Research Archives - Integr8 Fuels

Getting the bunkering lead time right is more important than ever

The key factors that are worth considering when buying bunker fuel are quality, availability and price. Excluding quality, availability and the relative price paid generally tend to correlate with the lead time, which is the difference between the enquiry/stem date and the start of the delivery window.

Following the IMO2020 transition, longer lead times have become key to securing bunker fuel while paying a competitive price. Shipowners who delay stemming risk non-availability and having to burn a more expensive compliant fuel instead. Book too early and potentially face cancellation costs or delays.

Zhoushan as a new Far East bunker hub

For decades Singapore has been the gateway to Asia, a major hub offering bunkering as well as other various shipping services. There have been a number of attempts to rival it, particularly when it comes to bunkering, however bunker sales in Singapore remain strong, at around 50 million tons per annum out of the global total of 300 million tons.

Recently, however, certain developments in China and particularly around Zhoushan mean, while unlikely to fully rival Singapore, it may become an attractive bunkering alternative for some.

We are off recent price lows, but that doesn’t mean we are in a continually rising market

Just over a month ago we put out a note on the collapse in oil prices and the pressures in the market from the significant loss in global oil demand because of ‘lockdowns’ against Covid-19.

Can bunkering outside hubs yield better pricing?

The short answer is yes, but not always. Continuous price monitoring is key to identifying price dislocations between different ports.

Advance bunker planning an answer to tighter HSFO availability

In the run-up to IMO2020 doubts existed whether there would be enough VLSFO available to meet demand, while HSFO was thought to remain in abundance. The reality however is very different, with the corona virus putting a cap on bunker demand, the growing oversupply of VLSFO and a relative HSFO tightness and availability concerns have become the new reality.

Where are we and do we know where we are going?

There is a little more clarity in oil market pricing, but still huge uncertainty on where things are going. It was just a few weeks ago when news of the coronavirus started to hit and OPEC put forward a proposal to cut production by around 1.5 million b/d, but only if there was the support of the OPEC+ group (principally Russia). The agreement didn’t happen, Saudi opened the taps and oil prices collapsed. With hindsight the proposed 1.5 million b/d cut was ‘a drop in the ocean’, with analysts now indicating that global oil demand could be an unprecedented 20 million b/d lower in April 2020 than in April 2019, and also some 4-6 million b/d down for this year as a whole. So, near-term oil supply is up by around 2-3 million b/d and demand down by around 15-20 million b/d. Markets tend to tell you almost everything and we have seen a near 70% collapse in crude prices since the start of the year to hit 18-year lows. At the same time the crude market has switched from backwardation to steep contango, bringing storage into play.

VLSFO pricing conditions for less distillate blending and higher viscosity

The recent drop in VLSFO viscosity has been a talked about topic. It is the result of more distillate making its way into the VLSFO blending pool. Having analysed over 15,000 VLSFO test results, viscosity was found to have dropped by over 35% between November 2019 and March 2020, from 160cst to 100cst.

Should the industry worry about decreasing VLSFO viscosity?

VLSFO quality remains a headline IMO2020 topic. As suppliers are getting
more experienced at producing VLSFO blends, the proportion of off-spec tests has been declining, although certain quality concerns remain. One of these is the reduction in viscosity, which is due to more distillate blending. This has resulted in vessels being required to adjust age old practices in order to handle and consume the fuel and moreover requires a change in tact when procuring bunkers. The choice of fuel is often limited, however checking quality before buying is as important as ever in order to minimise the risk of claims.

VLSFO prices now more settled, but still plenty to look at when buying bunkers

The absolute price of bunkers has fallen sharply since the start of the year, largely inline with the fall in crude. The easing of Middle East tensions, higher oil stocks, and now, far more significantly, the impact and uncertainty surrounding the Coronavirus have meant oil prices have dropped. Correspondingly, representative VLSFO prices East of Suez are down from around $750/ton in early January towards $500/ton currently, a drop of some 25-35%.

VLSFO: better quality but watch for critical parameters

It has been over a month since the IMO2020 regulation came into force and there are mixed views on how the transition has gone so far. Some participants claim the switch has gone smoothly, while others highlight the constant quality issues with the VLSFO blends.