MABUX: Bunker market this morning, Sept 09

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 Sep.08:

380 HSFO: USD/MT 299.94 (-3.74)
VLSFO: USD/MT 343.00 (-6.00)
MGO: USD/MT 421.75 (-4.02)

Meantime, world oil indexes also continued downward trend on Sep.08 pressured by concerns that a recovery in demand could weaken as coronavirus infections flare up around the world.

Brent for November settlement fell by $2.23 to $39.78 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October delivery decreased by $2.32 to $36.76 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.02 to WTI. Gasoil for September delivery lost $18.50 – $309.50.

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

International Energy Agency (IEA) said, the global economy is likely not headed for any major slowdown due to COVID-19 but piled-up storage and uncertainty over China's oil demand cloud oil markets' recovery. The IEA cut its 2020 oil demand forecast on Aug. 13, warning that reduced air travel would lower global oil demand by 8.1 million barrels per day (bpd). The Agency downgraded its outlook for the first time in three months, as the epidemic continues to wreak economic pain and job losses worldwide.

Bank of America Securities in turn said, that it will take three years for global oil demand to rebound to pre-pandemic levels, as jet fuel consumption continues to trend much lower than last year’s levels. While road fuel demand has recovered to nearly pre-COVID-19 levels, aviation fuel demand is struggling to take off materially as air travel is still significantly down compared to ‘normal’ levels from before the pandemic. As per report, if a vaccine is rolled out at the end of 2021, air travel would recover to 75 percent of pre-crisis levels in 2022 and to 90 percent of the typical consumption level in 2023. For the longer term, the bank sees global oil demand peaking at some 105 million barrels per day (bpd) in 2030, due to the rising share of electric vehicles (EVs) in light duty vehicle sales.

A new export tax rule in Russia could cost domestic exporters of fuel oil as much as US$1 billion in missed sales every year. Russia is set to enact as of September 14 a new rule on the taxation of fuel oil exports aimed at bringing in additional revenues for the state at a time when oil prices and oil demand took a hit with the pandemic. The new rule would close a loophole that companies have so far used to avoid paying export duty on fuel oil and other heavy oil products by passing off those products as duty-free export products. Meanwhile, Russia’s exports of petroleum products to the United States more than doubled in the first half of 2020 compared to the same period last year, reaching their highest levels since at least 2004. The U.S. has been raising its imports of fuel oil from Russia over the past year and a half after the U.S. imposed sanctions on Venezuela’s exports.

Europe, one of the world's biggest diesel consumers, faces a major glut which combined with weak demand is weighing heavily on the ability of the region's refineries to keep running. Having hit record lows at the height of the COVID-19 pandemic in April and May, European diesel margins are trending lower again after posting a modest recovery in July. While the easing of lockdowns in recent months across Europe has boosted diesel demand, some countries are seeing the recovery stall, including Spain and the UK. Besides, the diesel market is also afflicted with high stocks: Europe now accounts for the biggest share of global middle distillates floating storage globally.

Libya's central and southern regions experienced a major power outage, while Libya's oil terminals remain blocked for exports. Currently, oil production in Libya is just 100,000 bpd—down from 1.2 million bpd at the start of the year, just before paramilitary formations affiliated with the Libyan National Army (LNA) occupied Libya's oil export terminals and oilfields. Libya's conflict continues, preventing oil production and exports from the African OPEC member.

No new LNG export projects could be approved this year for the first time in two decades. Some forecasts say it is possible that one or two projects go forward, while others say none will receive FID. Before the pandemic, market expected as much as 70 million tonnes per year of new capacity to receive the go-ahead.

We expect IFO bunker prices may fall by 12-15 USD today while MGO prices may decline by 14-17 USD.