MABUX: Bunker market this morning, May 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 demonstrated slight irregular changes on May 13:

380 HSFO: USD/MT 228.89 (-0.57)
VLSFO: USD/MT 260.00 (0.00)
MGO: USD/MT 328.89 (+4.45)

Meantime, world oil indexes declined on May, 13 amid worries that a potential second wave of the coronavirus pandemic might trigger fresh lockdowns and slam fuel demand once again.

Brent for July settlement decreased by $0.79 to $29.19 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June declined by $0.49 to $25.29 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.90 to WTI. Gasoil for May delivery fell by $4.75.

Today morning oil indexes continue to decline.

The market ignored the U.S. Energy Information Administration's report of a surprise drop in crude stockpiles for last week and a larger-than-expected drawdown in gasoline to focus on Federal Reserve Chairman Jay Powell’s dour assessment of the coronavirus-struck economy.  Powell warned of a protracted road to recovery for the economy at a time when many are concerned that reopening too quickly could trigger a second wave of Covid-19 infections. Oil indexes were also pressured by the words of White House infectious diseases specialist Dr. Anthony Fauci, who said that U.S. states shouldn’t be rushing to reopen their economies from Covid-19 lockdowns without ticking enough boxes on the medical guidelines given to them.

While the futures move up, physical surplus oil continues to flow into tanks and the path of demand recovery remains highly uncertain. New North Sea loadings, which help set the price of ICE Brent futures, still face a quiet market.

At the same time, according to EIA, stockpiles of U.S. crude saw an unexpected drop last week, greatly easing worries that the United States will run out of space soon to store oil being produced within the country. Crude inventories fell by 745,000 barrels for the week ended May 8, the EIA said. That compared with expectations for a build of about 4.15 million barrels. That was the first decline in U.S. crude stockpiles since the end of January.

Separately, crude stockpiles also fell 3 million barrels at the Cushing, holding center for oil delivered against expiring contracts of WTI. Cushing stockpiles were growing as fast as 5 million barrels per week in recent weeks, triggering speculation that the 76-million-barrel capacity hub would run out of space before the end of this month. Fears of a Cushing max-out were what drove WTI futures to their first ever negative pricing in late April.

U.S. oil production fell by 300,000 barrels per day last week, bringing to 1.5 million bpd the total decline since output hit a record high of 13.1 million bpd in mid-March.

OPEC slashed its forecast on May, 13 for global oil demand this year and predicted this quarter would see the steepest decline even as some countries ease lockdown measures designed to stem the coronavirus outbreak. The Organization now expects global demand to decline by 9.07 million barrels per day (bpd), or 9.1%, in 2020. Last month, OPEC expected a drop of 6.85 million bpd. OPEC expects this quarter to see the biggest drop in demand and lowered its demand forecast for the second quarter by 5.4 million bpd. Downside risks remain for consumption in the United States, Europe and South Korea.

Oil prices have collapsed as government lockdowns curtailed travel and economic activity, tipping countries into recession. While some places in Europe and Asia have eased restrictions, concern of new virus outbreaks has kept a lid on oil prices. To tackle the drop in demand, OPEC and its allies agreed to a record supply cut that started on May 1, while the United States and other nations said they would pump less. OPEC said these curbs were already helping.

We expect bunker prices may demonstrate slight downward changes today: 3-5 USD down for IFO, 2-4 USD down for MGO.