MABUX: Bunker market this morning, June 12

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 June 11:

380 HSFO: USD/MT 286.64 (-0.44)
VLSFO: USD/MT 335.00 (+2.00)
MGO: USD/MT 408.29 (+1.39)

Meantime, world oil indexes fell on Jun.11, weighed down by another record build-up in U.S. crude inventories and the U.S. Federal Reserve’s projections that the world’s biggest economy would shrink 6.5% this year.

Brent for August settlement decreased by $3.18 to $38.55 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery fell by $3.26 to $36.34 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.21 to WTI. Gasoil for June delivery lost $13.25.

Today morning global oil indexes continue firm downward trend.

U.S. crude inventories rose unexpectedly by 5.7 million barrels in the week to June 5 to 538.1 million barrels - a record - as imports were boosted by the arrival of supplies bought by refiners when Saudi Arabia flooded the market in March and April. It also showed gasoline stockpiles grew more than expected to 258.7 million barrels. Distillate stockpiles, which include diesel and heating oil, rose by 1.6 million barrels, although the increase was smaller than in previous weeks.

Adding to the pressure on prices, the U.S. Federal Reserve said U.S. unemployment was set to reach 9.3% at the end of 2020 and it would take years to fall back, while interest rates were expected to stay near zero at least through next year.

Offshore oil production off the U.S. Gulf Coast remains shut in by 24% in the wake of Tropical Storm Cristobal. For oil production, this equates to more than 430,000 barrels per day. For natural gas, 619 million cubic feet per day remains offline. Those figures are down from 31% for crude oil and 33% for natural gas that were shut in on Tuesday. In total, 61 production platforms of the 643 manned platforms are still evacuated in the Gulf of Mexico. All dynamically positioned rigs have returned to their working locations.

Goldman Sachs booked revenues of more than US$1 billion in its commodities division for the first five months of 2020—the investment bank’s best start to a year in commodities in a decade, mostly thanks to oil trades. Goldman Sachs was one of the most active banks in commodities before the 2008 financial crisis, but it has since shrunk its commodities division because of lackluster profits, higher costs, and stricter regulation regarding investment banks entering trades. Last year, Goldman Sachs was said to have further downsized its commodities division as revenues and profits were shrinking and competition from oil trading houses and oil majors rose. This year, however, Goldman’s commodities division reaped the benefits of bets on an oil price decline after the price of oil collapsed in March and April due to the crashing demand and shrinking storage capacity around the world.

China’s Shanghai International Energy Exchange (INE) published rules for the low-sulphur fuel oil (LSFO) futures. The new futures contract, which will be launched on June 22, will be traded at 10 tonnes per lot. The INE, a subsidiary of the Shanghai Futures Exchange, said daily price limits of LSFO futures are at 5% from the settlement price of the previous trading session and the minimum trading margin is 8% of the contract value. The launch of LSFO futures will help with companies’ risk management in the industry.

Chinese oil companies may soon decline to charter any tanker that has visited Venezuela in the past year to avoid disruption to operations if the United States blacklists more ships for trading with Caracas. Increased sanctions would have a knock-on effect on the rest of the oil tanker market as oil companies and merchants scramble to swap out sanctioned vessels for others. A decision late last year by the U.S. government to sanction two units of the Chinese tanker company COSCO caused freight rates to hit record highs and roiled global oil trade.

We expect IFO bunker prices may fall by 15-20 USD today while MGO prices may decline by 13-22 USD.