MABUX: Bunker market this morning, Feb 28

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) declined on February 27:

380 HSFO - USD/MT 349.04 (-5.59)
VLSFO - USD/MT 495.00 (-13.00)
MGO - USD/MT 565.52 (-5.60)

Meantime, world oil indexes also fell on Feb.27 as a rise in new coronavirus cases outside China fuelled fears of a pandemic that could slow the global economy and dent demand for crude.

Brent for April settlement decreased by $1.25 to $52.18 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $1.64 to $47.09 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.09 to WTI. Gasoil for March delivery lost $23.50.

Today morning global oil indexes continue firm downward trend.

For the first time since the start of the coronavirus outbreak erupted in China, the number of new coronavirus infections outside China exceeded new Chinese cases. The spread of the virus to large economies including South Korea, Japan and Italy has raised concerns that growth in fuel demand will be limited. Forecast said oil demand would grow by 60,000 barrels per day in 2020, a level which is practically zero, due to the outbreak. U.S. President Donald Trump sought to assure Americans evening that the risk from coronavirus remained "very low", but Asian share markets continue falling.

The impact of the coronavirus outbreak on the shipping industry is continuing to increase in scope, and the ripple effects are continuing to show up. In the 10-week-period, comprising of the Chinese New Year and the ongoing coronavirus outbreak, the industry is being faced with a downfall of some 1.7 million TEU (twenty-foot equivalent unit is the inexact unit of a container), roughly 1.7 billion U.S. dollars in revenues for the carriers. Previously reported congestion in Chinese ports is also affecting other ports, since companies had to unload refrigerator (reefer) containers in other locations, increasing reefer plug utilization there, the report revealed.

Besides, since the Chinese New Year is the biggest holiday in China’s calendar, shipping and logistics companies already expected a higher number of blank sailings (cancellations by the carrier), but those estimates were elevated due to the epidemic. The largest capacity reduction was registered in Asia to North Europe lane, where 11 percent of the capacity was blanked since the Chinese New Year. When considering the holiday’s blanks, 29.5 percent of the capacity was removed from the trade, in over 10 weeks.

OPEC is monitoring the coronavirus spread ahead of its scheduled March 5-6 meeting. This comes in light of a suspected case of the infection being reported in Vienna near the secretariat. The OPEC and its allies (OPEC+) are considering extending the oil output cuts to cushion the impact on the virus spread on oil prices, as markets fret about its impact on the oil demand growth outlook. The alliance is considering cutting its quotas by another 600,000 bpd, but Russia is yet to announce its decision on the same.

Rystad Energy is predicting that the slowdown in global oil consumption caused by the coronavirus outbreak will mean that average oil prices for 2020 will fall below previous expectations. As per report, Brent crude oil prices – which the consultancy had previously expected to average nearly $60 per barrel in 2020 – are now forecast to slump to about $56 per barrel for the year following revisions to the January forecasts.

Kuwait has barred foreign ships, except those carrying oil, from departing to or arriving from several countries to prevent the spread of the coronavirus. The notice, dated Feb. 25, has banned ships from and to South Korea, Italy, Thailand, Singapore, Japan, China, Hong Kong and Iraq. Oil sector ships are excluded from the ban.

The U.S. shale industry continues to show signs of slowing down. The pressure is starting to have an impact on drilling and production. The latest EIA report shows that production in all major shale basins outside of the Permian have started to decline. Besides, the effects of the coronavirus have likely not yet filtered through to the U.S. production data. Shifts in drilling activity and rig counts often take several months after a major change in prices, so there could be another dip in the months ahead.

We expect bunker prices may continue downward trend today in a range of minus 5-10 USD for IFO and minus 12-22 USD for MGO.