The Bunker Review is contributed by Marine Bunker Exchange
World bunker prices will continue irregular fluctuations next week as funDamental factors on the market are unchanged.
Major fuel indexes continued irregular fluctuations during the week with no real driving factors which could be able to set up firm trend on the market. MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO in the main world hubs) for the period of June 11 - June 17 demonstrated slight decline which however could be compensated in a short run:
380 HSFO - from 338,07 down to 330,43 USD/MT (-7,64)
180 HSFO - from 365,43 down to 357.07 USD/MT (-8,36)
MGO - from 624,79 down to 617.93 USD/MT (-6,86)
Investors remain convinced that oil markets are oversupplied. The U.S. Energy Information Administration (EIA) estimates global petroleum oversupply at 2.6 million barrels per day at the end of the second quarter of this year, compared with just 1.05 million barrels per day in June 2014. EIA also forecasts world oil demand will rise more than expected this year: by 280 000 barrels per day (bpd) to 1.40 million bpd, bringing demand this year to almost 94 million bpd.
U.S. inventory draws have declined steadily since April driven by higher refinery runs and lower imports. U.S. stockpiles dropped seventh week by 2.70 million barrels. However gasoline inventories rose unexpectedly and crude oil stocks at the Cushing, Oklahoma, hub rose for the first time since April, while refinery utilization fell.
U.S. Energy Secretary Ernest Moniz suggested the Strategic Petroleum Reserve should be tapped to ease global oil-price shocks and not be limited to easing U.S. supply emergencies. As per him, rising U.S. crude production gives the nation more flexibility in how it uses the reserve. Moniz plan is to put crude from the reserve into the domestic market, not for export, which may provide the U.S. with valuable protections from oil-market disruptions. Any changes in reserve policy would require congressional approval.
The number of oil rigs in the United States declined another week, denying the market a sign that producers have started ramping up production. Energy firms pulled another seven rigs from U.S. oil fields - the most since late May. That was the 27th straight weekly decline, bringing the total rig count down to 635, the lowest since August 2010. Meanwhile, U.S. crude production climbed to over 9.6 million barrels a day last week, its highest level since the early 1970s.
Markets are closely tracking the Greek debt crisis. The talks concerning the release of the 7.2 billion euros ($8.1 billion) in rescue funds remaining in Greece`s bailout have dragged on for five months. However, negotiations in Brussels between Greece and its creditors collapsed after just 45 minutes last Sunday. Both sides insisted they were willing to engage, but without making any steps to change the situation. It brings Athens only two weeks away from a default on its debt, which could be followed by its exit from the eurozone.
Potential price rally is also under threat as Saudi Arabia said it was ready to raise output further if needed and as OPEC’s biggest members pump crude at a record pace. Saudi Arabia raised production in May to 10.25 million barrels a day from 10.16 million in April. Iraq increased to 3.85 million a day from 3.75 million, and the U.A.E kept output at 2.87 million barrels a day. Global oil supply was about 96 million barrels. The gains still leave OPEC’s supply about 1.3 million barrels above its collective output target of 30 million barrels a day.
The glut could rise further if Iran and world powers reach an accord on the Islamic Republic’s nuclear program by June 30 deadline. Imports of Iranian crude reached 1.4 million barrels a day in May, up 235,000 a day from April and the highest level since June 2012 when new restrictions on oil trade were imposed by the U.S. and European Union. The nation pumped 2.85 million barrels a day last month and is capable to produce 3.4 million to 3.6 million barrels a day after sanctions being lifted. Iran is also thought to be storing as much as 40 million barrels of oil on supertankers at sea, ready for a sales drive.
Islamic State (IS) strengthened its hold in central Libya, seizing territory near the country’s largest oil terminal in Sirte – former President Muammar Qaddafi’s hometown. IS already controls the desert town of Naufaliya, which is only about 30 miles from Es Sider and neighboring Ras Lanuf, Libya’s biggest and third-biggest export terminals. Both have been closed since December, when they were caught up in factional fighting. Crude output, which averaged more than 1.5 million barrels a day during Qaddafi’s last decade, slumped to 405,000 barrels last month.
In absentia of real driving factors on the market we expect world bunker prices will continue irregular changes next week.
* 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)