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MABUX: Bunker Prices Could Retreat 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 irregular on May 02:

380 HSFO – USD/MT – 431.86(-1.35)
180 HSFO – USD/MT – 479.57(+3.00)
MGO – USD/MT – 656.00(+2.86)

Meantime, world oil indexes dropped on May 02 as the market grappled with oversupply fears as increased U.S. sanctions on Iran had more gradual impact than expected and U.S. crude oil inventories rose sharply.

Brent for July settlement decreased by $1.43 to $70.75 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery dropped by $1.79 to $61.81 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 8.94 to WTI. Gasoil for May delivery lost $1.50.

Today morning oil indexes do not have any firm trend so far.

U.S. crude stockpiles last week rose to their highest since September 2017, jumping by 9.9 million barrels to 470.6 million barrels as production hit a record high of 12.3 million barrels per day (bpd). This comes as U.S. refineries head into the spring maintenance period, stoking fears that crude oil demand will be soft and stockpiles will continue to rise.

Iran and Venezuela have suffered falling oil production as the sanctions on both countries restrict exports and cut out buyers such as India, South Korea, and Cuba who will have to shop elsewhere to obtain sufficient quantities of crude oil. Venezuela’s oil production fell below 1 million bpd in March at 732,000 bpd, while Iran’s fell to 2.698 million bpd-with more decreases expected as the sanction waivers ended on May 02. Iran’s average production was 3.553 million bpd, while Venezuela’s averaged 1.354 bpd. The sanction crisis may continue to intensify contradictions in the oil cartel as other members will naturally respond to market demand as they are able.

Despite the desire of many OPEC members to continue supply cuts, the group may eventually be forced into action to meet demand in a market that has seen prices rise more than 30 percent this year. Russia in turn has sent signals about potentially increasing output. In April, however, the country’s oil output fell to 11.23 million bpd from 11.3 million bpd in March, still above OPEC quotas.

Over the last 10 weeks, hedge funds have been accumulating oil futures contracts counting on OPEC exceeding its planned production cuts, Venezuela’s production drying up, Libya’s supply continuing to deteriorate, and global oil demand growth continuing unabated. While these factors remain valid for now, net long positions in WTI and Brent are looking too bullish, thus increasing the risk of a crash if oil prices start dropping or some fund managers begin to take profits.

Russian government data showed that Russia’s oil production dropped in April from March, but missed, again, Russia’s target under the OPEC+ production cut deal. According to calculations of government data in tons, Russian production stood at 11.23 million bpd last month, down from 11.3 million bpd in March, but still not enough to meet Russia’s pledge to cut output to 11.191 million bpd.

The leader of the Houthi uprising in Yemen has asked the United Nations to sell a cargo of crude to generate revenues that will be used for the purchase of fuel and salaries for public sector employees. Oil used to be a vital export commodity of one of the poorest countries in the Middle East but the war has put a stop to that. Oil has moreover become a point of conflict between the Houthis, who control most cities in Yemen, and the Saudi-backed Yemeni forces loyal to the government that the Houthis ousted. Last August, the pro-government forces that control the oil-rich Shabwa province announced the first export cargo of crude since 2015, of half a million barrels. The oil was offered in an open tender, in which 35 companies from around the world took part.

We expect bunker prices may turn into downward trend today with a range of minus 8-12 USD for IFO and minus 1-5 for MGO.
Source: Marine Bunker Exchange

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