• 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 March 21

13:24 Andrei Chibis appointed Acting Governor of Murmansk Region
13:17 Coast Guard continues to break ice on Penobscot River to start on the Kennebec River
12:00 Steel cut for first short-sea LNG bunker vessel for Eesti Gaas at Damen Yichang Shipyard, China
11:39 15 vessels escorted by icebreakers in eastern part of Gulf of Finland during 24 hours on March 20-21
11:13 Bunker prices go down at the Far East ports of Russia (graph)
10:50 Doha to host Ports & Maritime Evolution, Rail & Logistics Evolution, Road & Logistics Evolution Qatar Assembly & Expo in September’19
10:27 Brent Crude futures price is up 0.16% to $68.61, Light Sweet Crude – up 0.02% to $60.24
10:08 MAN receives an order for two-stroke engines from Eastern Pacific Shipping
10:05 MABUX: Bunker Market this morning March, 21
09:59 2018 revenues of FSUE Rosmorport grew by 7% Y-o-Y to over RUB 26 billion
09:22 Baltic Dry Index is down to 709 points
09:08 CMA CGM announces FAK rates from ISC to North Europe and the Mediterranean
09:00 PSA, PFR and IFM investors partner to jointly acquire the deepwater container terminal Gdańsk from Macquarie infrastructure and Real Assets, MTAA SUPER, AustralianSuper and Statewide Super
08:36 Port Canaveral starts construction of new Cruise Terminal 3 complex
07:58 SeaKing Electrical completes DFDS ferry upgrades in France

2019 March 20

18:00 Insight Into Contemporary Seafaring workshop held at Azerbaijan State Maritime Academy
17:43 Damen Cruise inks first contract with SeaDream Yacht Club
17:34 Wärtsilä prepares solutions for new state-of-the-art Wasaline ferry
17:34 Fire on Costa Smeralda under construction at Meyer Turku Shipyard not to affect building schedule
17:08 NOVATEK BoD recommends payment of RR 16.81 per ordinary share as 2018 dividend
16:46 Ukrainian seaports increased cargo handling by 2.5 million tons in January-February
16:22 ABP’s Hull Dry Bulks Terminal marks milestone handling biggest shipment
16:03 IMSSEA hosted “Maritime training and research activities” workshop
15:40 EU NAVFOR supports Somali / Ugandan maritime leadership training exercise course
15:21 Port of Long Beach Survey Director named
14:59 Finland’s Ministry of Transport and Communications appoints steering group to support reform of Act on Transport of Dangerous Goods
14:35 11 vessels escorted by icebreakers in eastern part of Gulf of Finland during 24 hours on March 19-20
14:12 Nauticor and Destination Gotland start LNG bunkering in the port of Visby for MS “Visborg” with the world’s largest LNG bunker supply vessel “Kairos”
13:57 DNV GL has joined RAO/CIS Offshore 2019 as Sponsor of a conference session
13:32 TechnipFMC awarded subsea contract for the Equinor Johan Sverdrup Phase 2 development
13:11 BC Ferries reveals 25-year vision for Swartz Bay Terminal
12:49 RF Government approves implementation plan for construction of Kamchatka LNG terminal
12:30 Havyard delivers the third battery-run ferry for the Hareid–Sulesund route to Fjord1
12:04 A.P. Møller - Mærsk A/S announces the completion of the sale of ordinary shares in Total S.A.
11:48 Draft law on amendments to crab harvest quota distribution submitted by RF Government to State Duma
11:30 Brexit: Port of Rotterdam starts leafleting campaign at ferry-terminals
11:03 PD Ports welcomes Offshore Wind Sector Deal
10:44 Brent Crude futures price is up 0.20% to $67.81, Light Sweet Crude – up 0.04% to $59.33
10:26 NYK signs Japan’s first ESG management support loan
10:10 Bunker prices go down at the port of Saint-Petersburg, Russia (graph)
09:47 AS Tallink Grupp extends vessel charter agreement
09:22 Baltic Dry Index is down to 712 points
09:08 MABUX: Bunker market this morning, Mar.20.

2019 March 19

18:25 Navigation support tool receives 2018 Hydrographic Technology Encouragement Award
18:05 NYK holds conferences to improve the safety of its dry bulk fleet
17:36 Abu Dhabi Ports collects over 120 tons of floating sea debris
17:05 JAXPORT sets record with largest container ship to call Jacksonville
16:35 NYK introduces its market analysis initiatives using AI and big data
16:10 BigLift Shipping and Chung Yang Shipping cooperate in heavy transport
15:53 BW Group purchases a majority stake in Epic Gas from key shareholders and launches unconditional tender offer
15:23 Bunker market sees mixed price movements at the Far East ports of Russia (graph)
15:12 Royal IHC to design and deliver dredge installations for Van Oord
15:02 CMA CGM updates THC in Lithuania ports
14:31 Wight at the forefront of environmental stewardship – Hybrid Explorer Vessel
14:02 Maersk has announced FAK rates from Far East Asia to Mediterranean
13:31 GC Rieber Shipping: Shearwater GeoServices awarded acquisition and processing contract in Turkey
13:01 PIL starts new Middle East service – China Straits Gulf
12:41 V.Ships Leisure teams up with Mystic Cruises to provide crew services for the first expedition vessel, World Explorer
12:20 Global cruise industry meets at Posidonia Sea Tourism Forum 2019
12:01 Global Ship Lease agrees three-year charter with Hapag-Lloyd