MABUX: Bunker market this morning, Aug 08

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.07:

380 HSFO - USD/MT – 391.51 (-7.69)
180 HSFO - USD/MT – 431.60 (-6.42)
MGO - USD/MT – 637.15 (-5.93)

Meantime, world oil indexes fell on Aug.07 following a surprise build in U.S. crude stockpiles and fears that demand will shrink due to Washington’s escalating trade war with Beijing.

Brent for October settlement decreased by $2.71 to $56.23 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery fell by $2.54 to $51.09 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.14 to WTI. Gasoil for August lost $25.50.

Today morning oil indexes have turned into upward correction after steep losses yesterday.

U.S. crude oil stockpiles rose last week after nearly two months of declines as imports jumped to their highest since January, while gasoline and distillate inventories also grew as refiners ramped up production to their highest rate this year so far. Crude inventories rose 2.4 million barrels in the week to Aug. 2, compared with analysts’ expectations for a decrease of 2.8 million barrels. At 438.9 million barrels, U.S. crude oil inventories were about 2% above the five-year average for this time of year. Crude production grew 100,000 bpd to 12.3 million bpd, just under its weekly record high at 12.4 million hit in May. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures fell 1.5 million barrels.

A new report from BNP Paribas finds that the oil industry faces existential decline from the combination of renewable energy and electric vehicles. The study finds that the energy return on capital invested is 6x-7x times better for solar and wind plus EVs than it is for gasoline. As a result, if gasoline is going to compete with EVs, crude oil would need to fall to $9-$10 in the long run.

A subsidiary of China’s CNPC has used a fleet of tankers to help Iran move oil to China. Keeping Iranian oil exports alive presents a big downside risk to oil prices. Bank of America Merrill Lynch  in a note said that while they retained $60 a barrel Brent forecast for next year, they admitted that a Chinese decision to reinitiate Iran crude purchases could send oil prices into a tailspin.

Meanwhile, China could consider sending navy ships to the Persian Gulf to protect its commercial vessels in the area, should the situation become very unsafe. The U.S at the moment is trying to garner a broad international support for escorting oil tankers in the Gulf after a spate of recent attacks. However, so far only the UK has said it would join the U.S. in protecting tankers after a UK-flagged tanker was seized by Iran last month. Another key oil importer in Asia, South Korea, is said to be also preparing to send a naval unit, including a destroyer, to the Strait of Hormuz.

Russia-led Nord Stream 2 is moving ahead, with the Swedish section of the pipe scheduled to be ready by October. So far, the Gazprom-led consortium has laid 1,700 km of pipes, across Russia, Finland, Sweden, and Germany. The finished pipeline will have a capacity of 55 billion cu m annually and will cost US$10.65 billion (9.5 billion euro). Several European countries, including the Baltic states and Poland, as well as the European Union (EU), have expressed concern about Russia using gas sales and its gas monopoly in Gazprom as a political tool. The EU amended its gas directive, extending the rules of the EU’s internal gas market to natural gas pipelines to and from third countries. Nord Stream 2 AG challenged the new rules in court, arguing that they were discriminatory and asked the court to annul them.

A shortage of heavy crude has prevented U.S. refiners from taking advantage of stronger margins ahead of the new sulfur emission rules of the International Maritime Organizations, which will enter into effect next January. It was reported a narrowed spread between the prices of light sweet crude and heavy sour grades resulting from the supply crunch in the latter has pressured refiners’ margin. However, the pressure is expected to be temporary, with the spread widening again after IMO 2020 rules enter into effect. The reason would probably be the lower demand for heavier crudes.

We expect bunker prices may continue steep downward evolution today in a range of minus 15-23 USD.