MABUX: Bunker market this morning, Apr.05

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) changed irregular on Apr.04:

380 HSFO - USD/MT - 422.29(-0.71)
180 HSFO - USD/MT - 468.07(-0.72)
MGO - USD/MT - 636.57(-1.64)

Meantime, world oil indexes changed irregular on Apr.04 as expectations of tight global supply outweighed pressure from rising U.S. inventories and production.

Brent for June settlement increased by $0.09 to $69.40 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May delivery added $0.36 to $62.10 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 7.30 to WTI. Gasoil for April delivery gained $4.75.

Today morning oil indexes are steady.

It was reported a crude inventory rise in the U.S. of 7.24 million barrels for the last week (forecasts expected a stockpile drop of 425,000 barrels). Meantime, gasoline inventories as well as distillate stockpiles  fell by 1.78 million barrels and by 2.0 million barrels correspondingly. Those declines came on the back of refinery output running steadily at just under 86.5%. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 201,000 barrels. U.S. crude production climbed 100,000 barrels per day (bpd) to a record 12.2 million bpd, after hovering around 12-12.1 million bpd since mid-February. The inventory build could to be the result of distortions caused by the recent closure of the Houston Shipping Channel. A fire late last month at a chemical storage facility led to the shutdown of the important hub for crude oil imports and refinery runs.

Nigeria is hoping the oil production cut deal OPEC agreed with its non-member partners led by Russia will be extended for another six months beyond the June deadline. According to the Nigerian Petroleum Minister, the deal had succeeded in propping up prices to a point where both consumers and producers are at least a bit comfortable. There is doubt, however, that Russia will agree to an extension since it doesn’t need oil to be as expensive as most Middle East producers do. There have been reports that Moscow may only agree to a three-month extension, which would weigh on prices.

Venezuela exported a little over 980,000 bpd on average in March despite a string of severe blackouts. The bulk of what Venezuela exported last month went to China, India, and Singapore: these three destinations constituted 74 percent of PDVSA’s oil exports in March. That’s up from 70 percent in February. Meantime, the U.S. plans to tighten the sanction against Venezuela. Beginning in May, importers of Venezuelan crude that use U.S. subsidiaries in their transactions with PDVSA or the U.S. banking system would have to stop buying the commodity as a grace period granted by Washington to these entities expires.

South Korea in turn has begun testing super-light U.S. oil as a substitute for Iranian crude as it awaits word from Washington whether it can keep buying oil from the Middle Eastern nation. South Korea is one of Iran's biggest Asian customers, and was one of eight importers that received waivers to keep buying Iranian oil when the United States re-imposed sanctions in November. The U.S. is expected to reduce those waivers in May, disrupting South Korea's supply of Iranian condensate, an ultra-light crude oil that is used in its large refining and chemical industry. Seoul has been negotiating with the United States to extend its waiver. Yet to gain an extension South Korea will likely have to reduce its current imports by between 5 percent and 20 percent. This move may push the prices up for light WTI further high.

U.S. President Donald Trump met Chinese Vice Premier Liu He at the White House on Apr.04. It supposed that negotiations over a trade deal between the world’s biggest economies entered the final stages. The goal over the next few days is to strike an agreement on the core issues so Trump and Chinese leader Xi Jinping can hold a ceremony to sign a deal. Under the proposed agreement, China would commit by 2025 to buy more U.S. commodities, including soybeans and energy products, and allow 100 percent foreign ownership for American companies operating in China. One of the final issues is what will happen to the tariffs the two sides have imposed on about $360 billion of each other’s goods in the past nine months. Trump has suggested that at least some of the tariffs will stay in place. The news have supported fuel indexes to a certain extent.

In China the Caixin/Markit services purchasing managers' index (PMI) rose to 54.4, the highest since January 2018 and up from February's 51.1, a fourth-month low.

Rystad Energy forecasts that the upcoming IMO 2020 sulfur limit regulations for marine bunker fuels will have short-lived consequences for the world’s oil markets. It concludes that despite around 2,800 vessels having so-called scrubbers installed on average in 2020, and refiners gearing up and readjusting to meet the increased low sulfur fuels demand (LSFO, MGO) while also getting rid of most of the high sulfur fuel oil (HSFO) currently produced, there will still be a significant 0.6 million bpd deficit in marine gasoil in 2020. Rystad estimates that global gasoil/diesel demand growth in 2020 could reach 1.7 million bpd, 1.4 million bpd of which is from marine bunkers, almost six times the five-year average global gasoil growth. This could have reverberations for the whole fleet of diesel-driven vehicles. Global diesel prices – also at the pump – could be higher in 2020 than many expect.

We expect bunker prices may continue upward evolution today in a range of plus 1-4 USD.