Heightened Egyptian demand in tight market buoys European fuel oil prices

Motor Oil (Hellas) Corinth Refineries

17/10/2024 15:55

* 
      Egypt's fuel oil imports hit highest since 2016 in Sept
-Kpler 
    

        * 
      Planned and unplanned refinery outages tighten supply in
Europe
    

        * 
      Fuel oil refining profit margins hit 14-month peak on Oct.
9
    

        * 
      Longer voyages due to maritime attacks boost marine fuel
demand
    

  
    By Robert Harvey and Ahmad Ghaddar
       LONDON, Oct 17 (Reuters) - A spike in Egyptian imports
of fuel oil used for power generation has coincided with lower
supply in Europe, helping to push refiners' profit margins for
the fuel to their highest in over a year, traders and analysts
told Reuters.
    Firmer high-sulphur fuel oil (HSFO) prices could be
mitigating a wider slump in margins for refiners, but could also
boost costs for industries which use it such as in marine fuel
and asphalt production, in addition to power generation. 
    "Strong buying for September-loading cargoes helped offset
the global market weakness that usually seeps into the market
after the summer burning peak in the Middle East ebbs," said
Eugene Lindell of energy consultancy FGE. 
    High-sulphur fuel oil is one of the least valuable products
yielded from refining crude, typically trading at a discount to
Brent crude  LCOc1 . Profit margins flipped to a premium in
October, peaking at a 14-month high of $1.92 a barrel on Oct. 9,
according to data from financial group LSEG.
    Egypt has since the summer been boosting energy imports
including fuel oil to combat persistent power cuts amid rising
temperatures, as it grapples with increasing demand and a
growing population, as well as lower output from its gas fields.
    Egypt's fuel oil imports hit their highest since at least
2016 at 255,000 barrels per day (bpd) in September, according to
Kpler data, while exports fell.
    The leading supplier in September was Saudi Arabia, which
also helped Egypt fund gas purchases over the summer. 
    Imports remain above their 2024 average of around 153,000
bpd in October, with Russia and the United Arab Emirates
supplying the majority of its 173,000 bpd of imports over Oct.
1-17.
    Egypt's Petroleum Ministry did not immediately respond to
Reuters' request for comment.

    Planned and unplanned refinery outages, as well as an
anticipated 400,000 bpd of run cuts between September and
December from weak economics, have tightened fuel oil supply in
Europe and the Mediterranean, driving the "incredible strength"
seen in HSFO profit margins, FGE's Lindell said.
    Two fuel oil traders active in the European market, who
asked not to be named, also told Reuters that HSFO supply was
tight.
    Shell is undergoing major maintenance works at its Pernis
facility in the Netherlands, Europe's largest refinery, while in
the Mediterranean a recent fire forced reduced production at
Motor Oil Hellas' Corinth refinery.
    Longer-term factors have also tightened the fuel oil market
in recent months, including reduced availability of the heavier
crude oil grades that yield more residual fuels on both sides of
the Atlantic. 
    Longer voyages given diversions away from the Red Sea
because of maritime attacks by Houthi militants have also buoyed
marine fuel demand this year, further supporting fuel oil
prices.
    

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Egyptian fuel oil imports and exports    https://reut.rs/4dQd4kg
Egyptian fuel oil imports and exports    https://reut.rs/3YqYewb
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 (Reporting by Robert Harvey and Ahmad Ghaddar in London, and
Mohamed Ezz in Cairo, editing by Alex Lawler and Emelia
Sithole-Matarise)
 ((Robert.Harvey@thomsonreuters.com; +447552256587;))