MABUX: Bunker market this morning, Aug 12

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) turned into a phase of insignificant irregular changes on Aug.09:

380 HSFO - USD/MT – 361.90  (-0.80)
180 HSFO - USD/MT – 405.83 (-0.41)
MGO - USD/MT – 628.50 (+2.06)

Meantime, world oil indexes rose on Aug.09 supported by expectations of more production cuts by OPEC amid fears the U.S.- China trade row could lead to a global slowdown.

Brent for October settlement increased by $1.15 to $58.53 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery rose by $1.96 to $54.50 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.03 to WTI. Gasoil for August gained $12.75.

Today morning oil indexes turned into slight downward correction.

The IEA’s latest Oil Market Report shows some worrying numbers on oil demand. Consumption declined in May by 160,000 bpd year-on-year. Between January and May, demand was only up by 520,000 bpd, the weakest increase since 2008. Overall, the agency cut global demand growth for 2019 to 1.1 million bpd. The data offers further evidence of an economic slowdown.

Global financial markets were rocked over the past week after U.S. President Donald Trump said he would impose 10% tariffs on Chinese goods starting September and a fall in the Chinese yuan sparked fears of a currency war. China’s yuan strengthened against the dollar on Aug09, on the back of strong export growth in July.

Chinese crude oil imports added 14 percent in July as refineries started ramping up processing rates after profit margins began improving thanks to stronger fuel demand.
The average daily intake was 9.66 million barrels, with fuel exports rebounding as well last month, up by as much as 20 percent despite excess supply. This stronger demand from some industries, notably mining, was one of the key drivers behind the higher imports and processing rates. The other was demand from new refineries. This year may see refining capacity additions of as much as 890,000 bpd in China. Almost half of this will come from a new 400,000-bpd refinery property of teapot Hengli Petrochemical Co..

Saudi Arabia, de facto leader of the Organization of Petroleum Exporting Countries (OPEC), planned to maintain its crude oil exports below 7 million barrels per day in August and September to bring the market back to balance and help absorb global oil inventories. The United Arab Emirates also will continue to support actions to balance the oil market. The OPEC and non-OPEC ministerial monitoring committee would meet in Abu Dhabi on Sept. 12 to review the oil market. OPEC and its allies including Russia agreed in July to extend their supply cuts until March 2020 to boost oil prices.

The U.S. Maritime Administration has issued a fresh warning regarding commercial shipping in the Persian Gulf and the key oil chokepoint the Strait of Hormuz, saying that vessels in the area may encounter GPS interference and “spoofed bridge-to-bridge communications from unknown entities falsely claiming to be U.S. or coalition warships.” In at least two of the incidents in the Middle East in the past months, vessels reported GPS interference. The U.S. said in June that countries that get their crude oil via the shipping routes in the Middle East should protect their own ships along the lanes. 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.

Libya announced that it has resumed oil production from the country’s largest oilfield, Sharara. The oil production will gradually increase. The field had stopped producing on July 19 after an unidentified group had shutdown a pipeline valve. Production was resumed and the force majeure lifted on July 22, but yet another pipeline valve was closed on July 31, triggering another force majeure. Sharara has a capacity of 340,000 barrels per day, but prior to the most recent force majeure, the field had been pumping at a rate of 290,000 barrels per day.

The US oil rig count fell by 6 last week, adding to months of losses and bringing the overall rig count to the lowest since the first week of 2018. The combined oil and gas rig count is now 934 for the week, with oil rigs seeing a loss of 105 rigs year on year, with gas rigs down 17 since this time last year. Oil production in the US, however, remains above 12 million barrels per day, up over 1 million bpd over this time last year.

We expect bunker prices may change upward today in a range of plus 7-12 USD.