High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
The KPI Bridge Oil Composite declined over 3% this week as bunker prices reduced dramatically after several days of declines in the crude markets. With US Oil inventories at 22 year highs current oil prices are hard to justify even with an unlikely, but possible, conflict with Iran hanging overhead. There is a tremendous amount of uncertainty in the world markets right now and this uncertainty could easily cause further decline in oil prices.
Austerity measures in Europe seem to be coming to a standstill which has everyone worried that continued overspending by governments around the world will simply cause a collapse of the global market. Ireland which was one of the leaders on the austerity front is now also taking steps to stop the process. Greece has no government at all, yet is still operating in a deficit. The candidate that is getting the most positive response (Mr. Alexis Tsipras) by voters in Greece is calling for the end to austerity measures and is in fact saying the government needs to go in the opposite direction. With the new French President Mr. Francois Hollande, a Socialist Party member, being officially named this week the possibility of a further recession in Europe and governments moving towards a more protectionist/national focus exists.
It appears credit is once again tightening world wide which will make the speculative investor less of a factor in the oil markets. Lower bunker prices are certainly a relief to tired ship owners and charterers who could use a break in the excessive operating costs that they have been facing.
The KPI Bridge Oil Composite is a calculated fuel number based on 14 ports strategically positioned worldwide. It is calculated on a weekly basis blending 90% fuel oil prices with 10% distillate prices. The idea behind the number is that it would represent actual fuel costs on a global basis and what vessels would consume on average. This number will not fluctuate as quickly as daily prices and can easily be hedged or used for voyage calculations.
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