MABUX: Bunker market this morning, Mar 04

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) has turned into slight upward evolution on Mar.03:

380 HSFO - USD/MT 347.20 (+4.10)
VLSFO - USD/MT 476.00 (+2.00)
MGO - USD/MT 556.98 (+5.59)

Meantime, world oil indexes changed irregular on Mar.03 under pressure from falling equities, but the losses were contained slightly as top producers considered more output cuts to support prices and the Federal Reserve cut U.S. interest rates to support the economy.

Brent for May settlement decreased by $0.04 to $51.86 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April rose by $0.43 to $47.18 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.68 to WTI. Gasoil for March delivery gained $5.75.

Today morning global oil indexes continue slight upward evolution.

The U.S. Federal Reserve moved quickly to cut interest rates, slashing them by 50 basis points on Mar.03. As per Fed statement, the coronavirus poses evolving risks to economic activity. In light of these risks and in support of achieving its maximum employment and price stability goals, the Federal Open Market Committee decided to lower the target range for the federal funds rate by 1/2 percentage point.

G7 finance ministers are going to discuss this week how best to cushion the impact of the outbreak on economic growth. That is occurring as other major central banks have promised monetary and fiscal stimulus.

OPEC could agree further oil production cuts at its meeting in Vienna this week, even if Russia decides not to join them. In February, OPEC proposed further cuts of 600,000 bpd to make up for demand loss amid the coronavirus outbreak, but Russia was reluctant to agree. Now, the cartel is talking about even deeper cuts, of up to 1 million bpd. It would put the total reduction at 2.7 million bpd, and this is not including the decimated Libyan oil output, currently at a little over 120,000 bpd, down from over 1.2 million bpd at the start of the year.

Russia continues to refuse to announce its position regarding deeper cuts by the OPEC+ coalition, but over the weekend Russian President Vladimir Putin suggested that Moscow will continue to play ball and cooperate with OPEC, although it sees current oil prices as acceptable.  Russia’s second biggest oil producer Lukoil added that a collective OPEC+ cut of between 600,000 bpd and 1 million bpd would be sufficient to push Brent back up to $60 a barrel.

China’s marine fuels sales fell by as much as 30-50% in February as the rapidly spreading coronavirus and prolonged Lunar New Year break strangled freight movement in and out of the country. Demand in rival bunkering hubs such as Fujairah and Singapore are expected to have slumped by 20-30%. The demand shock could also delay Chinese refiners’ plans to boost output of VLSFO, which yielded profits averaging about $15 a barrel above Brent crude in February. The resulting plunge in freight demand has knocked 40% off Asian prices for very low-sulphur fuel oil (VLSFO) since early January and upended expectations of an enduring shortage of the VLSFO.

In the previous week, the API estimated a smaller than expected build in crude oil inventories of 1.3-million barrels, while the EIA’s estimates were more bullish, reporting a smaller build of 500,000 barrels for the week. The API this week also reported a draw of 3.9 million barrels of gasoline for week ending February 28, after last week’s 74,000-barrel build. This week’s draw compares to analyst expectations for a 2.095-million- barrel draw for the week.
Distillate inventories were down by 1.7 million barrels for the week, compared to last week’s 706,000-barrel draw, while Cushing inventories fell by 1.35 million barrels. US crude oil production as estimated by the Energy Information Administration showed that production for the week ending February 21 held fast at its all-time high of 13.0 million bpd for the third week in a row.

We expect bunker prices may demonstrate slight upward trend today in a range of plus 1-6 USD.