MABUX: Bunker market this morning, Apr.30
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) changed irregular with no firm trend on Apr.29:
380 HSFO – USD/MT – 204.58 (+2.70)
VLSFO – USD/MT – 226.00 (0.00)
MGO – USD/MT – 303.85 (-3.42)
Meantime, world oil indexes rose on Apr.29 after U.S. stockpiles rose less than expected and on expectations demand will increase as some European countries and U.S. cities moved to ease coronavirus lockdowns.
Brent for June settlement increased by $2.08 to $22.54 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery rose by $2.72 to $15.06 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $7.48 to WTI. Gasoil for May delivery gained $17.00.
Today morning global oil indexes continue firm upward evolution.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 9.0 million barrels from the previous week. At 527.6 million barrels, U.S. crude oil inventories are about 10% above the five year average for this time of year. This comes after an inventory build of a massive 15 million barrels for the previous week, itself following a record-breaking weekly addition of 19.2 million barrels for the second week of April. Forecasts expected a build of 10.6 million barrels for last week.
Meantime, U.S. oil companies have started sending oil to the Strategic Petroleum Reserve. Since the start of April, some 1.1 million barrels of crude have been sent into the SPR after the federal government finalized negotiations with nine companies for leasing SPR space for them to store their crude in. The talks for the lease of 23 million barrels worth of space began earlier this month, amid fast-falling prices that tanked deep below zero on April 20. It was a massive selloff to avoid physical delivery that brought about negative WTI prices this month. The selloff could repeat as storage space runs out, both onshore and offshore. Vessel demand data shows a marked increase in demand for Very Large Crude Carriers (can hold up to 2 million barrels of crude). Besides, SPR, the central storage hub in Cushing, Oklahoma, is reportedly soon to reach its limit.
Crude oil supply from OPEC members has soared by more than 2 million bpd in April to the highest levels since December 2018. The highest OPEC supply in nearly a year and a half is being driven by record oil supply out of OPEC’s top producer and the world’s largest oil exporter, Saudi Arabia, and from the United Arab Emirates (UAE). Another close Saudi ally in the Gulf, Kuwait, has also boosted its oil exports to multi-year highs this month, despite pledging an early production reduction ahead of the May 1 start date of the new OPEC+ deal. However, the nearly 10 million bpd OPEC+ cuts in May and June will be probably too little too late to support the market, considering that the current demand loss stands at around 30 million bpd.
Goldman Sachs in turn said that the world’s storage capacity could reach its limit within just three weeks. This would heighten volatility and keep it high until supply and demand rebalances. For this to happen, supply needs to decline by another 18 million bpd next month, as this is the size of demand loss that Goldman expects.
Russia said, that even though the new OPEC+ deal is set to come into force this week, oil prices will not rise much in the near future because of very high global inventories. It is expected that the oil market could begin to balance in the second half of this year, as demand is expected to recover with easing of travel restrictions and supply is set to be reduced due to the new OPEC+ production cut deal. Russia thinks that the result of the new agreement will depend on how fast the global economy could recover, which would lead to higher demand for energy resources.
Meantime, Russia’s oil production could decline by 15 percent annually in 2020. This year, Russia’s production of crude oil and condensate could be between 480 million tons and 500 million tons – or between 9.6 million bpd and 10 million bpd, in case of 100-percent compliance with the new OPEC+ agreement. As per Reuters estimates, a drop in 2020 production would be the first decline in Russia’s oil output since 2008. It was also noted, that all companies in Russia—including projects under production-sharing agreements with international oil majors—will be reducing production.
We expect bunker prices may rise today in a range of plus 10-20 USD.