MABUX: Bunker market this morning, Jan 17

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) demonstrated downward changes on January 16:

380 HSFO: USD/MT – 383.83 (-1.68)
VLSFO: USD/MT – 635.00 (-4.00)
MGO: USD/MT – 677.87 (-3.08)

Meantime, world oil indexes increased on Jan.16 buoyed by the long-anticipated signing of an initial Sino-U.S. trade deal that sets the stage for a jump in Chinese purchases of American energy products, while U.S. crude inventories fell more than expected.

Brent for March settlement increased by $0.62 to $64.62 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for February rose by $0.71 to $58.52 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.10 to WTI. Gasoil for February delivery increased by $0.25.

Today morning oil indexes slight down.

Under the so-called Phase 1 deal to call a truce in a trade war between the world's two biggest economies, China committed to buying over $50 billion more of U.S. oil, liquefied natural gas and other energy products over two years. At the same time, some said China could struggle to meet the target and gains in oil are likely to be limited ahead of more detail on how the commitments will be achieved.

Official U.S. data showed a much bigger than expected drop in crude oil inventories, which also helped to underpin prices. According to the Energy Information Administration (EIA), oil inventories fell by 2.5 million barrels, compared with analyst expectations of a drop of 500,000 barrels. Gasoline stocks rose by 6.7 million barrels and distillate stocks were up by 8.2 million barrels. U.S. crude production also rose to a record 13 million barrels per day.

Oil prices are returning to range trading as the threat of conflict between Iran and the U.S. receded further after they traded missile and drone attacks earlier this month. In a reassuring note to the market, the International Energy Agency (IEA) said surging oil production from non-OPEC countries along with abundant global stocks will help the market weather political shocks such as the U.S.-Iran stand-off.

In its monthly report, the IEA said it expected production to outstrip demand for crude from the OPEC even if members comply fully with a pact with Russia and other non-OPEC allies to curb output. US oil production growth will slow to 1.06 million b/d this year and drop further to 410,000 b/d in 2021 as rig counts remain low, but efficiency and well-level productivity both continue to rise. At the same time, EIA estimates US oil production averaging 13.3 million b/d in 2020 and 13.71 million b/d in 2021in its first Short-Term Energy Outlook with 2021 predictions.

According to IEA, crude supplies from Iraq, the Middle East’s second-biggest producer, are “potentially vulnerable", amid rising political risks in the country and the broader region. Iraq’s oil exports have doubled during the last decade to reach 4 million barrels a day. Iraq’s fragile security situation may limit its plans to expand oil-production capacity in the medium-term, making it difficult for the global industry to meet rising demand in the second half of the decade. The IEA left its global demand forecast for this year unchanged, a day after OPEC cut its forecast by a modest 50,000 barrels a day.

Key OPEC Gulf member the United Arab Emirates and the group’s ally Russia said on Jan. 15 they were still committed to meeting in March to decide on future production policies. Earlier it was said, that OPEC+ have started consultations on extending the current output-cutting deal until June without holding a meeting in March. The energy minister of de facto OPEC leader Saudi Arabia, Prince Abdulaziz bin Salman, also said that OPEC+ will meet in March and it was too early to say what decision it would take. Some say, it would be very unusual, if not unprecedented, for OPEC to extend production cuts without holding a meeting, three OPEC sources said.

We expect bunker prices to demonstrate slight upward changes: 2-4 USD up for IFO, 1-3 USD up for MGO.