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Global demand for low sulphur fuel oil (LSFO) that meets the 1.00% maximum limit for Emissions Control Area (ECA) operations is set to soar as we approach the implementation date for the North American ECA on August 1, 2012.
As of late May, there was no spot market supply of LSFO anywhere inside the ECA, which stretches 200 nautical miles off most of the coastlines of the US and Canada.
LSFO premiums compared to regular high sulphur fuel oil (HSFO) in ports around the world vary significantly, and also fluctuate at each port depending on supply and demand fundamentals.
Bunkerworld prices, as of mid to late May, showed that LSFO premiums in Rotterdam, the biggest European port falling within an ECA, ranged from $45 to almost $50 per metric tonne (pmt).
In Gibraltar, a port where many ships lift fuels on their way to the ECA zones in North Europe, LSFO premiums over HSFO were recently seen at around $60 pmt.
LSFO premiums in the world's biggest bunkering port Singapore as of late May ranged from around $80 to $100 pmt.
In the Americas, spot market indications for LSFO were very limited, and showing a wide range of premiums over HSFO.
On the Pacific coast, Callao in Peru appeared to have LSFO premiums ranging from as little as $10 to almost $40 pmt.
On the Atlantic side, Curacao in the Caribbean showed LSFO premiums over regular HSFO ranging from $75 to above $90 pmt in mid to late May.
Montevideo in Uruguay saw bigger variations still, with the LSFO premium ranging from below $20 to just over $50 pmt.
Santos, the biggest port in Brazil, was showing LSFO premiums between $10 t $13 pmt.
LSFO is readily available in Brazil, which is also a source of LSFO supplies for bunker markets further afield, including Singapore and Rotterdam.
According to a conference presentation from US-based bunker broker and trader Glander, premiums for LSFO in New York were approximately $75 pmt in April, and a bit higher in Philadelphia, Norfolk and Baltimore.
There was no LSFO available south of Norfolk at the time, but Glander said predictions were for premiums of around $90 to $100 pmt when supplies arrive.
US Gulf Coast ports expect to have LSFO supplies from August 1, but so far only New Orleans and Mobile had consistent availability with premiums at about $100 pmt, according to Glander.
Along the US West Coast, Glander said suppliers expect premiums to be $90 to $100 pmt if they import LSFO for markets there.
In the pacific Northwest, suppliers may have to resort to blending with distillates to meet contract demand, and spot market supply would be very scarce. As a result of blending, LSFO in this area may be a very low viscosity product with premiums at about $100 pmt.
As the examples above suggest, LSFO premiums may vary considerably between ports inside the North American ECA.
As seen in Europe since ECAs came into force in the Baltic and later in the North Sea and English Channel, LSFO premiums can be pushed up when regional supply of LSFO is lean and pushes up cargo prices, but also lower than expected at times when overall supply is abundant.
Looking at the key US bunker supply ports of New York, Philadelphia, Houston, New Orleans and Los Angeles/Long Beach, this Bunkerworld poll asks:
What premium do you expect for LSFO in these major US bunker supply ports from August?
PRODUCT AVAILABLE IN ROTTERDAM/ CI DIP AND PAY IN SELLER EX-SHORE TANK.
Russia D2 50,000-150,000 Metric Tons FOB Rotterdam Port.
JP54 5000,000 Barrels per Month FOB Rotterdam.
JA1 Jet Fuel 10,000,000 Barrels FOB Rotterdam.
D6 Virgin Fuel Oil 800,000,000 Gallon FOB Rotterdam.
(Mr.) Vladislav Yakov