• 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 April 25

13:02 APL enhances China-Indonesia trade lane with new China Southeast Asia Service 6
12:37 Ventis and OSM form JV for “K” Line LNG vessel crewing
12:06 Vostochny Port participated in 15th specialized international conference “Coaltrans China”
11:42 Bunker prices are still high at the Far East ports of Russia (graph)
11:18 Ukraine’s water transport carried 2,000 passengers in Jan-March'17, down 43.6%, Y-o-Y
10:59 First shiploader delivered to Vostochny Port’s Phase 3 (photo)
10:24 Brent Crude futures price up 0.44% to $55.37, Light Sweet Crude – up 0.43% to $49.44
10:05 Zelenodolsk Plant Named After M. Gorky lays down tenth small-size missile ship of Project 21631 for RF Navy (photo)
09:33 Port of Gdansk throughput up 0.7% to 8.86 mln t in Jan-March'17
09:16 Baltic Dry Index down to 1,170 points

2017 April 24

18:07 DOF Subsea purchased shares in Canadian Subsea Shipping Company AS
17:49 Cargo transportation by Ukraine’s water transport down 9.3% to 0.9 mln t in QI’2017
17:30 Shearwater GeoServices receives TGS Irish Atlantic Margin award
17:02 DOF awarded extension with Statoil for the vessel Skandi Vega
16:36 DHT Holdings announces delivery of two VLCCs from BW Group
16:23 Rosmorport prepares seaport of Petropavlovsk-Kamchatskiy for cruise navigation season of 2017
15:59 Icebreaker assistance services will not be provided at port Primorsk (Leningrad Region) from April 25
15:31 Average wholesale prices for М-100 HFO up to RUB 9,649 in RF spot market
15:03 ICTSI services inaugural call of Evergreen’s Kor-Twn-Phl route in Subic
14:50 IMO in China to share policies and regulations update
14:27 Big Port St. Petersburg stops providing icebreaker assistance services from April 25
14:03 HELCOM Pressure Group meeting focuses on reducing the input of nutrients into the Baltic Sea
13:41 Belgium accedes to oil pollution response treaty
13:20 Yaroslavsky Shipbuilding Plant launches fourth boom-laying boat of Project А-40–2Б-ЯР (photo)
13:02 Ocean Alliance prepares to call at Wilhelmshaven
12:42 Rail Baltica Global CBA confirms the project's financial and economical viability
12:19 Kimmo Rahkamo appointed CEO of Skangas
12:01 Nakilat concludes first quarter with net profit of QR 191 million
11:26 Pacific Fleet ship detachment finished its visit to the Philippines
11:23 Hyundai Samho Heavy Industries attracts 300 billion won investment via pre-IPO
11:04 TransContainer’s net income increased more than 2.3 times to RUB 1,237 million
10:40 Yantar Shipyard laid down rescue support ship of Project 23700, Voyevoda, for RF Ministry of Industry and Trade (photo)
10:02 Brent Crude futures price up 0.72% to $52.82, Light Sweet Crude – up 0.64% to $49.95
09:39 ABP South Wales offers bespoke solutions to Hinkley Point C suppliers
09:15 Baltic Dry Index down to 1,195 points

2017 April 23

08:23 Freeport of Riga CEO position to be announced this week
08:20 MPI Offshore and Vroon Offshore Services collaborate to provide offshore services for the Rampion Offshore Wind Farm
08:17 Christening of EasyMax vessel Egbert Wagenborg takes place
08:16 HRADF announces three improved binding financial offers for Thessaloniki Port Authority SA
08:11 Ocean Rig announces extension of Drill Rigs Holdings early consent deadline

2017 April 22

08:25 Norway is first to ratify 2010 compensation regime for Hazardous and Noxious Cargoes
08:03 Polarcus Amani delivered to Sovcomflot
08:01 Concordia Maritime charters two ECO MR tankers
07:59 DEME acquires new dredging contracts in Germany, France, UK and Spain
07:54 Two Damen companies to combine their specific skill sets
07:49 Ireland’s port traffic remains strong in 2016 despite challenging trading environment

2017 April 21

18:01 President of the Philippines visited RF Navy’s Varyag missile cruiser in the port of Manila
17:40 Shipbuilding cluster to be created in the Astrakhan Region
17:15 Bill on transit cargo transportation supported by RF Government with some comments and proposals
16:52 Commander of Varyag cruiser of RF Navy's Pacific Fleet had a meeting with Philippine Navy Commander
16:31 Gates on the Upper Volga can be opened ahead of schedule as requested by ship owners – Rosmorrechflot
16:06 Active search of crewmembers of dry cargo ship Geroi Arsenala is over in the Black Sea
15:48 Superficial structure of the Ice-Resistant Platform-2 escorted along the Volga-Caspian Marine Shipping Canal
15:24 CMA CGM announces GRI from Asia to Panama, the Caribbean and Cuba on PEX2 service
15:09 World's bunker market still in waiting mood, expert says
14:55 Indicative bunker prices are flat at the port of Saint-Petersburg, Russia (graph)
14:23 CMA CGM announces FAK rates from Asia to North Africa trades
14:02 Navios Maritime Partners agrees to acquire 14-vessel container fleet from Rickmers Maritime
13:41 Moscow will host Midstream & Downstream Russia & CIS on 22-23 June, 2017
13:23 Siem Offshore announces charter contracts