MABUX: Bunker market this morning, Feb 03

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) continued to decline on January 31:

380 HSFO: USD/MT – 368.21 (-3.64)
VLSFO: USD/MT – 579.00 (-5.00)
MGO: USD/MT – 625.79 (-6.39)

Meantime, world oil indexes also decreased on Jan.30 after airlines canceled flights to China.

Brent for March settlement decreased by $0.13 to $58.16 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $0.58 to $51.56 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.60 to WTI. Gasoil for February delivery lost $8.00.

Today morning oil indexes continue downward evolution amid worries about lower demand in China, the world's largest oil importer, following a coronavirus outbreak there. Supply chains across the world's second-largest economy have also been disrupted, prompting its biggest refiner Sinopec to cut output.

China's factory activity stalled in January as export orders fell, and analysts expect a big plunge in February's data as the virus outbreak hits demand in the country. China's central bank planned to inject more liquidity to shore up its economy on Feb.03, and pledged over the weekend to use various monetary policy tools to help allay the impact of the virus outbreak.

OPEC and non-OPEC’s Joint Technical Committee (JTC) has scheduled a meeting over Feb. 4-5 in Vienna to assess the impact of China’s new coronavirus on oil demand. The technical panel is likely to make a recommendation on whether to extend current oil supply curbs beyond March or to implement deeper output cuts. OPEC officials are considering their options on how best to deal with the potential impact from the spread of the coronavirus, which has killed more than 300 people and caused oil prices to slide.

OPEC's oil output plunged in January to the lowest since 2009 after several members led by Saudi Arabia over-delivered on a new agreement to cut production and as Libya's supply slumped.

Russian oil and gas condensate output rose to 11.28 million barrels per day (bpd) in January, from 11.26 million bpd in December. This is in line with what sources told Reuters last week and the highest since it reached 11.29 million bpd in August. In tonnes, oil output rose to 47.72 million versus 47.63 million in December. Reuters uses a 7.33 conversion ratio in its calculations when converting tonnes to barrels. Gas condensate, a light oil, has been excluded from Russia's production quota in a global pact aimed at curbing oil production and balancing out the energy markets.

According to Reuters poll, oil prices will remain supported near current levels this year as persistent geo-political risks and OPEC-led output curbs help offset growing supply from other producers. The survey of 50 economists and analysts, mainly conducted before the coronavirus outbreak, forecast benchmark Brent crude to average $63.48 per barrel in 2020. That compares with an average of $63.76 so far this year and last month’s forecast of $63.07. The 2020 outlook for West Texas Intermediate rose to $58.22 a barrel from December’s $57.70 forecast.

Tthe U.S. Energy Information Administration expects U.S. oil production to rise to a record of 13.30 million barrels per day (mbpd) in 2020. Growing non-OPEC supply could also offset the price effect of a de-escalation in the U.S.-China trade dispute following the signing of a phase one deal. Under the deal, China pledged to buy over $50 billion more of U.S. energy products over two years.

U.S. energy firms reduced the number of oil rigs operating for the first time in three weeks as producers follow through on plans to slash spending on new drilling for a second consecutive year in 2020.Drillers cut one oil rig the last week, bringing the total count down to 675. In the same week a year ago, there were 847 active rigs. In January, the rig count declined for the 13th time in the past 14 months following an increase in December.

Even though the number of rigs drilling new wells fell last year, U.S. oil output continues to increase. The pace of that production growth, however, is expected to slow.

We expect bunker prices may continue to decline today: 1-3 USD down for IFO, 6-8 USD down for MGO.