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2020-06-24

MABUX: Bunker market this morning, Jun.24.

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.23:

380 HSFO - USD/MT - 293.60 (+3.28)

VLSFO - USD/MT – 350.00 (+3.00)

MGO - USD/MT – 427.50 (+2.39)

Meantime, world oil indexes changed irregular on Jun.23, after U.S. President Donald Trump’s assurance on China trade deal.

Brent for August settlement decreased by $0.45 to $42.63 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery fell by $0.36 to $40.37 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.26 to WTI. Gasoil for July delivery gained $3.25 – $367.75.

Today morning global oil indexes continue slight downward trend.

President Trump wrote in a tweet that the agreement was “fully intact”. Earlier markets were unsettled by surprise comments from White House trade adviser Peter Navarro who said the hard-won deal was “over”. U.S.-China relations have reached their lowest point in years since the coronavirus pandemic that began in China hit the United States hard.

Despite fears of a second wave of COVID-19, fuel markets rebounded last week, showing signs of improving fundamentals as global supplies continue to tighten. Oil demand is currently stand close to 90 million barrels per day (bpd). U.S. oil inventories rose by 1.7 million barrels, while U.S. oil production stands at 10.5 million bpd, down by 1.7 million bpd year-on-year. U.S. oil rigs saw a 15th consecutive week of decline, dropping by 10 rigs to bring the total number of rigs to 189. There are also another positive signs for fuel markets, with the return of economic activity around the world. The U.S. manufacturing PMI rose to 43.1 in May from 41.5 in April 2020.

Bank of America estimates that the market saw a supply surplus on the order of 11 million bpd in the first half of 2020, but that quickly flips to a deficit of 2.5 million bpd for the remainder of the year. The bank noted that in the last 15 years, Brent crude averaged less than $50 per barrel only once – in 2016. Not even during the depths of the financial crisis in 2008 and 2009 was Brent below $50 for the full year. It will likely occur again in 2020, but Bank of America thinks Brent will return to $50 in 2021.

China looks to raise its crude oil production by 1 percent to 3.85 million bpd and natural gas output by 4.3 percent this year. In order to increase its domestic oil and gas production, China will boost efforts to develop oil- and gas-rich areas in the Bohai Bay offshore northern China in the Sichuan province and far western region of Xinjiang. Last year, China’s crude oil production rose for the first time in four years after the government started to urge local state oil majors to boost the development and production of local resources to increase the energy security of the world’s top oil importer.

China’s new low-sulphur fuel oil (LSFO) futures contract surged in its debut on Jun.22, rising as much as 13% on the Shanghai International Energy Exchange. The January contract was last up 10.5% at 2,617 yuan ($369.82) per tonne, versus a listing price of 2,368 yuan per tonne. The launch of the contract with sulphur content lower than 0.5% comes after an International Maritime Organization (IMO) ruling which bans ships from using high sulphur content fuel oil this year unless equipped with exhaust scrubbers. The contract could help boost China’s ambition to build a regional bunkering hub in its eastern Zhoushan port to vie with the ship fuel market dominated by Singapore.

The U.S. LNG industry expects to see buyers cancel as many as 45 LNG cargoes for August loading as natural gas demand in the Asian market and bloated European LNG inventories sap enthusiasm for U.S. LNG. That’s similar to the number of U.S. LNG cargoes that were canceled for July loading as well. For June loading, the cancellations were fewer but still substantial—anywhere from 20 to 30. Part of the problem is the narrow profit margin for U.S. LNG, with Henry Hub prices staying too close to European gas prices. Just 10 cents per million British thermal units separate the two. At that price, it’s impossible to turn a profit when factoring in shipping costs.

The American Petroleum Institute (API) estimated another build in crude oil inventories, this time of 1.749 million barrels for the week ending June 19. Forecasts had predicted a smaller inventory build of 299,000 barrels. In the previous week, the API shocked the market with an increase in crude oil inventories of 3.857 million barrels, after analysts had predicted a smaller build.

We expect IFO bunker prices may slightly decline by 1-3 USD today, VLSFO – minus 2-4 USD, while MGO prices may change irregular in a range of plus-minus 2-4 USD.

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