Strong Bidding Increases HSFO Premium Amid Tight Supplies

High-sulphur fuel oil in northwest Europe is priced at a premium to ICE Brent futures for the first time since at least 2005 according to Argus assessments amid increased bidding in the past few days.

• The premium of high sulphur fuel oil used for ship fuel and power generation has almost tripled since late July according to Platts.
• “Prices are bolstered by expectations of a tightening market,” said Serena Huang at Vortexa.
• Output cuts by OPEC and Russia will reduced supplies and some plant outages have limited supply, while seasonal factors have been impacting demand according to Vortexa.
• Less fuel oil is available to Europe from the Midde East during the cooling season after seeing strong supplies from the region this year according to Argus. The increase comes as a consequence of shortage in sour crude grades, extra upgrading and reliance on more long-haul imports.
• The Bloomberg 3.5% HSFO FOB BRG ROT vs ICE Brent has seen a gradual increase this year from a spread of around -26.5$/bbl in Jan to nearly -4$/bbl this week.