MABUX: Bunker market this morning, July 18

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) continued moderate downward evolution on July 17:

380 HSFO – USD/MT 433.45 (-6.23)
180 HSFO – USD/MT 467.69 (-5.58)
MGO – USD/MT 665.68 (-2.39)

Meantime, world oil indexes also fell on Jul.17, extending a more than 3% drop in prices the previous session, after U.S. government data showed large builds in refined product stockpiles.

Brent for September settlement decreased by $0.69 to $63.66 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery fell by $0.84 to $56.78 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.88 to WTI. Gasoil for August lost $17.50.

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

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.1 million barrels from the previous week. At 455.9 million barrels, U.S. crude oil inventories are about 4% above the five year average for this time of year, confirming and even exceeding the American Petroleum Institute’s Tuesday estimate of a small 1.401-million-barrel draw. Final figure follows an estimated a 9.5-million-barrel draw in oil inventories for the previous reporting period. In distillate fuels, the authority reported an increase in inventories of 5.7 million barrels, versus a build of 3.7 million barrels for the previous week. Production last week averaged 5.4 million bpd for the second week in a row.

More than half of daily crude production in the Gulf of Mexico remained offline on Jul.18 in the wake of Hurricane Barry, as most oil companies were re-staffing facilities to resume production. The Bureau of Safety and Environmental Enforcement said 1.1 million barrels per day of oil, or 58% of the region’s total, and 1.4 billion cubic feet per day of natural gas output remained shut.

Oil prices slumped on Jul.16 on increased hopes for a return of Iranian crude to the global oil market after U.S. President Donald Trump said progress had been made with Tehran, signaling tensions could ease in the Middle East. However, Iran later denied it was willing to negotiate over its ballistic missile program, contradicting a claim by U.S. Secretary of State Mike Pompeo, and appearing to undercut Trump’s statement.

The Turkish Foreign Affair Ministry on Jul.16 rejected the notion of European Union sanctions on Turkey over its drilling for gas in disputed eastern Mediterranean waters, pledging instead to send yet another ship to the area. The day before, European Union foreign ministers approved a new batch of sanctions against Turkey: the EU was suspending talks on an air transport agreement and would call on the European Investment Bank to review its lending to the country. Meanwhile, ministers of the EU members backed a proposal by the EU’s executive branch to reduce financial assistance to Turkey for the next year. Old tensions in the Eastern Mediterranean between Turkey and the EU member state Cyprus about jurisdiction for offshore oil and gas deposits intensified after Turkey’s decision to send a second drilling ship into disputed waters off the coast of Cyprus.  

The United Kingdom discussed on Jul.17 the detained Iranian oil tanker Grace 1. The tanker was seized earlier this month by British Royal Marines off the coast of the British Mediterranean territory of Gibraltar on suspicion of violating sanctions against Syria. Shipping data suggests that the tanker en route to Syria was loaded with Iranian oil off the Iranian coast. 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. Now the UK will facilitate the release of the Iranian oil tanker detained by Gibraltar if Iran gives guarantees that the crude loaded on that vessel wasn’t bound for Syria.

Shippers trying to minimize time in the Middle East after oil tanker attacks pushed up insurance costs are scaling back purchases of marine fuels from the United Arab Emirates' (UAE) Fujairah oil hub. Instead, they are turning primarily to Singapore with some diverting to smaller bunkering ports, including in India and Sri Lanka. A ton of 380 HSFO in Fujairah has slipped from an average $5-$10 premium over Singapore in May to a discount of $30-$70 over the past two weeks. The increased bunker demand in Singapore helped push Asian fuel oil market premiums to record highs last week. Singapore fuel oil inventories have mostly fallen since May as suppliers clear stocks of HSFO ahead of a shift to lower-sulphur grades under global ship fuel rules due to take effect next year.

We expect bunker prices may continue downward trend today in a range of minus 4-12 USD.