Australian heavy sweet Pyrenees crude trades at new record high

Quantum Commodity Intelligence - Australian heavy sweet crude oil has surged to record premiums this week, as soaring 0.5% sulfur fuel oil boosted demand for the low-sulfur crude.

An August-loading Pyrenees crude cargo was reportedly sold at around Dated Brent plus mid-$30s per barrel vs Dated Brent, up from around +$20/b for a July cargo.  

This compares to the record premiums of more than $30/b to Dated Brent in early 2020 following the introduction of the 0.5% sulfur bunker fuel, as mandated by IMO 2020.

Cracks for marine fuel 0.5% sulfur in Asia stormed to fresh all-time highs on Thursday of around $35/b over Brent futures, supported by ongoing shortages and healthy bunker demand.

The spot crack to Brent for 0.5%S in Singapore jumped $2.79/b and passed last week's all-time high as Quantum marked the spread at +$34.46/b.

Persistent high prices in the distillates market have diverted the supply of blend components away from lower sulfur fuel oils, with refiners relying on sweeter crudes to meet product specifications rather than jeopardising losing diesel and jet fuel revenues.

At 19.0 degrees API gravity and around 0.2% sulfur, the Australian heavy sweet grade is in demand for blending into the 0.5% bunker pool, where a shortage of lighter distillate fuels used in blending has seen the low-sulfur bunker grade rocket in recent weeks.

BHP owns a 71.43% operating interest in the Pyrenees field and is partnered by Inpex and Santos, while traders noted that Santos is typically a spot seller via tender.

The Van Gogh grade is expected to attract a similar premium to Pyrenees, while Vincent, also a heavy sweet, has been trading below Pyrenees due to a recent change in specifications on the grade, making it less suitable for 0.5% fuel blending.