MABUX: Bunker market this morning, May 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) changed insignificant and irregular on May 07:

380 HSFO – USD/MT - 417.21(-3.00)
180 HSFO – USD/MT - 464.57(-2.29)
MGO – USD/MT - 656.64(+2.21)

Meantime, world oil indexes fell sharply on May 07 as the China - US trade war continues, sparking fears that global growth will be disappointing, despite a tightening of oil supplies in Venezuela and Iran in the wake of US sanctions.

Brent for July settlement decreased by $1.36 to $69.88 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery lost $0.85 to $61.40 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 8.48 to WTI. Gasoil for May delivery fell by $5.75.

Today morning oil indexes do not have any firm trend.

Oil indexes dropped in the beginning of the week after President Trump decided to reignite the trade war with China just before it was supposed to be resolved. The question now is how Beijing will respond. China’s vice premier Liu He was about to travel to the U.S. in what the world had widely thought would be the final sprint to a trade deal. In fact, the damage to the Chinese economy would boomerang back to the U.S., slowing growth and presenting a series of headwinds for a variety of sectors. U.S. agriculture, for instance, has already been hit hard by the trade war, dealing American farmers their worst debt crisis since the 1980s. The oil industry could also be dragged down by punitive tariffs. Chinese tariffs on U.S. oil and gas could rise to a reciprocal 25 percent tariff. That could scramble trade flows.

Trump’s trade war may have depressed oil prices, but the U.S.’ decision to send warships to the Middle East is an ominous sign of a potential escalation in conflict with Iran. It was reported that the U.S. was sending a carrier strike group and a bomber task force to the Middle East to send a message to Iran that any attack on U.S. interests would be met with unrelenting force. The move comes only a week after the expiration of waivers on sanctions, and the U.S. is aiming to cut Iranian oil exports to zero.

Meantime, US refineries have upped their imports of Iraqi, Nigerian, Brazilian, and Angolan crude oil, with May volumes double that of April levels. Oil imports from these countries to the United States spiked as oil supply from Iran and Venezuela dried up, and as reduced OPEC production made scarce heavy sour and even medium sour grades. Venezuela’s oil production shortcomings have changed the face of US oil imports, causing refineries that had previously relied on the heavy crude to shop elsewhere for similar-grade crude – refiners such as Citgo, Valero, and Chevron.

As per U.S. sources, Saudi Arabia is raising its crude oil production to meet market demand after the U.S. sanction waivers for all Iranian customers ended last week. Saudi Arabia issued a measured response to the end of the U.S. waivers, vowing to work toward market stability, but stopping short of announcing any immediate production increase, as it did last year when it boosted oil production ahead of the U.S. sanctions waivers decision, only to see exemptions for eight Iranian buyers, an oversupplied market, and crashing oil prices. Last week, reports emerged that the Saudis might pump more oil in June but this does not necessarily mean they would raise crude exports because the increased production would likely go for power generation as the summer begins in the Kingdom.  

Iran is hinting that it could announce as early as on May 08 reduced compliance under the so-called Iran nuclear deal in counteractions against the maximum pressure campaign of the United States, which ended all waivers for Iranian oil customers and sent a carrier strike group to the Middle East as a warning to Iran. Meanwhile, the EU and the three EU countries part of the nuclear deal – France, Germany, and the UK – said over the weekend that they take note with regret and concern of the decision by the United States not to extend waivers with regards to trade in oil with Iran. The EU vowed to work on keeping legitimate trade with Iran, together with third countries interested in supporting the nuclear deal, including through the special purpose payment vehicle INSTEX, which the EU set up earlier this year to keep trade payments – including oil trade – with Iran open.

The European Union has promised to double its intake of U.S. liquefied natural gas over the next five years with the annual total reaching the equivalent of 8 billion cubic meters in 2023, double the current annual rate of import. For the European Union, this pledge to buy more U.S. LNG will defuse a tariff warning made by President Trump: he said he would slap import tariffs on German cars if the EU did not play nice. With few options available, this is exactly what the EU has done. It will also reduce its reliance on Russian gas – something that has been a problem for several central European EU members, most notably Poland and the Baltic States.

We expect bunker prices may turn into downward evolution today in a range of minus 4-8 USD.