MABUX: Bunker market this morning, Feb 25

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) fell on February 24:

380 HSFO - USD/MT 360.82 (-6.36)
VLSFO - USD/MT 530.00 (-8.00)
MGO - USD/MT 590.75 (-8.32)

Meantime, world oil indexes also dropped on Feb.24 as the rapid spread of a coronavirus in several countries outside China added to investor concerns over the effect on demand for crude.

Brent for April settlement decreased by $2.20 to $56.30 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $1.95 to $51.43 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.87 to WTI. Gasoil for March delivery lost $23.00.

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

Global fuel market remains on edge as the coronavirus is becoming a pandemic and there is no improvement of the situation in Iran, Italy, South Korea and Japan. South Korea's fourth-largest city, Daegu, grew increasingly isolated as the number of infections there rose rapidly, with some airlines suspending flights to the city until March 9 and March 28, respectively. The country reported its seventh death after raising its infectious disease alert to its highest level. Italy reported a third death from the flu-like virus and 150 infections. Iran said it had confirmed 61 cases and 12 deaths, with most of the infections in the Shi'ite Muslim holy city of Qom. Afghanistan, Iraq, Kuwait, Saudi Arabia and Turkey imposed travel and immigration curbs on the Islamic Republic.

Saudi Arabia and Russia have so far failed to reach an agreement to cut oil production even with the COVID-19 epidemic in China expected to significantly hurt energy demand this year, putting the more than three-year-old alliance between the two major oil producers at risk. The Saudis are holding talks with Kuwait and the United Arab Emirates this week to discuss a possible joint production cut of as much as 300,000 barrels a day. If the alliance were to split, the immediate reaction would be a drop in oil prices, but that could be reversed by a strong OPEC cut.

With no Nigerian cargoes sailing for China in February and the prime African crude producer becoming increasingly dependent on European demand, Nigeria’s state oil company NNPC has effectuated an across-the-board price cut on its March 2020 official selling prices. Its flagship export streams like Bonny Light, Qua Iboe, Forcados, Egina or Escravos were all cut by 50-60 cents per barrel month-on-month.

The national oil companies of Malaysia and Indonesia, Petronas and Pertamina, have signed a framework deal that would allow them to swap crude as part of their refinery optimization strategies. Malaysia generally produces light sweet grades like Kimanis or Kikeh, whilst Indonesian production is more to the medium sweet side. Valued by the sides at $0.5 billion, the contract also accounts for potential product swaps and further cross-investment into each other’s upstream sectors.

LNG deliveries from the US to Europe have become economically unviable on the back of the regional spreads narrowing. With landed LNG prices oscillating between 2.15-2.3 per MMBtu in the UK, France and Spain, buyers are cancelling their April-loading US cargoes, among them the Spanish Naturgy balking its Cheniere cargo. US exporters usually sell at 115% of Henry Hub futures plus the liquefaction fee.

With anti-government protests continuing to haunt Iraqi society, the new prime minister Mohammed Tawfiq Allawi has ordered to reinforce security around key oil fields in the southern province of Basrah so as to avoid the repetition of production disruptions. A new oil minister is expected to be nominated later this week.

BIMCO has announced it is co-sponsoring a proposal originally drafted by Japan to regulate the carbon intensity of existing ships. Under the proposals, existing vessels will have to comply with an Energy Efficiency Existing Ship Index (EEXI) limit. The proposal has been submitted to the intersessional working group on Green House Gas reductions, which will meet ahead of the Marine Environment Protection Committee (MEPC) in March.

A draft proposal has been issued to Beijing from China Shipowners’ Association (CSOA) requesting a temporary 12-months reprieve from IMO 2020 sulphur content restrictions following the financial and logistical challenges faced from the coronavirus outbreak. Such submission is in anticipation of a potential shortage of low-sulphur fuel oil provisions in China, alongside ongoing financial concerns as coronavirus’ impact on the economy continues to deepen. If the suspension is granted, it is unclear whether this would apply to non-Chinese entities.

We expect bunker prices may demonstrate downward trend today in a range of minus 8-12 USD for IFO and minus 18-22 USD for MGO with possible slight upward correction by the end of the trade session.