In a recent report,US based consulting firm Mcquilling Services attempted to forecast the course of bunker prices during the next few years,as this factor is among the most important ones when it comes to ship owning operating costs.
According to the company's projection,2013 average bunker prices are expected to reach USD 690 per tonne,while by 2017,bunker costs are forecast to average USD 760 per tonne.During 2012,the basket of bunker prices reached an all-time high of almost USD 750 per tonne in early March.
Mcquilling Services said that"This was influenced by an upward spike in crude oil prices combined with robust demand for power generation from various countries.Although prices have since subsided,bunker prices are anticipated to rise in the coming years.This increase will be in line with higher crude oil prices,but also tighter supplies due to secondary capacity additions and changes to the international crude slate.Tanker earnings will continue to be pressured,which will encourage owners to explore methods to boost fuel efficiency.”
It continued by explaining its methodology noting that"in our annual Tanker Market Outlook,McQuilling Services provides a bunker price forecast using the correlation between Dated Brent and the average bunker price.Dated Brent provides a more accurate gauge of international crude oil prices as it is not subject to the local logistical issues that affect the US benchmark WTI and it is considered the global oil price benchmark.In previous editions of the Tanker Market Outlook,we noted the correlation between Dated Brent and international bunker prices has shifted upwards as tighter specifications and refinery upgrades are reducing supplies.Between 1994 and 2007,the slope remained constant but started to steepen in 2008.This trend has continued into this year’s forecasting cycle.
The report added that"in our 2012 Tanker Market Outlook,we forecast that Dated Brent would average USD 105 per barrel and bunker prices USD 650 per tonne.Year to date Dated Brent has been roughly USD 111 per barrel or 3%above our forecast while bunkers averaged USD 675 per tonne,about 4%higher than projected.Going forward we see limited upward support for international crude oil prices as the global economy is expected to remain under pressure while supplies should remain relatively ample.
Global crude production should remain supported by the expectation that output in North America will increase throughout the forecast period.Saudi Arabia will continue to be the most influential swing supplier of OPEC nations while Russian production should also continue to hover around 10 million b/d.Political risks that could result in reduced production,especially in the Middle East and North Africa will remain present.Demand growth from non-OECD economies will stay healthy throughout the forecast period which will help absorb displaced barrels,in particular from the Caribbean,as a result of rising North American crude oil production.This will support ton-mile demand in particular for the larger tanker classes.
Mcquilling Serviced concluded its argument by saying that"this year’s medium term forecast anticipates that bunker prices will rise slowly over the next three years.This range bound activity will be influenced by a rising share of natural gas consumption in both industrialized and developing nations that will provide some balance to market fundamentals.The rise in the latter part of the forecast period is the result of tighter bunker fuel specifications combined with the growth in sophistication of the global downstream industry.”