MABUX: Bunker Market this morning, 7th October, 2020
Oil ends up on supply issues, mixed U.S. stimulus gives a bearish sign.
Oil prices rose more than 2% on Tuesday, supported by expected supply disruptions from a hurricane approaching the Gulf of Mexico and an oil worker strike in Norway.
The market slipped in post-settlement trading, however, after U.S. President Donald Trump said he was instructing his administration not to negotiate a stimulus package until after the Nov. 3 election.
Brent crude futures settled at $42.65 a barrel, up $1.36 a barrel, or 3.29%. U.S. West Texas Intermediate (WTI) crude settled at $40.67 a barrel, rising $1.45, or 3.7%. In post-close trading, however, Brent fell to $42.19 while U.S. crude dropped to $40.13 a barrel.
Oil prices eased further after the close following American Petroleum Institute data that showed U.S. crude stocks climbed 951,000 barrels last week compared with analysts’ expectations in a Reuters poll for a build of 294,000 barrels.
Trump returned to the White House following three days in the hospital for treatment for COVID-19. U.S. House Speaker Nancy Pelosi and U.S. Treasury Secretary Steven Mnuchin had been in negotiations for an additional $1.5 trillion to $2 trillion in economic stimulus before Trump’s tweet.
“It looked like something was going to materialize, and now it has been blown up so everything is selling off,” said John Kilduff, partner at Again Capital LLC in New York.
“The petroleum complex needed that stimulus to help stoke demand once again, and we’re obviously not getting it.”
Energy companies shut offshore oil platforms as Hurricane Delta strengthened to a Category 2 and was on track to reach the Gulf of Mexico on Thursday. It would be the 10th named storm to hit the United States this year, which would break a record dating back more a century.
Royal Dutch Shell Plc said it was evacuating nonessential workers from all nine of its offshore Gulf of Mexico operations and preparing to shut production. Equinor ASA and BHP Group Ltd also shut in production and evacuated workers.
Norway’s petroleum output is down 8% due to an oil worker strike. A major labour union in the country is trying to resolve the dispute with oil companies, which have shut six offshore oil and gas fields.
Oil Market today Wednesday morning
U.S. stocks take a dive after Trump halts stimulus talks.
Wall Street took a nosedive late in the session on Tuesday, reversing solid gains to close deep in negative territory after President Donald Trump announced he was calling off talks on coronavirus relief legislation until after the Nov. 3 election.
All three major U.S. stock indexes closed more than 1% lower.
“The markets finally ran out of hope Speaker (Nancy) Pelosi and (Treasury) Secretary (Steven) Mnuchin would pull a rabbit out of a hat,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance in Charlotte, North Carolina.
Trump’s announcement in a tweet came on the heels of U.S. Federal Reserve Chair Jerome Powell’s warning of dire economic repercussions if Congress failed to pass additional fiscal stimulus.
“Powell called for Congress to act quickly and Trump effectively pulled the rug out from under that,” said Oliver Pursche, president of Bronson Meadows Capital Management in Fairfield, Connecticut. “It’s troubling, given the statements Chairman Powell made earlier today.”
In remarks delivered online to the National Association for Business Economics, Powell warned the U.S. economy could slip into a downward spiral if the coronavirus is not contained and Congress fails to deliver additional fiscal support to businesses and households.
Crude prices extended gains, boosted by supply disruptions from approaching storms in the Gulf of Mexico and an ongoing oil worker strike in Norway.
Saudi Arabia raised pricing slightly for its flagship crude oil shipped to Asia, the first sign of strength in the physical market after a month and a half of weakness and crashing refining margins.
The increase in November pricing marks a change in course for the world’s biggest exporter after it pared prices in September and October as crude use stagnated. It’s potentially a sign of confidence that OPEC+ supply cuts will buoy the market even as the pandemic crimps demand.
Oil Future close 6th October, 2020
Brent crude: $ 42.65 (+1.36) /brl FM delivery Dec (FM=Front Month)
Light crude (WTI): $ 40.67 (+1.45) /brl FM delivery Nov
Gasoil ARA; $ 341.75 (+12.75) /mton FM delivery Oct
NY Harbor Ulsd: $ 365.92 (+17.02) /mton FM delivery Nov
Oil Futures trading at GMT 05.00; Brent: $-.61, WTI: $-0.78.
Expect bunker prices to continue upward also today, based on Oil Future close last night. Fuel Oil all up 8 – 9 usd/mton. MGO up 12 usd/mton and NY Harbor Ulsd up in big numbers again 17 usd/mton.