MABUX: Bunker market this morning, Nov 06

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 Nov.05:

380 HSFO - USD/MT – 363.35 (-2.22)
180 HSFO - USD/MT – 403.48 (-2.72)
MGO - USD/MT – 670.76 (+3.03)

Meantime, world oil indexes also changed sideways on Nov.05 on hopes for a U.S.-China trade agreement and optimism that Washington could roll back some of the tariffs it has imposed on Chinese imports.

Brent for January settlement increased by $0.83 to $62.96 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery rose by $0.69 to $57.23 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.73 to WTI. Gasoil for November delivery lost $4.50.

Today morning oil indexes have turned into slight downward evolution.

A potential U.S.-China trade deal continues to underpin global oil indexes while chasing out some of the weaker shorts. On Nov.01, China said that it had reached a consensus with the U.S. in principle after a phone call among high-level trade negotiators last week. Meanwhile, the White House added in a statement that the trade representatives made progress in a variety of areas and are in the process of resolving outstanding issues, while discussions will continue at the deputy level. China also said, Chinese President Xi Jinping and U.S. President Donald Trump have been in continuous touch through “various means. In fact, China continues pushing U.S. President Donald Trump to remove more tariffs imposed in September as part of a so-called Phase 1 deal, which would help to ease the broad economic damage inflicted by the trade dispute between the world’s two biggest oil consumers.

Iran says it will take a new step in reducing its commitment to a 2015 nuclear deal with world powers this week by injecting uranium gas into centrifuges at the Fordow facility. President Hassan Rohani said on November 5 that Iran will start injecting uranium gas into 1,044 centrifuges on November 6. Under the nuclear accord, the centrifuges are supposed to spin without gas injection. Enriched uranium can be used to make fuel for reactors, but also nuclear weapons. Iran insisted that all of the steps had been taken to reduce its commitments to the nuclear agreement were "reversible.": Tehran will uphold all of its commitments under the accord when the remaining signatories -- Britain, France, Germany, Russia, and China -- do the same.

OPEC said it will supply a diminishing amount of oil in the next five years as output of U.S. shale and other rival sources expands. OPEC's production of crude oil and other liquids is expected to decline to 32.8 million barrels per day (bpd) by 2024. That compares with 35 million bpd in 2019. Rising climate activism in the West and widening use of alternative fuels are putting the strength of long-term oil demand under more scrutiny. Anyway, OPEC still hopes to boost production in coming decades thanks to its abundant and cheap-to-extract reserves. It expects supply from non-OPEC producers to hit a high of 72.6 million bpd in 2026 and fall to 66.4 million bpd by 2040.

OPEC also reported, that the oil market outlook for 2020 may have upside potential, appearing to downplay any need for deeper cuts to production. The cartel and its allies led by Russia meet in December to review output policy. The so-called OPEC+ alliance has since January implemented a deal to cut oil output by 1.2 million barrels per day to support the market. The pact runs to March 2020.

The glut of oil inventory that Venezuela has been nearly choking on in recent months appears to be finally draining, as the crisis-stricken country managed to send off 800,000 bpd of oil for a second month in a row. Its list of oil buyers have decreased dramatically due to US pressure in the form of sanctions. The list includes China, Russia, and Cuba for the most part, although India’s Reliance has recently resumed Venezuela oil imports as well. For now, it seems, this has been enough to lift the Latin America’s oil exports to 812,775 bpd, and enough to drain some of its excess inventory that have filled its storage to the brim and caused a blending unit, Petrosinovensa, to shutter as it had nowhere to put more product. Venezuela’s October exports were still 3.7% below September’s, and well below June’s exports of 1.13 million bpd.

The source of the leak in the Keystone pipeline has still not been identified. There is no estimated timeline for a restart of the damaged pipeline. More than 9,000 barrels of oil spilled last week. Prices for Western Canada Select (WCS), a heavy blend of oil in Canada, fell sharply, dropping to a $22-per-barrel discount relative to WTI, the highest in nearly a year.

The American Petroleum Institute (API) has estimated a crude oil inventory build of 4.26-million barrels for the week ending October 31, compared to analyst expectations of a 1.515-million-barrel build. Last week saw a draw in crude oil inventories of 1.7 million barrels, according to API data. The EIA’s estimates, however, reported a build of 5.7-million-barrels for that week. After yesterday’s inventory move, the net draw for the year has now shrunk to 8.26 million barrels for the 45-week reporting period so far, using API data. US crude oil production as estimated by the Energy Information Administration showed that production for the week ending October 25 stayed at 12.6 million bpd for the fourth week in a row—the highest production level that the United States has seen.

We expect bunker prices may demonstrate irregular changes today in a range of plus-minus 3-5 USD.