Shipping industry intelligence service Alphatanker warns that the price of marine bunker fuel is about to soar. It adds that the price spike impact 3.5 percent high-sulfur fuel oil (HSFO) and 0.5 percent very low-sulfur fuel oil (VLSFO).
"There are expectations that crude, and therefore marine fuel, could move higher in the coming weeks as oil markets tighten further. This will undoubtedly clip gains in tanker earnings," Alphatanker says.
Data from fuel pricing data company Ship & Bunker (S&B) says that IFO 380 HSFO, mostly used by ships with exhaust scrubbers, is now priced at $514.50 per metric ton (MT). The current price is 51 percent higher than the price at the beginning of 2021. Meanwhile, VLSFO has hit $601 per MT – a 42 percent price increase since the start of 2021.
S&B Managing Director Martyn Lasek says: "Bunker prices in real terms are the highest they've been since July 2014. The main driver for bunker pricing is the price of oil – that's the key."
He also points out that HSFO prices have not reached such highs since October 2014.
Figures from Lasek's firm also notes that the spread between HSFO and VLASFO has unexpectedly narrowed over recent months. According to S&B data, the price difference between the two fuels has dropped to $86.50 per MT for the top 20 ports. This is slightly lower than the $121.50 high from June 21, and more than a quarter of the $315 per MT spread recorded in Jan. 2, 2020.
This lower price means that scrubbers are providing less savings to shipping companies, albeit on a temporary basis. (Related: Coronavirus has made jet fuel so cheap it's now being used to fuel ships.)
Fuel hikes impact all aspects of the shipping industry
The S&P Global Platts T4 index says that a Capesize – a dry bulk ship with a capacity of around 180,000 deadweight tons – running on VLSFO is spending $24,596 on fuel daily. It also notes that scrubber-equipped Capesize vessel that runs on HSFO only consumes $22,815 on fuel daily.
The assessment also notes that scrubber-equipped Capesize vessels earn $1,256 more due to fuel-cost savings than their VLSFO-consuming counterparts.
S&P Global Platts Head of Global Oil Analytics Richard Joswick says sentiment toward bunker fuel prices is "generally bullish." He elaborates: "Our outlook is that the price of crude oil stabilizes and maybe eases a little bit from where it is now through the winter into the first half of next year." (Related: Shipping industry turns its eyes to hydrogen to replace carbon-rich bunker fuel.)
"That said, there are risks. If there were some unexpected disruption, it would be harder to cover. So, the risks are probably more to the price upside than downside," Joswick adds.
Alphatanker says that the shipping sector has taken a "double whammy." Aside from the higher bunker fuel prices, the shipping intelligence service also mentions a decision by the Organization of the Petroleum Exporting Countries (OPEC) not to increase oil production at a faster pace.
Earlier this year, OPEC refused to go beyond its 400,000 barrels per day (bpd) average global production. The decision stems from the other member countries recording lower oil exports since the start of 2021.
While Saudi Arabia and the United Arab Emirates have managed to raise their combined oil exports by around 1.9 million bpd over the three months to September, the remaining producers have recorded declines of oil exports.
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