Week 39: Where Are Bunker Fuel Prices Heading?



Crude oil prices 

Brent crude oil prices ranged from $45.90 per barrel to $49.20 per barrel in week 39, which ended on September 30, 2016. On average, prices were similar to last year’s prices. 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 the crude oil tanker demand and has a positive impact on tanker rates. Higher freight rates benefit the crude oil tanker industry.

Bunker fuel prices

Bunker fuel prices, the largest cost of running a ship, correlate with crude oil prices. For the week ended September 30, 2016, the average bunker fuel price was $301–$305 per ton. Bunker fuel prices are 6% higher than the same period in 2015. Prices were $297–$305 per ton in the previous week.

In terms of major ports, bunker prices at Rotterdam were $246–$250 per ton, compared to $242–$250 per ton in the previous week. At the Port of Fujairah, bunker prices were $262–$271 per ton, compared to $261–$269 per ton in the previous week.

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 impact costs for 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.

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


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