MABUX: Bunker market this morning, Dec 03

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) declined on December 02:

380 HSFO: USD/MT – 332.12 (-6.57)
180 HSFO: USD/MT – 376.10 (-5.67)
MGO: USD/MT – 663.89 (-4.23)

Meantime, world oil indexes rose on Dec.02 as hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.

Brent for February settlement increased by $0.43 to $60.92 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for January delivery rose by $0.79 to $55.96 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.96 to WTI. Gasoil for December delivery gained $3.00.

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

Prices were supported by number of statements saying that OPEC and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd. The Organization of the Petroleum Exporting Countries (OPEC) and OPEC+: allies including Russia, are expected to at least extend existing output cuts to June 2020 when they meet this week. The OPEC+ group has coordinated output for three years to balance the market and support prices. Their current deal to cut supply by 1.2 million bpd that started from January expires at the end of March 2020. OPEC's ministers will meet in Vienna on Dec. 5 and the wider OPEC+ group will meet on Dec. 6 to make a decision on the current agreement.

China aims to launch low-sulphur fuel oil futures in the first quarter of 2020. A low-sulphur fuel oil contract would be China’s second bonded oil futures contract after the launch in March 2018 of its crude oil contract on the Shanghai International Energy Exchange (INE).

As per U.S. statement, Venezuela has spent US$5 billion worth of oil to reduce its debt to Russia and China and to send oil to Cuba, while leaving Venezuelans without basic food and medicines. Venezuela’s state-held oil firm PDVSA has cut its outstanding debt to the largest Russian oil producer, Rosneft, to below US$1 billion. Besides, faced with increasingly tightening U.S. sanctions, Venezuela and PDVSA are reportedly offering contractors and suppliers to pay them in yuan in Chinese accounts. At least four companies have been approached with such proposals, and they are still evaluating them.

Nigeria is committed to full implementation of agreements among OPEC and non-OPEC members. Nigeria's compliance had improved substantially since August and had achieved 100% compliance in November. Nigeria's crude production in the third quarter stood at 2.04 million barrels per day, its highest since the first quarter of 2016, which helped its economy grow 2.28% in the three months to September.

U.S. oil drillers reduced the number of drilling rigs for a record 12 months in a row, despite fresh production highs. Drillers cut three oil rigs in the week to November 27, bringing the total count down to 668, the lowest since April 2017. Meantime, U.S. production hit a record high of 12.9 million barrels per day and refinery runs slowed.

Global oil refiners have upgraded processing units and adjusted operations to raise output of low-sulphur residual fuels and marine gasoil (MGO) to prepare for stricter shipping fuel standards that kick in on Jan. 1. The shipping industry consumes about 4 million barrels per day (bpd) of marine bunker fuels, and the rule changes will impact more than 50,000 merchant ships globally, opening a significant new market for fuel producers.

Meantime, bunker fuel quality issues continue to persist in the industry, even as fuel management is set to become more critical. Come 2020, shipowners or operators buying the fuel will need to have a greater know-how for understanding what exactly they are going to buy. As a fuel buyer, the shipowner or operator would need to know the machinery onboard the ship and make a bespoke order with the supplier of the fuel being purchased, with parameters like viscosity clearly earmarked. The market is also anticipating stability and compatibility issues as many blending recipes are due for release. There is an expected increase in bunker fuel quality issues next year because of increased blending due to the 0.5% sulfur cap.

We expect bunker prices may demonstrate slight upward trend today in a range of plus USD 1-3.