MABUX: Bunker market this morning, June 25

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) continued upward trend on June 24:

380 HSFO – USD/MT 404.32 (+6.40)
180 HSFO – USD/MT – 443.82 (+5.65)
MGO – USD/MT – 654.44 (+4.88)

Meantime, world oil indexes changed irregular on Jun.24 as Middle East tension simmered.

Brent for August settlement decreased by $0.34 to $64.86 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery rose by $0.47 to $57.90 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.96 to WTI. Gasoil for July lost $7.25.

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

U.S. President Donald Trump said over the weekend that the U.S. will impose major additional sanctions against Iran this week after Tehran’s Islamic Revolutionary Guard Corps said it shot down the U.S. RQ-4A Global Hawk surveillance drone. Iran accused of incursion and spying over Iranian airspace, while the U.S. said that the aircraft was in international airspace when it was targeted. The news came after Trump called off military strikes against the Islamic Republic over concerns about the loss of life.

Besides, Donald Trump said countries that get their crude oil via the shipping routes in the Middle East should protect their own ships along the lanes. The daily flows of oil through the Strait of Hormuz accounts for around 30 percent of all seaborne-traded crude oil and other liquids.

Russia is willing to step in to help Iran export its oil while the Middle Eastern country is struggling to keep the oil flowing while pressured by sanctions levied by the United States. Iran’s budget counts on raking in around $30 billion from oil and gas condensate exports. Iran in turn was holding out hope that Europe would have its Instex European payment system in place that would allow Europe to continue purchasing Iranian oil, but the system is not yet running, leaving Iran in tight spot when it comes to getting its oil out of country. If Russia’s help is successful, Iran would be able to export substantial amounts of oil to Europe, Russia would be able to export more gas to the EU, and Europe would be able to purchase both low-cost oil and gas.

China said both China and the United States should make compromises in trade talks. Both countries last week said they were reviving talks ahead of the meeting between presidents Donald Trump and Xi Jinping. Hopes that it will lead to a de-escalation of a trade war that is damaging the global economy has cheered financial markets. At the moment both the Chinese and U.S. teams are making preparations for the Xi-Trump meeting. The two countries are in the middle of a costly trade dispute and have slapped increasingly severe tariffs on each other's imports. China has vowed to not give in on issues of principle nor under U.S. pressure. Trump has threatened to put tariffs on another $325 billion of goods, covering nearly all the remaining Chinese imports into the United States, including consumer products such as cellphones, computers and clothing. If the talks fail and the U.S. and China decide to escalate confrontation, a total recession is possible.

The OPEC+ has decided to meet in Vienna on July 1 and 2. The recent plunge in oil prices probably should make OPEC+’s decision an easy one. As long as they stick to the cuts and extend them, OPEC+ may succeed in keeping some stability in the market.

Robust US oil production is also keeping the prices in check, although falling back for the second week in a row on June 14 to 12.2 million bpd down from the all-time high of 12.4 million bpd.

Venezuela’s oil production fell to a new low last month, as economic crisis and sanctions continue to strangle the industry. Venezuela’s output fell by 35,000 bpd in May, plunging to 741,000 bpd for the month, the lowest total in about a half century. Venezuela has massive oil reserves, the largest in the world, but conventional fields are in decline and heavy oil fields require huge investment. As the country settles into a political stalemate that shows no signs of changing, the country’s oil production may simply continue to erode.

We expect bunker prices may change irregular today in a range of plus-minus 2-6 USD.