Asia-Pacific fuel oil margins have inched higher after the closure of the Suez Canal started to delay some cargo shipments from Europe to Saudi Arabia.
Asian 180cst high-sulphur fuel oil (HSFO) margins — the premium or discount of front-month swaps against Dubai crude values — strengthened to a discount of $3.83/bl yesterday, the strongest since reaching similar levels of -$3.86/bl on 19 March. Asian 0.5pc sulphur marine fuel margins also rose slightly yesterday, to $10.63/bl, after falling to over a two-month low of $10.11/bl on 23 March.
The Suez Canal, the quickest route for cargoes from markets west of Suez to Asia, has been blocked for two days after a container ship ran aground. The Suez Canal Authority today temporarily suspended navigation on the critical waterway, while efforts to refloat the giant container vessel continued.
Any lasting disruption could affect state-controlled Saudi Aramco's pre-Ramadan fuel oil buying programme. Several vessels carrying fuel oil heading towards the Red Sea are either stuck in the canal or unable to enter the waterway, through which they need to transit to reach their destinations.
Aramco's trading arm ATC has been securing cargoes from northwest Europe and the Mediterranean in preparation for the Islamic fasting month of Ramadan that starts in April, when domestic power consumption typically peaks. ATC bought at least three HSFO cargoes from Europe in March.
Vessels affected by the delays include the Minerva Zenobia, which departed Rotterdam on 10 March carrying about 80,000t of fuel oil and was expected to reach Yanbu in Saudi Arabia on 25 March, according to oil analytics firm Vortexa. The vessel was still in the Mediterranean today, just north of the Suez Canal, Vortexa data show.
The Stride lifted 100,000t of HSFO from Rotterdam on 22 March and is scheduled to arrive in Rabigh, on Saudi Arabia's Mideast Gulf coast, on 6 April.
Fuel oil exports to Saudi Arabia made up more than 50pc of total European shipments to the Middle East in February, according to Vortexa data.
A few Aframax tankers are also heading towards Port Said on Egypt's Mediterranean coast, likely for transit through the Suez Canal, market participants said. Shipping fixtures show ATC chartered the Minerva Olympia to ship 80,000t of fuel oil from the Amsterdam-Rotterdam-Antwerp (ARA) region to the Red Sea on 20 March. The vessel is likely to head to Ain Sukhna on the Red Sea coast, where ATC has storage capacity and where it blends fuel oil.
ATC could buy cargoes from Singapore or locations in the Middle East such as Kuwait or Bahrain in the case of a prolonged closure of the Suez Canal. But the company is likely to wait to see if delays continue, market participants said.
"They have paid for those cargoes from Europe and can afford to wait until the situation is clearer. Aramco can opt to bring in cargoes from east-of-Suez sources or even increase crude burn for power generation if need be," a Dubai-based trader said.
