MABUX: Bunker market this morning, May 27

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) declined on May 24:

380 HSFO - USD/MT - 423.61 (-9.37)
180 HSFO - USD/MT - 461.05 (-8.83)
MGO -         USD/MT - 683.33 (-9.55)

Meantime, world oil indexes changed irregular on May 24 ahead of long U.S. and UK holiday weekends, but posted the biggest weekly drop of the year, pressured by rising inventories and worries about the global economy.

Brent for July settlement increased by $0.93 to $68.69 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery added $0.72 to $58.63 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 10.06 to WTI. Gasoil for June lost $2.75.

Today morning oil indexes do not have any firm trade so far and changed irregular.
 
Oil rebounded on May 24 but it was not enough to erase the roughly 7 percent meltdown seen on May 23. The trade war is starting to become a top concern to global equity and commodity markets.

Russia tried to quickly resolve the oil contamination problem through its Druzhba pipeline but hit a setback last week. French oil company Total saw its Leuna refinery damaged, and reports suggest it may have been linked to receiving contaminated oil. The largest-ever outage to hit Russia may continue.

U.S. manufacturing growth fell to its lowest reading in nearly a decade, a sign that the trade war may be impacting the economy. Purchasing Managers Index (PMI) declined to 50.6 in May, the lowest level since September 2009. Anything below 50 is an outright contraction. In a speech last week, U.S. Federal Reserve Chair Jerome Powell warned about rising corporate debt.

Bipartisan momentum is building for sanctions on companies that help build the Nord Stream 2 pipeline. The U.S. views the pipeline as a geostrategic threat, hooking Europe on Russian gas. But it would also impact U.S. LNG exporters, adding an extra impetus to lawmakers to try to halt the pipeline. Meantime, Saudi Aramco agreed to buy LNG from the U.S Port Arthur LNG project. Aramco may also take a 25 percent stake in the project. The deal is a dramatic role reversal, with the U.S. sending energy to Saudi Arabia, rather than the other way around.

Demand for fuels in China is showing weakness, with small private refineries seeing inventories building up. Gasoline inventories in Shandong province have surged to their highest level since 2011. The refiners are losing $8 on every barrel they produce and are starting to cut run rates.

Looming IMO rules on sulfur fuels could push Middle East oil to a heavy discount. Dubai crude could fall to an $8-per-barrel discount to Brent, deeper than the current $4 discount, according to Citi. High-sulfur fuels will fall out of favor when the shipping rules take effect at the start of 2020. The shift will hurt countries like Saudi Arabia and Iraq that produce high-sulfur, known as sour in industry parlance, while boosting the value of cleaner oils produced across Africa and Europe. But it will also create opportunities for fatter profit margins for the world’s most powerful refineries, like those in India and the U.S. Gulf Coast.

We don’t expect any firm trend in bunker prices today. The indications may change irregular in a range of plus-minus 2-5 USD.