Connect with us

Analysis

Integr8: Singapore VLSFO at its lowest price in 20 months; what’s next?

Article discusses what lies ahead after monthly average prices for VLSFO in Singapore and Rotterdam are below their levels prior to Russian invasion of Ukraine, their lowest for 20 months.

Admin

Published

on

Integr8 Singapore VLSFO

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

29 May 2023

We have the lowest bunker prices in almost two years

For a number of months we have been ‘banging on’ about the analysts’ view of stronger oil fundamentals and higher prices, versus the reality of declining oil prices, and so lower bunker costs in our sector.

We are now at a point where monthly average Singapore and Rotterdam VLSFO prices are below their levels just prior to the Russian invasion of Ukraine, and at their lowest for 20 months. In fact, Singapore VLSFO prices have almost halved from their peak just 11 months ago.

graph 1 1024x686 1

Can bunker prices go lower?

As we have seen over the past three years, forecasting prices can be a difficult challenge, especially in our area, which has been heavily influenced by a pandemic, let alone politics and war. So, the answer is: yes, prices can continue to slide.

Over the past 3-4 months market sentiment has strayed away from those bullish analytical forecasts and centred on some very worrying global economic developments. But we may now be at a ‘breathing space’ in the market, and if nothing else major happens like even higher inflation rates, significant hikes in bank rates or banks collapsing, then the industry may come back to look at what the analysts are saying. They haven’t really changed their fundamental views, and so if this does happen, then there will be a generally more bullish sentiment coming through.

Oil production could remain near unchanged through the next 6 months

In our report a month ago, we focused on oil production and how this is likely to be constrained over the rest of this year if key OPEC+ countries abide by their commitments to cut around 1.2 million b/d of supply (watch OPEC+ was the mantra). Forecast gains in non-OPEC+ production are similar to the planned OPEC+ cutbacks, and so on this basis oil supply would be relatively flat through the rest of this year.

After OPEC+, it comes down to demand

In this report we are focusing on oil demand. Current forecasts are that global oil demand will hit an all-time high this year, at an annual average of 102 million b/d. This is up 2 million b/d on last year and surpasses the pre-pandemic high of close to 101 million b/d seen in 2019.

graph 2 1024x643 1

For all the talk of electrification in the auto sector, and anti-oil protests, global demand for oil is still rising, and is projected to continue rising for another 10 years or more. Electric vehicles will one day dominate and total oil demand will fall, it’s just that this is likely to be into the 2030s at the earliest.

The focus on demand definitely lies with China

Coming back to more recent developments and the demand outlook for the rest of this year. The graph below illustrates year-on-year changes in oil demand by main region. The two main points here are that through the earlier parts of last year it was the OECD countries that were coming out of lockdown and driving increases in global oil demand (with China maintaining strict lockdowns). Now growth in OECD countries has stalled to only minimal levels and it is China that is the focus and powerhouse of new growth, with lockdowns finally removed and the economy ‘getting back into gear’.

graph 3 1024x675 1

This story on Chinese oil demand is gaining momentum, with latest (March) data indicating an all-time high at 16 million b/d (this compares with the US at 20 million b/d, and the two countries combined, accounting for 35% of world oil consumption). Domestic air travel has also ‘taken off’, and is also back to pre-pandemic levels. Most analysts are indicating continued growth in these transport sectors, with a boom in international air travel on the cards for the second half of this year (at the moment international air travel is only around 70% of its pre-pandemic level).

The graph below illustrates the forecast year-on-year growth in Chinese oil demand for this year by product, and clearly shows the emphasis on the air and road transport fuels of jet and gasoline. It is obviously that analysts looking at a strong growth in global oil demand this year are ‘pinning their hopes’ on these two products in China.

graph 4 1024x648 1

Growth in naphtha demand in China is also very strong, with the major expansion in domestic petrochemical capacity.

In contrast, gasoil demand in China appears to be weak and this is a major concern because gasoil tends to be a ‘backbone’ to industrial activity. This does have further ramifications beyond the Chinese domestic market, as it is likely to limit any increase in exports and international trade. It also means a widening gap between levels of personal spending and industrial activity within China. However, the gains in travel are expected to far outweigh any limitations in the industrial sector.

Will market sentiment shift back to reflect what analysts are saying?

The IEA, Goldman Sachs, OPEC and the US EIA are some of the groups forecasting a tighter fundamental oil balance as we go through the rest of this year. There are some others that are less optimistic about China’s prospects and have greater concerns over economies in the OECD, but at the moment these seem to be in a minority.

It goes without saying that if there are heightened war or global political issues, then bunker prices are more likely to rise than fall. But summarising here, the fundamental outlook lies with the announced cuts in oil production from a few OPEC+ countries, along with the demand issues laid out in this report; in particular what is going to happen to oil demand in China. If no big, economic stories hit the headlines, and the sentiment shifts back to what various analysts are saying, then jet and gasoline demand in China will be a cornerstone in their thinking and oil prices over the rest of this year, including for us in bunkers.

Photo credit and source: Integr8
Published: 14 June, 2023

Continue Reading

Research

Yamna identifies five potential global ammonia bunkering hubs

Unlike methanol, ammonia is not constrained by biogenic CO2 availability, and its production process is relatively simple.

Admin

Published

on

By

Yanma projected ammonia bunkering hubs

Specialised green hydrogen and derivatives platform Yamna in early December identified several potential ammonia bunkering hubs around the world.

The hubs are Port of Rotterdam, Port of Algeciras, Suez Canal, Jurong Port, and Port of Salalah.

“The shipping industry faces an ambitious challenge: reducing emissions by 20% by 2030 (compared to 2008 levels) and achieving net-zero emissions by 2050, in alignment with IMO targets,” it stated.

“Achieving these goals in the medium to long term depends on the adoption of alternative low-emission fuels like green ammonia and methanol.

“Among these, ammonia is attracting growing interest as a viable option. Unlike methanol, it is not constrained by biogenic CO2 availability, and its production process is relatively simple.”

However, the firm noted kickstarting ammonia bunkering on a large scale required four enablers to align:

  • Ammonia fuel supply
  • Application technology
  • Bunkering infrastructure
  • Safety guidelines and standards

It believed ammonia bunkering hubs will first emerge where affordable and scalable ammonia supply is available.

Yanma Why use ammonia for bunkering fuel

 

Photo credit: Yanma
Published: 31 December 2024

Continue Reading

Research

Port of Long Beach releases Clean Marine Fuels White Paper

Document intended to prepare and position the port and its stakeholder for adopting low carbon alternative fuels.

Admin

Published

on

By

Clean Marine Fuels Port of Long Beach (December 2024)

The Port of Long Beach (PLB) in late December released the Clean Marine Fuels White Paper as part of efforts to identify solutions capable of reducing emissions from ships.

“To understand the opportunities and challenges related to the adoption of clean marine fuels, the Port of Long Beach hired ICF Consulting to develop this white paper as an educational resource and guidance document,” stated PLB

“This document is also intended to prepare and position the port and its stakeholder for adopting low carbon alternative fuels.

“The white paper provides high level information on the array of currently available low carbon marine fuels, along with an exploration of the potential infrastructure needs for their deployment.”

The document covers the use of different types of clean bunker fuels such as green hydrogen, green methanol, green ammonia, renewable LNG and biofuels for shipping.

“The shift to clean marine fuels is no longer optional but a necessity for the sustainability of the maritime industry,” stated PLB in its closing remarks.

“This transition, while presenting challenges such as high costs, limited fuel availability, and the need for extensive infrastructure development, is advancing due to evolving policy frameworks and growing industry commitment.

“Addressing these obstacles will require targeted initiatives and robust collaboration between public and private sectors. Continued policy support, government funding, and sustained industry commitment will be essential to driving this progress and ensuring the long-term sustainability of maritime operations.”

Editor’s note: The 123-page Clean Marine Fuels White Paper may be downloaded from the hyperlink here.

 

Photo credit: Clean Marine Fuels White Paper
Published: 26 December 2024

Continue Reading

Port & Regulatory

Clyde & Co: FuelEU Maritime Series – Part 6: Legal issues

Bunker purchasers should consider the wording of their bunker supply contracts carefully and ensure that they are comfortable with the contractual provisions.

Admin

Published

on

By

CHUTTERSNAP MT

Global law firm Clyde & Co on Thursday (19 December) released the final instalment of its six-part series uncovering the FuelEU Maritime Regulation.

In it, the firm looked at the legal issues that could potentially arise between various parties, such as owners, charterers, ship managers, bunker suppliers, and ship builders, as a result of the compliance requirements imposed by the Regulation.

The following is an excerpt from the original article available here:

Bunker supply contracts - legal issues

Both vessel owners and bunker purchasers will want to ensure that they are able to take advantage of the preferential treatment provided under the FuelEU Regulation for consuming renewable fuels, including biofuels and renewable fuels of non-biological origin (RFNBOs) (such as methanol and ammonia).

Article 10 of the FuelEU Regulation states that such fuels must be certified in accordance with the Renewable Energy Directive (RED) 2018/2001. If the fuel consumed by the vessel does not meet the applicable standards or have the appropriate certification, then it “shall be considered to have the same emissions factors as the least favourable fossil fuel pathway for that type of fuel[1].

In order to confirm that the fuel complies with greenhouse gas (GHG) intensity and sustainability requirements, the vessel owner and bunker purchaser will want to ensure that the bunker supplier provides the appropriate certification required under the FuelEU Regulation. The EU has required certification of such fuels, with the aim of guaranteeing “the environmental integrity of the renewable and low-carbon fuels that are expected to be deployed in the maritime sector.”[2]

The FuelEU Regulation provides that the GHG intensity of fuel is to be assessed on a “well-to-wake” basis, with emissions calculated for the entire lifespan of the fuel, from raw material extraction to storage, bunkering and then use on board the vessel.

Vessel owners and bunker purchasers will, therefore, need to be mindful of the importance of establishing how “green” the fuel actually is, and of the risk of bunker suppliers providing alternative fuels that will not allow for preferential treatment under the FuelEU Regulation.

It would, therefore, be advisable for bunker purchasers to consider whether the wording of their bunkering supply contracts is sufficient to ensure that the fuel is properly certified under the FuelEU Regulation. This could include contractual provisions that require the supplier (i) to provide a bunker delivery note (BDN), setting out the relevant information regarding the supply (such as the well-to-wake emission factor), and (ii) to provide the necessary certification under a scheme recognised by the EU.

Bunker purchasers should also be mindful that bunkering supply contracts often contain short claims notification time bars and provisions restricting claims for consequential loss. Issues could therefore arise where a purchaser tries to advance a claim against the supplier for consequential loss due to a lack of certification, but the bunker supplier argues that such losses are excluded under the terms of the bunker supply contract.

Bunker purchasers should therefore consider the wording of their bunker supply contracts carefully and ensure that they are comfortable with the contractual provisions.

 

Photo credit: CHUTTERSNAP from Unsplash
Published: 26 December 2024

Continue Reading
Advertisement
  • Sea Trader & Sea Splendor
  • RE 05 Lighthouse GIF
  • Zhoushan Bunker
  • EMF banner 400x330 slogan
  • Consort advertisement v2
  • v4Helmsman Gif Banner 01
  • Aderco advert 400x330 1
  • SBF2

OUR INDUSTRY PARTNERS

  • SEAOIL 3+5 GIF
  • E MARINE LOGO
  • Triton Bunkering advertisement v2
  • Singfar advertisement final
  • HL 2022 adv v1


  • Synergy Asia Bunkering logo MT
  • Energe Logo
  • PSP Marine logo
  • intrasea
  • Mokara Final
  • Golden Island logo square
  • 300 300
  • Auramarine 01
  • Victory Logo
  • pro liquid
  • LabTechnic
  • VPS 2021 advertisement
  • 400x330 v2 copy
  • Headway Manifold
  • Advert Shipping Manifold resized1

Trending