Northwest Europe draws more Baltic fuel oil

Northwest Europe has imported higher volumes of Russian fuel oil from the Baltic Sea in February as margins hit more-than-decade highs.

Tankers bound for Rotterdam — Europe's main bunkering and export hub — loaded nearly 1.9mn t in February, up sharply from the 1.16mn t loaded during the prior month. It is also substantially above average monthly Rotterdam-bound loadings from the Baltic Sea, which reached 1.13mn t during 2016-2018.

But Russian fuel oil exports are likely to feel some downward pressure from a higher export duty on dirty products, which is set to increase by $10.50/t from the prior month to $91.20/t in March. But the outlook for export demand remains firm, largely because of the impact of sanctions on fuel oil producing countries Iran and Venezuela.

In addition to sating bunkering demand, a large share of Russian fuel oil shipped to northwest Europe is re-exported to other regions, including Singapore, west Africa and the Middle East.

Singapore is set to import 4mn-4.3mn t of high-sulphur fuel oil from west of Suez this month, up from the 3.4mn-3.7mn t received in February. Stocks in Singapore fell last month on lower imports, pushing prices higher and bolstering the economics for exporting European material to that region.

European fuel oil was also exported to the US amid anticipation of tighter supplies because of sanctions against Venezuela. The South American country was the third biggest exporter of residual fuels to the US during January-October, data from the US Energy Information Administration (EIA) showed.

The increase in imports from the Baltic Sea was more than offset by rising exports of European fuel oil — which hit the highest level since October 2017 in February — and stocks in northwest Europe fell as a result. Fuel oil inventories held in independent storage within the Amsterdam-Rotterdam-Antwerp bunkering hub dropped to 831,000t in the week to 7 March, the lowest level in nearly a year.

Falling stocks have sent European fuel oil margins to their strongest in 15 years. High-sulphur standard finished bunker grade RMG barge prices averaged $2/bl between 27 February–5 March, the narrowest five-day average since 2003