Scandal in Denmark - OW Bunker

It will be interesting to follow the outcome of this investigation.  

From Bloomberg News

OW Bunker, which provides fuel to the marine industry, said shortly before midnight local time it had lost $275 million through a combination of fraud committed by senior executives at its Singapore office and poor risk management. Its shares have been suspended since yesterday and the company says its equity has been wiped out. Just eight months ago, investors drove OW Bunker’s shares up 21 percent in their first day of trading, following an initial public offering that valued it at almost $1 billion.OW Bunker, which provides fuel to the marine industry, said shortly before midnight local time it had lost $275 million through a combination of fraud committed by senior executives at its Singapore office and poor risk management. Its shares have been suspended since yesterday and the company says its equity has been wiped out. Just eight months ago, investors drove OW Bunker’s shares up 21 percent in their first day of trading, following an initial public offering that valued it at almost $1 billion.

What price for bunker fuel?

Oil has been going up.

Personally, I think there is way too much speculation going on which is driving up the price of oil. Hedge funds and others are now buying up oil, putting them in tanker ships, and (in my opinion) manipulating the market to drive up the price.

This of course, is just my opinion.

One of my friends is investing in an oil exploration venture. I have a chance to invest, but as I think the price or oil is now artificially high, I won't be investing.

OPEC says they won't be increasing production until oil hits 100.00 a barrel.

I am guessing there will be a lot of volatility in the market in the next few months.

History Oil Price - WTI

Many of the bunker adjustment factors charged by steamship lines have been changed to supposedly be based on a formula adjusted to the price of bunker fuel.

I realize bunker fuel price is not the same as the oil price, just as gasoline does not always go up or down the same as oil. However, let's face it, bunker fuel does come from oil.

I just happened upon an interesting site, giving the history of the spot oil price of
West Texas Intermediate (spot price in Cushing, Oklahoma, USA).

The WTI today is trading around 47.38

I had to go back 4 years to find a price even close to that low.
Here are the prices in February from 2005.

Feb. 2005 47.97
Feb. 2006 61.63
Feb. 2007 59.26
Feb. 2008 95.35
Feb. 2009 39.16

Were carriers charging bunker adjustment surcharges in 2006? I don't think so.

If they were, let me know.

Illogical BAF (bunker adjustment factors)

Update Dec. 12 - Why are there still bunker surcharges?

When I was looking at the Maersk web-site I noticed they are implementing a new BAF (bunker adjustment factor) calculator, as they call it. This type of surcharge use to be called a bunker surcharge, but as the acronym for that is BS, I guess they had to change it.

Not all the trades are implemented. This is one I picked out because it's lop-sided, much more than the others. Most of them were pretty close for each direction of the trade, but not this one.

North & Latin America to East Africa

USD 600 per 20’ container
USD1200 per 40’ container

East Africa to North and Latin America

USD 200 per 20’ container
USD 400 per 40’ container

Here is an example they give for calculating the bunker surcharge.


Bunker consumption: 0.047 mt/TEU/day Bunker Consumption - the amount of metric tons of bunker fuel needed to transport a 20' container each day of the transit.
Transit Time: 24 days Transit Time - the average number of days of a round trip voyage, divided by two, equals the one way transit time.
Imbalance factor: 0.50 Imbalance factor – is the ratio of headhaul to backhaul. This measures the inequality between imports and exports in each trade.
Bunker price change: 527 (Price) - 195 (Bunker base element) = 332 USD Bunker Price Change - the change in bunker cost, up or down, during the measurement period. The price change is the new price less the original price, (the base bunker cost is included in the base ocean freight rate).
Future bunker price: 682 USD Future bunker price - the change in bunker cost, up or down, during the measurement period. The price change is the new price less the original price, (the base bunker cost is included in the base ocean freight rate).
What are the monitoring ports

I have a friend who is a mathematician. I'll ask him to explain it to me.

Ok, well that's not really fair. I do understand it. I just don't know if like the way they are applying it. But then again it goes back to whatever the cargo can bear.

Oh, sorry, I gave away the secret to ocean rate pricing.