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2020-06-17

MABUX: Bunker market this morning, June, 17.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs increased on June, 16:

380 HSFO - USD/MT - 280.93 (+3.19)

VLSFO - USD/MT – 331.00 (+4.00)

MGO - USD/MT – 402.56 (+2.64)

Meantime, world oil indexes also demonstrated upward changes on June, 16 after the International Energy Agency (IEA) raised its 2020 oil demand forecast.

Brent for August settlement increased by $1.24 to $40.96 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July rose by $1.26 to $38.38 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.58 to WTI. Gasoil for July delivery added $15.50.

Today morning oil indexes decline as a second wave of coronavirus cases in China and a report pointing to a further swelling in U.S. stockpiles cast doubt on the demand outlook in the world’s two largest economies.

Beijing has ordered all schools to close in an escalation of containment measures as its struggles to halt the outbreak that’s already spread to neighboring provinces. China is one of the world’s few energy consumption bright spots, staging a rapid recovery over the past few months.

The International Energy Agency (IEA) reported on June, 16 that it expects to see a record drop in global oil demand this year to be followed by a record jump in demand next year. The Agency in its June report forecast global oil demand at 91.7 million barrels per day in 2020, some 500,000 bpd higher than what it cited for May due to stronger than expected imports in Asia. The IEA, however, warned that a slump in air travel due to the coronavirus means the world will not return to pre-pandemic demand levels before 2022. Data also showed that Saudi Arabia exported just one oil cargo to the U.S. so far in June, equivalent to about 133,000 barrels a day. That’s about one-tenth of the 1.3 million barrels a day it shipped in April, when Riyadh flooded the global market during a brief price war against Russia.

Russia’s early crude Urals program for the next month – July - showed even lower shipments than June. That was another sign that Moscow was keeping to pledged cuts under its OPEC+ alliance with Saudi Arabia and other global oil exporters.

The U.S. economy is unlikely to achieve full recovery until Americans are certain that the coronavirus pandemic has been contained, Federal Reserve Chairman Jay Powell said on June, 16. Moreover, the longer the downturn lasts, the greater the potential for longer-term damage from permanent job loss and business closures.

At the same time, The American Petroleum Institute (API) reported U.S. oil stockpiles rose by 3.86 million barrels last week. Inventories grew to a record in the previous week despite output having fallen by at least 2 million barrels a day since March. Inventories at the Cushing, Oklahoma, fell by 3.29 million barrels. It is expected, that the Energy Information Administration will report a draw of 0.152 million barrels when it issues numbers later today.

According to the energy minister of the United Arab Emirates, the production cuts of around 10 million barrels a day adopted by OPEC and its allies, including Russia, will soon bring prices back to “normal”. Prices could return to the usual levels within a year or two as curbs drain excess barrels from the market. Attention will turn to OPEC’s monthly report today, where the group will share its outlook and production estimates for May. The OPEC+ Joint Technical Committee and Joint Ministerial Monitoring Committee will be meeting on June 17-18, respectively, to discuss the ongoing record production cuts and see whether countries have delivered their share of the reductions.

We expect bunker prices may demonstrate upward changes today: 5-7 USD up for IFO, 10-15 USD up for MGO.

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