Backdoor Return of Russian Fuel Oil Won't Change Bunker Market Fundamentals: Sources

by Ship & Bunker News Team
Monday March 13, 2023

Prior to the Russia-Ukraine war, around half of the fuel oil cargoes going into the Amsterdam-Rotterdam-Antwerp market would be of Russian origin.But a year on from the outbreak of hostilities and that flow has all but disappeared as European Union sanctions have taken hold.

But according to a report by shipbroker Gibsons, changes in product tanker ownership have returned a fluidity to the oil markets that some players might not have thought possible as a flurry of sale-and-purchase deals has increased shippers' options.

Much of the product heading east is expected to end up in the Middle East. The region could become a blending hub where Russian components are transformed into products for re-export across the world.

"If this materialises, traditional Western export markets could see 'Middle East' gasoline competing with US and European supplies, perhaps even into the US itself despite the origin of the finished grades' original components," the broker said.

The disappearance of Russian fuel oil cargoes from the retail bunker market in Europe has to date had little impact (vis-a-vis other factors) as markets and players have adjusted to the new reality.

The advent of blended fuel with Russian origin components coming back into the market is unlikely to change that.

Evidence of market impact is absent while blended product by definition is hard to categorise as being 100% without certain components, market sources told Ship & Bunker.

"I don't see it, not yet, when asking about future prices," one player told Ship & Bunker.

Another said that while the effect of Russian-related products' circuitous route back into the European product market -- and by extension bunker market -- could be felt at the margin so could other events. It would be hard to know which was doing what, the source said, adding that if anything, the impact would be felt more in the cargo markets.

However, another view put quality ahead of price as the pertinent factor as far as market movements are concerned.

The line of argument relates to Russian fuel oil being relatively cheap straight run product. "Ships' engines can burn 500cSt without having to use any additives or other chemicals and the price differential if compared to 380cSt can be $50/80 per metric tonne," according to the source.