MABUX: Bunker market this morning, Oct 07

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 slight downward movement on Oct.04:

380 HSFO - USD/MT – 392.36 (-2.40)
180 HSFO - USD/MT – 431.49 (-1.77)
MGO - USD/MT – 654.64 (-4.53)

Meantime, world oil indexes rose on Oct.04, although remained on track for a second consecutive weekly loss, as an increase in U.S. jobs eased financial market concerns.

Brent for December settlement increased by $0.66 to $58.37 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery rose by $0.36 to $52.81 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.56 to WTI. Gasoil for October gained $13.50.

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

The labor market report showed that the U.S. economy had created more jobs than thought in August and that, while hiring slowed in September, it didn’t fall as some had expected after reading business surveys from the Institute of Supply Management last week.
The ISM’s manufacturing purchasing managers’ index fell to a 10-year low, while its non-manufacturing PMI fell to the lowest in three years.

Meantime, U.S. crude oil exports jumped by nearly 1 million bpd in the first half of 2019 from the same period in 2018 to average 2.9 million bpd between January and June this year. Canada stayed the top foreign destination of U.S. crude oil, with U.S. exports rising by 3 percent year on year in H1 2019. U.S. exports to Asia and Oceania jumped by 58 percent, with exports to South Korea, India, and Taiwan more than doubling. A notable exception from the rising trend of U.S. crude sales in Asia was China— U.S. crude oil exports to China averaged 248,000 bpd in the first half of 2019, down by 64 percent from the same period last year, as Chinese buyers have been reluctant to buy U.S. crude oil amid the U.S.-China trade war.

Market is also watching for further developments on tensions between the United States and Iran. France said Iran and the United States have one month to get to the negotiating table, suggesting that Tehran’s plan to increase its nuclear activities in November would spark renewed tension in the region.

Russia’s largest oil company Rosneft has set the euro as the default currency for all new exports of crude oil and refined products, as the state-controlled giant looks to switch as many sales as possible from U.S. dollars to euros in order to avoid further U.S. sanctions against it. In the latest tender for a spot sale of 100,000 tons of Urals blend loading from the port of Primorsk at the end of October, Rosneft specifies that the default currency in the payment should be in euros. The United States has not ruled out imposing sanctions on Rosneft over its involvement in trading oil from Venezuela and reselling it to buyers in China and India. Rosneft’s move was seen by traders as a future hedge against potential new U.S. sanctions on Russia and/or its oil industry.

India, which relies on oil imports to meet 80 percent of its demand, aims to cut that reliance by signing deals with Russia in the energy sector in recent months and years. Indian companies reaffirmed their interest in participating in developing oil and gas projects in Russia, while Rosneft, in a consortium with other foreign investors, is considering investments in doubling the refining throughput of the Vadinar Refinery in India and expanding the retail presence in India of Rosneft-participated Nayara Energy.  Apart from cooperation in the energy sector, Russia’s Rosneft also aims to boost its oil supplies to India.

U.S. energy companies last week reduced the number of oil rigs operating for a seventh week in a row. Drillers cut 3 oil rigs in the week to Oct. 4, bringing the total count down to 710, the lowest since May 2017.

Japanese refiner Fuji Oil has started supplying 0.5% sulfur bunker fuel oil this month at its sole 143,000 b/d Sodegaura refinery in Tokyo Bay as it gets ready for the International Maritime Organization’s mandate. Fuji Oil’s start of IMO-compliant fuel oil supply is the latest in growing supplies of 0.5% sulfur bunker fuel oil in Japan, where the country’s top three refiners JXTG Nippon Oil & Energy, Idemitsu Kosan and Cosmo Oil have also started their supplies across the country on Oct.01. For Fuji Oil, the start of 0.5% sulfur bunker fuel oil supply would mean an increased need to deal with high sulfur fuel oil and residual oil. Research showed that Japanese refiners could be burdened with surplus HSFO amounting to around 4.80 million kl/year (30.19 million barrels/year) if they blend export-grade gasoil with HSFO to make the IMO-compliant fuel.

We expect bunker prices may turn into slight upward trend today in a range of plus 4-10 USD.