MABUX: Bunker market this morning, Aug 16

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 downward evolution again on Aug.15:

380 HSFO - USD/MT – 351.48 (-10.84)
180 HSFO - USD/MT – 396.67 (-6.74)
MGO - USD/MT – 633.82 (-6.74)

Meantime, world oil indexes continued downward trend on Aug.15 pressured by mounting recession concerns and a surprise boost in U.S. crude inventories.

Brent for October settlement decreased by $1.25 to $58.23 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for September delivery declined by $0.76 to $54.47 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.76 to WTI. Gasoil for September fell by $1.00.

Today morning oil indexes turned into upward changes as recession fears ease amid positive U.S. data.

A rise in U.S. retail sales was cited as easing some concerns of a potential recession. It rose by 0.7% in July from a month earlier, data showed. It was previously expected a rise of 0.3%.

Large engineering and construction contracts for liquefied natural gas (LNG) projects pushed the total value of contracts in the oil and gas industry surging to US$42 billion in the second quarter of 2019, up by a massive 79 percent over the value of the contracts in the first quarter. In the first quarter of this year, the value of the contracts in the global oil and gas sector stood at US$23.4 billion. In the second quarter, several engineering, procurement and construction (EPC) contracts for LNG projects nearly doubled the contract value tally. In terms of number of contracts signed in Q2, the upstream sector saw 858 contracts awarded, accounting for 71 percent of all contracts, while the midstream and downstream/petrochemical sector recorded 245 and 100 contracts, respectively.

Global economic worries, amplified by tariff conflicts and uncertainty over Brexit, are also hitting European economies. A slump in exports sent Germany's economy into reverse in the second quarter, data showed, while the euro zone's GDP barely grew in the second quarter of 2019.

Iran says it aims to complete by March 2021 a long crude oil pipeline from its northwest deep in the Persian Gulf to a southern terminal east of the Strait of Hormuz, in order to export oil by shipping it first onshore to the terminal to bypass the world’s most critical oil chokepoint. The pipeline, which will cost US$2 billion, will be 1,100 kilometers (684 miles) long and capable of carrying 1 million bpd of crude oil from the Goureh oil terminal in the northwest to the Jask region on the Sea of Oman, without the need to have tankers travel through the Strait of Hormuz.  

In the Persian Gulf, just two oil producers—Saudi Arabia and the United Arab Emirates (UAE)—currently have some (limited) options for bypassing the Strait of Hormuz, where the daily transit in 2018 was 21 million barrels of oil per day, or the equivalent of some 21 percent of global petroleum liquids consumption. Iran, like all others, currently relies on the strait to get its oil to the market.

Rating agency Fitch has upgraded Russia’s debt rating recently, due to what it called “prudent economic policies”. The country's reserves will amount to nearly $600 billion as a consequence of trade and budget surpluses. Moscow has reduced the fiscal breakeven from nearly $110 a barrel in 2013 to $40 currently, and in the meantime, the Kremlin is successfully boosting its market share in European and Chinese markets. Russia, most likely, has a fair estimation of its partner’s willingness and necessity to act without the participation of Moscow beyond the current OPEC+ agreement. Unless prices drop below $40 per barrel, Moscow will remain reluctant to agree on further cuts.

Refinery throughput in China went up by 4 percent last month, to a total 52.6 million tons, or about 12.44 million bpd. That’s down from a record-high processing rate of 12.68 million bpd, recorded first in January and February this year and then again in April. It is still pretty strong going thanks to higher demand for crude from independent refiners who are building new refining capacity. With higher processing rates imports of crude also jumped in July. These averaged 9.66 million bpd, up by 14 percent on the year. The trend could soon reverse, however, as the country prepares for its National Day in October.

We expect bunker prices will decline today: 5-7 USD down for IFO, 1-3 USD down for MGO.