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) changed insignificant and irregular on Aug.23:
380 HSFO - USD/MT – 360.88 (+3.11)
180 HSFO - USD/MT – 407.04 (+2.93)
MGO - USD/MT – 641.77 (+0.60)
Meantime, world oil indexes traded sharply lower on Aug.23, after China announced it would impose import tariffs averaging 10% on $75 billion of U.S. goods, including crude and autos.
Brent for October settlement decreased by $0.58 to $59.34 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for October delivery fell by $1.18 to $54.17 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.17 to WTI. Gasoil for September lost $9.00.
Today morning oil indexes continued slight downward evolution.
The China’s move is a response to the U.S. decision to tariff all remaining Chinese imports by the end of the year. China will place tariffs on a range of U.S. products, including crude oil, in two batches starting on September 1 and on December 15. While expected, it further stokes fears about how far each side on the U.S.-China trade dispute is prepared to go in the short term to achieve its longer-term aims. China imported some 180,000 barrels a day of U.S. crude in July. It is expected that the tariff on U.S. crude imports will be subjected to an extra 5% from next month.
Federal Reserve Chair Jerome Powell said on Aug.23 that the central bank would act as appropriate to keep the U.S. economy healthy in a deteriorating global economy, but stopped short of committing to rapid-fire rate cuts. The message from Powell was that while the Fed may be willing to cut to protect the recovery, it made no promises. The Fed cut rates for the first time in more than a decade last month, backing Powell’s verbal commitment to sustain the expansion with action. The fuel market did not show any immediate reaction to Powell’s speech.
The oil market is facing a near-term supply deficit, despite the growing cracks in the global economy and stagnant oil demand. At the same time, the market is poised for a major surplus next year. The combination of the OPEC+ cuts, the worsening supply disruptions in Iran and Venezuela, and a slowdown in U.S. shale have all helped to tighten up balances. The second half of 2019 could see a rather significant pace of inventory drawdowns, erasing some of the glut. However, non-OPEC supply growth and decelerating demand means that the surplus is still set to return in 2020.
Sweden said that Britain’s oil tanker will soon be released after Iran’s Revolutionary Guards confiscated the tanker, ostensibly for violating unspecified maritime regulations. The British tanker Stena Impero, operated by a Swedish company, has been held since July 19. Just a few days ago, an Iranian tanker that was being held by Gibraltar was finally released and sent on its way to an unknown destination carrying crude oil that was originally thought to be destined to EU-sanctioned Syria. Iran denied the allegations, and gave its assurances to the Gibraltar court.
South Sudan reported that the country has made its first oil discovery since declaring its independence eight years ago. The latest oil find, at 5.3 million barrels of recoverable oil, is small but noteworthy for the country that has seen its oil production fall from as much as 0.35 million barrels per day to the current level of 0.18 million barrels per day as the war with neighboring Sudan damaged critical infrastructure. South Sudan has plans to resume its pre-war levels by the end of next year. Besides, South Sudan has plans to construct an inland crude pipeline that will tie into the main export pipeline that leads to Port Sudan at the Red Sea. The pipeline is expected to be completed in the fourth quarter of next year.
A strong showing in the shipping sector saw residual fuel oil demand hold steady in the US in July. Demand for residual fuel oil stood at 304,000 barrels per day (b/d) last month, a fraction below the 308,000 b/d registered in June, although 9.8% down on the 337,000 b/d recorded in July 2018. As per API, marine shipping appeared to rebound as the Baltic Dry Shipping Index of ship charter rates increased by more than 59% between June and July. Residual fuel production in the US during July also fell 3.8%, from 416,000 b/d in June to 399,000 b/d. This figure was also 10.1% down on the 444,000 b/d demand during July 2018.
The US oil and gas rig count fell sharply on Aug.23, decreasing by 19 for the week. The total oil and gas rig count now stands at 916, or 128 down from this time last year. US production, however, is holding fast at 12.3 million bpd. The total number of active oil rigs in the United States decreased by 16 according to the report, reaching 754.
We expect bunker prices may demonstrate slight downward trend in a range of minus 3-6 USD.