VLSFO: Back To Where We Started on ‘Day 1’ – What’s Next?
VLSFO prices back above $600
When VLSFO was fully introduced in December 2019/ January 2020, Singapore prices were in the range $615-660/mt; so far in November have averaged $620/mt – we are back to where it all started!
Source: Integr8 Fuels
Events over the past 22 months are well documented and will be written about for many years to come. The oil industry will be a mere microcosm of all this, but when you are involved in the bunker market these oil industry details become significant. The collapse in oil demand at the start of the pandemic led VLSFO prices down to around $250/mt. The subsequent cutbacks in OPEC+ crude production, combined with the loss of US crude supplies and the eventual rebound in oil demand have all contributed to the rise in oil prices and the reason why VLSFO has moved back above $600/mt. The clear question is: Where do we go from here?
Analysts foresee prices falling from here
Some analysts are indicating that we are currently at a peak, and that prices will ease from here. Brent crude futures (front month) hit a high of above $86/bbl in late October and are currently trading around $82/bbl. The pointers now are towards $75/bbl in Q1 next year and $70/bbl by Q2. On this basis, it would imply Singapore VLSFO down from around $610/mt currently, to around $565/mt in Q1 and $530/mt by next June.