MABUX: Bunker market this morning, Aug 29

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) continued insignificant and irregular changes on Aug.28:

380 HSFO - USD/MT – 366.12 (+0.22)
180 HSFO - USD/MT – 408.71 (-1.11)
MGO - USD/MT – 637.82 (+0.47)

Meantime, world oil indexes rose on Aug.28, after industry data showing a fall in stockpiles of U.S. crude somewhat eased worries about subdued demand due to the China-U.S. trade war.

Brent for October settlement increased by $0.98 to $60.49 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for October delivery rose by $0.85 to $55.78 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.71 to WTI. Gasoil for September gained $16.00.

Today morning oil indexes turned into slight downward correction.

Huge сrude oil draw in the U.S. sent oil prices higher yesterday. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 10.0 million barrels from the previous week. At 427.8 million barrels, U.S. crude oil inventories are at the five year average for this time of year. The report followed the American Petroleum Institute’s estimate of an 11.1-million-barrel draw in inventories, released on Aug.27. Forecasts have expected the EIA to report a draw of 2.133 million barrels.

China’s top four state-owned refiners plan to boost their combined low sulfur fuel oil production capacity to 18.15 million mt/year in 2020. The higher production capacity would allow Chinese refiners to supply LSFO into China’s bonded bunker fuel market, and could potentially flip China from a net bunker fuel oil importer to a net exporter, if Beijing announces a highly anticipated tax rebate scheme for overseas sales. China’s bunker fuel demand currently stands at around 12 million mt/year, and around 90% of this is met through imports into China’s bonded zones, which are exempt from taxes, and can be only be used to supply ships on international routes. China imported 16.44 million mt of fuel oil in 2018, of which 56% came from Singapore and Malaysia.

Sri Lanka, which doesn’t pump any oil at present, hopes to begin oil and natural gas production in 2023. The country held a tender for one block and received three bids for exploration and development of that block in the Mannar Basin off the northwestern coast of Sri Lanka. The government plans to award the block by November this year. Seismic data shows there could be more than 1 billion barrels of oil under in the Mannar Basin. Sri Lanka’s government also signed this week a two-year exploration deal with oil majors Total and Equinor to study the hydrocarbon potential in Sri Lanka’s waters.

A number of U.S. companies may delay their final investment decisions on new LNG capacity to next year because of U.S.-Chinese trade tensions. China has imported no U.S. LNG since March. There is another aspect of the trade war that is more damaging to U.S. LNG producers. To secure funding for these projects that typically cost billions, U.S. companies need long-term commitments to convince banks the projects are viable. Chinese buyers were the natural choice for these long-term commitments but this is no longer the case as Chinese investors shun U.S. projects amid the war. Besides, the gas price context is increasingly unfavourable and could add justification to delays in final investment decisions.

China reported the country imported an average of 926,119 bpd of Iranian oil last month. This was an increase of 4.7 percent on June but a drop of almost 72 percent on the year. While the actual import numbers could affect the course of the trade dispute between the U.S. and China, there was also some positive news for U.S. oil: imports of US crude jumped by 45 percent on the year in July, despite the trade war, to an average 362,364 bpd. This turned the United States into China’s eighth-largest oil supplier, after Oman and ahead of Malaysia. The jump could have come in anticipation of the 5-percent tariff on U.S. crude that Beijing said will take effect next month in response to the latest round of U.S. tariffs on Chinese goods. Saudi Arabia remained the undisputed leader among oil exporters to China, with shipments shooting up by almost 116 percent on the year to 1.65 million bpd in July. Russia came second and Iraq completed the top three.

We expect bunker prices may demonstrate today a firm upward trend in a range of plus 5-10 USD/MT.