VLSFO

Integr8: European VLSFO bunker fuel prices are worth watching

Research contributor Steve Christy explains what is behind the steep rise in European VLSFO prices relative to markets elsewhere in the world and where the Rotterdam VLSFO price may go in the coming weeks.

Published

8 months ago

February 23, 2024

Admin

Integr8: European VLSFO bunker fuel prices are worth watching

By Steve Christy, Research Contributor, Integr8 Fuels
[email protected]

22 February 2024

Recent uptick in oil prices; but for temporary reasons

There are mixed signals driving the absolute price of oil at the moment, with a slightly more bullish push over the past two weeks. But, to put it in context, this recent uptick followed a sharp drop in prices at the end of January and into the first few days of February, when Brent crude fell from $82/bbl to $77/bbl. The ‘bullish’ push in the past two weeks has only brought Brent back to $82/bbl.

Looking at very low sulphur fuel oil (VLSFO) prices in Singapore and Fujairah, these have traded in a narrow $25/mt range so far this month and are still lower than their end January levels (and $35-40/mt lower than average November prices). This is not the case in Rotterdam.

Integr8: European VLSFO bunker fuel prices are worth watching

Behind these price movements there have been some temporary bullish factors in the oil industry so far this year. Arctic weather conditions in North America shut in around 0.9 million b/d of oil production and halted around 1.7 million b/d refinery operations. At the same time, there have been planned, heavy maintenance programs in the Atlantic Basin refining industry running through January and into February. This again has restricted product availabilities and led to lower stock levels. But these are temporary issues!

On the bearish side, in recent reports we have focused on the weak prospects for oil demand this year, and this is still in play, especially when you look at the International Energy Agency’s (IEA) latest forecast for 2024. Also, gains in non-OPEC production look as though they will be high this year, and the recent cuts in OPEC+ production have been limited to only 0.2-0.3 million b/d from December levels. Therefore, the fundamentals for this year would indicate a ‘lid’ on prices. This, plus the ability of the industry to work around the attacks on Red Sea shipping, has so far superseded the heightened political events and risks in the Middle East region.

European VLSFO prices are ‘more exposed’

From the chart above, Rotterdam VLSFO prices have risen more steeply than in Singapore and Fujairah over the past two weeks. Rotterdam VLSFO prices are around $50/mt higher than in early February, and unlike the other major bunkering hubs, Rotterdam prices are higher than we have seen so far this year, and some $10/mt above their November average.

Back in November, Rotterdam VLSFO was priced at around $580/mt and Singapore at around $680/mt, i.e. a differential of $100/mt. Between then and now Singapore prices have fallen by $40, but Rotterdam prices have gone in the opposite direction and are around $10 higher. The net result is that the differential between the two markets has narrowed from $100- to $50/mt.

VLSFO pricing related to middle distillate pricing

The nature of VLSFO means supply and price movements are closely related to what is happening in other products. The chart below shows the close relationship between Rotterdam VLSFO and NW European diesel prices.

graph 3 (2)

The European VLSFO market looks like it will only get tighter

Europe is naturally short in the middle distillates of jet, diesel, and gasoil and so highly dependent on imports. The European sector had already been under pressure since the embargo on Russian supplies. However, the situation has tightened even further with the attacks on shipping in the Red Sea. These latest developments have hit diesel and jet shipments from the Middle East and India to Europe, with a leap in freight costs, longer voyage times via the Cape of Good Hope and tighter market conditions in Europe.

This loss of these supplies from east to west has partly been made up by an increase in diesel exports from the US to Europe. However, this may be short-lived as US refinery turnarounds in the first quarter cut availabilities and potentially limit diesel exports. Hence, European diesel (and so VLSFO) prices are likely to rise relative to VLSFO markets elsewhere in the world.

To compound this even more, Ukraine drone attacks on Russian refineries may have affected operations and so diesel exports from the country. Although this will not have a direct impact on the European diesel position, there is an indirect consequence, with other buyers of Russian products left short and having to source supplies from elsewhere, which will be in direct competition with European buyers.

Add to this a number of major European refineries going into turnaround in the north and Med regions, and the market is potentially even tighter!

If this isn’t enough, then there is a further layer to add to the argument; and that is the current exceptionally low distillate stock levels in Europe. The graph below shows the five year high/low range for middle distillate stocks in Europe, and that for the past two years stocks have been well below their five year average. More importantly, over the past three months stocks have been below their previous five year lows, and this is at a stage when we expect the market to tighten even further.

Whatever happens, Rotterdam VLSFO prices are likely to be relatively high

All else being equal (it never is!), the fundamentals point towards a more bearish oil market, but with this relative strengthening in European VLSFO prices.

Beyond the fundamentals, the geopolitical risks at the moment clearly lie in the Israel/Gaza position and developments surrounding Iran. But there are also a number of elections this year that will contribute to more uncertainty, not least in the US.

However, as things pan out, the European distillate market does look tight going forward and this would mean relatively higher VLSFO prices in Rotterdam, and Europe generally.

Photo credit: Integr8 Fuels
Published: 23 February, 2024

Related Topics:Bunker fuel - VLSFO Others - Research

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Baltic Exchange: Bunker Report (10 October 2024)

Bunker report panellists include Island Oil Limited, Cockett Marine Oil Pte, Monjasa A/S and KPI OceanConnect.

Published

2 days ago

October 11, 2024

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Baltic Exchange: Bunker Report (10 October 2024)

The following bunker report has been provided by freight market information provider Baltic Exchange for post on Singapore bunkering publication Manifold Times:

Note:

All values are in US$/metric ton, all-in (invoice price), delivered on board
Delivery in 7-10 days
ISO 8217:2010
IFO 380 3.5% Sulphur
IFO 380 0.5% Sulphur
DMA 0.1% Sulphur

Rotterdam – Waalhaven – Maasvlakte range
Houston – Houston Harbor
Singapore – Anchorage, under SBA Scheme
Fujairah – Offshore Anchorage Area

Submitted weekly at Close of Business UK time, on Tuesday & Thursdays

Panellists:
Island Oil Limited, Cockett Marine Oil Pte, Monjasa A/S, KPI OceanConnect

Photo credit and source: Baltic Exchange
Published: 11 October, 2024

Bunker Fuel Availability

ENGINE: Americas Bunker Fuel Availability Outlook (10 Oct 2024)

VLSFO and LSMGO availability normal in Houston; operations suspended in Florida ports amid Hurricane Milto.

Published

2 days ago

October 11, 2024

Admin

The following article regarding bunker fuel availability in the Americas region has been provided by online marine fuel procurement platform ENGINE for post on Singapore bunkering publication Manifold Times:

VLSFO and LSMGO availability normal in Houston
Operations suspended in Florida ports amid Hurricane Milton

North America

VLSFO and LSMGO availability is normal in Houston. Lead times of 4-6 days are recommended for both grades in the port. Prompt HSFO availability is tight, with lead times of up to eight days recommended for the grade, a trader said.

No product loading delays have been reported in the Houston area, another source said.

Several ports in Florida have been shut down because of Hurricane Milton, which made landfall on the western coast of Florida on Wednesday evening. The hurricane weakened into a category 3 hurricane before hitting Florida, but has been very destructive.

Port operations and bunkering have been suspended in the ports of Tampa, Manatee, St. Petersburg and Fort Myers since Tuesday, which were in the direct path of the hurricane. Bunkering usually happens by trucks in Tampa and all deliveries have been called off, a source said.

On Wednesday, US President Joe Biden described Hurricane Milton as the “storm of the century” and urged residents to evacuate ahead of the landfall.

Bunker deliveries in the Galveston Offshore Lightering Area (GOLA) have been suspended since Monday because of bad weather conditions. Calmer weather from Thursday afternoon could allow bunkering to resume in the area and for suppliers to clear backlogs caused by weather disruptions. One supplier is accepting orders for prompt supply in GOLA, but these deliveries are still subject to weather conditions.

Prompt VLSFO and LSMGO availability is normal in Baltimore – located on the East Coast of the US. One supplier can deliver LSMGO within two days, a source said.

VLSFO and LSMGO availability is normal in New York. Lead times of 2-4 days are recommended for both grades. Prompt HSFO supply can be tight in the port, with lead times of seven days recommended for the grade, a trader said. There is strong HSFO demand from container lines in New York, the trader added.

Prompt availability is tight in the West Coast ports of Los Angeles and Long Beach. Lead times of 8-10 days are generally recommended to secure VLSFO and LSMGO in both locations.

Caribbean and Latin America

Availability is normal in Balboa and Cristobal in Panama. Some suppliers are able to supply VLSFO and LSMGO for prompt delivery dates in both locations.

Bunkering was suspended in Bahamas’ Freeport on Thursday because of the rough weather that Hurricane Milton brought with it. The area was experiencing strong storm-force wind gusts of up to 55 knots, making barge deliveries difficult. Calmer weather conditions are forecast for Saturday, which could allow bunkering to resume in Freeport.

Prompt VLSFO and LSMGO availability is tight in Jamaica’s Kingston, a source said.

VLSFO and LSMGO availability is normal at Argentina’s Zona Comun anchorage. Wind gusts ranging between 16-27 knots are forecast in Zona Comun on Thursday. Winds at the higher end of that range can pose problems to bunker deliveries by barge.

By Nithin Chandran

Photo credit and source: ENGINE
Published: 11 October, 2024

Bunker Fuel Availability

ENGINE: Europe & Africa Bunker Fuel Availability Outlook (9 October 2024)

Prompt supply is tight in the ARA; HSFO is tight in Las Palmas; prompt VLSFO is tight in Richards Bay.

Published

3 days ago

October 10, 2024

Admin

The following article regarding Europe and Africa bunker fuel availability has been provided by online marine fuel procurement platform ENGINE for post on Singapore bunkering publication Manifold Times:

Prompt supply is tight in the ARA
HSFO is tight in Las Palmas
Prompt VLSFO is tight in Richards Bay

Northwest Europe

Prompt availability across all three grades is currently very tight in Rotterdam and in the wider ARA hub, a trader told ENGINE.

While LSMGO tightness has continued into its second week, HSFO and VLSFO began experiencing tightness last week. Product loading delays are leading to this tightness in prompt availability. Lead times for all three grades have stretched to 5–7 days now as several barges are stuck in long queues awaiting product loading, two sources confirmed. The region has been experiencing good demand, a trader confirmed.

The ARA’s independently held fuel oil stocks averaged 5% lower in September than across August, according to Insights Global data.

The region imported 229,000 b/d of fuel oil in September, a moderate increase from 223,000 b/d imported in August, according to data from cargo tracker Vortexa. The ARA imported low-sulphur fuel oil (LSFO) and HSFO in a 51/49 ratio in September, almost similar to August when the ratio was also tilted towards LSFO at 53/47.

The ARA hub’s independent gasoil inventories — which include diesel and heating oil — increased by 12% in September. The region imported 291,000 b/d of gasoil in September, down from 355,000 b/d of gasoil imported in August, according to Vortexa data.

Saudi Arabia became the region's top import source of gasoil and diesel in September, accounting for 17% of the total imports. Cargoes also arrived from the US (16%), Oman (12%), Qatar (9%) and Turkey (7%).

Germany’s Hamburg port is experiencing good bunker availability, a trader said. Lead times remain unchanged with traders advising 3–5 days for optimal coverage.

Mediterranean

In Gibraltar, bunker fuel availability is good, with suppliers able to offer prompt delivery dates for all three grades, a trader told ENGINE. Lead times have remained unchanged in the past two weeks with traders advising 3-5 days for all grades.

Rough weather may complicate bunker deliveries in Gibraltar on Wednesday when strong wind gusts of up to 30 knots are forecast in the port area. Calm weather is forecast from Thursday and through the weekend, making it conducive to bunkering.

Prompt HSFO availability is still tight in the Canary Islands’ port of Las Palmas, a trader told ENGINE. Lead times of 5–7 days are recommended for optimal coverage. Availability of VLSFO and LSMGO is good in the port and lead times of 3–5 days are recommended for both grades. Bunkering is likely to proceed smoothly in Las Palmas for the rest of the week amid calm weather conditions.

Bunker demand continues to be stable in other Mediterranean ports like Piraeus, Malta Offshore and Istanbul, a trader said.

In the Greek port of Piraeus, VLFSO and LSMGO availability is good, a trader said. Some suppliers are able to offer the grades within two days, the trader added. Prompt HSFO supply is subject to enquiry in Piraeus. Lead times of 3–5 days are generally recommended for all three grades. Calm weather is forecast in Piraeus this week, a source said, making it conducive to bunkering.

Off Malta, bunker availability is good for prompt delivery dates, a trader said. Recommended lead times for all grades are 3–4 days, a trader said. Rough weather is forecast off Malta from Thursday till Saturday, which may impact bunkering in the area, a source said.

Bunker fuel availability is good in the Turkish port of Istanbul. A trader advises lead times of 3–4 days for all grades. Bunkering may be hampered between Wednesday and Saturday in Istanbul due to bad weather, according to a source.

Africa

Availability of VLSFO is tight for prompt delivery dates in the South African ports of Richards Bay and Durban, with a trader recommending lead times of 7–10 days for optimal coverage.

LSMGO availability is also very tight for prompt delivery in Durban port, a trader told ENGINE. Lead times of up to 14 days are recommended.

Durban may experience bunker disruptions on Wednesday and Friday amid rough weather. Strong wind gusts of up to 27 knots are forecast on Wednesday, while wind gusts in the 20–25 knots range are forecast for Friday.

In Mauritius’ Port Louis, bunker availability is still very tight for all three grades, a trader told ENGINE. Most suppliers are recommending lead times of over 10 days for all three grades.

By Manjula Nair

Photo credit and source: ENGINE
Published: 10 October, 2024