The physical HSFO Med/North differential -- the premium of 3.5% sulfur FOB Mediterranean fuel oil cargoes to 3.5% FOB Rotterdam barges -- hit a two-month high Thursday of $3.50/mt, according to Platts data. It was last higher on May 16 when it was $4.25/mt.
Traders said the Mediterranean HSFO market was tight due to a combination of healthy bunker demand and lower availability of material in the region.
"We've seen [bunker] sales pick up in Algeciras and Gibraltar," one trader said. "So the market is a bit more tight."
"[Bunker demand in Algeciras] has grown 40% on a monthly basis over June 2013," a spokesman at the Algeciras Port Authority said.
The Mediterranean bunker demand typically picks up over the summer months due to the cruise season.
In addition, traders reported a decrease in Mediterranean production of HSFO as Spanish refineries were running light sweet crude.
"Tarragona has considerably reduced their production of HSFO and increased their production of LSFO," one trader said. "The Med hi-lo could well come down."
"Tarragona was not exporting HSFO in July," another trader said. "As they were running a sweet crude, they exported LSFO instead."
Plant owner Repsol wasn't immediately available for comment on the matter.
Traders also reported product leaving Greece for Yanbu, saying this contributed to draw available volumes away from the local market. --Maude Desmarescaux, maude.desmarescaux@platts.com
