MABUX: Bunker market this morning, Mar 31

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) continued slight downward movement on March 30:

380 HSFO: USD/MT 248.96 (-4.39)
VLSFO: USD/MT 314.00 (-2.00)
MGO: USD/MT 404.57 (-2.39)

Meantime, world oil indexes also fell on Mar.30 on heightened fears that the global coronavirus shutdown could last months and demand for fuel could decline further.

Brent for May settlement decreased by $2.17 to $22.76 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May fell by $1.42 to $20.09 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.67 to WTI. Gasoil for April delivery lost $15.00.

Today morning global oil indexes do not have any firm trend so far.
 
The price of oil is now so low that it is becoming unprofitable for many oil firms to remain active, analysts said, and higher cost producers will have no choice but to shut production, especially since storage capacities are almost full. As per Rystad Energy, the oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May, including cutting refineries runs and increasing storage. Besides demand destruction, oil markets have also been slammed by the Saudi Arabia-Russia price war that is flooding markets with extra supply.

Russia considers, the global oil market could return to balance in at least one year, all things being equal as-is. Any timeline on rebalancing would depend on how long major economies remain in lockdown. At $30-35 oil, U.S. oil production could drop by around 1.5 million barrels per day (bpd). Russia’s position of not to support deeper cuts at the OPEC+ meeting  was that the coronavirus outbreak was already hitting oil demand in February and was increasing the uncertainty about how far and how severe the pandemic would spread outside China. According to Russia, the ‘fair price of oil’ currently would be $45-55 a barrel. Such a price range would discourage costly projects and, at the same time, allow demand to grow.

Several OPEC members, largely bystanders suffering amid the Saudi-Russia oil price war, continue to press for a new production accord. Algeria, who holds OPEC’s rotating presidency this year, has been extremely active in attempting to round up enough support to try and convince Saudi Arabia to consider an alternative tack. But with the kingdom so far standing firm in its plans to ratchet up its production starting next month, the prospects of any new deal seem scant.

The United States says it has imposed sanctions against 20 companies based in Iran and Iraq, along with officials and other individuals there who are accused of supporting terrorist groups. The individuals and entities are also accused of “transferring lethal aid to Iranian-backed terrorist militias in Iraq such as Kata’ib Hizballah (KH) and Asa’ib Ahl al-Haq (AAH). Among other activities, the companies and individuals were said to be involved in smuggling weapons to Yemen, selling U.S.-blacklisted Iranian oil to the Syrian government, promoting propaganda efforts in Iraq, and intimidating Iraqi politicians. The sanctions freeze any U.S.-held assets of those designated and bar Americans from doing business with them.

China's central bank unexpectedly cut the rate on reverse repurchase agreements by 20 basis points on Mar.30, the largest in nearly five years, as authorities ramped up steps to relieve pressure on an economy ravaged by the coronavirus pandemic.

Global oil storage is filling up rapidly as the coronavirus pandemic reduces consumption by tens of millions of barrels per day (bpd) while leading oil producers have yet to rein in their crude output. No comprehensive data exists on total storage volumes available in the petroleum supply chain or the amount unfilled at the start of the year, but the International Energy Agency (IEA) has said consumption could have shrunk by 20 million barrels per day because of the pandemic and national lockdowns. If that is roughly accurate, storage will be filling at the rate of 600 million barrels per month.

We expect bunker prices may go downward today in a range minus 8-15 USD. A moderate upward correction is possible at the end of the session.