Europe residual fuel -- key market indicators this week

New York — The European 0.5%S marine fuel market was expected to see support this week from the pick-up in activity as many lockdowns are eased.

Meanwhile, bunker prices continued to track volatility in the wider oil complex, holding mixed implications for the maritime industry.

0.5%S marine fuel

**FOB Rotterdam 0.5% sulfur marine fuel barges were assessed at $174.25/mt last Thursday, up from $160.50/mt on May 1.

**Demand for fuel oil remained thin , though demand was 'ticking along', with shipping faring better than the likes of gasoline and jet fuel.

"There are more barrels around," one source said, adding there was better demand in Northwest Europe than the Mediterranean.

**Lower arbitrage inflows to Singapore have led to a drawdown in stockpiles, while adding to the supply overhang in Northwest Europe. Combined inland inventories of very low and high sulfur fuel oil in land in the Amsterdam-Rotterdam-Antwerp hub rose 9% to 1.745 million mt in the week to last Wednesday, according to data from Insights Global.

**Some 180,000 mt of 0.5%S marine fuel traded during the Platts Market on Close assessment process in April, down from 246,000 mt in March and 50,000 mt in February.

**Rotterdam port authority bunker fuel sales saw quarter-on-quarter rises as well as year-on-year rises. Fuel oil bunker sales were almost level on the year, rising 0.2% to 1.904 million mt, while marine gasoil rose 4.1% to 381,148 mt, the port authority said. Quarter on quarter, bunker fuel sales rose 4.5% from Q4 2019, the data showed. Within the reporting period, fuel oil sales rose 7.1% on the quarter.

** Burgeoning storage levels are increasingly having an effect on bunker prices, and suppliers may "prefer to sell that product at a loss than have product on a barge that cannot take the next cargo, [so] they face either demurrage from a vessel with the next cargo or penalties from the terminal as they cannot lift their contractual volumes, which in both cases can be much higher," the buyer said.

** Physical bunker supplier Bunker One announced plans to expand its fleet across West Africa. Having established operations in West Africa earlier this year, the company is adding to its portfolio of tankers, employing an additional tanker to take the total to three, covering the major shipping lanes for vessels going East-West via the Horn as well as traffic in and around the West African coast.

High sulfur fuel oil

**Saudi Arabia's fuel oil demand centers on requirements for power generation at desalination plants and to meet increased air-conditioning requirements in the summer months. This year the market is well supplied.

"There is still demand for HSFO there," a fuel oil source said the end of last week, while another source said while demand was covered for May, they were starting to see some bids in the market.

**Some 576,000 mt of 3.5%S RMG 380 CST fuel oil traded during the Platts MOC last month, up from 438,000 mt in March and 368,000 mt in February.

**Platts assessed Rotterdam 3.5% fuel oil barge at $152.50/mt on an FOB basis Thursday, up from $125.50/mt on May 1.

Derivatives

**The contango in the VLSFO forward remained steep, with the spread assessed at minus $16.50/mt between the balance-of-month and the front month.

** After two months of being weaker, Gasoline FOB Rotterdam barge cracks price above VLSFO FOB Rotterdam barge cracks, assessed Friday at $1.75/b and $1.167/b respectively.

Feedstocks

**Despite downstream indicators looking more positive, that had yet to reach the feedstocks as plentiful supply with low demand continued shroud the market.

**Russia's Tuapse May loading program suggested no slowdown in exports from previous months, expected to release 150,000 mt of VGO over the month.

**Sources pointed towards increasing exports from former Soviet Union countries into the wider market as domestic demand plummets.