MABUX: Bunker market seeks more clarity
The Bunker Review is contributed by Marine Bunker Exchange
World fuel indexes have not any firm trend during the week changing insignificant and irregular. The global glut of oil and fuel still weighs on the market. Slower economic growth and high inventories of crude and refined oil products have added pressure on fuel indexes.
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) changed insignificant in the period of Aug.04 - Aug. 11:
380 HSFO - up from 209.36 to 210,21 USD/MT (+0,85)
180 HSFO - up from 260.64 to 261.64 USD/MT (+1,00)
MGO - up from 438.00 to 445.93 USD/MT (+7,93)
The Energy Information Administration (EIA) increased its domestic output forecast: the EIA now sees U.S. production of 8.7 million barrels a day in 2016 and 8.3 million barrels a day in 2017. World demand will average 97.76 million barrels a day in 2017 while world production average 96.59 million barrels a day in 2017 (down 200,000 barrels from July).
At the same time U.S. oil producers are returning to the shale patch, adding rigs for a sixth-straight week. Rigs targeting crude in the U.S. rose by 7 to 381 this week. Drilling has increased as West Texas Intermediate oil prices have rebounded from a 12-year low in February.
As a sign of existing glut, the volume of crude held in floating storage off Britain's coast has grown this year due to excess supply. More than 10 million barrels of crude - over 10 percent of daily world production - was parked in tankers off the British coast for part of July. At least three supertankers holding crude remain off the British coast. Floating storages are still at-tractive due to the contango price structure for Brent, where later-dated supplies are more valuable than prompt barrels, and cheap freight and demurrage.
A fight for market share via high output and price discounts is still weighing on markets.
The Organization of Petroleum Exporting Countries will hold informal talks at a conference in Algiers next month. The renewed decline in oil prices keeps the pressure on many Cartel countries that are still unable to balance their budgets (incl. Venezuela, Ecuador and Kuwait). However, there are no specific plans to renew the failed April agreement with non-members to freeze oil production, while OPEC partners intend to discuss the oil market and potential cooperation with other producers. All in all, it is possible that renewed attempts at verbal intervention by OPEC may help bolster fuel market sentiment, although market did not expect more success from a potential future meeting.
Saudi Arabia reported it pumped a record 10.67 million barrels of oil a day in July to meet a summer surge in domestic demand. The output beat the previous all-time production high of 10.56 million barrels a day in June 2015. Saudi Arabia’s increased crude output comes as Russia and Iran are boosting shipments to top demand markets such as India and China.
Russia in turn sees no need for renewing discussion of an oil-output freeze at current crude prices, while leaving open the possibility for the future. Russian Energy Minister Alexander Novak didn’t rule out speaking with his counterparts from OPEC member states when he attends the meeting of the International Energy Forum in Algiers being held Sept. 26-28.
Iran is producing 3.85 million barrels of oil a day (output is set to rise to 4.6 million barrels a day in five years) and exporting about 2 million of that, which may allow to get back to about 80 percent of the market share it had before the restrictions.
Iraq has dropped the September official selling price for Basra Light crude to Asia by $1 to minus $2.30 a barrel against the average of Oman/Dubai quotes from the previous month – another sign of a fight for market share.
Libya has started maintenance work at Es Sider port, the nation’s largest oil export terminal, as part of plans to increase output. Exports should resume in a month. Es Sider has been closed since December 2014 when armed groups attacked the port. The nation pumped 300,000 barrels a day of oil in July, compared with as much as 1.78 million a day in 2008. It is expected that the resumption of exports from 3 main ports (Es Sider, Ras Lanuf and Zueitina) would help boost production by more than 900,000 barrels a day by the end of the year.
China’s crude imports stood at about 7.35 million barrels a day in July, the slowest import trend since January. One of the reasons was the slower demand by the independent refineries, as some have slowed with maintenance and others have filled up. Another reason may be a fresh sign that the Chinese economy is slowing down. Meantime, China’s product exports have increased 46 percent from January to July. It forecasts a further increase in the high level of product exports for Q3 as China’s independent refineries are expected to continue to produce gasoline and diesel at a high pace.
Global fuel marker is still looking for more clarity on where the fuel indexes are heading, while the expectations of a balanced oil market in the second half of 2016 have so far not proved to be correct. We expect bunker prices will continue insignificant changes and irregular fluctuations 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)