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MABUX: Bunker Prices To Continue Moving Upwards

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) turned into slight downward evolution on May 15:

380 HSFO – 411.00(-2.86)
180 HSFO – USD/MT – 457.64(-4.50)
MGO – USD/MT – 655.93(-3.71)

Meantime, world oil indexes inched up on May 15 as the prospect of mounting tensions in the Middle East hitting global supplies overshadowed an unexpected build in U.S. crude inventories.

Brent for July settlement increased by $0.53 to $71.77 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for June delivery rose by $0.24 to $62.02 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.75 to WTI. Gasoil for June gained $14.25.

Today morning oil indexes continued slight upward trend.

Crude oil production in the Organisation of Petroleum Exporting Countries fell by just 45,000 bpd in April, despite continued deep cuts by the largest producer, Saudi Arabia and continued decline in Venezuela and Iran. Iran registered the deepest decline in production in April, by 154,000 bpd to 2.554 million bpd. Interestingly, Iraq booked the second-largest decline, at 113,000 bpd to 4.63 million bpd. Saudi Arabia produced 45,000 bpd less crude oil in April than in march, at 9.742 million bpd. At the same time, Venezuela’s oil production decline was reversed last month, with output rising by a daily average of 28,000 bpd to 768,000 bpd. Still, this daily average production rate is a lot below what Venezuela produced last year: that average was 1.3354 million bpd.

It looks like OPEC is having a hard time predicting its next steps in the production cut agreement and in general. Unforeseen events such as Russia’s temporary suspension of exports via the Druzhba pipeline following contamination are interfering with the cartel’s estimates of the most likely supply drop by the end of the year, making it harder to decide on whether to continue the cuts or start pumping more as large importers would like.

Iran told European diplomats that it needs to export as much as 1.5 million bpd in order for it to stay in the 2015 nuclear deal, although this was likely a negotiating tactic. Last year, Iran had demanded 2 million bpd in a previous round of negotiations. Iran says that the European Union must provide some benefit to Iran for staying in nuclear deal after U.S. sanctions seek to eliminate all Iranian oil exports.

Saudi Aramco restarted pumping oil on May15 through the pipeline which was hit by drone attacks a day ago. Two pumping stations along Aramco’s East-West oil pipeline in Saudi Arabia were attacked by explosive-laden drones in the early morning local time on May 14. The sabotage caused minor damage and a fire at one of the pumping stations. The heightened security concerns and the potential threat to global oil supplies in the Middle East have rendered momentum support to oil and fuel prices.

Part of the increased tariffs during the trade war between the U.S. and China will include U.S liquefied natural gas (LNG) imports, rising from a previous 10 percent levy to a damaging 25 percent starting June 1. The increase in tariffs already come as Chinese imports of LNG from the U.S. has plunged. In 2018 some 27 LNG vessels travelled from the U.S. to China, down from 30 in 2017. Meanwhile, most of those that left U.S. ports last year did so before the trade war started, with 18 tankers going to China in the first half of the year and just nine during the second half. Now that China is increasing LNG tariffs from 10 to 25 percent, these export numbers will drop even more.

In a new report on energy investment, the IEA said that spending levels in 2018 stabilized for oil, gas and coal, but declined for renewables. Still, the agency said that the oil industry is not spending enough to ensure adequate supply in the years ahead.

U.S. crude inventories rose unexpectedly last week to their highest since September 2017. Crude stocks swelled by 5.4 million barrels, forecasts had expected a decrease of 800,000 barrels. Still, the build was smaller than the nearly 9 million-barrel build estimate on May 14 by the American Petroleum Institute (API), a trade group, which helped lift crude price sentiment.

We expect bunker prices may continue firm upward evolution today in a range of plus 1-3 USD for IFO and plus 8-12 USD for MGO.
Source: MABUX

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