Irregular trend in world bunker prices is expected to be continued
The Bunker Review is contributed to IAA PortNews by Marine Bunker Exchange
Main oil indexes demonstrated slight downward trend during the week on a variety of news, the most important of them were signs that the U.S. crude stockpile glut is easing, strengthened dollar, the situation in the Middle East and speculations on the possible results of OPEC meeting in June. MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO in the main world hubs) showed irregular changes with no firm trend:
380 HSFO - up from 334,79 to 337,93 USD/MT (+3,14)
180 HSFО - up from 369,71 to 369.79 USD/MT (+0,08)
MGO - down from 631,86 to 624.43 USD/MТ (-7,43)
Although United States oil inventories continue to fall the fourth straight week and US oil production also declined to under 9.3 million barrels a day (its lowest since early February), supplies still remain near the highest level since 1930, based on monthly records dating back to 1920. U.S. drillers have idled more than half of the country’s oil rigs since October. Global investment in oil production might fall by $100 billion this year, according to the International Energy Agency, which has curbed forecasts for non-OPEC supply growth to 830,000 barrels a day this year, down from a projection of 1.3 million a day in November.
The dollar strengthened to a four-week high against the euro following comments from U.S. Federal Reserve Chair Janet Yellen on May 22 that it would be “appropriate” to raise interest rates this year if the economy improves. A U.S. inflation report as well as better-than-expected readings on U.S. capital-equipment orders, new home sales and regional manufacturing also indicated underlying price pressures that could prompt a rate hike. A stronger dollar makes dollar-priced commodities more expensive for buyers using other currencies. As per some forecasts, a pressure on oil prices by a stronger dollar would likely be the start of a new trend.
In China, crude imports hit a record 7.4 million barrels per day (bpd) in April while President Xi Jinping claimed during his visit to Zhejiang province, that strategic oil reserves are significant to the country and called for an increase in stockpiles. The HSBC China Manufacturing Purchasing Managers Index rose slightly from 48.9 in April to 49.1 in May, a sign of a strengthening in the country’s industrial production.
Market also remained wary of ample supply as top OPEC producers Saudi Arabia and Iraq kept exports near record levels. Ali Al-Naimi, oil minister of Saudi Arabia, has stressed that OPEC would only cut output if other producers shared the burden of balancing the market. The Organization of the Petroleum Exporting Countries meets on June 5 and is not expected to alter its policy, in the interest of defending market share.
Iraq plans to increase crude exports by about 26 percent to a record 3.75 million barrels a day next month signalling an escalation of OPEC strategy to undercut U.S. shale drillers in the current market rout. The additional Iraqi oil is equal to about 800,000 barrels a day.
At the same time fighting in Iraq raised worries about the security of Middle East oil shipments and also boosted the market. The city of Ramadi fell to Islamic State on Sunday in the most significant setback for Iraqi security forces in nearly a year. Iraqi Prime Minister Haidar Al-Abadi claimed Iraq will retake Ramadi within a few days. Forces were gathering in preparation for the offensive.
Sanctions against Iran’s economy are likely to erode if talks to curb Iran’s nuclear program fail or U.S. lawmakers try to block an international agreement. Unlike the U.S., which banned American Companies from most commerce with Iran in the aftermath of the 1979 Islamic Revolution, France, Germany and the U.K. had significant commercial ties with the Persian Gulf state before sanctions. A majority of EU nations imported oil from Iran before an EU embargo was approved in 2012.
In Libya warplanes deployed by the internationally recognized government attacked an oil tanker docked outside the city of Sirte on Sunday, wounding three people and setting the ship on fire. It was the third confirmed strike on oil tankers, part of a conflict between competing administrations and parliaments allied to armed factions fighting for control of the country four years after the ousting of Muammar Gaddafi. Conflict has reduced Libya’s oil production to about 400,000 barrels a day.
We expect world bunker prices will continue irregular fluctuations next week as global funDamental factors are still unchanged and geopolitical situation does not give any real signs to the market.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)
