Bunker prices are falling to levels last seen 15 months ago, offering respite to shipowners struggling to pay the exceptionally high prices seen over the last year.
Owners are now paying $596 per tonne for 380 cSt fuel from the main Middle East bunkering hub in Fujairah, Greek shipbroker Optima said on Monday.
By comparison, bunker prices were around $650 two weeks ago and hit an all-time high of $763.50 in February.
The sharp price drop is linked to the fall in the oil price last week, caused by fears of falling oil demand from China after the country’s economy and manufacturing slowed.
The oil price rallied slightly this week on news of the Spanish eurozone bailout but it is still lower than it has been for more than a year.
Shipowners and operators, particularly in the tanker industry where earnings have been suppressed for a while, welcome lower bunker prices.
“It’s good news; it helps us a lot,” said Hafnia Tankers chartering manager Jesper Mortensen. On certain routes, daily earnings can rise by $1,000 per day if the bunker price falls, he said. “So it’s got a huge impact for us.”
Analysts have said lower bunker prices will lead to vessels speeding up because owners will see it as an opportunity to get cargo ahead of their competitors, covering the increase in fuel use with the rise in income from the voyage.
Vessels speeding up could have a detrimental effect on the supply-demand balance in the market, because ships will become available for employment quicker, exacerbating competition for cargoes and driving freight rates down.
Although bunker prices have dropped, there are still concerns in the shipping industry that new environmental regulations will drive up fuel prices in the long run. This is because gasoil will be required to make cleaner bunker fuel and gasoil is more expensive than traditional fuel oil for ships.
Furthermore, if oil prices fluctuate significantly on further eurozone crises or bailouts, the drop in the bunker price and the consequent relief for shipowners will be short-lived.