MABUX: Bunker market this morning, Dec 19

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 December 18:

380 HSFO: USD/MT – 366.27 (+0.90)
180 HSFO: USD/MT – 407.64 (+0.94)
MGO: USD/MT – 687.89 (+3.29)

Meantime, world oil indexes steadied on Dec.18 after U.S. government data showed a decline in crude inventories.

Brent for February settlement increased by $0.07 to $66.17 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for January lost $0.01 to $60.93 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.24 to WTI. Gasoil for January delivery declined by $3.75.

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

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.1 million barrels from the previous week (with analyst expectations of a 1.92-million-barrel draw and a build of 800,000 barrels for the previous week). At 446.8 million barrels, U.S. crude oil inventories are about 4% above the five year average for this time of year. Refinery processing rates remained unchanged last week from the week before, at 16.6 million bpd. Imports stood at 6.6 million bpd, down from 6.9 million bpd.

JP Morgan raised its oil price forecasts for next year, as the investment bank expects OPEC’s production cuts to be effective in conjunction with expectations for better economic growth in emerging markets. It is estimating that rather than oversupply, the oil market will be in a deficit next year, by 200,000 bpd. This is in stark contrast to its estimates from September, that assumed a 600,000 bpd oversupply situation for 2020. It is expected a 1 million bpd global demand growth—the same as its September forecast. JP’s new forecast for the Brent crude oil benchmark is $64.50 per barrel for next year, up from earlier projections of $59 per barrel. For 2021, the bank is expected prices to fall to $61.50.

Deeper production cuts coming from the Organization of the Petroleum Exporting Countries and its allies, such as Russia, which make up a group known as OPEC+, continued to offer some support and prevented a further slide in prices. OPEC+, which has cut production by 1.2 million barrels per day (bpd) since Jan. 1 this year, will make a further cut of 500,000 bpd from Jan. 1 to support the market.

As per Lukoil forecast, Russia’s crude oil and condensate production could rise to more than 12 million bpd by 2035, if global demand for liquid hydrocarbons continues to grow. Currently, Russia pumps around 11.2 million bpd of oil and condensate. Referring to the U.S. sanctions on Russia’s oil industry, Lukoil said that although these restrictions are unlikely to impact domestic production in the near term, they will have a significant impact in the long term.

The Chinese and Philippine foreign ministers sealed an agreement for the two countries to pursue joint oil and gas exploration in the South China Sea. The talks between the two countries on the South China Sea’s oil and gas potential and how to exploit it have been going on for years. An agreement has been difficult to reach, however, mostly because of China’s territorial claims to the basin, which cover nearly the entirety of it. Estimates of how much oil and gas the South China Sea contains vary between 28 billion barrels of crude and 125 billion barrels of crude and 500 trillion cubic feet of gas, but these figures have not been confirmed by an independent assessor.

U.S. oil output from seven major shale formations is expected to rise about 29,000 barrels per day (bpd) in January to a record 9.14 million bpd. Output at the largest formation, the Permian Basin of Texas and New Mexico, is expected to rise 48,000 bpd to a new record 4.74 million bpd, the smallest increase since July. However, the rate of growth has slowed as independent oil producers cut spending on new drilling and completions and focus more on earnings growth. The oil rig count, an early indicator of future output, has already declined for a record 12 months in a row.

We expect bunker prices will not have any firm trend today and will change irregular in a range of plus-minus 1-4 USD.