Breaking through $90 on Wednesday, Brent crude has risen by almost 9% over January and, together with West Texas Intermediate, is now trading almost 80% higher than the start of 2021.
Ships’ bunker prices are rising in parallel. Very low sulphur fuel oil was priced at close to $690 in Singapore yesterday, a few dollars more in Fujairah, around $655 in Rotterdam, close to $670 in Houston, and more than $700 in LA/Long Beach.
Higher fuel costs are yet another challenge for transport operators generally and ship operators in particular. They come on top of other major headaches for many companies including port congestion, equipment imbalances, and crew change obstacles.
Oil analysts are predicting further increases in the face of tightening energy supplies and possible fallout from geopolitical tension relating to Ukraine, Russia, and the West. Gas prices in Europe are likely to climb further, notably because Ukraine is a key link in the gas supply chain. Meanwhile, almost 12m tonnes of Russian crude oil was pumped to the European Union via Ukraine in 2021.
One of the world’s two principal benchmarks, Brent crude continued to trade above $90 early on Friday morning while the world’s other key standard, West Texas Intermediate, which always trades slightly lower than Brent, was flirting with $87.50.
In a note to clients on Wednesday, investment bank Goldman Sachs predicted further increases, commenting: “Against the backdrop of the tightest inventory levels in decades, low spare capacity and a much less elastic shale sector, this points to the skew of large energy price moves shifting to the upside.”
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