MABUX: Bunker market this morning, May 23

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) decreased on May 22:

380 HSFO - 417.00 (-2.21)
180 HSFO - USD/MT - 464.64 (-2.00)
MGO - USD/MT - 662.43 (-3.14)

Meantime, world oil indexes also declined on May 22 as the prospect of mounting U.S.-Iran tensions disrupting supply was offset by concerns that a lengthy trade war between Washington and Beijing would limit crude demand.

Brent for July settlement decreased by $1.19 to $70.99 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery fell by $1.71 to $61.42 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.57 to WTI. Gasoil for June lost $12.50.

Today morning oil indexes continue slight downward movement.

Over the past week, oil prices have trended higher as concerns about escalating U.S.-Iran and Iran-Saudi standoffs have overshadowed bearish-side concerns about the U.S.-China trade war and slowing global economic growth. The rising tension in the Middle East and the critical oil tanker waterways in the region have had some forecasts return to talking about Brent Crude hitting US$80, US$90, or even US$100 a barrel, compared to the current level of around US$72 per barrel. JP Morgan, however, thinks that the return of the geopolitical risk premium in oil prices could be only for the short term, as U.S. shale production continues to grow, while global oil demand may falter amid uncertainties in the world’s economy.  

OPEC+ reportedly discussed two options for increasing production in the second half of the year. The group weighed a plan that would end over-compliance with the cuts, which could add 0.8 million bpd of supply back onto the market. Or, the group could agree to trim the cuts from 1.2 to 0.9 million bpd. However, the group will wait until the June meeting in Vienna to make a decision, and many members are inclined to extend the cuts.

President Trump said that any trade deal with China must skew in favor of the U.S. because of past trade actions by China. The message seems to lower odds of a breakthrough in the weeks ahead. Meanwhile, the Trump administration lifted steel tariffs on Mexico and Canada.

U.S. Secretary of Energy Rick Perry said that a sanctions bill on the Nord Stream 2 pipeline would come in the not too distant future. Separately, Gazprom said that delays in getting permits from Denmark could push off the in-service date of the project into 2020 from late 2019.

 U.S. shale operators are on course to boost production by 16 percent this year. That could put output up 1.1 to 1.2 million bpd by the end of the year. Despite temporary challenges faced in the beginning of the year, E&P companies are set to deliver on their original production and capital targets, with some being well positioned to perform above initial expectations. Several operators have in fact raised their production guidance for the remainder of the year.

We expect bunker prices will continue downward trend: 5-7 USD down for IFO, 9-12 USD down for MGO.