EMEA News
Uneasiness Over Term Contracts Spreads to Europe
Uneasiness over agreeing term fuel oil contracts already seen in southeast Asia is surfacing in Europe.
While in the southeast Asian region the pressure point is distillate fuel grades, in Europe both high sulfur and low sulfur fuel oil contracts are in the frame, according to price reporting agency SP Global Platts.
The switch to a 0.5% sulfur cap on bunker fuel is expected to lead to price volatility which is leading "some traders [to] have reservations about being locked into the 2019 contracts".
The delivery period for fuel oil tenders runs from December to January 2020, the date the new sulfur cap on bunker fuel comes into force.
Platts says that players are likely to adopt different positions on the market implications of the bunker fuel specification change.
Demand for 1% sulfur fuel oil, a useful blendstock for 0.5%, could increase and so will its price. But power utilities, particularly island states in the Mediterranean, require the fuel thereby creating tension between competing markets which traders could use to their advantage.
"The battle with blenders will likely see utility companies slapped with hefty premiums on their annual tenders by suppliers that know the islands will have to pay to power their grids and not lose volumes to the blending market," Platts said citing trade sources.
But refiners may not want to be locked into a tender for a year when they can take advantage of spot opportunities and maximize margins in the blending market, the price reporting agency added.
