The high sulfur fuel oil physical Med/North -- the premium of 3.5% FOB Med cargoes to 3.5% FOB Rotterdam barges -- crossed the $4.00/mt threshold Wednesday for the second time in a week. It was assessed at $4.25/mt again, after recording the same level last Friday, for the first time since May 16.
HSFO FOB Mediterranean cargoes have been trading at a premium to HSFO FOB Rotterdam barges since July 7, after the physical Med/North differential spent a whole month in negative territory.
Traders attributed this to a tightening of the Mediterranean market, where sweet crude runs have seen the supply of HSFO shrink in July.
"The Med is stronger, Repsol was not producing [HSFO]," one trader said, adding that inflows of product into the region were also limited. "With the freight being higher, product is not coming from Northwest Europe into the Med, it doesn't make sense for now. But we'll see what happens if the freight comes down."
However, other sources said the Northwest European market remained the best pool of product for West Mediterranean players.
"I'm not seeing any product in the Med, so if you want to buy, you need to bring product from Northwest Europe," a trader said. "[The arbitrage from Northwest Europe] is open into West Med. It might not work going further into the Med but in Tangier, Algeciras, Ceuta, Gibraltar, it works."
