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2020-09-14

MABUX: Bunker market this morning, Sep.14.

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.11:

380 HSFO - USD/MT - 288.39 (-2.88)

VLSFO - USD/MT – 332.00 (0.00)

MGO - USD/MT – 407.65 (-2.15)

Meantime, world oil indexes demonstrated slight irregular changes on Sep.11 amid signs of a growing imbalance between supply and demand as the world economy struggles to return to pre-pandemic levels of activity.

Brent for November settlement decreased by $0.23 to $39.83 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for October rose by $0.03 to $37.33 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.50 to WTI. Gasoil for October delivery added $1.25.

Today morning oil indexes increase as a tropical storm in the Gulf of Mexico forced rigs to shut down.

Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane. The storm is disrupting oil production for the second time in less than a month after hurricane Laura swept through the region. Typically oil rises when production is shut but with the coronavirus pandemic getting worse demand concerns are to the fore, while global supplies continue to rise.

At the same time, Baker Hughes reported on Sep.11 that the number of oil rigs in the United States fell by 1 to 180. The total number of active oil and gas rigs decreased for the last week by 2, with oil rigs falling by 1 and gas rigs falling by 1. Total oil and gas rigs in the United States are now down by 632 compared to this time last year.

The U.S. government confirmed that crude stockpiles snapped a streak of six straight weekly declines. Inventories rose 2.03 million barrels last week, in contrast to expectations of a draw of 1.34 million barrels. In six previous weeks, the EIA had reported a total crude drawdown of more than 38 million barrels.

Moreover, Energy Information Administration’s report showed U.S. supplies of refined products to the domestic market were down 11% last week from their average of the last five years. At the same time, the EIA raised output estimates for U.S. crude by 300,000 barrels per day to 10 million bpd, accounting for the redeployment of production platforms on the Gulf Coast that were preemptively shut during last month’s Hurricane Laura.

The major traders such as Trafigura, Royal Dutch Shell, Vitol and others had all resorted to booking tankers to use as floating storage, a tactic often used to avoid dumping sport cargoes at depressed levels. Trafigura has chartered 12 very large crude carriers (VLCC), which can collectively hold 24 million barrels of oil. BP is said to have provisionally booked a supertanker to hold oil in floating storage offshore Malaysia. The demand made day rates for supertankers have tripled in a week.

The United Arab Emirates (UAE), currently OPEC’s third-largest producer, is estimated to have exported a lot more crude oil in August as it produced more than its quota under the OPEC+ deal, undermining the oil market’s faith in the group’s unity in the cuts. Crude oil production in the UAE averaged 2.693 million barrels per day (bpd) in August. This is some 100,000 bpd above the country’s production ceiling under the OPEC+ pact—2.59 million bpd. The key reason for the increased production in the UAE in August was said to be the high electricity demand in the hottest months in the Middle East, which this year was further boosted by more people staying and vacationing at home because of COVID-19-related travel restrictions.

Meanwhile, Libyan commander Khalifa Haftar on Saturday committed to ending a blockade of oil facilities that has been in place since January. The lifting of the blockade could add further oversupply pressure to the market, but Haftar’s statement did not specify whether oil fields and ports would also recommence operations.

We expect bunker prices may demonstrate slight irregular changes today: 1-3 USD down for IFO and 1-3 USD up for MGO.

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