MABUX: Bunker market this morning, Nov 28

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 in significant and irregular on November 27:

380 HSFO: USD/MT – 342.61 (+0.04)
180 HSFO: USD/MT – 386.73 (-0.07)
MGO: USD/MT – 667.87 (-0.39)

Meantime, world oil indexes fell on Nov.27 after a report showing U.S. crude inventories grew unexpectedly last week.

Brent for January settlement decreased by $0.21 to $64.06 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for January delivery fell by $0.30 to $58.11 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.95 to WTI. Gasoil for December delivery lost $2.00.

Today morning oil indexes continue to decline as official data showed production hit a record.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.6 million barrels from the previous week. At 452.0 million barrels, U.S. crude oil inventories are about 3% above the five year average for this time of year. Forecasts had expected a decline of about 350,000 barrels, after last week the EIA reported an inventory build of 1.4 million barrels. Production hit a record high of 12.9 million barrels per day (bpd) and refinery runs slowed.

U.S. President Donald Trump said on Nov.26 the United States was in the "final throes" in its attempt to reach a trade deal with China, but that at the same time Washington stands with protesters in Hong Kong, where it wants to see democracy. Trump was not specifically asked about congressional legislation to back protesters in Hong Kong. The new legislation, approved unanimously by the Senate and by all but one House lawmaker, requires the State Department to certify, at least annually, that Hong Kong retains enough autonomy to justify favorable U.S. trading terms that have helped it maintain its position as a world financial center. It also threatens sanctions for human rights violations. The legislation has greatly angered Beijing and Trump has been vague about whether he would sign or veto it as he tries to strike a deal with China to end a damaging 16-month trade war.

OPEC and Russia are likely to extend their oil production deal at least through midyear, but if they were to cut more output, as some speculate, it would blindside what has become a complacent market. The ministers head into the Dec. 5 and 6 meeting with oil prices near their highest levels in two months. OPEC and Russia and other allies have an ongoing agreement to reduce output by 1.2 million barrels a day, with the biggest cuts coming from Saudi Arabia. The current agreement expires in March, but many analysts expect the OPEC plus group to extend it until its next meeting in June or even to its meeting a year from now. U.S. sanctions on Iran and Venezuela have helped keep supply off the market, enabling the market to absorb increased supplies form the U.S. and elsewhere. But OPEC members Iraq and Nigeria were also producing above their limit, though they are currently more in line with the agreement.

Russian President Vladimir Putin stated that Moscow will continue to work with OPEC in what he sees as their common task, stabilizing oil markets. Russian officials have recently started to raise the possibility of increasing the amount of gas condensate exports being exempted from the country’s production quota. Labelling the US shale growth’s environmental consequences “barbaric”, Putin has pledged to maintain Russia’s oil output without resorting to shale drilling.

The political pressure intensifies for EU members to embrace the New European Green Deal which seeks to make Europe the world’s first-ever “climate-neutral continent”. In addition to fulfilling its Paris Agreement commitments, Brussels wants to use Emission Trading income to fund the fossil-dependent countries’ transformation, simultaneously intending to issue a carbon border tax on imported goods. Nuclear energy will be considered clean under the Green Deal.

Higher natural gas consumption due to extreme summer and winter weather and increased petroleum demand in transportation in a strong economy resulted in the United States reversing in 2018 several years of carbon dioxide (CO2) emissions reductions in the energy sector. According to the International Energy Agency (IEA), the U.S. saw its CO2 emissions rise by 3.1 percent in 2018, reversing a declining trend. Despite last year’s increase, emissions in the United States remain around their 1990 levels, or 14 percent below their peak in 2000.

We expect bunker prices may demonstrate slight downward trend today in a range of minus 1-4 USD.