MABUX: Bunker market this morning, Nov 20

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) slightly decreased on Nov.19:

HSFO 380: USD/MT – 338.29 (-2.16)
HSFO 180: USD/MT – 382.74 (-1.88)
MGO: USD/MT – 660.51 (-8.05)

Meantime, world oil indexes fell on Nov.19 on concerns about excess global crude supply and limited progress toward resolving the U.S.-China trade dispute that has clouded the outlook for oil demand.

Brent for January settlement decreased by $1.53 to $60.91 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery fell by $1.84 to $55.21 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.70 to WTI. Gasoil for December delivery lost $4.25.

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

Chinese government said there was gloom in Beijing about prospects for a trade deal, with Chinese officials troubled by U.S. President Donald Trump's comment that there was no agreement on phasing out tariffs. Still, a comprehensive breakthrough in the trade war is going to be extremely difficult, and the two sides have been far apart on the big issues. The partial deal, such as it is, would only suspend tariffs in exchange for China buying large sums of agricultural goods. The lingering trade battle has hit global growth prospects and clouded the outlook for future oil demand.

Saudi Arabia’s crude oil exports dipped to a 22-month low of 6.67 million bpd in September, when the Kingdom was hit by attacks on its oil infrastructure that knocked 5 percent of global daily supply offline for weeks. After the attacks on September 14, Saudi officials reassured the oil market that not a single oil shipment to customers would be skipped, although the Kingdom has reportedly offered to ship some customers different crude grades from what they had nominated. In October, Saudi Arabia’s production recovered and jumped by nearly 1 million bpd. While the Saudis restored production to pre-attack levels, they have been cutting total exports to below the 7-million-bpd mark for several months, trying to reduce supply to the most transparently reported inventories in the U.S., while keeping—and where possible boosting—their market share in Asia.  

The Iranian-aligned Houthis in Yemen have seized a vessel that was towing a South Korean drilling rig that was in the Red Sea. The vessel was seized on Nov.17.  Houthi officials said the vessel would be released if the vessel was confirmed that it was of South Korean origin and not from “countries of aggression”. South Korea is demanding the release of its rig and its crew. There was not immediate reaction on the news from fuel indexes as global fuel markets appear to be building up its immunity for insecurity issues over Middle East oil.

It was reported that Euro zone growth has stabilised and the European Central Bank’s recent stimulus scheme is working as intended, even if markets may still need more time to fully grasp the scope of the package. Euro zone growth has slowed sharply over the past year and a long predicted rebound has failed to materialise, raising fears that the bloc could fall into recession, forcing the ECB to provide even more stimulus despite years of unprecedented support. At the moment data from industry and trade suggest that weak growth may continue into the first half of next year but signals from services and the labour market were more positive.

Northwest European oil refining margins turned negative on Nov.19, falling to around -$0.49 a barrel. Margins fell to their lowest since October 2013. A sharp fall in gasoline and fuel oil margins in recent days precipitated the fall, with a relative strength in middle distillates failing to keep overall margins in positive territory. The return of refineries from maintenance has seriously reduced refinery economics, and this is not a sign of strong global oil product demand.

It forecasts, U.S. shale drillers are set to cut spending by around 13 percent next year. Stubbornly low prices, financial stress and pressure from shareholders for cash flow are forcing shale E&Ps to cut capex and lay off workers.

Meantime, the American Petroleum Institute (API) has estimated a crude oil inventory build of 5.954 barrels for the week ending November 14, compared to analyst expectations of a 1.543-million-barrel build – a huge discrepancy for the much-watched inventory figures. Last week saw a draw in crude oil inventories of 500,000 million barrels, according to API data. The EIA’s estimates, however, reported a build of 2.2-million barrels for that week. After today’s inventory move, the net draw for the year now sits at just 2.81 million barrels for the 47-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 November 8 moved to a brand new all-time high of 12.8 million bpd.

Weak LNG and natural gas prices in Asia and in Europe have weighed on gas importers and traders who find themselves unable to resell the cargoes they have bought because of ample gas inventories and a glut of LNG supply from newly started projects around the world. Storage in Europe is full, as low LNG spot prices amid abundant supply and weaker Asian spot demand have helped Europe to fill its storage tanks to more than average levels this summer. In Asia, milder weather in the world’s top two LNG importers—Japan and China—leads to weaker demand amid ample supply.

We expect bunker prices may continue downward trend today in a range of minus US$ 4-10.