MABUX: Bunker market this morning, Mar. 23

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs increased on Mar. 20:

380 HSFO – USD/MT – 262.82 (+7.38)
VLSFO – USD/MT – 337.00 (+11.00)
MGO – USD/MT – 426.21 (+9.81)

Meantime, world oil indexes demonstrated irregular changes on Mar. 20 lower after doubts emerged over the significance of reports that U.S. authorities could be looking at methods of curbing domestic supply.

Brent for May settlement decreased by $1.49 to $26.98 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May fell by $2.59 to $22.63 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.35 to WTI. Gasoil for April delivery increased by $13.25.

Today morning oil indexes slight down as an anticipated deal between OPEC and the U.S. failed to materialise.

The Trump administration plans to send a special energy envoy to Saudi Arabia to work with the kingdom on stabilizing the global oil market. U.S. officials believe Saudi Arabia’s move to flood oil markets compounds the global economic crash during a crisis caused by the pandemic. A senior Energy Department official will be sent to Riyadh for months at least to work closely with State Department officials and the existing energy attache. U.S believe, that the energy representative would help the countries return to a path of stability, they said.

Moreover, The Wall Street Journal suggested that the U.S., the biggest producer, is looking at imposing production quotas on domestic companies for the first time in decades, a move aimed at combating the supply glut. The U.S. has a history of regulating production through the Texas Railroad Commission back to before World War 2, but abandoned the practice nearly 50 years ago.

At the same time the U.S. may lean on Saudi Arabia and Russia to rein in their output, with the threat of sanctions directed at the latter in particular. An end of the price war means that both Saudi and Russia would bring back their production levels to where they were prior to the OPEC+ talk in early March.

On the other side demand destruction is only getting worse in the near term, as more and more of Europe and North America goes into lockdown. California, the most populous U.S. state, issued a “stay at home” order to residents on Mar. 18. In addition, Germany’s richest state, Bavaria, extended its prohibition on non-essential activity. Germany’s federal government has tighten its policy on closing non-essential business at the weekend, with the inevitable impact on fuel demand.

According to S&P Global Platts Analytics Global oil demand could collapse by over 3 million b/d this year due to growing social and economic lockdown measures aimed at slowing the spread of the coronavirus pandemic. World oil demand could fall by over 12 million b/d on the year in April and May and result in annualized fall of as much as 3.2 million b/d in 2020. The estimate for the potential demand impact from coronavirus is one of the most bearish by forecasters to date.

Norway-based consultant Rystad Energy on Mar.17 estimated that global oil demand will contract by 2.8 million b/d this year with jet fuel hit the hardest. Rystad estimated that jet fuel demand would fall by 12% year on year, or at least 800,000 b/d from last year’s average of about 7.2 million b/d. The International Energy Agency on Match 9 forecast a contraction in global demand for 2020 of 90,000 b/d — which would be the first shrinkage in consumption since the financial crisis in 2009.

Baker Hughes reported that the number of oil and gas rigs in the U.S. plummeted last week by 20, falling to 722, with the total oil and gas rigs clocking in at 244 fewer than this time last year.
The number of oil rigs decreased for the week, by 19 rigs, bringing the total to 664—a 160-rig loss year over year. The total number of active gas rigs in the United States fell by 1 according to the report, to 106. This compares to 192 a year ago.

We expect bunker prices to demonstrate irregular changes today: 5-7 USD down for IFO, 10-12 USD up for MGO.
Source: MABUX