Expert says no significant changes on world's bunker market next week
The Bunker Review is contributed by Marine Bunker Exchange
No drastic changes are expected on world bunker market next week
No fundamental changes were observed on the global fuel market during the week. The main supporting factor is still the expectations of OPEC and non-OPEC possible freezing output. Markets are also being supported by output losses in Iraq and Nigeria, and as Iran restores production more slowly than planned following the end of international sanctions. Terrorist attacks in Brussels were not transformed into momentum driver: the indexes were steady.
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) in the period Mar. 18 – 24 changed insignificantly with no firm trend:
380 HSFO - up from 165,57 to 165,71 USD/MT (+0,14)
180 HSFO - down from 209,07 to 208.29 USD/MT (-0,78)
MGO - up from 403,29 to 403.71 USD/MT (+0,42)
As per some prognoses, the oil market will be balanced in 2017 and stockpiles will fall from 2018 to 2021. Global demand may grow 1.2 percent a year in the five years to 2021, compared with 1.7 percent annual growth in 2009 to 2015. The risk of supply outages such as those in Nigeria and Iraq are considered to be episodic events due to political instability. Meanwhile, Venezuela’s economic problems may lead to social and political unrest and the potential for supply disruptions in Libya remains a risk.
The main supporting factor on the marker is still the news that members of the Organization of Petroleum Exporting Countries and some other producers plan to meet on April 17 in Doha to discuss a proposal to freeze output. At the moment it is expected about 15 or 16 nations will attend the meeting. The most problematic point here is Iran that is seeking to increase production after the end of economic sanctions and has said it won’t participate in any accord until its output has recovered.
Meantime, Iran’s oil exports climbed to the highest in 22 months at the moment - to 1.75 million barrels a day and by the end of the month could reach 2.0 million. In March production climbed to 3.37 million barrels a day. Iran aims to increase production to 4 million barrels a day before it will consider joining oil producers in a proposal to freeze output. That would be the highest since October 2008. Besides, the country last month shipped its first cargo to Europe since 2012. National Iranian Oil Co. has signed contracts for the sale of about 400,000 barrels of crude a day to European refiners, even if all cargoes for that entire amount haven’t shipped because of financial restrictions that remained in place.
Oversupply is considered to be one of the main problems lowering prices as well. Even though crude production in the U.S. has slowed about 5.5 percent since last summer, inventories are still bloated. Getting rid of that oversupply could take a while, especially since Saudi Arabia has kept pumping and Iran is promising to in-crease production.
U.S. crude inventories rose 9.36 million barrels last week to 532.5 million barrels, the highest level since 1930. Imports increased 9 percent to 8.38 million barrels a day. Supplies at Cushing, the delivery point for WTI traded in New York, slipped 1.26 million barrels. Cushing inventories had previously risen toward 70 million barrels, causing market participants to fear they could hit capacity. Production fell by 30,000 barrels a day to 9.04 million, the lowest since November 2014. U.S. refiners typically slow during March to perform maintenance before the summer peak driving season. Rigs targeting oil in the U.S. rose by 1 to 387 last week. The prior week’s number was the lowest since December 2009.
There are also signs that the oil export from the U.S. is growing. One reason behind the rise in exports is cheap pipeline and railway fees to move crude from the fields in Texas, Oklahoma and North Dakota into the ports of the U.S. Gulf of Mexico. Another is that U.S. oil prices have been trading at a discount to Brent crude, allowing traders to move oil from one shore of the Atlantic to another at a profit. And finally the exports could relieve pressure on storage capacity in the U.S. after stockpiles rose to the highest level in official data going back to 1930. However, the export volumes are still not significantly high and the U.S. is likely to remain for the foreseeable future a small exporter compared with OPEC ‘s Saudi Arabia, Iran and Iraq and non-OPEC producers Mexico and Russia.
As fundamentals on the world fuel market remain unchanged, we do not expect any drastic changes in bunker prices next week: most likely irregular fluctuations will continue.
* 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)
