• 2017 May 18 15:03

    Global bunker market: OPEC meeting is in focus

    The Bunker Review is contributed by Marine Bunker Exchange

    Global oil markets are still not stabilized. After a week of price shocks, with the expecta-tions that crude prices could be hitting the $40 per barrel mark soon, prices are up again. OPEC and Russia have agreed to extend the oil production cut deal until March 2018. The significant point here was the support for a nine-month extension rather than just an extension through the end of the year. The news immediately sent prices higher, although the rise was capped by yet another weekly build in the number of active drilling rigs in the U.S.

    MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) has increased slightly in the period of May. 11 – May. 18:

    380 HSFO - up from 286.14 to 296.36 USD/MT (+10.22)
    180 HSFO - up from 328.36 to 339.64 USD/MT (+11.28)
    MGO         - up from 503.14   to 507.21 USD/MT (+4.07)


    OPEC and Russia have openly discussed a potential nine-month extension of the produc-tion cut deal. The main reason for it is that the present cuts are bringing inventories down at a much slower rate than originally anticipated. As per some evaluations, even extending the cuts through December would only bring inventories down by just 722,000 bpd for a total reduction of about 120 million barrels. That is less than half of the 276 million barrel surplus that existed just in OECD countries at the end of the first quarter.

    Both: Saudi Arabia and Russia are sure that an extension through the first quarter of 2018 will do enough to decrease inventories, supporting fuel prices, but not boosting them so much that U.S. shale comes back even quicker than it already is. They will present their position at a meeting of OPEC and other nations that are part of the agreement on May 25 in Vienna.

    The OPEC/non-OPEC coalition is also trying to bring new countries into the deal, includ-ing Egypt and Turkmenistan. It is doubtful that some contributions from them – with a com-bined total output of 700,000 bpd – would significantly change the pace of adjustment, but their participation may add some psychological support to the market.

    At the same time OPEC boosted estimates for growth in rival supplies by 64 percent as the U.S. oil industry’s recovery accelerates. The forecast said production from outside the OPEC will increase by 950,000 barrels a day this year (up by about 370,000). The projection is four times higher than in November, when the group announced a production cut. The cartel also raised its outlook for U.S. production growth by 285,000 barrels a day to 820,000 a day. Non-OPEC nations pump about 60 percent of the world’s oil.

    So a nine-month extension could result in removal of around 1.8 million bpd from the market, making enough room to counter the expected 1 million bpd of additional oil from non-OPEC countries.

    Meanwhile, two OPEC members: Libya and Nigeria, which were exempt from reducing output because of internal problems, are boosting supplies again. Libya’s crude production has risen to more than 814,000 barrels a day as fields restart, the most since 2014. Nigeria’s 200,000 barrel-a-day Forcados oil pipeline is ready to export again after being shut down almost continuously since February 2016. It’s unclear whether the countries would still be exempted if the deal is prolonged.

    Iraq is another risk for OPEC cut deal. Through the first three months of the year, Iraq has made some cuts but has still not brought production down to its promised target (it signed on to cuts of 210,000 bpd). Meantime, there were comments from some high-ranking Iraqi officials that the country could ramp production up to 5 mb/d this year which would be well in excess of Iraq's promised limit of 4.35 mb/d.

    While OPEC is trying to balance the market, the price gains from its production cut deal added more confidence to the activity and spending plans of U.S. shale. U.S. production jumped to 9.3 million bpd as of end-April, with the EIA forecasting it to hit 10 million bpd in 2018. Now that prices have started going up again, chances are that the growth in U.S. production will continue and even intensify. A new Rystad Energy report said that even if prices fall to US$40, shale producers will continue growing production. There are plans of a combined capital expenditure of US$84 billion this year, an increase of 32 percent compared to last year. By comparison, the budget programs for international projects are seen up just 3 percent in 2017.

    And finally, OPEC made a statement that floating oil storage globally declined by a third in the first quarter of the year. The statement supports OPEC’s claims that the production cut has helped to relieve a glut. Earlier this month Reuters reported that there were 35 tankers with a combined capacity of 65 million barrels of crude staying in the Straits of Malacca in Malaysia – one of the main global oil shipment routes. However, as per other sources, the global supply had not dec lined. On the contrary, the figures suggested maritime supply, and more specifically OPEC supply, actually went up in the first quarter of the year, by as much as 700,000 bpd. The speculations around these figures may cap the potential rise of the fuel indexes.

    So for now there doesn’t seem to be a choice. It’s either to extend or to suffer oil back to the US$30s, which most OPEC members and Russia cannot afford. We expect global fuel market’s volatility to be continued until OPEC meeting. Bunker prices may demonstrate slight upward movement next week.



     

     

     

     

     

     

    * 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 26

18:26 Port of Gdansk sees record number of cruise ship calls this season
18:06 OCEASOFT’s Cobalt ML3 revolutionizes temperature monitoring for sensitive products during transport
17:54 Passenger Port of St. Petersburg welcomed 3 cruise ships last week
17:37 US Navy takes delivery of LCS 9 from Fincantieri and Lockheed Martin Corp.
17:19 Sovcomflot takes part in annual NEVA exhibition in St. Petersburg (photo)
17:01 Sub-Committee on Implementation of IMO Instruments is meeting for its fourth session
16:52 ICS Chairman’s message for IMO World Maritime Day: Shipping industry focused on serious CO2 emission reduction
16:47 India's Kandla Port renamed as Deendayal Port
16:36 Training for port security officials held in Mexico
16:12 IMS Group purchases OceanSaver assets
16:05 ClassNK announces R&D Roadmap
15:44 Rolls-Royce acquires technology for the electrically-assisted charging of MTU engines
15:29 Albwardy Damen announces Experience Day at its shipyard in Sharjah, UAE, on 28 September
15:25 China workshop discusses oil pollution response
15:06 Fuel oil prices are flat at the Far East ports of Russia (graph)
14:45 SCF Group seafarers commended at Vladivostok
14:24 Hapag-Lloyd recycles three container ships in an environmentally friendly manner
13:59 Warsaw will host Polish LNG Conference on 22-23 November 2017
13:36 OOCL adds Maher Terminal in port rotation, drops call to Colong, Panama on ECX1 service
13:10 RZD Holding arranged regular container transit between Europe and China via the Kaliningrad Region
12:46 MSC Belgium to attend Transport & Logistics fair in Antwerp
12:08 Teekay and Brookfield announce closing of strategic transaction
11:26 81,600dwt newbuilding vessel MV Sakizaya Power joined Wisdom Marine Lines fleet
11:11 RF Government set to ease customs formalities
11:08 Boskalis subsidiary VBMS signs Preferred Supplier Agreement for Triton Knoll OWF
10:48 Hydrotechnika Journal (Media Group PortNews) becomes an official information partner of RWTSTS
10:23 Serbian marines protect WFP merchant vessel Esbjerg
10:17 International Conference “Advanced port fleet - the basis of safety” gathered about 400 participants
10:08 ARC starts HHG Service to Italy
09:31 DPA reports record handling rate in 2016- 2017 in August
09:08 Scorpio Bulkers announces the acquisition of six dry bulk Ultramax vessels
08:13 Kelvin Hughes Australian integration partnership with AMS goes from strength to strength

2017 September 25

18:24 BV joins global industry alliance (GIA)
18:00 Patrol boat of Project 03160 built for RF Navy’s Baltic Fleet by Pella Shipyard completes sea part of state trials (photo)
17:37 Fincantieri delivers "Viking Sun" in Ancona
17:31 APM Terminals improves productivity, costs and flexibility with a win-win labor strategy
17:12 Intermodal terminal operations to be moved to Hisingen in December
16:47 FueLNG completes first commercial LNG bunkering in Singapore
16:32 General Dynamics secures $5bn U.S. Navy’s contract for ballistic-missile submarine
16:20 Murmansk Region Governor: energy infrastructure for MTH project to be completed by the end of 2019
15:41 Large ASW ship Vice-Admiral Kulakov provided security of Indian tanker’s passage through Gulf of Aden
15:13 Russian and Chinese military seamen practiced rescuing a ship in distress
14:50 Krylov Centre at the 13th International Exhibition & Conference RAO/CIS Offshore 2017
14:25 RF Navy’s ASW ships Onega and Naryan-Mar repelled simulated enemy’s air attack in the White Sea
14:01 Average wholesale prices for М-100 HFO up to RUB 12,711 in RF spot market
13:38 Zelenodolsk shipyard launches high-speed passenger ship of Project А145Е for UAE customer
13:04 Damen Shipyards Yichang launches first DT8000 SD, Damen Tanker 8000 Shallow Draft (photo)
12:32 Transocean announces retirement of six floaters
11:30 Fincantieri to build a next-generation ship for Cunard
11:03 The 28th meeting of the Tokyo MOU Port State Control Committee held in Vladivostok
11:00 ABS approves GMS self-elevating drilling unit design
10:29 Asia’s Maritime Technology Cooperation Centre up and running
10:27 Golden Ocean sells six Ultramax vessels
09:55 Cargo transportation by inland water ways of Russia down to 74.5 mln t in 8M’17
09:33 Brent Crude futures price down 0.21% to $56.3, Light Sweet Crude – down 0.28% to $50.52
09:16 Baltic Dry Index up to 1,502 points

2017 September 22

18:04 ESL Shipping's second LNG-fueled dry cargo vessel was named Haaga
17:47 Black Sea Fleet frigate Admiral Essen returned to Sevastopol
17:22 Port of Gdansk throughput up 4% to 25.5 mln t in Jan-Aug'17
16:58 Pella Shipyard (Leningrad Region) launched the harbor tugboat of Project 04690 (graphics)