• 2017 March 16 18:29

    MABUX: High level of uncertainty prevails in the global bunker market

    The Bunker Review is contributed by Marine Bunker Exchange

    World fuel indexes dropped to their lowest levels since December during the week when the optimism surrounding the OPEC deal was just getting underway, but turned into upward correction recently as U.S. crude stockpiles unexpectedly decline last week. The market’s volatility surged the most since before the 2014 price crash started.
     
    MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) dropped in the period of Mar.09 – Mar.16:

    380 HSFO - down from 297.07 to 283.00 USD/MT  (-14,07)
    180 HSFO - down from 339.36 to 326.21 USD/MT  (-13,15)
    MGO         - down from 517.21  to 510.07 USD/MT  (-7,14)


    OPEC’s strategy to balance the oil market and bolster prices is facing its biggest test now. The producer group is aiming to revamp the market by eroding a crude inventory surplus that’s depressed prices since 2014. However, a deal to cut output had the side-effect of triggering a surge in U.S. production and a jump in the inventories to an all-time high. So at the moment the effect of the cuts looks much more short-lived than expected, and the fall in prices last week may indicate a kind of turning point.

    OPEC’s February report showed total output had fallen from 32.097 million bpd in January to 31.958 million bpd. Members which agreed to the production freeze and cuts were able to reduce production from 29.9 million to 29.7 million bpd.

    The International Energy Agency in turn estimated OPEC compliance with agreed output cuts at 98% in the first two months of the year, while Saudi compliance was at 135%. At the same time Russia and other non-OPEC producers' adherence to agreed cuts in the period was only at 37%. If current output levels maintained to June the IEA sees an implied market deficit of 500,000 b/d in the first half of 2017.

    Though OPEC has managed to achieve a high standard of compliance, it has mostly been due to the oversized cut by the largest member of the group—Saudi Arabia. However, last week Saudi Arabia let it leak that the kingdom has no intention of leading OPEC toward another cut in production to accommodate the growing volumes of oil from American shale deposits. It is quite possible that if the situation doesn’t improve in the next few weeks, it is unlikely that Saudi Arabia will continue to bear the responsibility alone.

    Besides, two OPEC members, Iran and Iraq, are weakening Saudi Arabia’s position by taking steps to boost production. According to the IEA, Iraq will increase its output to 5.4 million barrels per day by 2022, which is significantly higher than the earlier estimates of an increase to 4.6 million bpd by 2021. Similarly, Iran is expected to boost production by 400,000 bpd to reach 4.15 million bpd production in 2022.

    A kind of price supporting factor at the moment is Libya, where oil output has allegedly dropped by about 80,000 barrels a day since clashes broke out. Output is now around 620,000 barrels per day (far less than the 1.6 million barrels a day it produced before a 2011 uprising) as Es Sider, the country’s biggest oil port, and Ras Lanuf, its third-largest, remain closed. The country's state oil company - NOC - stated that the Company could declare state of force majeure if the current clashes continue for long.

    The fact that U.S. crude inventories are breaking records every week and oil prices have failed to post any gains so far in 2017 offers the evidence that the comeback in the U.S. oil industry is undermining the effectiveness of the OPEC deal. The U.S. shale oil drillers have used higher prices to add new rigs for the past eight weeks in a row. In the week to March 10, the total rig count increased to 617, compared to 386 a year ago. Though the rig count is still way below the peak of 1,609 reached in October 2014, the recovery from the six-year lows of 316 rigs in May 2016, has been outstanding.

    As a result, U.S. crude oil production, which had dropped from the highs of 9,600,000 bpd in June 2015, to a low of 8,428,000 bpd in July, 2016 is on the rise once again. In the week ending March 10, 2017, U.S. crude output rose for a fourth week, advancing 21,000 barrels a day to 9.11 million barrel a day, the highest level since February 2016. The worrying part for OPEC is that the EIA estimates that U.S. oil production will average 9,210,000 bpd this year.

    The U.S. Federal Reserve raised interest rates by 25 basis points to a range of 0.75 percent to 1.00 percent for the second time in three months. The decision was spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank's target: the arguments supporting global fuel prices as well.

    What happens next is uncertain. The much faster return of U.S. shale production and soft fuel prices have stimulated discussions within OPEC to extend the six-month deal until the end of the year. This week Kuwait became the first member to officially endorse a roll-over of the production cuts for another six months. Iraq and Angola have also suggested they would be open to an extension. It is obvious that fuel indexes will drop if OPEC says that they are not open to extending their production cuts. On the other hand, if prices remain low, OPEC only stands to lose market share to its competitors by continuing the production cuts.

    We do not expect that the situation on the bunker market will clear up next week too much. So bunker prices may stay rather volatile and continue to demonstrate irregular changes.



     

     

     

     

     

    * 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)




2017 September 19

18:06 Samskip expands shortsea services in Scotland
17:48 Arctic Economic Council welcomes three new members
17:25 IMO is attending 34th session of ASEAN to update the Maritime Transport Working Group on its latest activities
17:06 Turkish shipyard Cemre Marin Endüstri A.S orders 4 x MAN 8L21/31 variable speed GenSets
16:39 Marine Engineering Bureau: half of Russia’s towing fleet is renovated, bunkering fleet situation is worse
16:14 MSC announces a new service between South America’s east coast and the Mediterranean
16:04 Port of Southampton completes construction of sixth multi-story car park
15:52 Turkish landing ship Bayraktar arrived in Novorosiysk
15:27 USPA announces tender for procurement of dredging vessel
15:04 GY Marinas and P&O Marinas launch superyacht complex in Sète, France
14:39 Commissioning works commenced at KN‘s LNG reloading station
14:14 Port of Gdansk, Port of Gdynia and Baltic Gateway attended Seatrade Europe in Hamburg
14:03 Wärtsilä Nacos Platinum bridge systems selected for two new mega yachts
13:50 IMO issues Guidelines on maritime cyber risk management
13:28 IMO says search and rescue is an international responsibility
13:01 Ningbo Zhoushan Port volumes up 72% to 254,000 TEUs
12:43 NEVA 2017, 14th International Maritime Exhibition and Conference of Russia, opens in Saint-Petersburg (photo)
12:22 Fuel oil prices are still high at the Far East ports of Russia (graph)
12:04 Jan De Nul wins IADC Safety Award 2017
11:40 Secretary-General of IMO believes in a great future of Vostochny Port (photo)
11:04 CMA CGM signs strategic partnership with Infosys to accelerate the transformation of its Information System
10:45 Central Design Bureau Iceberg developed basic design of new 40-MW icebreaker
10:37 GTT receives an order from Hyundai Heavy Industries to design the LNG tanks of a new FSRU
10:23 Maritime Salvage & Casualty Response conference held in London on 13-14 September
10:01 IMarEST workshop on practical biofouling management strategies held in Melbourne, Australia
09:42 Brent Crude futures price up 0.03% to $55.52, Light Sweet Crude – up 0.12% to $50.41
09:19 Baltic Dry Index up to 1,385 points

2017 September 18

18:37 Konecranes launches Crane Advisor customer support tool globally
18:07 Diana Shipping announces time charter contract for m/v Maera
18:06 Rosmorport is looking into construction of LNG bunkering tanker of 3,000 to 5,000 cbm in capacity
17:50 Rosmorport is going to build ships running alternative fuels
17:45 Italian terminal operator Spinelli purchases another Konecranes Gottwald Mobile Harbor Crane
17:33 DP World to acquire Dubai Maritime City and Drydocks World
17:25 IMO Secretary-General Kitack Lim visited sailings ship Nadezhda in Vladivostok (photo)
17:04 Chinese warships arrived at Vladivostok
16:47 Rosmorport to start construction of shallow-draft icebreaker before the year end
16:16 Vladimir Putin endorsed a list of instructions following the meeting on development of transport infrastructure in Northwest Russia
15:20 The Azerbaijan Government announces extension of ACG PSA to 2049 with co-venturers
15:06 Craneship launches icebreaking tugboat of Project Т40105, Yuribey, built for Atomflot (photo)
14:49 Wärtsilä launches new eco-friendly tug designs
14:23 ZIM marks the 3 millionth container at DaChan Bay Terminals
14:23 Average wholesale prices for М-100 HFO up to RUB 12,481 in RF spot market
13:55 Kitack Lim says Port State Control in the Asia-Pacific region is a deliberate focus of the Tokyo MoU
12:42 Sovcomflot awarded by Russian Ministry of Energy for achievements in R&D and innovations
12:20 6 races held as part of Russian Yachting Championship for SB20 class (photo)
12:01 EU countries authorized their vessels to fish unlawfully in African waters - Oceana
11:39 SCF supports development of professional maritime education in Russia’s Far East
11:17 Russia seeks closer cooperation with IMO, Vitaly Klyuyev says
11:00 Hapag-Lloyd orders 7,700 new reefer containers
10:40 Brent Crude futures price up 0.14% to $55.70, Light Sweet Crude – up 0.10% to $50.49
10:21 IMO Secretary-General Kitack Lim is on a formal visit in Russia
10:09 South Korean terminal operator PDCT puts Konecranes Gottwald Model 4 Mobile Harbor Crane into operation
09:31 DP World not to renew operating contract in Indonesia
09:18 Baltic Dry Index up to 1,385 points

2017 September 17

17:25 India signs $76mln loan deal with Japan International Cooperation Limited to upgrade Alang-Sosiya shipyards
17:23 CMA CGM outperforms the market with very strong operating and financial results in Q2 2017
17:21 IMO issues new warning on hazards of carrying bauxite by ship
17:19 DFDS increases its volumes on the North Sea freight routes to and from the UK
17:16 General Dynamics NASSCO named ‘Greenest Shipyard of the Year’

2017 September 15

18:06 Kiel Port Prize goes to Jörn Grage of SCA Logistics