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MABUX: Bunker Market Expected to Retreat Today

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) demonstrated slight downward trend on May 30:

380 HSFO – 418.55(-3.34)
180 HSFO – USD/MT – 457.08(-3.10)
MGO – USD/MT – 679.38-3.63)

Meantime, world oil indexes dropped on May 30 on a smaller-than-expected decline in U.S. crude inventories and fears of a global economic slowdown due to the U.S.-China trade war.

Brent for July settlement stayed declined by $2.58 to $66.87 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery decreased by $2.22 to $56.59 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 10.28 to WTI. Gasoil for June lost $7.75.

Today morning oil indexes continue downward evolution.

Emboldened by strong prompt demand amid tighter oil supply due to the U.S. sanctions on Venezuela and Iran, the world’s top oil exporter Saudi Arabia is expected to raise the prices of the crude grades it sells on its premium market, Asia, for July. If it do so, this would be the third consecutive month in which Saudi Arabia would have increased the prices of its oil for Asian customers. The tighter supply globally has pushed the Middle East crude benchmarks to multi-year highs. Besides, heavy grades are in particularly great demand among Asian refiners and supply is falling because of Venezuela’s continued production decline and political woes that are aggravating the situation.

The U.S. said the attacks on oil tankers in the Persian Gulf earlier this month were caused by naval mines almost certainly from Iran. Earlier this month, Saudi Arabia said that two of its oil tankers were attacked by saboteurs near the UAE, while the UAE said that a total four vessels were attacked off its coast at the port of Fujairah, which is the world’s second-largest bunkering port. A few days ago, the Pentagon accused Iran’s Revolutionary Guard of sabotaging four vessels at the Fujairah port. Iran in turn is blaming the U.S., Israel, Saudi Arabia and UAE for plotting anti-Iranian destructive policies.

At the same time, Arab leaders gathered in Saudi Arabia for emergency summits that Riyadh hopes will deliver a strong message to Iran that regional powers will defend their interests against any threat following attacks on Gulf oil assets this month. The U.S. Iran envoy in addition said the United States will respond with military force if its interests are attacked by Iran.

Energy Information Administration (EIA) projects that U.S. liquefied natural gas (LNG) export capacity will reach 8.9 billion cubic feet per day (Bcf/d) by the end of 2019, making it the third largest in the world behind Australia and Qatar. Currently, U.S. LNG export capacity stands at 3.6 Bcf/d, and it is expected to end the year at 4.9 Bcf/d as two new liquefaction units (called trains) become operational.

Meantime, EIA reported the U.S. crude oil inventory draw of 0.3 million barrels for the week to May 24. This follows a build of 4.7 million barrels in the previous week. Local production continued rising even if shale producers are slowing down as cash flow remains elusive. This has served as an additional bearish factor for oil prices despite bullish signals from the OPEC+ group.

A meeting to discuss production in late June was recently rescheduled to accommodate Russia’s Energy Minister Alexander Novak, who, it was recently reported, had a scheduling conflict with the original dates. Now, the meetings for both OPEC and OPEC+ have been moved to next week, which has sparked concern about a growing divide within OPEC and between OPEC and its largest external partner. If the rout in the cartel persists, July could see a return to the pump-at-will approach.

We expect bunker prices will continue downward trend today in a range minus 5-12 USD.
Source: MABUX

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