World bunker prices may turn into irregular fluctuation's phase next week, MABUX says

The Bunker Review is contributed by Marine Bunker Exchange

Main oil indexes have turned into steady upward movement beginning from the end of last week. Gains are fueled by a U.S. government forecast for tighter oil supplies next year, and indications that Russia, Saudi Arabia and other big producers might pursue further talks to support the market. How-ever, further price rally seems to be unlikely due to global oversupply which is still pressing prices down. MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) from Oct. 01 till Oct.07 rose significantly following the general trend on world oil market:

380 HSFO - up from 216,43 to 236,29 USD/MT    (+19,86)
180 HSFO - up from 246,29 to 262.07 USD/MT     (+15,78)
MGO          - up from 512,07 to 529.57 USD/MT     (+17,50)

Global oil demand is projected to average 93.79 million barrels a day this year and may grow by the most in six years in 2016 while non-OPEC supply stalls. That could be a sign that a surplus of crude is easing more quickly than expected. Total world supply is expected to rise to 95.98 million barrels a day in 2016 (0.1 percent less than forecast last month). Demand is forecast to rise 270,000 bpd to 95.2 million barrels (up 0.3 percent from September's forecast).

Official data shows the number of U.S. active oil rigs fell by 26 to 614 last week (the fifth straight week) adding to the 35 sidelined in the previous four weeks. U.S. oil production has already begun to decline after reaching a peak of 9.6 million barrels per day (bpd) in April, although production in some big shale patches has held steady so far. EIA predicted that output would reach a low of around 8.6 million bpd next year. However, if prices remained low for a long time and oil production outside OPEC and the United States declined due to capital expenditure cuts, this could cause prices to spike upwards, starting a new round of production growth in U.S. shale oil.

The fuel market is also waiting for an indication on when the U.S. Federal Reserve will hike interest rates for further trading cues while weaker-than-estimated reports on U.S. employment, manufacturing and services can make Fed to defer the decision.

Russian oil output rose to a post-Soviet record last month as producers took advantage of the weak ruble to push ahead with drilling. The Russia’s production of crude and condensate climbed to 10.74 million barrels a day, 1 percent more than a year earlier and topping a record set in June. Soviet-era production peaked at 11.48 million barrels a day in 1987. The increase comes at a time when Organization of Petroleum Exporting Countries (OPEC) is defending market share rather than cutting production amid a global output glut.

OPEC for its part sees the oil market improving because of higher demand for the group's crude and a drop in supply growth from non-members: the sign that OPEC’s strategy of defending market share is working. The Organization has invited non-OPEC countries to attend a technical meeting on Oct. 21 at its Vienna headquarters, to discuss the market. A separate meeting between Russian and Saudi officials was being planned for the end of October.

Intensified fighting in Syria has become another supportive factor for fuel prices as a political risk premium had re-entered the market. Russia and the United States are carrying on bombing campaigns in the country. The situation was complicated by the arrival of hundreds of Iranian troops in Syria to join a major ground offensive in support of government troops, a sign the civil war is turning still more regional and global in scope.

In China, Asia's biggest economy, activity in the manufacturing sector contracted for a second straight month in September, pushing fuel indexes down. China has failed to reverse an economic slowdown with five interest-rate reductions since November. According to the forecast, the country’s growth will slow to 6.8 percent this year, below the government’s goal of 7 percent.

We expect world bunker prices may turn into irregular fluctuations next week: despite of some signs that a surplus of crude is easing, major funDamental factors have not changed and geopolitical situation does not give any real indications 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)