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Integr8 on bunker prices: Let’s listen to what experts have to say

Indicative views from the experts implies Singapore VLSFO prices moving back up to around $650/mt and trading in the $650-700/mt range for the rest of the year, shares Steve Christy of Integr8 Fuels.

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

28 March 2023

Don’t trust the experts?

In these more macro reports, we tend to look at oil industry fundamentals and try to get a steer on where bunker prices are going. There is no doubt that over the past few months the industry has generally reflected a more bullish outlook for prices. BUT prices have fallen!

In February there were signs of short-term weakness in Asian and European oil markets and this led prices down. In March prices have fallen again. So, there has generally been a bullish view of pricing and yet Singapore VLSFO price are down by almost $150/mt (minus 20%)!

graph 1 650x427 1

One outcome of this is maybe, ‘don’t trust the experts, what do they know?’. This is certainly an approach some politicians have adopted in recent years! Another view is that we are in a market where not only do fundamentals count, but ‘unforecastable’ global events, politics and psychology play major roles (as an analyst, I’m going for this view!).

A lot of (non-oil) people influence bunker prices

In the bunker market, our prices are driven by crude oil, and this is freely, easily and widely traded in international futures markets; they set our benchmarks.

To put this in perspective, the size of the bunker market is around 5 million b/d, the total oil market is around 100 million b/d, and the average combined size of the two main crude futures markets is estimated at around 600 million b/d on front month contracts alone (this excludes trades on outer months and options etc).

grpha 2 650x432 1

At times of a global shock, crude futures trading can easily double. So, when anything happens in the world it can have an instant impact on crude futures prices, which in turn means an immediate hit on the prices we pay for bunkers.

A crisis in confidence in the banking sector means lower bunker prices

graph 4 650x452 1

These developments clearly put a focus on other banking institutions from around the 9th March onwards. Looking at eight major international banks (excluding Credit Suisse), the average share price fell by around 10% between the 10th and 20th March. There is a 1-2 day lag in oil prices, but the banking woes clearly hit crude prices on the futures markets over this period.

graph 5 650x489 1

From these share price movements, it is clear the banking community (and so also us) are ‘not out of the woods’ yet, although oil prices have bounced back from their lows.

What are the expects saying now?

So, we have seen short-term weakness in the oil markets in February, and a crisis of confidence in the banking sector in March. These overtook the bullish views that were in the oil markets at the start of the year. But what are the expects saying now?

Well, those bullish economic pointers of China and Asia, plus constraints on OPEC+ production still remain and are being talked about.

Perhaps the first signal has come from the FT Commodities Global Summit, taking place just last week in Switzerland. As a broad outcome from this, crude oil prices are forecast to hit somewhere between $80-140/bbl this year; this would imply Singapore VLSFO reaching a point between $600-1,000/mt over the next 9 months
I can hear the comments now: “These experts have a very, very wide range of price views.”; “What use is forecast with a $400/mt range?”; “They have already got it wrong so far this year!”.

There will be a lot more views than these three, and some may be unprintable. But it’s worth listening to what they say, as long as we know the reasoning behind their views.

Firstly, the consensus is that prices will rise from current levels. The experts are coming back to their fundamental views and these are generally bullish. The main one here is probably China and their expectations that domestic demand is already on the rise and this is enough to tighten global supply & demand balances. Indications from the big trading companies are that Chinese road and air travel are already back to, or above 2019 levels, and this can only fuel these more bullish views.

It’s human nature to find supporting evidence to reinforce views, and here the bolt-on arguments are:

  • A rise of oil demand in Asian economies;
  • No signs of the OPEC+ group (particularly Saudi Arabia) raising production against higher levels of demand;
  • US oil production cannot increase rapidly or by enough to take the sting out of the market.

These are generally the same market fundamentals that the experts talked about in January and February, and these still form their basis for prices hitting higher levels this year; it’s just that some curved balls have intervened in
the meantime.

The bottom line: What does this mean for bunker prices?

Although the headline news on forecasts show such a wide range, most commentators are gravitating towards Brent prices in the $90-95/bbl range for this year. Also, the recent trend is for most analysts to revise down their forecasts by around $5-7/bbl, including Goldman Sachs and Barclays. This means Goldman Sachs is now at $85/bbl for Brent this year, which is not that much higher than end March prices and very close to what we saw in January and February.

Taking these latest, indicative views from the experts implies Singapore VLSFO prices moving back up to around $650/mt and trading in the $650-700/mt range for the rest of the year; Not as concerning as headline news of $140/bbl Brent and $1,000/mt VLSFO.

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Where are the next ‘curved balls’ to prove the experts wrong?

The pandemic, the war in Ukraine and the uncertainty in the banking arena are just three recent events that were largely unforecastable; the first pushing prices significantly lower, the next pushing prices higher and the last taking around $50/mt off the Singapore VLSFO price.

Current hot topics involve the politics between China, Russia and the US and these always have the potential to change prices drastically. Also, any outcome in the war in Ukraine will shift oil prices. However, at this stage the biggest risks to the experts’ views come from recession or another economic crisis, which seem closer now than for many years; if it happens, oil demand will be hit and prices will definitely fall.

One other potential curved ball that has just come into view is China potentially brokering a deal to re-establish diplomatic ties between Saudi Arabia and Iran. The process is underway and the first phase is to reopen embassies in each other’s country within the next two months. Upcoming diplomatic talks are planned and there are even (unconfirmed) suggestions of the Iranian President going to Saudi Arabia to meet the King at some stage.

Obviously, it is unclear how far things will go, but in the first instance, any resolution between the two counties is more likely to lead to lower oil prices, rather than higher. However, that then leaves the political fallout from the situation and China brokering such a deal; where does this leave the US and how would they respond?

There are a lot of unknows here, and any oil expert looking at forecasting oil prices is not going to be able to factor-in these into any price forecast they make.

So, for us looking at bunker prices, let’s take a steer from the experts, make sure we know why they are saying what they are saying, and keep an open mind to world events and what these may do to prices in our market. Easy.

Photo credit and source: Integr8
Published: 11 April, 2023

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Fuel Testing

Singapore: CTI-Maritec shares testing protocols ahead of mandatory enhanced bunker fuel checks

In light of mandatory enhanced checks for marine fuel delivered at Singapore port coming into effect on 1 June, CTI-Maritec shares recommendations for fuel testing protocols, primarily focused at COCs and SAN detection for bunker supply in Singapore.

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Louis Reed from Unsplash

With mandatory enhanced checks for marine fuel delivered at Singapore port coming into effect on 1 June, bunker fuel testing and marine surveying business Maritec Pte Ltd (CTI-Maritec) has published a newsletter providing recommendations on vital pre-emptive fuel testing measures vessels should be taking as part of their routine fuel testing and also recommendations on optimal testing options available when deep-dive analysis is required to determine a root cause: 

Introduction

On 8 February 2024 the Maritime and Port Authority of Singapore (MPA) issued a Port Marine Circular No 3 of 2024 regarding the implementation of enhanced testing parameters for marine fuel batches intended to be delivered as bunkers in the Port of Singapore in addition to the existing quality assurance measures.

In accordance with the MPA’s Port Marine Circular No 3 of 2024, from 1 June 2024 onwards, bunker suppliers in the Port of Singapore must ensure that:

  • Residual & Bio-residual bunker fuel do not contain Chlorinated Organic Compounds (COC) above 50mg/kg and are free from inorganic acids.
  • COC must be tested using the EN 14077 accredited test method and shall be reported in the “Certificate of Quality” (COQ) provided to receiving vessels.
  • Inorganic acids must use the ASTM D664 accredited test method as prescribed in ISO 8217 and the Strong Acid Number (SAN) (in addition to the Total Acid Number (TAN) shall be reported in the COQ (i.e. SAN = 0) provided to receiving vessels. For distillate / bio-distillate bunker marine fuel batches, SAN must be tested as per ASTM D664 test method and reported in the COQ.
  • Residual marine fuels are free from polystyrene, polypropylene & polymethacrylate. These can be tested by filtration, microscopic examination, & Fourier-Transform Infrared spectroscopy analysis.

Testing Recommendations in line with MPA Enhanced Parameters to Protect Your Vessels:

In view of the above, CTI-Maritec recommends fuel testing protocols as depicted in the chart below (as routine pre-emptive measures and/or for deep dive requirements to detect the root cause) to help safeguard vessel health.

Our recommendations are primarily focused at COCs and SAN detection for bunker supply in Singapore, while recommendations for testing Polymers are advised for requirements of reported problem cases or when highly abnormal GCMS findings of chemical compounds like Styrene, DCPD and Indene are detected.

COC & SAN GCMS testing Packages A to E

Related: Singapore: CTI-Maritec publishes whitepaper on upcoming mandatory enhanced bunker fuel tests
Related: Singapore: Marine fuel quality testing agencies applaud move for mandatory enhanced bunker fuel tests
Related: Singapore: MPA tightens testing parameters to reduce contaminated bunker fuels
Related: MPA: Glencore and PetroChina supplied contaminated bunkers to about 200 ships in the Port of Singapore

 

Photo credit: Louis Reed from Unsplash
Published: 29 May 2024

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Methanol

VPS conducts assessment on first SIMOPS methanol bunkering op in Singapore

Firm was appointed by OCI Methanol Europe to conduct a quantity and quality assessment of a methanol bunker fuel delivery to “Eco Maestro” in Singapore.

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VPS conducts assessment on first SIMOPS methanol bunkering op in Singapore

Marine fuels testing company VPS on Tuesday (28 May) said it was appointed by OCI Methanol Europe, part of the OCI Global Group, to conduct a quantity and quality assessment of a methanol fuel delivery to Eco Maestro in Singapore.

Captain Rahul Choudhuri, President Strategic Partnerships, VPS, said VPS survey experts Rafael Theseira and Muhd Nazmi Abdul Rahim were at hand during the methanol bunkering to ensure the 300 metric tonnes of methanol transfer was carried out smoothly, having been involved in the first methanol bunkering a year ago. 

Manifold Times recently reported X-Press Feeders, Global Energy Trading Pte Ltd (GET), and PSA Singapore (PSA) successfully completing the first simultaneous methanol bunkering and cargo operation (SIMOPS) in Singapore.

A X-Press Feeder container vessel, Eco Maestro, on its maiden voyage from Asia to Europe was successfully refuelled with close to 300 mt of bio-methanol by GET, a MPA licensed bunker supplier, using MT KARA

The ISCC-certified bio-methanol used for the SIMOPS was produced by green methanol producer OCI Global and supplied via GET, a ISCC-certified supplier.

Captain Choudhuri said the role of the marine, petroleum or bunker surveyor has evolved over the years in shipping and maritime affairs, but the principles have not - and that is to provide independent assessment of the quality and quantity of the product transfer. 

“This may seem obvious but this quality and quantity control is crucial to avoid commercial discrepancies, shortages or fraud,” he said.

“Safety training is critical and we have been on top of this having completed the required MPA fire-fighting course and the IBIA Methanol training course. We will work more with the Singapore Maritime Academy for trainings in future,” he added.

In August last year, Singapore-headquartered independent common carrier X-Press Feeders launched its first ever dual-fuel vessel Eco Maestro in China.

Manifold Times previously reported VPS stating it was the first company to complete a methanol bunker quantity survey (BQS) operation in Singapore on 27 July last year.

VPS was appointed by Maersk and Hong Lam Marine Pte Ltd, to undertake the very first bunker quantity survey (BQS) of a methanol fuel delivery, supplied by Hong Lam to the Maersk vessel on its maiden voyage to Europe. 

Related: First SIMOPS methanol bunkering operation completed in Singapore
Related: VPS completes quantity survey on Singapore’s first methanol bunkering op
Related: Singapore bunkering sector enters milestone with first methanol marine refuelling op
Related: X-Press Feeders launches its first methanol dual-fuel vessel “Eco Maestro” in China

 

Photo credit: VPS
Published: 29 May 2024

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LNG Bunkering

Gasum and Equinor ink continuation of long-term LNG bunkering agreement

Agreement builds on the success of the previous contract Gasum has had with Equinor; Gasum’s bunker vessels “Coralius”, “Kairos” and “Coral Energy” will be used for the bunkering operations.

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Gasum and Equinor ink continuation of long-term LNG bunkering agreement

Nordic liquefied natural gas (LNG) bunker supplier Gasum on Tuesday (28 May) said it signed a long-term contract with Norway-based global energy company Equinor whereby Gasum continues to supply LNG to Equinor’s dual-fuel chartered fleet of vessels. 

The agreement builds on the success of the previous contract Gasum has had with Equinor. Gasum’s bunker vessels Coralius, Kairos and Coral Energy will be used for the bunkering operations.

The agreement also includes additional support services such as cooling down and gassing up, which has also been a part of Gasum’s previous collaboration with Equinor. 

Gasum has organised three separate LNG cool down operations for Equinor in Skagen so far this year.

Both Gasum and Equinor have committed to sustainability goals to enable a cleaner energy future. Equinor’s ambition is to become a net-zero emissions energy company by 2050.

Using LNG in maritime transport means complete removal of sulfur oxides (SOx) and particles, and reduction of nitrogen oxides (NOx) emissions of up to 85 percent as well as a reduction in CO2 emissions by at least 20%. LNG is interchangeable with liquefied biogas (LBG/bio-LNG), which reduces carbon dioxide emissions by 90% compared to conventional fuel such as marine gasoil (MGO).

With LNG and bio-LNG the maritime industry can reduce emissions already today, instead of waiting for future solutions. Gasum’s strategic goal is to bring yearly seven terawatt hours (7 TWh) of renewable gas to market by 2027. Achieving this goal would mean combined carbon dioxide reduction of 1.8 million tons per year for Gasum’s customers.

Related: Equinor Energy AS extends LNG bunkering agreement with Gasum
Related: Gasum expands LNG bunkering business to ARA region through partnership with Equinor

 

Photo credit: Gasum
Published: 29 May 2024

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