Average Global IFO380 Bunker Price Hits 2016 High After a Surprisingly Bullish Week for Crude

by Ship & Bunker News Team
Monday April 25, 2016

A surprisingly bullish week for crude sent Ship & Bunker's IFO380 Global Average Bunker Price Friday to a 2016 high of $222.50 per metric tonne (pmt).

It was the third weekly gain for crude, as Brent Friday ended the week at $45.11 per barrel, up $2.01 week-on-week, and WTI was up $3.37 over last Friday to $43.73 per barrel.

The gains also pushed Ship & Bunker's IFO380 Global 20 Ports Average bunker price, which tracks the average bunker price across 20 primary bunkering ports responsible for the large majority of global volumes, over $200 pmt for the first time this year.

The gains for crude futures came as a surprise for many market watchers after the much-hyped April 17 oil freeze talks in Doha failed to produce any results, sending oil markets tumbling in early Monday trading as analysts warned prices could sink to $30 per barrel "within days."

The crash never came though, and after a modest recovery, but still closing down last Monday, prices rallied for the following four days as traders evidently placed more emphasis on reports talking down production levels.

This included a strike among oilfield workers in Kuwait, reports that Colombian output dropped four percent in March to 916,000 bpd, an explosion at a PEMEX facility in Mexico, and a fall in the U.S. oil rig count to a six year low as the country's output slid to the lowest it has been since October 2014.

And of course chatter over the next round of supposed freeze talks was also well underway. 

Looking to the week ahead, bunker buyers should expect continued volatility in both directions.

On the downside, the market remains oversupplied, and Russia, Iran, and Saudi Arabia are all seemingly prepared to increase output even further - although analysts differ in their view of exactly how easily each can actually achieve this.

Venezuelan Oil Minister Eulogio Del Pino this week said he still believes $30 oil is coming unless a freeze is agreed

Worth noting too, are reports that U.S. producers are locking in 2016 prices at $40 to $45 per barrel, with Alabama-based Energen Corp said to have hedged about half of its expected 2016 production at around $45 per barrel, after saying in September it would hold out for $60.

Nevertheless, traders see U.S. declines leading a rebalancing of the market, and like last week, this confidence could be the deciding factor for price direction in the coming week.