MABUX: Bunker market this morning, Mar.18
The Bunker Review was contributed by Marine Bunker Exchange
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) changed irregular on Mar.15:
380 HSFO - USD/MT - 424.71(-0.36)
180 HSFO - USD/MT - 471.29(-0.85)
MGO - USD/MT - 642.14(+1.57)
Meantime, world oil indexes traded slightly down on Mar.15, leading up to the data release as OPEC appeared to slow its production cut activities, and as global inventories are still thought to be robust.
Brent for May settlement decreased by $0.07 to $67.16 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April delivery slid by $0.09 to $58.52 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 8.64 to WTI. Gasoil for April delivery lost $4.00.
Today morning oil indexes were stable, amid concerns that an economic downturn may dent fuel consumption, but crude markets remain broadly supported by supply cuts led by producer group OPEC and U.S. sanctions against Iran and Venezuela.
OPEC reduced production by 221,000 bpd in February, a more modest reduction than in prior months. Most of the reductions came from Venezuela, which saw output drop by 142,000 bpd. Meanwhile, OPEC estimated that OECD inventories rose by 22 million barrels in January, or 19 million barrels above the five-year average.
Besides, earlier last week, a group of top OPEC officials warned U.S. shale executives in a meeting on the sidelines of the IHS CERAWeek Conference in Houston that the NOPEC legislation working its way through the U.S. Congress could result in much higher levels of production from OPEC, which would crash prices. They made clear that without the ability to coordinate, they would produce at maximum levels.
The International Energy Agency (IEA) predicted production outages and Iran and Venezuela will tip the global oil market into a shortage during the second quarter. This will happen against the background of steadily rising demand despite a slowdown during the last quarter of 2018. The agency had kept its 2019 global demand forecast unchanged from the last one at 1.4 million bpd.
As per IEA, Venezuela’s oil production had stabilized around 1.2 million bpd before the massive power outage that hit the country earlier last week, noting this is the same amount as the one OPEC and its partners agreed to take off global markets in December in a bid to prop up prices. However, the forecast said any serious market disruption should be limited because OPEC members—excluding U.S. sanctioned Ian and Venezuela—are sitting on some 2.8 million bpd in spare capacity. This could be quickly brought back online to cover any shortages, especially of heavy crude. OPEC has cut mostly its heavy crude oil output.
IEA also noted the U.S. has started buying a lot more crude from Russia to replace lost Venezuelan barrels. As a result, Russia has taken the opportunity to increase its shipments to the US from relatively modest levels to around 150 kb/d.
Amid signals that the U.S. and China have made some progress in trade negotiations in recent weeks, China has tentatively resumed buying U.S. commodities. China is now once again importing U.S. crude oil and soybeans, but despite increased inquiries, the Chinese market response to U.S. liquefied natural gas (LNG) is still tepid. While a new summit between the two leaders - U.S. President Donald Trump and Chinese President Xi Jinping - is yet to be scheduled, the oil/fuel market has been recently buoyed by prospects of a trade deal between the world’s two largest economies. And the slow return of Chinese purchases of U.S. crude oil could be a positive sign in the trade talks.
The number of active oil and gas rigs in the U.S. fell once again last week, as oil production fell for the first week this year. The total number of active oil and gas drilling rigs fell by 1 rig, with the number of active oil rigs falling by 1 to reach 833 and the number of gas rigs holding steady at 193. The oil and gas rig count is now just 36 up from this time last year, 33 of which are oil rigs. US crude oil production for week ending March 8 was 12.0 million bpd—the first decline, albeit a minor one—in this calendar year, coming off last week’s high of 12.1 million bpd. The figures at least offer an indication that the explosive growth could be slowing down.
We expect bunker prices may slightly decline today in a range of minus 1-4 USD.