Fuel oil cracks reverse course in Europe after four days of losses

London, (Quantum Commodity Intelligence) – Fuel oil refining margins in Europe reversed course Wednesday following a four-day losing streak, according to Quantum data, on a day which saw most products make gains versus crude after Brent dropped 3.8% and gasoline and distillates stocks in the US fell by more than was expected.

June and July swaps for high-sulfur fuel oil barges FOB ARA were both assessed at $349.25/mt at the London close, down $12.75/mt and $13/mt respectively, but still gained strength relative to sharply lower feedstock crude.

Cracks for the two front-month swaps were up $1.12/b and $1/b at -$11/b and -$10.63/b.

Although negative cracks are expected to move closer to zero when crude prices drop, the percentage value for fuel oil versus Brent increased, indicating a real improvement in market sentiment.

However, June and July crack values for the bunker fuel were still down 8% and 6.3% on the week.

The spread between higher-sulfur fuel oils and marine fuel with 0.5% sulfur also remained historically high at $194.75/mt for the month ahead, creating a strong incentive for ships to operate scrubbers instead of using more environmentally friendly fuels.

June swaps for marine fuel 0.5% FOB ARA turned positive again after two days in negative territory, amid the slight rebound in HSFO cracks.