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MARINE FUEL 0.5%S: Global marine fuel supplies still holding back price recovery
4th August 2020 18:43 GMT

Global marine fuel 0.5%S prices improved in July, though demand still was below normal levels. Market sentiment was overall more positive than in June, though fundamentals of oversupply and slow demand resulted in a short-term bearish outlook for much of the globe.

ASIA

The Asian 0.5%S marine fuel market strengthened throughout July on expectations that an inflow of arbitrage cargoes from the West would decline in August and tighten supply. .

The Singapore August/September spread was assessed at a 5 cents/mt backwardation on July 30, up from a $4.25/mt contango on July 1, S&P Global Platts data showed.

Fuel oil traders expect an inflow of arbitrage cargoes to decline to 1.5 million mt-2.0 million mt for August arrival, down from 2 million-2.5 million mt for July, as the price spreads between Europe and Asia were not wide enough to bring cargoes from the West to the East.

But supply was still plentiful, as there are about 5 million mt of low sulfur fuel oil stocks sitting around Singapore, out of which, 4 million mt is likely low sulfur fuel oil, market sources said. The stocks are enough to meet bunker demand for a couple of months, market sources added.

"Overall, July demand is about the same as in June. Buyers are still waiting to see if suppliers will lower offers to clear oil since the market structure is in backwardation now," said a Singapore-based bunker trader.

In June, total low sulfur bunker fuel sales decreased 0.11% on the month to 2.711 million mt, data from Singapore’s Maritime and Port Authority (MPA) released July 13 showed.

EUROPE

The European 0.5%S marine fuel market has also failed to see demand gain traction.

"It's a lack of demand everywhere, volumes are down," a Northwest Europe-based trader said. "The soft contango keeps offer the side sitting and buyers need sharp numbers in this calmer bunker market," the trader said.

The market is currently still well supplied and despite a narrower contango in July the structure has continued to put pressure on storage economics.

The M1-M2 Rotterdam barge contango narrowed to average $3.99/mt in July, from $4.56/mt in June

Stocks of fuel oil in the Amsterdam-Rotterdam-Antwerp hub fell 13.8% to 1.255 million mt in the week to July 30, according to data from Insights Global, down 18% from the beginning of the month.

The weight of 0.5%S marine fuel supply has kept the market quiet towards the end of July and the contango was beginning to widen again. The contango was at $5.50/mt on July 31, according to Platts data.

US

US marine fuel prices in July reached their highest levels since prior to the coronavirus pandemic, though sources said demand for product was well outpaced by the large volumes of supply still in tanks.

The average price of USGC marine fuel 0.5%S in July was around $297.50/mt, up from around $275.25/mt in June as crude oil values also increased, but discounts for retail bunker fuel widened.

Houston retail marine fuel 0.5%S prices in July were assessed on average at a discount of around $8/mt to the bulk market, compared to a discount of around $3/mt in June.

Some suppliers said there could be hope on the horizon should the economy improve and Americans head back to work. Such a change would result in an increase in gasoline demand, and with it an increase on low sulfur feedstock demand from refiners.

Poor gasoline demand has decreased the need for refiners to buy additional LSVGO or LSSR to run in their FCC units. Any additional refiner demand could help clear out the glut of low sulfur inventory in the US, sources said.

The USGC has imported a total of 2.54 million barrels of low sulfur fuel oil products through the first seven months of 2020, compared to 17.53 million barrels in 2019, data intelligence firm Kpler data showed.


Bunkerworld .,
4th August 2020 18:43 GMT