The 3.5% FOB Med fuel oil cargo market was trading at a $3.00/mt premium to the front-month August swap Monday, the highest in seven weeks. The premium was last wider on June 6, when it was at $4.25/mt, Platts data showed.

Traders attributed strength in the HSFO Mediterranean market to a combination of firm bunker demand and reduced local supply.

In the major West Mediterranean and East Mediterranean ports, demand for shipping fuel has increased due to the summer cruise season peak and with a rising number of cargoes on the arbitrage routes to Singapore and the US.

West Mediterranean bunker players reported a 20-25% increase in demand from cruises compared to a year ago, while the Spanish port of Algeciras registered a 40% increase in cargo demand in June compared to last year.

“June was a good month,” one Gibraltar trader said.

Meanwhile in the Eastern Mediterranean port of Piraeus, bunker suppliers reported a 10% rise in demand in June/July from May, which they attributed to cruises and container ships.

“We noticed larger volumes requested by the cargoes,” another trader said.

On the supply side, traders said a drop in the local production of HSFO added to the current market tightness.

“The market is a bit more tight as Repsol produced less than usual,” one trader said. “I think they had one cargo for trading and one for their own system.”

Traders said Repsol had been running a light sweet crude this month, which led to a lower output of HSFO. Repsol was not available for comment.

“But I don’t think the Med is going to get tighter,” the trader said. “We are seeing some cargoes coming from Northwest Europe, including 80,000-100,000 mt from Totsa which will probably go into Gibraltar or the Canary Islands. We’ll see what happens, which also depends on how the market evolves in Amsterdam-Rotterdam-Antwerp.” Totsa was not immediately available for comment.