MABUX: Bunker market this morning, June 1
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs declined on May 29:
380 HSFO: USD/MT 253.14 (-0.94)
VLSFO: USD/MT 294.00 (-1.00)
MGO: USD/MT 368.11 (-3.07)
Meantime, world oil indexes demonstrated upward changes on May 29.
Brent for July settlement increased by $0.04 to $35.33 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July rose by $1.78 to $35.49 a barrel on the New York Mercantile Exchange. The WTI benchmark traded at the premium of $0.18 to Brent. Gasoil for June delivery added $2.75.
Today morning oil indexes decline on Sino-U.S. tensions, the market also awaits of upcoming OPEC+ meeting.
The latest survey by Baker Hughes showed a reduction of only 15 oil rigs last week, versus drops more than 60 per week during several weeks over the past 2,5 months. While the oil rig count is down 68% as a whole since the week ended March 13, the rate of decline has slowed in recent weeks, indicating that drillers were holding back on cuts as the surge in crude prices lure them to put out more barrels in return for more cash.
Also, weekly data on U.S. crude provided by the Energy Information Administration showed the biggest rise in stockpiles last week since the end of April.
The oil indexes got support in May from cuts in oil rigs and well shut-ins by U.S. drillers responding to the collapse in fuel demand, which drove WTI to sub-zero prices at one point in April.
Larger production cuts by OPEC, which aims to remove 9.7 million barrels per day from global output, has also helped. However, some said the market was still some way off to achieving normalcy, and prices appeared frothy after five weeks of nearly non-stop gains.
Not even a full month into OPEC’s deep production cut agreement, rumors have already surfaced that there is a difference of opinion over a possible extension of the oil production cuts — as usual, with Saudi Arabia on one side and Russia on the other. Looking ahead, OPEC+ is meeting again in June, and Saudi Arabia and some other OPEC members are considering extending record production cuts beyond the June deadline originally agreed. Russia, however, has been slow in agreeing to this move. State-owned giant Rosneft is arguing it does not have enough crude to ship to buyers with which it has long-term supply deals. This would make it very hard for the Russian company to continue with record oil cuts beyond June.
But those discussions seem premature, as the cartel failed to fully comply with its agreed-upon quotas in May. Overall, the group cut just 5.91 million bpd from April levels, producing 24.77 million bpd. This is 4.48 million bpd of the promised reduction, or 74% compliant. One the reason for OPEC’s failure to bring production down to promised levels is due to contractual obligations with buyers given the short timeframe between the date the agreement was made and its implementation.
OPEC president and Algerian energy minister Mohamed Arkab urged members of the exporters’ group as well as producers of a global pact to curb production, to consider an earlier date for their June meeting. He proposed advancing the date of the OPEC conference and OPEC+ meetings to June 4 instead of 9 and 10. He said reports of low levels of conformity to the OPEC+ may have an adverse impact as soon as markets are open on Monday. Mr Arkab urged ministers to share “positive messages” of conformity with the pact and indicate actual levels of commitments made.
At the same time, there are still worries over the slow pickup in demand as economies reopen and over the ability of major producers to maintain production discipline as the year continues
Investor sentiment has also been soured by rising Sino-U.S. tensions, with U.S. President Donald Trump set to respond on May, 29 to the decision of China’s parliament to back security legislation for Hong Kong. U.S. President Donald Trump promised “strong” and “meaningful” actions against China on Friday, although he did not provide specifics, in response to the NPC decision. Trump’s Secretary of State Mike Pompeo also said on May, 31 that U.S. had no basis to keep Hong Kong’s special trade status as China marches forward to enact the laws.
Protests in dozens of U.S. cities after the death of George Floyd on Sunday also raised concerns about oil’s demand recovery, as well as fears of a second wave of COVID-19 cases, in the country.
We expect bunker prices may slightly increase today: 1-3 USD up for IFO, 1-3 USD up for MGO.