2020 March 17 09:31
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) continued firm downward trend on March 16:
380 HSFO: USD/MT 277.26 (-11.53)
VLSFO: USD/MT 367.00 (-15.00)
MGO: USD/MT 451.02 (-16.83)
Meantime, world oil indexes fell on Mar.16 as emergency rate cuts by the U.S. Federal Reserve and its global counterparts failed to tame markets and China’s factory output plunged at the sharpest pace in 30 years amid the spread of coronavirus.
Brent for May settlement decreased by $3.80 to $30.05 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $3.03 to $28.70 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $1.35 to WTI. Gasoil for April delivery lost $30.25.
Today morning global oil indexes have turned into slight upward correction.
The U.S. Federal Reserve took yet another action on Mar.15 evening, announcing that the central bank would be slashing interest rates to zero percent and reactivating the crisis-era program of bond purchases known as "quantitative easing," in which the Fed buys billions of dollars in bonds to cut prices and keep markets flowing. The move comes following another announcement last week stating that the Federal Reserve pledged to inject as much as $1.5 trillion into U.S. markets to cull the growing panic sparked by the Coronavirus pandemic. Despite the supposedly rather good news, oil markets failed to react positively and continued downward evolution.
China’s industrial output fell by a much larger than expected 13.5% in January-February from the same period a year earlier, the weakest reading since January 1990.
An OPEC and non-OPEC technical meeting planned for Mar.18 in Vienna has been called off. A deal to cut oil output struck by the Organization of the Petroleum Exporting Countries and allies led by Russia - a grouping known as OPEC+ - is due to expire at the end of this month. On March 6, OPEC+ failed to reach a deal to deepen oil supply cuts or to extend existing curbs, deepening a slide in oil prices.
Venezuela is in discussions with OPEC and Russia about the current oil price collapse saying it reached out to its “partners” to take steps toward opening up a new dialogue between OPEC and non-OPEC nations. Meantime, Venezuela continues to suffer under the weight of US sanctions and last week the United States added another subsidiary of Rosneft—TNK Trading International SA (TTI)—for supporting Maduro’s regime. The sanctions block all property and interests in property of TTI that are in the US or in the possession or control of US persons, as well as any entities that are owned, directly or indirectly, 50 percent or more by the designated individuals and entity.
IHS Markit estimates that oversupply of oil could come to 800 million to 1.3 billion barrels. The projection is two to three times what existed in late 2015 to early 2016, when the Organization of the Petroleum Exporting Countries pumped more oil to combat the growing U.S. shale industry.
Saudi Arabia’s national shipping firm, Bahri, has provisionally chartered up to 31 supertankers, up from 19 vessels sought earlier last week. The Kingdom had said on Mar. 11 it would launch a programme to boost production capacity for the first time in more than a decade, signalling to Russia and other rivals it was ready for a long battle over production levels and market share. The number of supertankers Bahri was seeking to conclude charters for had risen to up to 31 from 19 on Mar.11. Each of these vessels, known as very large crude carriers, can carry a maximum of 2 million barrels of oil.
The shipping industry is drawing some comfort from the collapse of OPEC+ and coronavirus-led demand weakness thanks to cheaper marine fuel costs, with prices for VLSFO in Europe having experienced a greater-than-expected drop, plunging by half since the start of the year. Prices for VLSFO in Rotterdam plummeted approximately one fifth in January alone, as market participants cited softening demand as well as growing availability. Initial pockets of tight availability at Europe’s bunkering hub in Rotterdam did not appear to persist for long, partly due softened demand-related conditions from IMO 2020 which were further exacerbated by the COVID-19 outbreak.
The International Bunker Industry Association (IBIA) has issued advice on how to mitigate the risk of COVID-19 infection during bunkering operations. In a statement issued on 16 March, IBIA said that the key issues for any personnel involved in a bunker delivery – barge crew, ship crew, surveyors or agents – are to minimize touching surfaces which may be contaminated. The virus is unlikely to persist on bunker hoses, flanges, valve wheels etc. and in any case, gloves should always be worn in these circumstances.
We expect bunker prices may continue to decline in a range of minus 10-20 USD during the day, followed by a possible upward correction at the end of the session.