MABUX: Bunker market this morning, May 27

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) rose slightly on May 26:

380 HSFO: USD/MT 261.95 (+4.03)
VLSFO: USD/MT 300.00 (+3.00)
MGO: USD/MT 370.31 (+6.17)

Meantime, world oil indexes changed irregular on May 26, amid increasing confidence in the market that producers will to stick to commitments to cut crude supply while demand picks up with more cars back on the road.

Brent for July settlement increased by $0.64 to $36.17 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery rose by $0.63 to $34.35 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $1.82 to WTI. Gasoil for June delivery lost $2.75.

Today morning global oil indexes do not have any firm trend so far.

Recovering demand as coronavirus lockdowns ease combined with output cuts by top producers could balance global oil markets as soon as June.

Russia’s President Vladimir Putin has tasked the government with implementing a set of measures aimed at supporting the oil industry for the duration of the OPEC+ production cut agreement. The measures include a prescription not to sanction companies that stray outside their production quotas and a temporary lifting of penalties for state oil companies for not sticking to their 2020/2021 investment programs. The document also lists “special rates” to be implemented by pipeline operator Transneft and Russian Railways for transporting crude oil and oil products for the duration of the OPEC+ deal.

According to Reuters calculations, Russia’s crude oil production—net of condensates—averaged 8.72 million bpd in the first twenty days of May. This is the largest production cut Russian producers have had to implement in decades, which is probably why the government is lending a hand to help them manage the situation. This situation will last until the end of June, after which the combined OPEC+ production cuts will be relaxed from 9.7 million bpd to 7.7 million bpd.

A U.S. ban on new offshore drilling in the Gulf of Mexico, which presidential candidate Joe Biden promised to enact if elected, would lead to hundreds of thousands of job losses and billions in lost government revenue over 20 years. Biden has also said that moving away from fossil fuels would pave the way for big job gains in renewable energy. As per some analysis, if no new permits are issued, the offshore industry would have 179,000 jobs in 2040, less than half the 370,000 jobs it would be projected to support under current policies. Government revenues from the industry, meanwhile, would be $2.7 billion a year instead of $7 billion.

The first of five tankers carrying Iranian fuel for gasoline-starved Venezuela reached the country’s waters during the weekend. Venezuela has a major gasoline shortage as refineries are unable to operate at run rates higher than 10 percent because of a shortage of diluents necessary for the production of fuels as well as an urgent need for repairs. Iran, a fellow target of U.S. sanctions, last month sent to Venezuela two plane loads of equipment and chemicals necessary for the production of gasoline as it agreed to help Caracas restart one refinery, with a capacity of 310,000 bpd. 14 more flights were scheduled to arrive from Iran to Venezuela.

India’s fuel demand, which had crashed by 60 percent during the early days of its two-month lockdown, is set to reach pre-coronavirus levels in June. In May, demand for fuel in the world’s third-largest oil importer is back at 65 percent compared to May 2020. After the easing of the lockdown in India, two-wheelers and small cars will remain an affordable option for maintaining social distancing, thus boosting demand for gasoline. It is also expected, that the resumption of train service and flights will raise demand for diesel and jet fuel.

Natural gas flows from Russia via the Yamal-Europe pipeline that runs across Belarus and Poland to Mallnow, Germany, slumped to zero on May 26 after a sharp decline since May 24. Shipments into Baumgarten in Austria, a major European hub for Russian gas, fell by 25% from its 10-day average. Such a significant reduction in gas transit is primarily driven by weak demand in Europe amid warm winter, high levels of gas in underground storage and demand distortion due to Covid-19. European gas storage sites are about 71% full and the expectations have been that inventories may be completely full by July.

We expect global bunker prices may change irregular today in a range of plus-minus 2-5 USD.