MABUX: Bunker market this morning, May 04

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 increased on May, 01:

380 HSFO: USD/MT 213.36 (+2.79)
VLSFO: USD/MT 239.00 (+8.00)
MGO: USD/MT 320.85 (+7.56)

Meantime, world oil indexes demonstrated irregular changes on May 1 on record output cuts to tackle a supply glut due to the coronavirus crisis that has been weighing on the market.

Brent for July settlement increased by $1.17 to $26.44 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June rose by $0.94 to $19.78 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.66 to WTI. Gasoil for May delivery decreased by $16.75.

Today morning oil indexes decline on worries the global oil glut may persist as U.S.-China trade tension could hold back an economic recovery even as coronavirus pandemic lockdowns start to ease.

Suggestions by U.S. President Donald Trump of further trade tariffs on China as retaliation for the role he sees Beijing as having played in the coronavirus outbreak put a lid on oil indexes. In January Trump signed a first phase of a multibillion-dollar trade deal with China, seeking to end what had become a damaging trade war. Another trade war would likely limit global growth prospects, hitting demand for crude at a time when global demand has slumped in the wake of the lockdown measures put in place to curb the spread of the virus.

The OPEC+ has agreed to cut output by 9.7 million barrels per day from May 1. Bu there are still doubts the reduction will be enough as demand is unlikely to recover rapidly. The IEA projected global oil demand would fall by 9 million barrels a day, or about 9%, this year to the lowest level since 2012. The forecast comes as 4.2 billion people globally are subject to stay-at-home orders, which will tamp down demand for energy through 2020. IEA is forecasting a 6% decline in energy demand, which is the largest decline in 70 years. If that’s not all, the decline is equal to seven times that of the decline experienced during the financial crisis in 2008.

Also supporting oil prices, the U.S. Energy Information Administration said crude inventories rose by 9 million barrels last week, less than forecast of the 10.6 million-barrel rise. The EIA estimated that at the end of last week, U.S. crude production stood at 12.1 million barrels per day, down by just 1 million bpd from a record high of 13.1 million bpd in mid-March. That’s a remarkably slow slide compared to the stories in the media of voluntary production shut-ins, rig cuts and reductions in capital expenditure announced by various oil drillers.

Bloomberg data showed that OPEC’s crude production surged by the most in almost 30 years last month as its biggest members fought to dominate a global market devastated by the coronavirus crisis.

Oil indexes also were supported by good news on progress achieved over a potential drug for acute Covid-19 patients and optimism over the reopening of U.S. businesses from Covid-19 lockdowns. There were fears that the United States will run out of space soon to store oil from all the piled-up supply since the country went into lockdown to curb the spread of the virus. Slower crude builds since last week eased some of the storage fears, helping WTI rebound.

Baker Hughes said on May, 01 that oil rigs in the United States fell by 53 last week, bringing to 358, or 53%, the total number of oil rigs lost over the last seven weeks. Despite their cutbacks in production now, U.S. oil drillers have also become victims of their own success in recent years, by achieving admirable drilling efficiency from fracking in their shale fields.

We expect bunker prices may demonstrate irregular changes today: 6-8 USD up for IFO, 10-15 USD down for MGO.