MABUX: Bunker market this morning, Mar 19

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 March 18:

380 HSFO: USD/MT 262.36 (-8.18)
VLSFO: USD/MT 341.00 (-12.00)
MGO: USD/MT 427.69 (-9.49)

Meantime, world oil indexes fell on Mar. 18 as the coronavirus outbreak threatened demand and crude producers promised more supply despite massive stimulus from major central banks.

Brent for May settlement decreased by $3.85 to $24.88 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May fell by $6.58 to $20.37 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.51 to WTI. Gasoil for April delivery decreased by $28.75.

Today morning oil indexes increase as the market tries to assess how effective massive stimulus by central banks will be in shoring up the global economy.

With Brent plunging to multi-year lows, the price of the OPEC basket of thirteen crudes stood at $30.36 a barrel on Mar.17, compared with $30.63 on Mar.16, according to OPEC Secretariat calculations. At those prices, no OPEC producer can balance their budget and have enough oil revenues to cushion the blow from the looming global recession.

Among the latest moves by a major central bank to try to mitigate the spiraling economic and financial fallout from the epidemic, the European Central Bank kicked off a 750 billion euro ($820 billion) emergency bond purchase scheme after an unscheduled meeting on Mar.18. Japan is considering handing out cash to households as it faces the likelihood of recession after a sharp contraction of growth even before the outbreak, while South Korea and Australia also took action.

The glut is expected to be much larger than the 2016 record oversupply, by two to four times. The largest-ever glut is coming as oil demand is slumping due to the coronavirus pandemic and former allies Saudi Arabia and Russia promising to flood the market with. The Saudi Arabia-Russia feud is unfolding while the Covid-19 pandemic is wiping out millions of barrels per day of oil demand around the world as a growing number of countries are going into lockdown, closing borders, and banning flights from the most heavily impacted countries. Some say, that estimate that up to 3 million barrels a day extra could hit the global market in April, if Libya can agree a ceasefire in its civil war. Around 1 million b/d of Libyan capacity is currently shut in due to hostilities. According to Goldman Sachs, the global oil demand by the end of March could fall as much as 8 to 9 million barrels per day.

The Iraqi Oil Minister, Thamer al-Ghadhban, has asked OPEC’s head, Mohammed Barkindo to call an extraordinary meeting of OPEC+ to “discuss all possible ways” to reverse the oil price slide. Iraq is among the oil-producing countries most dependent on their oil revenues, so it is natural for al-Ghadhban to be the first to voice concern after Brent slipped closer to $30 yesterday.

The virus has moved from Asia to Europe and America. Deaths have continued to soar in Italy and Spain, prompting the European Union to ban travellers from outside the Schengen bloc for 30 days in an unprecedented move to seal its borders. Travel within Europe has also been severely limited by public health measures closing most non-essential business activity.

 China’s economy will grow 3.4% this year, according to the median of 12 forecasts since Mar.16. That is the lowest since a contraction in 1976 - the final year of the Cultural Revolution which wrecked the economy and society. The data showed an across-the-board slump in manufacturing, retail sales and investment in January and February, with all the numbers hitting historic lows.

According to the Energy Information Administration (EIA) U.S. oil crude stockpiles rose less than expected last week, by 1.9 million barrels. That compared with expectations for a build of about 3.3 million barrels. Gasoline inventories plunged by 6.2 million barrels, versus forecasts for a decline of about 2.9 million barrels. Distillate stockpiles fell by 2.9 million barrels, compared with expectations for a drawdown of 2 million barrels.

We expect bunker prices to continue downward trend today: 18-20 USD down for IFO, 20-25 USD down for MGO.