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2020-09-08

MABUX: Bunker market this morning, Sep.08.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) declined on Sep.07:

380 HSFO - USD/MT - 303.68 (-3.33)

VLSFO - USD/MT – 349.00 (-4.00)

MGO - USD/MT – 425.77 (-1.93)

Meantime, world oil indexes also decreased on Sep.07 as Saudi Arabia made its deepest monthly price cuts to supply for Asia in five months and uncertainty over Chinese demand clouds the market's recovery.

Brent for November settlement decreased by $0.65 to $42.01 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October fell by $0.69 to $39.08 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.93 to WTI. Gasoil for September delivery lost $7.50.

Today morning oil indexes are mixed on looming demand worries about a possible rise in COVID-19 cases following the U.S. Labor Day long weekend, which also marks the end of the peak U.S. driving season.

The Labor Day holiday on Sep.07 marks the traditional end of the peak summer demand season in the United States and that renewed investors' focus on the current dim fuel demand in the world's biggest oil user.

Oil is also under pressure as U.S. companies increased their drilling for new supply after the recent recovery in oil prices. According to the weekly report by Baker Hughes Co on ep.04, U.S. energy firms last week added oil and natural gas rigs for the second time in the past three weeks.

Additionally, the second wave of COVID-19 in Europe and the virus' continued spread through India, two other huge importers, is also weighing on prices. Moreover, coronavirus cases rose in 22 of the 50 U.S. states on the holiday weekend traditionally filled with gatherings to mark the end of summer. However, hopes for potential COVID-19 vaccines lent support to prices after Australian officials said they expected to receive their first batches of vaccines in January, and said the vaccines could offer "multi-year protection".

The world's top oil exporter, Saudi Arabia, cut the October official selling price for Arab Light crude it sells to Asia by the most since May. That situation shows that the demand recovery in the region, home to the second and third largest oil consumers, is running out of steam.

China, the world's biggest oil importer which has been supporting prices with record purchases, slowed its intake in August and increased its products exports. Crude oil imports into the country dropped 7.4% month-on-month to 47.5 million tons (11.2 million barrels/day) in August as demand for inventories slowed due to capacity constraints and price recovery. China’s demand slowdown comes at a time when the OPEC+ group has been easing production cuts and increasing supplies.

The International Energy Agency (IEA) said that the pace of global oil demand recovery has stalled in recent weeks on the back of weak refining margins, a lack of recovery in jet fuel demand, and uncertainties over global economic growth, including in the world’s top oil importer, China. Although the IEA doesn’t forecast major slowdowns in demand going forward, global oversupply has yet to show strong signs of drawdowns. The market will be waiting for the most recent assessment from the IEA in its next report scheduled to be released on September 15.

Russia complied nearly 100 percent with its share of oil production cuts in August as per the OPEC+ deal. In August, when OPEC+ started easing the record cuts by 2 million bpd, Russia's oil production rose by 5 percent from July, to reach 9.86 million bpd. Russia's production figures include condensate, while the OPEC+ deal excludes it. The Joint Ministerial Monitoring Committee (JMMC), which meets every month to assess compliance and the market situation, is meeting on September 17.

We expect bunker prices may decrease today: 3-5 USD down for IFO and 6-8 USD down for MGO.

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