MABUX: Bunker market this morning, Dec 23

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 20:

380 HSFO: USD/MT – 368.92 (+1.46)
180 HSFO: USD/MT – 408.82 (+0.31)
MGO: USD/MT – 692.96 (+1.52)

Meantime, world oil indexes fell on Dec.20, but prices were set for a third straight weekly gain amid the easing of U.S.-Chinese trade tensions.

Brent for February settlement decreased by $0.40 to $66.14 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for February lost $0.74 to $60.44 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.70 to WTI. Gasoil for January delivery declined by $1.00.

Today morning global oil indexes are sliding down.

Progress in a long-running trade dispute between the United States and China, the world's two biggest oil consumers, has boosted expectations for higher energy demand next year. China last week announced a list of import tariff exemptions for six oil and chemical products from the United States, days after the world's two largest economies announced an interim trade deal.

Libya’s General Haftar is closing in on Tripoli, which in turn is prompting a sudden uptick in Turkish activity on behalf of the Tripoli-based government. The UN-backed Government of National Accord (GNA) is probably fighting a losing battle because the only foreign friend willing to come to its aid militarily is Turkey, while a lineup of external forces (Egypt, UAE, Russia and in a less tangible way, France) are aiding Haftar, who controls the oil, even if he does not control the oil revenues. All the indications are there for a new phase in the conflict, supporting fuel indexes.

PetroChina, one of the largest buyers of liquefied natural gas (LNG) in the key LNG demand growth market, has offered the lowest bid in an LNG tender in Pakistan, in a sign that the Asian market continues to be oversupplied even after the winter heating season began. It’s not certain if Pakistan will award this tender, because it sometimes chooses not to buy. Still, prices were at their lowest for this time of the year, because of ample LNG supply and tepid demand growth with milder weather earlier in the heating season (Asian LNG spot prices for delivery in January were at US $5.65 per million British thermal units (MMBtu) last week). Last month, a Singaporean buyer of a U.S. cargo of LNG cancelled the loading, as both Asia and Europe are facing an LNG glut. Some other customers of U.S. LNG cargoes are also reportedly considering paying for those cargoes but not loading them.

While IMO 2020 is one week from taking effect, countries home to around 15% of the world’s oil-refining capacity have so far failed to sign up to the pact that’s designed to slash emissions of the pollutant starting in January. And even among the nations that back the rules, some important ones have said they are not going to start with an aggressive implementation. South Africa, the point connecting the east and western hemispheres, doesn’t have the domestic laws in place to enforce the rules. The United Arab Emirates, one of the world biggest vessel-refuelling centers, intends to avoid a draconian start to enforcement. Meantime, Denmark said it will be devastating if not everyone complies. For its part, the IMO says that any country that ratified the rules made a commitment to implement them from Jan. 1.

Several shipping associations representing the global maritime shipping industry have proposed creating a $5 billion research fund to help the industry develop technologies to slash emissions. The fund would be setup via a $2 per ton fee on fuel used by ships. The shipping industry accounts for 2.2 percent of total global CO2 emissions, and the IMO wants the industry to cut emissions by 50 percent by 2050. The fund, if it receives the backing of IMO member states, could be in place by 2023. The IMO said the proposal would be discussed by the organization’s Marine Environment Protection Committee at its next meeting at the end of March.

The Environmental Defense Fund (EDF) has called on the shipping industry to see the IMO 2020 sulphur cap as an ‘opportunity’ to ‘get ahead on the path to decarbonisation by advancing clean and safe zero-emissions fuels’ – and urged it not to ‘deviate from this path’ by ‘chasing devices or HSFO alternatives that do more environmental harm than good’. As per EDF, the industry should not be distracted by scrubbers or LNG but instead ‘identify and implement solutions that are climate friendly from production to use, such as green ammonia or hydrogen’. The EDF also questioned the strategy of using LNG as a ‘transition fuel’.

A rise in the U.S. oil rig count, an indicator of future supply from the world’s largest producer, also put pressure on prices. U.S. energy firms added the most oil rigs last week since February 2018, even though producers have been reducing spending on new drilling. Companies added 18 oil rigs in the week to Dec. 20, bringing the total count to 685, the most since early November.

We expect bunker prices may decrease today slightly in a range of minus 1-3 USD.