MABUX: Bunker market this morning, Sep 01

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 31:

380 HSFO: USD/MT 315.63 (+2.80)
VLSFO: USD/MT 367.00 (+4.00)
MGO: USD/MT 444.57 (+3.24)

Meantime, world oil indexes changed irregular on Aug.31 as global stimulus measures underpin prices even as demand struggles to return to pre-COVID levels in a well-supplied market.

Brent for November settlement rose by $0.23 to $45.28 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October delivery fell by $0.36 to $42.61 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.67 to WTI. Gasoil for September delivery lost $3.50 – $362.00.

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

The price crash and the capital expenditure (capex) cuts from exploration and production (E&P) companies have impacted the drilling rig market with less work contracted with offshore drilling providers than initially anticipated. This has caused drilling rig contractors in the North Sea to either remove rigs from their fleets permanently or cold-stack some of them, leading to a looming shortage of offshore rigs available for work in 2021. Drilling rig owners have removed six semisubs from the UK and Norwegian fleet since 2018. Currently, the total number of rigs in the UK fleet has diminished to just 11, of which three are cold stacked and not available for near-term work.

Twenty Saudi soldiers arrived last week at a U.S. military base close to an oilfield in northeastern Syria. It was reported that the arrival of the Saudi soldiers at Syria’s biggest oilfield coincided with the arrival of around 30 trucks carrying drilling and digging machinery. At the end of last year, Saudi troops were also reportedly stationed near Syria’s largest oilfield, Al-Omar in the oil-rich Deir Ezzor region, in what was thought to be Saudi protection for experts of Saudi oil giant Saudi Aramco. Meantime, incidents and altercations between the superpowers backing different sides in the Syrian conflict continue.

In recent months, the world’s biggest oil exporter, Saudi Arabia, has lost market share in China to the United States as the world’s top oil importer has boosted imports from America and reduced purchases from the Kingdom. After September, the Saudis could claw back some market share lost to the U.S. over the past two months, as the opportunistic Chinese buying of American oil may have come to an end.  China has imported record volumes of crude oil in recent months, taking advantage of the lowest crude prices in two decades in April stock up on dirt-cheap oil.  Last month, Saudi Arabia slipped to the third spot on the list of China’s key oil suppliers behind Russia and Iraq—the first time in two years that the Kingdom has not been the number-one or number-two oil supplier to the world’s top oil importer.

Responding to the impact of coronavirus on transportation patterns, US refineries have cut back on motor gasoline and jet fuel products and upped distillate fuel oil output. These three products generally have the highest yield from refineries - refinery yields reflect the volumetric ratio of a finished product to refineries’ total inputs of crude oil and net inputs of unfinished oils. According to the Energy Information Administration (EIA), refiners responded to reduced demand for transportation fuels by decreasing overall refinery runs from April onwards. Refinery runs were 22% lower in April 2020 compared with the full year 2019 average of 17.0 million barrels per day (bpd).

Chinese factory data saw its expansion slow down slightly in August, but the services industry was strongest level since early 2018. August’s non-manufacturing PMI rose to 55.2, higher than July’s reading of 54.2. The manufacturing Purchasers’ Managers Index (PMI) slipped to 51 in the same month, lower than July’s 51.1 figure and the forecasted 51.2. The lack of demand remains a hurdle to recovery, with firms suffering even with new orders rising to 52 and new export orders increasing to 49.1.

Next to positive data from China, a weaker U.S. dollar remains an important factor for crude markets. Other key crude importers in Asia continue to be tempted to purchase oil as a weaker dollar results in lower import bills.

We expect bunker prices do not have any firm trend today and may change irregular in a range of plus-minus 1-3 USD.