The collapse in crude oil prices this week has pushed bunker fuel prices to a four-year low.
Prices for 380 CST heavy fuel oil (HFO) plunged by more than 20% to $225 per tonne in Singapore and $218 per tonne in Rotterdam, the lowest levels since 2016.
The price of 0.5% low sulphur fuel oil (LSFO) fell almost $80 per tonne to reach $337 in Singapore and $300 in Rotterdam.
This gives a price spread between LSFO and HFO of only $82 in Rotterdam, down from $150 last week.
The gap was as much as $470 at the start of the year, giving scrubber-fitted ships a huge advantage. Now owners will face a longer pay-back time for their retrofits, but will be saving money on fuel bills in general.
LSFO prices have dropped by over 50% since the January peak.
Crude prices fell 30% at the start of this week following the collapse of talks between OPEC+ countries over production cuts.
It was the largest daily fall since 1991, but WTI and Brent prices have staged a weak $2 recovery since then, slowing the drop in fuel prices.
VLCC rates rising
In the VLCC market, rates have been surging as traders seek ships to store cheap crude.
Fearnley Securities said the sector "burst into life" on Tuesday, with at least 20 ships provisionally booked for loadings in late March/early February.
This included 15 fixtures from the Middle East Gulf (MEG), of which Saudi Arabia's Bahri booked nine.
"We seldom see Bahri on our fixture lists, and this thus underscores Saudi’s intention to flood the market with oil in the coming months," it added.
"The kingdom has already flagged that production will be 12.3m barrels per day in April, 25% higher than in February," it added.
"Most, if not all these cargoes, are likely ending up on storage given the weak demand outlook short term."
It put rates at $80,000 per day from MEG to South Korea, with scrubber fitted ships demanding at least $10,000 extra. VLCC rates were as low as $14,800 a month ago.
Expectations are for further firming today, it added.
Reuters reported several traders making enquiries to charter vessels to hold oil offshore.
"Tanker offers are quite high today," said a Singapore-based crude oil trader. "Now the contango market structure supports (oil storage), but shipowners are raising prices."
Shipbroker Poten & Partners said it is seeing several deals negotiated for short-term charters of six to 12 months, with one already concluded.
"The fall in oil prices has made floating storage more attractive, although the margins are still relatively thin," the outfit said.
Pareto Securities said that "while actual fixing activity was rather limited yesterday, the floating storage interest has boosted shipowners' sentiment and rate ideas have thus been increased substantially."
