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US sanctions on Venezuela creating strong pull for HSSR from Europe to USGC



By Sarah-Jane Flaws, Tamara Sleiman / Platts

Petroleumworld 03 07 2019

A strong pull from the US Gulf Coast for high sulfur oil products has emerged amid US sanctions on Venezuela, drawing heavy flows of high sulfur straight run cargoes from the Baltic and Northwest Europe across the Atlantic.

The sanctions against Venezuela's state-owned oil company PDVSA, introduced on January 28 and expected to remain in effect until Venezuelan President Nicolas Maduro leaves office, have forced US Gulf Coast refiners to scramble for new sources of heavy crude and cut off flows of US refined products and diluents to Venezuela.

Displaced heavy crude barrels mean there are less heavy byproducts being produced by refineries in the US that would typically run Venezuelan crudes. Consequently, refineries in the USGC have turned to HSSR to process in their crude distillation units. HSSR is used as alternative to crude when medium to heavy sour crude prices are high.

In parallel, the Urals crude market has maintained strength, with Urals NWE last assessed at forward Dated Brent minus 75 cents/b on Tuesday, compared with minus $2.7/b this time last year. An increase in Urals differentials would typically boost the feedstocks market, particularly high sulfur feedstocks such as HSSR.

The arbitrage from the Baltic Sea was said to be workable by numerous sources, with many attributing it to the counterseasonal strength in the high sulfur fuel oil crack amid falling supply from Russia, a strong pull for product from Singapore, and ongoing refinery upgrades globally in preparation for the International Maritime Organization's sulfur cap, which will require sulfur content in marine fuels to be cut to 0.5% from next year from 3.5% currently.

The front-month fuel oil crack was last seen trading on ICE Wednesday at minus $3/b, compared with minus $10.72/b this time last year. The front month fuel oil crack reached the narrowest discount on February 13 at $2.6/b, since the assessment began in June 2006.

HSSR is currently trading below the HSFO crack, one source said, providing more of an incentive to work the arb for HSSR, a cheaper alternative, from the Baltic ports to the USGC.

The Suezmax Sonangol Huila was heard on subjects to carry HSSR STS Malta mid-March, destined to discharge in the USGC, according to shipping sources.



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Story by Sarah-Jane Flaws, Tamara Sleiman from Platts / SPGlobal.

- newsdesk@spglobal.com

03 06


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