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2020-06-18

MABUX: Bunker market this morning, Jun.18.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) rose slightly on Jun.17:

380 HSFO - USD/MT - 284.67 (+3.74)

VLSFO - USD/MT – 336.00 (+5.00)

MGO - USD/MT – 410.44 (+7.88)

Meantime, world oil indexes changed insignificant and irregular on Jun.17, after the Energy Information Administration reported an inventory build for the week to June 12. Fuel inventories, however, fell.

Brent for August settlement decreased by $0.25 to $40.71 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery fell by $0.42 to $37.96 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.75 to WTI. Gasoil for July delivery gained $3.50 – $349.50.

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

A feared second wave of coronavirus infections may have arrived, with cases rising in many parts of the U.S., while exploding much more rapidly in Latin America. In China, a small number of new cases raised fears of a return of the virus. With much of the market pricing in a steady rebound in demand, any renewed lockdown or economic hit would drag oil back down.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.2 million barrels from the previous week. At 539.3 million barrels, U.S. crude oil inventories are about 15% above the five year average for this time of year. This compared with a 5.7-million-barrel build for the week before that. Forecasts had expected the the Energy Information Administration (EIA) to report a modest build of half a million barrels for the week to June 12. A day earlier, the American Petroleum Institute reported an inventory increase of 3.86 million barrels.

In distillate fuels, however, the EIA estimated a 1.4-million-barrel draw in inventories for last week, after a 1.6-million-barrel build the previous week. Distillate fuel production averaged 4.5 million bpd, down on a week earlier. Distillate fuel stockpiles have been rising steadily and strongly over the past few weeks in the U.S. as demand for different oil products recovered unevenly after lockdowns began to be lifted.

OPEC forecast a gradual recovery in global demand for oil, which has been hammered by the coronavirus crisis, and said record supply cuts by producers were already helping to rebalance the market. In a monthly report, the Organization of the Petroleum Exporting Countries said demand would decline by 6.4 million barrels per day (bpd) in the second half of 2020, less than the drop of 11.9 million bpd in the first six months of the year. Oil prices collapsed as government lockdowns to limit the spread of the virus curtailed travel and economic activity. To tackle the drop in demand, OPEC and its allies agreed to a record supply cut that started on May 1, while the United States and other nations said they would pump less. OPEC said these curbs were already helping.

The leader of the non-OPEC group of the OPEC+ pact, Russia, is showing an unprecedented commitment to the ongoing record collective production cuts by almost complying with its share of the reductions. As part of the OPEC+ deal sealed in April, Russia pledged to cut its production to 8.5 million bpd in May and June from a February 2020 baseline, or by 19 percent, from February 2020. So far in June, Russia’s crude oil production has averaged 8.549 million bpd. This production level between June 1 and 15 is just above the 8.5-million-bpd ceiling for Russian crude oil production under the deal.

Iraq appears to be cutting oil production to meet its OPEC+ quota, though it may still fall short of full compliance with the cartel’s target this month. The nation’s crude exports have fallen by 2% so far in June. Under its quota, Iraq is meant to produce no more than 3.59 million barrels a day -- including oil for domestic consumption -- from May through July. Last month, it pumped 4.21 million barrels daily. A committee from the Organization of Petroleum Exporting Countries and its partners will meet later this week to review compliance.

Venezuela's oil exports have fallen nearly 28% in the first half of June, on course for its lowest level in over 70 years as tanker owners and operators suspend contracts for transporting crude from once South America's largest oil supplier. Shipping firms are avoiding Venezuela after the United States earlier this month blacklisted four vessels and their owners for transporting the country's crude. Several shippers have turned tankers away from Venezuela's waters in the face of increasingly aggressive U.S. efforts to isolate and oust socialist President Nicolas Maduro by throttling the oil revenue that funds his government.

We expect IFO bunker prices may fall by 1-3 USD today while MGO prices may change irregular in a range of plus-minus 1-3 USD.

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