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MABUX: Bunker market this morning, Jan.20

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) demonstrated downward changes on Jan.17:

380 HSFO – USD/MT – 379.183 (-1.65)
VLSFO – USD/MT – 630.00(-5.00)
MGO – USD/MT – 675.87 (-2.00)

Meantime, world oil indexes demonstrated irregular changes on Jan.17 as sluggish economic growth in China, the world’s biggest crude importer, raised concerns over fuel demand and countered optimism from the signing of a China-U.S. trade deal.

Brent for March settlement increased by $0.23 to $64.85 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for February rose by $0.02 to $58.54 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.31 to WTI. Gasoil for February delivery decreased by $7.25.

China’s economy, the world’s second-largest, grew by 6.1% in 2019, its slowest expansion in 29 years. But surging Chinese demand, as seen in refinery throughput figures, helped offset the less positive economic growth data. In 2019 Chinese refineries processed 651.98 million tonnes of crude oil, equal to a record high 13.04 million barrels per day (bpd) and up 7.6% from 2018. Throughput also set a monthly record for December.

Today morning oil indexes rise after two large crude production bases in Libya began shutting down amid a military blockade, setting the stage for crude flows from the OPEC member to be cut to a trickle.

In the latest development in a long-running conflict in Libya, where two rival factions have claimed the right to rule the country for more than five years, the National Oil Corporation (NOC) on Jan.19 said two big oilfields in the southwest had begun shutting down after forces loyal to the Libyan National Army closed a pipeline. At the same time, Tribesmen in areas controlled by Haftar’s Libya National Army (LNA) faction on Jan.17 stormed the eastern Zueitina oil export port and announced the closure of all terminals under LNA control.
LNA spokesman Ahmed Mismari later told that the “Libyan people” had closed the oil ports. A source in state oil company NOC said the LNA and an eastern oil protection force had ordered the closure of the ports. The oil protection force confirmed exports had been stopped.

If exports are halted for any sustained period, tanks for storage will fill within days and production will slow to 72,000 barrels per day (bpd). Libya has been producing around 1.2 million bpd recently.

Also on Jan.19, foreign countries agreed at a summit in Berlin to shore up a shaky truce in Libya, even as the talks were overshadowed by the latest blockade. German Chancellor Angela Merkel told that the Berlin summit had agreed that a tentative truce in Tripoli over the past week should be turned into a permanent ceasefire to allow a political process to take place.

At the same time, the rise of U.S. oil rigs also pushed the oil indexes down. U.S. energy firms this week added oil rigs for the first time in four weeks even as the pace of growth in record crude output is expected to slow. According to Baker Hughes Co, companies added 14 oil rigs in the week to Jan. 17, bringing the total count to 673. In the same week a year ago, there were 852 active rigs.

In 2019, the oil rig count, an early indicator of future output, dropped for the first year since 2016, as independent exploration and production companies cut spending on new drilling as shareholders seek better returns in a low energy price environment.

Deliveries of 0.5% sulfur fuel oil and prices for the new product rose at major bunkering hubs at the end of 2019, according to the latest report from the International Energy Agency published on Jan.16. Deliveries of the VLSFO bunkers are increasing fast. In Rotterdam, they rose from almost zero in September to more than 20,000 b/d in November and deliveries represented 51.6% of the total bunker market in November. At Singapore, deliveries of 0.5% S FO rose from 40,000 b/d in September to 355,000 b/d in November while in the same period 3.5% S FO for bunkers fell from 720,000 b/d to 410,000 b/d. 0.5% S FO now accounts for 46% of bunker fuel oil sales in Singapore.

Concerns regarding the quality of the new VLSFO and its compatibility with some engines are less prominent, price data supports this position and shows the spread between 0.5% S FO and MGO values shrinking.

We expect bunker prices to demonstrate irregular changes today: 1-3 USD up for IFO, 5-7 USD down for MGO.
Source: MABUX

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