MABUX: Bunker market this morning, Nov 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) declined on Nov.02:

380 HSFO: USD/MT 286.06 (-3.15)
VLSFO: USD/MT 330.00 (-4.00)
MGO: USD/MT 395.54 (-4.21)

Meantime, world oil indexes increased on Nov.02 after Russia's oil minister held talks with domestic oil companies to delay crude output increases planned for January.

Brent for January settlement increased by $1.03 to $38.97 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December rose by $1.02 to $36.81 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.16 to WTI. Gasoil for November delivery added $2.25.

Today oil indexes decline as worries about soaring COVID-19 cases, rapidly rising Libyan supply and U.S election jitters outweighed growing hopes that major producers would hold back on planned production increases.

Russian Energy Minister Alexander Novak met with the top managers of Russian oil companies on Nov.02 to discuss a possible extension of oil output restrictions into 2021. The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, a group called OPEC+, slashed oil output from May to support prices and tapered the cut to 7.7 million barrels per day (bpd) in August. They are due to pare that further by 2 million bpd in January. But with soaring cases of COVID-19 in Europe and the United States and the recent swift return of oil supply from Libya following an eight-month blockade, Saudi Arabia and Russia are in favor of delaying the output increase in January. OPEC holds its next full meeting on Nov. 30.

Libyan supply stands at about 800,000 bpd, up more than 100,000 bpd from a few days ago. That, and the recent rebound in U.S. operating rigs, is worrying markets concerned about supply again outpacing demand. At the same time, output from the Organization of the Petroleum Exporting Countries (OPEC) rose for a fourth month in October.

The market has been under pressure in recent days, hit by concerns about weaker fuel demand. Following France and Germany, other economies in Europe announced this weekend second lockdowns amid surging coronavirus cases. Just weeks ago, the market and industry professionals were not expecting renewed lockdowns for whole countries. Late last week, Austria announced a second lockdown until the end of November, closing hotels for tourism, as well as restaurants except for takeaway and delivery. The UK, one of the largest economies in Europe, is also moving into lockdown as of this coming Thursday, and Belgium also returned to a nationwide lockdown. Italy is the latest country in Europe to tighten COVID-19 restrictions, including limiting travel between the worst-hit regions and imposing a nightly curfew, which will limit fuel demand. New infections spiked in the United States as well.

The widening lockdowns in Europe put pressure on oil prices, with market also looking for the outcome of the U.S. election.

The election in U.S. outcome most likely to shake equity markets in the near-term if there is no clear winner on Tuesday night, as several states remain where votes will need to be counted. President Donald Trump will face off against Democratic candidate Joe Biden in the election, which has spiked concerns nationwide about turbulence and protests stemming from the results.

Global oil trading companies and analysts expect further demand destruction because of the resurgence of virus cases, though estimates differ. Vitol sees winter demand at 96 million barrels per day (bpd) while Trafigura expects demand to drop to 92 million bpd or lower. Rystad Energy sees demand peaking in 2028, instead of in 2030, and sees a slower recovery next year.

U.S. inventory data is due from the American Petroleum Institute today and the Energy Information Administration on Wednesday.

We expect bunker prices may demonstrate upward changes today: 4-6 USD up for IFO and 2-4 USD up for MGO.