Scrubber spread narrowest in 7 months on strong HSFO

Wholesale scrubber spreads in northwest Europe moved to their narrowest point in nearly seven months on Wednesday, on growing demand for high-sulphur fuel oil (HSFO) compared with sweeter bunker fuels.

Fob very-low sulphur fuel oil (VLSFO) barge prices were assessed at an $82.50/t premium to those of HSFO barges in northwest Europe on Wednesday, their weakest since 10 October, when scrubber spread assessments hit $82.25/t.

Growing demand for higher sulphur bunkers since the beginning of the year has supported prices. Quarterly bunker sales data released by the port of Rotterdam at the end of April, showed that total HSFO bunker sales were higher than those for VLSFO for the first time in at least three years. Some 820,000t of HSFO changed hands, the most HSFO sold in the first quarter since at least 2021. This compares with 680,000t of VLSFO, the smallest volume in any quarter at the port between 2021-2024.

This shift in buying activity means wholesale prices of higher-sulphur residual product have strengthened faster than those of lower-sulphur ones so far this year. Fob HSFO barge prices grew by 14pc, to $472/t, between 29 December and 1 May. VLSFO prices on the other hand have risen by only 6pc over the same period to $554.50/t.

Higher demand for HSFO has been linked to vessels opting to make diversions around the Cape of Good Hope in the wake of attacks by Houthi rebels in the Red Sea. Longer routes made by often larger vessels such as container ships, which are more likely to have a sulphur-scrubber installed, has led to increasing demand for cheaper, higher sulphur fuel.

Market participants have previously said that VLSFO needs to maintain a premium of at least $100/t to make the economics of installing a scrubber on a vessel viable.

Fast-steaming, whereby ships sail faster and burn larger quantities of fuel, was also carried out by ships avoiding the Red Sea in order that they adhere to delivery schedules in Eastern ports despite travelling a longer distance.

By Bob Wigin