MABUX: Bunker market review as of this morning, Mar. 12

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) fell slightly on Mar.11:

380 HSFO - USD/MT - 419.07 (-0.36)
180 HSFO - USD/MT - 466.21 (-1.93)
MGO        - USD/MT - 638.36 (-3.71)

Meantime, world oil indexes rose on Mar.11, lifted by comments from Saudi Arabia that an end to OPEC-led supply cuts was unlikely before June.

Brent for May settlement increased by $0.84 to $66.58 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April delivery rose by $0.72 to $56.79 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.79 to WTI. Gasoil for March delivery gained $1.75.

Today morning oil indexes are steady so far.

As per Saudi Arabia, OPEC will continue producing less crude oil than it could until at least June as April, when OPEC+ meets, would be too early to end the cuts. It is expected that demand for crude will remain healthy this year, driven mainly by the United States and China. However, the former is becoming increasingly self-sufficient in oil, which might interfere with expectations for strong demand from that particular direction.

Meantime, Saudi Arabia will supply its clients with significantly less oil than they requested in April, extending deeper-than-agreed oil production cuts into a second month. This is the latest sign Riyadh is determined to regain control of the oil market as prices remain well below the level that many OPEC members need to cover their government spending. With Venezuela output falling further due to U.S. sanctions and power blackouts, oil refiners put in requests for Saudi crude of more than 7.6 million barrels a day for April. However, the kingdom will supply overseas customers with less than 7 million barrels a day, 635,000 barrels less than refiners asked for however.  

Prices were also buoyed by latest weekly report showing the number of rigs drilling for new oil production in the United States fell by nine to 834. The Paris-based International Energy Agency however said on Mar.11 that crude output in the United States will rise nearly 2.8 million bpd to 13.7 million bpd in 2024 from about 11 million bpd in 2018.

Rosneft sent cargoes of naptha to Venezuela to help PDVSA process its heavy crude, a lifeline for President Maduro who is suffocating under U.S. sanctions. Without diluents, PDVSA’s oil production would collapse, so the shipments could prevent such a catastrophe. Meanwhile, PDVSA has lost control of several key refineries in the Caribbean.

Norway has decided to exclude oil producers from its $1 trillion sovereign wealth fund, a significant move that highlights investor anxiety about the longevity of the oil business. The fund owns $37 billion in oil and gas shares, but the fund recommended the divestment in order to avoid the risk of volatile and low oil prices. “The plan still needs approval by parliament but the news rendered some pressure on the fuel indexes.

It is expected that the Sharara crude oil field in Libya will recover its daily rate of production to 300,000 bpd within two weeks. The field was originally closed for production in December, when clashes between militant groups forced the National Oil Corporation of Libya to institute a force majeure, which was only lifted last week. The three-month blockade of the field had cost it US$1.8 million and 20,000 bpd in lost production capacity as a result of vandalism and looting. The outages in Libya are one of the most important upward drivers for fuel prices at the moment.

International shipping associations have reduced the so-called High Risk Area for piracy attacks on ships and tankers in the Indian Ocean, but emphasized that serious threat remains despite the area reduction. Earlier this year, the International Chamber of Commerce’s International Maritime Bureau (IMB) published its annual piracy report, which showed that the number of piracy incidents in the world increased in 2018, due to a marked rise in attacks against ships and crews around West Africa. The IMB Piracy Reporting Centre (PRC) recorded 201 incidents of maritime piracy and armed robbery globally last year, up from 180 such incidents in 2017.

The IEA estimates that demand for high sulfur fuel oil (HSFO), the main vessel fuel since the 1960s, will plunge to 1.4 million bpd from 3.5 million bpd in just one year, and that there will be 4,000 scrubbers installed on large vessels by the end of 2020, consuming 700,000 bpd of fuel oil. The drop in fuel oil demand and the rise of petrochemicals over the next few years will benefit the U.S. oil producers whose typical crude products are lighter.

We don’t expect bunker prices will have any firm trend today. Insignificant and irregular changes in a range of plus-minus USD 2-5 may prevail.