MABUX: Bunker market this morning, Oct 11

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) changed insignificant and irregular on Oct.10:

380 HSFO - USD/MT – 390.32 (+1.62)
180 HSFO - USD/MT – 428.88 (+0.48)
MGO - USD/MT – 662.81 (+2.69)

Meantime, world oil indexes changed irregular on Oct.10, amid comments by the OPEC that the organization could take action to balance oil markets and that it will decide in December on supply for next year.

Brent for December settlement increased by $0.78 to $59.10 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery rose by $0.96 to $53.55 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.55 to WTI. Gasoil for November lost $11.75.

Today morning oil indexes turned into slight upward evolution.

Mohammad Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, did not specify if the move would mean extending a pact to rein in production to stabilize prices, but the comments appeared to nudge the market out of pessimism over U.S.-China trade talks. Separately, Saudi Arabia told OPEC its monthly oil output fell by 660,000 bpd in September after major attacks on its energy facilities, while OPEC lowered its 2020 forecast for non-OPEC supply growth.

Minutes from the Federal Reserve’s September meeting, published on Oct.10, showed market may be anticipating more rate cuts than the central bank deemed necessary to stimulate the economy. So far this year, the Fed has conducted two quarter-point rate cuts back to back in July and September, to try and preserve the U.S. economy's record decade-long growth. Market participants expect the Fed to agree on another quarter point cut when it meets Oct 29-30.

The EIA said that the largest monthly drop in U.S. crude oil production in more than a decade in July is likely a temporary, geographically isolated glitch largely due to Gulf of Mexico shut-ins due to Hurricane Barry. The EIA also expects expecting that U.S. crude oil production will return to grow month on month throughout the rest of this year. U.S. crude oil production dipped in July by 276,000 barrels per day (bpd) from June. This was the largest decline in monthly crude oil production in more than a decade. In the October Outlook, EIA expects that U.S. crude oil production will increase in each of the remaining months of 2019, and reach 13.0 million bpd in December 2019. This year’s U.S. crude oil production is forecast to average 12.3 million bpd, while the 2020 production is seen averaging 13.2 million bpd.

Iran’s priority in continuing to optimise its oil industry exports despite ongoing U.S. sanctions is to push the pace of development firstly of the multiple fields that constitute the West Karoun area and secondly of the fields it shares with Iraq. A third priority is to ensure that it build-outs export routes for its oil that do not have to go through the ultra-politically-sensitive Strait of Hormuz. The Strait is the world’s most important oil transit chokepoint – and the key transit route from the Arabian Gulf to the Indian Ocean and the Far East - with roughly 35% of all seaborne oil and about a third of global liquefied natural gas supplies passing through it.

The U.S. slapped the sanctions on September 25 on a number of Chinese tanker-owning firms and executives for transporting Iranian oil in violation of the U.S. sanctions on the Islamic Republic. As a result, China’s tanker owning company Cosco Dalian, has seen one third of its oil tankers turn off their automatic identification system (AIS) transponders in the past week. 14 ships owned by Cosco Dalian, including nine VLCCs, switched off their AIS transponders between September 30 and October 7. Six of the ships offline carry some oil on board.

Nigeria may face an easier task to finally fall in line with its share of the OPEC+ production cuts after OPEC has recently raised the African producer’s oil output ceiling.  OPEC has raised the quota for Nigeria to 1.774 million bpd from 1.685 million bpd. The higher quota given to Nigeria is due to the fact that the cartel had not factored in the newly launched production from the Egina ultra deepwater field which Total started up at the beginning of the year, expecting to pump 200,000 bpd at peak output.

India is set to resume oil imports from sanctioned Venezuela. It had stopped its imports of Venezuelan oil months ago after the United States sanctioned Venezuela. However, now the country feels secure in its decision to resume the imports, because it will be taking the crude oil in exchange for supplying Venezuela with fuels including diesel, a scenario that is allowed under the sanctions.  Venezuela’s oil industry has suffered under the weight of those sanctions that have caused inventories to build up, causing its last running blending unit, Petrosinovensa, to shut late last week. Other blending units had already been shuttered earlier in the year. For India, the resumption of Venezuelan crude oil imports will come as welcome relief, after it had to stop crude oil imports from Iran due to sanctions as well.

We expect bunker prices may change irregular today in a range of plus-minus 3-6 USD.