MABUX: Bunker market this morning, July 16

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) did not have firm trend and changed irregular on July 15:

380 HSFO – USD/MT – 448.05 (-4.55)
180 HSFO – USD/MT – 482.20 (-5.16)
MGO – USD/MT – 673.69 (+1.81)

Meantime, world oil indexes decreased slightly on July 15 on signs that the impact of a tropical storm on U.S. Gulf Coast production and refining would be short-lived, while Chinese economic data dimmed the crude demand outlook.

Brent for September settlement decreased by $0.24 to $66.48 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery shed $0.63 to $59.58 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.90 to WTI. Gasoil for August lost $4.50.

Today morning oil indexes sliding down.

The positive Chinese data may indicate early success in the government’s stimulus efforts and potentially more oil demand in the world’s second biggest economy. China’s crude oil throughput rose to a record of 13.07 million barrels per day in June, up 7.7% from a year earlier, following the start-up of two new, large refineries. Still, economic growth of just 6.2% in the second quarter of 2019 — the worst in 27 years — highlighted the impact of trade tensions with Washington and raised the possibility that more incentives might be needed to jump start the economy. Despite a truce agreed between the Chinese and U.S. presidents last month, the trade war remains unresolved.

It is still difficult to predict the impact of Tropical Storm Barry on oil and fuel prices. A key factor in last week’s rally, Barry reached hurricane status as it made landfall in Louisiana on Jul.13, only to quickly weaken back to a tropical storm. However, flash flood warnings were still in force for portions of far southeast Texas through much of Louisiana, Mississippi and Arkansas, and including parts of the mid Mississippi Valley. Some crude was still awaiting refinement due to the idling of some local refineries. The storm had the potential to cut Gulf of Mexico crude production by 140,000 to 230,000 barrels a day in July and the reduced refining activity could raise U.S. crude stockpile balances on the Gulf Coast in the short-term.

The International Energy Agency in its latest Report said global oil supply exceeded demand by about 0.9 million barrels per day (bpd) in the first six months of this year. This surplus adds to the huge stock builds seen in the second half of 2018 when oil production surged just as demand growth started to falter. As per IEA, market tightness is not an issue for the time being and any re-balancing seems to have moved further into the future.

In fact, all three of the major forecasters – OPEC, IEA and EIA – see robust supply growth from U.S. shale. The specific figures vary, but they generally see non-OPEC production (with U.S. shale accounting for most of the total) growing by around 2 million bpd this year, and by even more next year, which means that non-OPEC supply growth for both 2019 and 2020 will exceed demand.

Russia intends to grow its LNG potential amid the escalating pressure coming from Washington reflected in sanctions. The country, holding the world’s largest natural gas reserves, currently possess two LNG plants, including the Gazprom-led Sakhalin LNG plant situated on Sakhalin Island, which has an annual capacity of 9.6 million tons of LNG; and the three-train Yamal LNG plant, which has proven reserves of 683 bcm of gas. It opens the opportunity to set up LNG bunker infrastructure as well. Besides, nearly 50 billion Russian rubles ($800 million) have already been allocated to construct liquefied natural gas (LNG) carriers for the Arctic LNG 2 project, expected to start in 2023.

We expect bunker prices may demonstrate slight downward trend today in a range of minus USD 3-8.