MABUX: Bunker market this morning, Jan 20

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) continued downward trend on Jan.17:

380 HSFO: USD/MT 379.18 (-1.65)
VLSFO: USD/MT 630.00 (-5.00)
MGO: USD/MT 675.87 (-2.00)

Meantime, world oil indexes changed irregular on Jan.17 as sluggish economic growth in China, the world’s biggest crude importer, raised concerns over fuel demand and countered optimism from the signing of a China-U.S. trade deal.

Brent for March settlement increased by $0.23 to $64.85 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March rose by $0.02 to $58.54 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.31 to WTI. Gasoil for February delivery lost $7.25.

Today morning global oil indexes show slight upward correction.
 
China reported that its gross domestic product grew 6% in the fourth quarter, meaning economic growth slowed to 6.1% in 2019. This may have been the country’s weakest growth in nearly three decades, but traders zeroed in on the monthly data for industrial production, which grew at the fastest rate since April in December, while retail sales growth stayed at 8% and fixed asset investment ticked up from a multi-year low. All those indicators point to a bottoming out of the world's second-largest economy.

This follows on from the signing of the trade deal between China and the U.S. earlier last week, which capped - at least for now - hostilities between the globe's two economic powerhouses which have lasted for around 18 months and damaged global growth.

The spread between high and low sulphur fuel, which widened towards record-breaking territory around the implementation deadline of IMO2020, has now started to narrow slightly. This could indicate that the global fleet has bunkered sufficiently for the first wave of the transition. Many operators will have locked into contracts to ride the first wave of IMO 2020 implementation, but when they come back to the market a clearer picture of the true differentials between high sulphur fuel oil (HSFO), very low sulphur fuel oil (VLSFO) and marine gasoil (MGO) will emerge. Besides, on 1 March 2020, the high-sulphur fuel oil carriage ban takes effect, which prohibits ships without an exhaust gas cleaning system (scrubber) to even carry bunker fuels with sulphur content above 0.50%.

The International Energy Agency (IEA) believes that ship operators, bunker suppliers and ports have ‘so far coped well’ with the introduction of the IMO 2020 0.50% global sulphur cap. As per IEA, at the start of 2020 the oil market has again faced a period of geopolitical turmoil at the same time as a significant sector is adjusting to a major change to its operating environment. IEA also said that it is starting to see the ‘first data on the transition’ and it ‘appears that deliveries of the new VLSFO bunkers are increasing fast.

Demand for cleaner bunker fuels, including marine gasoil, in South Korea is expected to increase further, with fuel bills for shipowners likely to rise, as a result of plans to create an impending emission control area, or ECA. The price gap between 0.1% LSMGO [low sulfur marine gasoil] and 0.5% MGO will widen. Currently, the gap is between parity to $10/mt. With the IMO rule starting this year, demand and prices for 0.5% MGO have risen as it is sought as an alternative to 0.5% LSFO amid tight supplies for the compliant fuel. Currently, only SK Energy and Hyundai Oilbank are supplying 0.5% MGO, while all four refiners — SK Energy, Hyundai OIlbank, S-Oil and GS Caltex — are able to supply 0.1% LSMGO. South Korea is going to establish its ECA and implement the 0.1% sulfur limit fuel rule in stages from September this year and fully from January 2022.

The number of oil and gas rigs in the US increased last week, to 796—an increase of 15 rigs. It is the first weekly gain in four weeks. The total oil and gas rig count is now 254 down from this time last year. For oil rigs, last week saw an increase of 14 rigs, bringing the total to 673—a 179-rig loss year over year.

We expect bunker prices may demonstrate irregular changes today in a range of plus-minus 1-5 USD.