MABUX: Bunker market this morning, June 12
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) continued slight downward trend on June 11:
380 HSFO – 397.07(-3.45)
180 HSFO – USD/MT – 435.50(-4.27)
MGO – USD/MT – 644.56(-3.05)
Meantime, world oil indexes were steady on Jun.11 as firmer equities and expectations OPEC and its allies will keep withholding supply countered concern about slowing economies and demand.
Brent for August settlement unchanged: $62.29 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery increased by $0.01 to $53.27 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.02 to WTI. Gasoil for June stayed also unchanged: $559.25.
Today morning oil indexes turned into slight downward movement again.
The Organization of the Petroleum Exporting Countries (OPEC) and some allies including Russia, known collectively as OPEC+, have been withholding supplies since the start of the year to prop up prices. OPEC+ is due to meet in late June or early July to decide whether to extend the pact. Russia’s comments on Jun.10, and remarks last week from Saudi Arabia, bolstered expectations the deal will be renewed. While the talk of prolonged supply restraint is supporting prices, concern about slowing demand and economic growth has had a bigger impact on sentiment.
Russian Energy Minister Alexander Novak said on Jun.10 that there was a risk still that oil prices could fall to $30 per barrel, because the amount of oil produced in H2 could exceed market demand for oil—a sign that Russia may actually be on board for an extension of the production cuts, at least in some form and in some quantity.
Goldman Sachs Group considers that uncertainty over oil supply and demand fundamentals is making it tougher for Russia and Saudi Arabia to reconcile their differences over the framework for an extension of their output pact into the second half. As per Bank, current demand growth neither will support exiting the production agreement, nor is bad enough to reinforce more cuts. Combined with uncertainty over Iranian exports and growing U.S. shale output, it becomes increasingly difficult to know what production levels will balance the market.
Iran said that it has no plans to leave OPEC and regrets that some members of OPEC have turned this organization into a political forum for confronting two founding members of OPEC, meaning Iran and Venezuela, and added that two regional countries are showing enmity toward Iran in this organization. These two countries are most likely Saudi Arabia and the UAE. Both countries were quick to assure markets they would step in to fill the oil production gap that the U.S. sanctions against Iran would leave after the end of the waivers in May. Iran’s oil exports may have fallen to just 400,000 bpd last month, less than half of exports in April.
Meantime, the Trump administration is considering another round of sanctions that would target the European Union’s financial vehicle that was intended to keep trade alive with Iran. The U.S. sanctions would hit the financial entity Iran established to do business with the EU. Europe’s effort has largely been inadequate, but any U.S. move would damage its relationship with its European allies.
China’s crude oil imports dropped in May from a monthly record in April, as Chinese refiners drastically reduced Iranian oil imports after the end of the U.S. waivers and as some state refineries were offline for planned maintenance. Chinese crude oil imports fell by 8 percent from 43.73 million tons in April to 40.23 million tons in May. This, converted in barrels per day, is an 11-percent drop from April to May, to average 9.47 million bpd last month. Apart from the sharp drop in Iranian imports and regular maintenance at several refineries, another factor for the decline in Chinese crude oil imports in May were the weak refining margins across Asia.
The rig count in the U.S. continues to fall. In the week ending on June 7, the U.S. oil rig count plunged by 11, falling to 789. The rig count has declined by roughly 11 percent, or 100 rigs, from a recent peak reached last November. Despite the 73-rig decline year on year, US production continues to climb, with an almost 2 million barrel per day increase, reaching on week ending May 31 a brand new all-time high of 12.4 million bpd.
The American Petroleum Institute (API) reported another large, surprise build in crude oil inventories of 4.852 million barrels for the week ending June 6, coming in over analyst expectations of a 481,000-barrel drawdown in inventories. Cushing inventories also saw a sizable gain, and gasoline inventories grew as well. The U.S. Energy Information Administration report on crude oil inventories is due to be released later today.
We do not expect any firm trend in bunker prices today. Insignificant fluctuations may prevail.