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The shock
announcement by the Organisation of Petroleum Exporting Countries to cut
back production is expected to hit shipping lines with higher fuel costs.
Bunker (fuel) prices have risen substantially in line with strong oil price
hikes, which resulted from Opec's decision to slash output and export
levels.
Tanker owners are facing a two-fold impact as demand for crude loadings from
the Arabian Gulf is set to fall from the beginning of November at the same
time as their fuel prices will rise.
Crude prices increased by US$1.30 per barrel in the two days after Opec said
it would cut production by 900,000 barrels per day to 24.5m bpd.
Bunker prices in Houston increased by around 8% and similar rises were seen
in Rotterdam and Singapore.
Shipping fuel is a large proportion of shipping costs and that is an area
that will affect shipping companies in a significant way.
Bunker fuel usually accounts for between 5 per cent and 10 per cent of
shipping lines' operating costs.
The decision by Opec to reduce the supply of oil to world market has taken
tanker operators by surprise could cause freight rates for tankers to drop
after a healthy increase since early this year.
Market sources said tanker rates could suffer and oil prices have jumped as
a result of a surprise output cut agreed by the Organisation of Petroleum
Exporting Countries.
"Opec will cut by 900,000 barrels per day from November 1," Kuwaiti oil
minister Sheikh Ahmed al-Fahd al-Sabah said last week.
This will bring production down to 24.5m bpd from November with the aim of
preventing oil prices slipping in the first quarter next year.
However, according to Clarkson, London-based market analyst in the the
short-term the rates could increase as eastern charterers are looking to
cover mid October liftings, which has pushed rates for Japan/Korea discharge
to Worldscale index 135.
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