• 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 May 28

08:59 Carnival Corporation to offer Alipay payment services onboard its fleet in Asia
05:57 Majestic Princess begins journey to China along the Silk Road sea route

2017 May 27

15:56 US Commission meets to discuss regulatory reform initiative & ocean carrier alliances
15:54 Seaspan accepts delivery of 14000 TEU SAVER Containership
07:48 DNV GL releases the new issue of MARITIME IMPACT magazine
07:45 Yilport starts investments in Ecuador’s Puerto Bolívar container terminal by installing two mobile harbor cranes

2017 May 26

18:07 OOCL enhances Intra-Asia service network by launching the ITS and VJS products
17:48 Biofouling was on the agenda at the latest in a series of IMO workshops
17:40 Wärtsilä’s hybrid system increases offshore supply vessel’s engine efficiency
17:24 IMO treaty supporting free flow of international maritime traffic is the subject of a regional seminar in Bangkok
16:52 JSC “Latvijas kuģniecība” posts net profit of USD 0.16 mln in Q1 2017
16:00 Shanghai Maritime Court representatives visit WMU
15:33 Europort Masterclasses shape industry thinking
15:09 Press-conference devoted to new cruise opportunities held onboard Princess Anastasia in St. Petersburg
14:45 Passenger Port of St. Petersburg hosted business meeting with Royal Caribbean Cruises and Arctur Travel
14:11 Passenger Port of St. Petersburg BoD held regular meeting on 24 May 2017
13:36 Hydrographic boat of Project К 1100 Meridian launched at the port of Kaliningrad (photo)
12:58 MOL launches R & D on autonomous ocean transport system
12:27 Pacific Regional Search and Rescue workshop held in Auckland, New Zealand on 22-26 May
12:10 London will host 8th Maritime Salvage & Casualty Response on 13-14 September 2017
11:39 IMO Secretary-General Kitack Lim spoke at the European Maritime Safety Agency (EMSA) in Lisbon
11:04 Diana Shipping announces time charter contracts for m/v Astarte with Glencore and m/v Erato with Phaethon
10:43 Training with all-arms forces of RF Navy's Northern Fleet started in the Barents Sea
10:25 Brent Crude futures price down 0.60% to $51.13, Light Sweet Crude – down 0.78% to $48.52
10:06 Jacksonville harbor deepening awarded $17.5M in federal funding for construction
09:48 Indicative bunker prices continue going up at the port of Saint-Petersburg, Russia (graph)
09:31 Navios Maritime Partners acquires five 4,250 TEU container vessels from Rickmers Maritime
09:14 Baltic Dry Index down to 918 points
08:06 BPA attracts SM Line to bolster cargo volume at Busan Port
06:26 NYK bulk carrier rescues fishermen off the coast of Peru

2017 May 25

18:30 Rostov Port Group partners with Donskoy Krepezh to acquire 80% of interest in construction company PROSPEKT
17:06 Panama Canal sets new record for largest-capacity vessel
16:17 BMT signs submarine framework agreement in Norway
15:02 RF Navy's Pacific Ocean Fleet detachment finished its visit to Jakarta
14:30 RF Ministry of Agriculture approves Strategy of sea terminals servicing fishing ships
14:15 Scorpio Tankers to merge with Navig8 Product Tankers
14:14 Norwegian Bliss' keel laying ceremony held at MEYER WERFT in Germany
13:37 NSAG joint venture wins contract to supply Integrated Platform Management Systems
13:21 Liability cover for Antarctic waters
12:40 New service for project cargo to the Arctic Ocean
12:39 DryShips announces delivery of its newbuilding Suezmax tanker
12:13 Cruise ship Costa NeoRomantica will make her maiden call at port Vladivostok on May 30 (photo)
11:39 Сore functions of London Protocol to participants at workshop in Accra, Ghana
10:55 Arctia strengthens its customer relations team
10:17 Gazprom Neft reports record net income for Q1 2017
09:46 Brent Crude futures price up 0.80% to $54.39, Light Sweet Crude – up 0.76% to $51.75
09:28 Baltic Dry Index down to 934 points
09:12 Keppel secures contract to build LNG carriers worth over S$100m
08:39 Nor Lines and Rolls-Royce sign landmark Power-by-the-hour service agreement
08:14 Wärtsilä propellers and shaft generator system chosen for two new RoRo vessels

2017 May 24

18:01 Finnish Business Community took over AEC Chairmanship at AEC Annual Meeting
17:55 Port of Hamburg’s total throughput up by 1.7 percent at 35.4 million tons in the first quarter of 2017
17:44 RAO/CIS Offshore to be held on 12 - 15 September 2017 in Saint-Petersburg, Russia
17:41 Piraeus Port Authority investment plans tabled at 4th Posidonia Sea Tourism Forum
17:37 Greece is open for cruise industry business says Greek minister at Posidonia Sea Tourism Forum
17:00 Hapag-Lloyd and UASC complete merger
16:26 Throughput of NCSP Group up 1.4% to 50.6 mln t in 4M’17
16:02 MOL starts initiative to develop enhanced operational support tool
15:37 VSM reports record number of merchant vessel orders received by German yards
15:02 Australia develops new blockchain security architecture TBSx3