Bunker Review W.12, 2013
The Bunker Review is contributed by Marine Bunker Exchange
Fuel indexes will continue irregular trend on the uncertainty of geopolitical situation.
U.S. inventories fell by 1.3 million barrels for the first week since Jan. 11 while total petroleum consumption dropped 4.5 percent in the week ended March 15, the weakest level since Jan. 4. As new pipelines begin bringing oil from the middle of the U.S. to refineries along the Gulf Coast, stockpiles in Cushing, a transport hub, are slipping. Recent progress in relieving the supply glut is starting to translate into a shift in oil futures, and further fall in crude stocks could strengthen West Texas Intermediate (WTI) prices against Brent.
Meanwhile the expectations of a steady revival in demand growth in the United States are still rather supportive to the oil indexes. Almost all U.S. states began 2013 with lower unemployment rates than they had at the start of 2012. U.S. Federal Reserve signalled recently it would continue its stimulus programs and keep up $85 billion in monthly purchases. It is also expected that Fed will take into account risks posed by its policies and how much progress it was making lowering unemployment.
Uncertainty over a bailout for Cyprus intensified concerns about the euro zone debt crisis this week. Cyprus was seeking a new loan from Russia after the island's parliament rejected the terms of a European Union bailout, raising the risk of default and a bank crash. On its part the European Central Bank is likely to delay a vote on emergency support for Cyprus giving the government and euro-area officials more days to forge a deal after a banking-tax measure was defeated. It is clear that the ECB has no interest in forcing a collapse before a political decision has been taken, and the market gives optimistic sings that Europe will come up with some solutions. At the same time fresh trouble in European economies would further cut weak oil demand, while a stronger dollar means crude-oil futures become pricier for investors using some foreign currencies.
Oil output by the Organization of Petroleum Exporting Countries may rise by 850,000 barrels a day from April to June, signaling a gain in prices as spare production capacity is reduced. OPEC will pump more as refineries end maintenance and utilities in Saudi Arabia and Japan increase the use of crude and fuel oil for electricity generation.
Iran nuclear program is still a supportive factor for the world oil market. Last week President Barack Obama said military force remained an option if sanctions and diplomacy failed to thwart Iran's nuclear ambitions. Iran had been the second-biggest oil producer in the Organization of the Petroleum Exporting Countries, but international sanctions over its nuclear program have cut flows to their lowest level in 30 years. Worries that further confrontation between the West and Iran over the Islamic Republic's controversial nuclear programme may escalate and disrupt oil supplies will continue supporting oil indexes.
For the coming week expect marine bunker prices to go sideways.