Demand for 0.5pc sulphur marine fuel oil is ramping up in most of the world's largest ports, and the grade could account for 65pc of all marine fuel oil bought globally this month.
In Singapore, the world's largest bunkering hub, more than 43pc of delivered marine fuel deals received by Argus so far in November have been for 0.5pc fuel oil, and 0.1pc sulphur marine gasoil (MGO) accounted for 21pc. Demand for these two grades has been rising because they will be compliant with the International Maritime Organisation (IMO) 0.5pc sulphur cap, which is effective from 1 January. The remaining Singapore deals were for high-sulphur marine fuel oil (HSFO), which will not be compliant with the IMO rule.
In China's bunkering fulcrum of Zhoushan, 0.5pc fuel oil has made up 37pc of deals received by Argus in November; HSFO and MGO made up 31pc and 32pc, respectively.
Sales of 0.5pc fuel oil have increased sharply in the Middle East's main bunkering location of Fujairah, UAE, where it is available from seven suppliers. Shipowners have been topping up fuel tanks with 200-500t of HSFO rather than filling them, to avoid being left with non-compliant fuel next year.
Suppliers in the Amsterdam-Rotterdam-Antwerp (ARA) hub in northwest Europe have received an increasing number of enquiries for 0.5pc fuel oil this month. There has not been a drop in the number of enquiries for HSFO, the typical volumes requested have fallen from 2,000-3,000t to around 400t. HSFO will still be used by ships fitted with exhaust cleaning systems known as scrubbers.
Spanish integrated Cepsa's launch of 0.5pc fuel oil supply in Gibraltar and Algeciras last week increased availability in the Mediterranean market. Cepsa said the ratio of HSFO to 0.5pc fuel oil is 80:20, and it expects 0.5pc to become the main fuel this month. It started offering the product in Barcelona this week. Two suppliers in Las Palmas said the HSFO-0.5pc demand split is 60:40. One said this will flip to 30:70 or 20:80 by the end of the month.
Uptake of 0.5pc has been slower in the eastern Mediterranean. A supplier in Malta gauged it to 20-25pc of total demand and forecast it to reach 70pc by mid-December. Suppliers in Piraeus, Greece, started to receive requests for 0.5pc fuel oil last week. Motor Oil Hellas (MOH) has adapted its 175,000 b/d Corinth refinery to supply more compliant fuel. Hellenic Petroleum, the other refiner supplying the port, will start offering the grade from late November. In Istanbul, 0.5pc fuel oil has accounted for around 20-25pc of sales in November, according to two suppliers. They expect it to reach 70pc by mid-December.
Sales of 0.5pc fuel oil increased in Russia's far east in October and November. Four suppliers have been selling the grade on a limited basis. Shipowners' typical requested amount of HSFO has fallen to 200-300t. Suppliers in Baltic Sea ports, such as St Petersburg, have received a small number of 0.5pc fuel oil requests, but expect an uptick later this month.
Demand for 0.5pc fuel oil has lagged in North America, partly because of high prices. In South America, Brazil has made the switch to 0.5pc and MGO; state-controlled Petrobras stopped offering HSFO on 1 October. It said it produces enough 0.5pc fuel oil to meet domestic demand and exports the surplus. Argentinian suppliers have stopped offering HSFO in favour of 0.5pc fuel oil, but the opposite is the case in Peru and Ecuador where 0.5pc fuel oil is not yet available.
Globally, some shipowners have started buying 0.5pc fuel oil or MGO now so they have compliant fuel in at least one of a ships' tanks by mid-December, giving enough time to expel high-sulphur residues before the turn of the year. One shipowner with global reach said it bought 75pc HSFO and 25pc 0.5pc fuel oil in October. It expects 0.5pc to account for 65pc in November, 90pc in December and 100pc by January.
By Erik Hoffman and Enes Tunagur
