The Bunker Review is contributed by Marine Bunker Exchange
World fuel indexes demonstrated irregular changes during the week, but turned upward after US inventory data. A number of strong factors appeared in the market this week: Hurricane Harvey, North Korea nuclear test are among them.
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) had upward trend in the period of Aug. 31 - Sept. 7:
380 HSFO - up from 299.71 to 319.57 USD/MT (+19.86)
180 HSFO - up from 341.50 to 360.43 USD/MT (+18.93)
MGO -up from 518.50 to 550.57 USD/MT (+32.07)
Hurricane Harvey has knocked out major refineries along the Gulf Coast. In addition to Corpus Christi and Houston, the ports of Lake Charles, Beaumont, and Port Arthur were shut down. But now U.S. refineries are resuming operations. The demand for crude oil is rising, that pushed prices higher. However, about 3.8 million barrels per day (bpd) of refining capacity, or 20 percent of the U.S. total, are still shut. Apparently, the recovery might not be quick. In response to Harvey’s effect on national gasoline availability approximately 4.5 million barrels of oil have been released from the Strategic Petroleum Reserve (SPR) of U.S. Focus is also drawn to the Category 5 storm Hurricane Irma, which is approaching toward the Caribbean and Florida and could knock out other refineries and cause more fuel shortages.
Meantime, the shutdown of almost a quarter of U.S. crude refining capacity in the wake of Hurricane Harvey is presenting an opportunity for fuel traders in Asia. A spike in American gasoline prices as the storm cuts off supplies is drawing shipments from as far away as Singapore. Returns from making oil products in Asia have risen to the highest level in more than two years. Tankers have been booked to transport gasoline from Europe to the U.S., and the fuel is now set to be shipped over even longer distances as the premium of American prices soar relative to those in Asia.
Output from OPEC fell by 170,000 barrels per day in August, down from a year-long high in July and now stands at 32.83 million bpd. The drop-in output came as Libya faced renewed conflict in oilfields areas and OPEC members increased their compliance to preexisting production quotas. Saudi Arabia and Iraq cut output last month, causing compliance to rise by five points to 89 percent - just under the high of 90 percent from earlier in the year.
At the same time Libyan authorities reopened the pipeline from the southwestern Sharara field to the Zawiya refinery after they reached a final agreement with a militia group that had closed the link. Such a move may add more pressure on OPEC and other producers.
North Korea conducted its sixth and most powerful nuclear test on September, 3, which it said was a successful detonation of an advanced hydrogen bomb. That pressured US dollar supporting fuel indexes. In response to the nuclear test, U.S. President Donald Trump refused to rule out military action and threatened to cut off trade with any country doing business with North Korea. The move, if implemented, would likely affect China, North Korea's most important trading partner. Besides, an open military conflict in Northern Asia may disrupt more than a third of global seaborne crude oil trade: about 65 percent of Asia’s crude oil refining capacity is located in China, Japan, and South Korea.
Oil rigs in the United States now number 759-352 rigs above this time last year with the number of oil rigs in the United States flat last week. The number of active oil and gas rigs in the United States rose last week by 3 rigs.
Official data for crude inventories in the USA will be released today in the evening, for now it is expected, that inventories rose by about 4.0 million barrels.
Fuel indexes received some support from rising demand in the United States, at the same time market focuses on Hurricane Irma. It is expected, that it may reach US shore on weekend. Concerns about a potential hit to production along the Gulf coast may provide further support. Besides, two more hurricanes are following by Irma. We expect bunker prices may demonstrate slight upward deviation 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)