MABUX: Bunker market this morning, July 11

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 slight upward trend on July 10:

380 HSFO - USD/MT - 430.76 (+2.63)
180 HSFO - USD/MT - 467.19 (+2.61)
MGO - USD/MT - 653.63 (+0.26)

Meantime, world oil indexes rose on Jul.10 supported by U.S. inventory report as major U.S. producers evacuated rigs in the Gulf of Mexico before a storm.

Brent for September settlement increased by $2.85 to $67.01 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery rose by $2.60 to $60.43 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.58 to WTI. Gasoil for July gained $18.25.

Today morning oil indexes continue to rise  after data showed U.S. crude inventories fell last week.

The Energy Information Administration reported a huge oil inventory draw of 9.5 million barrels for the week to July 5, confirming and even exceeding the American Petroleum Institute’s estimate of an 8.13-million-barrel draw. At 459.0 million barrels, U.S. crude oil inventories are about 4% above the five year average for this time of year.

A storm system in the Gulf of Mexico has an 80 percent chance of becoming a tropical in the next few days. If it does, it will take a track through the oil producing region from east to west making landfall near the Texas and Louisiana border. Major oil companies began evacuating and shutting in production in the Gulf of Mexico. The Gulf of Mexico is home to 17% of U.S. crude oil output which stands at around 12 million barrels per day.

The United States and China are set to relaunch trade talks this week after a two-month interruption, but a year after their trade war began there is little sign their differences have narrowed. After meeting with Chinese President Xi Jinping in Japan just in late June, U.S. President Donald Trump agreed to suspend a new round of tariffs on $300 billion worth of imported Chinese consumer goods while the two sides resumed negotiations. The United States is demanding that China make sweeping policy changes to better protect American intellectual property, end the forced transfer and theft of trade secrets and curb massive state industrial subsidies. At stake, U.S. officials say, is dominance of the high-tech industries of the future, from artificial intelligence to aerospace. There has been no indication so far that the two sides are really ready to settle the dispute: trade war keeps its upward driving potential for fuel prices.

Iran said that it exceeded the 3.67 percent uranium enrichment level laid out in the 2015 nuclear deal, and in recent days exceeded 4.5 percent. Iran said that it would continue to pull out of parts of the accord on an ongoing basis until Europe delivers on some of the benefits laid out in the accord. The decision will increase tension with the U.S. and put pressure on Europe to carry out its promises to Iran. But it may also push Europe away and it increases the odds of punitive action from the EU.

As per info from Arab news, Egypt seized a Ukrainian oil tanker carrying Iranian crude while it was crossing the Suez Canal ten days ago. If confirmed, this would be the second detention of a tanker carrying Iranian oil over the past two weeks. Last week, Gibraltar detained a super tanker carrying crude oil to Syria. If the tanker indeed loaded oil from Iran, it was not only in breach of EU sanctions on the Syrian entity owning the refinery believed to be the destination of the oil, but it also violated the U.S. sanctions on Iran’s oil exports.

Also supporting oil indexes was news that Iran tried to seize a British tanker in Persian Gulf. The oil tanker was crossing into the Strait of Hormuz area when Iranian boats approached it and demanded that the tanker change course and stop in nearby Iranian territorial waters.

Russian oil production fell to a three-year low at the start of July, the result of lingering effects from the pipeline contamination crisis. Market participants remain concerned that Russian compliance could deteriorate again, and lower Russian output together with elevated compliance from OPEC nations may rebalance the oil/fuel market faster.

China’s refiners are cutting runs after a wave of new refineries came online and created a glut of supply. Tepid demand is also exacerbating a fuel surplus. As a result, China’s oil imports could stagnate, a negative for the global fuel market.

According to Goldman Sachs, ongoing production gains from U.S. shale means that supply will outstrip demand into 2020. OPEC+ will help take some surplus offline, but that only offers more space for shale. The investment bank also said that an exit strategy from the cuts was not discussed, and it remains to be seen whether the decision to extend cuts to accommodate shale growth will ultimately drive the need for deeper cuts in 2020.

We expect bunker prices may demonstrate firm upward evolution today and will add $12 - $18.