EMEA News
Exchange Rate, Competition Causing Russian Bunker Price Volatility
An analysis released by Platts says that declining oil prices, growing port and supplier competition, and a weak ruble can be credited for the recent challenging times at the Russian ports of St.Petersburg and Novorossiysk, where bunker prices slid to six-month lows during August.
"St. Petersburg prices are under pressure because oil is falling, ruble [to dollar] is weak and many suppliers are with a lot of product," one source was reported saying.
If low bunker prices continue, some small suppliers will reportedly be forced out of the market as it becomes increasingly difficult to generate profit from bunker supply deals.
At Novorossiysk, bunker prices were slashed in August in response to increasing competition from Istanbul and Piraeus, said to be a result of easing economic tensions in the Mediterranean region that allowed prices at the two ports to soften as well.
A significant factor to suppliers in the two Russian ports is said to be St. Petersburg's 380 CST HSFO price correlation with ruble to dollar movement, which was reported to have reached 74 percent during the period, while Novorossiysk's was up to 86 percent
Platts notes that the RUR/USD exchange rate rose by 8.2 RUR/USD, from 57.5 to RUR/USD in July to 65.60 RUR/USD in August, arguing that the "prevailing correlation level clearly depicts the inelasticity that suppliers run against their exposure to the ruble/dollar exchange."
Ship & Bunker data shows that St. Petersburg IFO380 was trading as low as $144/mt by the end of August, the lowest price since February and a steady fall from $209/mt recorded at the end of July.
In March, it was reported that Russia's Far East region accounted for 47 percent of total the country's bunker sales volumes in 2014, up strongly from the prior year.
