MABUX: Bunker market this morning, July 08

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 July 05:

380 HSFO - 420.23(+1.29)
180 HSFO - USD/MT - 457.67(+1.07)
MGO - USD/MT - 649.85(-0.67)

Meantime, world oil indexes rose slightly on Jul.05 supported by tensions over Iran and last week’s decision by OPEC and its allies to extend a supply cut deal until next year.

Brent for September settlement increased by $0.93 to $64.23 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery rose by $0.71 to $57.51 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.72 to WTI. Gasoil for July gained $2.00.

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

In a prolonged trade war between the United States and China that dampened prospects of global economic growth and oil demand, representatives of both countries are resuming talks this week to resolve the deadlock.

OPEC oil output sank to a new five-year low in June as a rise in Saudi supply did not offset losses in Iran and Venezuela due to U.S. sanctions and other outages elsewhere in the group. The 14-member Organization of the Petroleum Exporting Countries pumped 29.60 million barrels per day (bpd) last month, down 170,000 bpd from May's revised figure and the lowest OPEC total since 2014. Even though Saudi Arabia is raising output following pressure from U.S. President Donald Trump to bring down prices, the kingdom is still voluntarily pumping less than an OPEC-led supply deal allows it to. Meantime, Iran's crude exports have declined to less than 400,000 bpd from more than 2.5 million bpd in April 2018 while in Venezuela supply fell slightly in June due to the impact of U.S. sanctions on state oil company PDVSA and a long-term decline in production.

British Royal Marines seized an oil tanker in Gibraltar on Jul.04 accused of bringing oil to Syria in violation of EU sanctions, a step that could escalate confrontation between the West and Iran. Shipping data suggests it had been loaded with Iranian oil off the coast of Iran, although its documents say the oil is from neighboring Iraq. The authorities in Gibraltar made no reference to the source of the oil when they seized it under the authority of European sanctions against Syria that have been in place for years.

The likelihood that the cargo was Iranian drew a link between the incident and a new U.S. effort to halt all global sales of Iranian crude. European countries have tried stay neutral in that confrontation, which saw the United States call off air strikes against Iran just minutes before impact last month, and Tehran amass stocks of enriched uranium banned under a 2015 nuclear deal. By restricting Iran’s ability to move oil, U.S. sanctions have choked off Tehran’s Syrian allies, causing fuel shortages in government-controlled areas. In May, Syria received its first foreign oil for six months with the arrival of two shipments, one from Iran.

Iran’s parliament last week passed a draft bill allowing for a massive increase in the number of oil and gas condensates refineries in the country, to be funded from investment from private sector companies and regional banks. Although the U.S. recently extended sanctions to Iran’s largest petrochemical group, Persian Gulf Petrochemical Industries Company, Tehran still believes that the petchems sector is its best bet to avoid the full focus of the U.S.’s renewed sanctions effect. Iran also believes that in addition to the boost in its petchems export revenues), it can move dramatically increase foreign earnings from liquefied petroleum gas (LPG) sales and safeguard its hard-won gasoline independence as well.

Asian oil refiners are being squeezed by rising freight rates and insurance costs for shipping crude from the Middle East after attacks on ships in the Gulf last month. The Middle East accounts for more than two-thirds of Asia’s oil supply and the attacks on tankers in the Gulf of Oman on June 13 have heightened security concerns among oil companies and shippers operating in the region. The war risk insurance premium (WRP) for ships travelling in the Gulf has risen 10-fold as a result. Meanwhile, the freight rates for very large crude carriers (VLCC) from Gulf oil terminals to Asian ports have jumped about 30% since the attacks.

The US oil and gas rig count fell by 4 last week while the total number of active oil rigs fell by 5 reaching 788. The combined oil and gas rig count is still 963 for the week, with oil seeing a 75-rig decrease year on year. Year-to-date, the oil rig count has fallen from 858 active rigs since the beginning of the year to 788. Despite the rig decline year on year, US production is almost 1.2 million barrels per day higher year on year—the equivalent of OPEC’s production cut agreement. For week ending June 28 US production rose slightly to 12.2 million bpd, 200,000 bpd down from the all-time high of 12.4 million bpd.

IMPORTANT NOTICE: MABUX HAS STARTED PUBLISHING PRICE INDICATIONS FOR TEST LOTS OF VLS FO (0.5%) TRADING RECENTLY AT ARA, SINGAPORE AND FUJAIRAH. THE LIST OF PORTS WILL BE SUPPLEMENTED AS SOON AS THE AVAILABILITY OF THE CONVENTIONAL BLEND VLS FO EXPANDS. VISIT www.mabux.com FOR MORE DETAILS.

We expect bunker prices may add today 2-5 USD.