MABUX: Bunker market this morning, June 10

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) changed insignificant and irregular on Jun.09:

380 HSFO: USD/MT 284.33 (-2.72)
VLSFO: USD/MT 329.00 (-1.00)
MGO: USD/MT 403.13 (+2.25)

Meantime, world oil indexes moved sideways on Jun.09, weighed down by a stronger dollar and while optimism about recent commitments from major oil producers to curb production offset concerns about a resurgence in coronavirus cases.

Brent for August settlement increased by $0.38 to $41.18 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery rose by $0.75 to $38.94 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.24 to WTI. Gasoil for June delivery lost $1.00.

Today morning global oil indexes have turned into slight downward movement as API report showed a rise in crude and fuel inventories in the United States.

Morgan Stanley said oil prices have likely risen too fast too soon with the market focusing on supply cuts, while global oil demand may not return to pre-COVID-19 levels before the end of 2021. As per Bank, while the market is heading for deficit in the second half of the year, there are a lot of inventories – at an unusually high level – which will start shrinking in Q4 and in the first quarter next year. Other concerns about an oil price correction include U.S. shale restarting too much production as prices rise, as well as a sharp rise in oil production when OPEC and allies start unwinding the cuts.

Goldman Sachs in turn predicts, oil prices are likely to pull back in the coming weeks due to the uncertain path of future demand and a "daunting" inventory overhang. Goldman expects Brent prices to reach $35 per barrel in the short term. The Bank raised its 2020 Brent price forecast to $40.40 a barrel from $35.60 earlier, citing positive sentiment around the reopening of economies. WTI prices are now forecast to reach $36 this year, compared with a previous estimate of $33.10. As per Goldman, this rebound has been fueled by a macro risk-on backdrop and a policy induced Chinese crude import binge, yet fundamentals are turning bearish.

Iraq affirmed full commitment to the OPEC+ production cut deal. OPEC, Russia and other producers agreed on Jun.06 to extend record output cuts of 9.7 million barrels per day into July, curbing global supply by almost 10% amid a steep slump in demand due to the coronavirus pandemic. Iraq said, it is fully committed to cut its production in June and July in compliance with the OPEC+ deal, and also is committed to the production cut deal agreed after June and July.

It is expected, that a glut of crude oil and products stored in tankers at sea will take months to clear, although a recovery in global energy demand has reduced the volume compared with a peak hit in May. Ship broker Clarksons said 180 vessels with over 200 million barrels of crude were being used for storage globally as of May 29, down from a peak of 290 million barrels in early May. It added 170 tankers were storing 73.8 million barrels of oil products, down from 100 million barrels in early May. IHS Markit put crude floating storage at over 175 million barrels at the end of May versus over 180 million barrels in late April. A further unloading of cargoes on the water will take time as some volume remains under time charter contracts, which can tie traders into leaving their oil at sea for between three to 12 months.

Oil and gas producers in the Gulf of Mexico are gearing back up after tropical storm Cristobal cleared the area. Oil producers in the Gulf had shut in nearly 35% of all oil production in the area, or 650,000 barrels per day of production as of Sunday. Now, many are readying to bring workers back to shuttered facilities. Some companies who had evacuated workers and/or shut in production ahead of the storm last week were BP, Shell, Occidental, and more. It is unclear how quickly oil producers in the US Gulf of Mexico could bring all its production back online.

LNG spot prices have been on the slide since April, reaching an all-time low of $1.85 per million British thermal units at the end of May. The reason was the wide gap between supply and demand. As a result, cargos were cancelled, notably from the United States to Asia and Europe, with the number calculated at a minimum of 20 cargos for June and July. This dampened demand then pushed gas flows into LNG export facilities to a 13-year-low. It is possible that some new LNG projects will be delayed by a year or two until prices stabilize.

Armed individuals entered Libya’s largest oil field, El Sharara, just a day after reports said the field had restarted production after months of idling amid the ongoing civil war. Another force majeure has been declared. The first production phase at Sharara was supposed to begin at a capacity of 30,000 bpd. Libya’s oil production fell from over 1 million bpd to less than 100,000 bpd, with exports shrinking by 92 percent between January and May. The total losses incurred from the blockade and the production outages had reached $5 billion.

The American Petroleum Institute (API) estimated on Tuesday shocked the oil markets with a large crude build of 8.42 million barrels for the week ending June 5. Forecasts have predicted a small inventory draw of 1.738 million barrels. In the previous week, the API estimated a draw in crude oil inventories of 430,000 barrels. Meanwhile, the EIA’s estimates were for larger draw of 2.1 million barrels. Oil production in the United States has now fallen from 13.1 million bpd on March 13 to 11.2 million bpd for May 29—a drop of 1.9 million bpd—significantly more than OPEC’s production cut agreement from last year and the ninth straight drop for U.S. oil production.

We expect IFO bunker prices may gain 2-5 USD today while MGO prices may change irregular in a range of plus-minus 3-7 USD.