MABUX: Bunker market this morning, Aug 14

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 August 13:

380 HSFO: USD/MT 308.93 (+3.24)
VLSFO: USD/MT 367.00 (+3.00)
MGO: USD/MT 447.02 (+1.75)

Meantime, world oil indexes fell on Aug.13 after the International Energy Agency lowered its 2020 oil demand forecast following unprecedented travel restrictions.

Brent for October settlement decreased by $0.47 to $44.96 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery fell by $0.43 to $42.24 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.72 to WTI. Gasoil for September delivery lost $1.75 – $376.50.

This morning, global oil indexes demonstrate some signs for upward correction.

The International Energy Agency cut forecasts for global oil demand as air travel suffers from the coronavirus crisis even more than previously expected. The IEA reduced estimates for almost every quarter through to the end of 2021, with the second half of this year taking the steepest downgrades. Air travel remained two-thirds lower than last year in July, normally a peak month because of holiday flying. At the same time, global crude supplies increased last month as Saudi Arabia phased out some of the steepest production cuts it’s been making to offset the demand loss, and as improving prices helped the U.S. and Canada revive some operations. The agency cut global demand estimates for the last two quarters of this year by 500,000 barrels a day, projecting that consumption will average 95.25 million barrels a day in the period.

The Energy Information Administration (EIA) in turn predicted, U.S. crude oil production will drop by an average of 990,000 barrels per day for an average of 11.26 million bpd. That is a far greater loss than the agency expected during its previous forecast made in the July: average of 620,000 barrels per day for the full year 2020. In addition to the reduced outlook for U.S. oil production, the EIA sees high crude inventory levels and excess production capacity as a drag on oil prices in the coming months.

Fuel test Company VeriFuel reported, the global market share of VLSFO increased from 49% in Q1 2020 to 52% in Q2. The percentage for high sulphur fuel oil (HSFO) remained the same across both quarters, at 8%. Low sulphur marine gasoil fell back slightly, from 38% in Q1 to 36% in Q2. High sulphur marine gasoil remained the same at 1%, while the share of ultra-low sulphur fuel oil (ULSFO) changed from 4% in Q1 to 3% in Q2. Besides, in January this year, 4% of samples tested by VeriFuel were found to be off-spec. The percentage has changed slightly month on month, with June showing the lowest number of off-specs – just 2%.

Russia said, the OPEC+ panels will not be discussing next week any revisions of the ongoing production cut pact and are not expected to make any major decisions to tweak the deal. The volatile oil market and the highly uncertain trajectory of global demand recovery has forced the OPEC+ group to have the Joint Ministerial Monitoring Committee (JMMC) hold meetings every month until the end of 2020, instead of ahead of every full OPEC+ meeting only. The meetings of the Joint Technical Committee (JTC) will and the Joint Ministerial Monitoring Committee (JMMC) for August are scheduled for August 17 and August 18, respectively.

Vessel calls at Singapore would suggest that maritime trade and global economic activity has entered a recovery phase. Some 3,624 vessels called for bunkers in July which is the largest number seen in any month in 2020, and a considerable upswing from the 3,178 calls in June, which was the lowest number for the year so far.

Turkey alleged on Aug.13 that its oil and gas exploration vessel, the Oruç Reis, has come under attack, in what is an alarming escalation of the tensions in the Eastern Mediterranean.
The Greek-Turkish standoff over hydrocarbon exploration rights near the Greek border in the Eastern Mediterranean has been brewing for some time. Undeterred by Greece’s claim over the area, Turkey sent the Oruç Reis out this week to conduct seismic surveillance in its quest for energy resources, complete with a naval escort. Greece, who alleges that Turkey is exploring for resources in an area that is over its continental shelf, responded by deploying naval ships of its own.

U.S. horizontal drilling activity in oil basins, which has plummeted due to the Covid-19 pandemic, is not likely to materially recover this year. July’s drilling permits number is the lowest since September 2010, when horizontal permits in oil basins amounted to 438. But unlike the current situation, activity then was on the increase, while the current downturn is still under way. Comparing to the previous downturn, the lowest count was in January 2016, when only 622 permits were awarded.

We expect IFO bunker prices may go downward by 1-3 USD today, MGO prices will decline by 1-5 USD.