MABUX: Bunker market this morning, Sept 04

The Bunker Review was contributed by Marine Bunker Exchange

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) demonstrated firm downward trend on Sep.03:

380 HSFO - USD/MT – 354.08 (-10.36)
180 HSFO - USD/MT – 396.17 (-9.68)
MGO - USD/MT – 640.24 (-3.86)

Meantime, world oil indexes continued downward evolution on Sep.03, weighed down by rising OPEC and Russian oil output as well as the protracted U.S.-China trade dispute that has dragged on the global economy.

Brent for November settlement decreased by $0.40 to $58.26 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for October delivery declined by $0.90 to $53.94 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.32 to WTI. Gasoil for September lost $4.50.

Today morning oil indexes turned into slight upward correction.

OPEC’s crude production rose last month, the first increase since the group and its allies started a new round of output cutbacks at the start of the year to shore up a weak global market. Nigeria and Saudi Arabia led the boost by the Organization of Petroleum Exporting Countries, which collectively increased by 200,000 barrels a day to 29.99 million a day. Russia, the biggest producer outside OPEC in the coalition, has also shown signs of backsliding on its commitments. The country pumped 11.294 million barrels a day in August, or 104,000 a day more than its limit under the OPEC accord. A committee made up of key members in the OPEC+ alliance will meet in Abu Dhabi on Sept. 12 to review their progress in stabilizing world crude markets. The full coalition will then gather in December in Vienna to consider any action required in 2020.

It was reported that the Iranian government sees talks with the U.S. as inevitable. So Iran could pursue a dual-track strategy of escalation with the U.S. in order to gain leverage, while exploring the possibility of future talks. Notably, Iran could be open to a comprehensive deal, covering both nuclear issues and some other issues that the Trump administration has cited, such as Iran’s ballistic missile program. In exchange, Iran would demand lasting economic relief.

Meantime, Iran said that France has proposed to extend to Iran a credit line of US$15 billion for oil “pre-purchases” in exchange for full compliance with the nuclear deal, parts of which Iran has said it had started to breach. It was also reported, that France has proposed to transfer the money of the US$15-billion credit line in three separate instalments. Before 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 oil, or providing a credit line to Tehran.

The US Environmental Protection Agency (EPA) has proposed a technical correction to national diesel fuel regulations which will allow fuel manufacturers and providers to distribute 0.50% sulphur distillate diesel fuel in the US instead of the 0.10% sulphur marine diesel fuel limits that otherwise apply in the United States. According to the EPA, these changes will clarify that US refiners can legally distribute global marine fuel up to the 5,000 ppm sulphur limit, which it says, will facilitate ‘smooth implementation’ of the 2020 global marine fuel regulation. These changes would exempt such fuel from the prohibition against distributing distillate diesel fuel that exceeds the 0.10% sulphur emission control area (ECA) marine fuel regulation.

There have been 26 bankruptcies in the U.S. shale industry this year, nearly as much as the 28 bankruptcies in all of 2018. The default rate of 5.7 percent is at its highest level since 2017. Investors have lost faith in shale production, and bankruptcies are on the rise. Besides, the huge debt wave comes due over the next few years. Roughly $9 billion in debt is set to mature over the remainder of 2019 – but a massive $137 billion matures between 2020 and 2022.

The Baltic Exchange’s main sea freight index rose for an eighth-straight session on Sep.02, beating a near nine-year peak marked at the end of last week and helped by robust capesize demand. The Baltic index, which tracks rates for ships ferrying dry bulk commodities, gained 64 points to 2,442, a level last seen in November 2010. The capesize index rose 192 points to 4,659 points, the panamax index rose 2 points to 2,262 and the supramax index gained 10 points to 1,346.

Data due this week on U.S. inventory levels will be delayed by a day to Aug.04 and Aug.05 because of the U.S. Labor Day holiday on Monday.

We expect bunker prices may slightly decline today in a range of minus 2-5 USD/MT.