Ana sayfa » Marine fuel market becomes tougher as supply increases

Marine fuel market becomes tougher as supply increases


Global supply of fuel used by ships and power plants is expected to grow in the third quarter, while shipping demand to the maritime market remains weak.

As China and Brazil increase production, it is estimated that the third quarter supply will increase 620,000 barrels (bpd) per day compared to the second quarter.

However, inventories at major marine refueling centers have recently reached their all-time highs. This reduced bunker fuel prices and refineries margins. Hopes for a profitable year for low-sulfur fuel vendors meeting new emission regulations set by the International Maritime Organization have declined.

According to some fuel traders, there were 9-10 million tons (fuel inventory) at the beginning of the year, and that should have been withdrawn until the beginning of the second quarter, but is currently around 13 million tons and rising every month.

Inventories in Northwest Europe and the United Arab Emirates reached record highs in June, reaching their highest in more than three years in Singapore, one of the most important Bunkering ports.

Accordint to trade sources, record supplies have depressed the delivered VLSFO (very low sulphur fuel oil) bunker spot discount to around record lows of about $45 per tonne below benchmark gasoil prices and cut Asian refiners’ profits by nearly 80% from their record highs at the start of the year to $10.25 a barrel on Thursday.

Signs of weakness in bunkering demand are heavily felt in the Fujairah refueling area of Singapore and the UAE.

Until recently, bunker fuel sales at major fuel distribution centers were handled with opportunistic stocks, but sales volumes have since been confronted by the fact that global trade has slowed.

Although the refineries started production due to the improvement in road fuel demand after the pandemic lockdowns opened, the stagnant bunker market continues to be under pressure due to the increasing supply and low demand.

According to Singapore-based bunker traders, the demand outlook remains weak and a significant recovery in bunker demand do not seem possible before the end of summer.

The increase in the number of ships that could not find any cargo or the number of ships that skip some of the ports along its route or canceled the entire journey limits the demand for bunker.

Financial sources predict a deeper global recession as the coronavirus pandemic causes wider and deeper damage than predicted in economic activity, and they say that current low demand levels will continue throughout the process if their estimates come true.