MABUX: Bunker market this morning, Aug 05

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) dropped on Aug.02:

380 HSFO / USD/MT – 414.62 (-15.51)
180 HSFO / USD/MT – 450.679 (-18.07)
MGO / USD/MT – 654.82 (-11.35)

Meantime, world oil rebounded on Aug.02 after its worst selloff in three years.

Brent for October settlement increased by $1.39 to $61.89 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery added $1.71 to $55.66 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.23 to WTI. Gasoil for August fell by $8.25.

Today morning oil indexes have turned into slight downward evolution.

Oil prices were trading up on Aug.02, but the 2+% gains was not enough to offset the massive loss seen the day before when president Trump’s surprise announcement that he would put a 10 percent tariff on $300 billion worth of Chinese imports caused a widespread selloff in equities and oil prices. China said that it would retaliate if the tariffs go into effect. Trump left open the possibility that the U.S. could hold off, but only if China offered concessions.

OPEC’s spare capacity has been rising because of the production cuts aimed at drawing down stocks and bolstering oil prices. Thanks to the production cuts being extended into 2020, OPEC now has more than 3 million barrels per day (bpd) of spare production capacity, which makes the cartel, as well as the International Energy Agency (IEA), confident that the market can withstand a sudden major supply outage. The risks of such an oil supply disruption have increased in recent months with the flare-up of tensions in the Middle East and the Strait of Hormuz—the transit lane of 21 percent of daily global petroleum liquids consumption.

Iran’s oil exports plunged to just 100,000 bpd in July, although there is a dispute over the accuracy of that data. If true, volumes are down sharply from the 400,000 bpd in June. Meanwhile, the Iranian government approved a plan to lop off a few zeros from its currency and rename it amid bad inflation.

Libya’s oil production plunged to a five-month low this week, dragged down by another outage at the country’s largest oil field. On July 30, Libya’s National Oil Corporation declared force majeure on crude loadings at the Zawiya port, due to another “valve closure halting crude oil supply” from the Sharara oil field to the port. It’s the second outage at the field in ten days. As a result of the outage, Libya’s oil production fell to a five-month low of 950,000 bpd. Prior to the disruption, Libya had succeeded in raising output to 1.3 million barrels per day, the highest level in six years.

With IMO 2020 set to trigger a sharp rise in operating expenses, Indonesia’s Ministry of Transportation has decided not to enforce the regulation on its domestic fleet. Instead, in a bid to deplete an abundance of supply, domestic vessels will be allowed to continue burning high sulphur fuel oil within Indonesian waters, much to the chagrin of the Trident Alliance, which has reiterated the importance of maintaining a level playing field in applying the tougher sulphur regulations. The Trident Alliance says it is unclear how a failure or refusal to enforce the new sulphur cap would not expose a state to legal consequences. States, such as Indonesia, that are party to IMO’s MARPOL Annex VI do not have the facility to exempt merchant vessels from compliance. Additionally, the industry coalition notes that states that are party to Annex 6 can be held liable for non-enforcement by other signatories.

The New York Mercantile Exchange (NYMEX) is to list the Singapore Fuel Oil Bunker 380 cSt (Argus) futures contract for trading on the CME Globex electronic platform from 26 August. The contract, coded ABF, will settle on the monthly average of Argus 3.5% sulphur fuel oil delivered bunker assessments. In a statement, CME Group noted that some 2,395 deals were reported by market participants into the Singapore assessment process during the first six months of 2019 – an average of 20 a day. The assessment reflects the price paid for high sulphur fuel oil stems between 500 and 3,000 metric tonnes delivered to ships 4 to12 days from the trade date.

The US oil and gas rig count fell by 8 again last week, adding to months of losses and bringing the overall rig count to the lowest in a year and a half. The total number of active oil rigs in the United States fell by 6 according to the report, reaching 770. The combined oil and gas rig count is now 942 for the week, with oil rigs seeing a loss of 89 rigs year on year. Year-to-date, the oil rig count has fallen from 858 active rigs since the beginning of the year to 770.

We expect bunker prices may change irregular today in a range of plus-minus 8-11 USD.