MABUX: Bunker market this morning, May 06

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 05:

380 HSFO: USD/MT 221.02 (+5.46)
VLSFO: USD/MT 246.00 (+5.00)
MGO: USD/MT 322.88 (+4.08)

Meantime, world oil indexes jumped on May 5 on production cuts and a recovery in demand with the reopening of economies around the world.

Brent for July settlement increased by $3.77 to $30.97 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June rose by $4.17 to $24.56 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.41 to WTI. Gasoil for May delivery increased by $31.75.

Today morning oil indexes decline on worries of oversupply risks after U.S. crude inventories rose more than expected amid a slump in demand caused by restrictions to halt the coronavirus spread.

According to the American Petroleum Institute (API), U.S. oil inventories rose by 8.4 million barrels last week, compared with a rise of 10 million barrels the week before. Inventories at the Cushing, Oklahoma hub, where dwindling storage space has become a big concern, rose by nearly 2.7 million barrels.

Many think, that the demand bottom is behind. President Donald Trump weighed in on the jump in prices, writing “Oil prices moving up nicely as demand begins again!” in a tweet.

Oil demand has fallen off a cliff as the coronavirus pandemic spread around the globe, forcing billions of people to remain inside and bringing air travel to a near standstill. By some estimates as much as a third of worldwide demand was erased in April.

Economies gradually start to reopen — a number of U.S. states, including Florida, began phase one reopening plans on Monday, while millions of Italians will return to work this week. India and Thailand, began allowing some people to go back to work. This brings hopes in the market, that there will be an uptick in demand.

The improving demand outlook also comes as producers have scaled back production, which has also supported prices. The historic cut from OPEC and its oil-producing allies, which takes 9.7 million barrels per day offline, went into effect on May 1. Norway and Canada have also curbed production. Shut-ins at U.S. producers also help to ease the oversupply issue. French oil giant Total said May,05 that it now expects production of between 2.95 and 3 million barrels of oil a day in 2020, a reduction of at least 5% from previous 2020 forecasts.

At the same time there is still a fear, that the recovery for oil prices will be long and uncertain. Even with global producers scaling back operations, global storage is rapidly filling and some believe tank tops could be reached within weeks.

Goldman Sachs on May,04 raising its 2021 forecast for global benchmark Brent crude prices to $55.63 per barrel from $52.50 earlier, and lifting its estimate for West Texas Intermediate crude to $51.38 a barrel from $48.50 previously.

We expect bunker prices may rise today: 15-18 USD up for IFO, 20-25 USD up for MGO.