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Brent prices even lower than a month ago

Brent prices are some $4/bbl lower than their peak at end April, and in the interim we have seen another dive back down towards $60/bbl. Its like the crude price chart reflects a ‘friendship rating’ between the US and China, with Brent $15/bbl lower than when Trump came to power. Instead of prices around $80/bbl at the start of the year, we are now generally trading in the $60-65/bbl range, and have been for almost two months.

Source: Integr8 Fuels

We speculated last month that if President Trump and President Xi became ‘good friends’ it would trigger a return to confidence in global markets and higher oil and bunker prices. This clearly is not happening at the moment!

Much bigger increases in OPEC+ than previously planned

Brent crude prices have moved off their $60 lows, to around $65/bbl. Although there has been another delay in imposing the full US tariffs on China, the pickup in price is more a reflection of the latest round of tighter EU sanctions on Russia.

However, the good news for bunker buyers is that any rise in oil prices is being limited by OPEC+, as they start to unwind their voluntary production cutbacks. The process started in April, and the increases are much bigger than previously planned, rising by around 0.4 million b/d in April and another 0.4 million b/d anticipated in May (as opposed to an earlier planned rise of only some 0.15 million b/d each month).

So, although more EU sanctions on Russia is a bullish element to the market, this has been overshadowed by no political solution to the proposed US tariffs on China, and much bigger than expected increases in OPEC+ production. Hence, Brent is even lower than a month ago, and trading in the $60-65/bbl range.

But in bunkers, we are still not seeing the full effect of lower crude prices

In last month’s report we highlighted the fact that the fall VLSFO prices was nowhere near as big as the fall in crude. If we had seen the same drop in bunkers as we saw in crude, then VLSFO in Singapore would have been another $25/mt lower in April.

This trend has not only continued into May, but has actually got even worse for us.  Instead of using the crude headline of “even lower prices”, we must use “VLSFO prices are slightly higher than a month ago”.  In fact, Singapore VLSFO prices have been above $500/mt for most of May, and higher than all but the first few days of April; something that can’t be said for the crude market.  The graph below illustrates this recent divergence in prices between Brent and Singapore VLSFO, with both axes scaled the same.

Source: Integr8 Fuels

Whereas last month we said that Singapore VLSFO would have been $25/mt lower if it had tracked crude; now we are saying Singapore VLSFO would be $50/mt lower if it had tracked crude!

There is relative strength in product prices

Planned refinery maintenance, plus some unplanned shutdowns, have hit refinery crude throughputs over April/May extremely hard. As a result, global throughputs are much lower than in the same period last year, and also lower than in April/May 2023.

Source: Integr8 Fuels

There is no adjustment to crude production during these periods of much lower crude processing. This year the situation is even more extreme, with a bigger drop in throughputs taking place at the same time as significant increases in OPEC+ production. Naturally, this has led to a relative weakness in crude prices.

The bottom line is lower crude throughputs mean tighter product availabilities and more ‘spare’ crude.  Hence, we have seen crack spreads widen over April/May across most products and in most regions. For us, VLSFO crack spreads in Singapore and NW Europe both rose by some $6/bbl, which is equivalent to around $40/mt.

It’s therefore not surprising that recent VLSFO prices have not tracked crude prices to their lows.

When will VLSFO pricing fall back in line with crude? 

There are early signs that things are changing. After a cutback in trade in April and May, the arb on light/sweet West African crudes moving to Asia is opening up, and cargoes are likely to load and go east, but this is for the June loading program. There are also expectations of more VLSFO arrivals into Singapore, but again not until later in June and July.

This ties in with the expectations of a strong rebound in refinery throughputs in June, to levels higher than last year, resulting in increasing product availabilities coming later in June and into July.

It’s a fix, but not a quick fix, with these pointers suggesting we still have a number of weeks where VLSFO will remain at a relative strength to crude, but this should start to ease back later June and into July.

The question then is: What are the pointers for VLSFO prices? 

Bullish signs on oil prices could be if there is a quick end to the war in Ukraine, which isn’t looking likely at the moment. An even bigger bullish factor would be signs that President Xi and President Trump have become ‘good friends’ and end the planned use of high tariffs; again, not seen as a high probability in the very near term.

In the immediate short term, there are more bearish signals for VLSFO prices.

If the crude market is unchanged by the end of June, with Brent trading in the $60-65/bbl range, then we would expect Singapore VLSFO prices to fall from just above $500/mt, to the $450-475/mt level. If crude oil prices fall from current levels, to below $60/bbl, the fall in VLSFO prices will be even greater.

If crude prices remain the same, this means lower bunker prices; if crude prices fall this means even lower bunker prices!

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

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Another big drop in crude oil prices

In these monthly reports we take a ‘bigger picture’ look at oil industry developments. We try to vary the aspects we focus on, but in recent months the only subject to talk about is price. In our end March report, we said that oil prices were likely to continue falling, but I am not sure we anticipated a drop of more than $13/bbl (18%) in front month Brent over just 9 days at the start of this month!

Source: Integr8 Fuels

New US trade tariffs announced in early April, with reprisals from China and even greater fears of recession, all led prices down. If this wasn’t enough, some OPEC+ members also decided to start unwinding voluntary production cuts in April/May. The consequence was for Brent to fall to a 4-year low (back to COVID-19 times), and at one point drop below $59/bbl.

As it is under the Trump regime, there were further announcements and some delays/backtracking, and prices have moved back up off their lows. But prices are still low by recent standards. Everyone is acutely aware of the uncertainty surrounding President Trump’s announcements on tariffs, China’s responses, and high-profile institutions such as the International Monetary Fund (IMF) revising down their economic forecasts.

Of course, bunker prices have fallen

Given all these factors, it has been impossible to put a bullish slant on the market and of course bunker prices have also fallen. Across the main international markets, VLSFO prices dropped by around $70/mt (14%) in the first 9 days of April. There has been a rebound since then, but we are still $40/mt lower than at the start of the month.

Source: Integr8 Fuels

But bunker buyers have not benefitted as much as they might have

There are always nuances across crude and product prices, and in the VLSFO market the price drop has not been as big as for crude. The graph on the following page illustrates a disparity in the price drop between Singapore VLSFO and Brent crude – both axes are scaled the same, showing the bigger drop in crude. If all things were equal (they never are!), we would have seen Singapore VLSFO at lows of around $430/mt, and even now at prices close to $475/mt.

Source: Integr8 Fuels

VLSFO prices in Asia are strengthening relative to crude. This is based on lower volumes of low sulphur material moving from west to east, potentially tightening supplies once again. The market pointers are also there, with increased backwardation and rising crack spreads. Speculation of increased bunker demand ahead of the 90-delay in US tariffs being implemented (except for China) has added another positive talking point. However, these are all nuances to VLSFO prices; the big story still surrounds tariffs and what President Trump does next.

Analysts are revising down everything

In the current market it is very difficult for us to write about anything other than Trump and oil/bunker prices. The precarious nature of political decisions, and the threats of recession mean the market is focusing on bearish sentiments and low oil prices. Oil industry forecasters have already revised down their outlook for oil demand for this year and next. In mid-April, the IEA lowered its forecast for oil demand in 2025 by 0.3 million b/d, whilst the US EIA reduced its 2025 forecast by 0.4 million b/d.

In the same context, oil price forecasts are also being revised down. The EIA has just lowered its 2025 and 2026 Brent price forecasts by $6-7/bbl, to average $68 this year and $61 next year. Morgan Stanley has reduced its 2025 Brent price by $5/bbl (to $62.50/bbl), and Goldman Sachs are down by $2/bbl (to $63/bbl). The general trend (at the moment) is for even lower prices next year, with Goldman Sachs at the low end of the range, at $55/bbl.

Source: Integr8 Fuels

To re-enforce the bearish sentiment, these projections were made before publication of the IMF’s latest economic report, which came out this week. The IMF forecasts are downbeat, and it is no surprise that the biggest revision was to the US, where GDP growth for 2025 has been downgraded to 1.8%, from 2.7% projected in their January report. Downward revisions for other major economies have been set at around 0.4-0.5%. If based on this, it could be that the next round of oil demand forecasts are even lower.

We are only talking about one thing; Trump’s actions

US tariffs and international responses, particularly from China, are now at the forefront of everyone’s mind. There are still the wars in Ukraine and Gaza, and issues surrounding sanctions on Russia, Iran, and Venezuela, but still everyone’s focus comes back to President Trump and tariffs.

A lot of US policy decisions have been hugely unpredictable. Looking at tariffs, continual downwards revisions to the economy and corresponding downgrades of growth in oil demand, the pointers are towards lower bunker prices.

But we don’t know what is going to happen next. The day the IMF launched its more gloomy prospects for the economy, Trump hinted at a softer position with China, and the financial and oil markets both rose; Trump trumps the IMF?

It is still possible that President Trump could remove the planned tariffs, make international agreements, and be ‘good friends’ with China’s President Xi. We do know markets are very quick to respond, and any signs that the US is going to reverse its strategy on tariffs would trigger a return to confidence in the global economy, give us much stronger financial markets, and instantaneously push oil (and bunker) prices much higher.

If, or when this happens is the great unknown. As is always said, forecasts are only based on what we know today; the unpredictable nature of President Trump is that this may be completely different to what we know tomorrow!

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

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Prices have dropped sharply again…

In the past four months we have talked consistently about the bearish nature in oil markets, both on the fundamental and political fronts. The mantra of ‘too much oil’, and a Trump led end to the wars in Ukraine and Gaza have, until now, led oil prices down sharply. Front month Brent has hit the low $70s, and is some $10/bbl below peak levels seen two months ago.

Source: Integr8 Fuels

For us in bunkers, Singapore and Fujairah VLSFO prices have fallen by almost $100/mt in the past two months, to around $500/mt. The absolute drop in Rotterdam VLSFO prices has been less, at around $70/mt. But the main point is VLSFO bunker costs are now 13-15% lower than in mid-January.

Source: Integr8 Fuels

Singapore VLSFO at a 4-year low

Putting this in a more historical context, Singapore VLSFO prices are at their lowest for four years; back to levels we last saw in the first half of 2021.

Source: Integr8 Fuels

Given this, are we now at a position where the downside risk to prices is far more limited?

Watching peace negotiations & OPEC+

There are always bullish and bearish factors to consider in our market; it’s just that over the past four months the bearish factors have been huge. Given where we are today, are we in a more ‘balanced position’ in terms of price direction?

We still have the potentially bearish issue of OPEC+ unwinding their voluntary production cutbacks starting in April. In early March, the group re-iterated the plan, but it looks like the increases will now be staggered and that any gain in April is likely to be minimal. These moves by OPEC+ are already factored into current prices, and so the group is likely to ‘take a backseat’ in determining oil price direction in the very near-term.

Another bearish fundamental is the expectation that there will be too much oil over the next 12-18 months, even before any increase in OPEC+ output. But again, this is largely baked into current prices.

The upside to prices is if there is any faltering in peace negotiations in the Ukraine/Russian war.

No one wants ‘failure’, but at the moment these negotiations are taking small steps and look highly precarious.

But everyone wants to know how far President Trump will go

In the short term it seems a lot of the sentiment in price direction will come from the US peace talks with Russia and Ukraine.

However, President Trump’s strategy and rhetoric on US tariffs means there is now another bearish factor to consider, which goes well beyond our market. Potential trade wars and any accompanying recession has already contributed to the bearish sentiment and the recent fall in oil prices. If the situation escalates and major tariffs are fully implemented, it is a double-edged sword for us; yes, we could see lower bunker prices, but this world be at the expense of recession and a reduction in world trade.

So, having said we have hit a four-year low in bunker prices and we could be at a more balanced view on the price outlook, there still seems to be more bearish stories around, rather than bullish!

And now for something completely different… Refining

Taking a ‘side-step’ from looking at peace negotiations, tariffs, and economic prospects, here we look at some broad directions in the refining sector. Clearly supplies and blending in the oil bunker markets are dependent on refining and international trade. There is a clear direction here that refinery capacity and throughputs in Europe and the US are declining, whilst the reverse is happening in the Middle East and non-OECD Asia, with rising refinery investments and increased throughputs.

The graph below shows the clear shift in refinery operations this year from west to east, and, as highlighted in the following paragraphs, all the indications are that this trend will continue.

Source: Integr8 Fuels

BP has plans to cut around 30% of its European refining interests. There are also at least three refineries in Germany up for sale, with more assets in France likely to go. There are further complications in the region, with the Russian companies Lukoil and Rosneft trying to disentangle themselves from their European refining interests by selling them. Although independent refiners and traders could takeover some of these refineries, the end result is still that European crude runs in the future will be less than this year.

In the bigger picture, oil demand is falling in the west, so the overall strategy of selling/closing refineries may appear ‘sensible’. But this could be a key issue for the bunker market. Although the moves towards EVs, renewables and electrification mean total oil demand in the west is falling, for us in bunkers, along with aviation, we are the two sectors where oil demand in the region is rising. There are a lot of ‘moving parts’ in the outlook, but the possibility is that more bunker products/blending components will have to be moved into Europe and less HSFO moved out.

Summing up

It is always worth looking at some of the longer-term issues in the bunker market, such as refining. BUT it is very hard to move away from some of the bearish sentiment still in the market, and what is happening now politically around President Trump, and what impact this will have on bunker prices going forward.
Taking all of this into account, many analysts are still lowering their crude price forecasts for next year, with a number projecting Brent in the mid/high $60s. So, overall, this is not the time to stop talking about falling bunker prices!

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

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Prices are down: Is Trump close to ending the Ukraine war?

Uncertainty, uncertainty, uncertainty is running through the oil markets. The biggest news stories surround Trump and Putin getting closer and a potential negotiated end to the war in Ukraine. Who is involved in the negotiations, what might be ceded and how Ukraine comes out in all this is not yet precise. But when you look at crude prices, it shows the market has taken a general view that the situation has eased a lot since Biden’s 10th January, last gasp imposition of sanctions on Russia.

Source: Integr8 Fuels

Front month Brent had fallen back by $6/bbl from its recent peak, and has seen another sharp drop this week. The market is certainly taking pointers towards a settlement in the Russia/Ukraine war.

VLSFO prices have fallen alongside crude, with Singapore prices down from $600/mt to below $550/mt, including a significant fall at the start of this week. The drop in Rotterdam VLSFO prices has not been as great, with some strength in European middle distillate refinery margins and lower diesel trade from the US to Europe. Nonetheless, VLSFO prices are still lower than a month ago, although not yet back down to their December levels.

Source: Integr8 Fuels

It must be intriguing being a political analyst

Even experts in the political world have been surprised by some of the recent rhetoric, and how political relationships have changed. We have no special insight into how the Russia, Ukraine, US, European affiliations may pan out, which may become more clear as a number of European leaders meet with Trump. However, at this stage it is worth us using our expertise in the oil markets to look at what could happen if the Ukraine war does come to an end and Russia is somehow brought back into the international (or at least the US) fold.

Has the door just shut on OPEC+

In our report a month ago we mentioned that a tightening of sanctions on Russia could further constrain Russian oil exports and finally open a door for OPEC+ to start unwinding their 1.7 million b/d of voluntary production cutbacks. At their early February meeting, the OPEC+ Joint Ministerial Monitoring Committee (JMMC) reiterated their previous plan to start unwinding cutbacks from April. However, the renewed Trump/Putin dialogue and moves towards ending the Ukraine war seem to have removed any ‘easy’ option for OPEC+ to bring back this production into the international market anytime soon.

The world looks like it has more than enough oil, even without ‘extra’ OPEC+ volumes

Looking at analysts’ views of the oil market for this year, the general expectation is that even if OPEC+ maintain their voluntary cutbacks until the end of the year, there is still ‘too much oil’. The chart below illustrates total world oil supply and demand for 2024 and the outlook for 2025. This shows markets shifting from demand higher than supply between the third quarter 2024 and the first quarter this year, to supply exceeding demand from the second quarter 2025 onwards; and this is based on OPEC+ maintaining their cutbacks for the entire year!

Source: Integr8 Fuels

The expectation now is that although the increase in demand this year will be slightly bigger than in 2024, the gain will still be relatively modest, at around 1.2-1.3 million b/d. At the same time, production increase in the US, Brazil, Guyana, and Norway, along with minor gains elsewhere (and declines in some countries), means global oil supply is forecast to rise by around 1.6 million b/d, even without ‘extra’ OPEC+ oil.

Taking the analysts’ work, it looks like we are moving from a global stock-draw in the first quarter 2025, to a phase of global stock-builds over the rest of the year. The underlying position is for potential gains of around 0.3-0.5 million b/d over the second and third quarters of this year, rising to about 0.7 million b/d in the fourth quarter (even assuming OPEC+ maintain their cutbacks).

Source: Integr8 Fuels

If OPEC+ stick by their commitment to start ramping up production in April, then these stock-builds will be even bigger, at around 0.7-0.8 million b/d through Q2 and Q3, rising to well above 1 million b/d in Q4.

The signs are there for bunker prices to fall

If we were in a purely fundamental market (which we are not), this would imply oil and bunker prices falling this year, with the price declines even greater if OPEC+ unwind their cutbacks.

But we know we are also in a market which is highly driven by politics and psychology. Current politics are more extreme than in recent years, but if Trump can ‘pull off’ an end to the war, it will take a huge amount of ‘upside risk’ out of the market. If Russia can then trade oil more freely, it will also bring about a more settled position in the market.

This is obviously a very simplified view of what could happen, and a lot still has to be done internationally to bring an end to the war in Ukraine. But the starting position is one of a market that looks very well supplied for this year. If there is then an end to the war, and ‘normalisation’ in Russian oil trades, then we could see bearish price developments on a fundamental, a political and a psychological basis.

Perhaps the chart below illustrates this, showing the US EIA’s latest price forecast for Brent crude oil, and us superimposing the corresponding outlook for Singapore VLSFO. The projections go through to end 2026, with Brent prices dropping from mid $70s today, to low $70s by end year, and low $60s by end 2026. The implication for Singapore VLSFO is prices dropping from around $550/mt currently, towards $525/mt by December 2025 and $475/mt by end 2026.

Source: Integr8 Fuels

It looks like bunker prices will fall, but watch out for the curveballs!

Looking this far ahead must be taken with caution, especially in the current political environment. We haven’t even mentioned tariffs, Israel/Gaza, or Iran. Even bearing this in mind, it is always good to have a baseline position to work from, and this analysis provides that using a fair representation of where we stand today. We just have to be agile and adapt to new circumstances (which will surely happen!), but at the moment an end to the Russian/Ukraine war seems more likely, AND, at the same time, the fundamentals look bearish. It suggests we will be paying less for bunkers going forward. Just watch out for the ‘curveballs’ that may be coming our way!

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

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Biden and Trump mean we are paying more for bunkers

Through most of last year, and especially in the fourth quarter, we highlighted the weak fundamentals in the oil market and the downward pressures on oil (and bunker) prices.  Markets were at ‘obvious’ low prices through to the end of last year, and then politics kicked in, and prices surged! 

Brent crude back to $80/bbl

Politics have triggered a significant hike in crude oil prices to their highest level in 5 months, with front month Brent up from the low $70s to a high close to $82/bbl.  Prices have eased back after their initial hike, but they are still 7% higher than in December.  Clearly politics trump any bearish fundamentals in the market; no one at the moment is talking about oil supply exceeding demand this year!

Source: Integr8 Fuels

Biden started the ball rolling

The first surprise was that right at the end of his term, on 10^th January, President Biden imposed new sanctions on Russia, targeting around 160 tankers (the ‘dark/shadow fleet’), marine insurance companies and two Russian production companies, Gazprom and Surgutneftegaz.  These two companies had been exporting around 0.8 million b/d of crude, mainly to China and India.  Now buyers from these companies only have a grace period until February 27^th to offload their cargoes before facing sanctions themselves.

The implications and uncertainty surrounding these new US sanctions has meant the Russian crude export market has now ground to a halt.  The response has been for Chinese and Indian buyers to act quickly and enter the market looking for alternative supplies, including from the Middle East, West Africa, and Brazil.  The net result is that China and India are now competing with each other, alongside previous buyers of these crude grades.  Such an increase in competition and uncertainty about the future could only lead to one thing, a surge in oil prices.

VLSFO prices up by around 8%

Consequently, we have been hit with much higher bunker prices.  Singapore VLSFO has been back up at around $590-600/mt, with Rotterdam prices around $540-550/mt, 9% and 7% higher than their December averages.

Source: Integr8 Fuels

Oil sanctions on Russia are making us pay the price

Direct sanctions on the two Russian oil companies amount to around 0.8 million b/d of crude exports, split 50:50 between India and China.

Source: Integr8 Fuels

This alone may seem relatively small, given Russia had been exporting a total of some 4.6 million b/d of crude and 2.7 million b/d of products.  However, there are further issues that restrict export volumes, with non-compliant tankers also sanctioned, and these moved an estimated 1.6 million b/d of Russian exports last year.  Also, with sanctions on marine insurance companies and issues fulfilling US dollar financial transactions, it is no surprise there has been a halt in Russian exports and a rush to secure alternative crude volumes.

Russian sanctions will open the door for OPEC+

When one door closes, another often opens.  In this case the closure of Russian ‘doors’ now makes it far easier for the opening of OPEC+ ‘doors’.  If we exclude Russia, OPEC+ currently has 1.7 million b/d of voluntary production cutbacks that they have been looking to unwind since last year.  The re-introduction of these volumes has been pushed back to April this year because previous ‘market conditions’ were not right (i.e. oil prices were too low).

President Trump has already asked Saudi Arabia and OPEC+ to reduce oil prices, and the only mechanism they have for this is to raise production.  Although lower oil prices would appear to contradict incentives for companies to “Drill Baby Drill” in the US, an increase in OPEC+ production would ultimately take the sting out of prices following sanctions on Russia.  In fact, the full unwinding of OPEC+ cutbacks could offer Trump an ability to put even tighter sanctions on Russian oil exports, if he chooses.

Source: Integr8 Fuels

An eye on a bigger prize?

There are many dichotomies in what President Trump has said so far, such as talk of putting 25% tariffs on Canada and Mexico (and China?) and wanting lower oil prices, and wanting the US to “Drill Baby Drill”.  But, if it takes such a tight sanction squeeze on Russia (or even the threat of one) to start negotiating an end to the 3-year war with Ukraine, then President Trump could be a peacemaker.  Then Iran next?

This unpredictable, or ‘non-traditional’ approach to politics looks like we will continue to get extremes in oil prices.  Timings never match; a tightening of sanctions on one country will never coincide with an agreement to raise production in another country.  However, Saudi Arabia has an estimated 3 million b/d of spare capacity, the UAE another 1 million b/d, with Kuwait and Iraq another 1 million b/d between them.  If Trump works with these countries, there is potentially up to 5 million b/d of ‘replacement oil’ to work with if he imposes even tighter oil sanctions on Russia, or decides to escalate the position with Iran.

Higher bunker prices today, but where do we go from here?

There are nuances in bunker prices in different regions, and in their relationship with crude, but we are essentially ‘price-takers’ in the oil market.  Biden and Trump have made their moves, and we are currently paying around 7-9% more for bunkers than in December.

At the moment we are in the ‘initial shock’ period, which has meant a reversal in all the bearish oil price dynamics we were looking at for most of 2024.  However, prices have eased back a bit, and there will be ways that alleviate the initial response to these sanctions.  Buyers of Russian crude will have to use unsanctioned tankers and also prove the purchase price of Russian crude is less than the $60/bbl imposed cap; but it can be done (at the moment).

In the bigger picture, President Trump says he wants to end the war between Russia and Ukraine, following the Israel-Hamas ceasefire agreed on January 15^th.  We are not political commentators, nor forecasters of where the Nobel peace prize may go, but Biden has disrupted Russian oil exports and President Trump will continue disrupting global politics and markets throughout his term.

In the short-term, politics have pushed bunker prices higher, and obviously even tighter ‘Trump sanctions’ on Russia could see another leap in prices.  But if there is a negotiated peace in the Russia/Ukraine war, or one looks highly likely, then we could see oil prices tumbling and the Nobel peace prize making its way to the US.

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

This January 2025 edition of Integr8’s Bunker Quality Trends report is an essential resource for shipowners, charterers, and operators seeking to make informed decisions in an increasingly complex regulatory and market environment.

Leveraging data from over 130 million metric tons (MT) of global bunker fuel deliveries, the report highlights the most critical issues and actionable insights for the industry, including:

Strategic Buying

• Why Changes in VLSFO Blends Could Trigger a Wave of Problem Fuels
• Barge Bottlenecks: The Sulphur Compliance Challenge in Southern Europe
• Rising Automotive Fuel Blends Are Driving Flash Point Risks in the Med
• Smarter Procurement: Strategies to Tackle Fuel Quality and Availability Challenges

Practical Compliance

• Biofuel Compliance: How Much Ship Operators Need and the Smartest Way to Buy
• Navigating ISO 8217:2024 and Med ECA Rules: Adapting to a New Era
• Biofuels and LNG: Key Players in the Future of Fuel Compliance

Published January 2025

View this article as a PDF »

We have seen bunker prices slide for the past two months

For a number of months, we have pointed to bunker prices falling under the weight of very weak oil fundamentals. This has certainly come to fruition and bunker prices have continued to slide over the past two months. In Singapore, VLSFO prices are some $75/mt lower (minus 12%) than in mid-October, and in Rotterdam the drop has been around $50/mt (minus 10%).

Source: Integr8 Fuels

In the HSFO markets, the drop has been greater in NW Europe, down $75/mt in Rotterdam over the last two months (minus 14%), with Singapore down $50/mt (minus 10%).

The decline is even clearer looking back to end 2023

The picture below is enough to illustrate how far bunker prices have fallen since the end of last year, and just how low we are today.

Source: Integr8 Fuels

Has OPEC+ ‘come up with the goods’?

In our report last month, we highlighted the huge dilemma facing OPEC+, who at the time were looking to unwind their 2.2 million b/d of voluntary cutbacks starting in January next year. The problem was this was against a backdrop of weak growth in world oil demand and more than enough new non-OPEC+ production to meet additional demand. Consequently, it has been clear for some time that if OPEC+ wanted to maintain oil prices anywhere close to recent levels, then there was little, or no room for them to start increasing production anytime soon. The original strategy of reversing the cuts in January was almost certain to see Brent crude fall into the $60s (and Singapore VLSFO in the $450-500/mt range).

As is usually the case when faced with adversity, OPEC+ does ‘come up with the goods’. In this instance (at their early December meeting), they decided to shelve any idea of raising production in January, and pushed back the current target start date to April. They have also slowed the re-introduction period, now unwinding the cuts over 18 months, rather than the previously planned 12-month time frame.

At the same OPEC+ meeting, it was also agreed that the planned 0.3 million b/d increase in the UAE’s quota allocation would be pushed back by 3-months, to April and also be staged over 18-months (not 9-months as previously indicated).

The net result is that under current plans, OPEC+ production would increase by around 140,000 b/d each month starting in April, rather than increases of 210,000 b/d starting in January.

The market tells you everything

Looking at oil prices, they continued to slide through November. However, in the run-up to the early December OPEC+ meeting there were indications that the group would again delay (for the third time) any unwinding of the production cuts. The outcome has been for prices over the past 3-weeks to be maintained in the $72-74/bbl for Brent, and the $525-550/mt range for Singapore VLSFO.

The key here is, although prices appear to have held up after the OPEC+ meeting, there has been no significant rebound. The market does not believe at this stage that the new outcome will tighten oil fundamentals and push prices higher. OPEC+ may be ‘kicking the can down the road’ regarding the best timing to unwind production cuts, but they have come together to halt the slide in prices.

There is a strong view that when OPEC+ come to review the April start date, they will again have to delay unwinding production cutbacks.

Analysts vary on their price views, but they don’t see a major rebound

A number of analysts have published crude price projections since the outcome of the latest OPEC+ meeting. As always, there are variations, but looking at views for Brent crude over Q1 and Q2 next year, there are a number within the range $70-75/bbl, which is within the trading range we have seen over the past month and in line with the current $73/bbl price.

Source: Integr8 Fuels

Goldman Sachs are higher than this range, showing Brent moving up to $77/bbl in Q2, whilst Bank of America (BOA) are much lower, looking at $66/bbl in Q2 .

Based on $70-75/bbl crude price, Singapore VLSFO would be in a range of $525-550/mt (close to current prices). At the extremes, BOA’s view would imply Singapore VLSFO just below $500/mt, and Goldman Sachs at a high of $575/mt. Even at the outer reaches of these analyst views, the bunker market would not be in a ‘shock’ in the first half of next year.

Good news for bunker buyers looking at annual budgeting

If you are in the office and looking at how much you are going to spend on bunkers in 2025, the analysts would suggest, a lot less than this year (and last year). Again, a core of 2025 forecasts lie in the $70-74/bbl range, with BOA at a low of $65/bbl, and Goldman Sachs at a high of $76/bbl; all lower than the $80/bbl average price seen in 2023 and in 2024.

Source: Integr8 Fuels

UBS does have a higher price forecast of $80/bbl for Brent next year, but this was published before the OPEC+ decision to defer production increases, so perhaps should not be included.

Annual bunker costs 12% less in 2025?

Using these analysts’ views on Brent prices, it implies the 2025 annual average price for Singapore VLSFO falls within a core range of $525-550/mt, with the outer limits up to $570/mt as a high (Goldman Sachs) and $485/mt as a low (BOA).

Source: Integr8 Fuels

In terms of budgeting VLSFO bunker costs for 2025, it means the ‘core view’ is at least 10% lower than in this year. Even based on Goldman’s ‘higher’ price forecast, annual average bunker costs for 2025 will still be 5% lower than this year. Finally, using the BOA’s forecast suggests there will be a massive 20% reduction next year. Whichever way you look at it, the analysts are currently telling us that we will be spending less on bunkers in 2025!

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

View this article as a PDF »

Singapore VLSFO 20% lower than 12 months ago

Singapore VLSFO prices have fallen even further over the past month, to their lowest levels since last June.

The driving force behind this continual slide in prices is the bearish fundamentals in the oil market. There have been short-term ‘interruptions’ in this decline, largely from war-related developments in Ukraine/Russia and Gaza. Though the market has continually come back to focus on the bearish oil fundamentals outlined for this year and next year, especially by the IEA.

Source: Integr8 Fuels

Developments in the Russia/Ukraine war have not (so far) been enough to reverse the fall in prices. Hence Singapore VLSFO is $50/mt lower than 3months ago, and has fallen by around $125/mt (close to 20%) over the past 12 months.

Rotterdam prices also lower

The same price movements have been seen across the bunker world, and in other product markets as well. The graph below illustrates VLSFO prices in Rotterdam, which generally follow the same trend as in Singapore (apart from in September, when there was tightness in the Singapore market). Consequently, Rotterdam VLSFO prices are now just above $500/mt, and back to around $50/mt below those in Singapore.

Source: Integr8 Fuels

It all comes back to crude

Everything ultimately comes back to the crude oil price, and the benchmark references we all use are Brent and WTI futures prices; the whole industry feeds off these prices. So, the starting point for us is Brent, and the graph below is more-or-less the same illustration we have highlighted for VLSFO above; there are of course important nuances in bunker prices, but here we are just focusing on the bigger picture.

Source: Integr8 Fuels

There are always three things to assess!

Two big things to look at now are the Russia/Ukraine war, and anything that OPEC+ does. But we must also include any significant changes that newly elected President Trump implements, including bringing the Russia/Ukraine war to an end and possible higher trade tariffs against China.

However, before Trump is inaugurated, it seems President Biden is potentially making one last big move for Ukraine, with the provision of long-range missiles able to strike well into the Russian interior. This may also be a trigger for European allies to offer ‘more-powerful’ weapons to Ukraine. These comments have already pushed oil prices a little higher.

What will it take to push bunker prices even lower?

So, if long-range missiles are available to Ukraine, it is likely to mean oil prices go higher; but a Trump ‘solution’ to the war will mean prices go lower. At this stage no one knows where this will go, but it won’t be difficult to follow, it will be all over the front pages!

We can only sit and wait to see what happens in Russia/Ukraine, but we can look more closely at the situation for OPEC+, and what that might mean for oil prices and us in the bunker market.

OPEC+ is in a difficult position in that it has planned to gradually unwind at least 2 million b/d of additional voluntary cutbacks, but has said this is dependent on market conditions. With oil prices falling, the market conditions for OPEC+ ‘have not been met’, so they have continually deferred any decision to increase production, despite some individual members pushing to raise output. The latest decision is to potentially start ramping up production in January, adding around 180,000 b/d each month.

There is already strong growth in non-OPEC+ production projected for next year. Therefore, if OPEC+ does go ahead and unwind their production cuts, world oil supply could increase by more than 3 million b/d in 2025. This is against a projected increase in oil demand of only 1.0 million (by the IEA). The graph below illustrates the massive difference between the supply and demand increases next year, with the implication of a much weaker oil market and even lower oil and bunker prices.

Source: Integr8 Fuels

The IEA is at the lower end of demand forecasts for next year, but even looking at the US EIA and OPEC themselves, they only indicate a demand growth of 1.2 million b/d and 1.5 million b/d respectively. So even here, it still shows a large imbalance and infers weaker bunker prices.

Even if OPEC+ does continue to defer any decision to unwind the cutbacks for the whole of next year, it still suggests that world oil supply will increase by 2 million b/d. Again, taking any of the main forecasters’ views on demand for 2025, it still implies ‘too much oil’, and a potential further fall in bunker prices.

Source: Integr8 Fuels

Looking at the fundamentals, the only ‘balanced’ outlook for next year is if OPEC+ make a further production cutback of around 1 million b/d!

Source: Integr8 Fuels

Given that OPEC+ is talking about increasing production, at this stage it seems highly unlikely they will make a quick decision to impose further cuts.

The fundamentals & Trump could mean even lower bunker prices in 2025

So, from a purely fundamental view, everything points to sustained ‘low’ prices next year, and if OPEC+ is not prepared to make further cuts then there is every indication that oil and bunker prices could be even lower in 2025.

BUT we are not in a purely fundamental market, and in geopolitical terms it is Russia/Ukraine that is at the forefront. If Biden’s latest move on long-range missiles is carried out, then prices are likely to rise, even if its in anticipation of an escalation in the war. However, from the early part of next year we may see far more unpredictable outcomes under President Trump. If the war does come to an end, and OPEC+ increase, or even maintain output, then VLSFO prices in the $500s may look high!

Let’s watch Biden, Trump, and OPEC+ to see what happens.

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

View this article as a PDF »

The IEA report is another influential study for us to consider

Three months ago, we highlighted BP’s analysis of the longer-term oil industry and the implications for the bunker market, taken from their ‘Energy Outlook’ report to 2050. Last week the IEA published their long term ‘World Energy Outlook’ to 2050, taking another look at how things could pan out under three different scenarios.

Here we take a dive into what this could mean for the oil industry, and then specifically what they are saying about shipping and the potential impacts on our markets for bunkers.

We know major changes will happen

There is a clear global direction away from oil (and other fossil fuels). The IEA report highlights this, plus the ongoing electrification of the overall energy system, and that clean electricity is the future.

Coming down to the more micro-level of shipping (and aviation), the IEA recognises that we are in a difficult industry to eliminate hydrocarbons. The phrase they use is that we are in a “hard to abate” sector.

Two scenarios showing a possible range, and a case to get to net zero by 2050

The three IEA scenarios are labelled as follows:

Stated Policy case – The course we are on based on policies and technologies currently in place.

Announced Pledges case – If all government/industry pledges and targets are met in full and on time.

Net Zero by 2050 – A path that would achieve net zero by 2050, limiting global warming to 1.5⁰C

Oil is in decline: other energy forms (and efficiencies) will take over

There are a whole host of challenges to meet environmental targets, but the starting point is the world still ‘wants’ more energy. Economic growth in the developing and emerging economies, and the global population forecast to grow from 8.1 billion now, to 9.7 billion by 2050 (up 20%) are a testament to this.

However, by the next decade this growth will be ‘fuelled’ without using more oil, natural gas, or coal, i.e. we only 6-7 years away from peak fossil fuel demand. Renewables (largely to produce electricity) and energy efficiency will be the new bywords in energy demand. The graph below illustrates the scale of these changes from fossil fuels to renewables and electricity under the IEA’s ‘Announced Pledges’ case.

Source: Integr8 Fuels

What is happening to oil demand?

In the IEA’s ‘Stated Policy’ case, world oil demand remains just above 100 million b/d through to the early 2030s, and then only falls to around 93 million b/d by 2050. In terms of the discussion, this is likely to be at the very high end of oil demand forecasts. There is an expectation that more governments, industries, companies, and individuals will move towards greater environmental commitments, not least as the cost structure of new technologies is reduced.

The IEA’s second scenario, the ‘Announced Pledges’ case, reflects everyone actually doing what they have said they will do, and doing it on time. This illustrates a case where oil demand would fall to around 50 million b/d by 2050, half the size it is today and clearly a radical change in the market.

A ‘reality’ case may be somewhere between the two lines shown by the IEA, and this is where BP put their ‘Current Trajectory’ case three months ago (see graph below).

Source: Integr8 Fuels

What would net zero by 2050 mean for oil?

The ‘Net Zero’ case put forward by the IEA (and by BP) illustrate the kind of ‘oil world’ we would have to be in to achieve net zero by 2050. These are not forecasts, and at this stage seem highly unlikely to be achieved by 2050.

Source: Integr8 Fuels

However, they still show the very credible implications for the oil industry at some stage in the future, based on the global moves away from fossil fuels. In both the IEA and BP scenarios we get to an oil industry of only 20-25 million b/d in a ‘Net Zero’ world. This is not a viable market size to maintain scaled-up oil infrastructure across the globe, and illustrates the direction the oil industry, and the oil bunker markets are going in the longer term. It just re-iterates the case that we must gear up for change.

We are in one of the ‘more difficult’ oil sectors

In all of this analysis, electrification is a key means of reducing CO2 emissions, and will play an enormous role in industry, buildings, and road transportation. However, for us in shipping (and in aviation) there is no obvious, easy, or low cost means of using electricity to power our needs. The IEA states that we are in “hard to abate” sectors, and that hydrocarbons will continue to play the leading role. However, they also state that we will go through significant policy changes (through the IMO and the EU) to decarbonise our market and this is assumed to be through biofuels, ammonia, methanol, hydrogen and hydrogen-based fuels, other low emission fuels, plus greater efficiencies being imposed.

Now for the good news!

There is a huge amount of analysis that goes into this IEA report, starting with economic forecasts and moving all the way through government/institutional policy, industry and consumer responses and ultimately ending up with a demand figure for distinct types of energy in each of the sectors.

Within this work the IEA calculates the demand on shipping under their three different cases, and put a tonne-mile (or tonne-kilometre) figure on this. The graph below illustrates their tonne-mile demand for shipping in the ‘Stated Policy’ and ‘Announced Policy’ cases (the ‘Net Zero’ case being highly unlikely in the time-frame to 2050).

Source: Integr8 Fuels

The IEA’s ‘Stated Policy’ case shows the tonne-mile demand for shipping rising by more than 35% by 2050. In their ‘Announced Policy’ scenario they show a gain of 20%. Working off a single, ‘credible’ case somewhere between these two scenarios would indicate a rising shipping requirement of around 25-30% over the next 25 years.

Although growth in the bunker market is likely to be less than this, with efficiency gains, we are still likely to be in a growth sector!

Conclusions are: Adapt, Change, and move into a bigger market!

We are in an industry where it is harder to use the existing technologies of electrification to achieve decarbonisation, but we will be pushed along decarbonising policies; we must adapt. And if the size of our market is getting bigger, then there could be more opportunities for us and other players/investors to get involved.

We have to continue to watch what is happening out there, in terms of fuels, technologies, developments and what people are doing. We can also have an influence. In this way we can be best prepared for the opportunities that will be there in a new, and potentially bigger bunker market.

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com

View this article as a PDF »

Crude prices have fallen to 3-year lows

In the monthly reports this year we have often highlighted the bearish fundamentals within the oil industry, especially those from the IEA. The IEA has for some time been forecasting very low growth in global oil demand for this year. Last month we also emphasised the shift in analysts’ views from a bullish to a bearish outlook on prices for 2024/25. These bearish fundamental views are certainly being fulfilled at the moment.

The graph below illustrates the downward moves in Brent crude prices over the past 6 months, falling from:

• around $90/bbl in April;
• to the $80s in May, June and July;
• to just below $80/bbl in August;
• and now into the low $70s (after falling to just below $70/bbl, its lowest since December 2021 – almost 3 years).

Source: Integr8 Fuels

This equates to a 20% fall in crude prices since April and has taken place despite heightened tensions in the Middle East, relatively low oil stocks and OPEC+ recently deferring any increase in production by at least 2 months, until December.

The bearish fundamental signals are currently dominating the market and are clearly strong enough to overcome all the other political, war-related and OPEC+ factors!

Rotterdam VLSFO prices have tracked crude

For us, the focus is what is happening to bunker prices, and the ‘easiest’ analysis is in the Rotterdam VLSFO market. Here, these bunker prices have closely tracked the developments in Brent crude, such that earlier this month Rotterdam VLSFO prices dipped below $500/mt and have been at their lowest for some 3 years. Current prices are slightly higher, at around $520/mt, but are still tracking the bearish sentiment of the crude market.

Source: Integr8 Fuels

Singapore VLSFO prices have bucked the trend

There is a different story when it comes to the VLSFO market in Singapore. Here prices were tracking crude between April and early August, but Singapore VLSFO prices have not followed the recent drop in crude and Rotterdam VLSFO prices to their 3-year lows. In fact, Singapore VLSFO has remained either side of $600/mt since May. Ordinarily, if Singapore VLSFO prices had tracked crude (as in Rotterdam), then we may have expected a more recent drop of some $50/mt, towards $550/mt. It never happened and it’s never that simple!

Source: Integr8 Fuels

As outlined in our weekly market updates, VLSFO supply has been very tight in Singapore, with strong backwardation in prices and lead times of 10-13 days. This has meant Singapore VLSFO prices have been well supported and moved to a strong premium versus crude (and other products).

Any rebalancing in the Singapore VLSFO market should see prices re-align with crude and other product prices. If this takes place whilst oil prices generally remain under downwards pressures, then we could expect a substantial drop in Singapore VLSFO prices.

Looking at the bigger picture: It is China

As always, it is worth understanding what is driving the market at any given time; in this case it is China.

Economic growth in China over the second quarter this year is assessed at 4.7%, which is slightly lower than the official 5% target rate.

However, there have been massive downwards revisions to forecast growth in Chinese oil demand this year. Back in January the IEA forecast an increase of 700,000 b/d in Chinese oil demand for 2024. By April, expectations had dropped to a growth of 550,000 b/d this year, and by August growth in Chinese oil demand for 2024 was set at only 300,000 b/d. Though there has been another downwards revision this month, and the IEA now sees Chinese oil demand growing by just 180,000 b/d this year; massively different to expectations at the start of this year.

Source: Integr8 Fuels

These ever-reducing expectations for oil demand growth in China is one of the key signals behind the current bearish sentiment and recent drop in global oil prices, to 3-year lows.

Getting more granular, the big changes in Chinese demand expectations have taken place in the naphtha and the gas/diesel oil sectors. Growth in Chinese naphtha demand is still positive, but has slowed, with delays in new petrochemical capacity coming onstream. However, Chinese gas/diesel is the most impacted product, with demand actually expected to fall this year. This is unheard of in the context of China’s meteoric rise as an economic powerhouse.

This decline in gas/diesel demand comes with weaker economic projections for the Chinese economy, major concerns about the property market and a greater use of alternative fuels in commercial road trucks.

The prospects for Chinese demand next year are equally low

Growth in Chinese oil demand next year looks equally constrained, with a forecast increase of around 250,000 b/d. Apart from higher volumes of LPG, ethane and naphtha going into the petrochemical sector, demand for all other main products looks like remaining near flat with 2024 levels. EVs already account for the majority of new car sales in China, along with an increasing number of ‘alternative’ trucks. This, plus the rapid expansion of an electrified high speed rail network (‘taking’ demand from domestic air travel), will limit any increase in the demand for gasoline, jet fuel and diesel in the next few years.

Looking further ahead, there are potential declines of close to 3% p.a. in the Chinese gasoline and diesel markets over the next 5 years, as the economy matures and the number of EVs continues
to increase.

Global fundamentals show no signs of higher oil prices

In the broader picture, cuts in global interest rates may signal some support and stimulate an element of growth in world oil demand; we did see a slight price hike when the US Fed cut interest rates for the first time in four years, by 0.5%. However, we are in a world where oil demand is flat-to-declining in the OECD countries, and growth is far less than it used to be in China.

Against these muted prospects for world oil demand, next year we are expecting strong increases in non-OPEC+ production and potential increases in OPEC+ production. These gains in supply are likely to be more than enough to put a cap on higher oil prices, even if oil demand is higher than expected.

Weak fundamentals versus threats of war

Today the risk of higher prices comes from heightened political tensions or war. It is this balance between weak fundamentals and the ‘war situations’ in the Middle East and Ukraine/Russia that the market is closely watching.

Steve Christy

Research Contributor
E: steve.christy@integr8fuels.com