The low sulfur fuel oil barge crack, the discount of FOB Rotterdam 1% sulfur fuel oil barges to front-month Brent crude futures, fell $1.43/barrel Friday to minus $12.39/b, its lowest in over five months.
It was last lower on January 30 at minus $12.64/b, Platts data showed.
In swaps, the front-month low sulfur cargo crack swap was down $1.34/b at minus $10.99/b, its lowest in the three months since April 2 when it was minus $11.30/b.
With fuel oil typically pricing at a discount to crude, sharp gains in crude price tend to widen fuel oil cracks, as happened last week. However, crude futures turned lower in Monday's European morning session, giving back earlier gains that saw NYMEX crude hit a fresh 14-month high amid ongoing geopolitical concerns, with focus shifting to events in Europe.
"The marquee event is ECB President Mario Draghi's appearance before the Committee on Economic and Monetary Affairs this afternoon where he can be expected to face further questioning on the thinking behind the announcement last week that the ECB expects its key interest rates 'to remain at present or lower levels for an extended period of time'," Lloyds Bank analysts said in a note.
At 0940 GMT, August ICE Brent was down 69 cents (0.64%) at $107.03/b, while August NYMEX crude had shed 26 (0.25%) to $102.96/b.
Within fuel oil, low sulfur fundamentals continued to look bearish versus high sulfur, said traders, dragging down swaps.
The hi-lo swap, the premium of FOB NWE 1% sulfur fuel oil cargo swaps over FOB Rotterdam 3.5% barge swaps, fell $4.25/mt to be assessed at $18/mt Friday, its lowest in the two months since April 30.
"The Hi-lo has come off just because high sulfur is strong, and low sulfur is still weak, it could be even lower," said one trader Monday. "We're seeing very weak power station demand, and many LSFO shorts are covered for the next two months."
The hi-lo swap was a bit too high compared to physical, said the trader, adding that now it was "more balanced."
The physical hi-lo spread was assessed down $4.25/mt at $6.25/mt Friday, its lowest since May 1.
