All quiet in global bunker market: volatility, with no clear directions
The Bunker Review is contributed by Marine Bunker Exchange
Bunker prices: any firm direction is still opened to question.
World fuel indexes have swung between gains and losses since last week amid speculation about whether an agreement can be reached at the meeting in Doha and U.S. inventory and production data. Meanwhile there are some signs that the market is slowly moving away from Contango into Backwardation territory, which suggests the market expects the rally of fuel prices may have stalled and they could start coming down again in the coming months.
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) in the period Apr.01 – 07 had slight downward trend:
380 HSFO – down from 163,21 to 159,57 USD/MT (-3,64)
180 HSFO – down from 208,57 to 203.57 USD/MT (-5,00)
MGO – down from 396,36 to 388.71 USD/MT (-7,65)
The main supporting factor on the market is still the expectations of OPEC and non-OPEC possible freezing output: major oil-producing nations will meet in Doha on April 17. Saudi Arabia’s statement that the country will freeze output only if Iran follows suit put in doubt the prospects of a proposed deal. Kuwait on the contrary said it expected major producers to agree to freeze output, even as Iran continued to balk at the plan. According to some reports, oil-producing countries are discussing a draft resolution for the Doha meeting, which may lead to a decision on tools to monitor output levels.
The Organization of Petroleum Exporting Countries boosted production by 64,000 barrels to 33.09 million a day last month as Iraqi output gained and Iran pumped at the highest level in almost four years. Saudi Arabia trimmed output by 10,000 barrels a day to 10.19 million and is keeping output almost flat at January levels. Iraqi production rose by 150,000 barrels a day to 4.35 million in March while the country pumped 4.51 million barrels a day in January, the highest level from 1989.
Iran has expressed determination to continue increasing its oil production and ex-ports until it regains its pre-sanction market position. So Iran has rejected freezing its output at January levels, which OPEC secondary sources have estimated to be 2.93 million barrels per day. As per forecast, the country's crude output would reach four million barrels per day by March 2017. It is also reported that Iran's oil exports surpassed 2 million bpd at the moment.
Russian production of crude and a light oil called condensate climbed 2.1 percent in March from a year earlier to 10.912 million barrels a day. That narrowly surpassed the previous high of 10.910 million barrels in January. Exports rose 5.1 percent from a year earlier to 5.59 million barrels a day in March. Russia’s position on freezing oil production is unchanged: the country is proposing production be capped, not ex-ports.
U.S. crude stockpiles dropped 4.94 million barrels last week to 529. 9 million. Refineries processed the most crude in three months as output and imports declined. Meantime, refineries bolstered operating rates by 1 percentage point to 91.4 percent of capacity. U.S. refiners typically increase utilization in April as they finish maintenance before the summer peak driving season. Rigs targeting crude in the U.S. have fallen to 362, the least since September 2009. More than 1,100 oil rigs have been parked since the start of last year. As a result, production fell by 14,000 barrels a day to 9.008 million, the lowest since November 2014. Now refineries are buying foreign oil to replace the lost U.S. output—and are storing much of the less-expensive imported oil to sell when prices rise.
We expect world fuel market will keep next week high volatility ranges and further trend will be greatly depended on the progress of freezing oil production deal. Bunker prices may have short spikes while any firm direction is still opened to question.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)
