• 2019 January 10 15:26

    Expert says bunker prices may continue upward evolution in a near-term outlook

    The Bunker Review is contributed by Marine Bunker Exchange

    World oil indexes have turned into upward evolution during the week. The latest optimism centers on the ratcheting down of tensions between the U.S. and China, as well as a softer tone from the U.S. Federal Reserve. The threat of sanctions on Iran, global demand that continues to rise (despite increasing predictions of the demise of demand growth), and the deteriorating situation in Venezuela have also supported indexes.

    MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs), has demonstrated firm upward trend in the period of Jan.03 – Jan.10:
        
    380 HSFO - up from 333.79 to 373.71 USD/MT (+39.92)
    180 HSFO - up from 377.79 to 418.07 USD/MT (+40.28)
    MGO         - up from 556.93 to 592.79 USD/MT  (+35.86)


    Most major investment banks are forecasting a rebound in oil prices in 2019. Price forecasts vary widely, but most have both WTI and Brent above current spot prices. Bank of America Merrill Lync, for instance, sees WTI averaging $59 per barrel in 2019. Citi is at the bearish end with a $49 price target. For Brent, Barclays says the benchmark will average $72, and a half dozen other investment banks have price estimates within a few dollars of that price.

    At the moment there is a number of factors that may have impact on oil and fuel in 2019, on both the supply side and the demand side.

    The largest risk to supply comes from Iran. The U.S. waivers to eight countries buying Iranian oil will expire in May. Iran’s production fell by 380,000 bpd in November from a month earlier, dipping below the 3 million-barrel-per-day mark. There is still a lot of supply that could be disrupted, and if the U.S. succeeds, OPEC+ may find that it accomplished much of what it set out to do in Vienna by mid-year.

    In Libya the Sharara field, which has typically produced in excess of 300,000 bpd, was temporarily shut down last month. An inspection team reported the theft of key operational equipment, including transformers and cables from several wells. It is expected that the incident will reduce Sharara's output by approximately 8,500 barrels per day even after the main system restarts operations.

    Venezuela closed out the year near 1 million bpd of output, down more than 600,000 bpd since January 2018. The losses could slow at this point. Yet, it is hard to expect that production to rebound in the near- or even the medium-term. China and Russia are Venezuela’s biggest creditors, with China having provided US$50 billion in loans already. Venezuela has undertaken to repay these with crude oil supplies but has struggled to fulfill its commitments because of falling production and lack of financial means to reverse the fall. Crude oil deliveries under oil-for-money deals with Russia’s Rosneft have also been delayed.

    U.S. shale is expected to continue its growth. Shale producers have vastly exceeded 2018 forecasts, surpassing some initial estimates by around 1 million bpd. Nevertheless, the collapse of oil prices in the fourth quarter of 2018 led to a slowdown in the shale patch. The business activity index published by the Federal Reserve Bank of Dallas show that activity decelerated and production growth slowed. The data suggests that the U.S. shale industry was very responsive and sensitive to lower oil prices.

    OPEC+ cuts. The 1.2 million bpd cut should help eliminate much of the surplus, although perhaps not by the mid-year meeting in Vienna. OPEC+ might be forced into extending its production cuts. Besides, after suggesting multiple times earlier last year that OPEC and its non-OPEC partners – led by Russia – would formalize a permanent governance architecture to coordinate their efforts, the group is now downplaying such a development. Russia said that antitrust risks from the U.S. government make the idea too risky. There is still uncertainty on whether or not OPEC+ can complete the job of balancing the market.

    Despite of that, OPEC’s oil production fell in December to 32.68 million bpd, down about 460,000 bpd from a month earlier. It was the largest monthly decline in two years. The reductions came ahead of the OPEC+ deal, which begins this month, and suggests that Saudi Arabia wanted to unilaterally tighten up the market. Saudi Arabia alone decreased output by 400,000 bpd, and Saudi officials said they would cut deeper in January.

    One of the largest pricing risks is the possibility of an economic downturn. There are some critical markers already: slowing growth in China, contracting GDP in parts of Europe, currency crises in emerging markets and financial volatility around the world. WoodMac forecasts demand growth at 1.1 million bpd in 2019, but the trend is at risk. The U.S.-China trade war could still drag down the global economy, but financial indicators are in a warning zone.

    U.S. and Chinese officials resumed trade talks, and news of the meeting bolstered sentiment in financial markets. Anyway, China is still holding off on buying much American oil, despite the three-month trade truce between the two countries and due to the wide availability of crude supplies from Iran and Russia. Besides, the executives from the national oil companies hesitate to procure U.S. crude unless they are told to do so.

    The IEA expected the U.S. would add 1.3 million bpd in 2018, while the U.S. EIA predicted growth of 1 million bpd. In reality, the U.S. added about 1.5 million bpd in 2018, and preliminary data suggests U.S. production in December 2018 will be 1.6-1.7 million bpd higher than the same month a year earlier.

    Companies around the world have scrapped a record number of large crude tankers in 2018. About 100 vessels of the industry’s main crude carriers have been sent to India and Bangladesh for demolition. This is no surprise, as of September last year the vessels, which transport 40 percent of the world's crude, were on course for the worst charter rates in three decades. Morgan Stanley estimates the global fleet of large crude carriers could lack 100 million barrels of transportation capacity in the first half of 2020. Average earnings for 2 million barrel-hauling VLCCs crashed by 65 percent to $6,159 a day in 2018. They were $17,794 for all of 2017, $41,488 for 2016 and $64,846 in 2015.

    Outlook for the coming week
    The key factors in the next few months will be how much OPEC+ cuts will help clear the oversupply, how much U.S. oil production growth could slow down, and how the global economic growth will hold. In a near-term outlook, we expect bunker prices may continue upward evolution.

     

     

     

     

     

     

     

    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 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
13:15 Fincantieri to build LCS 31 for US Navy
12:53 Gdynia, Poland to host Transport Week 2019 on March 5-7
12:31 MOL moves to establish 'Asahi MOL Tankers' for pool operation of MR Product Tankers
12:14 DFDS expands cooperation with Turkish Ekol Logistics
11:45 ABP invests £2.2 million in new agribulk terminal at Port of Ayr
11:17 BIMCO: only international action will stop increase in piracy