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MABUX: Bunker market this morning, Apr.07

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) rose slightly on Apr.06:

380 HSFO – USD/MT – 255.19 (+5.21)
VLSFO – USD/MT – 307.00 (+2.00)
MGO – USD/MT – 395.24 (+2.51)

Meantime, world oil indexes fell on Mar.06 after Saudi Arabia and Russia delayed a meeting to discuss output cuts that could help to reduce global oversupply as the coronavirus pandemic pummels demand.

Brent for June settlement decreased by $1.06 to $33.05 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May fell by $2.26 to $26.08 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.97 to WTI. Gasoil for April delivery lost $3.25.

Today morning global oil indexes have turned into slight upward evolution.

Global fuel market is waiting for the meeting where oil output cuts to be discussed. The meeting was postponed from Apr. 06 until April 9, as a dispute between Moscow and Saudi Arabia over who is to blame for plunging crude prices intensified. The delay came amid pressure from U.S. President Donald Trump for the OPEC+ to urgently stabilise global oil markets. OPEC+ is working on a deal to cut the production of oil equivalent by about 10% of world supply, or 10 million barrels per day, in what member states expect to be an unprecedented global effort including the United States. Washington, however, has yet to make a commitment to join the effort. Other oil producers that do not belong to OPEC+ have indicated a willingness to help. Canada’s Alberta province is open to joining any potential global pact. Norway said it would consider cuts to its oil output if a wide global deal is agreed. Mexico called on Russia and Saudi Arabia to reach a deal soon to end their price war.

International Energy Agency (IEA) in turn said, even if the OPEC+ group and other major oil producers in the world were to agree to deep production cuts, they would be unable to prevent what is sure to be an enormous global inventory build this quarter due to unprecedented demand destruction. As a result of restricted commuter travel, grounded flights, and economic slowdown, demand for oil in April is expected to drop by 20 million bpd year on year, and probably more. IEA predicts that even if OPEC+ plus other producers were to discuss, agree to, and implement a collective cut of 10 million bpd, global oil inventories would still rise by 15 million bpd in the second quarter.

The market was also weighed down by a report from data provider Genscape that inventories at the Cushing storage hub in Oklahoma, the delivery point for WTI, rose by about 5.8 million barrels last week. If those figures are matched by official U.S. Energy Information Administration data on Apr.08, it would be the fifth straight weekly storage build at the hub and the biggest weekly increase on record dating to 2004.

Markets were also alarmed when the National Health Commission of China said on Apr.06 that 78 new asymptomatic cases had been identified as of the end of the day on Apr.05, compared with 47 the day before. Asymptomatic patients, who show no symptoms but can still pass the virus to others, have become China’s chief concern after strict containment measures succeeded in cutting the overall infection rate.

Demand for crude oil falls. Globally, storage is nearing capacity and is estimated to completely fill by the summer. Storage rates in the U.S. have doubled, and as of March 20, the U.S. Department of Energy says the Strategic Petroleum Reserve (SPR) is at 635 MMbbl out of a capacity 797MMbbl.

Meantime, tanker freight rates are surging. Freight costs on super tankers (Very Large Crude Carriers (VLCCs), Ultra Large Crude Carriers (ULCCs) and Suezmax) have typically been around $30,000/day to $40,000/day. There are a limited number of these tankers available to charter and Saudi Aramco appears to have chartered 25 to 40 of them in an attempt to gain market share over Russia. This increased demand recently drove prices to $110,000/day for Suezmax vessels and nearly $400,000/day for VLCCs and ULCCs.

We expect bunker prices may fall today in a range of minus $3-5 for IFO and minus $6-13 for MGO.
Source: MABUX

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