As we enter the New Year the spotlight is on sulfur, fuel cost, and quality.
As of January 1 global limits on sulfur were reduced to 3.5% and on August 1st the North America ECA zone becomes active with a 1.0% limit. Fuel costs since 1st quarter of 2011 have pretty much remained above $640 a ton for RMG 380.
However a number of refineries are expected to cut production as they shut down for upgrades.

The expected shutdowns and anticipated growth in world economies should provide the catalyst to further raise the price of fuel and potentially increase supply and quality issues.

SULFUR

We took a look at all RMG 380 samples (No low sulfur 380) for the 4th quarter 2011. Approximately 7% of the samples tested above the 3.5% sulfur content. Of the 7 % over the 3.5% limit the below pie graph provides a breakout of where the 7% sourced.

The biggest area of concern is the Middle East. More than half of the over 3.5 % samples came from the Middle East.
Further of the total amount of samples received in the 4th quarter from the Middle East 48.8% were above the 3.5% new global limit for 2012. 

For higher viscosity fuels the percentages are more than double that of 380. In the 4th quarter 2011 approximately 19% of submitted samples of 500 viscosity or more had sulfur tested above 3.5%.

CATFINES

We have reviewed the major bunker ports over a 3 year period as well as 4th quarter 2011.
As illustrated in the chart below, the percentage of samples that fall under a 20 mg/kg reading continues to decline in almost all areas. 

With most engines manufacturers recommending a reading of 15 or less, the percentage increases should serve to remind all to ensure that their fuel systems are working properly with 15 mg/kg or less of Al/Si entering the combustion chambers.

Fuel Prices

Since the 1st quarter of 2011 RMG 380 has traded between $640 and $660 MT. 
We are forecasting a slow climb in bunker pricing as suppliers try and source suitable cutter stock to deal with the new sulfur regulations and supply of residual oil is cut back when refineries begin upgrade programs.
We expect RMG 380 to rise to $675 by late second/early third quarter 2012 and 380 LS to top $700.

Please find our January newsletter attached.

Rob Leventhal
Vice President Sales and Marketing
Oiltest Marine Services
67 Walnut Avenue, Suite 107
Clark, NJ 07066
Office: 732-396-0565
Fax: 732-396-0685
Mobile: 908-902-0840
Web www.oiltest.com