LONDON — European fuel oil, used mainly as shipping fuel, traded close to the lowest in more than eight months on Friday as Russia increases exports.
Fuel oil in the Mediterranean traded at a discount of $9.70 per barrel to Brent as of 2:52 p.m. in London. The discount widened to as much as $11.18 per barrel on March 8, the most since June 2009, according to Bloomberg calculations.
Supplies are "probably coming from the Black Sea," Roy Mason, founder of tanker-tracker Oil Movements said Friday. Russia exports fuel to Europe via ports on the Black and Baltic seas.
The country levies lower export duties on low-quality products such as fuel oil than high-value products like jet fuel. This encourages Russian oil companies to produce more fuel oil, as it allows them to make additional profit on the export duty differential, Troika Dialog wrote in a report in October.
Russia exported 4.79 million tons in January, or about 980,000 barrels per day, according to the Federal Customs Service. That's up 2.1 percent on the 4.69 million tons shipped the same month a year earlier.
Russian fuel oil exports also rose in February on the month, JBC Energy wrote Friday in a research note.
The levy on fuel oil exports is $98.7 per ton as of March 1, down from $104.9 per ton last month, Artyom Konchin, an oil and gas analyst at UniCredit, said by phone. That compares with a levy of $253.6 per ton on crude oil.
"Increasing supplies from Russia and sluggish regional demand have also contributed to fuel oil stock building in Rotterdam and exerted pressure on fuel oil differentials on the spot market," the Organization of the Petroleum Exporting Countries wrote in a report earlier last week.
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