MABUX: Bunker market this morning, Oct 23
The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) continued slight downward trend on Oct.22:
380 HSFO - USD/MT – 348.40 (-4.02)
180 HSFO - USD/MT – 390.54 (-4.19)
MGO - USD/MT – 660.52 (-1.27)
Meantime, world oil indexes demonstrated slight upward movement on Oct.22 after China signaled progress in trade talks with the United States.
Brent for December settlement increased by $0.74 to $59.70 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery rose by $1.17 to $54.48 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.22 to WTI. Gasoil for November gained $11.00.
Today morning oil indexes turned into slight downward evolution again.
As per reports from China, both China and the United States have achieved some progress in their trade talks, and any problem could be resolved as long as both sides respected each other. As the world wants China and the United States to end their trade war, it required openness rather than a "de-coupling" of countries or a new Cold War. Meantime, Beijing fears that the Trump administration wants a complete separation with China. The two countries have been working to resolve their trade dispute, with the United States announcing a "phase 1" deal with China on trade matters and suspending a scheduled tariff hike for October. The International Monetary Fund last week forecast that fallout from the U.S.-China trade war and trade disputes across the world would slow global growth in 2019 to 3.0%, the weakest in a decade.
OPEC and its allies will consider whether to deepen cuts to crude supply when they next meet in December due to worries about weak demand growth in 2020. It was reported that Saudi Arabia wants to focus first on boosting adherence to the group’s production-reduction pact with Russia and other non-members before committing to more cuts. OPEC members Iraq and Nigeria are among the countries that have failed to comply properly with pledged output reductions. Next month the JTC committee, which monitors compliance with the pact, could start considering scenarios for deeper cuts and make its recommendations to the OPEC+ meeting for debate in December.
Goldman Sachs wound back its forecast for growth in U.S. shale output in 2020, and slightly reduced its outlook for 2020 global oil demand growth. The brokerage expects shale oil production to grow by 0.7 million barrels per day (bpd) in 2020, down from its previous forecast of 1 million bpd, and below 1.1 million bpd in 2019. The brokerage decreased its 2020 outlook for global oil demand growth to 1.3 million bpd from 1.4 million bpd previously. It also forecast supply growth from major oil producing non-OPEC regions, outside of shale, of 1.4 million bpd in 2020, falling sharply to 0.2 million bpd in 2021 and 0.3 million bpd in 2022.
China has issued more crude oil import quotas for mostly private refiners that will allow them to bring in a further 12.9 million tonnes for the rest of 2019. The third batch of quotas was allocated to 19 companies. China imported 369.04 million tonnes of crude oil in the first nine months of 2019, up 9.7% from the same period last year, boosted by the startup of new refineries as well as solid fuel demand in the country. Statistics supported fuel indexes in a short-term.
Kuwait and Saudi Arabia are still negotiating the restart of oil production at jointly owned fields in the so-called Neutral Zone between the two countries. Joint oil production in the neutral zone was suspended in 2015. The neutral zone could be pumping half a million barrels daily in a few months, which would add to about 10 million bpd of Saudi production and around 3 million bpd on Kuwaiti production. Meantime, if production in the Neutral Zone is restored, this will necessitate cuts in both Saudi Arabia and Kuwait, as OPEC is still in a capped production mode to keep prices steady.
Islamic State militants attacked checkpoints at a group of oil fields in northern Iraq, killing two members of the security force deployed there. The statement added that the attackers were being pursued by the Iraqi military along with the Popular Mobilization Forces, a group of Iran-backed Shiite paramilitary organizations. The Alaas oilfield, the largest in the group, used to be a major source of income for Islamic State while it controlled that part of Iraq.
Since its defeat in 2017, Islamic State has adopted a hit-and-run strategy to try and destabilize the Iraqi government, with kidnappings, car bombings, assassinations of local community leaders and attacks on the grid among its preferred attack of choice. Yet oil infrastructure is a natural target for the group as a means of faster destabilization.
The American Petroleum Institute (API) has estimated a crude oil inventory build of 4.45 million barrels for the week ending October 17—compared to analyst expectations of a 2.232-million-barrel build. Last week saw large build crude oil inventories of 10.45 million barrels, according to API data. The EIA’s estimates were similar, reporting a slightly smaller—but still huge—9.3-million-barrel build for that week. US crude oil production as estimated by the Energy Information Administration showed that production for the week ending October 11 stayed at 12.6 million bpd for the second week in a row—the highest production level that the United States has seen.
We expect bunker prices may slightly rise today in a range of plus 4-8 USD.
