Crude oil prices
Brent crude oil prices ranged from $47 per barrel to $50 per barrel in week 24, which ended on June 17, 2016. Prices in the previous week ranged from $50–$52 per barrel.
The current prices are still 20% lower than they were in the same period last year. Remember, crude oil (DBO) prices impact crude oil demand, which affects freight rates and bunker fuel prices.
Oil demand and tanker rates
Lower crude oil prices encourage countries to import larger quantities of cheap oil to store for future use. This increases crude oil tanker demand, which has a positive impact on tanker rates. Higher freight rates benefit the crude oil tanker industry.
Bunker fuel prices
Bunker fuel prices, which represent the largest cost to run a ship, are correlated with crude oil prices. For the week ended June 17, 2016, the average bunker fuel price was $284–$295 per ton. Prices were almost 25% lower compared to the same period last year. In the previous week, they were $281–$296 per ton.
For major ports, bunker prices at Rotterdam were $220–$234 per ton. This compares to the previous week’s 220–$232 per ton. At the Port of Fujairah, bunker prices were $236–$250 per ton compared to the previous week’s $242–$250 per ton.
Why it matters
Lower bunker prices reduce operating costs and increase 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 affect the cost side of product tankers and dry bulk shipping companies such as Navios Maritime Partners (NMM). LNG (liquefied natural gas) carrier companies such as Teekay LNG Partners (TGP), GasLog (GLOG), and Golar LNG (GLNG) are also affected by bunker fuel pricing.
Investors interested in a broad exposure to the industrials sector can invest in the SPDR Dow Jones Industrial Average ETF (DIA).