MABUX: Bunker market this morning, May 21
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 insignificant and irregular on May 20:
380 HSFO - 442.49 (-0.03)
180 HSFO - USD/MT - 477.51 (+0.14)
MGO - USD/MT - 705.18 (-2.97)
Meantime, world oil indexes also changed irregular on May 20 after OPEC indicated it would probably maintain production cuts that have helped support prices this year.
Brent for July settlement decreased by $0.24 to $71.97 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery gained $0.29 to $63.21 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 8.76 to WTI. Gasoil for June lost $5.50.
Today morning oil indexes have started the session with no firm trend.
Saudi Arabia said on May 19 there was consensus among the Organization of the Petroleum Exporting Countries (OPEC) and allied oil producers to drive down crude inventories gently but the Kingdom would remain responsive to the needs of a fragile market. UAE in turn stressed up that producers were capable of filling any market gap and that relaxing supply cuts was not the right decision.
Bank of America Merrill Lynch warns that Brent crude oil could reach $90 per barrel. Bank claims that the IMO rules regarding the allowable sulphur content, to take effect in 2020, could cause a spike in middle distillate demand, pressuring prices upward. Also pushing up prices could be the weakening dollar should the trade war between China and the United States simmer down. In February, Bank of America estimated that Brent crude would be trading within the $50 to $70 per barrel band through 2024, with prices anchored around $60 per barrel, citing rising US shale supplies and slowing oil demand growth. Along with its $90 per barrel warning, Bank said there was a risk that Brent could dip to $50 per barrel, if the trade war between China and the United States were to hurt consumer sentiment and lead to an economic downturn.
Saudi Arabia may soak up some of Iran’s previous market share on the Indian market as Saudi Aramco is set to ship additional 2 million barrels per month to Indian Oil Corp between July and December this year on top of the existing term supply deal between the two companies. India, Iran’s second largest oil customer after China, was one of the eight countries that were granted six-month waivers to continue buying oil from Iran after the U.S. re-imposed sanctions on the Iranian oil industry in November. The United States, however, pursued a maximum pressure campaign against Iran last month and put an end to all sanction waivers for all Iranian oil buyers. This put Indian refiners in a position to source the market for alternatives.
A month before OPEC and allies are set to discuss the future of their production cut deal, the leader of the non-OPEC group, Russia, appears to have finally fallen in line with its share of the cuts, producing below its OPEC+ quota for the month of May. Russia’s oil production between May 1 and 16 averaged 11.156 million bpd, which means that Moscow is now below its quota under the production cut deal, although the decline in production may have been the result of restricted exports via the Druzhba oil pipeline due to a contamination issue.
Venezuela’s oil production surprisingly inched up in April, to 768,000 bpd from 740,000 bpd in March. However, a PDVSA report has revealed that since the start of May, production has slumped by as much as 77 percent to 169,800 bpd because of the lack of tankers to carry the crude.
Global ship insurers are monitoring increased tensions in the Middle East and considering their next course of action. Last week London maritime ship insurers met to consider whether or not to increase shipping insurance rates for tankers in the Arabian Gulf. However, they have failed to reach a consensus so far, as the group doesn't have enough information yet to make a decision over rate possible increases.
China has issued a new batch of oil product export quotas and they are 5.3 percent higher than they were this time last year as the country’s refineries return to processing record-high amounts of crude oil. The total that Chinese refiners can export comes in at 45.29 million tons since the beginning of the year. That’s up from 43 million tons a year ago. The biggest share is for gasoline, at 9.09 million tons, and next is gasoil with quotas for 9.175 million tons. There is a concern among refiners in other Asian countries that surplus fuel production in China would spill into neighboring countries, undermining the profit margins of local refiners.
We expect bunker prices may slightly decline today in a range of minus 1-5 USD.