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 slight upward trend on June 05:
380 HSFO: USD/MT 277.44 (+3.55)
VLSFO: USD/MT 318.00 (+4.00)
MGO: USD/MT 389.35 (+2.75)
Meantime, world oil indexes pushed higher on Jun.05, amid expectations major oil producers would meet over the weekend to discuss extending record production cuts.
Brent for August settlement increased by $2.31 to $42.30 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery rose by $2.14 to $39.55 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.75 to WTI. Gasoil for June delivery gained $28.00.
Today morning global oil indexes continue firm upward evolution supported by OPEC+ cut deal.
Demand for oil is improving after lockdowns started being lifted in Asia, Europe, and North America. China's oil demand, notably, has recovered to 90 percent of pre-crisis levels, and U.S. demand is also on the rise, judging by rising refinery runs. Supply is still being limited, too. OPEC+ started cutting its agreed 9.7 million bpd last month, and despite far from perfect compliance, it has reduced the amount of oil going into markets. U.S. producers also cut production significantly in April and May, and so did Canadian oil companies.
OPEC and its partners concluded their meeting on Jun.06, announcing that it would extend its current production cut deal. The last couple of days, the cartel’s de-facto leader Saudi Arabia negotiated with other OPEC members and some non-OPEC countries including Russia, Kazakhstan and Azerbaijan to extend the current 9.7 million bpd output cuts for at least another month. Most countries partaking in the record production cuts were willing to continue the current deal, but poor compliance from countries like Iraq, Nigeria and Kazakhstan has caused discontent among other OPEC members, some of which have even made deeper cuts than agreed on in April. During the virtual meeting on Jun.06, the cartel agreed that the countries that were unable to reach full conformity in May and June will have to compensate for this in July, August and September.
Russia is predicting a shortage in the oil market next month. It is expected the global oil markets could see a shortfall between three and five million barrels per day in July. It was also noted that the filling up of oil storage has slowed, and that thanks to the current production cuts and the improving demand figures so far, the market should achieve balance in June, before slipping into a deficit in July.
Russia’s Rosneft has set up a new trading arm to replace the one that Washington sanctioned earlier this year for the company’s work with the Venezuelan government. The U.S. administration slapped sanctions on the Russian state oil giant in February as part of its maximum pressure campaign against the Maduro government. Following the announcement, Rosneft cancelled several VLCC cargoes carrying a total 5.7 million barrels of Venezuelan crude to be delivered to Asian buyers. The company also transferred its Venezuelan assets to a newly set-up Russian state-owned company dubbed Roszarubezhneft. Moscow paid for the Venezuelan assets in Rosneft stock.
U.S. shale producers are beginning to restart their shut-in wells. This is a necessity for many of them: the longer a well stays shut-in, the higher the risk of losing production. But this also means production will be coming back when storage facilities are still full. Demand cannot recover this fast, and fuel inventories are proving it: for two weeks now, gasoline and distillate fuel inventories in the U.S. have been rising, with the latest weekly data showing a 2.8-million-barrel rise in gasoline and a 9.9-million-barrel increase in distillate fuel stockpiles.
China’s crude oil imports jumped by 13 percent from April to near record-highs of 11.11 million bpd in May, due to favorable spreads of the Shanghai-traded yuan-denominated oil futures and a ramp-up in refinery throughput. China’s crude oil imports in May were up by 1.28 million bpd compared to April and up by 1.27 million bpd compared to May last year. Apart from the Shanghai crude futures and recovering crude processing rates, another factor in China’s near-record imports of crude was the fact that the independent refiners continued to actively procure oil, most likely because of the low prices.
U.S. lawmakers have sought to pass a bill to levy sanctions on the Nord Stream 2 project, which the United States sees as further undermining Europe’s energy security by giving Russian gas giant Gazprom another pipeline to ship its natural gas to European markets. Germany, the end point of the Nord Stream 2 pipeline, looks at the economic benefits of the project, while the U.S., including President Donald Trump, have been threatening sanctions on the project and even on Germany over its support for the project. At the end of 2019, the U.S. included in its massive defense bill for 2020 sanctions on companies helping Gazprom to complete Nord Stream 2. Russia is now using its own vessels to complete the pipeline laying.
The number of oil and gas rigs in the US fell again last week by 17, falling to 284, with the total oil and gas rigs sitting at 691 fewer than this time last year. The number of oil rigs decreased for the week by 16 rigs, bringing the total to 206—compared to 789 active rigs in play this time last year. The significant fall in the rig count over the last couple of months is also reflected in the steady decline of EIA’s estimate for oil production in the United States, which fell again last week to 11.2 million barrels of oil per day on average for week ending May 29, which is 1.9 million bpd off the all-time high and 200,000 bpd lower than the week prior. It is the ninth straight weekly production decline.
We expect IFO bunker prices may gain US$ 12-15 today while MGO prices may rise by US$ 20-25.