The New Orleans IFO 380 CST premium to the same product in Houston nearly doubled on Monday amid strong prompt demand and some congestion in Houston, rising to $39/mt from $20/mt on Friday, S&P Global Platts data show.
While New Orleans IFO 380 CST settled at $335.50/mt ex-wharf, up $5.50 higher, Houston IFO 380 CST was assessed $13.50 lower at $296.50/mt ex-wharf. According to Platts historical data, this spread was last wider on January 6, 2016, when it reached $43.50/mt.
This occurred in the context of a notable slide in crude prices Monday. Front-month ICE Brent futures contract settled at $54.90/b, down $2.21/b -- or $16.77/mt -- and one trader said the weakening crude market might help explain the day's divergent bunker price movement.
"In general, New Orleans is less connected to other markets than Houston. Whearas Houston prices tend to move more with global supply and demand, New Orleans prices have more to do with competition among the suppliers there," the trader said.
This could help explain why Houston bunker prices followed HSFO and Brent crude lower while New Orleans moved against the market.
Stone, Shell, Chevron and Peninsula supply the New Orleans bunker market and they compete to set the price in that port, which is small compared with Houston and has limited supplies, according to market sources.
Sources also said there were some vessel-loading delays due to ship congestion in Houston on Monday, yet this does not seem to have offered any support to prices there. Indeed, it's possible that physical suppliers in Houston were offering product at lower prices in order to breath new life into demand for prompt-delivered product. Some suppliers were heard closing prompt deals in Houston in the low $300s/mt, but these prices were not considered for assessments as they were reported after the Platts Market on Close assessment process.
Glencore entered the MOC process offering $305/mt ex-wharf for 500 mt of Houston IFO 380 and a January 12-16 laycan, but found no buying interest even after lowering the offer to $297/mt ex-wharf.
Meanwhile, in New Orleans, Peninsula initially bid at $323/mt ex-wharf, for the same quantity and laycan, but withdrew its bid after raising it to $335/mt ex-wharf.
