Around this time each month we tend to take a step back and look at the ‘bigger picture’ developments in the oil market. What happens here clearly underpins the price of bunkers.

The recent headline news in the oil market has been very bullish. In this report we look at why this is happening, draw some pointers for the future and see how bunker prices relate to this.

Brent now close to $76 and higher than just before the pandemic.

The recent hike in crude oil prices has pushed Brent front month futures close to $76/bbl, which is $6/bbl more than the January 2020 highs, just before the pandemic hit. The main drivers to this latest price rise are that oil demand is rising and expected to continue to recover, (especially in the US) and that headline stock levels are falling.

The graph below illustrates the phases where Brent crude prices have increased from their extreme lows in April last year (and how VLSFO prices have generally tracked this):

• Firstly, Brent up to and then remaining in the low $40s through
  to November;
• Then rising almost continuously to a peak of $70/bbl in early
  March;
• Followed by and easing and stuttering around $65/bbl for 2
  months;
• And now Brent moving well into the $70s in June.