Bunker prices to edge down next week after recent rally
The Bunker Review is contributed by Marine Bunker Exchange
On Wednesday, Brent and U.S. crude rose by 5-6 percent – a rally that analysts struggled to explain even after U.S. government data showed a draw in total stocks. The weekly report yesterday was positive on one side and negative on the other side, but the rally began before the release of the weekly report and was a sub one-minute affair during which crude oil gained more than $1 per barrel.
Rumors on the market said, 'the rally was caused by a big algorithmic trade'.
U.S. crude stocks rose last week, while gasoline and distillate inventories fell more than expected. Crude inventories climbed in line with trader expectations but the build-up was less than the 4.1-million-barrel increase reported by American Petroleum Institute (API), an industry group, a day earlier.
On Thursday crude oil futures fell as the dollar strengthened on signs the Federal Reserve may raise U.S. interest rates in December.
The U.S. Front Month crude WTI was trading at $45.57 (-0.17) and Brent at $48.78 (-0.27) GMT 15.18 and are slowly rebounding downward again.
Crude prices that have almost halved in the past year are unsustainable at current price levels. Projects are being postponed and lead to a decline in supply growth, according to Norway’s biggest oil company, Statoil.
“We think that the price level now is too low”, Erik Waerness chief economist and vice-president at Statoil ASA, said in an interview in Singapore on Thursday. “Some people will stop exploring for oil. With oil prices around $50, you get a stimulus for demand growth that will tighten the market.” Crude is expected to climb to $80 a barrel in 2018 and increase gradually after that as existing supplies get used.
Oil slumped more than 44 percent in the past year as U.S. stockpiles expanded at a time when OPEC producers bolstered output to retain market share, causing a global supply glut that the International Energy Agency estimates will remain until at least the middle of 2016 but most likely much longer.
Producers hurt by the collapse in prices have had to fire workers, cancel projects and sell oil fields to conserve cash. Statoil on Wednesday announced cuts to planned investments in 2015 by $1 billion to $16.5 billion. The start of its Aasta Hansteen and Mariner fields will be postponed to the second half of 2018 from 2017, seeking to protect shareholders payouts.
For the coming week expect bunker prices to edge downward again after the recent rally.
* 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)