European hi-lo fuel oil swap hits near 1-year low amid lower Russian volumes
5th April 2022 15:33 GMT

The European front-month paper hi-lo spread -- the relative value of 1% sulfur fuel oil to 3.5% sulfur material -– has fallen to a near one-year low this week, as relative tightness for lower sulfur grades eases.

The Platts hi-lo spread was assessed by S&P Global Commodity Insight at $47.25/mt April 4, the lowest differential since April 2021.

Sources said that there had been some relaxing of the tightness in the physical market for lower sulfur grades, such as 1% and 0.5% sulfur grades, causing the differential to high sulfur fuel oil to weaken.

HSFO supply in the region is likely to remain constricted as many participants in the market avoid Russian HSFO as a result of Russia’s invasion of Ukraine.

The decision to self-sanction by many buyers means that the traditionally dominant Russia-origin HSFO is no longer available, bolstering HSFO relative to LSFO and VLSFO.

In the physical market, the Platts fuel oil 1% sulfur cargo was assessed at $653.25/mt April 4, at a 50 cent/mt discount to the paper market.

Meanwhile, physical HSFO Rotterdam barges were assessed at $604/mt April 4.

Platts ,
5th April 2022 15:33 GMT