MABUX: Bunker market this morning, Aug 07

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 downward trend on Aug.06:

380 HSFO - USD/MT – 399.20 (-8.04)
180 HSFO - USD/MT – 438.02 (-7.40)
MGO - USD/MT – 643.08 (-5.43)

Meantime, world oil indexes fell on Aug.06 on the China/US trade escalations and signs of the resulting weakening demand growth.

Brent for October settlement decreased by $0.87 to $58.94 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery fell by $1.06 to $53.63 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.31 to WTI. Gasoil for August lost $5.50.

Today morning oil indexes continued downward evolution.

China showed signs of not backing down in the face of more tariffs from the United States. China let its currency, the yuan, to depreciate to more than 7 to 1 with the U.S. dollar, a threshold that indicates a strategic decision on behalf of Beijing to let the currency weaken in order to counter the effects of trade tariffs. A weakening currency is more than just a defensive maneuver. It signals that China is not willing to give up in an attempt to make a deal. As such, the odds of a deal seem increasingly remote. The financial markets interpreted the move as a sign that economic slowdown and recession are now definitively back. A slowdown, obviously, would have a negative impact on crude oil demand. A weaker yuan may help mitigate the impact of U.S. tariffs, but it also could cut into the purchasing power of the Chinese consumer.

Signs of rising oil exports from the United States also pressured fuel prices. U.S. shipments surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd.

Iran said it would no longer tolerate "maritime offences" in the Strait of Hormuz.  The statement was made a day after Iran seized a second oil tanker near the strategic waterway that it accused of smuggling fuel. Iran's seizure of the Iraqi oil tanker had raised some concerns about potential Middle East supply disruptions in the Gulf. It seems that concerns that the trade conflict has entered a phase of retaliatory action was weighing down on the sentiments in the fuel market, which at the moment is taking lesser notice of the Middle East tensions.

Meantime, the United Kingdom will join the United States in protecting oil tankers in the Persian Gulf and the Strait of Hormuz. The UK already has two Royal Navy ships in the Gulf, which have shadowed UK tankers to ensure their safety. But now the UK will work with other foreign governments to increase the security of the Gulf to encourage the smooth flow of tanker traffic in the area. It is unclear what countries would be interested in joining the efforts, but Germany has already said it definitively will not participate in any efforts—led by the United States at least—to secure the Gulf. South Korea, on the other hand, has agreed to send anti-piracy units to the Gulf to aid the US in keeping the Gulf safe.

President Donald Trump imposed further sanctions on Venezuela, freezing the government’s assets in the U.S. and adding immigration restrictions in a move aimed at stepping up pressure on the regime of Nicolas Maduro. Property belonging to the Venezuelan government may not be transferred, paid, exported, withdrawn, or otherwise dealt in. The U.S. will also block entry into the U.S. by any Venezuelan citizen determined to have assisted or acted on Maduro’s behalf. The moves put Venezuela on the same level as countries like North Korea and Iran that the U.S. has sought to isolate from the rest of the world. It’s, however, unclear whether the new measures will have a significant impact since the vast majority of the Venezuelan government’s income derives from oil and gold - two areas where Maduro’s regime already faces heavy sanctions.

The American Petroleum Institute (API) reported a crude oil inventory draw of 3.4 million barrels for the week ending Aug 1, compared to forecast expectations of a 2.848-million barrel draw. The inventory draw this week compares to last week’s large draw of 6.024 million barrels, bringing the net inventory moves for the year into net draw territory. US crude oil production showed that production for the week ending July 25 rebounded to 12.2 million bpd, just 200,000 bpd off the all-time high of 2.4 million bpd. The U.S. Energy Information Administration report on crude oil inventories is due to be released at its regularly scheduled time later today.

We expect bunker prices may continue slight downward evolution today in a range of minus 3-8 USD.