BUNKERWORLD INDEX: Supply shortages support on-week gains in bunker markets
17th June 2022 14:49 GMT

Bunker markets were faced with limited supply and varying states of demand, amid fluctuating sentiment in the wider oil complex in the week ending June 16.

S&P Global Commodity Insights Bunkerworld 0.5% sulfur fuel oil index ended the week at $1,058/mt, down $18/mt on the day, down $44/mt week on week and $113/mt higher than the 30 days previously.

The BW380 index, which represents value for 3.5% sulfur fuel oil, ended the week at $707.50/mt, down $8.50 on the day, stable week on week and $14.50/mt lower than 30 days previously.

Crude oil futures have wavered as new sanctions on Iran’s network of petrochemical producers and front companies countered mounting fears of a global recession.

The US Treasury Department on June 16 sanctioned Chinese, Hong Kong and UAE companies linked to Iran’s petrochemical exports to Asia. The move comes as talks to revive the Iran nuclear deal or the 2015 Joint Comprehensive Plan of Action continue to stall.

Meanwhile, fears of an economic recession took center stage as central banks in the US, UK and Switzerland raised interest rates to combat growing inflation.

In shipping markets, one cause for concern among shipowners who charter out their vessels is the International Maritime Organization's Carbon Intensity Indicator.

The CII works by dividing total fuel consumption by nautical miles and here the mathematics present a problem, as the CII can be improved by increasing the distance of a voyage. Likewise, vessels that have been delayed by queues to load at port will see their CII worsen.

That is something that lies partly in the hands of whoever controls the behavior of a ship, often the charterer, and so a short-term charterer can affect the vessel's CII, which has implications for both the owner and the next charterer.

"You get into a situation where you charter out a CII A-rated ship for a year and when you get it back the CII rating may have dropped as a result of your customer's trading patterns and then you will have your new and lower rating for another 12 months, which will negatively impact the commercial value of your vessel. This is an issue the industry needs to address," Hafnia executive vice-president commercial Jens Christophersen told S&P Global Commodity Insights.

In China, inventories at Shanghai remain quite tight even though there are more 0.5%S FO cargoes than in May, and this has made Zhoushan’s bunker market more competitive since June began.

In Northwest Europe, German suppliers reported increasing tightness in 3.5%S fuel oil, which pushed the premium for 3.5%S delivered material over Rotterdam to an all-time high of $140/mt June 16. New supply is not expected before June 20 and there is concern about long-term supply in the absence of Russian product.

Buyers in Hamburg were also faced with shortages in 0.1%S material, pushing shipowners to consider loading more expensive 50 PPM diesel in the absence of marine gasoil.

In Panama, supply constraints continue to be seen in the marine fuel 0.5%S market with some sellers facing limited availability for early deliveries. At the same time, demand is experiencing a traditional summer lull, market sources said. In May, sales of 0.5%S in Panama fell 14.6% from April to 246,842 mt and a 13.2% from May 2021, according to data from the Panama Maritime Authority.

The BW Indexes are weighted daily indexes made up of price assessments at 20 key bunkering ports. To obtain a representative geographical spread, the ports were selected by size with reference to their geographical importance.

The BW 0.5% Sulfur Index ports are Hong Kong, South Korea, Shanghai, Singapore, Japan, Las Palmas, Durban, Fujairah, Gibraltar, Piraeus, Rotterdam, St. Petersburg, Houston, Los Angeles, New York, Balboa and Santos.

The BW380 Index ports are Busan, Canary Islands, Colombo, Durban, Fujairah, Gibraltar, Hong Kong, Houston, Los Angeles, New York, Offshore Nigeria, Panama Canal, Piraeus, Rotterdam, Santos, Shanghai, Singapore, St. Petersburg, Suez and Tokyo.

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Bunkerworld ,
17th June 2022 14:49 GMT