MABUX: Bunker market this morning, Jan 30
The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) changed insignificant and irregular on January 29:
380 HSFO: USD/MT 373.42 (+0.34)
VLSFO: USD/MT 585.00 (-4.00)
MGO: USD/MT 634.32 (+0.46)
Meantime, world oil indexes rose for a second day on Jan.29 as worries about the impact of the coronavirus outbreak and swelling crude inventories in the United States weighed on prices, while talk that OPEC could extend oil output cuts provided support.
Brent for March settlement rose by $0.30 to $59.81 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $0.15 to $53.33 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.48 to WTI. Gasoil for February delivery lost $1.75.
Today morning global oil indexes demonstrate slight downward trend.
Fuel markets that have been hit by the spread of the new virus out of China and its rising death toll are taking stock of the economic fallout, helped by comments from the head of the World Health Organization supporting Beijing's efforts to beat the outbreak. It is expected, that any effect of the China virus on oil demand is likely to be clearer over the coming week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 3.5 million barrels from the previous week. At 431.7 million barrels, U.S. crude oil inventories are about 2% below the five year average for this time of year. Forecasts had expected a draw of 460,000 bpd, after last week the EIA reported a draw of 400,000 bpd for the seven days to January 17. Distillate fuel inventories fell by 1.3 million barrels last week. This compared with a 1.2-million-barrel decline a week earlier. Distillate fuel production averaged 5 million bpd in the week to January 24, unchanged from the previous week.
Barclays predicts, a slump in oil demand caused by the outbreak of the coronavirus in China could pressure oil prices by $2 per barrel, revising its full-year Brent crude forecast to $62 a barrel and its West Texas Intermediate forecast to $57 a barrel. The downward revision from Barclays comes just a week after the bank said that it expects global crude demand growth to pick up in 2020 thanks to an improving global economic outlook.
OPEC wants to extend oil production cuts until at least June from March, and may deepen the reductions should demand for oil in China be significantly reduced by the spread of the virus. The Organization of Petroleum Exporting Countries (OPEC) and allies including Russia, have been trying to stabilize prices amid questions over the global demand outlook and rising supplies, particularly out of the United States. OPEC and its allies will next be meeting in Vienna in March to decide on any further action on its output reduction agreement. Meantime, Russia had insisted it wanted the current deal to last only until March, while Saudi Arabia has been keener for the deal to last longer.
China is set to further expand its massive oil refining capacity this year, offering support to global oil and fuel prices, and U.S. producers in particular. Already the world's No.2 oil refiner after the United States, China added 800,000 barrels per day (bpd) of capacity last year - 80% of the United Kingdom's refinery throughput - and forecasts expect a further 460,000 bpd to become operational in 2020. Domestic demand, however, has failed to keep pace. Chinese exports of diesel, gasoline and jet fuel combined jumped 20% in 2019, reaching as far as Mexico, Nigeria and Italy, and weighing on global refining margins. Exports of diesel and gasoline, however, will be capped as refiners shift production to make cleaner marine fuels to meet new international emission standards.
A new report from the International Council on Clean Transportation (ICCT) has found that the most popular Liquefied Natural Gas (LNG) ship engine, particularly for cruise ships, emits between 70% and 82% more life-cycle greenhouse gas (GHG) emissions over the short-term compared to clean distillate fuels. The authors found that using LNG could actually worsen the shipping industry’s climate impacts compared to marine gas oil (MGO) when considering the amount of heat these emissions will trap over a 20-year period. LNG is being hailed as a climate solution by many in the shipping industry — a sector that is responsible for more global GHG emissions than major climate polluting nations, including Germany, Iran, South Korea, and Canada. As per report, if left unchecked in a business-as-usual scenario, international shipping GHG emissions could rise from its current 3% share of emissions to a staggering 17% of global GHG emissions by 2050. If ships were to continue to uptake LNG as a marine fuel, emissions could be even worse.
SEA\LNG and the Society for Gas as a Marine Fuel (SGMF) in respond pointed out that they were not contacted prior to the release - and therefore need some time to review the report in depth - but their ‘immediate comments are related to the assumptions and methodologies used and the lack of direct input from the engine manufacturers’.
Libya’s National Oil Corporation said earlier this week production had slumped by more than two-thirds over the last week, from over 1.2 million bpd to about 300,000 bpd. The drop followed the blockade of oil export terminals and the consequent shutdown of several oil fields. The situation could deteriorate further, with production falling to as little as 72,000 bpd: the potential upward driver in a short-term.
Yemen’s Iran-aligned Houthi movement said on Jan.29 it had carried out an unspecified military operation on Saudi Aramco sites in the kingdom’s south, but there was no immediate confirmation from Saudi authorities of any attack.
We expect bunker prices may change insignificant and irregular today in a range of plus-minus 1-3 USD.