MABUX: Bunker market this morning, Oct 31

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 trend on Oct.30:

380 HSFO - USD/MT – 356.94 (-3.99)
180 HSFO - USD/MT – 399.07 (-3.67)
MGO - USD/MT – 667.73 (-1.02)

Meantime, world oil indexes fell on Oct.30 after a steep U.S. crude inventory build added to worries about a possible delay in resolving the U.S.-China trade war.

Brent for December settlement decreased by $0.98 to $60.61 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery fell by $0.48 to $55.06 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.55 to WTI. Gasoil for November delivery lost $9.25.

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

The Energy Information Administration reported a crude oil inventory build of 5.7 million barrels for the week to October 25, pressuring oil prices a day after the American Petroleum Institute reported an estimated fourth consecutive inventory build, of 592,000 barrels. Forecasts expected a build of 729,000 barrels for last week after a 1.7-million-barrel draw interrupted a string of five weekly inventory builds, which added more than 19 million barrels to U.S. commercial crude oil inventories.

According to the International Energy Agency (IEA), if global oil demand growth continues to languish with uncertainties around the global economy and Brexit, the oil market will likely have to cope with another oversupply next year. The IEA cut its demand growth forecast by 100,000 bpd for both 2019 and 2020, to 1 million bpd and 1.2 million bpd, respectively. For the second quarter of this year, the IEA expects oil demand growth to quicken to 1.6 million bpd, thanks to a lower base for comparison in the same period of 2018 and to oil prices that are currently some 30 percent lower compared to a year ago. Other organizations, have been also revising down their oil demand growth estimates for this year and next, citing increased uncertainties over the pace of the global economic growth amid the U.S.-China trade war, Brexit, and slowing growth in major economies including China, India, and Germany.

Meantime, the market attention turns again on OPEC and its non-OPEC allies led by Russia, who need to decide in early December how to proceed with their production cut pact expiring in March 2020. There is a growing consensus among experts and observers that the OPEC+ coalition may need to cut even deeper if it wants to prevent a large oversupply building in 2020 and sending oil prices even more uncomfortably low for major oil-producing nations.

The United States and China were expected to sign "phase one" of the trade agreement at next month's Asia-Pacific Economic Cooperation summit in Chile. However, the summit where they were supposed to meet was cancelled because of violent protests. The White House said afterwards the United States still expects to sign an initial trade agreement with China next month, but no alternate location had yet been set for Xi and Trump to meet. China in turn said the bilateral talks will continue to proceed as previously planned and the lead trade negotiators from both countries will speak by telephone on Nov.01. A critical date is Dec. 15, when new U.S. tariffs on Chinese imports such as laptops, toys and electronics kick in. Both the United States and China have an interest in reaching a deal and averting those tariffs.

Saudi Arabia informally invited Brazil to join OPEC. Now the president of Brazil has to consult with Brazil’s economic team and energy ministry before agreeing to join. If it joined, Brazil could become the third-biggest producer in the Organization of the Petroleum Exporting Countries after Saudi Arabia and Iraq. Brazil’s burgeoning production is complicating OPEC’s effort to prop up crude prices in the face of booming supply from U.S. shale fields and weakening global demand. Brazil produced 2.71 million barrels a day 2018, according to the International Energy Agency, which forecasts the country’s average output to reach 2.9 million this year and 3.22 million in 2020.

A nationwide poll from The Washington Post and the Kaiser Family Foundation finds that 8 in 10 Americans say the U.S. should “decrease” drilling or “stay as is.” 51 percent said oil and gas exploration on federal lands should be reduced, and 53 percent say the same thing about offshore. Less than 15 percent say drilling should expand on public lands or offshore.

We expect bunker prices may continue downward evolution today in a range of minus 4-10 USD.