North American ECA Slowing U.S.-Europe Fuel Oil Exports

Data indicates that fuel oil exports to Europe are falling.

Fuel oil exports from the U.S. to the Netherlands were the second-highest on record in 2012 after peaking in 2011, but shipments to Europe slowed in the second half of the year as new Emissions Control Area (ECA) regulations drove up demand for low-sulfur fuel in the U.S., Platts reports.

Figures from the federal Energy Information Administration (EIA) show 16.735 million barrels of fuel oil moved from the U.S. to the Netherlands, the major European importer of the fuel, over the year, compared with 18.17 million barrels in 2011.

The Netherlands is the second-biggest importer of U.S. fuel oil after Singapore, with much of the demand likely representing low-sulfur fuel, although the EIA does not break its numbers down by sulfur content.

Exports to the European nation had stood at only around 2 million barrels a year before 2006, when the first sulfur ECA was implemented in the Baltic Sea, at the time limiting marine fuel sulfur content to a maximum of 1.5 percent.

European demand for low sulfur fuel then rose steadily with European ECA expansion and the maximum sulfur content was reduced to 1 percent in 2010.

"The 1% sulfur bunker market is very big in Rotterdam and the 1% sulfur production on the East Coast is often slurry with high metals that you can get much better value for over there, where it can be more easily blended into the 1.0% sulfur bunker pool," a U.S. fuel oil trader said.

What was said to be an uncharacteristic December resulted in total fourth-quarter export volumes to the Netherlands being the second-highest on record for the period.

However preliminary EIA data suggests exports from the U.S. to the Netherlands are actually slowing as the North American ECA, in effect since August 1, 2012, boosts domestic demand for low-sulfur fuel.

Removing December from the picture, export volumes from August to November were down approximately 19 percent, or 3.5 million barrels, compared with the same August-November period in 2011.

In October 2012, OW Bunker said U.S. fuel suppliers were having some problems adjusting to changes in demand for low-sulfur fuel due to the new ECA, which was reported to be as much as 50 percent of the total U.S. market.