MABUX: Bunker market this morning, June 16

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.15:

380 HSFO: USD/MT 277.74 (-1.33)
VLSFO: USD/MT 327.00 (-1.00)
MGO: USD/MT 399.92 (+0.42)

Meantime, world oil indexes rose on Jun.15, as signs fuel demand was recovering while OPEC+ members were complying with a production cut deal outweighed fears that new coronavirus infections could further slow the global economy.

Brent for August settlement increased by $0.99 to $39.72 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery rose by $0.86 to $37.12 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.60 to WTI. Gasoil for July delivery gained $2.00 – $330.50.

Today morning global oil indexes do not have any firm trend so far.

New coronavirus infections hit China, Japan and the United States, adding to concerns that a resurgence of the virus could weigh on the recovery of fuel demand. After nearly two months with no new infections, Beijing officials have reported 79 cases of the coronavirus over the past four days. U.S. coronavirus cases also started increasing. More than 25,000 new U.S. cases were reported on Jun.13 alone as more states reported new infections and hospitalisations.

An OPEC+ monitoring panel will meet this week to discuss the ongoing record production cuts to see how laggards in compliance are doing with making up for flouting quotas, but will not be making any decisions regarding the collective cut that was just extended through the end of July. The Joint Ministerial Monitoring Committee (JMMC), which includes members of OPEC and of the non-OPEC group of nations part of the deal, is meeting on Thursday, June 18, as part of a schedule of monthly meetings until the end of the year to discuss the situation on the oil market and the compliance with the cuts. 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, instead of ahead of every full OPEC+ meeting only.

The IEA forecasts a gradual recovery in demand in 2021 and 2022, but the impact of the coronavirus will be long lasting, increase uncertainties and dampen growth rates. What recovery is there is in demand is likely to be led by liquefied natural gas (LNG) and will be led by Asian countries. The chief concern is much of the rebound in demand is to come from China and India, but the optimistic demand scenarios are dependent on whether Asia’s two fastest growing major economies continue with gas-friendly policies, or whether they backslide and favour coal. The IEA expects China to overtake Japan as the world’s biggest LNG buyer, with imports of 128 bcm a year by 2025, equivalent to about 174 million tonnes, or almost three times the 60.25 million tonnes imported in 2019.

Oil shipments from Venezuela to China continued even after the United States restricted Venezuelan oil exports last August, threatening sanctions on all companies doing business with Nicolas Maduro’s government. Even after the U.S. increased the sanctions pressure on Venezuela, crude oil from the Latin American country continued to flow into China via the Switzerland-based unit of Russian oil giant Rosneft and after ship-to-ship transfers of the crude to conceal that its place of origin was Venezuela. Between July and December, 18 tankers carried a total of 19.7 million barrels of rebranded Venezuelan crude oil to Chinese port. Shipments of oil from Venezuela to China have continued into this year, too.

Saudi Arabia reduced the amount of crude it will supply next month to five refiners in Asia after OPEC+ agreed to extend its historic output cuts through July. The volume of contracted oil the five buyers are seeking for July will be cut by 10% to 40%. Some South Korean processors received steep curbs to their requested supply after being spared reductions last month, while three refiners in Japan will receive their full volumes after their flows were trimmed in June.

Ship owners are postponing or cancelling the installation of scrubbers that extract harmful sulphur emissions from their vessels as the coronavirus pandemic tightens finances. The global oil price crash has prompted a slide in the differential between low (VLSFO) and high-sulphur fuel (HSFO) to as low as $40 a tonne, from over $300 at the start of the year, decreasing profitability for companies who paid for scrubbers and lengthening the time for a return on their investment. Clarksons reported the number of ships pending retrofits was 750 – some of which may be postponed or cancelled – versus a peak of over 2,000 pending in the middle of 2019. They estimated there were now 3,015 ships fitted with scrubbers, from 506 at the start of 2019.

We expect IFO bunker prices may rise by 3-6 USD today while MGO prices may gain 3-11 USD.