MABUX: Bunker market this morning, Nov 04

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) demonstrated firm upward trend on November 03:

380 HSFO: USD/MT 291.40 (+5.34)
VLSFO: USD/MT 337.00 (+7.00)
MGO: USD/MT 400.95 (+5.41)

Meantime, world oil indexes extended their rally on U.S. Election Day amid a recovery in financial markets on Nov.03, but concerns over surging coronavirus cases around the world capped further gains.

Brent for January settlement increased by $0.74 to $39.71 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery rose by $0.85 to $37.66 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.05 to WTI. Gasoil for November delivery gained $9.50 – $316.75.

Today morning oil indexes continue upward trend.

Oil indexes rallied on Nov.03 on U.S. Election Day as equity markets around the world and in the U.S. also rose, with traders bracing for the outcome of the election.

The American Petroleum Institute (API) reported on Nov.03 a major draw in crude oil inventories of 8.01 million barrels for the week ending October 30.  Forecasts had predicted an inventory build of 890,000 barrels. In the previous week, the API reported a surprise build in oil inventories of 4.577-million barrels, after analysts had predicted a draw of 1.11 million barrels. Oil production in the United States rose last week, closing the gap between production this week and the all-time high this year down to 2.0 million barrels per day. U.S. oil production currently stays at 11.1 million bpd.

Meantime, the bearish factors for oil are still very much present, with Italy also tightening measures to curb the second coronavirus wave, but stopping short of a nationwide lockdown, for now. The UK, Austria, and Belgium joined this weekend France and Germany in announcing second lockdowns amid surging coronavirus cases. The market fears that the return of the lockdowns will further delay the economic and oil demand recovery.

The top executives of Russia’s oil companies discussed on Nov.02 the future of the OPEC+ deal, including an option to extend the cuts as-is for three months until March 2021, instead of easing the cuts from January as planned. Russian oil firms have openly criticized at times the OPEC+ deal in the past because, they argue, it burdens them with production cuts aimed at supporting oil prices, which in turn help U.S. producers to pump more oil. As a result of the meeting, the Russian companies supported the baseline option—keeping the terms of the OPEC+ deal as they are now, which means the group relaxing the cuts by 2 million bpd from January 2021. Russia’s oil firms, however, will not have a final say in Moscow’s options in the OPEC+ deal, as different options will also be discussed at a higher level. OPEC+ holds its next full meetings on Nov. 30 and Dec. 1.

Rystad Energy said, global oil demand will peak at 102 million barrels per day (bpd) in 2028, noting that the push to low-carbon energy and the coronavirus pandemic will speed up the peak oil demand timeline to 2028 from 2030 previously expected. As per Rystad, it will not be until 2023 that global oil demand recovers to the pre-pandemic levels. In 2023, oil demand is seen at 100.1 million bpd, surpassing the 99.6 million bpd demand in 2019. In 2050, however, oil demand is expected to significantly decline to 62 million bpd due to the expected high market share of electric vehicles (EVs).

Libya’s crude oil production has reached 800,000 bpd. This is a 100,000-bpd increase in just a few days. During the more than eight months of the blockade, Libya’s oil output slumped from over 1 million bpd to less than 100,000 bpd. Libya started ramping up oil production in late September when the Libyan national Army agreed to a ceasefire with the Government of National Accord and lifted its blockade from oil facilities. The political situation in the country, however, remains highly volatile, which makes more blockades and production outages very likely based on recent history.

The Dutch natural gas market is reinforcing its position as one of the most important trading hubs in the world. Trade on the Dutch Title Transfer Facility is surging as Europe increased imports from Russia, Norway and further afield via liquefied natural gas tankers. Dutch gas futures trading volume on ICE has soared 24% this year after more than doubling in the previous two years. The pace of growth is impressive compared with the much larger U.S. Henry Hub benchmark.

We expect IFO bunker prices may rise by 3-5 USD today while MGO prices may add another 4-9 USD. Short-term forecast: upward trend.