MABUX: Bunker market this morning, Oct 21

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 trend on Oct.18:

380 HSFO - USD/MT – 361.02 (-3.77)
180 HSFO - USD/MT – 404.08 (-3.62)
MGO - USD/MT – 661.00 (-0.52)

Meantime, world oil indexes changed insignificant and irregular on Oct.18: concerns about China’s economy outweighed bullish signals from its refining sector.

Brent for December settlement decreased by $0.49 to $59.42 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery dropped by $0.15 to $53.78 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.64 to WTI. Gasoil for November gained $5.25.

Today morning oil indexes demonstrate slight downward evolution.

U.S. oil inventories soared for the latest week, rising much more than the market expected. Crude stockpiles jumped 9.3 million barrels last week compared to expectations for a rise of about 2.9 million barrels. The buildup in U.S. stockpiles comes amid broader concerns of slowing global demand, as U.S.-China trade tensions continue to take a toll on the world-wide economy. At the same time this can pressure OPEC+ members to trigger deeper supply cuts.

The joint technical committee monitoring a global oil production pact between the Organization of the Petroleum Exporting Countries (OPEC) and partners found that compliance is being exceeded, with cuts for September representing 236% of agreed quotas.  OPEC and its allies, including Russia, have agreed to limit oil output by 1.2 million barrels per day (bpd) until March 2020. OPEC lowered its 2019 global oil demand growth forecast to 0.98 million bpd while leaving its 2020 demand growth estimate unchanged at 1.08 million bpd.

China’s economic growth slowed to 6% year on year in the third quarter, its weakest for 27-1/2 years and below expectations, dogged by soft factory production and continuing trade tensions with the United States. China’s September refinery throughput, however, was up 9.4% year on year at 56.49 million tonnes, boosted by new refineries and some independent refiners resuming operations after maintenance. Meantime, U.S. and Chinese trade negotiators are working on nailing down a Phase 1 trade deal text for their presidents to sign next month.

Russian Company Rosneft has temporarily suspended works at one block in Iraq’s semi-autonomous region of Kurdistan due to security concerns because of the blocks’ proximity to the Syrian border. It was reported, that in view of the current unrest in Syria, with the Turkish offensive against the Kurds in northern Syria, Rosneft has decided to temporarily halt works on block 8 because it is close to the Iraqi Kurdistan’s border with Syria. Rosneft continues works on block 11 in Kurdistan. This year the Russian company launched exploration works in Kurdistan. The exploration work is set to continue next year and could take several years to complete.

The British government insisted on Oct.18 the country will leave the European Union on Oct. 31 despite a letter that Prime Minister Boris Johnson was forced by parliament to send to the bloc requesting a Brexit delay. Johnson’s defeat in the British parliament over the sequencing of the ratification of his deal exposed the prime minister to a law passed by those opposed to a no deal departure, demanding he request a delay until Jan. 31. Johnson sent the request note as required, but unsigned, and added another signed letter arguing against what he cast as a deeply corrosive delay. One of his most senior ministers said Britain would still leave the bloc on Oct. 31.

More than 30 oil tankers have anchored in the Malacca Strait off Singapore and Malaysia. The flotilla has been expanding for months as traders amass supplies of fuel that comply with new shipping standards IMO 2020. In April, at least five vessels laden with low-sulfur fuel oil and blending components were sitting off Singapore. Traders and bunker oil suppliers have secured fuels that can meet the new specifications, or create a blend comprising oil such as gasoil, low-sulfur fuel oil, low-sulfur crude oil, high-sulfur fuel oil and other components. Crude oil grades such as Australia’s Pyrenees, Vincent, Stag and Barrow Island, Brazil’s Atlanta and Ostra Blend, Congo’s Emeraude Blend, North Sea’s Clair and Thailand’s Wassana are also being hoarded on tankers in the Strait. Lack of storage capacity for 380 HSFO in the region pushed prices for this type of fuel further up in recent weeks.

Tankers that had been scheduled to install emissions-cutting equipment ahead of stricter pollution standards starting in 2020 have deferred their visits to the dry docks to capitalize on an unexpected surge in freight rates. U.S. sanctions on subsidiaries of vast Chinese shipping fleet Cosco in September sparked a surge in global oil shipping rates as traders scrambled to find non-blacklisted vessels to get their oil to market. The rates for chartering a supertanker from the U.S. Gulf Coast to Singapore hit record highs of more than $17 million and a record $22 million to China earlier this week. The extraordinary spike in freight rates proved too good to miss for some shipowners who were due to send vessels to the dry docks for lengthy retrofitting and maintenance work. The shortage of ships to move crude oil was so acute that some shipowners also switched from carrying so-called 'clean' or refined fuels like gasoline to 'dirty' cargoes that include crude oil, despite the costs of having to clean them later. For scrubbers to be fitted, ships must be sidelined between 30 to 60 days.

We expect bunker prices may change irregular today in a range of plus-minus 2-4 USD.