MABUX: Bunker market this morning, Oct 01

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 firm downward evolution on Sep.30:

380 HSFO - USD/MT – 417.73 (-21.78)
180 HSFO - USD/MT – 456.70 (-22.16)
MGO - USD/MT – 668.58 (-2.48)

Meantime, world oil indexes slipped on Sep.30  as China’s economic outlook remained weak even as manufacturing data improved, with the continuing trade war with the United States weighing on demand growth for the world’s largest crude importer.

Brent for November settlement decreased by $1.13 to $60.78 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery fell by $1.84 to $54.07 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.71 to WTI. Gasoil for October lost $12.00.

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

China’s official Purchasing Managers’ Index (PMI) rose to 49.8 in September, slightly better than expected and advancing from 49.5 in August, expanded for a second straight month as Chinese factories ramped up production and new orders rose. However, it remained below the 50-point mark that separates expansion from contraction on a monthly basis. Meantime, China warned on Sep.30 of instability in international markets from any decoupling of China and the United States, after sources said that U.S. President Donald Trump’s administration was considering delisting Chinese companies from U.S. stock exchanges.

Saudi Arabia has restored capacity to 11.3 million barrels per day after an attack on its processing facilities this month, though Saudi Aramco has yet to confirm it’s operations have been restored fully. While Saudi Arabia is maintaining exports by using crude from inventories and spare production capacity, it remains unclear how much of its output has actually been restored. Saudi Arabia also warned that oil prices could spike to “unimaginably high numbers” if the world does not come together to deter Iran, but it would prefer a political solution to a military one.

The US Energy Information Administration (EIA) has projected that world energy consumption will grow by nearly 50% between 2018 and 2050 – with much of the increase coming from non-OECD Asia. The EIA also noted that natural gas and petroleum product consumption is rising in Asia faster than supply is growing, which it said could potentially shift global trade patterns and infrastructure investments. In contrast to energy consumption growth in Asia, EIA projects in the IEO2019 that crude oil production will be concentrated in the Americas, Russia, and the Middle East.

Freight rates for shipping naphtha and other clean oil products from the Middle East to Japan have jumped 13% to their highest levels in nearly two weeks after Washington imposed sanctions on tanker subsidiaries of China’s COSCO. Rates for crude and oil products tankers have shot up as traders avoided ships linked to COSCO Shipping Tanker (Dalian) Co, Ltd, after the sanctions were announced. Still, the Saudi oil attacks in mid-September had a larger impact on naphtha as it has sent spot premiums soaring to levels not seen since the first-half of 2018.

Because of long lead times for LNG projects, there is often imbalance between supply and demand. A wave of projects came online this year, pushing prices down to decade-lows. But by 2021, very few new projects will hit the market, a legacy of the shortfall in investment from several years ago during the market downturn. That could lead to market tightness in the early- to mid-2020s.

We expect bunker prices may continue firm downward trend today in a range minus 6-12 USD.