MABUX: Bunker market this morning, Aug 06

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 Aug.05:

380 HSFO: USD/MT 304.25 (+3.45)
VLSFO: USD/MT 361.00 (+4.00)
MGO: USD/MT 440.69 (+3.52)

Meantime, world oil indexes also rose on Aug.05 on a drop in U.S. crude inventories and the weak dollar, but mounting coronavirus infections weighed on the demand outlook.

Brent for October settlement increased by $0.74 to $45.17 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery rose by $0.49 to $42.19 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.98 to WTI. Gasoil for August delivery gained $17.25 – $388.00.

This morning, global oil indexes do not have any firm trend so far and change irregular, with the exception of Gasoil ARA, which is showing a sharp decline.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 7.4 million barrels from the previous week. At 518.6 million barrels, U.S. crude oil inventories are about 16% above the five-year average for this time of year. A week earlier, the EIA said inventories had lost as much as 10.6 million barrels, after a build of 4.6 million barrels for the second week of July. Forecasts had expected an inventory decline of 3.267 million barrels for the week to July 31.

A huge explosion at Lebanon’s main port Beirut on Aug.04 raised concerns about renewed instability in the Middle East, one of the largest oil producers. An investigation into the cause of the explosion is ongoing. Lebanon is reeling under its worst financial and economic crisis, with a sharp plunge in its local currency eroding purchasing power and throwing many into poverty and unemployment.

The Fourth IMO Greenhouse Gas Study reported, the greenhouse gas emissions of shipping have increased from 977 million tonnes in 2012 to 1,076 million tonnes in 2018 (9.6% increase). The carbon intensity of shipping has improved by about 11% in this period, but the growth in activity was larger than the efficiency gains. In the next decades emissions are projected to increase by up to 50% until 2050, relative to 2018, despite further efficiency gains, as transport demand is expected to continue to grow. While the impacts of the Covid-19 pandemic will probably cause a decline in emissions in 2020, they are not expected to significantly affect the projections for the coming decades.

Cuts by the OPEC+ combined with sanctions on Venezuela and Iran, hitting supplies of heavier crude and forcing processors from the U.S. to India to boost buying of high-sulfur fuel oil to use as an alternative feedstock in their refineries. While a large volumes of the fuel was previously used to power ships, consumption has waned after new regulations were implemented this year mandating vessels use cleaner burning fuels unless they are fitted with scrubbers. The recent demand surge also coincided with a seasonal boost from the Middle East, which imports fuel oil for use in electricity generation during the hotter summer months. Meantime, shipments typically bound for Singapore from Europe and Russia have been diverted to the U.S.

The International Monetary Fund (IMF) said, the coronavirus crisis will lead to global oil demand dropping by around 8 percent this year compared to last year. This year, oil prices will be 41 percent lower than in 2019. The direct impact of the low oil prices on oil trade balances will vary across economies, reflecting their dependence on oil exports and imports. The fund’s estimates for this year’s global oil demand decline are in line with other forecasters such as the International Energy Agency (IEA) and OPEC.

With Libya's conflict escalating, the country's crude oil exports are set to be just 1.2 million barrels in August, a 40-percent plunge from July. This month, two terminals in the country holding Africa's largest crude oil reserves are set to ship a cargo of 600,000 barrels each. Most of Libya's oil terminals and facilities are closed amid an ongoing civil war in the country, with violent clashes erupting between armed groups in Libya's Oil Crescent. Currently, oil production in the country is around 100,000 barrels per day (bpd). This figure is dramatically down from 1.2 million bpd at the start of the year, just before paramilitary formations affiliated with the Libyan National Army (LNA) occupied Libya's oil export terminals and oilfields.

We expect IFO bunker prices may add 3-5 USD today, while MGO prices – to gain 3-15 USD.