MABUX: Bunker market this morning, May 24
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) declined on May 23:
380 HSFO – 432.98(-6.44)
180 HSFO – USD/MT – 469.88(-6.12)
MGO – USD/MT – 692.88(-7.38)
Meantime, world oil indexes dropped on May 23 extending falls from the previous session amid surging U.S. crude inventories and weak demand from refineries.
Brent for July settlement decreased by $3.23 to $67.76 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery declined by $3.51 to $57.91 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.57 to WTI. Gasoil for June lost $25.00.
Today morning oil indexes turned into upward correction.
Russia is sending clean within-standards crude oil via the Druzhba pipeline toward Hungary and Slovakia, with first clean oil expected to arrive at the metering stations in those countries within a week. Russia also continues negotiations with Poland in view of restarting the crude oil flow via the pipeline to the Adamova Zastava station. Last month, Russia halted supplies via the Druzhba oil pipeline to several European countries due to a contamination issue. The Russian oil supply contamination has disrupted the refinery operations of some companies. Total, for example, halted last week some of the units at its 230,000-bpd Leuna refinery in Germany to conduct technical checks. On May 23, Total declared force majeure on shipments of refined oil products from the Leuna refinery.
The United States is at least a month from enacting its proposed tariffs on $300 billion in Chinese imports as it studies the impact on American consumers. Washington this month hiked existing tariffs on $200 billion in Chinese goods to 25% from 10%, prompting Beijing to retaliate with its own levies on U.S. imports, as talks to end a 10-month trade war between the world’s two largest economies stalled. No high-level talks have been scheduled since the end of two days of discussions in Washington on May 10, the day Trump imposed the higher levies on Chinese goods.
Iran’s oil storage on land and at sea is on the rise as U.S. sanctions on exports bite and Tehran battles to keep its aging fields operational and crude flowing. Washington announced in May the end of sanctions waivers for foreign countries importing Iranian oil, hitting Tehran’s biggest source of income. Some data showed onshore storage in Iran was 46.1 million barrels, from total capacity of 73 million barrels, its highest since mid January. Iranian oil exports fell in May to 500,000 barrels per day (bpd) or lower, more than half the level seen in April. Data also showed 16 Iranian tankers, holding some 20 million barrels, were estimated to be used for floating storage after being stationary between two to four weeks. Ten of those tankers with nearly 11 million barrels had been stationary for four weeks.
Nicolas Maduro has launched a new plan to convert oil tankers into warships, guarding them with active personnel of the Venezuelan Armed Forces (FANB), faced with the possibility that the United States may try to block the shipment of crude oil to Cuba. The ships used by state oil company, PDVSA, some of them flying under Panamanian flags, will now be protected by Venezuelan military with weapons, prepared to face any blockade. The decision of the Maduro regime is a reaction to the oil embargo imposed by the United States on all shipping lines and vessels that send Venezuelan crude to other countries, especially Cuba. The United States implemented a naval blockade in order to prevent the delivery of Venezuelan oil to Cuba.
Shipowners, who are facing one of the biggest changes in the oil industry in decades, are seeing more fuels that will be compliant with new rules on sulfur emissions from ships, but some say the way forward is far from clear. Oil majors, including BP and Royal Dutch Shell, have announced they are producing very low sulfur fuels that meet the 0.5% requirements but the specifications of those products are not yet clear nor are the ports where they will be available. In fact, the sulfur switch will be an immense task as it requires adapting the 300 million tonne a year bunker fuel market, valued at over $200 billion at current prices.
We expect bunker prices may demonstrate steep decline today in a range of minus 10-15 USD, taking into consideration that global oil market is in a phase of upward correction right now.