BUNKERWORLD INDEX: Prices drop on declined crude markets, tight supply
24th June 2022 14:23 GMT

 

Bunker prices fell in the week to June 24 on the back of a decline in crude markets and tight supply across regional bunker markets, in part stemming from recessionary fears.

 

S&P Global Commodity Insights Bunkerworld 0.5% sulfur fuel oil index ended the week at $1,038/mt, down $13/mt from June 23, $30/mt lower on the week, and $60/mt higher than 30 days previously.

The BW380 index, which represents the value for 3.5%S fuel oil, ended the week at $671/mt, unchanged on the day, posting a drop of $36.50/mt on the week and $44.50/mt lower than 30 days previously.

Crude futures have dropped on the week on the back of investors’ anguish over looming recessionary fears. The current uncertainties within the market have investors looking to cut their long-term exposures to oil. Crude oil continues to rapidly decline as recessionary fears continue to dampen investor’s prospects. Crude has experienced volatility as the Federal Reserve aims to combat inflationary levels, further impacting investors’ sentiment.

The key to countering increasing market fears that robust oil demand will result in supply shortages and push crude prices over the current plus $100/b in the short-to-mid-term is to fund more oil and gas activity, Hess Corp's top executive said June 23.

In other words, the only way to deal with a potential supply shock is to provide money for more supply, John Hess, CEO of Hess Corp, said in a presentation to the JP Morgan Energy, Power & Renewables Conference in New York.

"Supply has been struggling to keep up ... with demand basically for seven quarters," Hess said. "Oil inventories [have]gone down seven quarters in a row, so much so that global oil inventories right now are 400 million barrels less than pre-COVID levels. That's where we are now. The market is tight."

"In any scenario [where the International Energy Agency] talks about energy transition, more investment is needed for the oil and gas industry," he added.

South Korea's delivered marine fuel 0.5%S buyers were seeing fewer offers for June as local suppliers shifted to offering competitively for early July, market sources said June 24.

“LSFO suppliers are quite ample compared to demand requirements. Fixture-wise, demand in early July has recovered compared to [the same period in] June, but July prices are still low,” a South Korean bunker supplier said.

South Korean oil majors are reportedly close to selling out low sulfur fuel oil inventories for June bunker deliveries, with limited volumes available for prompt requirements, sources said.

In EMEA bunker markets, demand was mostly quiet during the week. While prices continue to be high across all grades of bunker fuel in ARA, sources reported significant intraday volatility in the week as the market reacted to instability in upstream crude markets.

While supply was mostly good at ports, tightness remained across high sulfur fuel oil in both Europe and the Mediterranean regions. This was due to the diversion of feedstocks in refineries toward more profitable clean products like gasoline and diesel.

In America, sources said prices in some USWC ports would need to move at least $50/mt closer to the Singapore market to attract demand. The difficulty in lowering prices has been rising diesel costs, an essential blending component for marine fuel 0.5%, a supplier said.

US West Coast suppliers produce limited amounts of low sulfur vacuum gasoil, which requires bunker suppliers to use more expensive products to bring the fuel to meet the 0.5% sulfur threshold.

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.


Platts ,
24th June 2022 14:23 GMT