IBIA: Market Expecting Low Bunker Prices for at Least Another 18 Months

Peter Hall, CEO of the IBIA, says the bunker industry will be challenged by continuing low fuel prices and increased environmental regulations.

The market is expecting bunker prices to remain low for at least another 18 months, with some believing it may be more then 5 years before there is a significant recovery, Peter Hall, CEO of the International Bunker Industry Association (IBIA) has told Maritime CEO in an interview.

"The market generally thinks that it will be at least 18 months before there's an increase in fuel prices, and indeed a number have suggested that it may be closer to three to five years before recovery," said Hall, who noted U.S. investment into shale oil as part of the ongoing oversupply picture.  

"The oil and gas majors are quite simply committed, the sites can't just be shut down until they are exhausted, so oversupply will continue until that point is reached," he said.

WTI Thursday closed under $36/bbl, Brent closed down at $37.05/bbl, and the Organization of the Petroleum Exporting Countries (OPEC) said its daily basket price on December 16 fell to $32.33/bbl.

The seemingly ever tumbling oil prices have, in recent days, meant key grade IFO380 in both Rotterdam and Houston has fallen under $150 per metric tonne (pmt), Ship & Bunker data shows.

While low bunker prices have been helpful for shipowners - particularly in dry bulk - who were facing equally low freight rates, Hall says it has also meant owners have been relatively happy to switch to MGO for Emissions Control Area (ECA) compliance, and has discouraged efforts into longer term compliance options.

Tighter regulations on shipping emissions will ultimately mean a greater cost for shipowners and operators, Hall says, but on the whole he says the industry coped well with the January 1, 2015 introduction of a 0.10 percent sulfur cap for ECAs.

IBIA's attention is now on the upcoming 0.5 percent global sulfur cap, which is expected in 2020 or 2025.

"We question how compliance with the new sulfur emission regulations will actually be enforced, post-2020, and with this in mind, IBIA has already suggested that one solution might be to make it illegal to carry non-compliant fuels on board a vessel without a certified abatement system," said Hall.

In October, it was reported that IBIA Chairman Jens Maul Jørgensen had leveled harsh criticism against the International Maritime Organization (IMO), accusing the organization of having "no idea" of the market from the owner and operator side.