MABUX: Bunker market this morning, June 15

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 decreased on June 12:

380 HSFO: USD/MT 279.07 (-7.57)
VLSFO: USD/MT 328.00 (-7.00)
MGO: USD/MT 399.50 (-8.79)

Meantime, world oil indexes also demonstrated irregular changes on June, 12.

Brent for August settlement increased by $0.18 to $38.73 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July declined by $0.08 to $36.26 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.47 to WTI. Gasoil for July delivery added $5.75.

Today morning oil indexes decline as new coronavirus infections hit China and the United States, raising the prospect that renewed outbreaks of the virus could weigh on the recovery of fuel demand.

A cluster of infections in Beijing has increased concern of a resurgence of the disease. The coronavirus pandemic started at the end of last year in the Chinese city of Wuhan. At the same time, U.S. coronavirus cases started increasing. More than 25,000 new U.S. cases were reported on June, 14 alone as more states reported record new infections and hospitalizations. Additionally, U.S. crude stockpiles unexpectedly expanded last week to 538.1 million barrels, the highest level in data compiled by Bloomberg since 1982. The increase underlines the difficulty facing OPEC and its allies in their efforts to balance the market.

The oil demand recovery is already expected to be a lengthy process, and a fresh wave of cases raises worries that a recovery in demand may take even longer than initially thought. Industrial output in China, the world's biggest crude oil importer, rose for a second consecutive month in May but the rise was smaller than expected, suggesting the world's second-biggest economy is struggling to get back on track after containing the coronavirus.

OPEC-led monitoring panel will meet on June, 18 to discuss ongoing record production cuts and see whether countries have delivered their share of the reductions, but will not make any decision. OPEC+, have been reducing supplies by 9.7 million bpd, about 10% of pre-pandemic demand, and agreed in early June to extend the cuts for a month until end-July. The volatile oil market and the highly uncertain trajectory of global demand recovery has forced the OPEC+ group to have the JMMC hold meetings every month until the end of 2020. This panel, however, cannot decide OPEC+ group’s production policy, it can only make recommendations for consideration at the full OPEC and non-OPEC meetings.

U.S. energy firms cut the number of oil and natural gas rigs operating to a record low for a sixth week in a row even as oil prices rebound from historic lows and some producers return to the wellhead. According to Baker Hughes Co, the U.S. oil and gas rig count, an early indicator of future output, fell by 5 to an all-time low of 279 last week. U.S. oil rigs fell by 7 to 199 this week, their lowest since June 2009, while gas rigs rose by 2 to 78. U.S. crude output is forecast to drop to 11.6 million barrels per day (bpd) in 2020 and 10.8 million bpd in 2021 from a 12.2 million bpd in 2019 according to the latest outlook of the U.S. Energy Information Administration (EIA).

An Iranian news agency said on June, 13, that Iran’s naval forces were preparing to target U.S. commercial vessels in the Gulf last month in case U.S. forces interfered with Venezuela-bound Iranian oil tankers. Iran sent a flotilla of five tankers of fuel to gasoline-starved ally Venezuela in May, and Tehran has said it will continue the shipments if Caracas requests more, despite Washington’s criticism of the trade between the two nations, which are both under U.S. sanctions. Iran complained to the United Nations last month and summoned the Swiss ambassador in Tehran, who represents U.S. interests in the Islamic Republic, over possible measures Washington could take against the Iranian tankers. The United States, which did not hinder Iran’s tanker cargoes, is considering imposing sanctions on dozens of additional foreign oil tankers for trading with Venezuela.

At the same time, Brazil’s Petroleo Brasileiro SA has told shippers it will not hire any tankers that have visited Venezuela in the past 12 months, signaling adherence to U.S. sanctions on the Latin American nation. The United States this year blacklisted oil tankers and shipping companies over their dealings with Venezuela, seeking to drain oil revenues that sustain the rule of Venezuelan President Nicolas Maduro. Washington said it could add to its sanctions list, a move that could disrupt sea-borne trade by sharply raising tanker rates.

We expect bunker prices may demonstrate upward changes today: 1-3 USD up for IFO, 3-5 USD up for MGO.