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2020-02-04

MABUX: Bunker market this morning, Feb.04.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) declined on Feb.03:

380 HSFO - USD/MT 364.36(-3.85)

VLSFO - USD/MT 573.00(-6.00)

MGO - USD/MT 619.10(-6.69)

Meantime, world oil indexes extended their losses on Feb.03, dragged down by worries about lower demand in China, the world's largest oil importer, following a coronavirus outbreak there.

Brent for April settlement dropped by $3.71 to $54.45 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for March fell by $1.45 to $50.11 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.34 to WTI. Gasoil for February delivery lost $17.50.

Today morning global oil indexes have turned into slight upward correction.

The coronavirus outbreak in China is already impacting demand for fuel. Demand for jet fuel, gasoline, and diesel is likely to be suppressed in the coming weeks, potentially prompting Chinese and other Asian refiners to cut refinery rates. The slowdown in China’s fuel consumption is also aggravated by an extended period of public holidays for office workers and multinational corporations. The weaker fuel demand in China is spilling over onto weakening refining margins for processing crude oil into jet fuel, gasoline, and diesel. Therefore, refiners in China—and elsewhere in Asia—are likely to slow down refinery run rates amid depressed demand and an oversupply of fuels.

Saudi Arabia produced 9.744 million b/d of crude oil in January, in line with its promise to keep output 400,000 b/d below its new OPEC+ quota. The kingdom plans to produce 9.744 million b/d in February as well. Saudi Arabia over-complied with its quota of 10.31 million b/d last year under the old agreement with the 23-member OPEC/non-OPEC coalition, collectively known as OPEC+, as the country made up for laggards Iraq and Nigeria, which flouted their quotas for most of last year. The coalition deepened its production cuts to 1.7 million starting January 1, 2020 from 1.2 million b/d last year to help soak up excess supply in the first quarter of 2020.

OPEC+ may hold a technical meeting in the next few days ahead of its March 5-6 meeting in light of the outbreak of the deadly coronavirus, which has killed over 300 Chinese, stoking fears of a global dip in oil demand as crude prices plunged in January. The gathering of the Joint Technical Committee in Vienna may be held instead of moving up the full ministerial meeting. Urged by Saudi Arabia, OPEC+ has debated moving forward the ministerial meeting, but not all members had been supportive.

It is reported that over the entire five-year period, 208 oil and gas producers have filed for bankruptcy in the U.S., involving approximately $121.7 billion in aggregate debt. There was an initial wave of more than 100 bankruptcy filings in 2015 and 2016 as the oil price crash pushed some companies to the breaking point. As oil prices recovered somewhat after 2016, the number of filings declined to 24 in 2017 and 28 in 2018. But the fourth quarter of 2018 saw a steep drop in oil prices, and that decline lingered into 2019. This resulted in a jump in the number of filings in 2019 back up to 42.

Delivered marine fuel VLSFO (0.5%) prices fell to new lows across North Asian ports, tracking the decline in international crude markers, as the Wuhan coronavirus outbreak weighed on sentiment. On Feb.03, MABUX had registered delivered marine fuel VLSFO (0.5%) at Shanghai and Hong Kong at a two-month low of $600/mt and $555/mt, respectively, both down $20/mt from Jan.31. MABUX had also registered the same delivered grade at South Korean ports at a two-month low of $580/mt, $20/mt lower on the day.

Mitsui OSK Lines (MOL) has warned that the coronavirus outbreak may delay some the scrubber installations scheduled to take place in Chinese shipyards this month. With four Chinese provinces asking companies to extend the Lunar New Year holiday by a week, to next Monday (10 February), workers may not be available to complete installations. Those vessels include no MOL ships.

India has abolished import tax on very low sulphur fuel oil (VLSFO) used by ships, according to federal budget documents for 2020/21, to reduce costs for local shipping companies. Some local refiners including Indian Oil Corp and Hindustan Petroleum Corp have started making VLSFO to meet demand. The fuel, however, is not available at all Indian ports, necessitating imports. It is expected, that tax exemption will reduce the cost and mostly help the local shipping companies.

We expect bunker prices for IFO may fell today by 8-15 USD, for MGO – may drop by 15-18 USD.

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