06-10-2017

Rotterdam RMK 500 fuel oil remains strong amid tight supply

Rotterdam higher viscosity RMK 500 CST fuel oil has been holding close to its highest level since at least mid-2014 versus the better-quality RMG 380 CST fuel as a result of tight supply, traders said.

FOB Rotterdam RMK 500 CST barges were assessed at a $3.25/mt discount to 380 CST FOB Rotterdam Barges on Monday, according to S&P Global Platts data, the highest level since the assessment began in mid-2014.

Since Monday, the discount has remained in a $3.50-$4.00/mt range.

“There is less high density [fuel oil] around,” a trader said.

It is usually large container vessels that purchase RMK 500 fuel oil, to burn when sailing the high seas to save costs on bunker fuel. Like its slightly more expensive variant RMG, RMK 500 does not meet the low sulfur content to burn in zones such as the Emissions Control Area around Europe.

“Shipowners burn RMK preferably when available and cheap enough versus RMG,” the trader said.

Nonetheless, bunker sources said RMK 500 was still economical and companies were still buying it as a bunker fuel. Typically ship operators who use RMK 500 tend to use it because they have refitted engines.

“RMK 500 only needs to be around $4/mt cheaper to look profitable,” a bunker buyer said.

In the refining sector, Lithuania’s 200,000 b/d Mazekai refinery typically produces 800 CST fuel oil and then blends down to produce RMK 500.

“People with Mazekai supply term are moving systematically to the East or Arab Gulf as they must see better value there,” the trader said.

In Singapore, the discount of 380 CST 3.5% FOB Singapore cargoes to 180 CST 3.5% FOB Singapore cargoes has been weak over the course of late September and October, traders said, adding that should not affect the market in Europe.

“Out of the oil arbed from Europe to the East, players prefer to take it to Singapore rather than the Arab Gulf as they do not get the benefit of the visco,” a second trader said.

The Persian Gulf is 180 CST driven, with Singapore being 380 CST driven.

Source: Platts

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