Bunker prices are back at a discount to jet fuel. File Image / Pixabay
While bunker prices rose in May for the first month since December, trading firm Integr8 Fuels has notes they are declining relative to other refined products on early signs of global economic activity resuming.
Very low sulfur fuel oil (VLSFO) prices were around 81-87% of the jet fuel price before the COVID-19 pandemic, spiked to a 15% premium at the height of the crisis and are now returning to a similar level as previously, the company said in an emailed research note Wednesday.
"The impact of Covid-19 on demand in our sector has been far less than in the jet, gasoline and diesel markets," the company said.
"This is shown in demand estimates, where the jet market has fallen by around 70% compared with the bunker market down by only around 10%.
"For these reasons, price relationships have gone to extremes."
But while the spreads between products may be heading back towards previous levels, the bunker market should not expect outright prices to do the same yet, the company warned.
"Prices are up from their floors and price relationships are returning towards more ‘normal’ levels, but there doesn’t look to be a ‘quick fix’ to get prices anywhere near where they were at the start of the year," Integr8 said.
"If prices ever do get back close to these levels, it's likely to be a long, drawn-out process going through at least into next year."