Mediterranean HSFO moves to premium over NWE after outflows to Asia

The physical Mediterranean high sulfur fuel oil cargo market has moved to a $1.50/mt premium over 3.5% sulfur Rotterdam barges following recent outflows to Asia, Platts data showed Wednesday.

The move has also coincided with a weakening in the Rotterdam barge market as the arbitrage to Singapore was thwarted by high rates for Very Large Crude Carrier. On Tuesday, VLCC rates on the route were hovering around the year's highest level, at $4.5 million.

Meanwhile, the Mediterranean HSFO market tightened after the arbitrage to Asia opened up for Suezmaxes. Several companies, including BP, Gunvor and Holt Global, were heard taking material east from the Mediterranean.

"The arb to Asia was open. There were a number of moves, but I am not sure if there is anything else penciled in," a Mediterranean trader said.

"There appears to be some shortage of cutters. The Med is a little bit short on the prompt, but it is nothing too dramatic," a second trader said.

In October, the CIF Med cargo market saw the highest volumes of the year traded in the Platts Market on Close assessment process, with at least 341,000 mt of product exchanging hands. BP was the buyer of all 13 HSFO CIF Med cargoes during October. Of these, 10 were sold by Lia Oil and 3 by Gunvor.

"The Med/north at this level means people can bring product down from the north. Once Gibraltar is covered there won't be much demand," a trader said, adding the recent lower Worldscale shipping rates suggested demand for product was still soft.

The Mediterranean high sulfur fuel oil market usually trades at a discount to northwest European material. During times of reduced supply or increased demand, Mediterranean HSFO cargoes can trade at a premium to Rotterdam barges. This can open up arbitrage opportunities to bring cargoes to the Mediterranean from NWE.
Source: Platts