ANALYSIS: Bunker Price Outlook for 2025

Graph 1. Image Credit: Ship & Bunker

Bunker prices will be lower in 2025, but overall costs will rise for those operating within European waters, according to analysis by Ship & Bunker.

Based on the latest oil price outlook for 2025, next year the average VLSFO price across major bunkering ports will fall to $585/mt, down from an average of $630/mt witnessed over the first 11 months of 2024.

However, with ETS regulations now in play and set to jump for those operating in EU waters, forecasts indicate affected buyers could see the true average cost of fuel in 2025 rise to $795/mt.

As always, our analysis uses data from Ship & Bunker's "G20" Global 20 Port Average index that tracks the average price of bunkers in 20 key bunkering hubs responsible for a significant proportion of global volume. For comparisons, Brent has been converted from barrels to metric tonnes (mt) at a rate of 7.53 bbl/mt.

The Brent / Bunker Relationship

As is well known, the primary driver for bunker prices is the cost of oil. By understanding the most recent relationship dynamic between bunkers and oil, we can then look to the 2025 oil price forecast to understand how this translates into a bunker price forecast for the year ahead. 

To that end, we can see from Graph 1 above that overall both bunkers and oil have trended downwards over the course of this year. 

Ship & Bunker's G20-VLSFO Index started the year at $637/mt, not far off a five-month low reached the previous month, steadily rising in the first quarter to reach a five-month high of $677/mt on April 8 before generally declining to Monday's 18-month low of $572.50/mt.

Oil has followed a similar path, with Brent prices rising in Q1 of this year in unison with geopolitical tensions amid the early stages of the war in Gaza. The concern was that the war would lead to wider conflict in the Middle East, with energy infrastructure under threat.

While Yemen's Houthi movement continued to attack ships in the Red Sea and Gulf of Aden throughout the year, the threat of conflict across the Middle East bringing in major powers largely subsided.

Even the advance of the war into Lebanon and blows traded between Israel and Iran largely left the region's energy infrastructure untouched, with oil and gas exports continuing to flow.

Later in the year, the weakening Chinese economy and the prospect of OPEC output rising took over as the main factor in oil markets, leading to a downward trend in Brent futures from April onwards.

While bunkers this year have tracked crude with reasonable consistency, 2024 reminded us that marine fuel markets can be slow to react to sudden changes in the oil price.

Movements at the end of August and into September are a case in point, with Brent shedding some $10/bbl in a matter of days following OPEC's revised oil outlook and news of China's economic slowdown. This widened the premium for VLSFO over Brent to a year-to-date high of 17.8%.

On the other end of the scale, in April VLSFO lagged behind rising oil prices, a dynamic that was repeated later in the year when bunkers in June hit at a discount to Brent of -3.1%.

Graph 2. Image Credit: Ship & Bunker

Overall, for the first 11 months of 2024 VLSFO has averaged a premium to Brent of 4.2%.

This compares to an overage of 3.3% for calendar year 2023.

Graph 4. Image Credit: Ship & Bunker

The four quarters sequentially for 2024 saw premia for VLSFO of 6.1% in Q1, 0.2% in Q2, 4.4% in Q3 and 6.6% so far in Q4.

HSFO's discount to Brent has narrowed over the year, moving from a low of -20.7% in April to a high of -4.7% in October.

Overall, for the first 11 months of 2024 IFO380 has averaged a discount to Brent of -14.6%.

The sequential quarterly numbers were -17.4%, -16%, -13.5% and -10.3%.

Scrubber Spread

The narrowing of HSFO's discount to Brent throughout 2024 can also be seen in its relationship with VLSFO over the year -- a key measure of the profitability of installing scrubbers.

Graph 3. Image Credit: Ship & Bunker

Scrubber installations on newbuild ships have been continuing apace this year, with a measurable impact on the market. HSFO demand overtook VLSFO at Rotterdam for the first time since the IMO 2020 transition in Q1, remaining on top since then, and a rising HSFO share of total demand can also be observed in data from Singapore, Fujairah and Panama.

As can be seen from the chart above, the G20-VLSFO premium to HSFO has largely been declining throughout the year, from a peak of $161/mt in February to a low of $73/mt in October.

Taken sequentially, the average premia were $145.15/mt in Q1, $99.88/mt in Q2, $106.82/mt in Q3 and $87.07/mt in Q4. The average for the year as a whole so far was $113.57/mt.

Historically a scrubber spread of $100/mt was viewed as a key level for keeping scrubbers profitable, but with those having installed them shortly after 2020 having long paid off capital expenditure costs for them, many shipping firms are now comfortable with much lower spreads. 

Bunker Price Outlook for 2025

A Reuters survey this month of 41 economists' and analysts' forecasts put the average Brent price in 2025 at $74.53/bl.

Key tests to this forecast will come from the geopolitical arena. A rapid end to the wars in Gaza and Ukraine, or a fundamental change in global trade conditions under the new Trump administration in the US, could significantly change the outlook for global energy markets.

Still, if the recent market dynamics continue into next year, and the premium for VLSFO over Brent holds at 4.2%, this would imply an average G20-VLSFO price next year of $585/mt.

This compares to an average of $630/mt witnessed over the first 11 months of 2024.

For HSFO, if the discount of 14.6% persists next year it would put average IFO380 prices at $480/mt.

This also suggests 2025 will see a healthy average srubber spread of $105/mt.

The EUA-lephant in the Room

While an outlook of lower bunker prices will presumably be welcomed by most, those calling at EU ports must now take the cost of carbon into account. 

Marine Shipping's inclusion in the EU ETS scheme is being phased in gradually, meaning ship owners pay 40% of the costs incurred in 2024.

For 2025 this jumps to 70% and for 2026 moves to 100%. Readers can learn more by clicking here.

Operators must buy and surrender EUAs to offset the carbon emissions generated from burning fuel. So far in 2024 the EUA price has averaged EUR 66.52. This is the cost to offset one tonne of carbon dioxide.

Given one tonne of bunker fuel produces a little over 3 tonnes of carbon dioxide, and taking into account this year only 40% of the total cost need to be paid, EU ETS rules this year have added around $90 to every tonne of fuel burned on intra-EU voyages.

For voyages where only one port lies inside the EU then this cost is $45/mt.

It should be noted that these are the costs incurred if EUAs were purchased at the time of the voyage in 2024. As EUAs do not have to be surrendered until September of the following year, the actual cost of EUAs and thus the true cost of bunkers in 2024 may not be known until the end of September 2025.

Looking ahead to 2025, a recent survey of analysts by Reuters put the average EUA price in 2025 at EUR 76.88.

It should be noted that some see the prices heading far higher than this, such as carbon market specialsts Veyt who see prices at EUR 95 in 2025.

If these predictions hold true, and taking into account that next year the total cost that must be paid rises from 40% to 70%, in USD terms this would add $170 to $210 to every tonne of bunker fuel burned on intra-EU voyages. 

For voyages where only one port lies inside the EU then this cost is halved to $85 to $105/mt.

With VLSFO forecast at $585/mt in 2025, taking into account EU ETS then the true cost of VLSFO bunkers for intra-EU voyages next year is forecast at $755-$795/mt.

For voyages where only one port lies inside the EU then this cost is $670-$690/mt.

With HSFO forecast at $480/mt in 2025, taking into account EU ETS then the true cost of HSFO bunkers for intra-EU voyages next year is forecast at $600-$690/mt.

For voyages where only one port lies inside the EU then this cost is $565-$585/mt.

Bunker buyers will also have one final matter to contend with in 2025 with FuelEU Maritime regulation set to come into force from the start of next year.

This means all ships on voyages touching Europe will be forced to reduce the carbon intensity of their fuel consumption by 2% next year.

For most, this will mean a shift to buying more expensive biofuel blends, at least some of the time.