MABUX: Bunker Market this morning, Oct 29
The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
Oil Market close yesterday evening
Oil plunges over 5% to four-month low as pandemic surges, U.S. crude output soars.
Oil prices fell more than 5% on Wednesday, sending Brent to a four-month low as surging coronavirus infections in the United States and Europe prompted renewed lockdowns and fed expectations for new declines in fuel demand.
Also pressuring prices, U.S. crude stockpiles rose more than expected last week as production surged in a record build, according to the U.S. Energy Information Administration.
“The increase in oil production led to an unexpected build of crude oil, and given the additional lockdowns we are seeing in Europe, that is just further heaping bad news on the oil market,” said Andy Lipow, president of consultants Lipow Oil Associates.
Brent futures fell $2.08, or 5.1%, to settle at $39.12 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $2.18, or 5.5%, to $37.39.
That was the lowest close for Brent since June 12 and for WTI since Oct. 2. It was the biggest daily percentage losses for both benchmarks since Sept. 8.
Crude price declines mirrored downturns in other risk-asset markets, as U.S. stock indexes were all lower, with the S&P 500 down 2.9%.
The safe-haven U.S. dollar rose 0.5% on prospects of national lockdowns in Germany and France to fight the pandemic. The stronger dollar makes oil more expensive for holders of foreign currencies, which traders said weighed on crude prices. [/USD]
The United States, Russia, France and other countries have registered record numbers of COVID-19 cases in recent days and European governments have introduced new curbs to try to rein in the fast-growing outbreaks.
Traders said crude prices were also hit by fading prospects for a quick deal on a new U.S. stimulus and increasing oil output from Libya.
On Tuesday, U.S. President Donald Trump acknowledged that a coronavirus economic relief package was unlikely until after next week’s election.
Libya’s production is expected to rebound to 1 million barrels per day (bpd) in the coming weeks.
The head of Saudi Aramco’s trading arm said the Organization of the Petroleum Exporting Countries and its allies, together known as OPEC+, will have to contend with a “lot of demand issues” before raising supply as expected in January 2021.
“Between the United States and Libya, production is up almost 2 million bpd in the past couple weeks,” said Robert Yawger, director of energy futures at Mizuho in New York, noting if OPEC+ takes the view that U.S. producers are only going to increase production, then OPEC+ may “unleash the 2 million barrels in January and let the chips fall where they may ... most likely crude oil down considerably.”
The market, meanwhile, shrugged off this week’s temporary decline in U.S. output as energy firms shut around half of offshore Gulf of Mexico production ahead of Hurricane Zeta, which will slam into the Gulf Coast later Wednesday.
Oil Market today Thursday morning
Oil inches up after 5% slide overnight as hurricane shuts U.S. output.
Oil prices on Thursday recovered slightly from a 5% slump in the previous session, gaining support from the prospect of tighter short-term supply with two-thirds of U.S. output shut in the Gulf of Mexico as Hurricane Zeta slammed Louisiana.
Market watchers said technical support was a factor as well, after signs of a growing global oil supply glut and a second wave of coronavirus infections sent prices tumbling on Wednesday.
U.S. West Texas Intermediate (WTI) crude futures edged up 7 cents, or 0.19%, to $37.46 a barrel by 0517 GMT, while Brent crude futures were up 4 cents, or 0.10%, at $39.16 a barrel.
WTI in the $36.45 to $36.95 range has proven to be a “buy zone” since the beginning of September, Axi chief market strategist Stephen Innes said. If the market fell through that, it would be a bearish sign, he said.
Hurricane Zeta’s impact is expected to be short-lived and the return of U.S. production will add to existing oversupply, as Libya rapidly ramps up output after an eight-month blockade.
Zeta is forecast to weaken into a non-tropical gale-force low by Thursday morning in the United States, the Florida-based National Hurricane Center said.
Data from the U.S. Energy Information Administration on Wednesday provided further evidence of the growing glut: U.S. crude stockpiles rose by 4.3 million barrels in the week to Oct. 23, a bigger increase than expected.
Surging COVID-19 cases in Europe, which have led to new restrictions keeping people off the roads, cast a shadow over the market. Oil fell in Asia’s mid-morning before edging up.
France will require people to stay home for all but essential activities as of Friday, while Germany will shut bars, restaurants and theatres from Nov. 2 through the end of the month.
“The pandemic’s resurgence is putting pressure on OPEC to delay its planned production hike in January,” ANZ Research said in a note.
The Organization of the Petroleum Exporting Countries and allies, together called OPEC+, plan on tapering their production cuts in January 2021 from a current 7.7 million barrels per day (bpd) to around 5.7 million bpd.
Meanwhile, the prospects of the bitter trade dispute between China and the United States, whose relations have sunk to the lowest point in decades over a range of issues, remains unclear.
In an interview with Reuters six days before the U.S. election next week, Joe Biden’s top advisers said he would consult with America’s main allies before deciding on the future of U.S. tariffs on China, seeking “collective leverage” to strengthen his hand against Beijing if he is elected president.
Oil Future close 28th October, 2020
Brent crude: $ 39.12 (-2.08) /brl FM delivery Dec (FM=Front Month)
Light crude (WTI): $ 37.39 (-2.18) /brl FM delivery Dec
Gasoil ARA; $ 314.75 (-14.75) /mton FM delivery Nov
NY Harbor Ulsd: $ 343.02 (-13.39) /mton FM delivery Nov
Oil Futures trading at GMT 06.19; Brent: $+0.05, WTI: $+0.10.
Expect Fuel Oil prices to drop in big numbers today like USD 13 – 15 pmt. (Fuel Oil, means 380 HS plus VLSFO together).
MGO and NY Harbor Ulsd expected to drop 13 – 15 usd/mton. All prices are based on Oil Future close last night Wednesday evening.