Bringing some relief to shipowners and operators, the price of fuel oil has seen a continued downward trend for Ultra Low Sulfur Fuel Oil (VLSFO) in the main bunker hubs of Rotterdam and Houston since mid-June, and Singapore and Fujairah from mid-July.
A report from the Research and Advisory Division of Integr8fuels dated August 24 noted that VLSFO prices at the world’s largest bunker port, Singapore, had fallen further to around $750 per metric ton (pmt). , in line with other ports such as Rotterdam. This compares to a high of $1,149 pmt on June 10 according to prices from Ship and hold.
Prices in Singapore have risen again in recent days, but dipped slightly to USD 791 on August 26, and overall the trend has been down.
The Integr8fuels report, however, highlighted concerns over natural gas prices, a major concern for consumers, governments and industry.
“To put this into context, current Brent crude oil prices are about 45% higher than 18 months ago; Singapore’s VLSFO is slightly higher, at 50% higher, but the benchmark price for European natural gas (TTF) is 1,500% higher! We’ve seen what we think is enormous volatility in bunker prices, but that’s nothing compared to what’s happening in natural gas markets,” the report said.
This, where industrial and electric companies can, which was noted as being of limited scope, would switch from natural gas to fuel oil. “…at the fringe it has an impact, and in the winter the developments are likely to be even more pronounced,” Integr8fuels said.
“Some European industries are already switching to heating oil as a replacement for natural gas and during the northern hemisphere winter we can expect increased demand for fuel oil in the power generation sector, particularly in some Asian countries.
The impact can be seen in the fact that the IEA (International Energy Agency) has raised its demand forecast for heating oil this year by 150,000 barrels per day (bpd) and gas/diesel by 160,000 bpd since their March outlook.
“The additional oil demand resulting from this change is split approximately 50:50 between fuel oil and fuel oil and is therefore likely to support bunker prices; additional heating oil demand will indirectly impact VLSFO availability and pricing, and additional fuel oil in power generation will directly impact the HFO (high sulfur fuel oil) market,” says the report.
Currently, scrubber-equipped vessels continue to offer a significant reduction in operating costs, with HFO trading at $516.5 pmt in Singapore, a discount of $274.5 pmt for VLSFO, according to Ship Prices. & Bunkers.
For vessels using LNG as fuel, the price in Rotterdam on August 19 was quoted at a staggering $3,518 pmt compared to $1,466 pmt on June 17.