Northwest European fuel oil cracks have slumped to four-month lows after Brent crude prices rallied on political turmoil in Egypt.
The high sulfur fuel oil barge crack -- the discount of FOB Rotterdam 3.5% sulfur fuel oil barges to Dated Brent -- fell to minus $14.19/b from minus $11.90/b Monday. This was the lowest HSFO crack since March 8, when it was assessed at minus $14.35/barrel.
Meanwhile, the low sulfur fuel oil crack moved to minus $11.32/b. This was the lowest LSFO crack since March 7.
"The Suez Canal is now on high alert and there are increased risks that there may be sabotage of oil pipelines, mainly the SUMED pipeline," said Price Futures Group senior market analyst Phil Flynn.
Flynn said closure of the SUMED pipeline and the Suez Canal would add an estimated 6,000 miles of transit around Africa to Persian Gulf oil shipments into Europe.
"Delayed loads and losses to the oil market and increasing transportation costs will push up the price of crude oil and products as well as the longer-haul routes will increase demand for bunker oil to fuel the ships," Nordea Markets analysts said in a note.
"The fear that Egypt would close down the Suez Canal at the outset of the Arab Spring in 2011 pushed up oil prices by around $7/barrel."
