• 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 January 24

10:29 15 vessels escorted by icebreakers in eastern part of Gulf of Finland during 24 hours on January 23-24
10:04 Port of Gothenburg container volumes up by 17 per cent in 2018
10:00 Brent Crude futures price down 0.36% to $60.92, Light Sweet Crude – down 0.38% to $52.43
09:41 Wilhelmsen Ship Management selected as the manager for Pardus Energy’s FSRU
09:37 Matthieu de Tugny takes helm at BV's Marine & Offshore division
09:18 Baltic Dry Index is down to 982 points

2019 January 23

18:27 Planning for 2020 IMO's sulphur cap has already started
18:13 Eagle Bulk receives commitment for a new credit facility totaling $208 million
18:02 Port of Gdansk (Poland) throughput in 2018 totaled 49.03 million tonnes, up 20.7% Y-o-Y
17:40 Andrei Malyarov elected as Chairman of Severnaya Verf shipyard's BoD
17:19 RWE files acquisition of renewables businesses of E.ON and innogy with European Commission
17:03 The Board of Directors of Fincantieri appoints a second General Manager
16:51 Ice restrictions at the port of Arkhangelsk come into effect on February 15
16:37 USCG interdicts smuggling boat with convicted criminals aboard off Florida
16:24 Regulatory issues related to operation of seaport infrastructure facilities to be discussed at the 2nd HES and Dredging Congress
16:08 First discharge of LPG from Ichthys LNG Project in Japan carried by “K” LINE’s VLGC “GRACE RIVER”
16:03 CMA CGM to launch its Med Pendulum Service (MPS)
15:46 Ice restrictions at the port of Vyborg (Leningrad Region) come into effect on February 6
15:33 Nakilat – Keppel welcomes first FSRU at the Erhama Bin Jaber Al Jalahma Shipyard
15:28 MHI Vestas achieves final turbine installation at Horns Reef 3
15:18 Rolls-Royce completes €57 million upgrade of Rauma thruster facility
15:03 NYK announces delivery of new coal carrier for Hokkaido Electric Power
14:33 Port of Oakland reports more ships than ever plugging into grid
14:20 Throughput of Port Vysotsky up 10.7% to 7.89 million tonnes in 2018
14:03 Kiel welcomes the TUI Cruises newbuilding
13:45 Admiralteiskie Verfi shipyard lays down large freezing trawler of Project СТ-192
13:27 Coast Guard’s only heavy icebreaker arrives at Antarctica
13:02 Rotterdam as a circular hub for the raw materials transition
12:58 The Russian Federation accedes to passenger compensation treaty
12:51 New initiatives to strengthen Singapore as a global maritime hub announced
12:37 SCHOTTEL presents new mechanical hybrid propulsion solution
12:04 Port of Riga cooperates with Balarusian forest industry to further increase its timber cargo volumes
11:42 15 vessels escorted by icebreakers in eastern part of Gulf of Finland during 24 hours on January 22-23
11:16 OSG exercises option for second 204,000 barrel barge at Gunderson Marine
10:55 Maritime Security & Offshore Patrol Week 2019 to be held for the first time ever in Dubai, UAE by IQPC Middle East
10:37 N-KOM welcomes first FSRU at the Erhama Bin Jaber Al Jalahma Shipyard
10:20 Responsibilities for implementation of state programmes of the Russian Federation divided between Deputy Prime Ministers
10:06 Brent Crude futures price up 0.03% to $61.52, Light Sweet Crude – up 0.02% to $53.03
09:48 Aderco: Planning for 2020 has already started
09:43 Vympel Shipyard lays down yet another hydrographic vessel / buoy tender of Project 19910 for RF Navy
09:19 Baltic Dry Index is down to 1,036 points

2019 January 22

18:25 Elengy prepares the sale of access capacities to the Fos Tonkin LNG terminal for the period 2021-2030
18:05 Monjasa steps up as the 2nd largest local bunker supplier in the Panama Canal in 2018
17:54 Relampago practices skills with UAE Navy ship
17:35 CalMac takes over the tiller at Argyll Ferries
17:05 NYK gets the highest-rated ‘A’ for Climate Change by CDP Survey
16:42 RF Government proposed candidates to Novorossiysk Commercial Sea Port's BoD
16:23 Pilbara Ports Authority achieves a new record tonnage on a single tide at the Port of Port Hedland
15:56 Port of Rotterdam Authority and Rotterdam Port Promotion Council renew collaboration
15:46 ICTSI Subic hits milestone 200,000th TEU move
15:44 Growth seen in several sectors at ABP South Wales
15:28 KONTUR SPb ERT unit’s drills get thumbs up from Rosmorrechflot’s certification commission
15:22 First ship viaVerbrugge Terminals’ new permanent shipping line with South America docks in North Sea Port
15:00 Meyer Turku delivers New Mein Schiff 2 to TUI Cruises in Kiel
14:41 Jotun looks into expansion of ship coatings production in Russia
14:32 HHLA completes expansion of the container rail terminal Burchardkai
14:19 Bunker prices are flat at the Far East ports of Russia (graph)
14:02 North Queensland Bulk Ports Corporation opens the Port of Mackay for new bulk material trades
13:32 China Navigation to acquire the bulk shipping activities of Hamburg Süd
13:22 14 crewmembers of gas carriers which caught fire in the Kerch Strait confirmed dead, five missing