MABUX: Bunker Market this morning, Oct 14
The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
Oil Market close, Tuesday evening
Oil rises nearly 2% as robust China trade data offsets returning supply.
Oil prices rebounded on Tuesday, supported by robust economic data from China that offset returning supply in other regions but gains were capped by forecasts for a slow recovery in global oil demand as coronavirus cases rise.
Brent crude futures were up 72 cents, or 1.7%, to $42.44 a barrel by 12:09 p.m. ET (1609 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 85 cents, or 2.2%, to $40.28 a barrel. On Monday, both benchmarks fell nearly 3%.
China, the world’s top crude oil importer, took in 11.8 million barrels per day (bpd) of oil in September, up 5.5% from August and up 17.5% from a year earlier, but still below the record high level of 12.94 mln bpd in June, customs data showed.
“Oil prices, which suffered quite a blow the previous day, were looking for a bright spot and Tuesday offered just that,” said Rystad Energy’s senior oil markets analyst Paola Rodriguez-Masiu.
“We find that China’s record haul of crude growth is poised to cease as independent refineries have nearly fully utilized their state-issued import quotas and companies struggle with extremely high crude inventories. Therefore, despite the initial enthusiasm, we find that the uptick in oil prices today is unjustified.”
The International Energy Agency (IEA) - which advises Western governments on energy policy - said in its World Energy Outlook that in its central scenario a vaccine and therapeutics could mean the global economy rebounds in 2021 and energy demand recovers by 2023.
But under a “delayed recovery scenario,” it said the energy demand recovery is pushed back to 2025.
“The era of global oil demand growth will come to an end within the next 10 years, but in the absence in a large shift in government policies, I don’t see a clear sign of a peak,” IEA chief Fatih Birol told Reuters.
The Organization of the Petroleum Exporting Countries (OPEC) also forecast a slower demand recovery on Tuesday.
In a monthly report, it said oil demand will rise by 6.54 million bpd next year to 96.84 million bpd, 80,000 bpd less than expected a month ago.
Social restrictions were being tightened in Britain and the Czech Republic to battle rising cases of COVID-19, and French Prime Minister Jean Castex said he could not rule out local lockdowns.
On the supply side, workers have been returning to U.S. Gulf of Mexico platforms after Hurricane Delta and Norwegian workers to offshore rigs after ending a strike.
The energy minister from the United Arab Emirates (UAE) said on Tuesday that OPEC+ oil producers will stick to their plans to taper oil production cuts from January.
OPEC member Libya on Sunday also lifted force majeure at its Sharara oilfield.
Libya’s total output on Monday was expected to hit 355,000 bpd while a full return of the 300,000 bpd Sharara field would nearly double that.
“For prices to rise further, we think elevated spare production capacity among OPEC+ needs to be reduced. This is why we describe the oil market as artificially, and not structurally, tight at present. The group can react easily to any large production disruption by using its spare production capacity to ramp up production in case prices spike,” UBS analysts said in a note.
Weekly U.S. oil inventory data is delayed a day due to Monday’s Columbus Day federal holiday.
Oil Market today, Wednesday morning
Oil prices slip as rising coronavirus cases stokes demand concerns.
Oil prices slipped on Wednesday on concerns that fuel demand will continue to falter as rising coronavirus cases across Europe and in the United States, the world’s biggest oil consumer, could impede economic growth.
The Organization of the Petroleum Exporting Countries (OPEC) said in its monthly report on Tuesday that oil demand in 2021 will rise by 6.54 million barrels per day (bpd) to 96.84 million bpd, 80,000 bpd less than its forecast a month ago, as a result of the economic dislocations caused by the coronavirus pandemic.
Brent crude futures for December fell by 12 cents, or 0.3%, to $42.33 a barrel by 0355 GMT while U.S. West Texas Intermediate futures were down 11 cents, or 0.3%, to $40.09.
The heads of two of the world’s biggest oil producers, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, discussed the current situation in the energy markets during a telephone call, the Kremlin said on Tuesday.
OPEC and producer allies such as Russia, a group known as OPEC+, will stick to their plans to taper oil production cuts from January, Suhail al-Mazrouei, the energy minister of the United Arab Emirates said on Tuesday.
“Oil prices are steady in Asia as the dollar rally takes a break and as the Russian and Saudis show a united front in making OPEC+ oil producers live up to their pledged output cut promises,” said Edward Moya, a senior market analyst at OANDA.
“Crude prices are looking very vulnerable as the coronavirus continues to spread like wildfire across Europe and trending higher in the U.S.,” Moya added.
On the supply side, crude oil production in the U.S. Gulf of Mexico continued to recover four days after Hurricane Delta made landfall with the amount shut falling to 44% on Tuesday from 69% on Monday.
U.S. crude oil inventories were seen falling last week, while distillate stockpiles likely declined for a fourth week, a preliminary Reuters poll showed on Tuesday.
The poll was conducted ahead of reports from American Petroleum Institute and the Energy Information Administration. Both the reports were delayed by a day because of the Columbus day holiday on Monday in the United States.
Oil Future close 13th October, 2020
Brent crude: $ 42.45 (+0.73) /brl FM delivery Dec (FM=Front Month)
Light crude (WTI): $ 40.20 (+0.77) /brl FM delivery Nov
Gasoil ARA; $ 339.25 (+2.25) /mton FM delivery Nov
NY Harbor Ulsd: $ 359.89 (+3.66) /mton FM delivery Nov
Oil Futures trading at GMT 04.53; Brent: $-0.08, WTI: $-0.10.
Fuel Oil prices expected to increase 5 usd/mton
(Fuel Oil, means 380 HS plus VLSFO together).
MGO and NY Harbor Ulsd expected increase by 2-4 usd/mton.
Above indications are based on Oil Future close last night 13th October.
The Oil Market began the day with a small downward trend, and in general a further drop of Oil Prices is more likely also today, but it never happened yesterday. The price uptick in oil prices yesterday was unjustified.
More oil productions are coming on stream and no visible demand increase in sight, which is likely to push oil prices further downward.