Bunker prices likely to move sideways next week
The Bunker Review is contributed by Marine Bunker Exchange
World fuel indexes have kept high volatility while tried to get some support from speculation on the attempts made by OPEC countries and Russia to freeze output.
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) from Feb. 12 till Feb.18 changed irregular with a final slight signs of growth:
380 HSFO - up from 136,21 to 146,36 USD/MT (+10,15)
180 HSFO - up from 168,79 to 193.14 USD/MT (+24,35)
MGO - up from 356,50 to 369.00 USD/MT (+12,50)
The top crude producers finally have agreed to freeze production at January levels. The deal comes after months of competition for market share. Saudi Arabia has begun to sell crude to traditional Russia’s partners in Eastern Europe, while Russia overtook Saudi Arabia in oil exports into China. The two nations are also on the opposite sides in the Syrian civil war.
Besides, both Russia and the OPEC are already pumping oil nearly record levels: Saudi Arabia pumped 10.2 million barrels a day in January while Russian output of crude and a light oil called condensate climbed 1.5 percent last month from a year earlier to 10.9 million barrels a day. Venezuela, which will join the pact with Qatar, has lobbied exporters including Russia, Iran and Saudi Arabia to arrange a meeting between OPEC members and other suppliers in an attempt to reach an agreement to balance the market. The freeze is conditional on other nations agreeing to participate.
The fact that Russia and Saudi Arabia were able to agree to anything is a sign of some progress. Saudi Arabia considers the output freeze was the beginning of a process and it may create a diplomatic solution for a more ambitious deal later.
But the success of the deal still depends on Iran, Iraq and other large exporters. Iran has supported an accord by Saudi Arabia and Russia but without saying whether it would curb its own production. Meanwhile, country has continued to comment that it is committed to growing production and regaining market share, suggesting that any deal involving Iran would need to allow for some production growth. Country’s output is still 1,5 million barrels per day lower than it was be-fore international sanctions and it seems unlikely that Iran would sign up for any limits on output at the moment.
This week Iran loaded its first cargo of oil to Europe since international sanctions ended. Country is planning three initial shipments to Europe carrying 4 million barrels of oil with 2 million barrels going to Total and the rest to companies from Spain and Russia. At present Iran is exporting 1.3 million barrels per day (bpd) of crude oil, and plan to pump 1.5 million bpd by the start of the next Iranian year on March 20.
Iraq stated it is ready to join Saudi Arabia in freezing output, or even cut, if others commit to the accord.
All in all market participants consider that the agreement between Saudi Arabia and Russia to freeze production will not have big impact on the oil market as pro-posed. Goldman Sachs Group Inc. reiterated its call for prices to remain volatile while being bound to a range in the coming months until inventories stop increasing.
Explorers idled more drilling rigs in U.S. oilfields last week as record supplies begin to push crude prices down. Rigs targeting oil in the U.S. fell by 28 to 439. That com-pares with 1,056 oil rigs operating in same week a year ago. Some forecast, however, say the rig count will decline for a few more months before recovering later this year when crude price is expected to rise. It is still believed that shale output will come back if oil prices rise to $50 a barrel and shale companies can lock in prices, attracting lenders.
China’s crude imports declined 20 percent in January from December to the lowest in three months as state refiners slowed operations amid swelling stockpiles of fuel. Import from China was cut in January by 4.6 percent from a year ago to 26.69 million metric tons (or about 6.3 million barrels a day). The sudden slowdown comes after the government’s decision to stop lowering fuel prices when crude trades below $40 a barrel. China awarded a combined 330,000 tons of fuel export quotas to four independent refiners and they are required to use at least 60 percent of the quota.
As a resume, supply still exceeds demand and record global oil stockpiles continue to swell, potentially pushing prices down, while speculations on possible oil cut may render some short-term support to the indexes. We expect bunker prices may continue change sideways 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)
