MABUX: Bunker market this morning, July 02

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) rose slightly on July 01:

380 HSFO: USD/MT 288.69 (+0.33)
VLSFO: USD/MT 345.00 (+3.00)
MGO: USD/MT 417.94 (+2.67)

Meantime, world oil indexes also increased on Jul.01, following a drawdown in U.S. crude inventories from record highs and a string of positive manufacturing data.

Brent for September settlement increased by $0.88 to $42.03 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery rose by $0.55 to $39.82 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.21 to WTI. Gasoil for July delivery gained $5.25 – $357.50.

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

Crude oil inventories in the United States shed 7.2 million barrels in the week to June 26. Forecasts had expected an inventory decline of 710,000 barrels for the period, and the American Petroleum Institute had estimated a sizeable inventory draw, to the tune of 8.156 million barrels, the largest inventory draw so far this year. For the previous week, the EIA reported an inventory build, at 1.4 million barrels, after another moderate build, of 1.2 million bpd, for the week before. Oil inventories remain above the five-year average for this time of the year, but refinery runs for the past few weeks suggest demand for fuels is increasing, albeit slowly.

Reuters poll shows oil prices are unlikely to jump too much this year despite the OPEC+ production cuts as the economic and oil demand recovery are set to pick up steam only in the fourth quarter. Meanwhile, a second wave of coronavirus cases could dampen the global economic and oil demand recovery if countries and U.S. states backtrack some of the eased measures. Still, it is difficult to justify significant upside in prices in the near term due to the high levels of inventory, continued weakness in refinery margins, and the fear over a severe second wave of Covid-19. Most probably the market will continue to consolidate around current levels.

Sentiment was also boosted by improving economic data around the world. In China, the manufacturing purchasing managers’ index (PMI) showed factories slowly gathered steam in June after the government eased lockdowns. Germany’s manufacturing sector contracted at a slower pace in June, while French factory activity rebounded into growth. However, a surge in infections in the United States and warning from the government’s top infectious disease expert that the number could soon double is still the potential downward driver.

The U.S. job-shedding in May and June had not been as severe as feared and bolstered confidence in the resilience of U.S. demand. Private payrolls processor ADP said the U.S. private sector added 2.369 million jobs last month. While that was below expectations, the company also sharply revised down its estimate of job losses in May, leaving the net job count, on balance, higher than assumed.

It is expected, fuel demand in India, the world’s third-largest oil importer and third-largest oil consumer, is set to rebound to pre-crisis levels by the end of September. The statistics shows demand for gasoline, diesel, liquefied petroleum gas (LPG), and other commercial fuels is coming back to its normal level, while jet fuel demand continues to be a drag on overall demand – as it is everywhere in the world. As demand recovers, India’s refinery capacity utilization picked up in May to an average of 77 percent after India started to ease the nationwide lockdown. Refinery throughput increased by 11 percent in May compared to April.

We expect 380 HSFO bunker prices may slightly rise by 3-5 USD today, VLSFO – add 4-6 USD, MGO prices may gain 3-5 USD.