MABUX: Bunker market this morning, May 29

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 28:

380 HSFO: USD/MT 421.81 (-1.79)
180 HSFO: USD/MT – 461.04 (-1.10)
MGO: USD/MT – 685.88 (+3.68)

Meantime, world oil indexes were steady on May 28: latest rebound eased on signs the U.S. and China are still far from reaching a trade deal, but prices remained supported by supply risks in the Middle East.

Brent for July settlement stayed unchanged: $70.11 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery added $0.01 to $59.14 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 10.97 to WTI. Gasoil for June lost $2.50.

Today morning oil indexes turned into slight downward evolution.
 
Russian oil production continues to trend lower in May as exports via the Druzhba oil pipeline have been restricted due to a contamination issue, helping Russia to finally fall in line with the OPEC+ production cuts. Russia’s oil production averaged 11.126 million bpd between May 1 and 26. This compares to average production of 11.147 million bpd between May 1 and 21. As part of the OPEC+ production cuts between January and June, Russia is taking the biggest share of the non-OPEC cuts and pledged to reduce production by 230,000 bpd from October’s post-Soviet record level of 11.421 million bpd, to 11.191 million bpd. However, last month, Russia halted supplies via the Druzhba oil pipeline to several European countries due to a contamination issue.

During his visit to Japan, Trump said American tariffs on Chinese goods could go up very substantially and very easily. China over the weekend pushed back at the perception that the trade war is hurting its economy, saying higher tariffs would have a very limited impact, and would hurt the U.S. about as much. Fuel market  has largely interpreted Trump’s trade comments as a negotiating tactic.

Israel suggested that it is open to United States-mediated negotiations with Lebanon over a long-standing dispute over a maritime border-and if talks are successful, oil and gas exploration in the eastern Mediterranean could receive much needed easing of the tension and positive regulatory and political climate for oil and gas companies. Neither Lebanese nor U.S. officials have immediately commented on the possibility of such talks. Lebanon and Israel have an unresolved maritime border dispute over a triangular area around 860 square kilometres, that extends along the southern edge of three of Lebanon’s 10 blocks.

The Pentagon has accused Iran’s Revolutionary Guard of sabotaging four vessels at the Emirati port of Fujairah that media reported earlier this month. The Pentagon announcement came on the same day that President Trump said he will send 1,500 more troops to the Middle East. Meanwhile, Washington designated the Iranian Revolutionary Guard a terrorist organization as part of its efforts to apply increasing pressure on Iran. Commenting on the designation, Secretary of State Mike Pompeo said this was a direct response to an outlaw regime and should surprise no one. Meantime, President Trump also said that he is not seeking regime change in Iran, and only wants to contain their nuclear weapons, a comment that seems to contradict the rising risk for war.

Buyers of Iranian oil have disappeared following U.S. sanctions. In March, the countries that had exemptions on U.S. sanctions purchased 1.6 million barrels per day from Iran, and evidence suggests that they are all mostly abiding by U.S. demands to cease purchasing.

A shortage of heavy oil due to the outages in Venezuela and Iran are cutting into the profits of refiners who rely on such oils. Gulf Coast fuel oil, a byproduct of heavy crude, saw prices surge to a six-month high. As refiners ramp up production of gasoline, their margins are narrowing. Meanwhile, for refiners who have made expensive upgrades to produce cleaner fuels, the forthcoming IMO rules on sulfur concentration could provide a windfall.

We don’t expect any firm trend in bunker prices today. The indications may change irregular in a range of plus-minus 1-3 USD.