MABUX: Bunker market this morning, Apr 14

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 decreased on April 13:

380 HSFO: USD/MT 251.94 (-2.14)
VLSFO: USD/MT 293.00 (-3.00)
MGO: USD/MT 380.88 (-1.33)

Meantime, world oil indexes demonstrated irregular changes on Apr. 13. after the OPEC+ agreement, but there are concerns that it would not be enough to head off oversupply with the coronavirus pandemic hammering demand.

Brent for June settlement increased by $0.26 to $31.74 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May fell by $0.35 to $22.41 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $9.33 to WTI. Gasoil for April delivery fell by $4.00.

Today morning oil indexes rise after U.S. Energy Information Administration (EIA) predicted U.S. shale output would fall by the most on record in April, adding to cuts from other major producers.

Production has been sliding for several months, but the declines are expected to accelerate sharply in April with a loss of nearly 200,000 bpd of production, the EIA said. That would bring shale oil output, which has been the driver of the sharp growth in U.S. production, to 8.7 million bpd.

OPEC and allies led by Russia agreed on Apr.13 to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by 20%. After four days of talks OPEC+ said it had agreed to reduce output by 9.7 million barrels per day (bpd) for May and June. The biggest oil cut ever is more than four times deeper than the previous record cut in 2008. Producers will slowly relax curbs after June, although reductions in production will stay in place until April 2022. Oil demand has dropped by around a third because of the coronavirus pandemic.

Saudi Energy Minister Prince Abdulaziz bin Salman told that real effective cuts by OPEC+ would total 12.5 million bpd because Saudi Arabia, the United Arab Emirates and Kuwait would cut supplies steeper given higher output in April. Non-members Brazil, Canada, Indonesia, Norway and the United States would contribute 4 million to 5 million bpd. The International Energy Agency (IEA) would announce purchases into stocks by its members to the tune of 3 million bpd in the next couple of months. It would provide an update on Apr.15 when it releases its monthly report. The United States, India, Japan and South Korea have said they could buy oil to replenish reserves.

Oil producers from G20 have agreed to reduce their combined crude oil output by 3.7 million bpd. G20 met on Apr.10 to discuss oil production, but reports from that day revealed that the group had failed to agree on a specific number. Such broad support for an oil production-cutting effort is unprecedented.

Still, there is a figure for at least one G20 member: the United States. U.S. President Trump spoke with his Mexican counterpart on Apr.10 after Mexico refused to sign up for cuts of 400,000 bpd under the OPEC+ agreement. The U.S. would implement cuts of 250,000 bpd to help Mexico, which will cut 100,000 bpd. Trump confirmed the agreement. Besides, U.S. oil production could be lowered by as much as 2 million bpd by the end of the year.

According to Goldman Sachs, even though oil producers finally agreed to cut production by nearly 10 million bpd, the deal will fail to support oil prices in the coming weeks as the agreement is falling short of the enormous demand destruction and expectations. The voluntary cuts from the OPEC+ group will be too little to counter a nearly 20 million bpd demand loss this month and next. The global oil deal would translate into just 4.3 million bpd of actual production reduction from Q1 2020 levels, assuming that all major OPEC members comply 100 percent and all other producers comply at 50 percent with the agreement. Moreover, compliance with those new historic cuts will also be an issue, and Saudi Arabia is unlikely to go the extra mile this time, considering the size of its cuts.

Baker Hughes reported, that the number of oil and gas rigs in the US fell last week by 62, falling to 602, with the total oil and gas rigs standing at 420 fewer than this time last year. Over the last four weeks, oil and gas rigs combined have shed a total of 190 rigs. The number of oil rigs decreased for the week by 58 rigs, bringing the total to 504—a 329-rig loss year over year. It is the fewest number of active oil rigs since December 2016.

We expect bunker prices to change irregularly today: 1-3 USD up for IFO, 2-4 USD down for MGO.