Post by Howe Robinson Partners

The re-escalation in the Iran conflict has reignited concerns over Hormuz trade flows. Whilst dry bulk flows and rates have remained relatively unaffected by the disruptions, the restarting of aggression has potentially significant implications for bunker prices. Bunkers, alongside most other refined products, mostly follow the crude oil price (unless facing disruptions particular to their own markets). But whilst crude had returned to pre-war levels by the start of July however, VLSFO prices remain +30% above pre-war levels on average. That is largely due to restrained refining capacity: Whilst crude oil markets have largely rebalanced, refined product markets are likely to still be in deficit due to the shutting-in of Middle Eastern refining capacity (which accounts for 10% of global refining capacity). A more severe and persistent increase in crude oil/bunker prices has so far been avoided by stockpile releases from the US, Japan and probably China, offsetting another 47% of the disruption to supply. Whilst the decline in crude oil prices may suggest rebalancing in supply has been easier than many expected, our analysis suggests that is not the case beyond the short-term. In other words, the risk for sustained, higher crude and bunker prices over coming months is likely without a clear resolution to the Iran conflict. Howe Robinson Partners publishes a weekly dry cargo report covering supply, demand and fleet data. To learn more and discuss our services and publications, please contact us: [email protected]. #commodities #drybulk #shipping #maritime