Weekly fuel oil wrap: HSFO cracks fall on warmer weather, marine fuel rise on Sines

22 Oct 2021

Quantum Commodity Intelligence - It was a tale of two sulfurs this week, with some grades of HSFO falling to multi-month lows while marine fuel cracks rose, helped by sustained high diesel values.

In Asia, the 180cst HSFO crack fell to its lowest in almost five months as reports emerged that gas-to-oil switching would likely be lower than expected among technical challenges, as well as warmer weather forecasts and more heavy crude from OPEC+.

Flat prices for 180 cst utility grade fell to $473.75/mt FOB Singapore – the lowest in a month and down $37/mt in a week, leaving the crack at -$9.60/b, the weakest level since 28 May.

That had a knock-on effect in the 380cst market, which saw flat prices fall to $464.75/mt FOB Singapore, the lowest so far this month and down $38/mt in a week.

The crack for the higher-viscosity bunker now stands at -$11/b, the lowest since 1 October.

Conversely, a dearth of exports from China and higher prices in Zhoushan has seen marine fuel oil cracks in Asia widen to equal a one-month high, helped along by diesel cracks running above $12/b basis FOB Singapore.

Marine fuel oil 0.5% prices rose $4/mt in a week to $609.50/mt on Friday, and the crack on a 6.9 density basis versus nearby Brent was $4.12/b, equalling a one month high.

Asian stocks crept higher in both Fujairah (138,000 barrels) and Singapore (638,000 barrels), although they remain relatively low.

Europe

Over in Europe, there was a similar dynamic, with marine fuel 0.5% cracks surging higher amid tightening supplies and higher blending costs, while refining margins for high sulfur fuel oil cracks slid lower as demand from the power generation market east of Suez eased.

An unplanned outage at Portugal’s 225,000 b/d Sines refinery created a shortage of marine fuel 0.5% barrels and shifted demand from the Mediterranean to Western Europe.

“The market is very tight on 0.5%. Sines being down take out a large amount of supply for west-Med, so cargo interest has jumped,” a broker told Quantum.

Marine fuel 0.5% barge prices were the only major European oil product where prices were higher Thursday than last Friday, up $3/mt to $587/mt.

Cracks for the bunker fuel, using a density conversion rate of 6.9, were pegged at $1.92/b Thursday, up from -$0.05/b last Friday.

The rise of distillate cracks, which hit year highs last Friday, has also been a factor in the strength of marine fuel 0.5%.

In early October, the crack value for marine fuel 0.5% barges was as low as -$2/b, $4/b below where they are currently.

In contrast, the collapse in Asia cracks dragged high sulfur fuel in Europe lower.

Cracks for high sulfur fuel oil barges in ARA have slumped over the week to -$12.60/b Thursday, a drop of $2.71/b from -$9.89/b last Friday.

That has cut the profitable arb east substantially, with the east-west for 380cst falling $10/mt in the past week.