MABUX: Bunker market this morning, Jan 13
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) demonstrated irregular changes on January 10:
380 HSFO: USD/MT – 388.10 (+0.31)
VLSFO: USD/MT – 661.00 (-7.00)
MGO: USD/MT – 701.31 (-9.29)
Meantime, world oil indexes also demonstrated slight irregular changes on Jan.10 as the market focused on rising U.S. inventories and other signs of ample supply. However, markets were still eyeing the longer-term risks of conflict, and prices were briefly supported on Friday by new U.S. sanctions on Iran in retaliation for its missile attack on U.S. forces in Iraq this week.
Brent for March settlement decreased by $0.39 to $64.98 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for February declined by $0.52 to $59.04 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.94 to WTI. Gasoil for January delivery increased by $0.50.
Today morning oil indexes slight amid easing U.S.-Iran tensions.
Last week, the U.S. House of Representatives voted to curb U.S. President Donald Trump’s power to strike Iran. Meanwhile, Vice President Mike Pence said the Islamic Republic has asked militias in the Middle East not to carry out attacks against U.S. interests.
Oil prices have been under pressure since Jan.8 after President Donald Trump refrained from responding to Tehran’s rocket attacks on U.S.-Iraqi airbases after the U.S. killing of Iranian General Qassem Soleimani. Even media reports out of Beijing on Jan.9 confirming that China will sign the phase one trade deal with the United States Jan.15 couldn’t get oil higher.
The United States rolled out harsher sanctions on Iran on Jan.10, targeting the Islamic Republic’s multi-billion-dollar metals Industry, as part of the White House’s “maximum pain” campaign aimed at crippling Tehran’s possible nuclear bomb ambitions. Iran’s Revolutionary Guards commander has also vowed he would take "harsher revenge" on the United States after the raid on the airbases, which did not kill any U.S. servicemen.
Both Iran and Iraq are members of OPEC, which together with Saudi Arabia, account for about 40% of the world’s oil production. On Jan.08, crude tankers deliberately avoided the Strait of Hormuz around Iran to be on the safe side. Still, there has been no disruption to Middle East oil production as a result of the flare-up in tensions.
Also, a Russian navy ship “aggressively approached” a U.S. Navy destroyer in the North Arabian Sea on Jan.9, the U.S. This puts some fear back into the market place
OPEC output declined in December ahead of the new pact. Still, production remains higher than the forecast demand for early 2020. Global oil markets will remain well supplied this year, with a possible overhang of some 1 million bpd, according to the International Energy Agency. Non-OPEC production remain strong. It is still expected production coming from Norway, Canada, Guyana, among other countries. Norway is about to experience a sharp jump in oil production in the next four years. After a steady decline over several years, production is set for a 43-percent increase between 2019 and 2024, reaching 2.02 million bpd in 2024. This will be thanks to the start of production at the Johan Sverdrup offshore field along with several smaller fields.
The start of 2020 has seen the spread between the main compliant bunker fuels, 0.5% sulfur fuel oil and marine gasoil, shrink, amid high demand for very low sulfur fuel oil and slack market conditions for middle distillates. European 0.1% sulfur marine gasoil remains priced at a premium to 0.5% VLSFO, which is to be expected due to higher refinery and manufacturing costs. However, the differential between VLSFO and 0.1%S marine gasoil in both the barge and the downstream bunkers market has narrowed notably over the first days of 2020. Some suggested MGO would fill potential local demand shorts for 0.5% sulfur bunker fuel if availability becomes limited. However, practical and operational limitations have tested this outlook, with some sources saying the less viscous 0.1% marine gasoil is less suitable for long voyages and more liable to cause difficulties in ships’ engines.
The Mediterranean has seen the most pronounced tightness for 0.5%, with spreads of around $10 between VLSFO and MGO at some ports in 2020.All this has been reflected in the upstream refinery feedstocks market. Low sulfur straight run has seen rocketing values as the product enters directly 0.5% marine fuel blendstock. Similarly, increasing demand for low sulfur vacuum gas oil, for use as a blendstock, has returned strength to a product that had remained relatively flat for 2019.
We expect bunker prices to demonstrate slight irregular changes: 1-3 USD down for IFO, 1-3 USD up for MGO.