2020 October 28 10:01

MABUX: Bunker Market this morning, Oct 28

The Bunker Review was contributed by Marine Bunker Exchange (MABUX)

Oil Market close yesterday evening
Oil rises 2% on U.S. Gulf shutdowns, outlook weak.

Crude settled higher on Tuesday as companies shut down some U.S. Gulf of Mexico oil production ahead of an approaching storm, although surging coronavirus infections and rising Libyan supply limited gains.

Companies including BP, Chevron, Shell and Equinor ASA evacuated rigs or closed facilities. So far producers have shut 16%, or 294,000 barrels per day (bpd) of oil output due to Zeta, which weakened to a tropical storm on Tuesday from a hurricane on Monday, the U.S. National Hurricane Center (NHC) said.

Brent crude closed up 75 cents, or 1.9%, at $41.21 per barrel by 1:22 EDT (1722 GMT). U.S. oil gained $1.01 cents, or 2.6%, to $39.57. Both contracts fell more than 3% on Monday.

The storm-induced bump in prices may be short-lived, however, with demand expected to weaken anew with coronavirus cases rising.
“We have a lot of vaccine, no stimulus, and the very real possibility of a contested election in a couple days, and a stock market that won’t react positively to that,” said Bob Yawger, director of energy futures at Mizuho.

Libya’s production should rebound to 1 million bpd in coming weeks, complicating efforts by other OPEC members and allies to restrict output.
The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, are planning to increase production by 2 million bpd from January after record output cuts this year. That would cut overall reductions to 7.7 million bpd - still an enormous amount by the standards of major oil producers, but it may not be enough to offset weak demand.

Russian President Vladimir Putin, speaking last Thursday, did not rule out extending the cuts for longer.

“As the virus continues to spread, the odds of additional OPEC + production tends to diminish in helping to provide some balance to the market,” said Jim Ritterbusch, president of Ritterbusch and Associates.

The latest weekly U.S. oil inventory figures, due later on Tuesday and on Wednesday, are expected to show rising supplies. Analysts polled by Reuters expect crude stocks to rise by about 1.1 million barrels.

Oil Market today Wednesday morning
Oil falls 2% as rise in U.S. crude stocks fans oversupply fears.

Oil prices slid about 2 percent on Wednesday, giving up most of the previous day’s gains, as a surge in U.S. crude stocks and growing coronavirus infections in the United States and Europe fanned fears of a supply glut in oil and weaker fuel demand.

Brent crude was down 76 cents, or 1.8%, at $40.44 a barrel by 0343 GMT, having climbed nearly 2% the previous day. U.S. oil was down 90 cents, or 2.3%, at $38.67 a barrel, after gaining 2.6% on Tuesday.

U.S. crude oil and gasoline stocks rose last week, data from industry group the American Petroleum Institute showed, with crude inventories rising by 4.6 million barrels to about 495.2 million barrels, against analysts’ expectations in a Reuters poll for a build of 1.2 million barrels.

“The higher-than-expected build in U.S. crude stocks prompted fresh selling, while concerns over supply disruption from Hurricane Zeta have receded,” said Hiroyuki Kikukawa, general manager of research at Nissan Securities.

Energy firms and ports along the U.S. Gulf Coast prepared on Tuesday for Zeta, the 11th hurricane of the season, as it entered the Gulf of Mexico.
“Rising COVID-19 cases with the lack of a U.S. coronavirus fiscal relief package also dented investors’ risk appetite,” Kikukawa said. He expected the gloomy sentiment to keep prices under pressure through the Nov. 3 U.S. presidential election.

The United States, Russia, France and other countries have registered record numbers of infections in recent days, and European governments have introduced new curbs to try to rein in the fast-growing outbreaks.

President Donald Trump acknowledged on Tuesday that a coronavirus economic relief deal would likely come after the election, with the White House unable to bridge differences with fellow Republicans in the U.S. Senate as well as congressional Democrats.

“With and without another lockdown, movement across Europe and North America will fall during the coming winter months as most people avoid travel and big gatherings,” said Henning Gloystein, director of global energy & natural resources at Eurasia Group, in a note on Wednesday.

“This will dent fuel consumption and almost certainly force OPEC and its allies to continue withholding oil supply well into 2021,” he said.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, plans to scale back the size of its production cuts in January from a current 7.7 million barrels per day (bpd) to roughly 5.7 million bpd in January. While still an enormous amount, this may not be enough to offset weak demand.

Adding to pressure, Libya’s production should rebound to 1 million bpd in coming weeks, complicating efforts by other OPEC members and allies to restrict output.

Oil Future close 27th October, 2020
Brent crude:          $ 41.20 (+0.74) /brl         FM delivery Dec (FM=Front Month)
Light crude (WTI): $ 39.57 (+1.01) /brl         FM delivery Dec
Gasoil ARA;           $ 329.50 (+9.25) /mton    FM delivery Nov
NY Harbor Ulsd:     $ 356.41 (+11.05) /mton  FM delivery Nov  

Oil Futures trading at GMT 06.46; Brent: $ -0.72, WTI: $ -0.87.

Expect Fuel Oil prices to increase 4 - 9 usd/mton. (Fuel Oil, means 380 HS plus VLSFO together). MGO is expected to increase around 7 usd/mton and NY Harbor Ulsd an increase of 11 usd/mton.  All prices based on Oil Future close last night Tuesday evening.