Global bunker markets to see mixed price movements next week
The Bunker Review is contributed by Marine Bunker Exchange
Main oil indexes demonstrated irregular trend during the week. Fuel prices have seen a build in risk premium over armed insurgences in conflict-hit Iraq, Ukraine and Libya, but world market was confident in supply that eased worries about the impact of potential disruptions. MABUX World Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO in the main world hubs) showed slight upward movement for the period Aug.21-27 with a little chance to set up firm trend:
380 HSFO - increase from 547,36 to 548,71 USD/MT (+1,35)
180 HSFО - increase from 581,29 to 582.64 USD/MT (+1,35)
MGO - increase from 902,21 to 905.50 USD/MТ (+3,29)
World market is continuing to monitor geopolitical tensions in Ukraine. Ukrainian President Petro Poroshenko promised after negotiations with Russia's Vladimir Putin in Minsk to work on a ceasefire plan to defuse the separatist conflict in the east of Ukraine. Putin in turn said that no talks were held on conditions for a ceasefire in Ukraine because Russia isn’t a party to the conflict but a working group will intensify efforts to stem the crisis. Besides, Ukraine and Russia are planning military consultations. Energy negotiations will also resume on Aug. 29. Any significant moves towards an armistice between Kiev and two rebel eastern regions could mean an eventual step towards ending sanctions on Russia that have pressured Russian economy so far.
One of the main supporting factors for fuel prices this week was macroeconomic data from the U.S. as it overshadowed concerns about slowed growth in other oil consuming economies and ample global oil supplies. Durable goods orders jumped 22.6 percent in July, the biggest monthly gain on record. Besides, the Conference Board reported that consumer confidence rose for a fourth straight month to its strongest level since February 2008. Data from IEA showed U.S. crude and gasoline stockpiles fell by 2.07 and 0,96 million barrels correspondingly last week. The U.S. supply side could potentially keep prices from escalating, compensating any effects from geopolitical factors.
Market also took into consideration the comments from Federal Reserve Chair Janet Yellen. As per her, slackness remains in the U.S. labor market and the central bank has no “mechanical answer” for when to raise rates. So makers must be certain the economy is on a solid footing.
At the same time a survey of China's factory activity showed the growth in the sector slowed to a three-month low in August, pressuring fuel prices and fueling concerns about a soft economy dampening demand for oil in the world's second-largest oil consumer.
Market participants are also tracking conflict zones around the world. The threat from Islamic State militants in northern Iraq has not prevented oil exports from the south of the country: volumes remain near record levels. The president of the Kurdish Regional Government, Massoud Barzani, for his part asked Iran for ammunition to fight insurgents, which may mean that Iran is going to join efforts to back Iraqi Kurds battling Islamic State militants. Besides, Kurdistan can bring $100 million of crude ashore in Texas after a U.S. judge threw out a court order that would have required federal agents to seize and hold the cargo for the Iraqi Oil Ministry until a court there decided which government owns it. Acceptance of Kurdish crude by international buyers and by the country’s central government may boost the nation’s total exports by about 12 percent.
Libya's oil production has also been increasing in the past few weeks despite a split between an Islamist faction in Tripoli and the newly elected parliament and following air strikes attributed to Egypt and the United Arab Emirates. So at present Libya could be considered as one of the potential drivers for lower prices in the near-term outlook.
We expect bunker prices will continue irregular trend next week.
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)