Fuel prices have taken a massive nosedive since the beginning of the year with low sulphur fuel prices in Singapore dropping from 734 US dollars per tonne on January 1st to 415 US dollars per tonne today.

The price drop comes at a good time as the transport and logistics industry is struggling with low demand as a result of the coronavirus. Export in China fell by seventeen per cent in January and February, reports the Chinese customs authority.

The fuel prices follow that trend and are dropping in even bigger percentages. In Rotterdam, a tonne of low sulphur fuel oil sold for 379 US dollars on Sunday, reflecting a decline of 35 per cent in comparison with January 1st when a tonne of VLSFO in Europe’s largest port cost 586 US dollars.

Russia blocks curbing production

Prices could drop even further after OPEC+ imploded over the weekend as Russia rejected any further production cuts. In response to the coronavirus, which has significantly lowered oil demand in China, Saudi Arabia wanted OPEC and its partners in OPEC+ to introduce further production cuts. Russia, however, rejected the proposal, saying the US has benefitted and gained market share every time OPEC+ curbed production. Instead of lowering production, Russia is actually planning to ramp up its oil output to call the US producers to a halt.

The decision was ill-received by Saudi Arabia, which warned Russia it would regret this decision and immediately launched a price war by ramping up production and lowering its oil price. As Saudi Arabia is the lowest-cost oil producer in the world, it is best equipped to sustain such a low price oil market. As a result of the move, the price of Brent oil instantly dropped from roughly 45 to 35 US dollars per barrel.

The oil price plunged down after Saudi Arabia launched an oil price war.

For scrubber users, the fuel price drop has been less significant. In some of the major bunker ports like Singapore and Houston, the heavy fuel oil prices do show a gradual decline since the start of the year, but in other major ports like Rotterdam, the heavy fuel oil price has been relatively stable. Depending on the port, heavy fuel oil prices currently vary from roughly 275 to 330 US dollars per tonne.

This article first appeared on Project Cargo Journal, a sister publication of SWZ|Maritime.