US Gulf Coast VLSFO Bunkers, LSMGO Remain Strong on Scarcity of Blending Components
As the U.S.-Iran conflict continues, the global middle distillate reshuffle has increased the cost of blending finished marine fuels and kept retail bunker prices high in the U.S. Gulf Coast.
The most obvious price movement is in low-sulfur marine gasoil, where prices have skyrocketed since the Middle East conflict began. According to the OPIS Global Marine Fuels Report, on Feb. 27, Houston LSMGO was assessed at $708 per metric ton ex-wharf. The following day, after the commencement of U.S. military action, the price jumped to $835/mt.
Since then, Houston LSMGO peaked at $1,430/mtw on April 7. In the 33 assessment days says since Feb. 27, LSMGO has averaged $1,215/mtw.
“You can always make the case that crude is higher, so is everything else,” one fuel oil broker said. “But it’s more than that … it’s taking all the pieces and finishing fuel for the retail [bunker] market.”
The “pieces” mentioned by the broker are lower sulfur distillates in various forms.
“Blending components are very expensive … if you can find them,” one Gulf Coast trader said. “You could use ULSD, but that would be incredibly expensive and that would blow up your blending economics.”
Blending other fuels, such as gasoline and road diesel, siphoned off much of the blendstocks typically used for bunker blending, such as light cycle oil. The gasoline and diesel markets always take precedent for supply coverage before the marine market.
NYMEX front-month ULSD was $2.6709/gal (about $835.75/mt) on Feb. 27 and hit a high of $4.6084/gal ($1,442/mt) on March 20 and averaged $3.9281/gal ($1,229/mt) since that time.
Very low-sulfur fuel oil bunkers sold basis Houston also spiked with the blending challenges. OPIS assessed VLSFO on Feb. 27 at $503/mtw, saw a high of $919/mtw on April 7, and averaged $778/mtw over that period.
“Cutter stock is hard to find,” the Gulf Coast broker said. “We aren’t seeing low-sulfur vacuum gasoil coming from Europe or the Middle East, so meeting viscosity and sulfur [specifications] is difficult.”
The broker added that few traders had finished VLSFO bunkers blended up 10 days ago.
“It’s getting better, but we had like two (companies) fully blended up.”
A second trader also mentioned exports of VLSFO to Asia as putting pressure on the Gulf Coast bunker market.
“When the Asia market ran up, that arb opened up and we quietly saw VLSFO being sent there,” the trader said. “[Asia has] cooled since then, but we’ve seen a supply gap.”
The sources also mentioned refinery issues in the Gulf Coast, most of which have been resolved. “But that’s something we deal with all the time,” the second trader said.
Reporting by Tom Sosnowski, tsosnowski@opisnet.com, Editing by Erik Papke, epapke@opisnet.com Michael Kelly, mkelly@opisnet.com