MABUX: Bunker market this morning, Jan 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) increased slightly in the end of the first week 2020:

380 HSFO: USD/MT – 382.85 (+4.43)
VLSFO: USD/MT – 660.00 (+6.00)
MGO: USD/MT – 714.15 (+1.38)

Meantime, world oil indexes rose on Jan.03 amid escalating tension in the Middle East and supported by U.S. inventory report.

Brent for March settlement rose by $2.35 to $68.60 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for February gained $1.87 to $63.05 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.55 to WTI. Gasoil for January delivery added $10.00.

Today morning global oil indexes continue firm upward trend.

Reports that a U.S. air strike killed key Iranian and Iraqi military personnel escalated Middle East tensions and raised concerns of oil supplies disruption. Tensions have been building between Washington and Tehran after an Iran-backed Iraqi militia stormed the American embassy in Baghdad to protest deadly U.S. airstrikes earlier last week. Concerns in the region have persisted over the past year as Saudi Arabia’s energy facilities as well as foreign tankers in and around the Persian Gulf have been the target of several attacks. The area has five of OPEC’s biggest oil producers. Two of them: Iran and Iraq, combined pumped more than 6.7 million barrels a day of oil last month, more than one-fifth of OPEC output. Energy exports from both countries also rely on the Strait of Hormuz, the narrow and crucial oil and natural gas shipping choke-point that’s always in focus when Middle East tensions flair, particularly with Iran.

The U.S. Energy Information Administration reported a crude oil inventory decline for the last week of 2019. The draw totaled an impressive 11.5 million barrels. Analysts had expected a decline of 3.167 million barrels, after the EIA reported a draw of 5.5 million barrels for the week to December 20. At 429.9 million barrels, U.S. crude oil inventories are at the five-year seasonal average. Meantime, U.S. oil production had hit a record 12.66 million barrels daily in October, with weekly estimates suggesting this could have risen further in the months since October to over 13 million bpd.

Russia has halted oil supplies to refineries in Belarus amid a contract dispute threatening large Russian oil deliveries to Western Europe. However, ta the moment Russian oil transit to Europe via Belarus was so far uninterrupted.

Testing companies are examining new low-sulfur marine blends acquired in Antwerp, Belgium; Houston and Singapore and have found sediment at levels that could damage the engines of ocean-going vessels. The potential hazards were demonstrated already in 2018 when some ship operators were forced to pay for costly repairs after buying bunker fuel contaminated by a chemical used in epoxy. That incident affected about 200 vessels. Some 60% of the recipes for making low-sulfur fuel proposed by bunker suppliers near the top U.S. oil port of Houston failed to meet sediment specifications. Last month high sediment levels in bunker fuel samples were also found in Singapore, Antwerp and other European ports. The levels exceeded international residue standards. Mixing two or more low-sulfur bunker fuels can raise the sediment levels, producing a residue that could clog and damage an engine.

The implementation of low sulfur bunker fuel regulations on January 1 could result in changed market structures for clean and dirty tankers in 2020 as a result of compliance choice, as sources contemplate the possible emergence of multi-tiered pricing, specialized routes, and bunker availability issues. Roughly 17% of the tanker fleet is expected to be installed with scrubbers by the end of 2021 to comply with the International Maritime Association’s 0.5% sulfur bunker fuel specifications, enabling those ships to run lower-cost high sulfur bunker fuel. Meantime, shipowners have already faced delays in finding low sulfur bunkers in Brazil and Panama, with longer voyages and later laycans requiring more forward-looking bunkering schedules. Mexico is unlikely to have low-sulfur bunkers available anytime soon, as the country has not signed onto the IMO mandate and infrastructure at the ports appears limited.

We expect bunker prices may demonstrate today firm upward movement in a range of plus 8-11 USD.