Refinery margins for high-sulphur fuel oil (HSFO) in northwest Europe hit their weakest level in nearly five months this week because of residual product flooding in from Mexico.
Margins for finished HSFO in northwest Europe, which contains 3.5pc sulphur, slid to a discount of $15.58/bl against the front-month Ice June Brent crude futures contract on 2 April, the widest discount since early November.
Traders in northwest Europe point to large inflows of Mexican HSFO as a key factor weighing on margins. Vortexa data show Mexico has shipped marginally more HSFO to northwest Europe than key supplier Poland has so far this year, all of which discharged in the Netherlands between March and April. It means the country is the largest single supplier of HSFO to northwest Europe in 2024, having delivered roughly 370,000t in total, compared with just 15,000t over the same period last year.
Total fuel oil exports from Mexico accelerated in March because demand along the US Gulf coast grew as seasonal refinery maintenance there drew to a close. US refineries use HSFO in coking units to produce products such as diesel and gasoline.
The supply overhang from Mexico has found its way to Europe despite the refinery maintenance season still in full swing there. Traders said the Mexican product would likely contain 4pc sulphur, meaning it has been bought for use in Europe as a blendstock in the production process.
