BIMCO chief shipping analyst Peter Sand said the reduced bunker rates will provide some hope to shipowners and charterers but added “Perhaps less hopeful are the bunker suppliers, who must now supply bunker fuels at a fraction of the price seen four months ago”
A recent IEA report projects a collapse in global oil demand in Q2 2020 with a drop of 23.1M b/d compared to 2019.
The imbalance in supply and demand has led to a rise in stockpiling which will further affect oil prices.
OPEC production cuts have caused prices to tick upward once again but BIMCO does not expect this to have a short-term effect on balancing out the demand destruction.
With oil market volatility at an all-time high, low sulphur marine gas oil (MGO) prices have collapsed from US$744 per million tonnes (mt) on 8 January 2020 to US$243/mt on 5 May 2020.
However, BIMCO noted the lower bunker fuel prices are partly buoying earnings by way of cost savings, adding that with the lower cost of sailing, some companies have started sailing around the Cape of Good Hope on the Asia-Europe backhaul instead of paying toll dues to transit the Suez.
BIMCO does not expect the recovery period to be as rapid as the collapse and follow a v-shaped curve. Mr Sand said “If the past is anything to go by in this case, the ascent from the doldrums will be nowhere near the same rate as the descent from the peak.”
In light of the demand for marine fuels post-IMO 2020, Mr Sand said “Prior to the implementation, the industry was worried about the availability of low sulphur bunker fuels. Now, in April 2020, the availability of HSFO seems to be the most pressing issue in some places – next to that of quality.”
Port bunkering data indicates there is still considerable demand for HSFO constituted by scrubber-fitted ships. In Singapore, 17% of sales were HSFO while in Rotterdam, Europe’s largest bunkering hub, the low sulphur to high sulphur bunker fuel sales ratio came in at 74% to 26%, with VLSFO accounting for 42% of total sales. In Panama, 93% of the 1.3 MT of total bunker oil sold was VLSFO.
BIMCO said the Panamanian sales highlight the issue of HSFO unavailability. Because bunker suppliers have adjusted to the IMO 2020 demand, cleaning tanks and storage to accommodate low sulphur fuels, this has made it more difficult to source HSFO in the spot market.
Ultimately Mr Sand noted “The depth of the coronavirus crisis and the shape of any potential recovery will ultimately determine how the oil and bunker prices develop in the coming months. With OPEC cuts implemented, oil demand must now recover to counteract the massive supply overhang.”
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