Business
Integr8 fuels: Oil fundamentals tightening, with $400 to $500 VLSFO potentially on track
OPEC+ adherence implies stronger prices and would signal Singapore VLSFO nearing the $400 range by late 2020 and moving towards $500 in late 2021, it said.
Integr8 Fuels, the bunker trading and brokerage arm of Navig8, on Thursday (26 June) published an update on how improving oil fundamentals could affect the absolute price of bunker fuels depending on the cooperation of market stakeholders and economic conditions post COVID-19 lockdowns:
We are now around 4 months into this global pandemic, and in the analysts’ world ideas about oil demand and how it may rebound are converging. In mid-April we did a webinar reflecting the wide range in expectations of the collapse in global oil demand and how quickly it may recover. At that time views varied from a ‘minimal’ loss of 15 million b/d in April (versus April 2019) up to an extreme case of a 28 million b/d loss. Also, the perception back then was that oil demand would recover back to 2019 levels by the end of this year.
Now, ten weeks later, a number of analysts are more aligned on a demand loss of around 21 million b/d (mid-way between the early indicators), but the impact is now expected to last much longer. Most analysts are now suggesting oil demand will not return to 2019 levels until early 2022. So, the impact is not as deep as some first feared, but it is expected to go on for longer.
The graph below illustrates this, showing the latest views from a number of analysts on how they see the loss in oil demand developing after the extreme position in April (each month represents the loss versus the corresponding month in 2019). Three of the four analysts’ forecasts are relatively similar, with one more extreme on the downside. Averaging the four gives a pattern where demand is rebounding, but still slightly below 2019 levels even by end 2021.
When we look at the bunker business, the demand impact on us has been relatively minor, at around 9% loss in fuel oil demand. It has been the other transportation sectors that have taken the big hit, and especially the jet market, where two-thirds of the demand has been lost. However, it is not the bunker market that determines bunker prices, it is the overall oil fundamental backdrop that largely determines the absolute price and we are going through one of the most extreme oil markets ever seen.
Price does tell us a lot, and we have seen VLSFO in Singapore fall from $740/ton at the start of the year to a low of $190 in late April and back up to around $320 today. The shape of this curve mirrors the oil fundamentals; collapse as demand falls much faster than supply and rebound as demand picks up and supply is cut.
The ‘worst’ is over and oil fundamentals are now tightening; demand is rebounding fast as countries come out of lockdowns, and production has fallen with the OPEC+ cuts along with losses in output from low oil prices (most notably in the US). The question is, where do prices go from here?
The chart below illustrates the massive supply and demand shifts we have already gone through, and also shows a fundamental case going forward. This is based on the average demand view discussed above and two supply cases, one where OPEC+ fully adheres to the current agreement and the other where ties to the agreement slip. Any slippage could be for a number of reasons, but the two main ones are likely to be either a breakdown between Russia and Saudi Arabia (which underpins the agreement), or that at some stage the oil price becomes ‘acceptable’ to the OPEC+ group and they feel comfortable easing the cuts.
Looking at analysts’ current views, full adherence would appear to result in supply running considerably below demand for the rest of this year and throughout 2021. This would be highly price supportive and we could expect bunker prices on an upwards trajectory. Any slippage in the OPEC+ agreement would lower the price prospects, and in the case shown here the supply and demand outlook is relatively balanced; i.e. stocks would remain close to current levels and we would not expect a significant price rise.
OPEC has typically been a very good organisation at responding to crises, and along with other key countries the initial agreement in mid-April and the extension in early June has turned the market around.
There is the framework for this OPEC+ agreement to run through to April 2022, and IF the analysts are right on oil demand AND OPEC+ stick to the current plan, then we could see oil stocks fall rapidly from now onwards. The graph below shows how global oil stocks have increased relative to the position at January 1st 2019 (the blue line) and that we are currently close to 2 billion barrels above this level. It also shows a continual decline from now on.
It will still take until late Q4 2021 / Q1 2022 until we get back close to the 2019 stock levels, when Brent crude prices averaged $65/bbl and indications for Singapore VLSFO were around $550/ton. Nonetheless, this is a clear road to this point and could see Brent well above $50/bbl by the end of this year and around $60/bbl later next year.
Full OPEC+ adherence does imply much stronger prices than the current crude forward curve indicates and would signal Singapore VLSFO knocking on the door of $400 at the end of this year and moving towards $500 in late 2021.
There is of course a lot of conjecture here, and this obviously depends on the key factors of how we come out of lockdowns and the state of the economy, plus what OPEC+ actually does, but we do have to keep watching these developments to see where pricing in our sector is going. This approach gives an idea on what track we are on and if, or how far we may be deviating from this $400/ton and $500/ton VLSFO price trajectory. Let’s keep tracking and we will continue to post regular updates.
Photo credit and source: Integr8 Fuels
Published: 28 June, 2020
Legal
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Port & Regulatory
Gard: Sulphur-related bunker claims rise amid tighter China MSA enforcement
Claims involving excessive sulphur content in marine fuels have been rising, while stricter inspections by the China MSA have heightened the focus on sulphur compliance, particularly in the Bohai Sea.
Maritime protection and indemnity (P&I) club Gard on Wednesday (12 August) highlighted that claims involving excessive sulphur content in marine fuels have been rising, while stricter inspections by the China MSA have heightened the focus on sulphur compliance, particularly in the Bohai Sea:
Rise in off-spec sulphur claims
Recent claims experience indicates that bunker quality continues to pose a significant operational risk for shipowners. In our earlier review of bunker-related claims during the first five months of 2026, we highlighted a rise in off-specification bunker incidents amid increased pressure on global fuel supply chains following the escalation of the conflict in the Middle East.
Specifically for Sulphur compliance, between January and June 2026, the number of sulphur-related cases increased by more than threefold compared with the same period in 2025. Notably, the number of cases recorded in the first six months of this year has already exceeded the total number reported during the whole of last year by approximately 40%.
While each case is fact-specific, the increase is notable because excessive sulphur content constitutes a MARPOL compliance issue. Unlike many other bunker quality problems, sulphur non-compliance identified through port state inspections can result in vessel delays, enforcement action, and substantial costs associated with debunkering and fuel disposal.
The map below illustrates the geographical distribution of sulphur-related claims recorded during the first six months of 2026, based on the location where the bunkers were stemmed.
China MSA steps up sulphur compliance enforcement
According to our correspondent, Huatai, on 5 June 2026, the maritime authorities of Tianjin, Hebei, Liaoning and Shandong jointly launched a special campaign on ship pollution prevention and control in the Bohai Sea region. The campaign involves coordinated supervision by local MSA branches across the region and is expected to last nearly five months. It covers major ports and surrounding port areas in the Bohai Sea region, including Tianjin, Tangshan, Qinhuangdao, Huanghua, Jinzhou, Yingkou and Longkou.
While the initiative is broader than bunker sulphur compliance alone, its scope includes inspections relating to air pollution prevention, SOx emissions, fuel compliance and other high-pollution-risk operations. Enforcement measures are expected to comprise onboard inspections, cross-regional enforcement activities, unannounced spot checks and remote monitoring. These efforts will be supported by a combination of UAV patrols, maritime patrol vessels, shore-based monitoring systems and rapid on-site fuel testing.
As a result, vessels trading in the Bohai Sea region may experience increased scrutiny of fuel compliance documentation, fuel sampling records, onboard fuel management procedures, and the handling or disposal of suspected non-compliant fuel.
Documents typically requested by China MSA
Based on our recent experience, including the case discussed above, and subject to the specific requirements of the local MSA office, owners and operators may be requested to provide supporting documentation such as:
- Bunker documentation – Bunker Delivery Notes (BDNs), MARPOL fuel sample records, fuel test reports, and relevant fuel quality certificates.
- Statutory certificates – including the International Air Pollution Prevention (IAPP) Certificate and International Oil Pollution Prevention (IOPP) Certificate.
- Operational records – engine logbooks, deck and navigation logbooks, Oil Record Book entries, and records relating to fuel transfers, storage and consumption.
- Sampling documentation – the Master’s statement and any records demonstrating how fuel samples were drawn, sealed, labelled, handled and retained.
- Correspondence records – communications with the authorities, bunker suppliers, charterers and other relevant stakeholders.
- Fuel disposal records – approved disposal plans, debunkering documentation, receipts and evidence of final disposal, where applicable.
The exact documentation required will depend on the nature of the investigation, the findings of the inspection, and the requirements of the local enforcement authority.
Possible regulatory consequences in China
Under the Air Pollution Prevention and Control Law of the People’s Republic of China, ocean-going vessels are required to use fuel oil meeting atmospheric pollutant control requirements after berthing. Vessels operating within designated emission control areas must also comply with applicable emission standards. Article 106 provides that where vessel fuel oil fails to meet applicable standards or requirements, the competent maritime authorities may impose fines ranging from RMB 10,000 to RMB 100,000. Liability may extend to shipowners, ship operators and ship managers depending upon the circumstances of the case.
Recommendation
Sulphur compliance should be treated as both a fuel quality and regulatory risk. Owners and operators are encouraged to take preventive steps before bunkering, act promptly if non-compliant fuel is suspected, and preserve evidence carefully if an inspection or claim arises. Under amended
Resolution A.1206(34), Appendix 18, 2.1.5, if the BDN shows compliant fuel, but the master has independent test results of the fuel oil sample taken by the ship during the bunkering which indicates non-compliance, the master may document this by notifying the ship’s flag Administration, with copies to:
- the competent authority of the relevant port of destination,
- the Administration under whose jurisdiction the bunker deliverer is located,
- and to the bunker deliverer.
Photo credit: shraga kopstein on Unsplash / Gard
Published: 14 August, 2026
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