MABUX: Bunker Market Volatility to Kick In Today
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) changed insignificant and irregular on May 21:
380 HSFO – 441.87(-0.57)
180 HSFO – USD/MT – 478.05(+0.11)
MGO – USD/MT – 702.90(-3.34)
Meantime, world oil indexes also changed irregular on May 21 as the prospect of mounting U.S.-Iran tensions disrupting supply was offset by concerns that a lengthy trade war between Washington and Beijing would limit crude demand.
Brent for July settlement increased by $0.21 to $72.18 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery gained $0.03 to $63.13 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.05 to WTI. Gasoil for June lost $6.50.
Today morning oil indexes demonstrate slight downward movement.
OPEC and its partners may decide to keep the oil production cuts until the end of the year as the cartel fears a steep price drop if cuts were to be reversed within the next couple of months. However, there seem to be two ways to do that: one would be to have everyone comply 100 percent with the production targets set out in the December agreement that called for the removal of a combined 1.2 million bpd from global supply. Another is to allow individual members of the club to implement a different level of cuts by taking as baseline the average monthly production rate for a month of their choice between September and December 2018. However, while an attempt at strict compliance with the December targets would eventually reduce global inventories in the second half of the year, the other option would result in an eventual increase in the five-year average of global supply.
Despite criticizing the U.S. decision not to extend any sanction waivers for Iranian oil customers, Turkey appears to be fully complying with the U.S. sanctions on Iran’s oil. Turkey was one of the eight buyers of Iranian oil that were given an initial six-month waiver to continue importing crude from Iran at reduced volumes after the U.S. slapped back sanctions on Iran in November last year. The U.S. ended all waivers for all Iranian customers as of early May. At the moment Turkey had reduced its imports from Iran and has started to buy more oil from Russia, Kazakhstan, and Iraq, to replace Iranian barrels,
The Houthi rebels in Yemen said over the weekend that last week’s attack on an Aramco oil pipeline in Saudi Arabia was the start of military operations against some 300 vital military targets in the Kingdom and in the United Arab Emirates (UAE). The Houthis have identified targets such as military headquarters and facilities in the UAE and in Saudi Arabia, as well as their bases in Yemen. Saudi Arabia and Iran are essentially fighting a proxy war in Yemen, where the Saudis lead a military Arab coalition to restore legitimacy in the country, while the Houthi movement, which holds the capital Sanaa, is backed by Iran. The heightened tension in the Middle East and the U.S.-Iran standoff have been supporting oil prices in recent days.
Western oil majors Total and Eni have suspended payments to the Russian companies that sold them contaminated crude via the Druzhba pipeline. Last month, Russia halted supplies via the Druzhba oil pipeline to several European countries due to a contamination issue. Normal deliveries via the pipeline are expected to resume in the second half of May. The supplies via the Druzhba pipeline are made according to Russian law, under which buyers first pay, and if they are not satisfied with the quality of the crude, they can claim damages and compensations. The Russian oil supply contamination has disrupted the refinery operations of some companies. Total, as an example, halted last week some of the units at its 230,000-bpd Leuna refinery in Germany to conduct technical checks.
Crude and lease condensate production in the North Sea is set for lower levels in the summer months, further tightening the global oil market. Current unplanned outages at Oseberg and Flotta in the North Sea restrict a total of 160,000 bpd of North Sea production. It is estimated that outages in the North Sea in May will be 185,000 bpd. Yet, the biggest disruption is expected next month, when North Sea oil production is seen down to its lowest level since August 2014 because of scheduled maintenance at Ekofisk. The news rendered support to the fuel prices.
We expect bunker prices will not haver firm trend and will change irregular in a range of plus-minus 1-4 USD.