MABUX: Bunker market this morning, Feb 05

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 downward trend on February 04:

380 HSFO – USD/MT 354.51 (-9.85)
VLSFO – USD/MT 559.00 (-14.00)
MGO – USD/MT 608.24 (-10.86)

Meantime, world oil indexes changed irregular on Feb.04 on hopes for additional production cuts from OPEC and its allies to offset any potential demand drop triggered by the coronavirus outbreak.

Brent for April settlement decreased by $0.49 to $53.96 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $0.50 to $49.61 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.35 to WTI. Gasoil for February delivery gained $8.25.

Today morning global oil indexes do not have firm trend and change irregular so far.

It is reported that OPEC+, comprising the Organization of the Petroleum Exporting Countries and allies including Russia, was considering cutting crude output by a further 500,000 barrels per day (bpd). However, the producer group could yet face the necessity to agree more cuts so soon after the existing pact was agreed and because there remains a lack of clarity over how long the virus crisis will last.

Meantime, OPEC+ consulted with China in an urgent assessment of how the coronavirus may hurt oil demand, and what measures the group could take in response. After meeting with experts on the OPEC+ Joint Technical Committee, Wang Qun, China’s ambassador to international organizations in Vienna, told reporters that the virus would inevitably affect oil demand, but cautioned against overreacting. Behind closed doors, he told cartel officials that the impact would be limited and localized.

Oil prices are still under pressure as oil demand falters as the death toll for the coronavirus exceeds that of the SARS outbreak in 2002/2003. China has reported 425 deaths from the virus so far—this compares to 349 deaths from SARS. The number of confirmed coronavirus cases in China has reached 20,400—this is more than double that of SARS. Oil’s price drop is not just market panic—demand is faltering, with China cutting its March orders from Saudi Arabia, and Sinopec is already cutting its refinery production this month by 600,000 bpd because it is seeing reduced demand. China’s oil demand will likely fall by 20% compared to normal demand this time of year due to the stringent restrictions on travel within China, and well as to and from China. This 20% would be roughly 3 million barrels per day.

Experts are warning that the current coronavirus outbreak could turn into a full-blown pandemic. The US is taking an abundance of precautions, issuing a mandatory federal quarantine on Friday for Americans flying home from China who had spent time in Hubei Province—it is the first such quarantine in 50 years—since the time of smallpox.

Russia’s production of crude oil and condensate inched up to 11.28 million barrels per day (bpd) in January, up from 11.26 million bpd in December and the highest production level since August last year. Russia slightly increased from December its oil and condensate production in January 2020, when deeper production cuts by OPEC and its Russia-led non-OPEC partners entered into force, at least for the first quarter of this year. While Russia’s compliance with the deal in January 2020 remains a difficult task to calculate due to the condensate production, OPEC’s crude oil production in January dipped to more than a decade low, with Saudi Arabia and its Gulf Arab allies over-complying with the cuts, and Libya’s oil supply falling due to the ongoing port blockade.

Sediment is still a problem for new VLSFO marine fuel. Recently fuel samples from Rotterdam, ordered as ISO-F-RMG380 grade, indicated Total Sediment Potential (TSP) which exceeded the ISO 8217 limit of 0.10% mass. FOBAS notes that the TSP results of these samples, which were tested over the past week, ranged from 0.17 – 0.26% mass, whilst other fuel parameters indicated satisfactory results. In the past week FOBAS has also issued alert over high sediment levels in fuels which were ordered as ISO-F-RMG380 grade and delivered in the Greek ports of Piraeus and Kali Limenes.

The American Petroleum Institute (API) estimated on Tuesday a larger than anticipated crude oil inventory build of 4.18 million barrels for the week ending January 31, compared to analyst expectations of a 2.8-million-barrel build in inventory. The Energy Information Administration’s (EIA) report is due later today. US crude oil production as estimated by the EIA showed that production for the week ending January 24 stayed at 13.0 million bpd for a third week in a row, a record high for the United States.

We expect bunker prices for IFO may fell today by 1-3 USD while MGO prices may gain 3-7 USD.