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Fuel costs have risen so much that tanker freight has soared

  • Author:Alvin
  • Source:HKSG-GRUP
  • Release Date:2018-08-16
As the current fuel cost is 30% higher than the same period last year, the global benchmark freight rate index of the tanker will definitely change greatly this year.

Ship brokerage company Gibson recently pointed out in his latest weekly report that due to fluctuations in international fuel prices, exchange rates and port costs, the unified freight rate of the tanker global benchmark route has been reset at the beginning of each year, making the freight rate in the oil transportation market more complicated.

On long-haul routes, fuel is the most important component of all navigation costs, so large fluctuations in fuel prices will likely result in considerable changes in the route tariff (WS100).

The short-haul routes are slightly different. The shorter the distance, the less important the fluctuations in oil and fuel prices. This also means that the importance of exchange rate changes increases because it affects the dollar equivalent of total port expenditures.

According to Gibson, the upward trend in oil prices has continued since last year, and international fuel prices have stabilized at around $120/ton since September 2017. Strong oil demand, declining crude oil inventories, continued decline in Venezuela's crude oil production, and concerns about the future direction of crude oil exports have prompted oil prices to strengthen.

Taking into account the actual fuel assessment and the latest fuel outlook curve since October 2017, international fuel prices are expected to be about 30% higher than the same period last year.

This shows that the WS100 in 2019 will increase by about 15-17% on long-haul routes and by 9-13% on short-haul routes. These changes are essentially indicative, as the increase in the benchmark tariff will be compensated for by the corresponding drop in spot prices without any impact on the actual transportation costs.

However, considering that the global sea fuel sulfur limit rule will come into force on January 1, 2020, the prospects for actual freight rates may be very different from those after 2020.