The premium of low sulfur fuel oil cargoes over high sulfur fuel oil cargoes in the Mediterranean has fallen to its lowest in over four months, on the back of sharply diverging fundamentals for the two grades, trade sources said.
CIF Mediterranean 1% sulfur fuel oil cargoes were assessed at a premium of $30.25/mt over CIF Mediterranean 3.5% sulfur fuel oil cargoes Wednesday, the lowest premium since January 27, when it was assessed at $23.75/mt, Platts data shows.
Traders say this is partly because the HSFO market in the region is tightening. Bunker demand is picking up not just due to increased vessel traffic in the summer, but also after outright price falls of over $100/mt over the last two months following falling crude, allowing some shipping lines to increase their volumes, according to suppliers.
LSFO meanwhile, always a much smaller market in the Mediterranean than in Northwest Europe, has faced very low demand for the last month, according to trade sources.
"The summer has been quiet so far," said one trader Thursday.
Mediterranean low sulfur demand -- although typically for 1.5% rather than 1% sulfur content -- generally increases in the summer due to tourism-related shipping, as well as increased power generation burning to run air conditioning.
But any seasonal increase has been well covered by output from Fiumicino, Saras and Ineos refineries, say trading sources, as well as LSFO brought in from outside Europe.
"Brazil's Petrobras is supplying a lot in the Med, they have grown [in Europe], not just supplying the Rotterdam barge market," said a trader.
Petrobras has been supplying a utility on the island of Cyprus for the last four years, according to trading sources. A source at the company was not available to comment.
