MABUX: Bunker market this morning, Aug 14

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) demonstrated slight downward evolution on Aug.13:

380 HSFO - USD/MT – 355.93 (-6.31)
180 HSFO - USD/MT – 399.57 (-5.10)
MGO - USD/MT – 632.04 (-1.11)

Meantime, world oil indexes jumped on Aug.13 after the United States said it would delay imposing a 10% tariff on certain Chinese products, easing concerns over a global trade war that has pummelled the market in recent months.

Brent for October settlement increased by $2.73 to $61.30 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery rose by $2.17 to $57.10 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.20 to WTI. Gasoil for September rose by $19.00.

Today morning oil indexes do not have any firm trend so far.

The Chinese Ministry of Commerce said in a statement on Aug.13 that U.S. and Chinese trade officials spoke on the phone and agreed to talk again within two weeks. The Chinese products include laptops and cellphones. The tariffs had been scheduled to start next month. The possibility that the United States and China can continue the trade talks is raising hopes that they might actually get some type of deal.

Iran is going to restructure its budget in a way that should reduce the country’s dependence on oil revenues to zero. The Iranian officials also admitted the government would need to restructure its budget to reduce oil’s weight in it even without sanctions. In the latest budget approved by the Iranian government last December, revenues from oil exports were calculated at US$21 billion. This would constitute a third of the budget for the 2019/2020 financial year that started this March. The figure assumed an average price for Iranian oil of between US$50-54 a barrel. That’s cautious enough but it also assumed average daily exports of 1-1.5 million barrels. After the removal of sanction waivers for Iran’s largest oil buyers, most sources agree that Iran is exporting a lot less than that.

Saudi Arabia said late last week it plans to keep its crude oil exports below 7 million barrels per day in August and September to help drain global oil inventories. Market expects the country to support prices ahead of its plans to float Saudi Aramco, in what could be the world's largest initial public offering (IPO). Saudi Aramco was ready for its IPO, but the timing for the deal will be decided by its sole shareholder, the Saudi government. Aramco’s valuation, which The Kingdom feels is $2 trillion, is dependent on oil prices. Analysts claim that this $2 trillion valuation is overpriced, and that the real value of Aramco is at most $1.5 trillion.

The People's Bank of China lowered its official yuan midpoint for the ninth straight day to 7.0326 per dollar. A lower yuan increases the cost of dollar-denominated oil imports in China, the world's biggest crude oil importer.

Booming U.S. shale oil output also continues to chip away at efforts to limit the global supply overhang, weighing on prices. U.S. oil output from seven major shale formations is expected to rise by 85,000 barrels per day (bpd) in September to a record 8.77 million bpd. The start-up of a major pipeline between the Permian shale basin and the Gulf Coast means that more crude can be exported, adding to global supplies.

The shipping industry is preparing for a disruption of the types of fuels it will be using as of the beginning of 2020, but the oil and fuels market, as well as refiners, are also getting ready for the impact. Wood Mackenzie forecasts, that due to the new rules, gasoil’s price differential to crude oil will be stronger while the HSFO spread will weaken. In terms of individual oil-producing nations, the first impression is that the impact on the largest sour crude producers—Saudi Arabia, Russia, and Iraq—could be quite significant. Among other producers, WoodMac is concerned that Canada could be badly hit because of its heavy oil sands output, while Brazil and the U.S. would be winners because of their large production of heavy-sweet and light-sweet crudes, respectively.

The American Petroleum Institute (API) has estimated a surprise crude oil inventory build of 3.7 million barrels for the week ending Aug 8, compared to analyst expectations of a 2.761-million barrel draw. Market awaits now weekly oil inventory data from the U.S. Energy Information Administration which is due to be released at its regularly scheduled time later today.

We expect bunker prices may demonstrate firm upward trend today in a range of plus 13-20 USD.