MABUX: Bunker Market this morning April, 08

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) slightly increased on Apr. 05

380 HSFO - USD/MT 423.07 (+0.78)
180 HSFO - USD/MT 468.14 (+0.07)
MGO - USD/MT 639.50 (+2.93)

Meantime, world oil indexes also rose on Apr. 05 driven up by OPEC's ongoing supply cuts, U.S. sanctions against Iran and Venezuela and strong U.S. jobs data.

Brent for June settlement increased by $0.94 to $70.34 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May delivery rose by $0.98 to $63.08 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 7.26 to WTI. Gasoil for April delivery increased by $2.25.

Today oil indexes continue to rise. Brent and WTI both hit their highest levels since November last year at $70.76 and $63.48 per barrel, respectively, early today.

OPEC+ have pledged to withhold around 1.2 million barrels per day (bpd) of supply this year to prop up prices. OPEC-led supply cuts meant excess inventories are disappearing and the market looks healthy.

Strong U.S. jobs data from Apr. 05 and U.S. sanctions against OPEC-members Iran and Venezuela also support oil indexes.

Sanctions can cut 500,000 bpd of Venezuelan exports. Add that to a cut in Iran waivers and prices can rise substantially. US will sanction 34 vessels owned or operated by PDVSA and two companies that move Venezuelan crude to Cuba. The sanctions target two companies, Ballito Bay Shipping and ProPer In Management, which delivered Venezuelan oil to Cuba in February and March on the crude tanker Despina Andrianna. The US also sanctioned 34 vessels that PDVSA has an interest in. The sanctions are the latest punitive actions by the Trump administration, as it aims to remove Venezuelan President Nicolas Maduro from power. The US recognizes opposition leader Juan Guaido as Venezuela’s legitimate leader.

A significantly higher oil price would make it more difficult for the U.S. government to drive Iranian oil exports down to zero as quickly as possible. Exemptions from U.S. sanctions on importers of Iranian oil will expire in early May. The U.S. government granted the exemptions in November as oil prices rose in response to tightening OPEC production, which was amplified by Venezuela’s production decline, and anticipation of the Iran sanctions.

At the same time, there remain some factors that could bring prices down later this year. Russia is a reluctant participant in its agreement with OPEC to withhold output, and Russian oil production may increase again if a deal with the producer club is not extended once it expires before July 1. Russian oil output reached a record high of 11.16 million barrels per day (bpd), last year.

In the United States, crude oil production reached a record 12.2 million bpd in late March. U.S. crude exports have also risen, breaking through 3 million bpd for the first time earlier this year.

There also still remain concerns about the health of the global economy, especially should China and the United States fail to resolve their trade dispute soon. Global (trade) demand has weakened, and existing tariffs on Chinese goods shipments to the U.S. are providing an additional drag, although Chinese monetary stimulus measures would likely support growth over 2019.

The weekly U.S. rig count published by industry firm Baker Hughes showed its first surge in oil rigs in seven weeks: a 15-unit climb last week to 831 rigs. EIA data on Apr.3 showed a crude inventory build of 7.2 million barrels. That build came from issues at the Houston Ship Channel last month that slowed U.S. oil exports.

Expect bunker prices to continue slight upward changes today: USD 4-6  up for IFO, USD 1-3 up for MGO.