• 2018 December 13 14:44

    Uncertainty lingers in fuel markets despite OPEC cuts

    The Bunker Review is contributed by Marine Bunker Exchange

    World oil indexes rose steeply on December 7 as OPEC+ agreed to reduce output to drain global fuel inventories and support the market. However, later on the decision to cut 800,000 bpd (OPEC) plus another 400,000 bpd (non-OPEC) has failed to have any significant effect on international prices, with the improvement possibly a lot more modest than expected by OPEC.

    MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs), also lost a chance to resume upward evolution and finally demonstrated firm downward trend in the period of Dec.06 – Dec.13:
        
    380 HSFO - down from 393.36 to 375.07 USD/MT (-18.29)
    180 HSFO - down from 443.21 to 424.07 USD/MT (-19.14)
    MGO         - down from 610.79 to 605.29 USD/MT (-5.50)

    OPEC+ agreed that the 1.2 million bpd cut will begin in January, with a review scheduled for April. OPEC will take 800,000 bpd of the total, and non-OPEC countries will take on the other 400,000 bpd. The baseline used to measure the cuts is October production levels. The cut is larger than some forecasts had expected. There won’t be country-specific quotas. However, Iran, Libya, and Venezuela have all received some kind of special dispensation.  The official line is that Iran and Venezuela were both exempted because they are still under U.S. sanctions: Iran over the nuclear deal and Venezuela over the destruction of democracy and human rights violations. Libya has been given a pass due to its chronic production outages.

    Russia, as expected, played a pivotal role in the deal, and its willingness to go along with a larger-than-expected cut was the key factor in the oil production’s cut. However, Russia is planning to reduce its oil production only by 50,000 bpd to 60,000 bpd in January and it may take it may take months to reach the 228,000-bpd (Russian’s share) production reduction. Anyway, the deal can be called a success for two reasons: it takes 1.2 million bpd off of the market beginning in January, which will go a long way to erasing the surplus. And it also removes a great deal of uncertainty about what to expect in the near future: it’s reasonable to assume that any surplus or deficit won’t be so large as to lead to dramatic price swings, at least in the short run.

    Besides, OPEC and its non-OPEC partners are set to officially sign a cooperation agreement in March of next year in Saudi Arabia and will seek to align OPEC with non-OPEC oil producers, most importantly Russia, on matters likely to include achieving market balance—specifically production quotas. The term market balance is the new phrase OPEC is using instead of referencing specific oil prices, after OPEC in October steered its members away from any words that may put it at odds with proposed U.S. legislation called the NOPEC Act.

    The question now is how the U.S. government will react. President Trump has repeatedly demanded low oil prices. OPEC would not be all that sensitive to Trump’s demands, but Saudi Arabia is under pressure after the international outrage over the murder of Jamal Khashoggi.

    Soon after the meeting in Vienna it was reported that Saudi Arabia could reduce its daily crude oil shipments abroad by as much as 1 million barrels next month.  The move would be motivated by weaker demand due to seasonal patterns in consumption and Saudi Arabia’s commitment to the new production cut. In total, Riyadh will likely export an average 7.3 million bpd in January. This compares with less than 8 million bpd this month. Saudi Arabia will once again carry the greatest burden of the OPEC-wide cuts, cutting 500,000 bpd from its December production levels, which stand at an average 10.7 million bpd, the same as in October.

    World Bank warned that after several months of oil price rises and then a sharp reversal over the last few weeks, world oil markets are in for more heightened volatility next year because of scarce spare production capacity among OPEC members. The U.S. Energy Information Administration estimates OPEC’s spare capacity at a little over 1 million bpd as of the fourth quarter of this year. That’s down from 2.1 million bpd at the end of 2017, but with Venezuela’s production in free fall and with Iran pumping less because of the U.S. sanctions, the total spare capacity of the group has declined substantially.

    Iran hopes that the special purpose vehicle that would allow the European Union (EU) to continue buying Iranian oil amid the U.S. sanctions will become operational by the end of this year. The EU has been struggling to set up the vehicle for months, because no EU member was will-ing to host it for fear of angering the United States. However, last week, Germany and France were said to be joining forces to host the special vehicle to keep trade with Iran. In another energy-currency related development, the European Commission (EC) is calling for a wider use of the euro currency in energy-related transactions.

    China over the weekend reported an annualized 8.5 percent jump in November crude imports, to 10.43 million bpd, marking the first time China imported more than 10 million bpd. That leaves the world's second-biggest economy on track to set yet another annual import record. Strong demand is being driven by Chinese purchases for strategic reserves, but also by new refineries, triggering excess supply of fuels, filling up storage tanks and eroding refinery profits across Asia.

    Meantime, U.S. said new tariffs will be imposed unless U.S.-China trade talks wrap up successfully by March 1. Global markets are nervous about a collision between the world's two largest economic powers over China's huge trade surplus with the United States and U.S. claims that China is stealing intellectual property and technology. The arrest of a top executive at Chi-na's Huawei Technologies Co Ltd has roiled global markets amid fears that it could further ex-acerbate the China-U.S. trade conflict, although US officials insisted the trade talks with China would not be derailed by the arrest.

    U.S. drillers last week cut oil rigs by the most in over two years, after adding rigs in recent weeks. Energy companies cut 10 oil rigs in the week to Dec. 7, the biggest weekly decline since May 2016, bringing the total count down to 877. As per forecasts, drilling activity could fall 10 to 20 percent in the U.S. next year if oil prices stay low. Many analysts see $50 per barrel as a key threshold.

    A growing number of major corporations are announcing plans to curtail carbon emissions. Maersk, the world’s largest container shipping company, said that it would slash emissions to zero by 2050, which would require coming up with emissions-free engine technologies by 2030. To do so they have to find a different type of fuel (instead of fossil fuels) or a different way to power the vessels. Meantime, for the first time in five years, rich countries are on track to see their CO2 emissions rise this year (according to the IEA). Higher oil and gas consumption offset declining coal use. Rising emissions come even as scientists warn that the worst effects of climate change are coming faster than previously predicted.

    Market seems to be beginning to worry the supply cut announced by OPEC+ would not be enough to compensate projections for slowing demand growth as pressure increases on emerging economies. We expect bunker prices may demonstrate irregular fluctuations next week.



     

     

     

     

     

     

    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)




2019 May 23

09:39 NOVATEK signed MoU with Ninh Thuan Province in Vietnam
09:20 Baltic Dry Index is up to 1,059 points
09:10 MABUX: Bunker market this morning, May 23
09:08 Royal IHC signs contract with Cameroon’s Port Authority of Douala
08:25 Sempra LNG and Aramco Services Company sign heads of agreement for Port Arthur LNG

2019 May 22

18:05 CMA CGM to resume the Bijagos Shuttle service
17:50 RF Government approves rules for collecting port investment dues from ship owners in Russian seaports
17:38 The University of Calabria and Finсantieri ink training agreement
17:05 CMA CGM PAD-Service delivers first Zespri kiwifruits to the port of Zeebrugge
16:44 CMA CGM announces GRR from Asia to South Africa
16:05 Jinling Shipyard in China orders 4 × MAN 51/60DF engines for Baltic RoPax newbuilding
15:31 Throughput of port Helsinki (Finland) in Jan-Apr’19 fell by 3.5% to 3.89 million tonnes (table)
15:09 Rob Grool appointed new CEO at ZEABORN Ship Management
14:45 CMA CGM to upgrade its EUROSAL XL service between North Europe, the Caribbean and South America West Coast
14:29 InterMoor wins 2 mooring installation contracts from COOEC
14:04 Comprehensive drill held at CPC Marine Terminal
13:28 Astrakhan branch of Ship Repair Center ‘Zvezdochka’ launches rescue towboat SB-427 for RF Defence Ministry
13:09 DOF, KONGSBERG, SINTEF Ocean and NORCE join forces to deliver ‘Intelligent Efficiency’ for offshore operations
12:52 Gazprom Neft develops partnerships with leading cruise operators
12:27 New standard Cyber Security Clause agreed by BIMCO’s Documentary Committee
12:09 PETRONAS floating LNG Satu achieves its first LNG drop post relocation
11:44 ESPS Navarra provides maritime security training in Seychelles
11:09 Hamburg Süd christens “Polar Ecuador” in Antwerp
10:51 Throughput of port Vyborg in Jan-Apr’2019 fell by 34% Y-o-Y to 275,500 tonnes
10:30 Throughput of port Kaliningrad in Jan-Apr’2019 fell by 16% Y-o-Y to 3.94 million tonnes
10:08 Austal partners with Fred. Olsen on next generation MARINELINK Smart technology rollout
09:53 Baltic Dry Index is up to 1,049 points
09:37 Bunker market at the port of Saint-Petersburg, Russia sees mixed price movements (graph)
09:37 WesCom Signal and Rescue showcases its commitment to safety training at Nor-Shipping 2019
09:20 Brent Crude futures price is down 0.62% to $71.73, Light Sweet Crude – down 0.82% to $62.61
09:08 West Africa Container Terminal makes further investment in equipment
08:53 MABUX: Bunker market this morning, May 22
08:08 Ocean Yield takes delivery of two modern Ultramax dry bulk vessels with 11-year charters

2019 May 21

18:33 Maersk to charter 13 new feeder ships powered by conventional fuel from 2021
18:25 Long-term Wärtsilä service agreements support optimal performance for LNG Carriers
18:04 GTT notified by Samsung Heavy Industries for the tank design of a new LNG carrier for Nisshin Shipping
17:48 Throughput of port Vysotsk in Jan-Apr'2019 climbed by 7% Y-o-Y to 6.65 million tonnes
17:25 Bunker prices still show no considerable changes at the Far East ports of Russia (graph)
17:19 ABB to enable world’s first hydrogen-powered river vessel
17:04 Port of Zeebrugge sets new record with maiden call of OOCL United Kingdom
16:42 Sredne-Nevsky Shipyard lays down Pioner-M, research ship of Project 25700
16:19 USCG host workshop to discuss safe operation of commercial passenger vessels
16:04 IMO issues additional guidance for sulphur 2020 implementation
15:33 UN agency pushes forward on shipping emissions reduction
15:19 Nevsky Shipyard delivers Nevsky Shipyard second vessel in a series of five dry cargo vessel of project RSD59
15:03 Panama Canal announces enhancements to its Green Connection Environmental Recognition Program
14:27 DSD sells its ferry and expressboat company Norled
14:06 Throughput of port Primorsk in Jan-Apr’2019 grew by 5% Y-o-Y to 18.95 million tonnes
14:03 MOL and Weathernews release of FOCUS Project part I 'Fleet Viewer' application
13:44 Port of Hamburg posts Q1 2019 results
13:41 Czech and Polish officials visit the Port of Gdansk to promote trade between the countries
13:14 Multipurpose Reloading Complex boosts investments in environment protection 15 times to RUB 8 million
12:49 Port of Ust-Luga handled 35.55 million tonnes in 4M’19, up 8% Y-o-Y
12:25 Throughput of Port St. Petersburg in Jan-Apr'2019 grew by 2% Y-o-Y to 19.67 million tonnes
12:02 IAPH Port Planning and Development Committee published a report “Autonomous Vehicles’ Impact on Port Infrastructure Requirements ”
11:28 Port of Kiel welcomes “Aidaprima” for its maiden call
11:00 Container Terminal Saint-Petersburg allocated RUB 2.9 million for implementation of its social programme in 1Q’2019
10:11 Swan Hunter completes modular offshore grid cable storage load-in
09:56 Brent Crude futures price is up 0.31% to $72.19, Light Sweet Crude – up 0.43% to $63.48
09:27 Debmarine Namibia to invest in world’s first custom-built diamond recovery vessel