MABUX: Bunker market this morning, May, 22
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 upward trend on May, 21:
380 HSFO - USD/MT - 256.20 (+7.12)
VLSFO - USD/MT – 301.00 (+9.00)
MGO - USD/MT – 368.79 (+7.66)
Meantime, world oil indexes demonstrated slight irregular changes on May, 21.
Brent for July settlement increased by $0.31 to $36.06 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July rose by $0.43 to $33.92 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.14 to WTI. Gasoil for June delivery declined by $3.00.
Today morning oil indexes decrease after China's decision to omit an economic growth target for 2020 renewed concerns that the fallout from the coronavirus pandemic will continue to depress fuel demand in the world's second-largest oil user.
China's National People's Congress (NPC) kicked off a week-long meeting on May,22 with the government saying it omitted the 2020 target, while pledging to issue 1 trillion yuan ($140 billion) of special treasury bonds to support companies and regions hit by the pandemic. Abandoning the growth target can point to putting less focus on infrastructure investment and could be viewed as negative for oil.
At the same time, the fuel demand is recovering as countries ease business and social restrictions imposed to counter the coronavirus pandemic. Gasoline demand is returning with traffic congestion in some of the world's capitals recovering to year-earlier levels after the lifting of coronavirus. Traffic flows in Berlin and Tokyo have rebounded, according to the data, while in the United States the easing of restrictions in many states has supported demand for gasoline. The upcoming Memorial Day holiday weekend typically kicks off the U.S. summer driving season.
U.S. drillers are in the process of cutting 1.75 million barrels a day of existing production by early June. That’s on top of OPEC+’s agreement to curb almost 10 million barrels a day of output, which is being strictly adhered to after taking effect at the start of May. The cuts are eroding the stockpiles built up amid coronavirus lockdowns and the price war, with inventories at the U.S. storage hub at Cushing, Oklahoma, shrinking by the most on record last week. Meanwhile, demand in China, the world’s biggest crude importer, is almost back to pre-virus levels, while economic activity is starting to recover in parts of Europe and North America.
However, crude oil demand in India will take longer to recover than many hope for as the country braces for the worst recession in its history after a two-month lockdown. The demand for the commodity might take until the end of the year to return to pre-crisis levels after last month, fuel demand at one point dropped by as much as 70 percent. Still, most of the demand will return before the end of the year.
At the same time, despite the low oil demand during the COVID-19 outbreak in China, the world’s top oil importer is set to increase its crude oil imports by 2 percent in 2020. China’s apparent crude oil consumption is expected to increase by between 1 percent and 2 percent year on year. However, demand for refined oil products in China is forecast to record its first drop in two decades, as it is expected to fall by 5 percent this year compared to last year.
According to Goldman Sachs Group Inc, The oil industry will enter a structural phase of no production growth outside of OPEC starting next year. OPEC may be required to supply as much as an additional 7 million barrels a day through to 2025 from pre-virus levels, while U.S. shale will emerge from the current slump as a lower growth and more cash generative industry.
We expect bunker prices may demonstrate irregular changes today: 1-3 USD up for IFO, 1-3 USD down for MGO.