MABUX: Bunker market this morning, Mar 03

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 slightly on Mar.02:

380 HSFO - USD/MT 343.10 (-1.19)
VLSFO - USD/MT 474.00 (-2.00)
MGO - USD/MT 551.39 (-0.82)

Meantime, world oil indexes have turned into upward correction on Mar.02 as hopes that a bigger than expected production cut from OPEC and stimulus from central banks could offset economic gloom from the coronavirus outbreak.

Brent for May settlement increased by $1.38 to $51.90 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April rose by $1.99 to $46.75 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.15 to WTI. Gasoil for March delivery gained $13.50.

Today morning global oil indexes continue slight upward evolution.

China’s fuel demand has materially weakened after the coronavirus outbreak forced authorities to lock down cities and discourage travels. Some estimates put the current demand loss in China at around 4 million barrels per day (bpd) of fuel. Still, China’s crude oil imports are expected to have held up pretty well in February, slowing by just around 160,000 bpd compared to January import levels. Crude oil imports would be weaker in March, because most of the February volumes had been contracted, set, and en route to China when the coronavirus outbreak put the brakes on fuel demand in the country. If China effectively contains the coronavirus in March and authorities loosen their stimulus purse strings to help the economy, fuel demand could begin to recover as early as in April.

Saudi Arabia and Russia are going to test OPEC+ pact when they meet in Vienna next week to debate another round of production cuts to stem the oil market’s COVID-19 rout.  Oil prices have fallen about a quarter since late January, when news of the coronavirus outbreak began shocking markets. But despite heavy lobbying by Saudi Arabia, the 23-country coalition of OPEC and non-OPEC producers has yet to agree on any plans to rein in crude oil production further. Russia, the key non-OPEC partner in the deal, appears relatively nonplussed by the market plunge, given its higher fiscal tolerance for lower prices. The alliance meets March 5-6 in Vienna. Failure to reach an accord could put the entire OPEC+ pact at risk.

Meantime, Russian oil production, including gas condensate, stood at 11.29 million barrels per day (bpd) over Feb. 1-27. Russia’s highest monthly oil production of 11.45 million bpd was recorded in December 2018. From late last year Russia was allowed to exclude production of gas condensate, a form of light oil, from its quota in OPEC+, but it continues to report a combined figure with no breakdown. Russia’s current oil production quota stands at 10.33 million bpd excluding gas condensate.

Port state control authorities have started to enforce the IMO’s Sulphur 2020 from 1st March, making it an offense for ships to carry fuel that contains a sulphur content higher than 0.5 percent unless the ship has an Exhaust Gas Cleaning System. As of March 1st, enforcement agencies will no longer have to prove usage. Showing that vessels without Exhaust Gas Cleaning Systems have non compliant fuel aboard will be enough to prove a violation. Major port state regimes including Paris MoU, Tokyo MoU and the United States Coast Guard (USCG), have made it plain that they will rigorously enforce the requirements.

The IMO’s Sub-Committee on Pollution Prevention and Response (PPR) has agreed draft amendments to MARPOL Annex I that would prohibit using and carrying heavy fuel oil (HFO) as fuel by ships in Arctic waters with effect from 1 July 2024, but with a provision to allow a waiver for domestic shipping to continue using HFO for another five years. The temporary waiver would, for example, allow Russian flagged ships to operate in Arctic waters subject to Russia’s jurisdiction up to 1 July 2029. The draft amendments will be submitted to the 76th session of the Marine Environment Protection Committee (MEPC 76) in October this year for approval, followed by circulation for adoption at MEPC 77 in spring 2021.

We expect bunker prices may turn into upward correction today in a range of plus 5-10 USD for IFO and plus 10-15 USD for MGO.