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MABUX: Bunker Expected to Continue Rising Next Week

Over the Week 23, the world bunker indices continued their firm upward trend amid the ongoing military conflict in Ukraine. The 380 HSFO index rose by 9.77 USD: from 758.55 USD/MT to 768.32 USD/MT. The VLSFO index went up more significantly: by 45.06 USD: from 1043.18 USD/MT to 1088.24 USD/MT, reaching a new all-time high. The MGO index also showed a significant growth: plus 58.62 USD (from 1316.61 USD/MT to 1375.23 USD/MT).

The Global Scrubber Spread (SS) weekly average – the price difference between 380 HSFO and VLSFO – continued its firm growth over the week – plus $ 32.09, setting a new record and exceeding a $ 300 mark for the first time ($ 300.20 vs. $ 268.11 last week). In Rotterdam, the average SS Spread rose more significantly: $250.17 vs. $189.00 (up $61.17 compared to last week). The most significantly the average price premium 380 HSFO/VLSFO surged in Singapore: $ 482.50 versus $ 411.00 (plus $ 71.50). More information is available in the Price Differences section at mabux.com.

Natural gas prices in Europe have been on the decline for last few days now as demand eases while supply remains strong due to to LNG and continued deliveries by Gazprom via Ukraine and the Nord Stream 1 pipeline. The price for LNG as bunker fuel in the port of Sines (Portugal) dropped on June 6 by 95 USD to 1821 USD/MT (versus 1916 USD/MT a week earlier). LNG prices are still significantly higher than those of traditional bunker fuels: the cost of MGO LS in the port of Sines was quoted at 1505 USD/MT as of June 08.

Over the week 23, the most significant change of MDI index weekly average (comparison of MABUX market bunker prices vs MABUX digital bunker benchmark) was the underestimation of 380 HSFO fuel grade in three ports at once out of four selected: Rotterdam – minus $ 14, Singapore – minus $ 65 and Fujairah – minus $ 7. The only overpriced port at the moment is Houston – plus $ 22, while the overcharge premium at this port is gradually decreasing.

VLSFO fuel grade, according to MDI, remained overpriced in all selected ports: plus $44 in Rotterdam, plus $214 in Singapore, plus $149 in Fujairah and plus $40 in Houston. Here, the MDI index did not have any firm dynamics, increasing in Rotterdam, Singapore and Fujairah, but decreasing in Houston. VLSFO fuel remains the most overvalued segment in the global bunker market.

As for MGO LS, MDI unexpectedly registered an underestimation of this fuel grade in two ports out of four selected: in Rotterdam – minus $ 20 and in Singapore – minus $ 37. In other ports, the overprice premium was: Fujairah – plus $ 111 and Houston – plus $ 27. Overcharge premium is gradually narrowing, while underpricing margins are widening.

Thus, there is still no firm dynamics in the correlation between market and benchmark digital MABUX (MDI) prices, which indicates high volatility in the global bunker market.

According to DNV’s Alternative Fuels Insight platform, 30 orders for LNG fuelled vessels were placed in May, but high LNG prices continue to impact bunkering activity. With the addition of contracts filed in May, the total order book for 2022 now stands at 151. DNV notes that the growth last month was principally driven by containerships and car carriers. The number of LNG-fuelled vessels on order and in operation is 805, with a further 229 vessels classed as LNG-ready. As per DNV, with the pace of orders continuing, Q2 2022 is already the strongest quarter on record, despite only being two months in. Current LNG bunkering activities remain very low, however. Though there is also some hope that activity in the LNG bunker market could return as oil prices continue to stay high, at least temporarily.

The military conflict in Ukraine continues to be the main driver in bunker prices’ uptrend. We expect bunker indices to continue rising next week.
Source: By Sergey Ivanov, Director, MABUX

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