MABUX: Bunker market this morning, Oct 03

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 downward movement on Oct.02:

380 HSFO - USD/MT – 399.73 (-8.08)
180 HSFO - USD/MT – 438.86 (-6.71)
MGO - USD/MT – 662.06 (-1.77)

Meantime, world oil indexes slipped on Oct.02 after industry data showed a surprise drop in U.S. crude inventories, although gains were capped as weak economic readings in the United States depressed global markets.

Brent for December settlement decreased by $1.20 to $57.69 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery fell by $0.98 to $52.64 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.05 to WTI. Gasoil for October lost $15.00.

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

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.1 million barrels from the previous week. At 422.6 million barrels, U.S. crude oil inventories are at the five year average for this time of year. Forecasts had expected a relatively modest build, of 1.57 million barrels, after a week earlier the EIA reported a build of 2.4 million barrels. The agency’s latest report extends two weeks of consecutive inventory builds.

Saudi Aramco has restored oil production levels at the crude-processing plants at Abqaiq and at the Khurais oil field. Multiple reports that Saudi’s production would be back online quickly have helped push oil prices back down to where they were prior to the September 14 attacks. Maximum production capacity still isn’t at pre-attack levels, and Aramco said that won’t be restored until late-November. Presently, Abqaiq capacity has been restored to 4.9 million barrels a day (BPD), versus a pre-attack capacity of 5.5 million BPD. Khurais is operating at 1.3 million BPD, versus a pre-attack capacity of 1.5 million BPD. Aramco has reportedly continued to supply its customers, in part by drawing down its oil inventories.

Meantime, U.S. oil production fell in July. The latest EIA data shows that oil output fell sharply in July, dipping by 276,000 barrels per day. The decrease can be caused by outages related to a hurricane that forced oil companies to temporarily idle operations in the Gulf of Mexico. Offshore Gulf of Mexico production plunged by 332,000 bpd in July. It looks like not a one-off aberration. U.S. output has stagnated in 2019, ending several years of explosive shale growth. Compared to December 2018, total U.S. production was only up 44,000 in June 2019, which essentially means that despite heady forecasts and lots of hype, U.S. shale has plateaued this year.

Unplanned oil production outages among countries outside the Organization of the Petroleum Exporting Countries (OPEC) fell to 64,000 barrels per day (b/d) in August, the lowest level since the U.S. Energy Information Administration (EIA) began tracking global production outages in 2011. Unplanned outages in major non-OPEC oil producers such as the United States, Russia, and Canada have abated, leaving Sudan and South Sudan as the only remaining non-OPEC producers with unplanned outages in August. The decline in non-OPEC unplanned outages may have contributed to the resilience of the global oil market following the disruption of almost 5.7 million b/d of Saudi Arabian crude oil production on September 14, 2019.

Iran is building an onshore oil pipeline worth US$1.8 billion to a terminal just outside the Strait of Hormuz. As much as US$700 million of the investment will go to develop the port terminal at Jask. The project will transform the region, as various oil storage facilities, export jetties, wave breakers, and single buoy mooring systems would be built in Jask. The first commodity to be exported from the Jask terminal would be gas condensate from the South Pars field in the next Iranian calendar year (the current year started on March 21, 2019). Last month, Iran said that it was aiming to complete by March 2021 the long crude oil pipeline from its northwest deep in the Persian Gulf to a southern terminal east of the Strait of Hormuz, in order to export oil by shipping it first onshore to the terminal to bypass the world’s most critical oil chokepoint.

Ecuador, one of the smallest members of the Organization of the Petroleum Exporting Countries, said it would leave the 14-nation bloc from Jan. 1 due to fiscal problems. Ecuador will be the second country to withdraw from OPEC in the last year after the departure of Qatar.

Russia has been continuously growing its oil exports to China, but in recent months, Saudi Arabia has been China’s top oil supplier as the Kingdom has been significantly boosting exports to the Asian market at the expense of slashing shipments to the most transparently reported market, the U.S. For a second month in a row, Saudi Arabia was China’s biggest oil suppler in August, but the attacks on Saudi oil infrastructure last month could change that in the September data.

We expect bunker prices may continue firm downward trend today in a range minus 5-10 USD.