GRAPH: 2020's Average Bunker Price 8% Lower Than 2019

Bunker costs in major hubs during 2020 have been 8% lower on average than they were in 2019, according to Ship & Bunker data.

The comparison takes into account that the majority of vessels were lifting HSFO in 2019, and then switched to VLSFO in 2020 following the introduction of the IMO 2020 rule on January 1.

For the January 1 to December 16 period in 2019, the average IFO 380 price at major hubs was $407/mt. VLSFO over the same period in 2020 has averaged $375/mt. The comparison uses data taken from Ship & Bunker's Global Top 20 Port Port index (G20).

The reality of 2020's bunker prices is a far cry from what was expected last year, when the new fuel rules were expected to increase bunker costs some 20-40%. Looking at the daily price trend in relation to Brent, it is clear the dramatically lower low oil price during most of 2020 has been the key to lower bunker costs.

While IFO 380 in 2019 was almost always as at a discount to Brent (converted from bbls to tonnes), VLSFO has been at a premium over Brent throughout the year - as would be expected.

That VLSFO premium relative to HSFO was over 80% at the start of the year, reflecting the demand surge and logistical challenges associated with the changeover to a 0.50%S global cap.

Having fallen sharply as global demand slowed as a result of measures taken in response to the Coronavirus pandemic, that premium has spent most of its time at 30% or less since Q2.

Keeping in mind there are still a few days left for 2020 to produce a final twist, the average VLSFO premium over HSFO in H2 so far as been just under 20%, and at a premium to Brent of 6%

If that continues to hold true, and with the likes of Goldman now predicting mass COVID vaccinations and limited production increases will send Brent to an average $65/bbl next year, it suggests 2021 could well see bunker costs jump 60% higher next year as we see the return of $600/mt bunkers.

* This article has been edited from is original version to clarify references to VLSFO/Brent and VLSFO/HSFO relationships