Refiners are chasing diesel at all costs — and flooding the system with HSFO in the process.
Refiners are chasing those lucrative diesel cracks so aggressively, with a subpar inventory and toolkit (global coker capacity), that we are being left with too much HSFO as a consequence. This is causing an increasing disparity between HSFO and LSFO cracks.
Even the escalation in power generation demand for HSFO does not appear to be a sufficient counterbalance.
This is now starting to show up in Heavy Sweet and 0.5%, as companies are beginning to realise that arriving at this much HSFO is not only economically unsustainable, but also impractical after the fact.
| ARRIVAL | VESSEL | QTY | CGO | LAYDAYS | LOAD PORT | RATE | CHARTERER/RECEIVER |
|---|---|---|---|---|---|---|---|
| DISCHARGED | YU LIN WAN | 100 | HSWEET | 20-22/04 | PENGLAI | COA | CNOOC-HUIZHOU (CNOOC) |
| ANCHOR | AMANTEA | 130 | HSWEET | 25-27/03 | ANGOLA | O/P | UNIPEC-HUIZHOU (CNOOC) |
| ANCHOR | LIAN SHENG HU | 60 | HSWEET | 24-25/04 | BOHAI BAY | COA | CNOOC-HUIZHOU (CNOOC) |
| 04 MAY | SESTREA | 135 | HSWEET | 10-11/04 | BASHAYER | RNR | PETROCHINA-JIEYANG (PDVSA/PETROCHINA) |
| 04 MAY | BEI HAI ZHAN WANG | 100 | HSWEET | 27-29/04 | PENGLAI | COA | CNOOC-HUIZHOU (CNOOC) |
| 06 MAY | NEW VIGOROUS | 135 | HSWEET | 19-21/03 | CAMEROON | COA | PETROINEOS-ZHANJIANG (SINOPEC/KPC) |
| 15 MAY | PSARA I | 135 | HSWEET | 22-23/04 | BASHAYER | 13.383M | PETROCHINA-JIEYANG (PDVSA/PETROCHINA) |
| 16 MAY | SEAWAYS HENDRICKS | 270 | HSWEET | 12-14/04 | ANGOLA | 17.148M | UNIPEC-HUIZHOU (CNOOC) |
| 19 MAY | YUAN QIU HU | 140 | HSWEET | 16-18/04 | ANGOLA | O/P | UNIPEC-MAOMING (SINOPEC) |
| 23 MAY | NEW VOYAGE | 285 | HSWEET | 19-21/04 | ANGOLA | COA | UNIPEC-ZHANJIANG (SINOPEC/KPC) |
| 23 MAY | SEA SPLENDOR | 275 | HSWEET | 20-22/04 | ANGOLA | O/P | SINOCHEM-YANGPU (SINOPEC HAINAN) |
| 28 MAY | NEW HORIZON | 140 | HSWEET | 27-29/04 | ANGOLA | COA | SINOCHEM-YANGPU (SINOPEC HAINAN) |
| 28 MAY | CAVALRY | 145 | HSWEET | 21-23/04 | BENIN | RNR | PETROINEOS-JIEYANG (PDVSA/PETROCHINA) |
| 29 MAY | DELTA GLORY | 295 | HSWEET | 24-26/04 | CAMEROON | RNR | PETROINEOS-JIEYANG (PDVSA/PETROCHINA) |
| 01 JUNE | MARAN HERMES | 135 | HSWEET | 10-11/05 | BASHAYER | 10.706M | PETROCHINA-JIEYANG (PDVSA/PETROCHINA) |
| 03 JUNE | NEW MERIT | 140 | HSWEET | 27-29/04 | ANGOLA | COA | UNIPEC-MAOMING (SINOPEC) |
| 14 JUNE | POLA | 135 | HSWEET | 23-24/05 | BASHAYER | 9.157M | PETROCHINA-JIEYANG (PDVSA/PETROCHINA) |
This was briefly mentioned last week, but Chinese Oilcos continue to ramp up activity in this region.
CNOOC flows remain consistent, but the rest reflects a more directive shift — the State effectively signalling to teapots to step away from this flow.
This helps explain why teapots have suddenly leaned into Kazakhstani crude, joining Korea in using it as a relatively cheap — albeit less desirable — way to secure light ends.
| ARRIVAL | VESSEL | QTY | CGO | LAYDAYS | LOAD PORT | RATE | CHARTERER/RECEIVER |
|---|---|---|---|---|---|---|---|
| 28 MAY | C. BRAVE | 275 | HSWEET | 27-29/04 | ANGOLA | 11.843M | TOTAL-KAOHSIUNG (CPC) |
| 01 JUNE | FPMC C JADE | 140 | HSWEET | 30-02/05 | ANGOLA | O/P | FORMOSA-MAILIAO (FORMOSA) |
Booking this much heavy sweet is out of character for Taiwan, particularly for Formosa.
CPC has some familiarity in this space, but overall this represents a deviation from their typical crude slate.
| ARRIVAL | VESSEL | QTY | CGO | LAYDAYS | LOAD PORT | RATE | CHARTERER/RECEIVER |
|---|---|---|---|---|---|---|---|
| DISCHARGED | ASTRA MARIS | 140 | HSWEET | 29-31/03 | ANGOLA | 7.0M | VITOL-DUNG QUAT (PETROVIETNAM) |
| 20 JUNE | APOLLO | 100 | HSWEET | 21-23/05 | ANGOLA | O/P | PVTRANS-DUNG QUAT (PETROVIETNAM) |
Vitol introduced this yield profile and its associated economics.
PetroVietnam is now replicating this independently, sourcing Angolan barrels directly.
| CRUDE | API | RESID YIELD |
|---|---|---|
| Angola (Dalia) | 23.3–23.7 | 40–50% |
| Angola (Kuito) | 19 | 50–60% |
| Angola (Mondo) | 27.9 | 30–40% |
| Angola (Pazflor) | 24.5–25.6 | 35–45% |
| Angola (Saturno) | 25.9 | 35–40% |
| Argentina (Escalante) | 23.5–24.1 | 40–45% |
| Australia (Pyrenees) | 19.3 | 45–55% |
| Australia (Stag) | 18 | 50–60% |
| Australia (Van Gogh) | 17 | 55–65% |
| Australia (Vincent) | 18–19 | 50–60% |
| Brazil (Atalanta) | 14–16 | 55–65% |
| Brazil (Ostra) | 20–24 | 40–50% |
| Cameroon (Doba) | 28.5 | 30–40% |
| China (High Tan) | 18–20 | 45–55% |
| Niger via Benin (Meleck) | 24.4 | 40–45% |
| Sudan (Dar Blend) | 23.3–26.4 | 35–45% |
| United Kingdom (Kraken) | 13–15 | 60–70% |
The dark horse from a derivatives standpoint is HSFO, particularly on the short side, and it appears Trafigura is already positioning heavily.
Increased Venezuelan crude into the US Gulf Coast (via Trafigura, Vitol and Chevron) has made the region effectively straight-run self-sufficient.
From an import standpoint, the US Gulf is starting to resemble the US Atlantic Coast, leaning more towards LSFO imports from outside the Caribbean basin.
Reliance is absorbing large volumes of Venezuelan crude, yielding up to 80% HSFO.
Rather than upgrading via HDUs, they are using it as feedstock and importing LSFO, suggesting the system is becoming strained.
If conditions remain unchanged post-summer (September), HSFO cracks should widen again.
However, a reopening of Hormuz introduces a counter risk — a surge in HSFO supply and a collapse in the crack.
Current HSFO cracks are -9.50 to -11.00 USD.
Pre-IMO 2020 levels were -30 to -35 USD.
These are the structural levels traders like Trafigura and Glencore are likely positioning around.
