MABUX: Bunker market this morning, Oct 10

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.09:

380 HSFO - USD/MT – 391.62 (-1.09)
180 HSFO - USD/MT – 429.00 (-1.27)
MGO - USD/MT – 659.04 (-2.46)

Meantime, world oil indexes changed irregular on Oct.09, following media reports that China was open to agreeing a partial trade deal with the United States, while unrest in OPEC members Iraq and Ecuador also supported prices.

Brent for December settlement increased by $0.08 to $58.32 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery fell by $0.04 to $52.59 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.73 to WTI. Gasoil for October gained $12.50.

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

Negotiators from China and the United States will meet in Washington on Oct.10-11 in the latest effort to settle a deal aimed at ending a long-running trade dispute that has slowed global economic growth. But tensions between China and the U.S. rose this week after the United States imposed visa restrictions on Chinese officials for the detention or abuse of Muslim minorities, while a row escalated over comments by a leading U.S. National Basketball Association official in support of protests in Hong Kong.  The issues have set markets on a risk-aversion course, even though the global oil market remains in a supply deficit which should in theory support prices at above $60 a barrel.

The EIA has revised downward again its oil price forecast in October’s Outlook (STEO), shaving another $5 per barrel off its forecast compared to last month’s STEO. The reason for the downward adjustment to oil predictions, which it now expects will be fall to $57 per barrel by the second quarter of 2020, is due to the rise of global oil inventories during the first half of 2020. Brent spot prices averaged $63 per barrel in September. While the EIA acknowledges the greater risk of oil supply disruptions as of late, it remarks that this risk is more than offset by “increasing uncertainty about economic and oil demand growth in the coming quarters.”

Iran is upping its defenses around key oil and petrochemical facilities, as Iran prepares for a retaliatory act just weeks after Saudi Aramco’s oil facilities were struck by missiles. The areas that will be covered under this increased defense will be air traffic in the south, over the Persian Gulf as well as over the Strait of Hormuz and the Sea of Oman, and will cover area of critical importance to the gas and petrochemical industries such as Assaluyeh and Kharg island.

Turkey said its forces would cross the Syrian border shortly, launching attacks that could impact the economy of the oil-producing Kurdistan region in Iraq, and energy prices. Anti-government protests also threatened oil production in Ecuador and Iraq, members of the Organization of the Petroleum Exporting Countries.

The IMO 2020 sulphur regulation will force ocean carriers to use more expensive, cleaner fuel, or install expensive scrubbers: it means that their operating costs will be higher. To offset costs, shipping companies are going to deploy larger vessels, since an increase in ship size does not mean an equal increase in fuel consumption. As a result, it is expected a shift from the 10,000 TEU to the 14,000-18,000 TEU size. Currently, most cargo ships are in the 10,000 – 14,000 TEU (Twenty foot Equivalent Unit – corresponding to the size of a standard 20ft shipping container) range, with larger ships ranging from 18,000 to 23,500 TEU. One 20,000 TEU ship does not use as much fuel as two 10,000 TEU vessels. On the water side, most large U.S., European and Asian ports are ready to receive 14,000-plus TEU vessels. However, the question is how well they can handle these vessels on the land side.

Russia’s liquefied natural gas (LNG) producer Novatek is in talks to tranship its Yamal cargoes in Norway or Russia’s Murmansk because it is unsure of the impact of U.S. sanctions on the Chinese COSCO tankers it uses. The United States imposed sanctions on Sept. 25 on state-owned COSCO for allegedly ferrying Iranian crude. Novatek had a deal with Norwegian shipping company Tschudi to reload Yamal cargoes in Norway’s Honningsvag between November 2018 and June 2019. This allowed the company to export the Yamal volumes that came from trains launched ahead of the schedule, while not all Arc7 ships designed to export those were as yet available.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.9 million barrels from the previous week. At 425.6 million barrels, U.S. crude oil inventories are at the five year average for this time of year. That comes after three weeks of inventory increases, with the latest, for the last week of September, at 3.1 million barrels. The authority also reported gasoline inventories had shed 1.2 million barrels last week, versus a 200,000-barrel draw in these a week earlier. In distillate fuels, the EIA reported a decline of 3.9 million barrels, after a week earlier it estimated these had gone down by 2.4 million barrels.

We expect bunker prices for IFO may change irregular today in a range of plus-minus 1-3 USD. MGO prices may rise by 5-10 USD.