Week 14: Did Bunker Fuel Prices Continue Their Fall?
Week 14: Tanker Stocks Tank, Analysts Change Recommendations
Crude oil prices
Brent crude oil prices ranged from $37.70 per barrel to $41.90 per barrel in the week ending April 8, 2016. Prices rose from the previous week but were nearly 26% lower than in the same period last year. Crude oil (DBO) prices impact crude oil demand, which affects freight rates and bunker fuel prices.
Oil demand and tanker rates
Lower crude oil prices encourage countries to import larger quantities of cheap oil to store for future use. This increases crude tanker demand, which boosts tanker rates. Higher freight rates benefit the crude tanker industry.
Bunker fuel prices
Bunker fuel prices, the biggest cost to run a ship, correlate with crude oil prices. For the week ending April 8, 2016, the average bunker fuel price ranged from $224 per ton to $233 per ton. Bunker fuel prices were almost 34% lower than prices in the same period last year. Bunker fuel prices had ranged from $230 to $231 in the previous week.
Major ports
The bunker prices at Rotterdam were $147–$157 per ton, lower than the previous week’s range of $158–$160 per ton.
At the Port of Fujairah, the bunker prices were $166–$180 per ton, lower than the previous week’s range of $177–$181 per ton.
April 7 marked a significant drop in bunker fuel prices, which immediately recovered the next day. Bunker fuel prices at Rotterdam and Fujairah rose by approximately 8% on April 8, compared to prices the previous day.
Lower bunker prices reduce operating costs and increase profits for companies such as Frontline (FRO), Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Gener8 Maritime (GNRT), Navios Maritime Midstream Partners (NAP), and Euronav (EURN).
Bunker fuel prices also affect the cost side of product tankers and dry bulk shipping companies like Navios Maritime Partners (NMM). LNG (liquefied natural gas) carrier companies such as Teekay LNG Partners (TGP) and Höegh LNG Partners (HMLP) are also affected by bunker fuel pricing.
Investors who are interested in broader exposure to the industrials sector can invest in the SPDR Dow Jones Industrial Average ETF (DIA).
Browse this series on Market Realist:
