MABUX: Bunker market this morning, Aug 24

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) fell slightly on August 21:

380 HSFO: USD/MT 309.37 (-0.55)
VLSFO: USD/MT 364.00 (-3.00)
MGO: USD/MT 443.24 (-2.33)

Meantime, world oil indexes dropped on Aug.21 as the economic recovery worldwide runs into stumbling blocks due to renewed coronavirus lockdowns, even as major global crude producers limit crude supply.

Brent for October settlement decreased by $0.55 to $44.35 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October delivery fell by $0.48 to $42.34 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.01 to WTI. Gasoil for September delivery lost $11.00 – $360.00.

This morning, global oil indexes do not have any firm trend so far and change irregular.

Eurozone purchasing managers index readings showed a slowdown in the region’s economic activity, while data out of Japan indicated a continued decline in activity. Meanwhile, a renewed rise in COVID-19 cases in parts of Europe and elsewhere have underlined worries about the outlook for energy demand. In Asia, a cutback in refining activity in response to poor fuel demand is also a troubling sign.

The OPEC+ group has as much as 2.31 million barrels per day (bpd) of oil production above the collective quota for May-July to offset in August and September. The estimates from OPEC+ show that Iraq was overproducing at a rate of 851,000 bpd between May and July—this was the least compliant member of the pact. Nigeria was also overproducing a lot between May and July, pumping 315,000 bpd above its ceiling. Russia, the leader of the non-OPEC group in the OPEC+ coalition, was also producing above its quota – 283,000 bpd more than it should be in order to be in full compliance. The Joint Ministerial Monitoring Committee (JMMC), which met on Aug.19, said it had requested other underperforming participating countries to submit their plans for implementation of the required compensation for the overproduced volumes to the OPEC Secretariat by the end of next week, August 28.

As per recent forecasts, global crude oil prices will continue their slow grind higher, reaching $50 per barrel by year’s end and closing in on pre-pandemic levels near $60/bbl by the end of 2021. Global oil demand is expected to be very weak for 2020, with estimates calling for a decline of between 8 million bpd and 9 million bpd. However, as demand rebounds amid a recovery in the economy, consumption could return to 2019 levels by 2022. Year-to-date, non-OPEC oil supply is anticipated to have declined by 5 million bpd amid reductions by the U.S. and other producers. Global crude oil inventories should continue to be drawn down through 2021 as OPEC+ countries comply with output cuts.

U.S. President Donald Trump redoubled his promise to withdraw the few U.S. troops still in Iraq, but said Washington would remain ready to help if neighbouring Iran took any hostile action. The president declined to lay out a timetable for a full withdrawal. The statement was made amid a new spike in tensions between Washington and Tehran after Washington said it would seek to reinstate all previously suspended U.S. sanctions on Iran at the United Nations. Since 2014, the primary mission of U.S. troops deployed in Iraq has been defeating the Islamic State militant group. Officials in the U.S.-led coalition say Iraqi forces are now mostly able to handle the insurgents on their own.

The UN-backed government of Libya announced a ceasefire on Aug.21, and the east-based rival administration also called for a truce in a move that could pave the way to reopening of Libya's oil terminals, if the ceasefire holds.  Currently, oil production in Libya 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) led by General Khalifa Haftar occupied Libya's oil export terminals and oilfields.

Chinese buyers have reportedly chartered around 19 tankers for September to transport a record order of roughly 37 million barrels of U.S. oil to China. Should the order be placed as planned, it would smash May’s record of 35.2 million barrels, and would be an indication that China is ramping up purchases to meet its commitments under the phase one trade deal between the two countries.

The number of oil rigs in the United States rose for the first time since January by 11, to 183—the first double-digit increase since the pandemic took locked down significant parts of America. The total number of active oil and gas rigs increased by 10 for the week, with oil rigs climbing by 11 and gas rigs falling by one. The EIA’s estimate for oil production in the United States stayed the same for the week ending August 14—the last week for which there is data, at 10.7 million barrels of oil per day. Oil production in the United States is 2.4 million bpd less than its all-time high reached earlier this year.

We expect IFO bunker prices may fall in a range of minus 1-3 USD, MGO prices - in a range of minus 8-11 USD.