MABUX: Bunker market this morning, Sep 02
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) demonstrated slight irregular changes on September 01:
380 HSFO: USD/MT 315.82 (+0.19)
VLSFO: USD/MT 366.00 (-1.00)
MGO: USD/MT 443.75 (-0.82)
Meantime, world oil indexes demonstrated upward changes on Sep.01 on positive economic news from China, and plans by the UAE's state oil company to reduce crude oil supplies by as much as 30 percent in October.
Brent for November settlement increased by $0.30 to $45.58 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October rose by $0.15 to $42.76 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.82 to WTI. Gasoil for September delivery added $3.75.
Today morning oil indexes rise after the American Petroleum Institute (API) announced a larger-than expected draw in crude oil inventory.
API reported a 6.360 million-barrel draw for the week ended August 28, much larger than the forecast of 1.950 million, and the previous week’s 4.524 million-barrel draw. The market will now be looking at the U.S. Energy Information Administration’s figures on crude oil supply, due later in the day.
Strong Chinese manufacturing data also lifted oil prices. The Caixin Media Co. & Markit Manufacturing Purchasing Managers' Index (PMI) showed China's factory activity expanded at the fastest clip in nearly a decade in August, bolstered by the first increase in new export orders this year. The demand in China has also driven the current rise in oil prices, but weaker crude imports could limit the rally, especially if the demand recovery in Europe and the U.S. fails to materialize in September.
Also supporting oil was better-than-expected U.S. manufacturing activity data released on Tuesday. August’s ISM Manufacturing Purchasing Managers Index (PMI) rose to 56, beating July’s reading of 54.2 and the 54.5 forecast. A rise in new orders saw the index climb to its highest level in more than a year.
At the same time, slower-than-expected resumption of oil output in the United States after Hurricane Laura raised concerns over tighter supply. Output in the Gulf of Mexico is slowly recovering as activity resumes and was down by 525,099 barrels per day, or 28.4% of the region’s daily production, on Sep.1. 71 of the 643 manned platforms in the Gulf of Mexico remain closed in the aftermath of the storm that hit the region last week - the number was down from 117 platforms on Aug.31.
The decline of U.S dollar gave some support to oil indexes. The USD was down 0.04% at 92.146 against a basket of currencies, after hitting its lowest since May 2018 in the wake of the U.S. Federal Reserve's policy shift on inflation announced last week. The weakening U.S. dollar makes oil and other commodities priced in dollars more attractive to global buyers.
The U.S. Energy Information Administration U.S. said in a monthly report on Sep.01 that U.S oil production rose in June, but did not fully recover from a dramatic plunge in May. U.S. oil output rose 420,000 barrels per day in June to 10.436 million barrels a day. Production remained far below April levels of 11.99 million bpd. U.S. oil output had dropped sharply in the previous month as producers had scaled back as oil prices sank and demand fell due to the coronavirus pandemic and global oversupply.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said that its oil output reportedly rose by around 1 million barrels per day (bpd) in August. A sharp drop in fuel demand due to COVID-19 prompted OPEC+ to cut production by a record 9.7 million bpd from May 1, but this cut was eased to 7.7 million bpd from Aug. 1, with the eased cuts to remain in place until December. In August, OPEC countries bound by the deal delivered 99% of the pledged reduction. Compliance in July was revised up to 95%.
Goldman Sachs expects Brent crude to reach $65 a barrel in the third quarter of 2021, although it could end the year lower, at $58 a barrel. It is also said it is expected WTI to rally to $55.88 a barrel by the third quarter of next year, up from $51.38 a barrel in earlier forecasts. Separately, Goldman analysts said back in July that demand for oil would likely recover to pre-crisis levels by 2022, spurred by a return to work for millions, a shift towards more private transport, and government support in the form of infrastructure spending. In their latest note, the investment bank's analysts said they expected oil demand to improve by 3.7 million bpd between January and August next year, while supply remains capped thanks to OPEC+' continuing production cuts and a modest increase in non-OPEC supply.
At the same time, the market also assessing the stalled recovery in fuel demand as countries continue to battle the coronavirus pandemic with rolling COVID-19 lockdowns. This has created uncertainty about whether demand for transportation fuels will ever return to normal.
We expect bunker prices may increase today: 1-3 USD up for IFO and 2-4 USD up for MGO.
