MABUX: Bunker market this morning, Aug. 21
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs declined on Aug.20:
380 HSFO – USD/MT – 309.92 (-0.56)
VLSFO – USD/MT – 367.00 (-1.00)
MGO – USD/MT – 445.57 (-1.12)
Meantime, world oil indexes also decreased on Aug. 20 after a surprise increase in U.S. initial jobless claims that suggested continued pressure on local oil demand.
Brent for October settlement declined by $0.47 to $44.90 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October fell by $0.11 to $42.82 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.08 to WTI. Gasoil for September delivery lost $5.75.
Today morning oil indexes increase buoyed by major oil producers’ efforts to hold back output amid concerns about the economic recovery from the coronavirus pandemic.
Initial jobless claims raised for the first time since the end of March, to over 1.1 million, with another half a million making initial claims for Pandemic Unemployment Assistance. As the latter program has been sharply cut since the start of the month, such increases are likelier to pass through into demand than earlier in the summer, when a more generous support regime kept consumer incomes largely intact.
Oil indexes also reacted with decline after the Fed released on Aug.18 the minutes from its July 28-29 meeting. The participants in the meeting noted that the path of the economy would depend significantly on the course of the virus and that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and posed considerable risks to the economic outlook over the medium term.
The Energy Information Administration’s weekly report on oil stocks on Aug.18 had reinforced the impression that U.S. products consumption has stalled, with levels of gasoline and diesel consumption still more than 10% below year-earlier levels and supplies of jet fuel down nearly 50%.
At the same time, the risk of oversupply on the global market is still alive. According to the Joint Ministerial Monitoring Committee (JMMC), the countries who had signed up to the OPEC+ pact on cutting output had oversupplied by an average of 2.3 million barrels a day between May and July. Iraq was the biggest culprit, but Russia and Kazakhstan together overproduced by nearly half a million barrels a day on average. The surplus seen between May and July ought to be compensated for in August and September.
Meanwhile, OPEC+ was focused on ensuring that members who had overproduced against their commitments would cut their output. The Committee said, that achieving 100% conformity from all participating countries in the agreement and compensating for the shortfalls in May, June and July 2020 is fair and vital for the ongoing rebalancing efforts and to help deliver long-term oil market stability. An additional concern for the oil market according to JMMC is that the pace of recovery appeared to be slower than anticipated with growing risks of a prolonged wave of COVID-19. It found if a prolonged second wave of infections hits China, India, Europe and the United States in the second half of the year, demand could fall by 11.2 million bpd in 2020. A meeting of ministers, however, concluded that no change from the current schedule on output was necessary.
We expect bunker prices may demonstrate downward changes today: 1-3 USD down for IFO and 3-5 USD down for MGO.