BUNKERWORLD INDEX: Surging gas supports prices, limits VLSFO blendstock
24th September 2021 10:58 GMT

Bunker prices continued to climb in the week to Sept. 23, with spiking natural gas values supporting the energy complex and drawing 1% sulfur fuel oil from the blending pool for bunkers in Europe.

The Bunkerworld 0.5% sulfur fuel oil index ended Sept. 23 at $562/mt, up $6/mt on the day, up $5/mt on the week and $36/mt higher than 30 days previously. The BW380 index, which represents value for 3.5% sulfur fuel oil, ended the week at $476/mt, up $7.50/mt on the day, up $13.50/mt on the week and $41/mt higher than 30 days previously.

Crude oil futures have moved higher amid a continuing supply deficit, with buying for the northern hemisphere winter set to lend further support to the rally.

In shipping markets, tanker freight rates are facing a period of sustained lows and the sector will remain unprofitable well into 2022, international shipping association BIMCO's chief shipping analyst said at an industry event.

Potential future rises in the oil complex and, subsequently, in bunker prices could put the sector under further pressure, market sources said.

"Our baseline case goes like this: we will not see profitable freight rates for another 12 months… simply due to the lackluster demand on a global scale," BIMCO's Peter Sand said during the S&P Global Platts European Refining Virtual Conference Sept. 22.

Of the two tanker segments, product tankers have the bigger potential to show upside sooner, Sand said.

Demand at the key Asian bunkering hub of Zhoushan has picked up over the past week, pushing up delivered premiums to a four-month high as of Sept. 23, amid tightened supplies, market sources said.

The pick-up in delivered prices has largely been attributed to a strong recovery in demand for the low-sulfur grade of bunker fuel at Zhoushan, after Typhoon Chanthu struck last week, market sources said.

One supplier said that shipowners are rushing to fix their deliveries for next week as ports will be closed on Oct. 1 for the start of China's Golden Week holiday.

VLSFO has also been tight at major bunkering ports in Northwest Europe amid a lack of blending components.

Record-high LNG prices have driven countries like Greece and Lebanon to burn more 1% fuel oil for power generation, creating strength in the LSFO market and making it uneconomical for blenders to use LSFO to make VLSFO.

European gas prices have soared in recent weeks, following on from a sustained rally since the start of 2021, with concerns over supply this winter adding a significant risk premium to prices.

Spot bunker prices in Latin America have experienced solid increases, tracking the soaring prices in global oil closely, with Panama seeing a flurry of activity late in the week and values in Argentina rising and widening their premium to those in Brazil, after weeks of a narrow spread between the two.

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.

Click here to see prices: https://www.bunkerworld.com

Bunkerworld .,
24th September 2021 10:58 GMT