Rising Bunker Prices Could be Good News for Traders

Tuesday May 15, 2018

Surging oil prices have dragged up bunker prices by 20% in less then 10 weeks, a situation that is putting pressure on some suppliers to the benefit of traders.

Ship & Bunker's Global 20 Ports Average index, which tracks bunker prices across 20 ports responsible for the vast majority of global bunker sales, for Tuesday showed the average IFO380 price was at a 2018-high of $449/mt, up 20% from a 2018 low of 372/mt set on March 9.

"With big volumes and high prices, suppliers are less flexible and want to reduce their risk. Trading houses take on this financial risk," Platts quoted a market source as saying.

"With the strong market we will see an increase in the amount of people using traders."

Brent is currently priced at 78.43/bbl, but a growing number of analysts have warned that in the current geopolitical climate prices could hit $100.

If that happens, IFO380 would likely jump above $550/mt, at least until the start of the expected shift in demand to MGO that the industry will make in the run up to January 1, 2020 when the new 0.50% global sulfur cap comes into force.

Presumably of greater concern would be the fact that $100/bbl crude would likely translate to MGO at above 900/mt, but again, this would be before any IMO 2020 considerations are taken into account.