MABUX: Bunker market this morning, July 17

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) turned into moderate downward evolution on July 16:

380 HSFO – USD/MT – 439.68 (-8.37)
180 HSFO – USD/MT – 473.27 (-8.93)
MGO – USD/MT – 668.07 (-5.62)

Meantime, world oil indexes fell down yesterday after U.S. President Donald Trump said progress has been made with Iran,

Brent for September settlement decreased by $2.13 to $64.35 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery fell by $1.96 to $57.62 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.73 to WTI. Gasoil for August lost $0.50.

Today morning oil indexes do not have firm trend and change irregular.

President Trump said a lot of progress had been made with Iran and that he was not looking for regime change in the country. No details about the progress were given, but U.S. Secretary of State Mike Pompeo noted Iran had said it was prepared to negotiate about its missile program. Tensions between the United States and Iran over Tehran’s nuclear program have previously lent support to oil futures, given the potential for a price spike should the situation deteriorate.

Producers began restoring some of the roughly three-quarters of output that was shut at U.S. Gulf of Mexico platforms ahead of Hurricane Barry. There was 1.3 million barrels per day (bpd) of oil production offline in the U.S. waters of the Gulf of Mexico on Jul.15, about 80,000 barrels fewer than on Jul.14. Workers also were returning to the more than 280 production platforms that had been evacuated. It can take several days for full production to be resumed after a storm leaves the Gulf of Mexico.

The market was also weighed down by signs of further increases in output from the United States, which has ridden a wave of shale oil production to rise to become the world’s biggest crude oil producer, ahead of traditional top producers Russia and Saudi Arabia. U.S. oil output from seven major shale formations is expected to rise by about 49,000 bpd in August, to a record 8.55 million bpd. Overall U.S. crude production is now more than 12 million bpd. The rising U.S. output will further undermine the efforts by Russia and Saudi Arabia to reduce global oil inventories by convincing suppliers both in the Organization of the Petroleum Exporting Countries and outside of OPEC to cut production.

In the first six months of the year, Libya’s oil revenues were down 11.2% from the same period in 2018, falling to $10.2 billion in H1. Like most OPEC members, oil is the backbone of the Libyan economy, representing 92.8% of its total income in H1. Despite the sagging revenue, oil production in the first two quarters of 2019 was higher than in 2018. However, oil prices were less favorable in the beginning of 2019 than they were at the beginning of 2018, with the OPEC basket price the first week of January in 2019 running about $10 under the level it was trading at that same time during the year prior.

European Union officials agreed political and financial sanctions against Turkey after Ankara went ahead with drilling operations off Cyprus despite repeated warnings. Last week the Turkish drilling vessel Yavuz sailed to an area off Cyprus’ east coast — the second to follow a first drilling vessel, Fatih, which had already been exploring in Cypriot waters. Notably, the vessels have been accompanied by the Turkish military, including drones, F-16 fighters, and warships. Cyprus has long condemned Turkey's aggressive oil and gas explorations as a "second invasion" in reference to the creation in 1974 of the breakaway Turkish Republic of Northern Cyprus after a military takeover.

BuzzFeed News reported on a secret meeting between Russian and Italian officials, which unmasked the details of a scheme that would see Russian money funneled into the far-right Lega Party in Italy. According to BuzzFeed, a Russian oil company would sell fuel at a discount to Eni, with the difference – roughly $65 million – secretly diverted into the coffers of the Lega Party.

The American Petroleum Institute (API) reported a small crude oil inventory draw of 1.401 million barrels for the week ending July 11, compared to analyst expectations of a 2.69-million barrel draw. The inventory draw this week is disappointing after last week’s large draw of 8.129 million barrels, according to the API. After a string of inventory draws, the net build is now just 12.16 million barrels for the 29-week reporting period so far this year, using API data. US crude oil production as estimated by the Energy Information Administration showed that production for the week ending July 05 rose slightly this week to 12.3 million bpd, just 100,000 bpd off the all-time high of 12.4 million bpd. The U.S. Energy Information Administration report on crude oil inventories is due to be released later today.

We expect bunker prices may continue downward trend today in a range of minus USD 5-10.