MABUX: Bunker market this morning, Sept 03

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) changed irregular on September 02:

380 HSFO: USD/MT 315.00 (-0.82)
VLSFO: USD/MT 366.00 (0.00)
MGO: USD/MT 445.62 (+1.87)

Meantime, world oil indexes fell on Sep.02 as gasoline demand fell in the United States in the latest week, an indication that economic recovery from the pandemic may be slower than expected.

Brent for November settlement fell by $1.15 to $44.43 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October delivery decreased by $1.25 to $41.51 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.92 to WTI. Gasoil for September delivery lost $10.50 – $355.25.

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

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 9.4 million barrels from the previous week. At 498.4 million barrels, U.S. crude oil inventories are about 14% above the five year average for this time of year. The EIA also reported an inventory draw of 4.3 million barrels in gasoline and a 1.7-million-barrel decline in distillate fuel inventories for the last week of August. Refineries last week processed 13.9 million bpd of crude oil, compared with 14.7 million bpd during the previous week. Hurricane Laura had a big part to play in last week’s processing rates as some refineries had to close temporarily.

It is expected that China’s refined fuel consumption to swing back to positive growth in the second half of this year. With China’s economic recovery taking hold, end-user demand for gasoline, diesel and kerosene may rise 1% in the second half from a year earlier, after a 13% fall in the first half.

Meantime, China will ship in much less crude in September and October than it did in May and July, with private refiners seeing purchases drop as much as 40%. The drop-off is coming as the plants run out of quotas following a buying binge earlier this year. The reduction will test the resiliency of the oil market, which has seen prices recover from the lows of April but is still contending with virus lockdowns in major markets and OPEC+ members adding supplies after cutbacks. China’s independent refiners were the first to recover from the virus and have been among the most active buyers supporting oil’s rebound.

Iraq’s crude oil exports fell in August compared to July, as OPEC’s second-largest producer is reducing supply in an attempt to comply with the OPEC+ production cut pact, which it had largely disregarded in previous deals. Iraq’s crude oil exports in August averaged 2.597 million barrels per day (bpd), down from the previous month. Oil revenues are critical to Iraq’s budget income, but in recent months the country has come under pressure from its fellow OPEC+ partners led by Saudi Arabia to stop cheating on their production quotas and finally start complying with the OPEC+ agreement. Iraq promised additional cuts of around 400,000 bpd in August in order to compensate for the lack of compliance with the OPEC+ deal in the previous months.

By July 2020, Venezuela produced a daily average of 339,000 barrels of crude compared to 755,000 a year earlier and almost a seventh of a decade earlier. The outlook remains poor, particularly if the domestic rig count is used as a proxy measure of oil industry activity. At the end of July 2020, there were no active oil rigs in Venezuela and only one operational natural gas rig. That is compared to a total of 25 operational rigs for the same period a year ago and 70 rigs a decade earlier. Analysts predict Venezuela’s oil production could fall to zero by 2021.

North Korea could have oil storage capacity of up to 1.5 million tons or almost 11 million barrels—an amount that could last it a full year if the country gets cut off from external oil suppliers. North Korea has a restriction on the amount of oil products it can receive from abroad, and this restriction stands at 500,000 barrels a year. However, North Korea may have been boosting its underground storage capacity. In July, more than 40 UN members, including the United States and Japan, told the UN that North Korea had breached the limit for oil imports using illegal ship-to-ship transfers. According to these members, the country had taken in some 1.6 million barrels of oil products between January and May through 56 ship-to-ship transfers at sea.

We expect IFO bunker prices may fall by 5-8 USD while MGO prices will decrease by 8-13 USD.