Novorossiisk bunker market expands as demand soars, supply limited: sources

The Novorossiisk bunker market has expanded significantly this year as demand for bunker fuel has soared amid limited availabilities to cover prompt volumes, sources said.

“Demand is extremely strong…we sold out all available prompt volumes,” one trader said.

Traders have said demand has significantly increased for Novorossiisk deliveries in the summer, the peak cruise season for the Black Sea ports, with July and August bunker sales up 1.5 times compared with June volumes.

“Prompt supply has been booked already since the beginning of the month,” a Novorossiisk source said. “We had to buy additional volumes but it takes time to deliver due to delays with rail cars.”

Prompt bunker fuel deliveries are unavailable over the next seven days as most bunker suppliers have been already booked, a source said Tuesday.

Another source said that in the first six months of the year the Novorossiisk bunker market increased 40% year on year.

One of the main reasons for this has been the cheap price of shipping fuel, traders said. On an outright basis, the average August price of 380 CST HSFO at Novorossiisk was $475.96/mt, on average $121.84/mt cheaper than the price in Istanbul in August at $597.80/mt, Platts data shows.

According to Russian sources, Novorossiisk bunker fuel oil prices are formulated based on domestically traded fuel oil prices.

While buying interest continued to rise for spot volumes in Novorossiisk, bunkering companies started to expand their operations to deal with the prompt shortage of barges and fuel.

One of the leading Russian bunker fuel companies, Gazprom Neft, is planning to expand its fleet by bringing in a bigger bunker barge that is expected to arrive in October, a company source said.

The company currently operates three barges for Novorossiisk deliveries, the company source said.

Meanwhile, another big bunker supplier, Rosneft Bunker (RN Bunker), which leases two chartered bunkering barges for deliveries in the port of Novorossiisk, is planning to bring a new barge starting October 1, the company source said.

Lukoil, the third-largest bunker supplier has three bunkering barges in service with an additional marine gasoil barge that will be discontinued soon, a company source said. “The company has already arranged a purchase of the new barge to cover implied demand,” the source said. The barge is expected to arrive by September 4, the source said.

Also, due to heavy traffic and congestion at Novorossiisk in the last few weeks, some of Lukoil’s bunker operations have been moved to the nearby port of Kavkaz, where prices are usually similar to those of Novorossiisk, the source said.
Source: Platts