MABUX: Bunker market this morning, Nov.12
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) slightly decreased on Nov.11:
380 HSFO – USD/MT – 349.19(-2.39)
180 HSFO – USD/MT – 390.79(-2.82)
MGO – USD/MT – 663.61(-0.85)
Meantime, world oil indexes changed irregular on Nov.11 amid renewed doubts over the prospects of a trade deal between the United States and China, while concerns over excess supplies also weighed on the market.
Brent for January settlement decreased by $0.33 to $62.18 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for December delivery fell by $0.38 to $56.86 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.32 to WTI. Gasoil for November delivery gained $7.00.
Today morning oil indexes do not have any firm trend so far.
Trump said on Nov.09 that trade talks with China were moving along “very nicely,” but the United States would only make a deal with Beijing if it was the right one for America.
The 16-month trade war between the world’s two biggest economies has slowed economic growth around the world and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020. Trump also said there had been incorrect reporting about U.S. willingness to lift tariffs as part of a “phase one” agreement, news of which had boosted markets. Underlining the impact of the trade war, data over the weekend showed that China’s producer prices fell the most in more than three years in October.
Chinese data during the weekend showed continued weakness in Chinese economic growth. China’s producer price index (PPI) slumped the most in October since July 2016, while car sales fell for the 16th month in a row. Both sets of data suggest that China’s economic growth continues to slow down, which, combined with an overall global economic growth slowdown, doesn’t bode well for oil demand growth, and consequently, oil and fuel prices.
Germany insists that Britain and France together with Germany must be ready to react to Iran’s breaches of its 2015 nuclear deal and this could mean reimposing international sanctions on Tehran, though Europe still wants to save the accord. Iran said last week it had resumed low-grade uranium enrichment at its underground Fordow nuclear plant and at the weekend said it could refine up to 60% of fissile purity, not far off the 90% level needed for nuclear bomb fuel – its most significant breaches of the deal with world powers. So far, the European position is that the International Atomic Energy Agency and its inspectors must first verify Iran’s latest announcements on enrichment.
The statistics published by Baker Hughes last Friday showed that the Oil Rig Count in the USA reached the lowest level over the previous 31 months: the indicator lost 8 units and now equals to 684. The total number of rigs lost 7 units, down to 817 overall. As a result, the actual reading is close to April of 2017. Since the beginning of 2019, the indicator has dropped 23%, but without influencing the total oil extraction as it has added 8% over the same period. The latest numbers showed that the daily oil output in the USA stopped at 12.6 million barrels per day.
It is expected that the introduction of the 0.50% global sulphur cap will increase the need for additional IMO 2020-compliant fuel and blend component tank storage. ARA and Houston are the largest in terms of tank capacity, followed by Singapore and Fujairah, and all these hubs have demonstrated a similar growth trajectory, albeit starting at different moments in time. Global tank capacity (i.e. all those terminals that rent out capacity to third parties) is currently around 1 billion cubic metres (cbm), with these four bunker hubs together accounting for a market share of just under 10%. Moderate oil price levels as well as price volatility moving upwards were positive indicators for the tank storage business, whereas low stock levels and an oil price forward curve in backwardation could be considered as negative sign.
Meantime, forecast said that the anticipated switch to pricier 0.50% sulphur fuels from 1 January 2020 will mean that trading conditions for ageing and inefficient tonnage become more challenging. IMO 2020 will add an additional cost on top of typical expanded off-hire periods and greater maintenance and repair expenses. Scrapping activity will likely stay at minimal levels over the next few months on the expectation that IMO 2020 disruptions and seasonal strength in refining runs — plus geopolitical uncertainty and weather-related delays — could support tanker earnings during winter. However, this situation could change in the transition to Q2 2020.
We expect bunker prices may change insignificant and irregular today in a range of plus-minus 3-5 USD.