By Roslan Khasawneh and Keith Wallis
SINGAPORE, Dec 9 (Reuters) – Ship fuel prices have plummeted to lows not seen in over a decade, pulled down by a rout in crude oil prices as a result of a global glut just as demand for marine fuel slows on the back of Asia’s weakening economies.
The benchmark end-user price for marine fuels, also known as bunker, Singapore’s 380-centistoke grade bunker fuel , closed at $183.21 per metric tonne on Tuesday, almost $10 lower from the previous day and at levels last seen in January 2005.
Singapore is the world’s main shipping fuel hub, trading over 40 percent of it globally.
The fall in bunker fuel follows the tumble in crude prices after the Organization of Petroleum Exporting Countries ended their meeting last week without even mentioning production targets, indicating that members will continue to pump near record levels. OPEC members now seem to be defending market share against one another internally and against competitors like Russia and North America.
The average daily fuel cost to operate a Very Large Crude Carrier (VLCC) has fallen from over $75,000 to under $18,000 currently, meaning a sharp reduction in operating costs for shippers.
Despite this fall in costs, bunker traders said that demand from shippers remained weak as they struggle with a slowdown in global seaborne trade.
“Although (bunker) prices are low, demand has been weak compared with the same time last year because of mounting pressures on the shipping industry amid slowing global activity,” one bunker fuel trader said.
China, the world’s biggest exporter, reported a 6.8 percent drop in exports in November from a year earlier, while its imports slowed 8.7 percent, as the country’s economy grows at its slowest pace in decades.
Another trader said that demand would only increase if the average distance of ships’ voyages rose and if ship owners filled their tanks in anticipation of a price rise. Yet, with the oil supply glut expected to last well into next year and the economic outlook also not improving, this is seen as unlikely.
(Additional reporting by Jessica Jaganathan; Editing by Henning Gloystein and Christian Schmollinger)
(c) Copyright Thomson Reuters 2015.