MABUX: Bunker market this morning, Sept 23

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) decreased slightly on Sep.22:

380 HSFO: USD/MT 293.44 (-2.14)
VLSFO: USD/MT 338.00 (-7.00)
MGO: USD/MT 406.76 (-6.25)

Meantime, world oil indexes edged up on Sep.22 before the API’s data release, despite the worsening demand sentiment in the market brought on by reports of increasing coronavirus cases.

Brent for November settlement increased by $0.28 to $41.72 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November delivery rose by $0.49 to $39.80 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $1.92 to WTI. Gasoil for October delivery gained $0.50 – $322.25.

This morning, global oil indexes have turned into downward direction as API reported a rise in U.S. crude inventories against expectations for a decline.

The American Petroleum Institute (API) reported on Sep.22 a build in crude oil inventories of 691,000 barrels for the week ending September 18. Forecasts had predicted an inventory draw of 2.256-million barrels.

Global oil refiners cut output by as much as 35% in spring as coronavirus lockdowns destroyed the need for travel. As lockdowns eased, refiners increased output slowly through late August. But in top fuel consumer the United States and elsewhere, refiners have been decreasing rates for the last several weeks in response to increased inventories, a sustained lack of demand and in response to natural disasters. The hit to capacity has been most notable in China. The second largest fuel consumer led the world in oil demand recovery after taming its outbreak of coronavirus. But its refiners also export fuel, and those shipments have been weak due to the virus's effect on fuel demand in other Asian nations.

Jet fuel consumption remains the hardest hit section of the global oil market as passengers avoid air travel as a result of the pandemic and government travel restrictions. Globally, air freight tonne-kilometres were down just 18% in June compared with passenger revenue-kilometres down 87%. An early resumption of long-haul flights is currently looking less likely than a few months ago, given the resurgence of coronavirus cases in many parts of the world.

The OPEC+ JMMC meeting last week resulted in an extension for compensation cuts until the end of December, as many countries asked for more time to make the required output cuts. Despite the fact that Iraq has been fully compliant in August, it has not delivered its missed targets in the previous months yet. Furthermore, the UAE, Russia and Nigeria have achieved compliance rates of 74%, 95%, and 78%, respectively. The group is scheduled to relax its cuts further to 5.8 million bpd starting from Jan 2021.

Libya’s National Oil Corporation (NOC) sees oil production rising to around 260,000 barrels per day (bpd) next week, up from some 100,000 bpd before the blockade of its oil ports and oilfields was lifted at the end of last week. Crude shipments will resume from the ports of Brega and Hariga at first and will be later followed by other ports, depending on the safety and security situation.

The United States is building a coalition aimed at preventing the completion of the Nord Stream 2 pipeline that will substantially increase the flow of Russian gas into Europe. Germany will be the receiver of most of the gas that will flow through the expanded Nord Stream pipeline amid an expected surge in demand for natural gas as it closes coal and nuclear power plants. The U.S., however, is against it, claiming it will only increase Russia’s influence in the energy supply of the EU, which would be unwise. There are also the U.S. gas interests as a major LNG exporter.

India used the ultra-low crude oil prices earlier this year to top its strategic petroleum reserves with oil at $19 a barrel, saving nearly US$700 million in the process. The average cost at which India bought the crude oil in April and May was $19 per barrel, compared to $60 a barrel oil price in January 2020. Meanwhile, fuel demand in India, which crashed by 60 percent during the initial nationwide lockdown, fell again in August month over month, for the biggest monthly decline since April, as localized lockdowns impacted mobility and economic activity.

The U.S. industrial sector saw its consumption of natural gas drop as economic activity slowed with the lockdowns in response to the COVID-19 pandemic. Industrial consumption of natural gas fell from 25.4 billion cubic feet per day (Bcf/d) in January 2020 to 20.1 Bcf/d in June 2020. This year, consumption of natural gas by U.S. industries is expected to drop by 4.4 percent year over year, while in 2021, consumption of natural gas by the U.S. industrial sector is expected to rise by 1.1 percent on the year.

We expect IFO bunker prices may add 1-3 USD while MGO prices will change irregular in a range of plus-minus 1-3 USD.