Luis Gronda of global energy and commodity price reporting agency Argus Media on Thursday (24 December) published a summary on the various market forces that could increase demand for bunker fuel in Latin America following the release of the Covid-19 vaccine:
Latin American bunker demand could rebound in 2021 as the Covid-19 vaccines are distributed worldwide and pandemic-related lockdowns are eased.
Price levels for bunker fuel products such as high-sulphur fuel oil (HSFO) and very low-sulphur fuel oil (VLSFO) could rise close to pre-pandemic levels alongside prices in other regions as demand continues to rebound compared to the height of the pandemic in spring of 2020.
The monthly average price for VLSFO in Buenos Aires, Argentina, was assessed at $657.5/t in January and $563.5/t in February of 2020, according to Argus data. That declined to as low as $290/t in May before rebounding going into the summer months. But this jump has not reached price levels seen before the Covid-19 outbreak. That could happen in 2021, depending on how quickly Latin American countries are able to access the vaccines.
Another sign of a rebound that could continue into 2021 is in the bunker sales figures at major Latin American ports. In Panama, VLSFO sales have increased four months in a row to 314,731t as of October, according to the latest data from the Panama Maritime Authority (PMA). That is a 38pc increase from sales in June 2020, but it has not yet reached pre-pandemic levels. VLSFO sales were as high as 388,307t in January 2020, the PMA data shows.
A recovery from the pandemic in the US would likely be beneficial to Panama as it could resume importing bunker fuel from the US Gulf coast at increased levels. Panama has traditionally purchased most of its fuel from the US Gulf, but it has expanded its sourcing from other countries that have VLSFO, such as Argentina and Brazil in Latin America and the Netherlands and Estonia in Europe, data from Vortexa shows. That data also showed 112,600t of fuel oil imported from the Netherlands and 39,600t from Estonia so far in 2020, after Panama did not buy fuel oil from either country in 2019. The fuel oil was likely low-sulphur.
Panama also propped up VLSFO imports from St Eustatius and the Bahamas in the Caribbean. St Eustatius and the Bahamas do not have refineries and all fuel there is imported and aggregated in their oil storage terminals before being re-exported. The VLSFO re-exported to Panama from St Eustatius and the Bahamas originated mostly from Argentina and Brazil. About 300,782t of fuel oil came from St Eustatius to Panama so far this year compared to 78,100t in 2019, according to Vortexa.
HSFO could cruise to a rebound
The possible restart of cruise sailings could be a boon to HSFO demand in the Americas as cruise companies have many ships in their fleet that are fitted with scrubbers. This allows them to continue using HSFO while remaining compliant with the International Maritime Organization’s 0.5pc sulphur restriction that started in 2020.
The major US cruise companies — Carnival, Royal Caribbean and Norwegian Cruise Line — are currently developing plans to resume voyages in 2021. They must enforce policies to prevent the spread of Covid-19, including testing crew members, passengers and a mask mandate onboard its ships, in order to receive permission from the Centers of Disease Control and Prevention to resume cruises.
This resumption would drive up HSFO demand in Latin American and Caribbean countries that these cruise ships frequent including Panama, Bahamas and Jamaica. There could also be an avenue for HSFO exports from Venezuela to the US to restart depending on what stance the incoming administration of president-elect Joe Biden will take towards Venezuela and the sanctions currently active that block oil exports.
In 2018, before the sanctions, Venezuela exported 8.6mn t of residual fuel oil and 2.9mn t of that went to the US, according to Vortexa. Venezuelan exports dropped to 4.3mn t the following year after US sanctions began.
Photo credit and source: Argus Media
Published: 28 December, 2020
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