Bunker Fuel

Integr8 Fuels: Upcoming OPEC+ meeting and possible impact on bunker market

Research Contributor Steve Christy elaborates on big questions for OPEC+ meeting, taking place on 1 June, surrounding member countries’ production cutbacks and how it could impact the bunker market.

Published

8 months ago

May 28, 2024

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Integr8 Fuels: Upcoming OPEC+ meeting and possible impact on bunker market

By Steve Christy, Research Contributor, Integr8 Fuels
[email protected]

22 May 2024

Bunker prices are at their lowest for three months

Although VLSFO has been in a relatively narrow price range, prices are now at their lowest for more than 3 months. The sharp drop in oil prices at the start of this month has meant Singapore and Fujairah VLSFO prices are down by $20/mt since end April, with Rotterdam VLSFO down by $30/mt.

General concerns about future economic growth, a perceived greater chance of a truce in the Israel/Gaza conflict, weaker oil demand (especially in Europe) and rising oil stock levels have all contributed to this bearish sentiment and led prices down.

Source: Integr8 Fuels

Lower crude prices mean OPEC+ has tough decisions to take

The drop in crude prices has meant Brent has fallen from $90+ levels, back down to the low $80s, and is why OPEC+ is facing a significant dilemma at their upcoming June 1st meeting.

Source: Integr8 Fuels

The big questions for OPEC+ surround their production cutbacks, where there are three key aspects:

First, the main cutbacks from all OPEC+ countries that amount to around 3.7 million b/d. These have been extended a number of times and are now scheduled to run until the end of this year, and so perhaps will not be a primary focus just yet.
The main issue now surrounds a limited number of OPEC+ countries that have made additional voluntary cutbacks totalling 2.2 million b/d. These were implemented in July 2023 and have been extended through to the end of the second quarter this year.
Finally, the extent of continued over-production by some countries. In April, the main ‘over-producers’ were Iraq (at 0.24 million b/d), UAE (0.24 million b/d), Kazakhstan (0.13 million b/d) and Russia (0.20 million b/d)

The immediate dilemma for OPEC+ is: what do those countries making the additional voluntary cutbacks do? The quote from OPEC in early March was that from end June “these voluntary cuts will be returned gradually subject to market conditions”. Will they do this?

Which countries are we talking about?

Of the eight countries involved in the additional 2.2 million b/d cutbacks, Saudi Arabia is by far the biggest, and most likely to drive the decision to extend or unwind this part of the agreement.

On paper, Russia also has a significant role, but this is ‘clouded’ by the fact that the crude cutbacks are split between production for the domestic market and those for export. It is only the export volumes that matter to the fundamentals and sentiment in international oil markets.

Source: Integr8 Fuels

Not all eight countries will have an impact

Outside of Saudi Arabia, and possibly Russia, there may be little impact from the unwinding this ‘additional’ agreement. Even if it does go ahead, it is possible that there will be very little (if any) change in production from six of the eight member countries involved.

The reasoning here is that in the broader OPEC+ agreement covering all countries, the four members that are producing substantially more than their allocation (Iraq, UAE, Kazakhstan, and Russia) are also included in the eight members that make up this additional 2.2 million b/d cutback.

The graph below illustrates the extent of over-production versus the agreed additional cutbacks made by each of the eight countries involved.

Source: Integr8 Fuels

For instance, Iraq is currently producing around 0.19 million b/d more than its 4.00 million b/d allocation. If the additional cutbacks are removed, then Iraq’s new allocation will rise to 4.22 million b/d. This is virtually in-line with their current production. So, for Iraq, it could be that they just maintain current production levels as the additional cutbacks are unwound. This would mean they automatically fall into line as a ‘good’ member, adhering to their new, higher allocation; AND there will be no increases in world oil supply!

It is exactly the same for UAE and Kazakhstan; their output levels can just continue at current levels, and they will also ‘fall into line’ with their new allocation as the additional cutbacks are unwound.

After this, Algeria and Oman are relatively small players in volume terms, and so will have limited impact. It does mean that Saudi Arabia and Russia will be the main protagonists.

So, what will happen if the additional cutbacks are unwound in Q3?

Based on the scenario above, which is credible, if the additional cuts are removed then Saudi Arabia is highly likely to ramp up production by 1 million b/d, and Kuwait potentially by 0.1 million b/d.

That then leaves Russia, which is highly uncertain given it may not have capacity to raise output, and if it has, whether this would go to their domestic market, or into the international market.

The table below indicates what the agreed additional cutbacks are, compared with the latest levels of over-production. Assuming the agreement is unwound and each country abides by its new production allocation, the final column shows the potential gain in oil supply.

Source: Integr8 Fuels

Either way, it looks like a removal of the additional OPEC+ cuts would result in an extra 1.0-1.2 million b/d to world oil supply (outside of Russia), and not the full 2.2 million b/d headline figure.

What signal would an ‘unwinding’ send to the market?

The IEA and the US EIA put the call on OPEC+ remaining more-or less flat through the rest of this year, and also flat to a potential slight decline next year (highlighted in our report April 24th). This implies any unwinding of the OPEC+ additional cuts would be a bearish signal to the market this year (and even in 2025!).

However, market analysis by OPEC contradicts this, and shows a much stronger growth in oil demand for 2024 and 2025 than other organisations. In their latest report, OPEC indicates the call on OPEC+ increasing by around 0.8 million b/d over the remainder of this year, and another 0.9 million b/d between end 2024 and end 2025. On their basis there is room for OPEC+ to start unwinding the additional cutbacks from end June and there would be only a small material change to the fundamental oil balance.

It is likely to come down to Saudi policy

Although an announcement could be made at any time, the market focus will be on the run-up to the June 1st OPEC+ meeting.

If the group decides to extend the additional cuts again, then this is more likely to be seen ‘price neutral’.

For most, an unwinding is likely to be seen as a bearish signal. In this case, bunker prices would fall. There are also further implications for us in bunkers, as almost all the crude supply gains would be heavy/sour grades from the Middle East, and so have a potential impact on the VLSFO/HSFO spread.

Is there a ‘curved ball’, where OPEC+ make more cuts? We can only keep an eye on OPEC+ and Saudi Arabia ahead of the June meeting (and for the rest of this year and next!).

Photo credit: Integr8 Fuels
Published: 28 May 2024

Bunker Fuel Quality

Report: Integr8 warns changes in VLSFO bunker fuel blends could trigger ‘problematic fuels’ wave

Firm said its new report shows that over 45% of global VLSFO supply would not meet RM380 2024 requirements of ISO 8217:2024 specification without adjustments to blend recipes and the changes could lead to a spike in ‘problematic fuels.’

Published

13 minutes ago

January 15, 2025

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Report: Integr8 warns changes in VLSFO bunker fuel blends could trigger problematic fuels wave

The introduction of the ISO 8217:2024 specification has brought renewed focus on viscosity limits, with a significant proportion of VLSFOs currently failing to meet the updated standards, according to Integr8 Fuels on Tuesday (14 January).

This was based on the firm’s latest Bunker Quality Trends report, offering insights into the evolving landscape of marine fuels. Drawing on comprehensive data from over 130 million metric tons (mt) of deliveries, the report provides an in-depth analysis of critical quality issues, regulatory implications, and market trends.

“Data from the report shows that over 45% of global VLSFO supply would not meet the RM380 2024 specification without adjustments to blend recipes,” it said.

“These changes could lead to a spike in problematic fuels, as was observed during the IMO 2020 transition, potentially affecting fuel stability and other critical parameters.”

Regions like Singapore and Houston are flagged as hotspots for adjustments, with over two-thirds of VLSFO in Singapore requiring reformulation.

“Buyers are urged to adapt charterparty wording to ensure suppliers comply with the latest standards to reduce the risk of critical handling issues,” Integr8 Fuels said.

Other key developments highlighted in the report are:

The Smart Way to Meet Compliance Targets: Plan Biofuel Bunkering on a Fleet or Pool Level

When it comes to compliance with environmental regulations, FuelEU Maritime doesn’t specify a fixed biofuel percentage. The focus is on reducing the greenhouse gas (GHG) intensity across a vessel’s voyages over the course of a calendar year. The target is a 2% reduction in GHG intensity between two EU ports, which translates to around 3% biofuel blended with VLSFO or HSFO, or 2% biofuel with MGO.

However, it’s more efficient to take larger biofuel quantities on select vessels and transfer compliance surpluses across your fleet or between ships in multiple fleets, which is also known as pooling. The most common biofuel grades stocked by suppliers are B24 and B30 blends, and pure B100. Their availability varies by port and region. Shipowners are advised to carefully manage their biofuel strategies and check the GHG intensity figures in Proof of Sustainability documents provided by suppliers.

Barge Bottlenecks: The Sulphur Compliance Challenge in Southern Europe

Sulphur compliance for VLSFO remains a pressing concern, with 2.4% of supplies exceeding the 95% confidence limits for ISO 8217 Table 2 parameters in the past six months. Geographical variances are significant, with higher non-compliance risks reported in bunker hubs such as Rotterdam and Balboa compared to Singapore. Infrastructure constraints, including the practice of switching between HSFO and VLSFO on the same barges, are identified as contributing factors. The report underscores the importance of data- driven procurement and robust supplier practices to mitigate these risks.

Rising Automotive Fuel Blends Are Driving Flash Point Risks in the Med

The integration of automotive diesel into bunkering pools has led to heightened risks of flash point non-compliance, particularly in the Mediterranean. Automotive fuels often have a minimum flash point of 55°C, below the 60°C threshold mandated for marine fuels under SOLAS regulations. The report identifies specific ports where these risks are most prevalent and calls for enhanced due diligence when purchasing in regions reliant on automotive diesel imports. Ensuring DMA specifications are met is critical to avoiding costly compliance breaches.

Biofuels and LNG: Key Players in the Future of Fuel Compliance

The report highlights the growing role of biofuels and LNG as transitional solutions for meeting stringent emissions regulations, such as FuelEU Maritime and the upcoming Mediterranean Emission Control Area (Med ECA). While LNG remains a reliable option due to its consistent quality and negligible SOx emissions, biofuels are gaining momentum as suppliers expand blending capabilities globally.

The report cautions buyers about potential operational risks, such as biofuel-related cold flow challenges in colder climates and the limited availability of LNG bunker vessels. The introduction of the Med ECA from 1 May 2025 will likely boost LNG bunker demand in the region, however, the delivery of LNG bunker vessels is failing to keep up with growing demand, tightening the LNG supply chain.

Note: The full Bunker Quality Trends Report Q1 2025 by Integr8 can be found here.

Photo credit: Integr8 Fuels
Published: 15 January, 2025

Bunker Fuel

Viroque Energy completes its first physical bunker supply operation in Colombia

Significant milestone involved the logistics coordination and delivery of 416 mt of VLSFO to an international client in an operation in Cartagena de Indias, Colombia.

Published

20 minutes ago

January 15, 2025

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Viroque Energy completes its first physical bunker supply operation in Colombia

Energy firm Viroque Energy, a new supplier for bunker services in South America, on Monday (13 January) said it successfully completed its first physical bunker supply operation in Cartagena de Indias, Colombia.

The significant milestone involved the logistics coordination and delivery of 416 mt of Very Low Sulphur Fuel Oil (VLSFO) to an international client.

The company said the operation reinforced its worldwide operational coverage and commitment as maritime industry suppliers in ‘one of Latin America’s most dynamic spots in terms of trading and commerce’.

“As part of our mission to provide high-quality marine fuels, this achievement reflects our dedication to supporting shipowners and maritime clients with efficient, high-quality, and reliable solutions tailored to their needs, now in America,” it said in a social media post.

Viroque Energy’s portfolio includes VLSFO and Marine Gas Oil (MGO).

Note: For inquiries or further details, contact [email protected].

Photo credit: Viroque Energy
Published: 15 January, 2025

Alternative Fuels

Höegh Autoliners names LNG-powered RoRo ship “Höegh Sunlight” in China

Firm’s fourth Aurora Class newbuild “Höegh Sunlight” began its LNG-powered maiden voyage to Europe, fully loaded with Chinese cargo after a naming ceremony at Taicang Haitong Auto Terminal.

Published

23 minutes ago

January 15, 2025

Admin

Höegh Autoliners names LNG-powered RoRo ship before commencing first voyage

Höegh Autoliners on Tuesday (14 January) said its fourth Aurora Class newbuild, Höegh Sunlight, was named at a ceremony at Taicang Haitong Auto Terminal.

The 9,100 CEU Höegh Sunlight commenced its LNG-powered maiden voyage to Europe, fully loaded with Chinese cargo, shortly after the fireworks.

“We now have four of the world’s largest and most environmentally friendly car carriers sailing the seas,” the firm said in a social media post.

“Today’s celebrations are not only marking the handover of a ship; they once again underline our relentless quest toward a greener future—and a transformed industry.”

Höegh Autoliners names LNG-powered RoRo ship “Höegh Sunlight” in China

The Höegh Sunlight will reduce carbon emissions by 58 percent per transported car compared to the current industry average.

In 2027, when the first Aurora is powered entirely by clean ammonia, nearly all carbon emissions will be eliminated.

CEO, Andreas Enger, said: “Taking delivery of four of the world’s largest and most environmentally friendly PCTCs within six months is a decisive step to renew the company and our industry. We are pleased to celebrate this milestone with customers and partners during her first cargo operation in Taicang.”

COO, Sebjørn Dahl, said: “Never in our nearly 100-year history have we built so many vessels in one newbuild programme, such large vessels, so technically advanced, so green, and so many at the same time and at this speed. We are indeed an agile, bold, and professional team at Höegh Autoliners.”

Photo credit: Höegh Autoliners
Published: 15 January, 2025