MABUX: Bunker market this morning, May 14

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) did not have any firm trend on May 13:

380 HSFO - 415.50(+1.07)
180 HSFO - USD/MT - 462.93(+1.29)
MGO - USD/MT - 658.64(+3.35)

Meantime, world oil indexes changed irregular on May 13 on increasing concerns about supply disruptions in the Middle East.

Brent for July settlement decreased by $0.39 to $70.23 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery declined by $0.62 to $61.04 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.19 to WTI. Gasoil for June gained $3.00.

Today morning oil indexes does not have any firm trend so far.

Saudi Arabia said on May 13 that two Saudi oil tankers were among vessels attacked off the coast of the United Arab Emirates, condemning it as an attempt to undermine the security of global crude supplies. The UAE in turn reported that four commercial vessels were attacked near Fujairah, one of the world’s largest bunkering hubs. The port lies near the Strait of Hormuz, one of the world’s most important oil export waterways. Iran’s foreign ministry called the incidents worrisome and dreadful and asked for an investigation into the matter.
 
Russia is sending at the moment mixed signals on its willingness to continue taking part in the supply agreement with OPEC. Thereafter, OPEC’s task in estimating global oil supply going forward has been made more difficult by mounting uncertainty over Russian oil supplies to Europe via the Druzhba pipeline, expectations of further production declines in Venezuela, and the possibility of an outage in Libya, which is in the midst of a civil war with rival armies fighting for the capital Tripoli.

Adding to that, the U.S. threw a major challenge to the cartel and allies’ supply pact by ending all sanction waivers for Iranian oil buyers, leaving the organization and the market guessing just how much supply will be lost from Iran until June and afterwards, and how much more the other OPEC members—those with spare production capacity like Saudi Arabia and the UAE—will have to potentially produce to offset the loss of Iranian oil.

Another potential upward driver at the moment is the threat of a direct Iran-U.S. confrontation. Taking into account the presence of hardline fundamentalist groups in the area, Tehran can mount a strong force without officially taking part in attacks against the U.S. The same could be done in Syria or Yemen, targeting U.S forces and its allies in the area. By using Hezbollah or Hamas, Tehran would even be able to instigate a full-scale regional war, forcing Israel to take part in the conflict. Proxy wars in several countries in the Middle East could have a harmful effect on global oil and fuel markets. Any disruption to oil flows cannot be countered by increased OPEC output or even U.S. shale oil. The market may seem well supplied, and inventories are still at relatively high levels, but this reality could soon change.

The trade conflict between Washington and China pushes oil/fuel prices down. The United States and China together accounted for 34% of global oil consumption in the first quarter of 2019. The trade turmoil has prompted hedge funds to cut their bullish wagers on U.S. crude oil to the lowest level in a month and raised their bets on Brent crude to the highest in nearly seven months.

Separately, in an early indicator of future output, U.S. energy companies last week reduced the number of oil rigs operating for the third time in four weeks, cutting them by two and bringing the count down to 805.

A collision between an oil tanker and a tug boat in the Houston Ship Channel on May 10 caused a capsizing and an oil derivative leak. The tug boat, according to reports, was moving two barges, one of which capsized as a result of the collision. The Houston Ship Channel was closed after the collision but was reopened May 12: the water was reportedly not dangerous for humans even though there had been several reports about dead animals in the vicinity. The cause of the collision is yet to be established but whatever it is, the cost for Houston Port will be high. The port is one of the busiest in the United States and every hour it remains closed carries a hefty price tag.

We expect bunker prices will not have firm trend today and may change irregular in a range of plus-minus 1-3 USD.