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Bunker Fuel

Integr8: What is driving increased bunker prices and how quickly can they fall? 

Integr8 breaks down the fundamentals that are behind the price hikes, specifically, what is happening on supply side in Saudi oil production and what is behind demand increase coming from China.

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

28 September 2023

VLSFO prices have been on another rise

A month ago, we wrote about high bunker prices which were based on two key factors: Tightness in most product markets; And additional oil production cutbacks by Saudi Arabia. Now, bunker prices are even higher.

Brent has moved above $90/bbl, with Singapore VLSFO above $660/mt and close to peak levels seen at the start of this year. Rotterdam VLSFO has been trading at around $615-635/mt, its highest so far this year. More recently Rotterdam prices have eased slightly but they are still above this year’s previous peaks, and Singapore prices remain at high levels.

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Much tighter fundamentals are behind the price hike

On a very short-term basis, the market can see dramatic price shifts, but it is normally the fundamentals that drive price direction over a period of weeks and months. We are now in a strong fundamental period, with year-on-year growth in global oil demand at 3 million b/d in Q2 this year and projected at 2 million b/d in Q3 and Q4. The key factor here is growth is almost entirely centred on China.

At the same time there are huge constraints in oil supply, with the additional 1 million b/d voluntary cut made by Saudi Arabia, starting in July. In fact, part of the recent price hike is that Saudi Arabia has recently committed to extending these additional cuts through to the end of this year.

Additionally, the September 21st announcement by Russia which banned all diesel and gasoline exports to support their own domestic market and, we can see clear reasons why oil prices have taken another leap higher over the past month.

On the supply side, it is what’s happening to Saudi oil production

Saudi Arabia’s stated policy is aimed at supporting a market with less volatility, and more sustainable and predictable outcomes. As part of this strategy, the country had reduced crude output by 0.5 million b/d in line with the overall OPEC+ agreement, and then made a further 1 million b/d cut over the second half of this year. The net result is that Saudi crude production has fallen sharply over the past few months and is currently some 1.5 million b/d lower than average 2022 levels (8.9 million b/d in August vs an average of 10.4 million b/d last year). This lower level of output is expected to be maintained through to the end of the year.

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Looking at alternative crude supplies, US production crude production is near record highs and higher oil prices has incentivised even greater investment in US shale oil. However, the problem here is Saudi cuts are instantaneous and any rise in US shale production from new investment takes months. Hence, current signals are for a potential tightness in supply over the rest of this year, before an expected 1 million b/d hike in January as Saudi crude output climbs back towards 10 million b/d.

On the demand side it is all about China, China, China

Fundamentals on the demand side also point to higher oil prices. As mentioned, increases in global oil demand are running at 2-3 million b/d (year-on-year), and these are big numbers. However, they are almost entirely based on what is happening in China; product demand developments elsewhere are minimal, and even falling in Europe and projected to start falling in the US next year.

The reason for current very high year-on-year growth rates in China is that the country was still largely in lockdown through 2022, and the easing has only taken place this year. This is much later than almost all other countries worldwide, where the post-pandemic ‘boom’ took place in 2022, not 2023. Therefore, it is more-or-less China alone that is driving up oil demand this year.

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Clearly there is a risk of weaker demand than forecast in many countries but if we are looking for a big price impact from the demand side, then it is more likely to be stories about China that are going to drive prices up or down.

Market tightness in Q3 & Q4, but potentially changing going into 2024

Bringing together these more extreme developments in supply and demand, the graph below illustrates global fundamentals on a quarterly basis. The key for us is that global oil supply exceeded demand through most of 2022 and in the first quarter of this year, resulting in an ongoing global stock build. However, we have just been through a turning point, where demand is exceeding supply in Q3 this year and this is expected to be repeated in Q4, leading to stock draws.

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It is not until the start of next year that we see a reversal and another turning point is envisaged. It is at this stage; Saudi Arabia says it will lift its voluntary 1 million b/d cutbacks. At the same time year-on-year growth in oil demand is expected to ease back to around 1 million b/d. So, at the start of next year oil supply is projected to exceed demand once again, reverting us back to a world of stock builds.

Summarising by looking at the global stock build/stock draw positions, we can see the exceptional times we are currently in; Having moved to a position of stock draws in Q3 and projected for Q4 this year. In addition, the tightness in global stocks lies with oil products, and not crude oil. This has been driven by high product demand and exacerbated by several unplanned refinery outages this year.

graph 5 1024x618 1

Going into next year the position looks like reversing again, going back to a fundamental global stock build.

What’s next?

Given the fundamentals, these developments explain the wave of price rises we have seen in September.

Looking ahead over the rest of this year and into 2024, on the demand side China is the main story. Of course, Chinese demand could be higher than currently projected, in which case Brent crude could easily pass the $100/bbl ‘barrier’, along with Singapore VLSFO going above $700/mt.

However, the chatter at the moment is about weakness in the Chinese economy. If this translates to lower oil demand, then it will be a sign ‘to sell’, and prices for us all would come down. This is clearly the story to watch on the demand side.

The supply side seems more predictable – When Saudi Arabia announces the additional cutbacks will be eased (or there are strong indications of this), then oil prices are likely to fall. A reversal of the Russian ban on diesel and gasoline exports could also have a bearish impact.

Timing is everything in all these developments, and the extent of any fall in prices may still be dependent on how tight oil product stocks are at the time and what stocks look like doing in the near term.

Being precise on price movements is difficult, but we know prices never wait for the fundamentals to be borne out; Markets react on news, changes, and psychology. If the fundamentals do play out as shown in this report, then prices are more likely to fall before the end of the year, in anticipation of weaker fundamentals going into 2024. Let’s see what happens…..

Photo credit and source: Integr8
Published: 4 October, 2023

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LNG Bunkering

Singapore: FueLNG achieves 400th LNG bunkering operation milestone

Bunker tanker “FueLNG Bellina” successfully delivered LNG bunker fuel to “BYD Shenzhen”, the world’s largest LNG-fuelled car carrier at Singapore anchorage during its maiden voyage.

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Singapore: FueLNG achieves 400th LNG bunkering operation milestone

Singapore’s licensed LNG bunker supplier FueLNG on Thursday (15 May) announced the successful completion of its 400th LNG ship-to-ship (STS) bunkering operation in the republic.

FueLNG, a joint venture between Keppel Offshore & Marine and Shell Eastern Petroleum Pte Ltd, marked the milestone with bunker tanker FueLNG Bellina successfully refuelling BYD Shenzhen, the world’s largest LNG-fuelled car carrier, at Singapore anchorage during its maiden voyage.

“With a capacity of 9,200 vehicles and equipped with dual-fuel LNG propulsion, the BYD SHENZHEN represents the next generation of low-emission maritime transport,” it said in a social media post. 

Shell said it supported BYD Shenzhen on its maiden voyage as the supplier of the LNG bunker fuel. 

“Like all LNG dual fuel vessels, BYD Shenzhen is on the pathway to net zero emissions. She can take bio-LNG, and in the future e-LNG, in her fuel mix for further emission reduction and regulatory compliance,” it said in a separate social media post. 

 

Photo credit: Shell
Published: 16 May, 2025

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Biofuel

Hong Kong: CPN hits new record for China’s largest B24 biofuel bunkering operation

Chimbusco Pan Nation delivered 6,300 mt of B24-VLSFO in Hong Kong to boxship “XIN LOS ANGELES” on 15 May, exceeding its previous record of 5,500 mt delivered in February 2025.

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Hong Kong: CPN hits new record for China's largest B24 biofuel bunkering operation

Hong Kong-based bunker supplier Chimbusco Pan Nation Petro-Chemical (CPN) on Friday (16 May) said it has set a record for China’s largest B24 marine biofuel bunkering operation.

CPN said it delivered 6,300 metric tonnes (mt) of B24-VLSFO in Hong Kong to container ship XIN LOS ANGELES on 15 May. 

The supply exceeded CPN’s previous record of 5,500 mt delivered to the same ship in February 2025.

“This collaboration reinforces CPN’s ability to execute large-scale marine biofuel bunkering with precision and reliability,” the company said in a social media post.

“By consistently supplying large volumes of B24 marine biofuel, CPN supports reduced carbon emissions and sustainable shipping practices globally.”

Related: CPN achieves largest B24 bio bunker fuel delivery in Hong Kong and China

 

Photo credit: Chimbusco Pan Nation Petro-Chemical
Published: 16 May, 2025

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Bunker Fuel

Tigonic launches physical bunker fuel supply operations by barge at Khorfakkan

Move enhances Tigonic’s regional supply capabilities with barge-based delivery of VLSFO and MGO along the vital East Coast of UAE; company also supplies bunker fuel at port of Sharjah by trucks.

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Tigonic launches physical bunker fuel supply operations by barge at Khorfakkan

Dubai-based energy trading and bunker supply firm Tigonic on Thursday (15 May) said it has launched its physical bunker supply operations at Khorfakkan, UAE by barge and has completed its first successful deliveries of bunker fuel in the past few days.

The company said the move enhances Tigonic’s regional supply capabilities with barge-based delivery of Very Low Sulfur Fuel Oil (VLSFO) and Marine Gas Oil (MGO) along the vital East Coast of the UAE.

 Tigonic also supplies bunker fuel at the port of Sharjah in UAE by trucks and may expand into other ports in the region in the foreseeable future.

Tigonic’s operational expansion into physical supply with its dedicated bunker barge enables the company to deliver marine fuels directly at anchorage. 

“This launch marks a significant milestone in our service evolution,” said the team at Tigonic.

“With physical supply now live at Khorfakkan, we are elevating our ability to provide fast, flexible, and reliable marine fuel solutions to the global fleet.”

This expansion follows Tigonic’s recent achievement—the successful lifting of multiple cargoes of High-Sulfur Fuel Oil (HSFO) from the SASREF refinery in Jubail, Saudi Arabia, and fuel oil of Bahrain origin for their customers in the Singapore Straits.

 

Photo credit: Tigonic
Published: 16 May, 2025

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