The Bunker Review was contributed by Marine Bunker Exchange
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) dropped on Feb.26:
380 HSFO - USD/MT - 411.14(-9.07)
180 HSFO - USD/MT - 457.86(-8.43)
MGO - USD/MT - 639.64(-6.57)
Meantime, world oil indexes rose on Feb.26 as Saudi Arabia and the rest of OPEC were expected to stick to their production cuts, despite renewed pressure from U.S. President Donald Trump.
Brent for April settlement increased by $0.45 to $65.21 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April delivery rose by $0.02 to $55.50 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.71 to WTI. Gasoil for March delivery gained $8.75.
Today morning oil indexes continue upward evolution after a report of declining U.S. crude inventories.
The American Petroleum Institute (API) reported a surprise draw in crude oil inventory of 4.2 million barrels for the week ending February 22, coming in under analyst expectations that predicted that crude oil inventories would build by 2.842 million barrels. US crude oil production as estimated by the Energy Information Administration showed that production for the week ending February 15 - the latest information available - averaged 12 million barrels per day - another high for the US, breaking yet another psychological barrier. The EIA report on crude oil inventories is due to be released later today.
Goldman Sachs said, Brent Crude oil prices could reach $70 to $75 a barrel in the near term, with an upside potential of exceeding the $67.50 a barrel forecast made earlier this month, as the oil market continues to tighten significantly. Yet, Goldman Sachs sees a possible Brent Crude jump into the $70s as fleeting, because U.S. oil exports and a possible easing of OPEC’s production cuts in the second half of the year could cap the bullish sentiment. According to the bank, OPEC’s cuts and possible acceleration of Venezuela’s supply disruptions will support oil prices in the coming months.
President Trump cited significant progress in his decision to delay the implementation of tariffs on Chinese goods. A comprehensive trade deal remains rather difficult task, but the Trump administration is keen to dial back on the trade war. The development removes, for the time being, one of the greatest bearish factors facing the global fuel market.
Venezuela has reportedly been forced to pay heavy premiums for fuel imports from Russia and Europe. The U.S. cut off shipments of diluents to the country, and PDVSA has had to look elsewhere, but has been forced to pay higher prices as many sellers around the world decline to do business with the company. Besides, Venezuela is reportedly running out of storage space being unable to find enough buyers for its crude oil. As per estimations, more than 8 million barrels of oil are stashed on roughly 16 ships sitting idle along the country’s coast.
Recently, tanker demand and rates have highlighted shifting supply patterns and have sparked a bit of a worry about OPEC’s compliance rates. Tanker rates changed from a low of US$15,000 per day earlier in February to double that last week. This rebound caused a knee-jerk reaction in traders, immediately concluding that OPEC producers were failing in their production cut agreement: higher rates mean more demand for tankers and this means more crude coming into the market, normally. Another bullish factor for oil demand and tanker demand is the new set of emission regulations from the International Maritime Organization (coming into effect next year), which will reduce the maximum allowed amount of sulfur in maritime vessel emissions to 0.5 percent from 3.5 percent. It may cause a boom in demand for low-sulfur bunkering fuel, and, accordingly, a boom in demand for the crude that is used to make it. As per forecasts, daily tanker rates will average US$29,200.
Energy traders are starting to make plans for the possibility of a chaotic situation as the Brexit plan is still rather obscured with only a few weeks before the UK officially exits the European Union. Because of the links to the continent for natural gas, carbon allowances, and electricity, the ramifications for a no-deal Brexit could be significant.
Shell, the world’s largest LNG buyer and seller, in its annual LNG report forecast that global LNG trade will rise 11 percent to 354 million tonnes this year as new facilities in Australia, the U.S., Russia and elsewhere increase supplies to Europe and Asia. More countries are also building LNG import or receiving terminals. As per Shell, LNG trade rose by 27 million tonnes last year, with Chinese demand growth accounting for 16 million tonnes of those volumes. The Asia-Pacific region accounts for 72 percent of global LNG demand, with that amount projected to soon increase to as much as 75 percent. However, some of this demand growth will not only come from China, but India, Pakistan, Bangladesh, Thailand, and in time the Philippines, and Vietnam. The Philippines and Vietnam, however, have yet to construct their first LNG receiving terminals. Meantime, LNG buyers move away from signing longer-term offtake deals: LNG spot trade amounted to 1,400 cargoes in 2018 which was close to 30 percent of the global market compared to 25 percent in 2017.
We expect bunker prices may slightly rise today in a range of plus 1-3 USD for IFO and plus 5-7 USD for MGO.