BUNKERWORLD INDEX: Hesitancy over Russian clients, supply concerns contribute to volatility
18th March 2022 13:52 GMT

Bunker markets saw self-sanctioning weighing on demand and curtailed fuel supply at some key ports amid ongoing volatility in crude markets in the week ending March 17.

The S&P Global Commodity Insights Bunkerworld 0.5% sulfur fuel oil index ended the week at $858/mt, up $21/mt day on day, down $101/mt week on week and $125/mt higher than 30 days previously.

The BW380 index, which represents value for 3.5%S fuel oil, ended the week at $665.50/mt, up $7/mt on the day, down $50/mt on the week and $95/mt higher than 30 days previously.

There has been considerable volatility in crude markets, not least since the International Energy Agency March 16 warned of a potential global oil supply shock, with an estimated 3 million b/d of Russian oil production likely to be shut in the next month due to sanctions and buyers shunning the major exporter.

Such disruptions are likely to outweigh the IEA's estimate of lower demand growth for 2022 by 1.1 million b/d to 2.1 million b/d on the back of higher prices and reduced Russian consumption. The IEA now expects 2022 demand at 99.6 million b/d.

Although some progress has been made to increase the momentum of international shipping's decarbonization, roadblocks still linger as the industry navigates through this drastic transition, with the Russia-Ukraine crisis unleashing some important lessons as far as the switch to cleaner fuels is concerned, industry watchers said March 16.

The Russia-Ukraine crisis has "added a little bit of a shock and complexity in our [industry's] efforts to decarbonize [in the short run]," Timothy Cosulich, CEO Marine Fuel Fratelli Cosulich, said at the S&P Global Commodity Insights Asian Refining and Petrochemicals Summit.

In the long term, it highlights "that we have been late in going through the process of making the industry less dependent on oil… independent from fossil fuels," Cosulich said, adding it showed the importance of forging ahead with decarbonization efforts in a timely manner and with more motivation.

The Port of Fujairah's bunker sales slumped in February to their lowest since reporting began in 2021 as traders balked at selling to Russian-flagged vessels and buyers tried to minimize purchases because of high prices after Russia's invasion of Ukraine.

The war in Ukraine was expected to curb supply of low sulfur bunker fuel at Fujairah as economic sanctions on Russia impede imports of 0.5%S fuel oil feedstocks for the blending pool, local traders said.

Rotterdam has been experiencing tightness of availability across all products. Suppliers from Rotterdam have attributed the tightness to the steepening backwardation stemming from Russia's invasion of Ukraine and the resultant shunning of Russian supply, a situation which could last some time.

In New Orleans, bunker fuels have been facing low availability, leading to persistently firm values.

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 ,
18th March 2022 13:52 GMT