MABUX: Bunker market this morning, Mar 16

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 Mar. 13:

380 HSFO: USD/MT 288.79 (-2.35)
VLSFO: USD/MT 382 (-10.00)
MGO: USD/MT 467.85 (-7.17)

Meantime, world oil indexes demonstrated irregular changes on Mar. 13 as the coronavirus outbreak threatened demand and crude producers promised more supply.

Brent for May settlement increased by $0.63 to $33.85 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April rose by $0.23 to $31.73 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.12 to WTI. Gasoil for April delivery decreased by $0.75.

Today morning oil indexes decline as an emergency rate cut by the U.S. Federal Reserve failed to soothe global financial markets panicked by the rapid spread of the coronavirus while a price war rages on between top producers.

The U.S. Fed slashed interest rates on March, 15 in its second emergency cut this month, and said it would expand its balance sheet by at least $700 billion in coming weeks in a bid to ease tension in financial markets.

Analysts in the snap poll slashed their forecasts of Brent crude prices to $42 a barrel on average this year versus the $60.63 consensus in the February monthly poll. The global benchmark is expected to average about $34.87 in the second quarter and $39.05 in Q3, before regaining some ground to $44.08 in the final quarter. The survey of 21 analysts forecast WTI will average $30.37 per barrel in Q2 and about $37 for the year.

Adding to pressure on oil prices, already knocked by the virus as fewer people travel and business events are scrapped, major oil producers were pumping more crude into the market. Saudi Arabia is going to raise production and offer crude oil at deep discounts is an attempt to punish and pressure Russia while at the same time squeezing the U.S. shale industry. U.S. shale producers, meanwhile, rushed to deepen spending cuts and reduce future production.

Global oil demand is expected to mark its first quarterly decline for the first time since 2009, with most analysts predicting a drop of anywhere between 0.8 million barrels per day (bpd) and 4 million bpd in the first half of 2020. For the year, a modest demand growth of 0.1-0.5 million bpd is expected. Goldman Sachs said it now expected a record high oil surplus of 6 million barrels per day (bpd) by April, in a global market that usually consumes about 100 million bpd.

The US Treasury Department’s Office of Foreign Assets Control (OFAC) has applied sanctions against Geneva-based TNK Trading International S.A. (TTI) for broking the sale and transport of Venezuelan crude oil in violation of US sanctions against Venezuela, which were introduced in January 2019. On 18 February sanctions were also imposed on Rosneft Trading S.A. (RTSA), a subsidiary of the Russian state-owned oil giant Rosneft. Rosneft assumed control of TTI in December 2017 and the company is involving in trading, processing and transporting raw material, notably unrefined petroleum and petroleum products. According to OFAC, following the US Treasury designation of Rosneft Trading last month, cargoes of Venezuelan oil allocated to RTSA were switched to TTI in order to evade U.S. sanctions. OFAC notes that TTI and RTSA handled a large percentage of Venezuela’s oil exports in 2019. In January 2020, TTI is said to have purchased nearly 14 million barrels of crude oil from PDVSA.

We expect bunker prices to demonstrate irregular changes today: 1-3 USD up for IFO, 1-3 USD down for MGO.