MABUX: Bunker market this morning, Oct 15

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 irregular on Oct.14:

380 HSFO - USD/MT – 384.80 (-7.10)
180 HSFO - USD/MT – 423.11 (-7.75)
MGO - USD/MT – 665.04 (+4.27)

Meantime, world oil indexes were down on Oct.14, as the market is becoming more sceptical on whether the “phase one” trade deal the U.S. and China agreed on Oct.11 would lead to a quick recovery in oil demand.

Brent for December settlement decreased by $1.16 to $59.35 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery fell by $1.11 to $53.59 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.76 to WTI. Gasoil for November lost $16.50.

Today morning oil indexes continue slight downward evolution.

Washington and Beijing reached a partial trade deal late last week. The U.S. will not be imposing more tariffs on Chinese goods this week as previously planned, while China promised it will buy more U.S.-made agricultural products. However, most of the tariffs set upon Chinese goods remain in place, raising concerns that tariffs will become the "new normal." At the moment chances are still high that Washington and Beijing will fail to agree on any specifics in time for a mid-November meeting between Trump and Chinese President Xi Jinping. Even if they do, China will be less motivated to make the concessions needed for a more difficult "Phase 2" of negotiations, choosing instead to live with substantial U.S. tariffs.

OPEC and its non-OPEC allies in the production cut deal achieved a compliance rate of more than 200 percent with their cuts in September, mainly due to last month’s attacks on vital oil infrastructure in OPEC’s largest producer Saudi Arabia, which knocked 5.7 million bpd - or 5 percent of global oil supply - offline. Due to this attack, OPEC’s total production slumped by 1.318 million bpd from August to 28.491 million bpd in September. The largest non-OPEC producer part of the pact, Russia, saw its oil production inch down in September, to 11.25 million bpd from 11.29 million bpd in August, but still above Moscow’s cap under the deal. Russia has vowed that it is still looking to comply with its share of the cuts.

According to Iranian media reports, the Iranian tanker Sabiti was hit by missiles off the Saudi Arabian coast on Oct.11. The National Iranian Tanker Company confirmed these reports but denied those of them that said the attacks had originated in Saudi Arabia. The Sabiti had sent a distress signal with a request for assistance, while the crew said the front of the tanker was damaged and the vessel was leaking oil. Iran’s President on Oct.13 warned the perpetrators of the attack that there will be a response. The attack on the Sabiti came as Pakistani Prime Minister Imran Khan was on a visit in Iran as mediator between Tehran and Riyadh.
News have formed upward driver for fuel prices in the end of last week.

The number of active oil rigs in the US has been in steady decline since late 2018, falling in early October to its lowest level since May 2017. These factors are behind the EIA’s surprising downward revision of US oil production, with the agency expecting domestic oil supply to decline by 0.4 million b/d year-on-year in 2021 in its latest international energy outlook. However, despite these concerns the prevailing view is still for a further growth beyond 2020. In recent years, there have been significant increases in rig productivity on the back of technological advancements.

The Trump administration has been tightening the noose around Venezuela. The latest round of sanctions was signed in August and they spread to anyone doing business with the Maduro government, both U.S. and non-U.S. Following the signing of the order for the sanctions, the Shipowners’ Club told its members to “exercise caution” in their dealings with Venezuela.

Nearly 300 oil tankers globally have been placed off limits as companies fear violating U.S. sanctions against Iran and Venezuela, driving freight rates to new highs. The move has taken roughly 3% of the global oil tanker fleet out of the market. Unipec, the trading arm of China’s Sinopec, Swiss trader Trafigura AG, oil firm Equinor ASA , Exxon Mobil Corp are shunning 250 crude and oil products tankers which have carried Venezuelan oil in the past year. Oil companies are also avoiding 43 oil tankers owned by COSCO Shipping Tanker (Dalian) after the United States last month imposed sanctions on two units of Chinese shipping giant COSCO for allegedly transporting Iranian crude.

For Venezuela, there is also another problem coming up. Later this month, waivers will expire for the handful of U.S. companies still operating in the country. There has been no indication that Washington is willing to extend these, which means Venezuela’s oil production could drop by as much as half.

We expect bunker prices may decline today in a range of minus 6-8 USD for IFO and minus 10-15 USD for MGO.