European fuel oil: Key market indicators this week

London — The European 0.5%S marine fuel market this week is expected to weather ongoing conditions caused by demand destruction due to the coronavirus pandemic, following pressure on bunker premiums, while the crack spread reached record lows.

Marine fuel 0.5%S

**0.5% marine fuel FOB Rotterdam barges were assessed at $217.25/mt Friday, down $10/mt week on week on the back of declines in the wider oil complex.

While the 0.5% European market saw relative strength compared to declines in crude, the market was heard well-supplied with generally poor buying appetite.

**Combined stockpiles of very low and high sulfur fuel oil on land in the Northwest Europe region were up 4.5% from the previous week at 1.54 mil mt -- a fresh 21-month high, according to data from Insights Global, amid fewer arbitrage opportunities to Singapore. Supporting this, arbitrage volumes expected to reach Singapore during May are likely to be lower than in April, according to sources.

**The outlook for bunker demand continues to weaken as macro-economic weakness weighs on container and some bulk sectors of shipping. Tankers may see some upside as storage for oil products everywhere nears capacity, although fuel oil storage capacity is heard to be slightly less full than other product tanks.

**The current supply overhang led the Rotterdam-delivered marine fuel 0.5%S bunker fuel premium over the benchmark Rotterdam Marine Fuel 0.5%S barges on a FOB basis to be assessed at $1.75/mt Friday, its lowest level since September.

High sulfur fuel oil

**On the high sulfur fuel oil barge side though, while demand was also weak, there was constrained availability of the product, traders said. This was resulting in a lack of ease to move product, one trader said. In the bunker market this has supported levels in the Black Sea, sources said.

**Refineries have been heard producing more sour crudes amid reduced run rates, which will lead to less very low sulfur fuel oil and more HSFO production.

**The pricing premium of Rotterdam-delivered 0.5%S bunker fuel over 3.5%S bunker fuel – an indicator for scrubber investment economics -- was assessed at $57/mt Friday, having reached fresh lows of $38/mt on Wednesday.

Derivatives

**The 3.5% FO Med/North differential hit records lows on the prompt, marking the largest spread between the two regions since records began in 2010. For the balance-of-month contract it was assessed Friday at minus $19.00/mt.

** VLSFO cracks reached record lows on Thursday to be assessed at $1.388/b, as the product came under pressure from plentiful supply. However, the crack increased Friday to be assessed at $2.446/b.

Feedstocks

**CIF HSVGO values moved into positive territory Friday, as the product finds small pockets of demand despite weak refinery margins.