Northwest Europe fuel oil imports hit 3-year high in November

Motor Oil (Hellas) Corinth Refineries

16/12/2024 16:57

By Enes Tunagur and Georgina McCartney
       LONDON/HOUSTON, Dec 16 (Reuters) - A rush to replenish
scarce supply of high-sulphur fuel oil (HSFO) pushed Northwest
European imports of residual fuel oil to their highest in three
years in November, analysts told Reuters.
    The Amsterdam-Rotterdam-Antwerp (ARA) area, Europe's main
trading and refining hub, received around 450,000 barrels per
day (bpd) of all types of fuel oil in November, the highest
monthly volume since November 2021.
    That compared with an average of 332,000 bpd over
January-October this year, according to trade analytics firm
Kpler.
    Residual fuel oil is one of the key products refined from
crude oil and is widely used in the maritime and construction
industries. Structural changes in Europe's refining industry
have left it more prone to shortages, and therefore leaning more
on imports.
    Demand for high-sulphur fuel oil for bunkering, or vessel
refuelling, has risen in ARA at a time when supply of the fuel
has slowed because of maintenance and economic run cuts at local
refineries. 
    "HSFO tightness in Europe is partly attributed to high
maintenance levels in the region, specifically concentrated in
the Mediterranean," said Royston Huan, analyst at consultancy
Energy Aspects.
    Huan pointed to incidents at Greece’s Motor Oil Hellas
Corinth and Turkey’s Tupras Izmir refineries, which typically
export HSFO. 
    "The HSFO shortage in Europe was caused by lower fuel oil
production when European refiners cut run rates on weak
margins," said Vortexa analyst Xavier Tang.
    Ample supply in Asia helped divert supplies from east of
Suez to northwest Europe, despite higher shipping costs stemming
from longer voyages around Africa as commercial vessels continue
to avoid using the Red Sea because of Houthi maritime attacks.
    Fuel oil imports to ARA from east of Suez sources reached
all-time highs of 126,000 bpd in November, as shipments from the
Middle East and India rose sharply, according to Kpler.
    Fuel oil more typically flows in the opposite direction, as
leading global bunkering hub Singapore pulls in production from
other regions.
    "With tightness in the west narrowing HSFO east-west
spreads, there is much less incentive to arbitrage Europe
Mediterranean barrels east," said Energy Aspects' Huan.
    Traders in Asia may also have been looking to profit from a
rise in profit margins for HSFO in Europe since October, as
reduced supply pushed prices higher. 
    Supply of HSFO has also fallen in Europe because of longer-
term trends. The EU embargo against Russian oil has left
European refiners without Urals crude, a heavier grade that
yields more residual fuels. 

 (Reporting by Enes Tunagur and Georgina McCartney; Additional
reporting by Jeslyn Lerh; Editing by Robert Harvey and Ed
Osmond)
 ((Enes.Tunagur@thomsonreuters.com;))