• LSMGO prices surge on tight supply
• US fuel oil stocks grow amid Mexico and Middle East imports
• Prompt VLSFO tight in Zona Comun
LSMGO supply is limited amid dwindling distillate inventories on the US East Coast. Refiners and suppliers have not been able to keep up with demand for distillate products, including marine gasoil. And strong diesel margins may have favoured diesel production over gasoil for the marine fuel pool.
Total US distillate inventories have been drawn to 14-year lows and the draw has been particularly strong in the Central Atlantic region, where the port of New York and New Jersey is located. At 9.1 million bbls their stocks are now 61% below their level in mid-December, according to Energy Information Administration (EIA) data.
“The shortage is likely to be intensified later in 2022 and 2023 as a result of U.S. and European Union sanctions on Russia’s petroleum exports because Russia is a major supplier of distillate fuel oil,” says Reuters columnist John Kemp, drawing on research on economic and commodity cycles.
He says the acute distillate shortage has driven up prices for not just diesel and gasoil, but also crude, and does not expect the shortage to ease until consumptions growth slows or reverses.
With the supply-demand balance tilting ever more to undersupply, LSMGO prices have surged. New York’s price has been at a highly unusual premium of around $400/mt over Houston this week.
There are also signs of LSMGO tightness in other US ports, including Corpus Christi where a long queue to load product has pushed back a supplier’s earliest delivery date to six days ahead. VLSFO is more readily available in the Texan port.
All grades are in tight supply on the US West Coast. A supplier’s earliest delivery date for VLSFO in Los Angeles is 11 days out, while another supplier requires around 10-12 days of lead time in San Francisco.
Meanwhile, US fuel oil inventories added weight through April amid builds in the Gulf Coast and East Coast regions, while West Coast inventories were steadier and declined slightly, according to the EIA.
Higher fuel oil imports have supported the US stockbuild. According to cargo tracker Vortexa, Mexico displaced Russia as the biggest fuel oil import source through the month. A US embargo on Russian oil came into place in early March, but 45 days were given to wind down existing contracts. The last fuel oil imports from Russian ports hit US coasts in mid-April and no new cargoes have been confirmed since.
Prompt VLSFO supply has been under pressure in Argentina’s Zona Comun. Several suppliers’ earliest delivery dates range between 5-8 days out, which is roughly the same as the 6-7 days of lead time estimated at the beginning of the week.
Source: ENGINE (https://engine.online/)