MABUX: Bunker market this morning, Nov.12

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) continued firm upward evolution on Nov.11:

380 HSFO – USD/MT – 307.94 (+5.58)
VLSFO – USD/MT – 368.00 (+10.00)
MGO – USD/MT – 432.50 (+6.89)

Meantime, world oil indexes also rose on Nov.11 on hopes of an effective COVID-19 vaccine and an industry report showing U.S. crude inventories fell more than expected.

Brent for January settlement rose by $0.19 to $43.80 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery added $0.09 to $41.45 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.35 to WTI. Gasoil for November delivery gained $7.50 – $358.50.

Today morning oil indexes turned into moderate downward movement.

Vaccine optimism is tempered by the negative short-term outlook, with Covid-19 cases out of control in the U.S. and in Western Europe. There’s still the problem of the second wave and that’s going to affect demand in the near-term.

American Petroleum Institute data released on Nov.10 showed a 5.15 million barrel drop in crude stocks last week. The U.S. government’s inventory data will be published on Nov.12 this week, a day later than usual, owing to the Veterans’ Day holiday on Nov.11.

The International Energy Agency said, renewable power generation capacity will increase by 7 percent this year despite a 5-percent forecast decline in global energy demand. The agency also said the use of biofuels in industrial activity and transportation will decline this year, but the increase in renewables use will be strong enough to offset it, with the net increase in renewable energy demand seen at 1 percent.

OPEC in turn once again cut estimates for the amount of crude it will need to provide in the coming year as the return of measures to contain the global pandemic hits fuel use. The group reduced forecasts for the volume of crude it needs to pump this quarter by 960,000 barrels a day to 26.51 million a day. This follows significant downgrades in the past two months. OPEC’s new downward revision of its oil demand forecasts—the fifth consecutive this year—is giving the market all the more reasons to speculate that the OPEC+ group needs to roll over the 7.7-million-bpd cut into 2021, instead of easing it by 2 million bpd from January.

Chinese refineries will likely have to lower utilization rate in 2021 amid growing refining capacity and limited oil product outlets overseas. The country is expected to add 440,000 bpd or 22 million mt/year of new capacity, set to be in commercial operation in 2021, in addition to the 260,000 bpd expected to come online in 2020. However, China’s oil product demand in 2021 would only recover to the level in 2019 while demand in the overseas [markets] would remain lower than that in 2019 due to the ongoing pandemic. As a result, the additional product supplies would have nowhere to go, so refineries have to cut utilization rate.

India’s energy demand is beginning to improve as businesses reopen. India, along with China, is expected to be the main driver of oil demand in the coming years. The country is the world’s third-largest oil consumer in the world, trailing only the United States and China. Recently, India invited foreign companies to invest in an expansion of its strategic petroleum reserve capacity as it seeks to boost its energy security by storing more oil locally.

Global LNG supply is expected to turn tight gradually in the next five years due to the delay of final investment decisions on many LNG projects, which would ultimately lift prices. It was expected that there would be 60 million mt/year of LNG projects to make Final Investment Decision (FID) in 2020 earlier, but many of these projects were said to have been either delayed or cancelled due to COVID-19. The move will surely affect LNG supply in the next 4-5 years. On the demand side, it is expected that COVID-19 impact on LNG demand would be mainly in 2020, with global LNG demand estimated to fall around 10 million-16 million mt, or 4% year on year.

We expect bunker prices will not have any firm trend today and may change irregular: IFO – in a range of plus-minus 1-3 USD, MGO – in a range of plus-minus 2-6 USD.
Source: MABUX