What's the Relationship Between Vessel Fuel and Crude Oil?
BAF is tied to the price of Brent Crude Oil.
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Vessel fuel (also known as BAF - Bunker Adjustment Factor) is tied to the price of oil, set by Brent Crude Oil price, a major benchmark for worldwide oil prices. The Brent Crude Oil price has been going up since OPEC (Organization of Petroleum Exporting Countries) began reducing their oil supply in the beginning of 2017. Oil cuts are expected to continue through the end of 2018, with U.S. sanctions against Iran also expected to contribute to rising oil prices.
The graph below shows Brent Crude Oil price trends over the past year. Monitoring the oil price will provide some insight into how BAF fluctuates.
ICE Brent Crude Oil Price ($/bbl) - (1yr.) - Bloomberg