Fuel oil imports to northwest Europe fell sharply in September to the lowest since at least 2016.
Latest Vortexa estimates show the region received 1.29mn t, down from 2.23mn t a year earlier and 1.55mn t in August and the lowest since the company's records began in 2016.
High-sulphur fuel oil (HSFO) has historically accounted for the largest share of European fuel oil imports, but structural changes in the market have constrained flows. Participants said demand is steady, but supply concerns have persisted for most of the year following the 5 February EU ban on Russian oil products. Russian fuel oil accounted for 21pc of northwest Europe imports last year, and 38pc in 2021. In September just 540,000t of HSFO arrived in the region, compared with more than 2mn t — 39pc of which originated from Russia — in September 2019. No Russian HSFO was imported into northwest Europe in September this year, according to Vortexa data.
Nearly 167,000t of HSFO arrived from the Mideast Gulf in April this year, according to Vortexa, presenting the region as a viable alternative for supply. But movements on this route were limited throughout the summer, with just 150,000t in the following months, as local demand rose seasonally for power generation purposes.
HSFO cargoes from the US Gulf coast were also an alternative supply pool for northwest Europe in the earlier part of the summer, but market participants reported tightening supplies — particularly from Mexico — have led to a drop in regional exports. About 245,000t of HSFO departed the USGC in September, none of which were destined for northwest Europe according to Vortexa.
Imports of very-low sulphur fuel oil (VLSFO) to northwest Europe slumped in September. Market participants reported limited regional demand throughout the month, and ample supply. The eastward VLSFO arbitrage was mostly closed throughout the month, according to market participants. Northwest European VLSFO exports to Singapore were around 77,000t, steady from August but nearly half of the 141,000t moved on the route in July. That may have lessened the need to import any extra. Consequently, European VLSFO barge margins against the front-month Ice Brent crude futures contract averaged a discount of 19¢/bl, flipping from August's $4.82/bl premium to the same marker.
Tightness in the HSFO import pool may soon change, with market expectations of greater import availability from the Mideast Gulf in the coming weeks as the summer draws to a close. Vortexa said at least 214,000t of fuel oil is scheduled to arrive in northwest Europe from the Mideast Gulf in October so far.
