MABUX: Bunker market this morning, Mar 25

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 demonstrated irregular changes on March 24:

380 HSFO: USD/MT 258.95 (+0.10)
VLSFO: USD/MT 329.00 (-1.00)
MGO: USD/MT 416.83 (-2.36)

Meantime, world oil indexes increased on Mar. 24 as the U.S. indicated the possibility of an alliance with Saudi Arabia to stabilize prices.

Brent for May settlement increased by $0.12 to $27.15 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May rose by $0.65 to $24.01 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.14 to WTI. Gasoil for April delivery increased by $17.25.

Today morning oil indexes continue to rise after the American Petroleum Institute (API) reported a drop in the U.S. crude oil supply.

According to the American Petroleum Institute U.S. oil inventories fell last week, by 1.25 million barrels. That is about 421,000 down the week before. U.S. distillate stockpiles fell by 1.9 million barrels, while gasoline dropped by 2.6 million barrels.

U.S. Energy Secretary Dan Brouillette hinted on Mar.23 that a U.S.-Saudi oil alliance was one option to stabilize prices as the COVID-19 pandemic continues to shrink demand and the price war between Saudi Arabia and Russia shows no sign of abating.

At the same time, oil indexes were also supported by steps by the U.S. Federal Reserve to bolster the economy and hopes the United States will soon reach a deal on a $2 trillion coronavirus aid package. The Fed rolled out an array of programmes including backing for the first time corporate bond purchases on Mar.23. U.S. Treasury Secretary Steven Mnuchin voiced confidence that a deal on the aid package would be reached soon. The expected stimulus pushed the U.S. dollar lower against other currencies. A weaker dollar tends to support the price of oil and other dollar-denominated commodities.

Still, the oil prices are hit by the demand shock caused by the coronavirus outbreak and government restrictions to contain it, and the sudden removal of measures by OPEC and other nations to limit supply. British Prime Minister Boris Johnson ordered Britons on Mar.23 to stay at home to halt the spread of coronavirus, imposing curbs on everyday life without precedent in peacetime.

Saudi Arabia now plans to boost exports, although flows have yet to increase in March. That means that global oil supply will rise significantly in the next two months

Wood Mackenzie’s latest analysis reveals that China’s crude stock (including strategic and commercial petroleum reserves) could reach 1.15 billion barrels in 2020, equivalent to 83 days of oil demand. At the same time China is expected to continue importing crude to fill its reserves taking advantage of lower oil prices. But this time, China could build its crude reserves by up to 300,000 barrels per day (b/d) from March 2020 to the end of 2020, due to limitations in storage capacity, as storage capacity utilisation reaches 90% this year. This fill rate is also less than half of what we have seen in the last two years, hence providing less support to oil prices than usual this time

We expect bunker prices to increase today: 1-3 USD up for IFO, 15-17 USD up for MGO.