MABUX: Bunker market this morning, Mar 10

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) dropped sharply on March 09:

380 HSFO: USD/MT 309.21 (-28.47)
VLSFO: USD/MT 428.00 (-37.00)
MGO: USD/MT 510.19 (-37.68)

Meantime, world oil indexes also fell on Mar.09 after Saudi Arabia cut its official prices in a market already reeling from the impact of the coronavirus on global demand.

Brent for May settlement decreased by $10.91 to $34.36 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $10.15 to $31.13 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.23 to WTI. Gasoil for March delivery lost $54.00.

Today morning global oil indexes have turned into slight upward correction with no firm trend so far.
 
The disintegration of the grouping called OPEC+ - made up of OPEC plus other producers including Russia - ends more than three years of cooperation to support the market. Saudi Arabia plans to boost its crude output above 10 million barrels per day (bpd) in April after the current deal to curb production expires at the end of March. The world's biggest oil exporter is attempting to punish Russia, the world's second-largest producer, for not supporting the production cuts proposed last week by OPEC. Saudi Arabia, Russia and other major producers last fought for market share like this between 2014 and 2016 to try to squeeze out production from the United States, which has grown to become the world's biggest oil producer as flows from shale oil fields doubled over the last decade.

The International Energy Agency (IEA) forecasts global oil to fall this year for the first time in over a decade, as the rapid spread of coronavirus around the world curtails travel and broader economic activity. The IEA now sees global oil demand at 99.9 million barrels a day in 2020, down around 90,000 barrels a day from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global oil demand would grow by 825,000 barrels a day in 2020. At the start of the year, the IEA had estimated growth of over 1 million b/d. As per IEA, the impact of the coronavirus crisis on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels.

The present situation is a great challenge for U.S. shale. The industry has been largely unprofitable to date, but had received several rounds of huge injections of capital in the last decade, most recently following the 2016 downturn. But by last year, investors had begun to sour on unprofitable shale drilling. Energy stocks collapsed and access to capital became increasingly scarce. Unlike a few years ago, recapitalization in any meaningful way is out of discussion at the moment. The wave of debt taken out during the 2014-2016 downturn is about to come due. North American oil and gas companies have more than $200 billion in debt maturing over the next four years, with $40 billion due this year.

Meantime, the United States was a net exporter of crude oil and petroleum products last month, with the four-week average net imports at a negative 907,000 barrels per day (bpd) in the last week of February. Since the start of 2020, the U.S. was a net exporter of crude and petroleum products in each of the weeks in January and February. The United States exported more crude oil and petroleum products than it imported in September 2019—the first month in which America was a net petroleum exporter since monthly records began in 1973.

The U.S. has plans to issue warnings to oil shippers, insurers, and port authorities that storing Iranian crude oil will bring the wrath of US sanctions. The US is also looking to ship captains to obtain and submit to US authorities photo evidence of anyone engaged in the practice of ship-to-ship transfers of Iranian oil. Last year, Chinese shipper COSCO had several units sanctioned after transporting Iranian crude in violation of the sanctions, resulting in a significant increase in shipping costs for the crude trade.

Standard Club is advising its members that – pending further clarification from the relevant authorities regarding restrictions on wash water discharges – vessels calling at Brazilian ports should switch to a closed-loop, if equipped with a hybrid scrubber, or use IMO 2020-compliant fuel while entering in national waters. According to Club, the Brazilian maritime authorities are silent on whether there is any restriction or prohibition to discharge wash water from open-loop scrubbers within Brazilian waters and, if so, what is the distance from the nearest land point where discharge is allowed.

We expect bunker prices may continue sharp decline today in a range of minus 25-35 USD.