The marine fuels market has been tested each year since the turn of the decade by tighter emission regulations, higher supply costs and geopolitical turmoil — and 2024 may be the most challenging year yet.

The move to a net-zero carbon shipping market will continue to present challenges for the industry as new fuels such as biofuels, methanol, hydrogen and ammonia begin to enter the bunker mix. Still, they will probably meet just a fraction of total demand, with biofuels viewed as most likely to take hold quickly. And scaling up production of these new fuels will remain an issue for the next five to six years.

Fewer Panama Canal Transits

Barring a sharp change in conditions, continued drought at the Panama Canal will factor into bunker demand there and along the US Gulf and East coasts. Total oceangoing transits through the key waterway fell to 783 vessels in November, down from a more typical number of over 1,000/month when water levels are not an issue.

With reduced transits and increased draft restrictions, larger ships such as very-large gas carriers and larger container ships have been exploring re-routing.

“There hasn’t been any effect in New York [on bunkering demand] yet, but that may be due to contractual business,” an industry consultant said. “October through January is grain season … but come February, that may change.”

One global bunker broker said there were a large number of vessels taking on fuel in Argentina and heading down to the Strait of Magellan to sail around South America rather than deal with canal delays.

“We are seeing clean tankers loading in the US Gulf Coast for Chile and going the other way,” the broker said. “Then they go all the way up to Balboa and wait for a fixture. They are basically stuck in South America.”

It essentially comes down to a numbers game — fewer Panama Canal transits means less bunker demand there, while reductions in the number of ships passing through the canal could reduce Gulf Coast and East Coast bunkering volumes starting in February.


As governing bodies press the shipping industry to decarbonize, Europe has taken the lead in rewarding or penalizing shippers according to their fuel use in an effort to push the industry toward alternative fuels.

The inclusion of shipping in the European Union emission trading scheme, set to get under way in January, marks a first-of-its-kind step for the shipping industry and it’s a costly one. In January, the EU ETS will be covering CO2 emissions from all vessels of 5,000 gross tons and above that enter the region’s ports. It will apply to 50% of emissions from voyages starting or ending outside of the EU and 100% of emissions that occur between two EU ports.

Shipping companies will need to pay for 40% of their CO2 emissions in the first year by purchasing EU emissions allowances, and that will rise to 100% starting in 2027, according to the European Commission. Methane and nitrous oxide emissions will also be added beginning in 2026.

“I don’t know how it’s going to play out,” another bunker broker said. “Do you want to pay a tax to the EU? Or will you spend the money on a more expensive alternative fuel? It’s going be interesting.”

In the US, two House members — one Republican and one Democrat — have introduced a bill that would allow international shipping companies to generate Renewable Identification Number credits under the Renewable Fuel Standard by using renewable fuels to operate their vessels.

The proposed Renewable Fuel for Ocean-Going Vessels Act would amend the Clean Air Act by broadening a provision currently that now provides tax credits to blenders of heating oil and jet fuel to include “fuel for ocean-going vessels” and allow shipping firms to keep credits that are otherwise sacrificed under current regulations because those vessels forfeit their blending obligations on international trips.

VLSFO Still Dominant

Very low-sulfur fuel oil will remain the dominant fuel in 2024. Blending components, namely diesel and its close relatives, factor into the pricing of finished VLSFO and marine gasoil and have been very much a part of the wild ride diesel prices have experienced.

Houston VLSFO averaged $606.68 per metric ton ex-wharf, including an annual high of $672/mtw in Q3 2023, according to OPIS data through Dec. 8. The third quarter also saw the highest quarterly price for the NYMEX ULSD contract, which averaged $949.27/mt. As ULSD prices eased in the fourth quarter to an average of $914.21/mt, VLSFO also backed off to an average of $586.67/mtw.

MGO hit a yearly high of $1,045/mt on Jan. 26, 2023, the peak of the US winter heating season. And as diesel stocks remain tight in the US, particularly along the East Coast, a winter cold snap would send diesel prices higher and take supply from the marine market, pushing MGO prices up.

Scrubber Spread

Scrubbers, which were once viewed as the solution for burning high-sulfur bunker fuel, don’t have the same shine they once did. The Hi-5 spread, or difference between the cost of HS 380 CST and VLSFO, was predicted to hold between $220-260/mt, allowing higher sulfur fuel users to shorten the time it takes to recover their cost of installing scrubbers. And for a time, that all worked as planned.

But a few events, particularly the Russian oil embargo, disrupted the fuel oil market’s structure. Russia is the world’s largest producer of heavy fuel oil, with M100 being among the most prized. The Hi-5 spread averaged $200.31/mt in the first quarter of 2023, according to OPIS data. That spread fell to $120.39/mt in Q2; $90.30/mt in Q3 and $100/mt so far in the fourth quarter. The Q4 spread was $100/mt up to Dec. 8, when it narrowed to $60/mt.

The shrinking spread comes as high-sulfur fuel oil prices have held up better than VLSFO prices due to relatively tight HSFO supply.

There is hope for scrubber users with the US easing sanctions on Venezuela. US refiners got access to an additional 200,000 b/d of Venezuelan crude after the Biden administration in October lifted a range of sanctions against the country’s oil and gas sector.

The US once imported more than 1 million b/d from Venezuela, but those exports have fallen sharply as relations between the two countries have worsened.

Venezuela’s Orinoco crude is an extra heavy sour crude (4.6% sulfur) that yields a large amount of HSFO when processed. That influx of crude could lower HSFO prices and restore health to the Hi-5 spread.

Despite a pullback in recent years in the number of players working the U.S. Gulf Coast offshore bunker business, the offshore bunker segment so far this year appears to represent nearly a half-billion dollars’ worth of business while moving more than 4 million barrels of product.


In 2013, the Vancouver, Canada-based Waterfront Shipping Company introduced seven of the world’s first ocean-going vessels built with Germany’s MAN methanol dual-fuel engines. Early in 2021, Singapore’s Eastern Pacific Shipping (EPS) announced it was partnering with MAN Energy Solutions and methanol producer OCI to convert conventional vessels from its existing tanker fleet to run on methanol, while at the same time planning to build new vessels with engines powered by methanol and ammonia.

Danish container shipping giant AP Moller-Maersk tabled contracts in August worth $1.4 billion for a series of 16,000 twenty-foot equivalent unit (TEU) ships to be fitted with dual-fuel MAN engines, after ordering its first methanol dual-fueled 2,100 TEU container ship earlier in the year. Global production capacity of methanol totaled around 80 million metric tons in 2020 and is expected to increase by 3.2% every year for the next five years, IHS Markit data showed.

“The methanol-fueled engine market for shipping is really in the early stages,” says Martin Dorsman, secretary general of the European Community Shipowners’ Association (ECSA). “Some shipowners have run their vessels on methanol for some years, but they are the frontrunners. We are just at the start of the process,” Dorsman told OPIS.

Back in 2018, the IMO set out legislation to reduce the average carbon intensity of international shipping by 40% by 2030, followed by the adoption of new additional technical and operational requirements in June 2021.

Since then, energy transition in the maritime sector has gained momentum, with around 12% of newbuild vessels in 2021 ordered with alternative fuel systems, with liquefied natural gas (LNG) leading the way, according to the international shipping classification society DNV. That’s compared with 6% of newbuilds ordered in 2019, DNV data showed. However, less than 1% of ships currently in operation burn alternative fuels, with the huge majority that do use such fuel plying short-sea routes, said DNV.


In 2018, the International Maritime Organization (IMO), a specialized agency of the United Nations that internationally regulates shipping, adopted an initial greenhouse gas (GHG) strategy, targeting a minimum 50% reduction of total GHG emissions from international shipping by 2050, compared to 2008 levels.


Since the beginning of 2020, the world has been dramatically altered in the wake of the COVID-19 pandemic.


Mid-December seemed to be giving a peek into the 2021 bunker market, as fuel prices have been rising and Brent crude values have rebounded to pre-COVID-19 levels, and distillates, although lagging, have also gained ground.