MABUX: World bunker prices may turn into irregular changes next week
The Bunker Review is contributed by Marine Bunker Exchange
Main oil indexes changed irregular fluctuations for a few days price rally during the week. Despite this, big further gains seem to be unlikely due to global oversupply. MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO in the main world hubs) from June 04 till June 10 slightly rose following the general trend on world oil market:
380 HSFO - up from 336,57 to 338,57 USD/MT (+2,00)
180 HSFO - up from 363,00 to 368.29 USD/MT (+5,29)
MGO - up from 624,64 to 627.64 USD/MT (+3,00)
In the U.S., drillers idled more rigs. As per Baker Hughes Inc., the number of machines decreased by four to 642 last week - the lowest level since August 2010. At the same time U.S. production remains at a record. Output averaged 9.59 million barrels a day through May 29, the fastest pace in weekly data since January 1983. As oil prices are expected to hold at current levels over the next three to six months, US drilling may start increasing again in the second half of this year. The forecasts predict from 50 to 140 rigs may be put back to work by the end of the year.
U.S. stockpiles dropped sixth week by 6.81 million barrels to 470.6 million barrels. Supplies at Cushing, Oklahoma, the delivery point for WTI, also dropped 1.02 million. Refiners used 16.9 million barrels a day of crude, up 1.5 percent from the previous week. Plants operated at 94.6 percent of their capacity. A dip in US stockpiles is considered to be an indicator of growing demand which is supporting global prices.
At the same time the U.S. exported the record volumes - more than half a million barrels a day - in April. The country’s ban on exports has exemptions, including sales to Canada and shipments of ultra-light crude known as condensate as well as some Alaskan and California heavy crudes.
Crude's biggest producers and shippers in the Organization of the Petroleum Exporting Countries agreed at a meeting in Vienna to stick to a policy of unconstrained output for another six months - 30 million barrels a day (cartel pumped 31.58 million barrels a day in May) - choosing to defend market share and force higher-cost producers such as U.S. shale companies to slow drilling.
For their part Iran, Iraq and Libya plan to add millions of barrels to the market this year. Iraq is set to increase exports by about 100,000 barrels a day this month as fighting with Islamic State militants spares its biggest-producing regions. Iran asked OPEC to make a room for the country’s rising output. The Persian Gulf nation is negotiating rolling back its nuclear program in exchange for relief from Western sanctions. Libya’s emergency stoppings at the ports of Ras Lanuf and Es Sider may end in July or August. Restoring service would allow the nation to pump 1 million barrels a day, about double its current output.
China’s government has switched to stimulus mode with monetary easing and efforts to engineer a clean up of local government debt. The inflation pace is less than half the official 3 percent target - 1.2 percent year-on-year in May, raising concerns about growing deflationary pressures as the economy cools.
The latest indicators are still pointing to a continued slowdown. China's oil imports fell about 11 percent in May from a year ago. Overseas purchases slid to 5.5 million barrels a day, down from a record 7.4 million a day in April. The main reasons for this were increased refinery maintenance and port storage facilities filled up.
At the same time China's request for crude is expected to pick up in the second half of the year as new commercial and strategic storage tanks are finished. Country may add 100,000 barrels a day in emergency supplies during the rest of this year and another 200,000 barrels a day in 2016. It has been already started filling a strategic petroleum reserve cavern in Qingdao city, one of four underground facilities expected to start this year.
Positive signals from Europe supported fuel prices. Gross domestic product rose 0.4 percent in the three months through March. As per ECB President Mario Draghi, despite concerns about Greece’s debts the recovery was “on track.” In a sign of the trend continuing, euro-area economic confidence remained near a four-year high in May: Markit’s factory output index rose to 52.2 last month, above the key 50 mark that divides expansion from contraction.
Market is also looking for signs of progress in Greece’s debt talks. Greece pulled back on budget concessions to its creditors in new proposals while trying to unlock bailout funds. On June 30, Greece’s financial safety net is set to expire, putting any remaining funds off limits unless Tsipras can reach an accord with creditors before then. Meanwhile, both sides are confident that reaching the agreement within the coming days is possible.
Iraq is committing 27,000 security personnel to protect its oil and energy industry from the advance of Islamic State. The final structure of the new oil security forces will be finalised over the next few weeks. There are fears that ISIS, which operates in parts of Iraq, Syria and Iran, could disrupt supply through terrorist attacks and could also look to annex more oil resources to help fund its campaigns. Iraqi forces have opened supply lines into Baiji town and its nearby oil refinery, making some progress at last against Islamic State rebels.
We expect world bunker prices will continue irregular fluctuations next week as global funDamental factors are still unchanged and geopolitical situation does not give any real signs to the market.
* MGO LS
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)