MABUX: Bunker market this morning, Dec 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) slightly rose on December 05:

380 HSFO: USD/MT – 340.36 (+4.94)
180 HSFO: USD/MT – 385.58 (+5.54)
MGO: USD/MT – 665.74 (+0.16)

Meantime, world oil indexes were stable on Dec.05 supported by expectations that OPEC will deepen output curbs but pressured by the prospect that gas condensate will be excluded from cuts for non-member producers.

Brent for February settlement increased by $0.39 to $63.39 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for January unchanged from the previous settlement: $58.43 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.96 to WTI. Gasoil for December delivery added $4.50.

Today morning oil indexes turned into slight downward evolution.

OPEC and allies led by Russia on Dec.05 agreed one of the deepest output cuts this decade to prevent oversupply in a deal that will apply for an unexpectedly short period of the first three months of 2020. OPEC began a meeting to discuss policy in Vienna yesterday and today will meet with Russia and other producers, a group known as OPEC+ that accounts for more than 40% of global oil production. Existing supply curbs of 1.2 million barrels per day, aimed at supporting oil prices and preventing a global glut, are set to expire in March. Russian Energy Minister Alexander Novak said a panel of energy ministers including Saudi Arabia and Russia had recommended OPEC+ deepen the cuts by 500,000 bpd. A cut of 1.7 million bpd would amount to 1.7% of global supply.

Non-OPEC member Russia, the world’s second largest oil exporter, had previously opposed extending or deepening cuts as its companies are arguing that reducing output during winter months amid low temperatures damages the fields. Meantime, it was reported that OPEC agreed to allow all OPEC+ members to exclude condensate from their oil output calculations, same as OPEC does with its own figures. Condensate is a high-value light type of crude oil extracted as a by-product of gas production. For Russia, it means that some 760,000 bpd of condensate would be excluded from calculations, meaning Russian baseline production used for cuts would decline to around 10.66 million bpd from 11.42 million.

Saudi Arabia, the world’s top exporter, was more keen on reducing output as the kingdom needs higher oil prices to support its budget revenue and the initial public offering (IPO) of Saudi Aramco. On Dec.05, the state oil giant priced its IPO at the top of its price range, raising $25.6 billion and topping Alibaba’s record $25 billion listing in 2014.

The International Energy Agency (IEA) predicts that a combination of supply side pressure and demand uncertainty will trouble OPEC well into 2020. The challenge facing OPEC ministers is the big wave of supply growth from non-OPEC countries hitting the market already, and certainly growing in 2020 supply is going to continue to grow from the US, although there is some debate as to how high that will be. IEA cited Brazil, Canada, Norway and Guyana as other key sources of oil supply growth. Some of these are more similar in terms of crude quality to OPEC crude grades than the additional lighter sweeter US shale growth.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.9 million barrels from the previous week. At 447.1 million barrels, U.S. crude oil inventories are about 3% above the five year average for this time of year. Forecasts had expected an inventory decline of 1.798 million barrels and the American Petroleum Institute estimated inventories had gone down by 3.72 million barrels.

The United States exported more crude oil and petroleum products than it imported in September 2019—the first month in which America was a net petroleum exporter since monthly records began in 1973. In September 2019, the U.S. exported 89,000 barrels per day (bpd) more crude oil and petroleum products than it imported, due to surging U.S. crude oil production and the lifting of export restrictions in 2015, and to continuously growing oil products output and exports. The U.S. continues to import more crude oil than it exports, but it exports more petroleum products than it imports, as U.S. refineries continue to raise their gross inputs of crude oil and produce and export more petroleum products such as jet fuel, gasoline, and distillate fuel.

Market is also monitoring progress on resolving a 17-month-old Sino-U.S. trade war that has hit global growth and demand for oil. U.S. President Donald Trump on Dec.04 described trade talks with China as going "very well," a day after saying it could take until after next year's presidential election to complete an agreement.

We expect bunker prices will not have any firm trend today with possible fluctuations in a range of plus-minus 1-4 USD.