Sluggish trade in Houston vacuum gasoil barges this week turned attention of market players to substitute feedstock from Algeria, market sources said Thursday.
Low-sulfur straight-run fuel oil at maximum 0.30% sulfur can be substituted for VGO in the gasoline-making fluid catalytic cracker at a refinery.
The 335,000 b/d refinery complex at Skikda, Algeria, has been a major source of the low-sulfur feedstock for US use. Much US-produced straight run fuel oil reflects higher sulfur levels up to 3.00%, with that product used as coker feed. A small fraction of US-produced straight run fuel oil tests beneath 0.3% sulfur, market sources have said.
"The Skikda is basically the poor man's VGO," a US feedstocks source said. "That should make further moves up in VGO less likely."
The differential for straight run fuel oil at 0.30% sulfur ("low-sulfur straight run") rose 25 cents Thursday to cash February WTI plus $5.5/b. Low-sulfur VGO fell 25 cents to $8.25/b.
Market players offered different ideas Thursday on the fuel oil-VGO breakdown this month at the maw of Gulf Coast FCCs. Brokers said the balance was tipping to fuel oil, and a trader at one US refiner said the balance was in favor of VGO. Another market source had the split as level among the feedstocks.
But nearly all market sources agreed that US VGO trade has slowed. Only a handful of barge trades have been heard since last Friday.
Phillips 66, Valero and BP were seeking transit Thursday for a combined 165,000 mt of low-sulfur straight run fuel oil from Algeria to Gulf Coast ports. Phillips 66 and Valero were understood by market sources to be acquiring feedstock for use at their Gulf Coast refineries, with BP expected to deliver on a supply contract.
"Valero brings in the majority," a shipping source said.
Separately, Litasco was seeking transit for 70,000 mt of VGO at an unspecified sulfur level from the Bahamas to the Gulf Coast aboard the British Merlin starting Thursday.
A refinery restart confirmed Thursday should lend support to straight run fuel oil and VGO markets in the coming days. Exxon Mobil said it was restarting unspecified units at its plant in Beaumont, Texas. The FCC and diesel-focused hydrocracker went offline there earlier this week.
The market for lower-sulfur feedstocks also found support in rising gasoline profits. The unleaded-87 crack against Gulf Coast-dominant Louisiana Light Sweet crude has risen three consecutive trading days and was up 3 cents/b Thursday to $13.77/b. It has topped $13.00/b for 15 consecutive trading days, something that has not happened since August 2015.
