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Where Were Bunker Fuel Prices Heading in Week 32?

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Crude oil prices 

Brent crude oil prices ranged from $44.05 per barrel to $47 per barrel in Week 32, which ended August 12, 2016. This was higher than the previous week’s prices of $41.80–$44.20 per barrel. Prices are still nearly 8% lower than in the same period last year.

Crude oil (DBO) prices impact crude oil demand, which affects freight rates and bunker fuel prices.

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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 tanker demand, which has a positive impact on tanker rates. Higher freight rates benefit the crude tanker industry.

Bunker fuel prices

Bunker fuel prices, the largest cost to run a ship, correlate with crude oil prices. For the week ended August 12, 2016, the average bunker fuel price was $279–$285 per ton. Bunker fuel prices were almost 12% lower than in the same period last year. Prices were $273–$279 per ton in the previous week.

In terms of major ports, bunker prices at Rotterdam were $212–$221 per ton compared to the previous week’s range of $208–$216 per ton. At the Port of Fujairah, bunker prices were $229–$237 per ton compared to the previous week’s range of $219–$225 per ton.

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 GasLog (GLOG) and Golar LNG (GLNG) are also affected by bunker fuel pricing.

Investors who are interested in a broader exposure to the industrials sector can invest in the SPDR Dow Jones Industrial Average ETF (DIA).

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