MABUX: Bunker market this morning, May 28

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 irregular changes on May 27:

380 HSFO: USD/MT – 400.93 (-1.57)
180 HSFO: USD/MT – 449.79 (+0.65)
MGO: USD/MT – 641.64 (-1.15)

Meantime, world oil indexes increased on May 27 supported by Middle East tensions and OPEC-led supply cuts, though concern over the U.S.-China trade dispute and global economy capped gains.

Brent for July settlement increased by $1.42 to $70.11 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery rose by $0.50 to $59.13 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 10.98 to WTI. Gasoil for June increased by $16.50.

Today morning oil indexes demonstrate slight irregular changes.

The main factor preventing the market from going higher is the concern about the global economy.

Tension between the United States and Iran, with Washington's announcement on May,24 that it would deploy more troops to the Middle East, is supporting the market but its impact could be limited by concern about the global economy.

In addition to the OPEC-led supply cuts, the U.S. sanctions on OPEC members Iran and Venezuela have curbed their crude exports, reducing supplies further. In comments suggesting OPEC isn't in a rush to ease supply restraint ahead of a mid-year meeting to review policy.

U.S. President Donald Trump said a deal with Iran regarding its nuclear program was possible after weeks of tension in the Middle East. Trump also said he wasn't looking to force regime change on the Islamic Republic. Tensions between the two countries had risen after an attack on oil tankers in the Gulf region earlier in the month, followed by drone attacks on Saudi Arabian export pipelines. The U.S. has blamed the attacks on Iran and its Yemeni proxies. Iran denies responsibility.

Kuwait's oil minister said the market was expected to be in balance toward the end of 2019 as global inventories fall and demand remains strong, but OPEC's object is not achieved yet. There are still uncertainties around oil demand growth due to concerns about the impact of the U.S./China trade dispute on global economy, while U.S. shale oil production is still rising. A long-term cooperation agreement between OPEC, Russia and other non-OPEC producers will be on the agenda at the OPEC+ meeting in June.

Trade tensions between Washington and Beijing remained in focus, as profits of China’s industrial firms fell in April due to slowing demand and activity. The data published by the National Bureau of Statistics (NBS) on May,27 shows that the Chinese economy is starting to feel the strain of the ongoing trade war. China's automobile sales, which is a key driver of global oil demand growth, is expected to stagnate this year, after contracting for the first time in more than two decades in 2018. Given the rising share of electric vehicles, that implies another year of relatively weak demand for gasoline.

At the same time, Saudi crude oil exports to China rose 43 percent on the year in April to an average 1.53 million bpd versus 1.07 million bpd in April 2018 as independent refiners continued buying more. According to customs data cited by Reuters, Chinese refiners also increased their purchases of Iranian crude last month ahead of the expiry of sanction waivers. The average daily intake of Iranian oil was almost 790,000 bpd or 3.24 million tons for the whole period.

We expect bunker prices will rise today: 6-8 USD up for IFO, 10-15 USD up for MGO.