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Week 13: West African VLCC Market Strengthens

PART:
1 2 3 4
Part 3
Week 13: West African VLCC Market Strengthens PART 3 OF 4

How Will Bunker Fuel Prices Shape Up in the Coming Week?

Bunker fuel prices

In the previous part of this series, we saw how the West African VLCC (very large crude carrier) market rebounded, while demand in the West African Suezmax market remained quiet.

Now let’s shift our focus to the cost side of the crude oil (DBO) tanker industry. Let’s see how bunker fuel prices performed in week 13, which ended March 31, 2017.

How Will Bunker Fuel Prices Shape Up in the Coming Week?

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Overall bunker fuel prices rose in week 13. According to a TransOil report for week 13, bunker fuel prices will strengthen at the beginning of next week due to the wider spread between bunker prices and the price of oil.

Bunker fuel

Bunker fuel is one of the highest costs for crude oil tanker companies. It’s closely related to oil prices. Lower crude oil prices translate to lower bunker fuel costs.

Lower crude oil prices also encourage countries to import larger quantities of cheap oil to store for future use, which increases the crude oil tanker demand.

Bunker fuel prices fell

On March 30, 2017, the average bunker fuel price was ~$332 per ton, compared to $323 per ton in the previous week.

In terms of major ports, bunker prices at Rotterdam were $282 per ton on March 30, 2017, compared to $270 per ton on March 23, 2017, and $306 per ton in the previous month, according to Gibson’s weekly report. At the Port of Fujairah, bunker prices were $300 per ton on March 30 compared to $293 per ton on March 23 and $334 per ton in the previous month, according to the same report.

Who’s affected?

Lower bunker prices reduce operating costs and boost profits for companies such as Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).

Bunker fuel prices also impact the costs of product tankers and dry bulk shipping companies such as Navios Maritime Partners (NMM). Liquefied natural gas carrier companies such as GasLog (GLOG) and Golar LNG (GLNG) are also impacted by bunker fuel pricing.

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