MABUX: Bunker market this morning, Jun.22
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) rose slightly on Jun.19:
380 HSFO – USD/MT – 286.19 (+3.70)
VLSFO – USD/MT – 342.00 (+5.00)
MGO – USD/MT – 420.38 (+9.14)
Meantime, world oil indexes rose on Jun.19, after OPEC producers and allies promised to meet supply cuts and on signs of demand.
Brent for August settlement increased by $0.68 to $42.19 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery rose by $0.91 to $39.75 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.44 to WTI. Gasoil for July delivery gained $10.75 – $364.50.
Today morning global oil indexes have turned into the phase of slight downward movement.
OPEC+ emerged from its Joint Ministerial Monitoring Committee (JMMC) on Jun.18 confident that all members would reach their respective production quotas as laid out in the Declaration of Cooperation. The JMMC highlighted the 87% compliance rate to those production cuts that were originally supposed to last through the end of this month, but the group agreed to extend the cuts into July on one condition—all members fully comply with their cuts. Iraq and Kazakhstan pledged to comply better with oil cut.
The world’s biggest oil-producing company, Aramco, has started laying off hundreds of employees—mostly foreign staff—across several divisions in response to the oil price crash. Aramco, which employs nearly 80,000 people, annually revises down its staffing, but this year’s job cuts are larger than before. Saudi Aramco’s first-quarter net income dropped to US$16.66 billion from net earnings of US$22.2 billion for Q1 2019 due to the coronavirus pandemic and the oil price crash that Saudi Arabia itself helped to worsen with the oil price war in March.
Meantime, nearly 85,000 people in the U.S. oilfield services industry have lost their jobs due to the pandemic-driven oil price crash and demand destruction. Compared to employment figures in May 2019, oilfield services employment is down by 105,000 jobs, and is now at its lowest point since 2016. Employment in the oilfield services and equipment (OFS) sector declined by 13.5 percent from 785,106 jobs in May 2019 to 679,281 jobs in May 2020. Many oilfield companies have up to half their workforce currently on furlough, while some of the largest companies in the sector expect to lay off thousands in the near future.
The number of oil and gas rigs in the US fell again last week, by 13, to 266, suggesting that the slide in the number of active rigs is not yet over. The total oil and gas rigs is now sitting at 701 fewer than this time last year. The number of active rigs in the United States has continued to decline over the last fifteen weeks. The number of oil rigs decreased for the week by 10 rigs, bringing the total to 189—compared to 789 active rigs this time last year.
The significant fall in the rig count over the last couple of months is also reflected in the steady decline of EIA’s estimate for oil production in the United States, which fell again last week to 10.5 million barrels of oil per day on average for week ending June 12, which is 2.6 million bpd off the all-time high and a staggering 600,000 bpd lower than the week prior. It is the eleventh straight weekly production decline.
China’s crude oil imports jumped to a record high in May, while refinery throughput increased to near-peak levels, suggesting a strong recovery in oil demand after the coronavirus outbreak. At the same time, rebound may be softer than what headline figures suggest because China stepped up its crude oil stockpiling this year and boosted exports of refined oil products. Last month, China imported a record-high 11.34 million bpd of crude oil. While part of the record imports was driven by economic activity picking up, the other driver was April’s eager oil prices, which incentivized China’s crude oil stockpiling in strategic and commercial inventories.
China last year replaced the United States as the number-one importer of oil from Venezuela. Despite sanctions imposed by the U.S., China never stopped buying, instead using intermediaries such as subsidiaries of Russia’s Rosneft and a roundabout delivery method that made it seem as if the oils’ origin was Malaysia. Between July 1 and Dec. 31, vessels delivered at least 18 shipments of 19.7 million barrels of rebranded Venezuelan crude to Chinese ports. Those 18 shipments amounted to more than 5 percent of Venezuela’s total exports last year.
Goldman Sachs reported, global investment in renewable energy is set to surpass oil and gas for the first time ever next year. As soon as 2021, renewable energy will capture more investment than oil and gas, and renewables could see $16 trillion in investment through 2030. That would keep the world on track to avoid more than 2 degrees Celsius of warming, although regulatory and policy changes are still necessary for this scenario to play out. Goldman also says that a wave of clean tech investment “has a major role to play in the upcoming economic recovery,” noting that green infrastructure is 1.5 to 3 times more capital- and job-intensive than fossil fuels.
We expect IFO bunker prices may rise by 3-5 USD today, VLSFO – add 5-7 USD, while MGO prices may gain 5-10 USD.