MABUX: Bunker market this morning, May 26

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 25:

380 HSFO: USD/MT 257.92 (+3.42)
VLSFO: USD/MT 297.00 (+2.00)
MGO: USD/MT 364.14 (+1.24)

Meantime, world oil indexes demonstrated upward changes on May, 25 on clear signs that producers are sticking to commitments to cut crude supply as more cars get back on the road with coronavirus lockdowns easing around the world.

Brent for July settlement increased by $0.40 to $35.53 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July rose by $0.47 to $33.72 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $1.81 to WTI. Gasoil for June delivery increased by $12.00.

Today morning oil indexes increase as countries around the world continued to ease lockdown measures imposed to combat the coronavirus pandemic.

The market was buoyed by comments from Russia reporting its oil output had nearly dropped to its target of 8.5 million barrels per day (bpd) for May and June under its supply cut deal with OPEC +. OPEC+ countries are set to meet again in early June to discuss maintaining their supply cuts to shore up prices, which are still down around 45% since the start of the year. The big producers agreed in April to cut output by nearly 10 million bpd for May and June.

Russia's energy ministry on May,25 quoted minister Alexander Novak as saying a rise in fuel demand should help cut the current global surplus of around 7-12 million bpd by June or July. At the same time, Russia is banning imports of refined oil products, including gasoline, diesel, and jet fuel, to protect its refining industry from cheap imports. The ban will be in effect until October 1. Russia has been considering this measure since early April, after oil prices crashed and led to much cheaper refined oil products outside Russia. In Russia, however, the price of fuels didn’t change much because of the nature of its regulations. In addition, fuel demand in Russia has plummeted because of the self-isolation and lockdowns to curb the spread of the coronavirus pandemic in the country.

However, there are also doubts over the long-term outlook for demand, raised by the potential of the pandemic to change consumption habits forever.

The head of the International Energy Agency (IEA) told on Monday, that the world hasn’t seen peak oil demand yet, expecting that sooner or later, oil consumption would return to the pre-crisis levels and rise above that. According to IEA, increased use of cars instead of public transport after the lockdowns and the depressed new passenger vehicle sales mean that oil demand for road transportation at least would recover faster than demand for other uses of oil. Birol’s assessment of oil demand trends for after the COVID-19 pandemic and recession could sound reassuring to major oil-producing nations that depend on oil revenues for their budgets, as well as to oil majors, some of which have expressed uncertainty whether oil demand will ever return to the 2019 levels.

According to Rystad Energy, oil demand is now projected to drop by 10.8 percent for 2020, or 10.7 million barrels per day (bpd) year-on-year. The estimates show that total oil demand in 2019 was approximately 99.5 million bpd, which is now projected to fall to 88.8 million bpd in 2020. May demand is expected to fall by 21.1 percent to 77.9 million bpd. June demand is forecast at 84.5 million bpd, down by 14 percent. Further ahead, total oil demand in 2021 is expected to average at 98.1 million bpd. This update takes into account developments that have occurred up to and including Tuesday, 19 May.

The market also keeps an eye on mounting tensions between the U.S. and China, the world’s largest oil consumers, over moves by Beijing to impose security legislation on Hong Kong. Ties between Washington and Beijing have soured since the outbreak of the coronavirus pandemic. President Donald Trump and President Xi Jinping have traded barbs over the outbreak, including accusations of cover-ups and lack of transparency.

We expect bunker prices may demonstrate upward changes today: 1-3 USD up for IFO, 9-12 USD up for MGO.