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2020-05-20

MABUX: Bunker market this morning, May, 20.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs increased on May, 19:

380 HSFO - USD/MT - 246.87 (+7.76)

VLSFO - USD/MT – 291.00 (+13.00)

MGO - USD/MT – 357.55 (+15.41)

Meantime, world oil indexes demonstrated irregular changes on May, 19 amid signs that producers are cutting output as promised while the market awaits more clarity on the demand picture as some countries ease out of lockdowns.

Brent for July settlement decreased by $0.16 to $34.65 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July rose by $0.14 to $31.96 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.69 to WTI. Gasoil for June delivery declined by $12.50.

Today morning oil indexes rise as supply cuts and U.S. Treasury Secretary Steven Mnuchin said he supported extending certain measures intended to bolster the economy.

The market weakened early after Mnuchin and Federal Reserve Chair Jerome Powell faced sharp questions at a Senate hearing, but got another boost after Mnuchin said he was willing to consider extending and modifying a payroll loan program for small businesses.

Global demand recovery is expected to be slow as some restrictions remain and there is a significant risk of repeat outbreaks and lockdowns. There was little sign of a repeat of the historic plunge below zero seen last month ago on the eve of the May contract’s expiry amid signs of rising demand for crude and fuels. But the market was boosted by signs that output cuts agreed by the OPEC+ are being implemented. OPEC+ cut its oil exports sharply in the first half of May suggesting a strong start in complying with their latest pact to curb output.

According to the U.S. Energy Information Administration, U.S. production is also falling, with crude output from seven major shale formations expected to fall to 7.822 million barrels per day in June, the lowest since August 2018. Losses will be led by the Permian Basin -- which straddles Texas and New Mexico -- where output is seen falling by 87,000 barrels a day in June to 4.29 million. Overall production is seen falling by 197,000 barrels a day next month to 7.822 million barrels. The number of drilled but uncompleted wells in the Permian rose by 28 to 3,464 in April. That’s the highest since September and further evidence that producers will have a large backlog ready to tap once the recovery takes hold.

In addition, The American Petroleum Institute (API) estimated a large crude oil inventory draw, of 4.8 million barrels for the last week. The API reported a draw of 651,000 barrels of gasoline for week ending May 15—compared to expectations for a 2.134-million-barrel draw for the week. Distillate inventories were up by 5.1 million barrels for the week.

PetroChina’s biggest refinery, a 410,000-bpd facility in Dalian, will resume operations in late June after a two-month overhaul. This could mean an increase in Chinese oil imports from Russia because the Dalian facility is connected to the East Siberia-Pacific Ocean pipeline, and is the biggest processor of the ESPO blend. The restart of the Dalian refinery will add to rising run rates in the world’s top oil importer, which would likely be taken as good news for demand, no matter where the supply comes from. Earlier there were also reports that Chinese refiners are ramping up their processing rates.

We expect bunker prices may demonstrate irregular changes today: plus/minus 1-3 USD for IFO, 9-12 USD down for MGO.

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