MABUX: Bunker market this morning, Mar 09

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 decreased on March 06:

380 HSFO: USD/MT 337.68 (-6.42)
VLSFO: USD/MT 465.00 (-4.00)
MGO: USD/MT 547.87 (-6.58)

Meantime, world oil indexes also fell on Mar. 06 after Russia refused to back Saudi Arabia and other allies in OPEC on deeper production cuts to offset demand lost to the coronavirus.

Brent for May settlement decreased by $4.72 to $45.27 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $4.62 to $41.28 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.99 to WTI. Gasoil for March delivery decreased by $42.75.

Today morning oil indexes crash down after Saudi Arabia slashed prices and set plans for a dramatic increase in crude production in April.

OPEC+ issued a statement after talks in Vienna, saying it would continue consultations to stabilize the oil market. The Saudis were supposed to have come up with 1 million bpd of that and the Russians the balance..

But some traders think the Russian resistance is a calculated move to bleed dry U.S. shale oil producers, who aren’t a part of OPEC+ and who have been producing at record levels while enjoying price support from the alliance’s actions and grabbing market share from Saudi-Russian cuts. OPEC+ cuts have been going on for more than three years now.

Oil prices plunged 10% as the development revived fears of a 2014 price crash, when Saudi Arabia and Russia fought for market share with U.S. shale oil producers, which have never participated in output limiting pacts.

OPEC said it was all or nothing, and hence all limits would expire at the end of the month, meaning that OPEC members and non-OPEC producers can in theory pump at will in an already oversupplied market. Russian Energy Minister Alexander Novak said on March,6, that there is no more oil output deal between Russia, its allies and members of OPEC oil-producing countries, adding that the OPEC+ group of nations would continue to monitor the market situation.

Forecasts for 2020 demand growth have been slashed but Moscow has long argued it was too early to assess the impact. OPEC ministers said on March,5  they backed an additional 1.5 million barrels per day (bpd) of oil cuts until the end of 2020, in addition to rolling over existing cuts of 2.1 million bpd. That would have meant removing a total of about 3.6 million bpd from the market, or 3.6% of global supply.

Saudi Arabia slashed its official selling price (OSP) for April for all its crude grades to all destinations and likely will rise oil production, after OPEC’s oil supply cut pact with Russia fell apart. State oil giant Saudi Aramco has set its Arab light crude oil to Asia for April at a discount of $3.10 to the Oman/Dubai average, down $6 a barrel from March.

Goldman Sachs cut its second- and third-quarter Brent price forecasts to $30 per barrel, citing the oil price war between Russia and Saudi Arabia and a significant collapse in oil demand due to the coronavirus that has killed more than 3,500 globally. Lower oil prices from Saudi Arabia will start creating acute financial stress and declining production from shale as well as other high cost producer. There will be a negligible response from U.S. shale producers in the second quarter, but output will fall in the third quarter by 75,000 barrels per day (bpd) and a further 250,000 bpd in the fourth quarter of 2020. Assuming no change in production policy, Goldman expects a supply deficit to emerge in the fourth quarter of 2020, which would run down excess inventories through 2021. The prospect of inventory draws would help prices to rebound to $40 per barrel by the end of this year.

We expect bunker prices to drop today: 20-25 USD down for IFO, 25-30 USD down for MGO.