MABUX: Bunker market this morning, Dec 09
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) slightly rose on December 05:
380 HSFO: USD/MT – 345.04 (+4.68)
180 HSFO: USD/MT – 389.35 (+3.77)
MGO: USD/MT – 669.11 (+3.37)
Saudi Arabia shocked the oil market on Friday, with its energy minister Prince Abdulaziz bin Salman pledging to voluntarily cut even more oil production than its new quota, according to S&P Global Platts.
Under the existing oil production quota, Saudi Arabia had agreed to keep production under 10.311 million bpd—a cut of 322,000 bpd. But on Friday, OPEC divvied out an additional 372,000 bpd of cuts to its members, with Saudi Arabia’s new production cap coming in at 10.145 million bpd—an additional cut of 166,000 bpd.
But Saudi Arabia is planning to do more than even that—planning to keep its production at or below 9.744 million bpd. For reference, Saudi Arabia’s production for October was 9.890 million bpd, so this new voluntary pledge to cut even more than the group had asked it to is even more of a reduction.
If all members, including the non-OPEC side which must cut an additional 131,000 bpd, stick to their new production quotas including Saudi Arabia’s voluntary cuts, it would mean a total of 2.1 million bpd in restrictive oil production.
The fact that Saudi Arabia was willing to shoulder even deeper cuts than it was asked to is telling of the position of the Kingdom, who has long carried the production cut deal nearly singlehandedly, motivated by its upcoming Aramco IPO, which depends significantly on oil prices.
As additional motive for Saudi Arabia and the cartel to agree on a deeper production quota despite losing market share by doing so is the expectations of depressed demand growth going forward, which is expected to continue to weigh on oil prices without additional supply restrictions.
The news of an OPEC win and the Saudi Surprise has already started to lift oil prices, with WTI and Brent up roughly 1.3% and 1.6%.
Monday morning outlook
Oil prices fell on Monday after data showing China’s overall exports of goods and services shrank for a fourth straight month.
Monday’s sudden chill came after customs data released on Sunday showed exports from the world’s second-biggest economy in November fell 1.1% from a year earlier - a sharp reversal from expectations for a 1% rise in a Reuters poll.
The weak start to the week came despite data showing China’s crude imports jumped to a record, revealing just how deep jitters are embedded in the market over the U.S.-China trade row that has stymied global growth and oil demand.
The sagging export data is “a casualty again of the protracted trade war,” said Stephen Innes chief Asia market strategist at AxiTrader.
Monday’s declines also went against signs on Friday that China was easing its stance on resolving its trade dispute with the United States, confirming on Friday that it was waiving import tariffs for some soybean and pork shipments.
OPEC Meeting in Vienna conclusion
On Friday, OPECS' producers agreed to deepen their output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd, representing about 1.7% of global production. “What made the announcement constructive... was the fact that Saudi Arabia said it will produce around 400,000 bpd below its new quota level,” ING Economics said in a note. “This would effectively take OPEC+ cuts to 2.1 million bpd,” ING said.
Oil Future close on Friday 6th December
Brent: 64.39 (+1.00) USD/barrel
WTI: 59.20 (+0.77) USD/barrel
NY Harbor Ulsd: 600.97 (+8.99) USD/Metric Ton
MGO: 583.50 (+4.50) USD/MT
Oil Futures trading at GMT 0718: Brent: - 21 cents, WTI: - 28 cents
We expect bunker prices to rise: Fuel Oil + 4-5 USD/MT, ICE MGO +4-5 USD/MT and NY Harbor Ulsd + 9 USD/MT