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Bunker prices creeping up as crude market firms

Bunker prices creeping up as crude market firms
Bunker fuel prices have been creeping back up over the past month, heading towards $400 per metric tonne (pmt) as crude oil prices rose nearly 20% for the last six weeks.

Global benchmark bunker grade Singapore 380 cst was indicated at $386.50 pmt on Thursday, gaining close to $30 in a week, according to data from Ship & Bunker.

The bunker market has been firming largely in tandem with the increase in crude oil prices, bunker traders noted, and Singapore 380 cst bunker prices were up by 18.9% compared to $325 pmt a month ago on 7 April.

Singapore-based bunker traders said suppliers have been competing rather aggressively for spot bunker stems, resulting in some downward pressures on prices and averting a potential surge.

In addition, the healthy availability of supplies has also helped to limit the hike in bunker prices, traders added. “There has been an increase in demand (for bunkers) as the market started firming in recent weeks. Some price undercutting was seen in the market,” a bunker trader told Seatrade Global.

Another bunker player said that the good level of product inventory has helped to hold back a bigger jump in prices and potentially heavier price undercuts, especially by the smaller bunker suppliers.

Bunker prices today have moved up by 21.7% since the start of this year. But compared to a year ago, the bunker price yesterday was 34.3% lower than $588 pmt seen on 7 May 2014, Ship & Bunker data showed.

The bunker market started to soften during the last two months of 2014, and the decline continued into 2015 to reach a year-to-date low of $273 pmt on 14 January.

Looking ahead, bunker traders believed that bunker prices would largely follow the direction of crude oil prices, while fuel supplies are expected to stay strong, similar to the situation in the crude market.

Meanwhile, OPEC is unlikely to decide to cut output when it meets on 5 June. An OPEC delegated was quoted by Reuters as saying that the oil market will continue to firm and demand growth will be stronger-than-expected into the second half of this year.