MABUX: Bunker market this morning, Dec.17
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) showed slight upward trend on Dec.16:
380 HSFO - USD/MT - 361.06(+1.80)
180 HSFO - USD/MT – 402.50(+2.12)
MGO - USD/MT – 679.27(+7.12)
Meantime, world oil indexes rose slightly on Dec.16 on hopes energy demand will benefit from the trade deal between the United States and China announced last week.
Brent for February settlement increased by $0.12 to $65.34 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for January rose by $0.14 to $60.21 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.13 to WTI. Gasoil for January delivery added $11.50.
Today morning oil indexes do not have any firm trend so far.
The United States and China announced on Dec.13 a “phase one” agreement that will reduce some U.S. tariffs in exchange for what U.S. officials said would be a big jump in Chinese purchases of U.S. farm products and other goods. The agreement averted additional tariffs on Chinese goods totaling $160 billion that the United States was set to impose over the weekend. It is expected the deal would nearly double U.S. exports to China over the next two years and was “totally done” despite the need for translation and revisions to its text. Progress on trade could jump start oil demand and ease fears of a glut which have weighed on prices.
Data from China on Dec.16 showing industrial output and retail sales growth accelerating more than expected in November offered some support for oil prices. But growth in China is expected to slow further next year, with the government likely to set its growth target at about 6% in 2020 compared with 6%-6.5% this year.
The International Energy Agency (IEA) predicts deeper production cuts by the OPEC and other major producers including Russia could be not enough to prevent a global supply glut. Even if the countries adhere to the deal struck in Vienna and supply growth from other nations drops, there could still be a surplus of 700,000 barrels per day in the first quarter of next year. IEA kept its global oil demand growth forecasts unchanged for 2019 and 2020, at 1 million and 1.2 million barrels per day respectively. Meantime, US oil production has more than doubled over the past decade, driven by the boom in shale production. As per IEA, the United States was a net oil exporter for the first time in decades in September, and that could become commonplace starting late next year or in early 2021.
China and India are still among the world’s top oil consumers, together accounting for almost a fifth of global oil consumption. Both countries have been consistently trumping the United States in importance when it comes to oil price trends in recent years as demand for oil has been growing a lot faster in both China and India. In China, oil demand has been growing at an average annual rate of 5.5 percent. In India, it has been growing by some 5.1 percent since 2008. Meanwhile, U.S. oil demand has only been climbing by 0.5 percent over the last decade. Besides, both countries are overwhelmingly reliant on imported oil. In China, the percentage of imported oil in its total consumption is almost 70 percent. In India, this percentage is even higher, at more than 80 percent. So, if in supply, one has to watch the U.S., OPEC, and Russia, in demand, however, these are China and India. Anything that happens in those two economies immediately affects oil and fuel prices.
The European Union agreed to cut its total emissions to net-zero by 2050 after ten hours of debates as Eastern European states demanded financial help to hit the target. One EU member state was left out of the agreement: Poland. Poland has opposed the ambitious emissions plan, saying it will cost too much to implement. As a result, the EU agreed to let it off the hook for now on the promise the country will revisit the issue next June. The union also allowed the Czech Republic to include nuclear energy in its energy mix. The agreement comes a day after the EU approved the net-zero emissions plan, which will cost it $111.7-billion (100 billion euro). Dividing these costs among the members proved to be tricky as well as navigating between the demands of individual countries.
As 2020 rapidly approaches, very low and ultra-low sulphur HFO availability has long been a concern, but it appears that suppliers have responded to the upcoming demand and supply will not be a problem. Possibly of greater concern is how long High Sulphur HFO will remain available or if the price of it will get closer to the low sulphur fuels, greatly affecting the ROI of those owners who opt for scrubbers. Incompatibility of bunker stems may leave shipowners facing serious engine repairs, requiring vessels to be taken out of service and leading to serious loss of earnings for operators. The mixing of non-compatible fuels can lead to the formation of sediment in the tanks which can block filters and purifiers. Add to that the ever-present risk of asphaltenes and cat-fines in certain fuels then the stemming of good quality fuel and good on-board management is essential if damage to the engines and fuel systems is to be avoided.
We expect IFO prices will stay stable today while MGO prices may add 5-8 USD.