Less Advance Warning Needed for Spot Bunker Sales as VLSFO Availability Improves: Integr8

Bunker buyers may need less advance warning of their purchases in future. File Image / Pixabay

The amount of advance warning needed for spot bunker purchases is falling as the availability of very low sulfur fuel oil (VLSFO) becomes more reliable, according to trading company Integr8 Fuels.

Integr8 is now allowing a lead time of around 8.5 days on average for VLSFO stems, down from 10 days at the start of the year but still much higher than the 5-6 days needed for high sulfur fuel oil (HSFO) in the past, the company said in a research note Friday.

"Getting the lead time right is very important," the company said.

"Short lead times risk non-availability or a relatively expensive price paid.

"While some may argue long lead times are always beneficial, these are also associated with risks.

"One of these risks is the change in voyage orders, with vessels trading on the spot being particularly vulnerable. Should the destination port change, where bunkering has already been arranged, the owner risks racking up cancellation fees, unless a change of supply port has been agreed with the supplier where possible or the market moved up since fixing.

"The other risk lies in facing unexpected bunkering delays due to congestion or bad weather, particularly for bunker-only calls.

"Both are very hard to predict over a week ahead and such delays can be very costly. Lastly, the vessel itself may arrive late at the bunkering port, causing delays in bunker supply."

The combination of these factors means a lead time of about six days is currently optimal for VLSFO, with slightly more for HSFO, the company said.