MABUX: Bunker market this morning, June 30

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) dropped on June 29:

380 HSFO: USD/MT 285.00 (-2.99)
VLSFO: USD/MT 339.00 (-5.00)
MGO: USD/MT 411.33 (-7.79)

Meantime, world oil indexes rose slightly on Jun.29, supported by improving economic data and supply cuts by major producers, but held in check by sharp spikes in new coronavirus infections around the world.

Brent for August settlement increased by $0.69 to $41.71 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery rose by $1.21 to $39.70 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.01 to WTI. Gasoil for July delivery gained $9.00 – $348.00.

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

It is expected, that global oil prices could continue to chop higher in the coming months as COVID-19 shelter-in-place restrictions begin to lift. Forecasts pointed to reduced global supply and the faster-than-expected return of demand keeping both Brent and West Texas Intermediate crude prices on an upward trajectory. Most analysts see prices stabilizing between $50 per barrel and $60 per barrel by year’s end, still shy of pre-pandemic levels. It is also expected, that global oil supply is anticipated to decline by a record 7 million bpd in 2020 on the back of the organized cuts from OPEC+, which were supplemented by economically driven reductions by the U.S. and other producers.

U.S. trade deficit in goods unexpectedly widened in May versus forecasts for a narrower deficit, due to a slide in exports mostly driven by oil. The U.S. international trade deficit in goods was US$74.3 billion in May, up by US$3.6 billion from US$70.7 billion in April. Forecasts had expected that the deficit in May would shrink from April. Economists had predicted a deficit of US$66.5 billion, while the median forecasts from the consensus were for a US$68.3 billion deficit. Meantime, U.S. exports of crude oil in April – when oil prices hit their lowest in years – plunged to US$3.205 billion from US$5.185 billion in March.

As per different analyses, as much as 30 percent of the U.S. shale drillers could go under if oil prices fail to move substantially higher. These 30 percent are technically insolvent at oil prices of $35 a barrel. Oil is now trading closer to $35 than to $50—the level at which most shale drillers will be making money. At the same time, banks have started cutting credit lines for industry players as they reassess their assets and the production that they promised would be realized from these assets. Banks could reduce asset-backed loan availability for the industry by as much as 30 percent, which translates into tens of billions of dollars.

European refiners are shunning Russia’s flagship crude grade Urals, which is now more expensive than Brent Crude after Russia cut its exports as part of the OPEC+ agreement. Over the past few weeks, the price of Urals, a blend of heavy sour oil from the Urals mountains and light oil from Western Siberia, has risen to a premium to dated Brent prices after Russia has significantly reduced its exports of the grade. As the price of Urals has increased, European refiners are looking into alternatives and are considering a shift to West Texas Intermediate from the United States or light oil from West Africa.

China’s low-sulphur marine fuel exports fell 20% last month to 1.14 million tonnes compared with April, reflecting a monthly dip in demand from international shipping. Chinese refiners began exporting very low sulphur fuel oil (VLSFO) in January, with a maximum sulphur content of 0.5% to comply with emission rules set by the International Maritime Organization, after Beijing waived export taxes for domestic refiners to meet shipping demand. Exports for the first five months totalled about 5.2 million tonnes. China has been striving to reduce its reliance on bunker fuel imports and create its own marine fuel hub to supply northern Asia.

The International Energy Agency said in its report, that natural gas is expected to experience its largest demand shock on record in 2020 as the Covid-19 pandemic hits an already weakened market. This shock will cause a 4-percent drop in global gas demand. The IEA also said the lost demand would start returning next year, but it added that the shock will still lead to lost demand of some 75 billion cu m of natural gas in the period to 2025. As per report, liquefied natural gas is expected to remain the main driver behind global gas trade growth, but it faces the risk of prolonged overcapacity as the build-up in new export capacity from past investment decisions outpaces slower than expected demand growth.

We expect IFO bunker prices may slightly rise by 4-7 USD today, VLSFO – add 5-9 USD, MGO prices may gain 7-10 USD.