MABUX: Bunker market this morning, Feb 07

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) rose slightly on February 06:

380 HSFO - USD/MT 363.39 (+8.12)
VLSFO - USD/MT 559.00 (+6.00)
MGO - USD/MT 610.42 (+3.78)

Meantime, world oil indexes changed insignificant and irregular on Feb.06 as an OPEC+ committee agreed on a required level of output cuts, but didn’t reach a decision on an emergency meeting as Russia resisted.

Brent for April settlement decreased by $0.35 to $54.93 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $0.20 to $50.95 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.98 to WTI. Gasoil for February delivery gained $1.50.

Today morning global oil indexes have turned into slight upward evolution.

The OPEC+ technical panel has recommended a production cut of 600,000 barrels a day to offset the demand impact from the coronavirus outbreak. Following three days of discussions in Vienna, there was no agreement on if ministers from OPEC and its allies should meet this month to ratify the Joint Technical Committee’s suggestion. Russia said it needs more time to assess the impact of the outbreak. Saudi Arabia in turn continues to push for an output cut. The dynamic between the two countries is not new. They have often disagreed about whether to curb production since the OPEC+ alliance was formed, but have ultimately found a way to compromise.

The near-term impact of the coronavirus outbreak on oil demand remains uncertain as much depends upon when and how China’s manufacturing industry restarts after the currently extended Lunar New Year public holiday. Wood Mackenzie has lowered its oil demand forecast for Q1 2020 by nearly 900,000 barrels per day (b/d) to 98.8 million b/d. Much of the drop is attributable to efforts to contain the outbreak, including flight cancellations. It is expected, that the Q1 2020 fall in Chinese demand – a 200,000 b/d drop to 13 million b/d – is the first year-on-year decline in the country’s demand since 2009.

Meantime, ship calls at or through major Chinese ports have fallen 20% since Jan. 20, as measures to control the coronavirus outbreak cut into international supply chains. It is projected that the impact of factory shutdowns and other restrictions hitting China’s economic output will reduce global ocean container volumes, a major piece of global trade, by about 0.7% over the full year, or about 6 million containers. China, acting to halt the spread of the disease, has extended until Feb. 9 the Lunar New Year holiday that traditionally curtails factory production. Travel restrictions remain in place, however, which may leave many factories short of workers to resume production if they try to reopen next week. Brokers in China said bookings for container ships, tankers and dry bulk vessels are falling rapidly and that the slowdown could extend until March. The reduction in shipping volumes is expected to ripple across supply chains in the U.S. and Europe, with rail and truck volumes likely sliding in the coming weeks on the reduced flow of international goods.

Meantime, falling Chinese demand for crude oil and fuels amid the coronavirus outbreak will likely cut shipping rates globally. Charter rates for supertankers on key shipping routes from the United States and the Middle East to Asia have already dipped to their lowest levels since the middle of September, because the coronavirus outbreak has started to eat into oil demand in the world’s top oil importer, China. If demand continues to be depressed for months, tanker rates on the key oil shipping lanes in the world would dip, affecting the revenues of shipping firms.

Venezuela’s oil exports fell 14% in January, exporting less than 1 million bpd of crude and refined products for the month. The 951,903 bpd that was shipped compares to 1.1 million bpd shipped in December, and 1.38 million bpd shipping a year ago January. Despite the falling off of crude exports for the troubled Latin American nation, its oil stocks in storage fell also—from 39.85 million barrels in September 2019 to 35.9 million barrels at the end of January. Most of the pre-January stock loss was due to extra crude shipments to India, who had previously stopped purchasing Venezuelan crude. Those shipments have since resumed.

The results of the first month of IMO 2020 show that HSFO is largely being bought on contract or direct between large buyers and sellers. When there have been spot enquiries for HSFO, barge availability can be problematic as the vessels are fully booked for contract deliveries. In addition, HSFO avails seem to be concentrated in the large ports, and vessels tramping to smaller ports may encounter difficulty in sourcing the product.

We expect bunker prices may change irregular today in a range of plus-minus 1-5 USD.