MABUX: Bunker market this morning, Jan 28

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) dropped on Jan.27:

380 HSFO: USD/MT 378.14 (-2.12)
VLSFO: USD/MT 599.00 (-10.00)
MGO: USD/MT 644.82 (-11.24)

Meantime, world oil indexes fell on Jan.27 as the death toll from China's coronavirus rose and more businesses were forced to shut down, stoking expectations of slowing oil demand.

Brent for March settlement decreased by $1.37 to $59.32 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $1.05 to $53.14 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.18 to WTI. Gasoil for February delivery lost $24.50.

Today morning global oil indexes continue slight downward trend.

The death toll from the coronavirus rose to more than 80 and the Chinese government extended the Lunar New Year holiday to Feb. 2, trying to keep as many people as possible at home to prevent the virus from spreading further. Outside China, 12 countries have also reported infections from the virus — Australia, Canada, France, Japan, Malaysia, Nepal, Singapore, South Korea, Taiwan, Thailand, Vietnam and the United States.  The rapid spreading of the virus fuelled fears of slowing oil demand and raised speculation that OPEC and its allies including Russia, a group known as OPEC+, will consider deepening production cuts. According to a report from Goldman Sachs, the coronavirus could cut into demand by around 260,000 bpd and reduce oil prices by more than $3 per barrel.

Saudi Arabia and the United Arab Emirates, allies in the Organization of the Petroleum Exporting Countries (OPEC), tried to play down the impact of the virus, with Riyadh, the de-facto OPEC leader, saying the group can respond to any changes in demand. The OPEC+ group has been withholding supply to support oil prices for nearly three years and on Jan. 1 increased an agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd through March.

American Petroleum Institute (API) reported that, U.S. petroleum exports hit a new all-time high of 9.0 million barrels per day (mb/d) in the final month of 2019. This latest milestone came as U.S. crude oil production notched a fifth consecutive monthly increase to reach a record 12.9 mb/d.

The implementation of the IMO’s sulfur reduction regulations for bunker fuel has sidelined high sulfur fuel oil from the global marine fuel pool, but feedstock supply tightness on the US Gulf Coast has created an outlet for Russian fuel oil. Limited availability of feedstock on the USGC due to a closed arbitrage from Europe along with the pull of the bunker fuel blending pool has kept USGC vacuum gasoil and straight run fuel oil differentials well-supported, putting them on a higher shelf than refiners are willing to reach for. This has forced refiners to look at alternative options for feedstock. As a result, while HSFO demand for bunkering has evaporated due to the IMO 2020 sulfur shift, demand for the product as a refinery feedstock has jumped.

LNG prices are on track to hit an all-time low in Asia later this summer. Gas is also at its weakest seasonally in the U.S. and Europe since the late 1990s. There’s a surplus already in the U.S. and Europe, while the mild winter in Asia build another surplus up there. As per evaluation from Gunvor Group Ltd., LNG exporters are 50 cents away from shutdowns.

The environmental lobby group Clean Arctic Alliance has called on the International Maritime Organization (IMO) to support an immediate switch to distillate fuels for ships in the Arctic and develop a global rule prohibiting fuels with high Black Carbon emissions. Earlier a paper submitted by Germany and Finland to the IMO’s Pollution Prevention and Response (PPR) sub-committee indicated that the new IMO 2020-compliant 0.50% sulphur fuel blends contain high aromatic compound levels, which can directly impact on black carbon (BC) emissions. The Clean Arctic Alliance said that oil companies must explain how their new “Super Pollutant” shipping fuels ever came to market and the IMO must stop new “Super Pollutant” shipping fuels in the Arctic and globally.

Libya’s oil production took a nosedive to less than 300,000 bpd last week, from over 1 million bpd following a blockade of its main oil export terminals, which has in turn prompted the shutdown of several large fields. Tribal groups affiliated with General Khalifa Haftar’s Libyan National Army, occupied the terminals last week and seized several fields in Libya’s main oil producing region. Among the affected fields were Sharara—Libya’s largest—and neighboring El Feel, the two contributing almost a third of Libya’s total output. The blockade will also cost Libya between 500,000 and 800,000 bpd in lost oil production. Before the blockade, Libya was pumping around 1.3 million bpd. The news is supporting fuel indexes at the moment.

We expect bunker prices will drop today in a range of minus USD 4-8 for IFO and minus USD 15-22 for MGO.