MABUX: Bunker prices to remain mixed amid Greek's debt worries
The Bunker Review is contributed by Marine Bunker Exchange
Crude oil prices were steady on Thursday, with U.S. contracts still down around 16 percent since a peak hit in June, as traders fretted about China’s stock market rout, Greece’s debt crisis and a glut in supply. Brent futures prices tumbled more than 6 percent on Monday, a highly unusual move that has raised questions about whether shifting funDamentals will send the market even lower over the coming months.
Front-month U.S. crude futures (WTI) were trading on Thursday at $53.24 (+1.59) compared to low $51.48 per barrel. Brent crude oil was trading at $58.72 (+1.67) compared to today’s low $57.01 at GMT 12.27.
Oil is being pressured on multiple fronts, and China equity wobble, the prospect of Iran’s re-entry to the market and low liquidity all add up to an extremely fraught environment. The crude oil needs to establish a new range and we would see the WTI crude low about $50 with the upside capped at $58 per barrel and Brent about $4 higher i.e., low $54 and with the upside capped at $62.
Over the last month, front-month prices have dropped 17 percent, breaking out of the very narrow range that had prevailed since the middle of April.
Reasons for the drop are no hard to find, according to the Financial Times on Tuesday set out six bearish factors that have come together to produce a perfect storm for the oil market to re-enter the bear market.
The reasons are: China’s stock market tumble, turmoil in Greece, prospects for a nuclear deal with Iran, rising oil output from OPEC, an uptick in rigs drilling for oil in the United States for the first time in over six months, and bearishness among commodity-focused hedge funds and banks.
But the significance of the big move on Monday and the wider decline in oil prices over the last month is much harder to assess because large daily moves in the price of oil and other commodities do not correlate well with new information about supply and demand.
Of the six factors the Financial Times discount three, Greece, Iran and OPEC and left are China, the uptick in U.S. rigs and increased bearishness among hedge funds and commodity banks.
MABUX own feeling is that the oversupply of 1.5 million barrels per day has the major impact on the present situation and run a risk of worsening the bear market. Don’t think the bottom has been reached yet. It is not only OPEC that produces too much crude, it is also the U.S. and Russia and other smaller producers. - Freight rates for all sorts of oil tankers around the globe are increasing by the minute. There is a shortage of tonnage since many of the large crude carriers are being used as floating storage because of the large quantities of unsold crude. This over capacity of crude will take time before it is in balance with the world market. A further drop in crude prices are likely to come soon.
Bunker price outlook for the coming week: Due to the Greek situation its is hard to judge – bunker prices mainly go sideways, one day up and one day down, like before.
* 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)
