Fuel oil Prompts Independent ARA Oil Product Stock Draw

April 23, 2020 – The total volume of oil products held independently in storage in the Amsterdam-Rotterdam-Antwerp (ARA) refining and trading hub fell during the past week, largely as a result of higher fuel oil flows to Singapore, according to consultancy Insights Global.

Overall stocks reached seven-month highs a week earlier, and inventories of gasoil and gasoline continued to increase during the week to yesterday amid low demand and steep contango in the forward curve for both products. The overall fall was mainly the result of the VLCC Bunga Kasturi Lima departing for Singapore carrying fuel oil across two separate bookings. Demand for bunker fuels from within the ARA area remained low, supporting the viability of the arbitrage route.

Stocks of naphtha and jet fuel also fell. Naphtha inventories fell on the week on lower imports. Tankers did arrive from France, Norway, Poland and Spain but carrying relatively small cargoes. The volume of naphtha heading up the Rhine into Germany on barges fell, and demand from gasoline blenders was very low. Naphtha is more economical as a blending component when it trades at a heavy discount to gasoline. But northwest European naphtha was assessed above the benchmark Eurobob oxy gasoline quote yesterday, making it uneconomical. Demand in northwest Europe came predominantly from the petrochemical sector, where high prices of rival feedstocks are probably supporting interest in naphtha.

Jet fuel stocks fell, pushed down by the departure of a tanker for the UK and at least one for use as floating storage in the North Sea. Part cargoes arrived from the Mideast Gulf and Asia-Pacific. Local demand was low, which freed up several barges in the ARA area that have typically been used to carry jet fuel to Amsterdam’s Schiphol airport. Some market participants have sought to take advantage of excess barge capacity in the region to use the vessels as floating storage, particularly in the gasoil market.

Gasoil inventories, including those of heating oil and diesel, rose. The Ice gasoil forward curve is in steep contango and consumer demand for heating or road fuels was broadly stable at a low level. Demand comes predominantly from market participants seeking to store cargoes. Ice May gasoil traded weaker than the month-ahead Ice June gasoil contract at lunchtime today, creating a clear incentive and encouraging the rare use of barges as floating storage.

Gasoline inventories also rose on low demand and steep contango in the forward curve. Demand in Europe has dropped by more than half in some major European markets since travel restrictions were imposed. A single tanker departed for key export market the US, but outflows to China rose as refinery run cuts east of Suez and the easing of lockdown measures supported gasoline demand. Tankers also left the ARA for use as floating storage off Amsterdam, as well as leaving for the Mediterranean and Singapore. Tankers arrived from France, Russia, Spain, Sweden, the UK and an LR tanker arrived from Finland.

Reporter: Thomas Warner

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