MABUX: Bunker market this morning, Aug 30

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 trend on Aug.29:

380 HSFO - USD/MT – 368.68 (+2.56)
180 HSFO - USD/MT – 411.02 (+2.31)
MGO - USD/MT – 642.29 (+4.47)

Meantime, world oil indexes rose on Aug.29, lifted by a deep draw on U.S. crude inventories.

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 do not have any firm trend so far.

Concerns about a slowdown in economic growth due to the trade war raging between the United States and China, along with the potential hit to oil demand, are keeping prices in check. U.S. President Donald Trump said on Aug.26 he believed China was sincere about wanting to reach a trade deal, but concerns arose on Aug.27 after China's foreign ministry declined to confirm a telephone call between the two countries on trade.

The U.S EIA showed a massive 10-million-barrel drawdown in crude oil stocks last week, significantly more than the market had assumed. Unlike in prior reports that tended to offer mixed signals, this one also showed a 2.1-million-barrel drop in gasoline inventories, and a similar-sized drawdown in distillate fuel stocks. The EIA data added some evidence to the prevailing forecasts that the supply/demand picture is set to tighten in the second half of the year. The International Energy Agency (IEA) currently sees oil demand growing by 1.1 million barrels per day (bpd) in 2019. But in the first five months of the year, demand only grew by 520,000 bpd over the same period a year earlier.

U.S. crude stocks dropped last week by 10 million barrels to their lowest since October as imports slowed, while gasoline and distillate stocks each fell by over 2 million barrels.
Inventories at the nation’s main delivery hub in Cushing, Oklahoma, where WTI futures are priced, slumped last week by nearly 2 million barrels to their lowest since December. The drop came after two new pipelines opened in the Permian Basin this month, flowing crude to the U.S. Gulf Coast and tightening supplies at Cushing.

The approach of Hurricane Dorian toward Florida also raised fears that offshore U.S. crude producers may slow output if the storm passes into the Gulf of Mexico over the weekend. Dorian is forecast to strengthen and become a highly dangerous Category 4 hurricane on Sunday.

Iranian and Iraqi officials have stated to the press that discussions currently are being held with regards to an Iranian proposal to build a new oil pipeline from Iran to Syria, crossing Iraqi territory. it seems that two options for the pipeline are on the table: a new 1,000 km pipeline running through Iraq into Syria, or repairs on the Iranian side of the Kirkuk-Baniyas pipeline, which is an 800 km pipeline. The new pipeline project is slated to target an overall capacity of 1.25 million barrels of oil per day. This project would take around 2 years to be completed. The goal of the official discussions are to find alternatives to the Strait of Hormuz for Iraq and Iran.

There are wide expectations for greater demand for light sweet crude, which is the primary sort of crude the United States produces and exports. These expectations are related to the new sulphur emissions rules the International maritime Organization will put into effect from next January. According to the Bank of America, the new IMO rules will create a pretty big premium on light sweet grades which are mostly coming out of the U.S. these days and which may impact badly Chinese refineries. However, the United States is not even in the top five suppliers to China. As of end-2018, Russia was the largest one, followed by Saudi Arabia—which this year has overtaken Russia as number one—Angola, Iraq, and Oman. The situation has changed this year: Chinese buyers have been keeping their intake of U.S. oil to a minimum as the trade war continues.

Morgan Stanley lowered its price outlook for the rest of the year for Brent to around $60 per barrel from $65 and for U.S. crude to $55 per barrel from $58 as it downgraded its demand growth forecast for this year and next.

We expect bunker prices may slightly rise in a range of plus 3-5 USD/MT.