MABUX: Bunker market this morning, Jan 22

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) changed irregular on January 21:

380 HSFO: USD/MT 381.13 (+1.77)
VLSFO: USD/MT 627.00 (0.00)
MGO: USD/MT 673.95 (-0.26)

Meantime, world oil indexes fell on Jan.21 on expectations that a well-supplied market would be able to absorb disruptions that have cut Libya’s crude production to a trickle.

Brent for March settlement decreased by $0.61 to $64.59 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $0.38 to $58.38 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.21 to WTI. Gasoil for February delivery lost $7.75.

Today morning global oil indexes continue slight downward evolution.

The International Monetary Fund (IMF) said, Saudi Arabia’s economy is expected to grow by 1.9 percent this year, revising down its forecast of 2.2-percent growth from just three months ago, due to expected lower Saudi oil production as the Kingdom has pledged to overcomply with the OPEC+ oil production cuts. At the OPEC+ meeting in December, OPEC and its partners decided to deepen the current cuts by 500,000 bpd in the first quarter of 2020, when demand is expected at its weakest for 2020. This brings total production reductions at 1.7 million bpd—that is if rogue members fall in line with their quotas. Considering the pledge from OPEC’s largest producer and de facto leader Saudi Arabia that it would continue to significantly overcomply with its share of the cuts, the total OPEC+ cuts could be as high as 2.1 million bpd.

Local Libyan tribes, allies of Libya’s General Haftar’s LNA, disrupted production at the El Feel and Sharara fields and blocked the transportation of crude oil to the Zawiya export terminal. The fields, producing 70,000 and 300,000 bpd, are the country’s main producing fields. Haftar’s allies acted while France, Italy, Germany, Russia, Turkey and several others gathered in Berlin to discuss a possible ceasefire between the Tripoli based and UN backed El Serraj government (GNA) and Haftar’s UAE-Egypt backed LNA. The shut-ins at the El Feel and Sharara field are not the only outages in the country.

The Tripoli based National Oil Corporation (NOC) recently declared a force majeure after the LNA blocked the exports from Brega, Ras Lanuf, Hariga, Zueitina and Sidra. The force majeure was called after the LNA ordered the units managing local production to halt exports via these ports. The closure of operations in the East of the country has taken out around 800,000 bpd. Taking into account all outages, only around 60,000 bpd of capacity will still be online, compared to the 1.23 million bpd the country produced in November. The impact of Libya’s oil outages on global markets are relatively small so far, but a protracted supply disruption surely affect global fuel prices.

Escalating protests in Iraq have led to a halt in production at the Al Ahdab oil field, which pumps some 70,000 bpd. It has been blockaded by security guards who are protesting against the absence of permanent employment contracts. The other field at risk of closure, Badra, produces about 50,000 bpd. Iraq is the second-largest oil producer and exporter in OPEC. It has been hit by a series of economic protests that started last year and are not showing any sings of ending any time soon as disgruntled citizens demand better public services and economic reforms and protest against widespread government corruption. Serious supply disruptions from Iraq have not happened recently, and therefore have the potential to push prices a lot higher.

The governments of Belgium, Denmark, France, Germany, Greece, Italy, the Netherlands and Portugal have pledged their political support for the creation of a European-led maritime surveillance mission in the Strait of Hormuz. The governments of the eight countries share the assessment that the current situation in the Gulf and the Strait of Hormuz remains unstable in a region critical to global stability, and support the de-escalation approach when it comes to dealing with regional security issues. It is expected, that the mission will concretely provide enhanced maritime situation awareness and surveillance through the deployment of additional maritime surveillance assets in the Gulf and Arabian Sea.

A submission by Finland and Germany to the IMO’s Pollution Prevention and Response (PPR) sub-committee includes the finding of a recent report which are said to ‘clearly indicate’ that new IMO 2020-compliant 0.50% sulphur fuel blends contain high aromatic compound levels, which can directly impact on black carbon (BC) emissions. A comparison was made between the BC emissions of 0.50% hybrid fuels and HFO and DMA, and also a synthetic Gas to Liquid (GtL) fuel, using varying engine ratings on a test bed. None of 0.50% fuels showed any reduction in BC emissions compared to HFO, but there was a reduction in the emissions of conventional DMA grade distillate and particularly the GtL fuel. The study suggests that the results of the test indicate that it is necessary to include aromatic content in the ISO 8217 specification as this would enable a better assessment of bunker fuels in terms of their environmental performance in terms of BC emissions.

We expect bunker prices may go downwards today in a range of minus 1-3 USD for IFO and in a range of minus 7-12 USD for MGO.