The Bunker Review is contributed by Marine Bunker Exchange
Oil prices steadied on Thursday, but remained near 12-years low on the prospect of Iran unleashing its oil on an oversupplied market and with few signs of improving demand in a fragile global economy.
Oil market on Thursday at GMT 15.31, Brent $30.77 (+0.46) and WTI $31.40 (+0.92). Market fell earlier where Brent traded its lowest number since 2004 $29.73 per barrel. With no apparent signs of strengthening demand, and only further indications of future global supply growth, the outlook oil prices are still very much downward.
Barclays Bank said it had raised its estimates of Iranian oil supply on western sanctions being lifted sooner than expected. Analysts at the bank said they now assume that Iran will produce almost 700,000 barrels a day more in the fourth quarter of 2016 than over the same period in 2015. – Iran had said its exports would rise by 1 million barrels a day within six months of sanctions being lifted. – If so, this will probably drive oil prices further down.
U.S. weekly inventory report on Wednesday showed crude rose 234,000 barrels last week, much less than expectations, but was overshadowed by reported builds of 8.4 million barrels in gasoline and over 6 million in distillates, which includes diesel and heating oil.
Price of oil has now reached a critical level that oil and gas projects worth $380 million have been postponed or canceled since 2014 as companies slash costs to survive the oil price crash, including $170 billion of projects planned between 2016 and 2020.
Oil market is today flirting with $20 per barrel, which would give OPEC cause to cut. Oil at $20 is a stark prediction. Continued global oversupply and China’s increasingly unpredictable economy could make it a reality unless members of the OPEC can put aside their differences and agree to deep production cuts. It could happen, if major producers outside the cartel such as Russia co-operate.
Some members of OPEC, such as Nigeria’s oil minister on Jan. 12, are openly calling for a meeting of the 13-member group, which pumps over 30 percent of the world’s crude. Yet the chances of this happening remain remote unless OPEC heavyweights such as Saudi Arabia and its close Gulf Arab allies agree.
The barrier to that happening isn’t the bitter diplomatic row currently raging between Saudi and Iran. Instead, it’s Russia. The world’s largest oil producer, not part of the OPEC group, is expected to increase production to close to 11 million barrels per day in 2016, its highest level since the Soviet Union disintegrated.
The risk for OPEC is that if it makes cuts and Russia doesn’t, the bloc will lose market share. Some members of the group have continued these discussions but a deal would probably have to remove between 3 million and 4 million barrels per day from the market to be effective.
For the coming week we expect bunker prices to stabilize but could still see bunker prices edge downward.
*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)