MABUX: Bunker market this morning, Mar 27

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 26:

380 HSFO: USD/MT 257.23 (+1.23)
VLSFO: USD/MT 326.00 (-4.00)
MGO: USD/MT 419.90 (+1.97)

Meantime, world oil indexes decreased on Mar. 25 after the $2 trillion U.S. Covid-19 fiscal rescue left out the Trump administration’s plan to top up the country’s oil reserves in a bid to throw a lifeline to shale drillers.

Brent for May settlement decreased by $1.05 to $26.34 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May declined by $1.89 to $22.60 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.74 to WTI. Gasoil for April delivery fell by $2.25.

Today morning oil indexes increase as governments around the world pledged a huge injection of funds and other measures to limit the economic fallout from the coronavirus pandemic.

The Senate unanimously reached agreement on a $2 trillion relief package late on Mar.25. The bill now moves on to the House of Representatives, with a vote expected today. At the same time, the $3 billion earmarked for filling the U.S. Strategic Petroleum Reserve, which promised to support domestic producers moderately as they struggle with the collapse in prices, were removed from the bill.

Oil demand worldwide continues to take hits as the pandemic severely curtails travel and more countries order lockdowns to curb the spread of the disease. India, the second most populous country and the third largest oil consumer in the world, started a 21-day lockdown Mar.25. Vienna-based JBC Energy said it expected world oil demand to fall by an even larger 15.3 million bpd in the second quarter, likely pushing benchmark prices, at least temporarily, to around $10 per barrel. Goldman Sachs expects oil demand to fall by 10.5 million barrels per day in March and possibly by as much as 18.7 million bpd in April. According to EIA’s Executive Director, Fatih Birol, global oil demand could fall by about 20 million barrels per day.

The weekly jobless claims report from the U.S. Labor Department offered the clearest evidence yet of the coronavirus' devastating impact on the economy. The number of Americans filing claims for unemployment benefits surged to a record of more than 3 million last week, with initial claims coming in at a seasonally adjusted 3.28 million in the week ending March 21, eclipsing the previous record of 695,000 set in 1982.

The U.S. is putting increased pressure on Saudi Arabia to take a step back from the ongoing price war with Russia. Secretary of State Michael Pompeo urged the Saudis to “rise to the occasion and reassure global energy and financial markets when the world faces serious economic uncertainty”. However, there was no indication of any change in Saudi policy in King Salman's opening remarks at an emergency G20 meeting. At the same time, the Kremlin spokesman Dmitry Peskov told, that the oil market will not be a topic of discussion at the G-20 video summit. He pointed, that the topic of the economic repercussions of the coronavirus on the global economy will not remain undiscussed.

Due to the Saudi-Russian oil price war and the plunging demand as economies remain under lockdown, the situation on the oil market is such that no major oil-producing nation will exit unscarred. Oil at below $30 a barrel is unsustainable for the indebted U.S. shale industry, which cannot make any money at these prices. But the situation on the market is not forever sustainable, even for Saudi Arabia and Russia. They both will need to tap into their sovereign wealth funds to patch up budget shortfalls from lower revenues at $30 oil.

At the same time, Saudi Arabia was struggling to find customers for its extra oil as demand plummets due to the coronavirus and as freight rates surge. Royal Dutch Shell and U.S. refiners were taking less Saudi crude. Finland’s Neste was not taking any in April. Indian refiners had sought delayed deliveries and Polish refiners were easing up on purchases.

We expect bunker prices to decrease today: 3-5 USD down for IFO, 1-3 USD down for MGO.