ARA fuel oil stocks fell 5% to 8.26 million bbls last week, but remained above the five-year average. Suppliers in the bunkering hub has readily available volumes of all grades to deliver. Fuel oil import demand for US refinery coking units and a slight resurgence in imports from Singapore has contributed to draw fuel oil out of ARA storage tanks.
ARA’s gasoil inventories were drawn by 7% to 16 million bbls and sit far below the five-year average.
Stronger road fuels demand is spurring a tentative production hike at European refineries. Higher production should yield more gasoil, and fuel oil as a by-product, and possibly boost stock levels unless favourable arbitrages pull more product to the US or East of Suez.
Front-month Low Sulphur ICE Gasoil futures have weakened against Rotterdam’s VLSFO and LSMGO in the past month, as more diesel in the market has put downward pressure on the futures contract. European refinery diesel margins rose through May, but have not yet recovered to pre-pandemic levels. Refineries are unlikely to fully ramp up overall production to normal levels as long as travel restrictions are in place and jet fuel demand remains sluggish.
Gibraltar Strait and Canary Islands ports have plentiful supplies of fuel oil and gasoil. There has been talk over oversupplied markets amid a slowdown in regional bunker demand, and unviable arbitrage economics for VLSFO cargoes to move eastwards. Singapore’s VLSFO bunker price is at a similar level to those in the Gibraltar Strait, and Singapore has been better stocked with residual fuel oil in recent months.
Bunkering resumed at a supplier’s ex-pipe supply in Ceuta this week. Heightened security at the port has allowed the service to be restored. Bunkering was suspended through last week, after migrants crossing over the border from Morocco had attempted to set fire to a terminal and board ships as stowaway across the Gibraltar Strait to European countries.
HSFO380 is generally in good availability for prompt deliveries in European ports, with lead times of around 3-4 days recommended in the ARA and Gibraltar Strait. HSFO can be tight for prompt dates in the Canary Islands and in South African ports. Prompt HSFO180 became more limited in South African ports since two refineries in Durban and Cape Town were shut following a fire and an explosion last year.
A supplier has started offering HSFO380 in the ARA area again after cutting the grade from its product range in the lead-up to the IMO 2020 transition away from HSFO for vessels without scrubbers fitted. Two of the supplier’s barges will carry HSFO380.
Source: ENGINE (https://engine.online/)
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