MABUX: Bunker market this morning, Aug 27
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) changed insignificant and irregular on Aug.26:
380 HSFO – USD/MT – 361.73(+0.85)
180 HSFO – USD/MT – 406.61(-0.43)
MGO – USD/MT – 639.02(-2.75)
Meantime, world oil indexes also changed sideways on Aug.26, after the United States and China both suggested they could ease up in a trade war that has undermined the outlook for the global economy and crude demand.
Brent for October settlement decreased by $0.64 to $58.70 a barrel on the London-based ICE. Futures Europe exchange. West Texas Intermediate for October delivery fell by $0.53 to $53.64 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.06 to WTI. Gasoil for September added $2.00.
Today morning oil indexes do not have any firm trend so far.
U.S. President Donald Trump said on Aug.26 he believed China was seeking a trade deal after he said Beijing contacted U.S. officials overnight to say it wanted a return to talks.
Chinese Foreign Ministry spokesman Geng Shuang in turn said he had not heard about a phone call between the two sides.
Last week China unveiled new tariffs on $75 billion worth of American goods, a move that reignited fears about a global economic slowdown. China’s higher tariffs hit American soybeans, pork, beef, and crude oil as well. China had become a major buyer of U.S. shale oil in recent years and has refrained from hitting crude with tariffs up until now. Beijing stated it would put a 5 percent levy on American oil, which could depress the U.S. benchmark relative to Brent. Some of the measures were planned to take effect on September 1, while others, such as the 25 percent levy on American automobiles, will go into effect in December.
The United States said it will respond aggressively to any party helping the now notorious Iranian tanker Adrian Darya 1, formerly Grace 1, which was released from Gibraltar earlier last week. As per U.S., all parties in the shipping sector should conduct appropriate due diligence to ensure that they are not doing business with nor facilitating business for, directly or indirectly, sanctioned parties or with sanctioned cargo. The Iranian tanker is currently sailing through the Mediterranean, and the latest positioning has the vessel headed Southeast around Sicily, carefully avoiding EU waters.
The United States still needs to import heavy varieties of oil, as most of the domestic output tends to be light crude while refineries are running on a diverse range of crudes, including heavy oil. Crude oil production in the U.S. jumped by 17 percent in 2018, setting a new production record of almost 11.0 million bpd. While light oil production is booming, refineries still need heavier crudes, and most of the U.S. oil imports consist of heavy oil. Last year, 7.5 million bpd, or 97 percent, of all imported crude oil had an API gravity of 40 or lower.
Turkey is going to continue exploring for oil and gas in the eastern Mediterranean waters around disputed Cyprus. Turkey, which recognizes the northern Turkish Cypriot government and doesn’t have diplomatic relations with the internationally recognized government of EU member Cyprus, claims that part of the Cyprus offshore area is under the jurisdiction of Turkish Cypriots or Turkey, and they are entitled to part of the potential oil and gas resources in the area. Last month, tensions between Turkey and Greece regarding the Cyprus drilling rights spiked again when Greece’s newly elected government said Turkey undermined the security of the eastern Mediterranean with its drilling operations off the Cypriot shores.
Refining margins in Asia have slumped by more than 50 percent since the middle of July as fuel market participants have accelerated the sell-off of high-sulfur fuel oil ahead of the new shipping fuel standards as of January 2020. Since the middle of July, the fuel margins started to slide, as market participants de-stock and sell high-sulfur fuel oil (HSFO), which can no longer be used in ships after January 1 unless said ships have installed the so-called scrubbers—systems that remove sulfur from the exhaust gas emitted by bunkers. Looking forward, the fuel glut could continue to depress margins of gasoline and diesel as refineries come out of maintenance and new refineries, including in China, start up or ramp up production.
We expect bunker prices may change irregular today in a range of plus-minus 3-5 USD/MT.