MABUX: Bunker market this morning, July 19

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 18:

380 HSFO - USD/MT - 427.85 (-5.32)
180 HSFO - USD/MT - 463.04 (-4.47)
MGO - USD/MT - 659.30 (-6.38)

Meantime, world oil indexes also fell on Jul.18, weighed down by an expectation that crude output would rise in the Gulf of Mexico following last week’s hurricane in the region.

Brent for September settlement decreased by $1.73 to $61.93 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery fell by $1.48 to $55.30 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.63 to WTI. Gasoil for August lost $14.00.

Today morning oil indexes have turned into upward correction.

U.S. offshore oil and gas production has continued to return to service since Hurricane Barry passed through the Gulf of Mexico last week, triggering platform evacuations and output cuts. Royal Dutch Shell, a top Gulf producer, resumed about 80% of its average daily production in the region.

Meantime, renewed Sino-U.S. trade tensions were also cited as a headwind. U.S. President Donald Trump accused Beijing of not buying U.S. farm products as agreed and said a trade deal with China might not be concluded in the near term. The president also threatened to slap additional tariffs on Chinese goods.

Facing vigorously enforced U.S. sanctions directed principally on oil, Iran is focussing on the less targeted strategic areas in its hydrocarbons business, notably continuing to develop its gas sector and building out its petchems and related capacity. One such area is the generation of sufficient gasoline at least to meet its own needs, as its reliance on other countries during the previous sanctions era was seen as a national humiliation. Despite the worsening sanctions environment, Iran is now not only self-sufficient for gasoline but is rolling out plans to allow it to export the product.

Risk Intelligence has warned that the attacks against tankers off Fujairah in May and in the Gulf of Oman in June are likely to be a part of a larger plan by Iran’s government, involving strikes against targets that are somewhat linked to the United States and its Arab allies. Risk Intelligence noted that the situation has had a direct impact on the threat to shipping operations in the Persian Gulf. The Company has published a whitepaper which includes several scenarios outlining the potential impact on shipping operations in the Persian Gulf over the coming months, highlighting the need for contingency plans and relevant mitigation measures.

Iran’s Revolutionary Guard said on Jul.18 that it seized a foreign oil tanker, which it claims was smuggling 1 million liters of fuel near the island of Larak in the Persian Gulf on Sunday. The recent Middle East conflict come amid reports of a softening rhetoric between Iran and the U.S. officials, which could push crude and fuel prices higher as new supplies hit the market if energy-export sanctions are lifted. However, market mostly expressed skepticism about a near-term Tehran-Washington resolution, with testiness between the countries providing support for energy prices.

Russia’s oil production in the past few days has recovered to the ceiling that Moscow has pledged in the OPEC+ deal. Russia’s oil production in the first days of July averaged 10.79 million bpd, the lowest level since August 2016, when production stood at 10.71 million bpd. Despite the rise in the June production, Russia was still complying, for a second month in a row, with its pledge under the OPEC+ deal in which it vowed to reduce production by 230,000 bpd from October’s post-Soviet record level of 11.421 million bpd, to 11.191 million bpd.

We expect bunker prices may continue downward trend today in a range of minus 8-12 USD.