MABUX: Bunker market this morning, Apr 23

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 firm downward trend on April 22:

380 HSFO: USD/MT 209.13 (-12.00)
VLSFO: USD/MT 239.00 (-18.00)
MGO: USD/MT 329.92 (-13.60)

Meantime, world oil indexes changed irregular on Apr.22 supported partly by voluntary as well as the prospect of forced production cuts to tackle a glut caused by the coronavirus crisis.

Brent for June settlement increased by $1.04 to $25.57 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery rose by $2.21 to $13.78 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.59 to WTI. Gasoil for May delivery lost $4.00.

Today morning global oil indexes continue slight upward evolution.
 
U.S. President Donald Trump said on Apr.21 he has asked his cabinet to devise a plan to inject cash into the ailing U.S. oil-drilling industry to help it survive a historic collapse in crude prices. U.S. oil and gas companies from Texas to Wyoming have struggled to stave off bankruptcy amid worldwide stay-at-home orders and business stoppages spurred by the coronavirus outbreak that have obliterated global demand for fuel. Trump has also separately announced plans to fill up the U.S. Strategic Petroleum Reserve. Congress so far has declined to provide the funding due to opposition from Democrats who oppose aiding the oil industry when laid-off workers and other sectors also need help. In the meantime, the Department of Energy is in talks with oil companies to lease some of the available space.

Meantime, a historic crash in crude prices is driving U.S. shale into full-on retreat with operators halting new drilling and shutting in old wells, moves that could cut output by 20% for the world’s biggest producer of oil. According to IHS Markit Ltd., for shale companies, the price of West Texas Intermediate crude went to crisis mode in just a few days, with many now unsure whether there will even be a market for their oil. Some 1.75 million barrels a day is at immediate risk of shutting down while the number of new wells is forecast to plunge almost 90% by the end of the year. As per evaluation made by Evercore, the potential for zero revenues in the second and third quarters this year may mean that large U.S. oil explorers burn through $7 billion in liquidity. By the end of it all, as many as 30% of publicly traded shale explorers could be forced to exit the market one way or another.

Goldman Sachs predicts, the recovery in U.S. oil prices is still weeks away. The reason for the note of caution is because cutting oil production is not a simple matter. It takes time and costs money, and, perhaps more importantly, it could damage the well. There has been no change yet in demand for crude oil globally, and U.S. producers are running out of storage space for their product. Oil in floating storage had reached a record high at 160 million barrels last week, according to sources from the shipping industry. That was a 100-percent increase over the previous week as traders scrambled to store their unsold and currently unsellable oil.

Saudi Arabia has hinted for a second time in two weeks that it is ready to take further measures with OPEC to restore oil market stability. As per statement made by Saudi cabinet on Apr.21, government discussed Saudi Arabia's willingness to achieve stability in the oil market, its affirmation with the Russian Federation of a firm commitment to implement agreed targeted cuts over the next two years, their continuing monitoring of oil market situations closely, and being prepared to take further measures jointly with OPEC+ and other producers. It seems, however, that the new deal is too little too late to make a meaningful impact on growing global inventories amid crashing demand.

For the first time ever, Chinese refinery throughput has surpassed refinery crude processing in the United States as China emerges from the lockdown. At the same time, U.S. fuel demand continues to plummet amid lockdowns in many states. China’s independent refiners began to restore some curtailed production in March, taking advantage of the cheap oil amid the oil price war as the country started to lift lockdowns and ease travel restriction measures gradually. In the week to April 10, refineries in the U.S. processed an average of 12.7 million bpd of crude. This compares with 14.9 million bpd three weeks ago.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 15.0 million barrels from the previous week. At 518.6 million barrels, U.S. crude oil inventories are about 9% above the five-year average for this time of year. This comes after a record-breaking 19.2-million-barrel build the EIA reported last week, and an API inventory build estimate of 13 million barrels, reported on Apr.21. Forecasts expected the EIA to report an inventory build of a little over 16 million barrels.

We expect IFO bunker prices may rise in a range of plus 5-15 USD while MGO prices will change irregular in a range of plus-minus 3-5 USD