11.08.2020

Maritime market update: A new “normal” for maritime market

Risavika LNG index for September has increased by 8.9 % week on week to 17.93 EUR/MWh on higher European gas market prices due to tighter supplies amid seasonal demand change and lower flows through Ukraine.

Oil market remained rather stable. Fuel oil front prices (FO 3.5) closed at 240.32 USD/t last week, by 0.9 % higher week on week. Low Sulphur (MFO 0.5) front month closed at 302.71 USD/t, gaining 0.4 % from previous week. ARA oil inventories showed another build as of last week, indicating slower demand recovery in Europe.

After half of a year with IMO 2020 sulphur cap, it has become evident that the fuel of choice for maritime market has been a very low sulphur fuel oil (VLSFO or MFO 0.5). According to ING Group assessment of demand in Singapore ports, more than 70 % of fuel sales were VLSFO. While back in 2019, the refiners were getting ready to produce a new type of fuel and increasing the volumes, the reality of 2020 with covid-19 impact on demand pressured new fuel prices down leaving market oversupplied. Interestingly, high sulphur oil prices (HSFO or FO 3.5) have been rather resilient due to serving as a feedstock for refiners in the US and as lower stocks kept in the inventories from 2020. The spread between VLSFO and HSFO has fallen from almost 300 USD/t in late 2019 to just about 50 USD/t, which is significantly increased payback period of scrubber installations. This led to about 700 retrofits of scrubbers delayed or cancelled altogether as a result of the narrow spread. The rest of 2020 looks uncertain as new covid-19 cases alerts are appearing and the outlook for recovery seems to still be at the bottom of the “U-shape”.

LNG Risavika - LNG FOB Risavika 

LBG Risavika 10 % - 10 % blend of Liquified Biogas

FO 3.5 FOB Rdam – European 3.5% Fuel Oil Barges FOB Rdam (Platts) Futures Quotes

MFO 0.5 FOB Rdam - European FOB Rdam Marine Fuel 0.5% Barges (Platts) Futures Quotes

MGO 0.1 FOB ARA - Gasoil 0.1% Barges FOB ARA (Platts) Futures Quotes

ULSD FOB ARA - European Diesel 10 ppm Barges FOB ARA (Platts) Futures Quotes

Source: CME Group, Gasum, Reuters, ING, Forbes

*An estimate for LNG FOB Risavika 

** An estimate for 10 % LBG blend FOB Risavika