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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.





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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Alternative Fuels

Championing environmental stewardship: DNV partners Anglo American for vessel electrification feasibility study

Study revealed the potential transformation of Anglo American supported- Waterways Watch Society’s petrol-powered boats into battery electric vessels, aligning with their mission to safeguard waterways in Singapore.





DNV Singapore office web

Classification society DNV recently sat down with global mining company and shipowner Anglo American to discuss their joint high-level vessel electrification feasibility study in the first episode of DNV’s Decarbonization Insights series.

In this session, DNV executed a feasibility study of battery electric boat operations for Waterways Watch Society (WWS), a non-profit organization supported by Anglo American.

The study revealed the potential transformation of WWS’ petrol-powered boats into cutting-edge battery electric vessels, aligning with their mission to safeguard waterways in Singapore.

Currently, there are six workboats powered by petrol at Waterways Watch Society, used/deployed for educational purposes, including collecting litter around Singapore’s waters.

The scope of work included technical assessment and commercial study on the electrification solutions.

Anesan Naidoo, Head of Sustainability at Anglo American, discussed how the innovative collaboration emphasizes their dedication to corporate responsibility, while DNV experts shared their perspectives on how vessel electrification is reshaping the landscape of maritime decarbonization in Singapore and the wider region.

Watch a trailer of the first episode of DNV’s Decarbonization Insights featuring Anglo American on DNV’s official YouTube Channel here.


Photo credit: DNV
Published: 15 April 2024

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18th Singapore Maritime Week opens with ‘Actions meet Ambition’ theme

MPA will be making several announcements related to developments on low- emission maritime energy transition technologies, maritime artificial intelligence, cybersecurity, and manpower, over the five-day event.





18th Singapore Maritime Week opens with ‘Actions meet Ambition’ theme

The Singapore Maritime Week (SMW), organised by the Maritime and Port Authority of Singapore (MPA), returned in its 18th edition with more than 50 events from 15 to 19 April 2024 at the Suntec Singapore Convention and Exhibition Centre.

Themed ‘Actions meet Ambition’, MPA said SMW is organised around four pillars - decarbonisation, digitalisation, services, and talent development. More than 10,000 maritime professionals from close to 40 countries, including delegates from governments, port authorities, international organisations, as well as industry experts and thought leaders are expected to attend SMW. 

In addition, the inaugural Expo@SMW trade exhibition, taking place from 16 to 18 April 2024 as part of SMW 2024, will showcase maritime solutions by close to 50 companies and startups.

SMW 2024 was launched by Mr Chee Hong Tat, Singapore’s Minister for Transport and Second Minister for Finance. Speaking at the Opening Ceremony, Mr Chee highlighted that Maritime Singapore has continued to grow year-on-year – a mark of the industry’s vote of confidence in Singapore, and the strong tripartite relationship between business, workers, and the government. 

Looking forward, Mr Chee said that Singapore aims to be a global hub for innovation, reliable and resilient maritime operations, and maritime talent, to better serve the current and future needs of our stakeholders and allow Singapore to contribute to global development and sustainability goals effectively.

A maritime dialogue was held on the topic of Supply Chain Resilience, Digitalisation and Decarbonisation. The panel, comprising Dr Volker Wissing, Federal Minister for Digital Affairs and Transport, Germany, Mr Even Tronstad Sagebakken, Deputy Minister, Ministry of Trade, Industry and Fisheries, Norway, and Mr Francis Zachariae, Secretary-General, International Association of Marine Aids to Navigation and Lighthouse Authorities (IALA) was moderated by Professor Simon Tay, Chairman, Singapore Institute of International Affairs. 

The panel discussed the challenges the maritime sector faces when dealing with these changes and disruptions, the efforts and measures undertaken by them to prepare the maritime industry and its workforce, and the potential for various stakeholders to work together to address these challenges and capture new opportunities.

Other participants of SMW 2024 include Mr Arsenio Dominguez, Secretary- General of the International Maritime Organization (IMO); and Mr Sergio Mujica, Secretary-General of the International Organization for Standardization (ISO).

Speaking at his first maritime event in Singapore since his appointment as the Secretary-General of the IMO in January 2024, Mr Dominguez delivered a keynote speech at the Singapore Maritime Lecture that was moderated by Ambassador Mary Seet-Cheng, Singapore’s Non-Resident High Commissioner to the Republic of Fiji and Non-Resident Ambassador to the Pacific Islands Forum.

Secretary-General Dominguez emphasised the importance of ensuring seafarer safety and wellbeing, particularly in the light of geopolitical changes impacting shipping, and highlighted his vision for IMO to flourish as a transparent, inclusive, diverse institution. 

He also noted the rapid green and digital transition unfolding in the maritime sector, driven by the targets set by IMO Member States in the IMO 2023 GHG Strategy. 

Mr. Dominguez said: “IMO is on track to adopt mid-term measures by late 2025 to cut GHG emissions, to reach net zero targets. Alongside this regulatory work, there is a need to consider issues such as safety, pricing, infrastructural availability to deliver new fuels, lifecycle emissions, supply chain constraints, barriers to adoption and more.”

“Seafarers will require training to be able to operate new technologies as well as zero or near-zero emission powered vessels safely.”

“We need ‘early movers’ in the industry as well as forward-looking policy makers to take the necessary risks and secure the right investments that will stimulate long-term solutions for the sector. In this regard, we welcome the efforts being undertaken by Singapore to facilitate collaboration among maritime stakeholders, including the MPA-led Maritime Energy Training Facility.”

SMW 2024 will also bring together MPA’s Green and Digital Shipping Corridor (GDSC) partners, namely Australia, six ports in Japan, Port of Los Angeles, Port of Long Beach, Port of Rotterdam, and Tianjin, to discuss GDSC initiatives to support IMO’s Greenhouse Gases (GHG) emission reduction targets for international shipping.

These include the development and uptake of zero or near-zero GHG emission fuels at scale along corridor routes, technologies to accelerate decarbonisation, collaboration to enhance operational and digital efficiencies, as well as updates on key milestones achieved for the Singapore and Port of Rotterdam and the Singapore and Port of Los Angeles and Port of Long Beach GDSCs.

MPA will ink several partnerships and agreements with more than 30 partners during SMW 2024 in areas such as training and cybersecurity. These partners comprise international organisations, foreign governments and agencies, classification societies, maritime partners, institutes of higher learning, tech companies, trade associations, and unions. 

MPA will also be making several announcements related to developments on low- emission maritime energy transition technologies, maritime artificial intelligence, cybersecurity, and manpower, over the five-day event.

MPA and 22 partners , including the leading global marine engine manufacturers, today also signed a Letter of Intent to establish the Maritime Energy Training Facility (METF). The METF, supported by the tripartite maritime community in Singapore, aims to close the skills and competencies gap for the safe operation of new zero or near-zero emission-powered vessels.


Photo credit: Maritime and Port Authority of Singapore
Published: 15 April 2024

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Alternative Fuels

MPA to set up facility for maritime workforce to train in handling new bunker fuels

Facility will be anchored by new dual-fuel marine engine simulator for training on safe handling, bunkering and management of incidents involving the use of alternative marine fuels such as methanol.





MPA to set up facility for maritime workforce to train in handling new bunker fuels

The Maritime and Port Authority of Singapore (MPA) on Monday (15 April) said it will establish an industry-supported facility to address the current competencies gap by training the global maritime workforce in handling and operating vessels using clean marine fuels. 

MPA said there is a need for more maritime personnel and seafarers to be trained and equipped to operate these ships safely and efficiently as the number of ships operating on zero or near-zero emission fuels grows. 

With hundreds of crew changes conducted daily here, Singapore’s Maritime Energy Training Facility (METF) is well placed to support the training of international seafarers. Ship owners and operators can expect time and training cost savings by tapping on METF’s training facilities. 

Around 10,000 seafarers and other maritime personnel are expected to be trained at METF from now to the 2030s, as the facilities are progressively developed by 2026.

The Letter of Intent to establish METF was signed by MPA and 22 partners comprising global marine engine manufacturers, international organisations, classification societies, trade associations, unions, and institutes of higher learning, at the SMW 2024 opening ceremony. 

The setting up of METF follows from recommendations put forth by the Tripartite Advisory Panel, formed in early 2023 by SMF and supported by MPA, to identify emerging and future skills and competencies to build for the maritime workforce.

METF will be established as a decentralised network of training facilities in Singapore. It will be anchored by a new dual-fuel marine engine simulator for training on the safe handling, bunkering and management of incidents involving the use of alternative fuels, such as methanol and ammonia. 

Other training facilities supporting METF include the integrated engine room and bridge simulator by the Singapore Maritime Academy (SMA) at Singapore Polytechnic (SP), as well as the bridge and engine simulator at Wavelink Maritime Institute (WMI)2 for crew resource management training. 

For emergency response training, METF is supported by gas and fire safety training facilities at Poly Marina operated by the SMA, as well as AR-enabled scenario- based training developed by SP’s Centre of Excellence in Maritime Safety.

METF will also tap various partners’ assets and training technologies to upskill the global maritime workforce, including seafarers, on the operations, bunkering and management of zero or near-zero emission-powered vessels. New training courses and curriculum will be developed by METF’s partners, and progressively rolled out from this year.

MPA also aims to support and contribute to the work of the Maritime Just Transition Task Force (MJTTF) as one of the institutions rolling out the Baseline Training Framework for Seafarers in Decarbonization – which is under development – through METF. 

This will directly contribute to the joint International Maritime Organization (IMO)–MJTTF work to develop training provisions for seafarers in support of decarbonisation of shipping, and complements the IMO's ongoing comprehensive review of the International Convention and Code on Standards of

Training, Certification and Watchkeeping for Seafarers (STCW). Singapore is currently chairing the IMO Working Group on the comprehensive review of the STCW Convention and Code, established in 2023 under the Sub-Committee on Human Element, Training and Watchkeeping.

As part of the METF curriculum, SMA has launched one of the Asia Pacific’s first training courses focused on handling methanol as fuel for ships. The training course, accredited by MPA, covers operational and safety protocols during methanol fuelling developed by MPA following the first ship-to-containership methanol bunkering operation conducted in Singapore in July 2023. 

The course also includes a methanol firefighting practical component covering both shipboard and terminal fires. SMA currently offers two sessions of the Basic and Advanced courses every month, with plans to scale up based on the industry’s demands. The course will be open to all maritime personnel and seafarers starting in April 2024.

With strong demand signalled by the industry for such common training facilities, METF is expected to catalyse investments by the industry to develop other training facilities and solutions in Singapore to tap into this growth area. MAN Energy Solutions, one of the leading global engine makers of alternative-fuel engines, recently opened a new mixed-purpose facility. 

The facility includes a new MAN PrimeServ5 training academy for customers and employees on the safe operation, maintenance, and troubleshooting of all MAN Energy Solutions equipment. METF is also expected to benefit corporate training academies set up by shipping companies, such as those from Eastern Pacific Shipping, to train their global seafaring crew and shore-based personnel.

The MPA – SMF Joint Office for Talent and Skills (Joint Office) was established in March 2024 to coordinate and drive the tripartite efforts by the government, industry, and unions to upskill the Maritime Singapore workforce across shore-based and seafaring jobs and to ensure Singapore continues to have access to a diversity of maritime talents and experts.

To provide workers with greater flexibility in the acquisition of new skills, the Joint Office will work with IHLs and industry to review and progressively convert relevant short-term courses, or on-the-job training into accredited competency-based micro-credentials. These will focus on emerging skills such as maritime cybersecurity, digitalisation, and sustainability. 

The micro-credentials could potentially be stacked towards formal or industry-recognised qualifications and to fill the gap in quality and flexible upskilling or reskilling opportunities for working adults while they remain in full employment. The Joint Office plans to expand the micro-credential pathway, allowing recognition of more courses and workplace learning as micro-credentials over time.

Related: Singapore bunkering sector enters milestone with first methanol marine refuelling op


Photo credit: Maritime and Port Authority of Singapore
Published: 15 April 2024

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