MABUX: Bunker market this morning, May 08

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 May 07:

380 HSFO: USD/MT 224.58 (-1.43)
VLSFO: USD/MT 256.00 (-3.00)
MGO: USD/MT 329.00 (-9.08)

Meantime, world oil indexes demonstrated irregular changes on May, 07.

Brent for July settlement decreased by $0.26 to $29.46 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June declined by $0.44 to $23.55 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.91 to WTI. Gasoil for May delivery increased by $9.75.

Today morning oil indexes increase supported by Saudi Arabia's decision to lift prices to help stabilize values and a monthly climb in China's oil imports.

Oil indexes gained some support after the state oil giant of Saudi Arabia, Saudi Aramco, has raised the official selling price by $1.40 a barrel, of its June Arab light crude to Asia. While the Arab crude grade remains at a significant discount of $5.90 per barrel to the competing Oman/Dubai average, the price hike wasn’t in line with market expectations. This increase in the price for Saudi crude for June – which generally sets the trend for the pricing for Asia of other Gulf producers such as Kuwait, Iraq, and Iran – was interpreted as a sign that oil demand may have started to pick up.

Oil prices rebound from the lows of last week, powered by optimism over the reopening of business in most of America’s 50 states after a six-week lockdown imposed over the Covid-19. Yet, there are still doubts in the market amid the existential oversupply of tens of millions of barrels at sea, as well as in land-based storage facilities for oil.

The Plains all-American Pipeline, a reference source for physical oil, quotes physical WTI at $20 per barrel, versus its April 28 quote of $8.25. That indicates that the physical market is broadly keeping up with the action in futures. Even so, June WTI remains at a discount of at least 20% to physical barrels. While that may be typical, it’s a worry under the present circumstance, given both have to converge when June WTI expires in less than two weeks. Massive difference between the physical and futures markets was what accelerated WTI’s plunge into historic sub-zero prices when the May WTI expired two weeks ago.

The latest data from the Energy Information Administration showed that U.S. crude oil inventory increased by 4.59 million barrels over the past week, the slowest weekly build since mid-March as domestic output fell further. While crude oil inventory at Cushing, Oklahoma increased by 2.07 million barrels, again the smallest build since late March.

That said, as the world starts to ease lockdowns, oil demand recovery will likely be slow and timid. All after, the latest data showed the number of Americans applying for initial unemployment benefits totaled 3.17 million last week, remaining at historic levels even as many parts of the country start to reopen.

Market will also be keeping a close watch on shipping numbers out of OPEC, the United States — and particularly Russia — to check their adherence to the so-called GLOPEC deal’s commitment to remove at least 9.7 million barrels daily from the market from this month.

Chinese crude imports climbed to 10.42 million barrels a day in April from 9.68 million barrels in March, according to Reuters calculations based on customs data for the first four months of 2020. Overall exports from China also rose against expectations of a sharp drop.

We expect bunker prices may demonstrate slight irregular changes today: 1-3 USD down for IFO, 7-9 USD up for MGO.