MABUX: Bunker market this morning, Aug 20

The Bunker Review was contributed by Marine Bunker Exchange (MABUX)

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 upward correction on Aug.19:

380 HSFO - USD/MT – 350.48 (+3.61)
180 HSFO - USD/MT – 396.52 (+3.82)
MGO - USD/MT – 633.90 (+0.58)

Meantime, world oil indexes rose on Aug.19 following a weekend attack on a Saudi oil facility by Yemeni separatists and as traders looked for signs that U.S.-China trade tensions could ease.

Brent for October settlement increased by $1.10 to $59.74 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for September delivery rose by $1.34 to $56.21 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.53 to WTI. Gasoil for September gained $1.50.

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

A drone attack by Yemen’s Houthi group on an oilfield in eastern Saudi Arabia on Aug.17 caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected. The oil market seems to be pricing in again a geopolitical risk premium, but it might not sustain if it does not result in any supply disruptions. Saudi Arabia, in coalition with the UAE, and Iran are essentially fighting a proxy war in Yemen, where the Saudis lead a military Arab coalition to “restore legitimacy” in the country, while the Houthi movement, which holds the capital Sanaa, is backed by Iran. Meanwhile, tensions around Iran appeared to ease after Gibraltar released an Iranian tanker it seized in July though Tehran warned the United States against any new attempt to seize the tanker in open seas.

In its latest report, OPEC only slightly downgraded its forecast for global oil demand, lowering it to 1.10 million barrels per day (bpd) for 2019, down only a minor 0.04 million bpd from a month earlier. OPEC also said that global supply could grow by 1.97 million bpd this year, significantly outpacing demand growth. Still, that figure is down by 72,000 bpd from a previous estimate, due to lower-than-expected production growth in the U.S., Brazil, Thailand and Norway. As per OPEC’s estimation, oil inventories in OECD countries rose by 31.8 million barrels in June from a month earlier, rising to 67 million barrels above the five-year average. In other words, just as OPEC+ was meeting to extend the production cuts for another 9 months, inventories were rising, an indication of an oversupplied market.

Saudi Arabia and Donald Trump tend to push the oil market when prices get too far away from their preferred range. Just as soon as Brent neared $60 per barrel recently, rumors surfaced that Saudi Arabia was considering deeper action to rescue prices. The rumor alone sent oil prices up. But in the past few years, whenever Brent rises into the $70s, Trump has lambasted OPEC, demanding lower prices. The result is Brent trapped between $60 and $75.

Meantime, Saudi Arabia has seriously ramped up its oil exports to China in recent months. The Saudi Kingdom’s crude shipments to China have doubled in the span of a year. During the same period, its oil exports to the U.S. have dropped by nearly two-thirds. According to TankerTrackers.com, Saudi Arabia exported 1,802,788 barrels per day (bpd) to China in July, compared to 921,811 bpd in August of 2018. By contrast, exports to the U.S. in July were 262,053 bpd, nearly 62% down from 687,946 bpd in August of last year. U.S. sanctions on Iranian oil have helped the shift.

The Trump administration is readying a plan to end direct federal regulation of methane leaks from oil and gas facilities, even as some energy companies insist they don’t want the relief. A draft proposal from the Environmental Protection Agency (EPA) would prevent the federal government from directly targeting that potent greenhouse gas as it restricts emissions from oil wells and infrastructure, despite fears that time is running out to avert catastrophic consequences of climate change. More than 60 oil and gas companies have made voluntary commitments to pare emissions of methane, the chief ingredient of natural gas, though some of them insist federal regulation is still essential for the highly fragmented industry.

Through August, the number of bankruptcies in the U.S. oil and gas industry this year has nearly reached the 2018 total. The total volume of debt affected so far ($20 billion) has surpassed last year’s figure ($17 billion).

We expect bunker prices may rise slightly today in a range of plus 1-6 USD.