MABUX: Bunker market this morning, Aug 20

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 19:

380 HSFO: USD/MT - 310.48 (+0.48)
VLSFO: USD/MT – 369.00 (0.00)
MGO: USD/MT – 446.69 (+2.88)

Meantime, world oil indexes changed irregular on Aug.19 as concerns lingered over soft U.S. fuel demand while global producers feared a second prolonged wave of the coronavirus pandemic was a major risk for the market recovery.

Brent for October settlement decreased by $0.09 to $45.37 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery rose by $0.04 to $42.93 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.44 to WTI. Gasoil for September delivery lost $3.25 – $376.75.

This morning, global oil indexes have turned into slight downward trend.

OPEC+ virtual meeting was reviewing compliance with production cuts and left output reductions unchanged. Still, a draft OPEC+ statement said a second extended wave of the pandemic posed a major risk for the oil market recovery. The group pressed members such as Nigeria and Iraq to do more to meet their quota commitments after they exceeded them between May and July.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.6 million barrels from the previous week. At 512.5 million barrels, U.S. crude oil inventories are about 15% above the five year average for this time of year. This compared with a draw of 4.5 million barrels for the previous week, the third weekly draw—and hefty—in a row. Distillate fuel inventories rose by 200,000 barrels in the week to August 14, after a 2.3-million-barrel draw estimated for the previous week. Distillate fuel production averaged 4.7 million bpd, versus 4.8 million bpd for the previous week. Refinery runs fell to 14.5 million bpd last week from 14.7 million bpd the week before.

Russia’s seaborne crude oil exports are trending lower so far in August compared to July, but with Russia ramping up production with the easing of the OPEC+ cuts, this summer’s trend of low volumes of exports to Europe may not last long. Russian seaborne crude oil exports plunged by 42 percent year-on-year in July and declined by 14 percent compared to June. In the first half of August, cargoes loaded from Russian ports are 10 percent lower compared to July and 34 percent lower compared to August 2019. Meantime, Russia has already increased its crude oil production in early August to 9.8 million barrels per day (bpd), up from below 9.4 million bpd last month.

While Russian shipments to Europe were at record low levels in July, crude oil cargoes from the U.S. to European importers strengthened in July, following three months of very low activity. U.S. cargoes loaded for Europe in July exceeded 1.2 million bpd for the first time since March 2020, while shipments in the first half of August remained above 1 million bpd. Refineries in north Europe are importing most of the U.S. crude oil as they prefer U.S. grades to Russia’s flagship crude export grade Urals.

Forces loyal to Libya’s eastern commander Khalifa Haftar said oil ports closed since January can reopen, although it wasn’t clear if crude production would be allowed to resume. The ports can restart operations to dispose of stored fuel and gas to resolve electricity shortages in eastern Libya. Libya, which holds Africa’s largest crude reserves, produced around 1.2 million barrels a day last year. That figure plummeted to about 90,000 daily barrels after supporters of Haftar, who’s been fighting to unseat the United Nations-backed government in Tripoli in western Libya, halted operations at fields and ports under his control at the start of the year.

The amount of crude and condensate stored on tankers has fallen to more than two-month lows as the incentives for storage start to recede, although volumes offshore China remain high, putting pressure on the physical oil market. Data intelligence firm Kpler estimates that floating storage volumes were around 169.57 million barrels for the week beginning Aug. 17, the lowest since early May. Floating crude volumes reached a peak of over 210 million barrels in late June but there has been a steady decline since then as some VLCCs and Suezmaxes have come out of storage.

Piracy at sea tends to record significant upswings during times of economic downturns and the economic devastation caused by the Covid-19 pandemic. It is reported that piracy attacks have returned to the Gulf of Mexico, a key floating storage hub where oil producers have been anchoring their excess inventories during the oil supply glut. The attacks here have primarily been focusing on ships carrying oil cargoes, with pirates preferring to rob the crews of money and seizing valuable technical equipment for sale in black markets instead of hijacking the ships. Maritime security officials have also reported that piracy in Asia doubled during the first half of 2020 compared to last year's corresponding period.

There are quality problems registered again with Low Sulphur Fuel Oil (VLSFO and ULSFO) supplied in Rotterdam. According to FOBAS, the Total Sediment Potential (TSP) results from some samples ranged from 0.16%m/m to 0.43% m/m. The testing agency also notes that some attritional results showed clear instability and others were less clear on the nature of the sediments present.

We expect IFO bunker prices may have little changes today while MGO prices may lose 2-4 USD.