MABUX: Bunker market this morning, Aug 06

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) continued downward trend on Aug.05:

380 HSFO - USD/MT – 407.24 (-7.38)
180 HSFO - USD/MT – 445.42 (-5.25)
MGO - USD/MT – 648.51 (-6.31)

Meantime, world oil fell on Aug.05 on renewed global economic growth concerns after U.S. President Donald Trump threatened to escalate a trade war with China with more tariffs, which could limit fuel demand in the world’s two biggest crude consumers.

Brent for October settlement decreased by $2.08 to $59.81 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery fell by $0.97 to $54.69 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.12 to WTI. Gasoil for August fell by $13.25.

Today morning oil indexes continiued downward evolution.

Trump last week said he would impose a 10% tariff on $300 billion of Chinese imports starting on Sept. 1 and said he could raise duties further if China’s President Xi Jinping failed to move more quickly towards a trade deal. On Aug.05, China let the yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing may tolerate further currency weakness because of the trade dispute. A lower yuan would raise the cost of dollar-denominated oil imports in China and may limit the import volumes.

Meantime, U.S. crude oil is unlikely to become a target of possible Chinese retaliatory tariffs in response to the latest American tariff threat. Chinese refiners have not bought much U.S. crude oil over the past year, because of the U.S.-China trade spat and related uncertainties over which goods could be subject to tariffs next. So far, oil has been spared from the tariffs, yet Chinese oil traders and refiners have been shunning U.S. crude and they no longer want to sign long-term supply agreements with U.S. producers. So, American crude oil is currently not an essential trade item between the United States and China.

Iranian oil tankers have been offloading their supply into Chinese ports, despite U.S. sanctions on crude from the Islamic Republic. These flows could seriously disrupt U.S.-China trade talks as well as oil markets if Beijing decides to actually use them. Estimates as to the volume of Iranian crude that’s made its way to China between last January and May vary from 12 million to 14 million barrels, an amount that could dramatically impact the price of oil and fuel.

Russia plans to use Iran’s ports in Bandar-e-Bushehr and Chabahar as forward military bases for warships and nuclear submarines, guarded by hundreds of Special Forces troops under the guise of ‘military advisers’, and an airbase near Bandar-e-Bushehr as a hub for 35 Sukhoi Su-57 fighter planes. By such a move, Russia not only has unfettered access to all of Iran’s onshore, offshore and Caspian Sea oil and gas, but also is set to secure two of the most strategically well-placed ports and surrounding areas in the world’s most sensitive oil and gas hotspot, giving it effective control over the Strait of Hormuz.

Iran’s seizure of an Iraqi oil tanker raised some concerns about potential Middle East supply disruptions in the Gulf, with Iranian state media reporting on Aug.04 that its Iranian Revolutionary Guards seized the ship for smuggling fuel. Iraq’s oil ministry in return said it has no connection with an oil tanker. Iraqi port officials said initial information obtained show that the seized “small ship” is owned by a private shipping company which is owned by an Iraqi private trader.

We expect bunker prices may demonstrate firm downward evolution today in a range minus 6-12 USD.