The bunker fuel market in the Black Sea is waiting for higher demand from the dry bulk sector as harvest season in the region picks up, although the extent to which demand will increase is in question.

Harvest season traditionally ramps up through July and is at its peak in August-September. Russia exported 2.03 million mt of grains in July 2016, 3.31 mt in August and 4.62 mt in September, according to data from the Russian Ministry of Agriculture.

Black Sea wheat is currently the most competitive origin globally, as a result of the sharp uptick in US and Australian wheat prices, according to agriculture sources.

This bodes well for the dry bulk sector in the Black Sea but increased demand may be passed on to the regional bunker market only partially.

“Bunker prices are a bit high [at Novorossiisk, Russia] so they are taking minimal volumes,” a bunker trader said Tuesday. “Harvest should bring more volumes but there is a question about how much more,” the trader added.

S&P Global Platts assessed 380 CST fuel oil at Novorossiisk at $298/mt delivered Tuesday, a $15/mt discount to rival port Istanbul, Turkey. Prices have averaged $17.66/mt since June 22.

Sources said this is a narrow discount and that for Novorossiisk prices to be attractive the discount to Istanbul should be at least $20/mt.

Novorossiisk’s discount to Istanbul at the same time point in 2016 was $85.09/mt.

The start of Black Sea grains exports was reported by several shipping sources this week, although it has yet to lift freight activity in the region after a dearth of demand in the past month.

“[We] certainly expect to see an increase on activity sooner rather than later,” a shipbroker said.

Source: Platts