Analysis by Drewry
Forecasting oil prices is even more difficult than predicting container freight rates or carrier profits.
According to Drewry, while we cannot confidently say which way bunker prices are headed, we can be confident in saying that no matter how low they go, carriers will not return to sailing containerships at their design speeds for fear of flooding the market with the latent capacity that has been held in check by slow steaming.
Brent crude prices were remarkably stable for over three years, averaging $110 per barrel since passing the $100/bbl threshold at the end of January 2011. However, crude has fallen around a quarter since the recent mid-June peak of $110/bbl. Explanations for the sudden drop include greater US self-reliance (shale gas), easing supply concerns in the Middle East and Africa, subsiding threat of ISIS on the oil fields of Iraq, and weaker global demand as highlighted by another IMF downgrade.
Carriers will benefit from a prolonged drop in oil and bunker prices, as will shippers that currently pay variable BAF surcharges. However, slow steaming is not going away due to overcapacity fears.
Source: Drewry
