Fuel Oil
With a huge reduction in medium-heavy Middle Eastern crude intake, there is simply not enough resid going around. Even higher volume of WTI or any of the light grades will yield nowhere near enough resid to make up for that.
And at these premiums, the low sulphur pool is completely losing to the high sulphur pool when it comes to pulling any available mid-sulphur components.
The RFCC runs will still need to be sustained at their own minimum rates at the very least and at these margins we are seeing, little resid will be available for the blend pool.
On the other hand, with dirty freight still expensive, forward landed diffs for blend components into Singapore remain firm. And with VLSFO premiums in the low 20’s, forward blend margins for 0.5% don’t look particularly attractive anymore.
Back in 2022, GOFO exploded but there was no real oil lost. This time we have significant loss of fuel oil production.
Gasoil demand is more elastic and will likely correct faster than fuel oil.
Fuel oil demand is not/should not be elastic -> we cannot have ships running out of bunker.
Clean vs Dirty product spreads are going to have to revert narrower at times to keep bunker supplies ample.
