MABUX: Bunker market this morning, Sep.02

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 slight upward trend on Aug.30:

380 HSFO - USD/MT – 370.42 (+2.31)
180 HSFO - USD/MT – 412.33 (+1.88)
MGO - USD/MT – 645.33 (+3.33)

Meantime, world oil indexes fell on Aug.30, ahead of a hurricane near the Florida coast that could dampen demand.

Brent for November settlement decreased by $1.24 to $59.25 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for October delivery declined by $1.61 to $55.10 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.15 to WTI. Gasoil for September lost $10.75.

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

The United States began imposing 15% tariffs on a variety of Chinese goods on Sep.01 - including footwear, smart watches and flat-panel televisions - as China put new duties on U.S. crude, the latest escalation in a bruising trade war. U.S. President Donald Trump said the sides would still meet for talks later this month. Beijing’s levy of 5% on U.S. crude marks the first time the fuel had been targeted since the world’s two largest economies started their trade war more than a year ago.

Hurricane Dorian gained strength, raising the risk that parts of the U.S. state will be hit by strong winds, a storm surge and heavy rain for a prolonged period. Dorian was the strongest hurricane on record to hit the northwestern Bahamas as a life-threatening Category 5 storm on the five-step Saffir-Simpson Wind Scale. Also on Sep.01, a new tropical storm formed southwest of Mexico and was expected to become a hurricane today. Tropical Storm Juliette was 455 miles (735 km) from Manzanillo, Mexico, with maximum sustained winds of 60 mph (95 kph).

U.S. crude oil output fell for a second straight month in June, dropping by 33,000 barrels per day (bpd) to 12.08 million bpd. In an indication of future production, U.S. energy firms cut 12 oil rigs in the week to Aug. 30, bringing the total count down to 742. The rig count declined for the ninth straight month to its lowest level since January last year.

Crimea is ready to assist Iran in transporting crude oil via Crimean ports. Iran’s traditional oil route toward the Mediterranean passes through the Suez Canal, but this route is now closed for the Islamic Republic because of the U.S. sanctions on its oil and shipping industries. So Iran can use Crimean shipping capabilities: river-sea canals, and carry oil over the Volga-Don canal, via Crimea, to the Black Sea. The offer from Crimea is a rare voice of someone openly saying they would help Iran ship oil amid the strict U.S. sanctions, about which the United States continues to pledge that it would pursue with sanctions anyone who deals with oil from Iran.

Meantime, Iran has offered the European Union two options to keep the nuclear deal alive as the EU keeps failing to find a way to support the Iranian economy amid U.S. sanctions. The options include either asking the United States to reinstate sanction waivers for the countries that import Iranian crude or providing a credit line to Tehran. The first option may be the less likely to succeed but the second one has a chance after President Trump said he was not against the idea of Europe providing Iran with “a letter of credit”, backed by oil, that would allow the country to meet pending payment obligations.

Saudi Arabia needs to take action to support oil prices at least around US$60 a barrel Brent. Although OPEC’s largest producer and de facto leader Saudi Arabia has been cutting much more than required under the OPEC+ deal, oil prices have lingered well below the reported breakeven price for Saudi Arabia –around US$80 a barrel. Besides, despite losses of barrels from Iran and Venezuela due to the U.S. sanctions, OPEC may have to cut its production by another 1 million bpd to keep prices on  60 USD per barrel for long. One key uncertainty in a Saudi plan to take a more decisive action to boost oil prices could be how willing Russia would be to continue its cooperation with OPEC in the production cut deal.

Gazprom admitted that its gas exports to Europe will fall in 2019. In 2018 it shipped 200.8 billion cubic meters of gas to Europe and Turkey. Gazprom revenues are responsible for 5 percent of Russia’s economy. In 2018 Western European countries made up 81 percent of Gazprom’s exports, led by Germany, while Central European states accounted for 19 percent. Russia controls about 35 percent of Europe’s total gas market. The reason for its gas export decrease in 2019 is sluggish demand. Meantime, Gazprom also announced that it had begun filling its pipeline to China, the Power of Siberia, with gas. Shipments are expected to start next year.

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