Premia in the Northwest European LSFO complex have been weakening over the past weeks as market participants reported a decline in bunker demand.
Physical FOB Rotterdam barges and FOB NWE cargoes were both assessed at a month low premium to their respective front-month swap, Tuesday.
The premium of FOB Rotterdam barges to the November swap dropped to $4.50/mt, while the FOB NWE cargo premium to the front-month swap fell to $3.50/mt, both levels not seen since September 29 and 30 respectively.
Low sulfur fuel oil traders said the market for 1% sulfur content fuel oil was shrinking ahead of January 2015, which will see a tighter cap imposed on sulfur emissions in ECA zones.
"The market is getting smaller rapidly," one trader said, explaining that supply and demand for 1% sulfur fuel oil were both declining.
Bunker players also reported decreasing requirements for the 1% sulfur grade, with reports of a shift towards other types of fuel.
"Demand for bunkers is getting less and less, we don't see big inquiries any more," one trader said. "We lately see no more than 500 mt for 380 CST LSFO compared to over 1,000 mt earlier in the year."
"We are seeing a big change since the last few weeks," another source said. "There is more demand for gasoil now especially for the liners."
On the paper side, front month hilo swaps -- the premium of 1% FOB NWE cargo swaps over 3.5% FOB Rotterdam barge swaps -- continue to hover around 14 month lows, having shed $51.50/mt between their year peak of $57/mt on May 22 to the almost 46 month low reached on October 15, when it was $5.50/mt.
Second month hilo swaps have fared similarly, trending at more than 42 month lows since August 19, when they hit $14.75/mt. It was last lower on February 18 2011 when it was $14.25/mt.
