EUROPE AND AFRICA RESIDUAL AND MARINE FUEL: Key market indicators Aug 1-5

Marine fuel 0.5%S

** FOB Rotterdam 0.5%S marine fuel barges were assessed at $741/mt July 29, up $16/mt week on week.

** Platts Capesize Scrubber Premium Index was at a 2 month low of $12,430/mt on July 29.

** Utility demand for LSFO remains high, due to high natural gas prices. Natural gas prices have soared in recent days, following the decision by Russian state-owned Gazprom to reduce the amount of natural gas it sends through its Nord Stream 1 pipeline to 20% capacity starting July 27. "We are seeing utility demand picking up and being arbitraged to the US from Europe," said another trader.

High sulfur fuel oil

** FOB Rotterdam 3.5% fuel oil barges were assessed at $484.75/mt July 29, up $20.75/mt from July 22.

** The differential between 0.5%S and 3.5%S fuel oil -- also known as the Hi-5 spread -- has risen $4.75/mt since July 22 to $256.50/mt at Rotterdam.

** High sulfur markets remained stable on the week, with sources talking about a decline in trading volumes due to the summer holiday period. "Not a lot has changed to be honest, we aren't seeing a lot trading. It's the summer period, a lot of people are on holidays," said one fuel oil trader.

** Fuel oil stocks in Amsterdam-Rotterdam-Antwerp region, as measured by Insights Global, dropped 2.77% to 1.125 million mt in the week to July 28, after rising 4.42% the previous week. Fuel oil stocks represented 21.82% of total refined oil products stocks in the region, which was down from last week's percentage change at 22.41%. The four-week rolling average was 1.128 million mt.

Bunkers

** In downstream bunker markets, Rotterdam VLSFO prices finished the week to July 29 $9/mt higher, while HSFO rates regained most of their losses from earlier in the week, dropping $2/mt lower.

** HSFO supply remained healthy in ARA ports, according to suppliers on the week, but prices crept up 2% in Hamburg on tight supply.

** Premiums for HSFO in Hamburg ended the week at $168/mt to Rotterdam material, falling $12/mt on the week, however, demand has gradually diverted to ARA ports in the absence of supply. "I'd say we've seen a 20%-30% increase in HSFO inquiries," said one supplier based in Rotterdam, commenting that additional demand was also coming from ships that would previously have bunkered in Russia.

** In the Mediterranean, supply fears eased on the week in Gibraltar and Las Palmas after new shipments to the ports, while Italian suppliers in Augusta remained strapped for VLSFO.

Feedstocks

** The European feedstocks market remain well supplied on the vacuum gasoil side as high natural gas prices have reduced throughput in secondary units. "Most refineries don't want to run secondary units at the moment," one European feedstock trader said Aug. 1.

** VGO is used as a feedstock for secondary refinery units like distillate hydrocrackers. As of late, DHC margins have come under pressure as soaring gas prices have led to increased hydrogen and power costs. Therefore, run rates in secondary units such as DHCs will be affected by the price of gas.

** VGO is a common feedstock to produce secondary products such as diesel and gasoline. Therefore, the supply-and-demand dynamics of secondary products can have a significant impact on the VGO market.

** The Platts Gasoline Eurobob 10 ppm FOB ARA barge brent crack was last assessed at $21.80/b on July 29, down 21 cents/b on the week.