September HSFO Rotterdam barge MOC trade volumes drop 25% on month
Fuel oil volumes traded in the Platts Market on Close assessment processfor 3.5% FOB Rotterdam barges declined 25% month on month in September, as themarket gears up for the switch to 0.5% sulfur marine fuels at the start ofJanuary.
Some 412,000 mt of 3.5% RMG 380 CST fuel oil traded in the Platts MOC inSeptember, below the year-to-date monthly average of about 471,000 mt, andwell below August’s 546,000 mt and July’s 594,000 mt.
BP, Shell and Mercuria were the main buyers, while Litasco, Vitol andGunvor sold the majority of the barge clips.
Refiners and bunker suppliers around the world are preparing for theInternational Maritime Organization’s incoming 0.5% sulfur cap limit on marinefuel from January 1 by introducing low sulfur bunker fuels.
From the start of next year, vessels will no longer be able to use 3.5%sulfur fuel oil unless they have an exhaust gas cleaning system fitted.
Bunker hubs such as Singapore have made reducing HSFO inventories aprimary focus. Companies are looking to store low-sulfur components on VLCCsoff the coast of Singapore for the 0.5% blending pool.
The hi-lo spread — measuring the 1% FOB NWE cargoes premium to 3.5% FOBRotterdam barges — showed a contango structure along the forward curve forthe remainder of the year, supported by increased storage incentive.
Low sulfur fuel oil has become an attractive blendstock for theproduction of 0.5%S marine bunker fuel.
About 7 million mt of components are being stored in 20-25 VLCCs, sourcessaid. In addition, Singapore has 1 million-2 million mt of LSFO components interminals, according to sources.
Singapore’s bunker demand is about 4 million mt/month. The LSFOcomponents in storage are considered sufficient to cover similar demand untilthe end of the first quarter of 2020.
Some European refineries have already switched to producing low sulfurfuels in an attempt to steer away from HSFO ahead of the sulfur capregulation, sources said.