MABUX: Bunker market this morning, Sept 19

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) turned into downward correction on Sep.18:

380 HSFO - USD/MT – 463.74 (-12.33)
180 HSFO - USD/MT – 499.06 (-14.67)
MGO - USD/MT – 685.81 (-11.62)

Meantime, world oil indexes fell on Sep.18 extending losses from the previous session after Saudi Arabia's energy minister said the kingdom will restore lost oil production by the end of the month.

Brent for November settlement decreased by $0.95 to $63.60 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October delivery fell by $1.23 to $58.11 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.49 to WTI. Gasoil for October lost $9.00.

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

Saudi Arabia’s Abqaiq plant has restarted and is now processing about 2 million barrels a day, restoring just under half the output lost after the facility was damaged in an attack. The kingdom expects output at the facility to return to pre-attack levels of about 4.9 million barrels a day by the end of September. The long-awaited statement from the kingdom -- which before the strike pumped almost 10% of the world’s oil -- gives the market much-needed clarity over the worst sudden supply disruption in its history. However, it’s slower progress than the kingdom had initially expected. Besides, even as Aramco fixes the damage at Abqaiq, the possibility of further escalation of conflict in the Middle East hangs over the market.

Meanwhile, the United States believes the attacks that crippled Saudi Arabian oil facilities last weekend originated in southwestern Iran and involved cruise missiles and drones. U.S. officials did not provide evidence or explain what U.S. intelligence they were using for the evaluations. Iran denies involvement in the strikes. Iran's allies in Yemen's civil war, the Houthi movement, claimed responsibility, saying they struck the plants with drones including some powered by jet engines.

Saudi Arabia has decided to join the U.S.-led maritime security coalition that aims to ensure freedom of navigation and safe passage through the Persian Gulf. The coalition was initiated by the United States following a string of incidents in the Persian Gulf and its vital chokepoint the Strait of Hormuz earlier this summer. The UK, Australia, and Bahrain have joined the coalition, before Saudi Arabia said it would also participate.

U.S. crude shipments are set to rise as major Asian importers look to replenish supplies after attacks on Saudi Arabia’s oil facilities. Brokers in Singapore and Europe say crude loadings at Ras Tanura, the major oil export port for the Saudi Arabian Oil Co.’s oil plant in Abqaiq that was struck by missiles on Saturday are largely idle for certain types of crude cargoes, with at least eight supertankers waiting outside the terminal. Ship owners said finding alternatives to pick up specific types of crude can be complicated as refineries are tailored to produce specific types of products. American refiners have the capacity to produce crude for Asian demand while Russia, the United Arab Emirates and Kuwait can also supply the market. It was also reported that tanker demand could be hurt if Asian importers such as China, India, South Korea and Japan choose to tap into their reserves, but they can’t rely on reserves for more than 10 days without supplies falling to critical levels.

Goldman Sachs cut its 2019 oil demand forecast to 1 million bpd, down from 1.1 million bpd. As per analysis, additional OPEC production cuts will be needed to keep inventories near normal. Wood Mackenzie lowered its forecast to just 700,000 bpd for 2019, down from 850,000 bpd previously.

U.S. President Donald Trump said his administration could seal a deal on trade with China before the U.S. presidential election, or an agreement could be reached the day after U.S. voters go to the polls. The U.S. president's comments come two days before U.S. and Chinese deputy trade negotiators are due to meet in Washington for the first in-person meetings in nearly two months. Those discussions are aimed at paving the way for expected high-level negotiations in early October that would seek a way out of a 14-month trade war between the world's two largest economies. The talks will follow an easing of trade tensions last week, in which Trump delayed a scheduled Oct. 1 tariff increase by two weeks on $250 billion worth of Chinese imports, while China delayed retaliatory tariffs on some U.S.-made cancer drugs, animal feed ingredients and lubricants.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.1 million barrels from the previous week. At 417.1 million barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. This compares with a 6.9-million-barrel draw a week earlier, which strengthened oil’s rally spurred by plans by OPEC to extend its production cuts. U.S. production continued to grow as well. In its latest Drilling Productivity Report, the EIA said it expected shale oil production to hit 8.84 million bpd in October, up from 8.77 million bpd this month.

We expect bunker prices may continue slight downward correction in a range of minus 4-8 USD.