MABUX: Bunker market this morning, Apr.09
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) changed irregular on Apr.08:
380 HSFO – USD/MT – 253.49 (+1.34)
VLSFO – USD/MT – 299.00 (-5.00)
MGO – USD/MT – 391.82 (-0.98)
Meantime, world oil indexes also ended a trading session on Apr.08 with no firm trend amid hopes that a meeting between OPEC members and allied producers later today will trigger output cuts to shore up prices that have crumbled amid the coronavirus pandemic.
Brent for June settlement increased by $0.97 to $32.84 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May rose by $1.46 to $25.09 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $7.75 to WTI. Gasoil for May delivery lost $0.25.
Today morning global oil indexes do not have any firm trend so far.
Videoconference meeting between members of the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, is widely expected to be more successful than their gathering in early March. That ended in failure to extend cuts, and a price war between Saudi Arabia and Russia amid slumping demand. But doubts remain over the role of the United States in any production curbs. While Saudi Arabia, OPEC member countries and Russia are likely to agree to cut output, that accord could be dependent on whether the United States would go along with cuts. The U.S. Department of Energy said on Apr. 07 that U.S. output is already declining without government action.
The U.S. Energy Department (EIA) said, U.S. oil companies are expected to temporarily reduce oil output by about 2 million barrels per day as lower crude prices force companies to cut back operations. According to the EIA, the United States pumped a record of more than 12 million barrels per day (bpd) in 2019. Now the EIA projected that U.S. oil output in the fourth quarter would average about 11.04 million bpd, down about 1.74 million bpd from the year-ago quarter. The Energy Department did not immediately respond to a query about whether the projection of a temporary 2 million bpd drop was based on this figure.
Traders seeking to store oil have put their plans on hold this week after prompt Brent crude futures surged against future months and made storage uneconomical, despite overwhelming supplies in the market. Crude supplies have started building in Asia since February when China went into lockdown to curb the coronavirus outbreak. Since then, a decline in demand accelerated with more countries locking down globally, while traders from all over the world have shipped more crude to Asia for China, a rare spot where demand is recovering. Some companies will have to store oil at a loss as they’re unable to sell their cargoes even at depressed prices.
Saudi Arabia sends a number of supertankers to the U.S. ahead of oil meeting. Last month, when Saudi Arabia pledged to flood the markets with oil, the Kingdom’s crude oil exports to the U.S. hit a one-year-high of 516,000 barrels per day (bpd). This month, at least seven supertankers carrying a total of 14 million barrels of oil are currently traveling to the U.S. Gulf Coast. This compares to just 2 million barrels of Saudi oil en route to America in the same period in March. Almost all tankers are chartered by the Saudi state-run shipping firm Bahri.
Meantime, U.S. exports of liquefied natural gas (LNG) have resumed flowing to China for the first time since March 2019, after the Chinese authorities have granted tax waivers to several Chinese LNG importers. Four tankers that have loaded LNG at U.S. LNG export facilities are planning to dock in China. Earlier this year, Rystad Energy estimated that China’s LNG imports from the U.S. would restart only once the tariffs are lifted or if political support is offered by the Chinese government.
Rystad Energy also predicts, the American oil and gas industry is reducing drilling at record speed, putting the horizontal oil rig count on track to fall by about 65% from mid-March levels. From a peak of about 620 rigs in mid-March 2020, the oil rig count is forecast to free-fall to a potential bottom of around 200. Most of the anticipated decline will come already by the end of April. The horizontal rig count has so far dropped to roughly 500, falling by 19% from the recent apogee just three weeks ago. The rig count not only represents the actual drilling activity in the market but is also a key metric of consumer confidence, closely related to price developments.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 15.2 million barrels from the previous week. At 484.4 million barrels, U.S. crude oil inventories are about 2% above the five-year average for this time of year. The EIA also reported gasoline inventories had increased by 10.5 million barrels and distillate fuel inventories had added 476,000 barrels. This compared with a gasoline inventory increase of 7.5 million barrels for the previous week and a distillate fuel inventory fall of 2.2 million barrels.
We expect bunker prices may change irregular today in a range of plus-minus $ 3-7.