MABUX: Bunker market this morning, Feb 18
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) did not have firm trend and changed irregular on February 17:
380 HSFO - USD/MT 364.17 (+2.18)
VLSFO - USD/MT 539.00 (-2.00)
MGO - USD/MT 599.51 (+2.22)
Meantime, world oil indexes were little changed on Feb.17 as concerns of falling fuel demand caused by the economic fallout from the coronavirus outbreak in China were offset by expectations that output cuts from major producers will tighten crude supply.
Brent for April settlement increased by $0.35 to $57.67 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March rose by $0.26 to $52.31 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.36 to WTI. Gasoil for March delivery lost $4.25.
Today morning global oil indexes have turned into slight downward trend.
The production cuts continued by OPEC may not be enough to stabilise global markets and the oil cartel may have to look cutting crude output by another 0.85 million barrels to balance the market hit hard by the Coronavirus outbreak. In the worst case scenario if China’s demand falls by 2.0-2.6 mbpd in February-March 2020, OPEC may need to further cut production by 0.85 mbpd to prevent the price of global crude oil from falling. China is the largest importer of oil and among its top consumers after the US. The spread of coronavirus there has also impacted oil consumption and resulted a further slide in already oversupplied oil market.
Meantime, Chinese refineries have cut output by about 1.5 million barrels per day (bpd) over just two weeks, causing crude stocks to pile up. That has left numerous Very Large Crude Carriers (VLCCs), capable of holding more than 2 million barrels of crude each, unable to unload at China’s top crude import terminal of Qingdao. Other cargoes are being diverted to South Korea, Malaysia, Singapore and other locales in China, while storage tanks in Shandong province – where Qingdao is located – are filling swiftly. Oil storage tanks in China’s eastern Shandong province are nearing peaks seen last June as independent refiners slash processing rates. China’s overall crude storage is at 760 million barrels, versus a peak of 780 million barrels in early June last year.
The International Energy Agency (IEA) slashed its demand forecast for the first quarter of 2020, predicting that global oil consumption will contract for the first time in over a decade. IEA dramatically revised its oil demand forecast, predicting consumption will actually contract by 435,000 bpd, the first outright decline year-on-year since the global financial crisis more than a decade ago. Previously, the agency expected consumption to increase by 800,000 bpd from a year earlier. For the full-year in 2020, the IEA cut demand growth by 365,000 bpd to just 825,000 bpd. That would be the lowest annual increase since 2011, and slightly below the growth figures for 2019, which itself was a down year.
Iran said that when it comes to the rising tensions in the Gulf, the United States and Saudi Arabia are to blame. Tensions in the Gulf took an anxious turn last month when the U.S. conducted a deadly strike on Iran’s top military leader. The Jan. 2 strike that killed Gen. Qasem Soleimani, a key military figure of Iranian and Middle East politics, followed a string of attacks on locations that hosted U.S. and coalition forces, including the U.S. Embassy in Baghdad. The tension in the Persian Gulf is still one of the main upward drivers for oil and fuel indexes.
A cargo of 950,000 barrels of crude that had been stranded at sea for about a year has finally docked at the port of Jose in Venezuela. The cargo was worth around $50 million at today’s prices. The cargo, on the Gerd Knutsen tanker, was loaded in January 2019 but never reached its destination on the U.S. Gulf Coast because of the escalation of U.S. sanctions against Venezuela and the takeover of Citgo by Venezuelan opposition leader Juan Guaido with the support of Washington.
Warmer winter weather this year has reduced U.S. natural gas demand for heating, and as production growth continues to exceed demand growth, U.S. natural gas prices slumped this month to their lowest February levels in two decades. Natural gas prices dipped to below US$2 per MMBtu this January for the first time in almost four years. This winter season, the glut is further aggravated by higher gas production in the Permian, higher than normal inventories, and warmer weather so far this winter. For full year 2020, EIA forecasts that Henry Hub natural gas spot prices will average $2.21/MMBtu, and then rise to an annual average of $2.53/MMBtu next year.
Libyan UN-recognized Government of National Accord said, country is facing financial disaster if the Libyan National Army does not lift the oil port blockade. The blockade began in mid-January when a group of paramilitary formations affiliated with General Khalifa Haftar’s Libyan National Army occupied the country’s oil export terminals along with pipelines and fields. Since then, Libya’s oil production has slumped from over 1.2 million bpd to less than 200,000 bpd. Despite rounds of talks, the warring sides cannot seem to find common ground for a ceasefire that would last long enough for oil production to start recovering.
We expect bunker prices may change insignificant and irregular today in a range of plus-minus 1-3 USD.
