MABUX: Bunker market this morning, May 06

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) demonstrated downward trend on May 03:

380 HSFO - USD/MT - 426.29(-5.57)
180 HSFO - USD/MT - 472.86(-6.71)
MGO - USD/MT - 654.79(-1.21)

Meantime, world oil indexes changed irregular on May 03 as strong U.S. economic data boosted demand sentiment and as production losses in sanctions-hit Iran and Venezuela tightened the market.

Brent for July settlement increased by $0.10 to $70.85 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery added $0.13 to $61.94 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 8.91 to WTI. Gasoil for May delivery gained $11.50.

Today morning oil indexes turned into downward evolution.
 
The oil price rally ended last week with rising U.S. inventories and production. Crude stocks soared by almost 10 million barrels and U.S. production rose to 12.3 million bpd in the last week of April. It means that even with deep losses in supply from Iran and Venezuela, as well as a few other countries around the world, OPEC+ will still need to hold back production to balance the market.

Despite an escalating situation in Venezuela, oil exports from the country remained perhaps surprisingly stable in April, at an average daily rate of 1.06 million barrels. Shipments of Venezuelan crude to China increased during last month, as did cargoes bound for India. The flow of oil from Venezuela to Cuba continued despite attempts by the opposition to put a stop to these. Meanwhile, Juan Guaido’s opposition’s attempts to topple Nicolas Maduro’s government continue. Despite his repeated calls for more protests and striking across the country, and an attempt at a military coup earlier last week, the situation remains unchanged. It becomes clear that the army is the key to a regime change in Venezuela. For now, it appears to remain loyal to Maduro.

Iran said that OPEC may fall apart. As per Iran’s oil minister, Iran is a member of OPEC for its interests and any threat from member states won’t go unanswered, referring to Saudi Arabia’s apparent coordination with the U.S. on Iran sanctions. Iran considers that OPEC is in danger by the unilateralism of some members and the organization faces the risk of collapse. Last year, Qatar quit OPEC, but it would be a much more significant development if Iran were to exit.

Meantime, OPEC production fell to a four-year low in April. Declines in Venezuela and Iran were the major factor. The cartel’s collective output stood at 30.23 million bpd, down 90,000 bpd from March and the lowest since 2015. However, Saudi Arabia said it may increase oil production in June, but any increase would likely be consumed domestically for electricity generation, leaving little extra left over for exports.

Fuel prices were also put under pressure by Russia's pumping clean oil through the Druzhba pipeline towards western Europe again, after several countries halted imports last week because of contamination. Poland, Hungary and the Czech Republic are offering their domestic refiners about 8 million barrels of oil from strategic reserves after supplies from the Druzhba pipeline were halted.

Although U.S. commercial crude oil inventories have been rising in recent weeks, they have been doing so less than normal for this time of the year although U.S. refineries have been undergoing heavy spring maintenance to be ready to process fuel in the fall and winter of 2019, just ahead of the new low-sulfur requirements for shipping fuels. When the U.S. refinery maintenance ends and refineries begin full production ahead of the summer driving season, crude oil inventories are likely to decline quickly, leading to a tighter market.

The number of active oil and gas rigs fell slightly in the United States last week, after two large drops in the two previous weeks, keeping the overall rig count well below year-ago levels for a third week in a row. The total number of active oil and gas drilling rigs in the United States fell by 1 according to the report, with the number of active oil rigs gaining 2 to reach 807 and the number of gas rigs falling by 3 to reach 183. Despite the recent downward trend in the number of active oil rigs in the United States, US crude oil production reached a new all-time highs, and for week ending April 26, US oil production stood at 12.3 million barrels.

We expect bunker prices may change irregular today with a range of plus-minus 1-3 USD for IFO and plus-minus 5-8 USD for MGO.