MABUX: Bunker market this morning, July 15
The Bunker Review was contributed by Marine Bunker Exchange
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) demonstrated slight upward trend on July 12:
380 HSFO – USD/MT 452.60 (+1.18)
180 HSFO – USD/MT 487.36 (+1.24)
MGO – USD/MT 671.88 (+5.64)
Meantime, world oil indexes were little changed on Jul.12 as U.S. Gulf of Mexico crude output dropped by more than half from disruptions caused by a tropical storm, but concerns over a global crude surplus in the months ahead limited gains.
Brent for September settlement added $0.20 to $66.72 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for August delivery gained $0.01 to $60.21 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $6.51 to WTI. Gasoil for August lost $3.50.
Today morning oil indexes sliding down after a storm shut almost three-quarters of U.S. Gulf of Mexico crude production, even as lingering supply and demand concerns continue to dent the outlook.
Tropical Storm Barry boosted crude futures as oil companies in the Gulf of Mexico sliced production. As of Jul.12, nearly 59%, or 1.1 million barrels per day, of crude oil production in the U.S.-regulated areas of the Gulf of Mexico has been cut because of the storm. At the moment companies are returning workers to their offshore platforms and restarting output in the Gulf of Mexico. The region accounts for 16% of total American crude oil production and under 3% of natural gas production.
The IEA and OPEC issued dueling Oil Market Reports last week, both forecasting a renewed supply surplus in 2020. While the figures vary a bit, both see non-OPEC supply (mostly U.S. shale) continuing to grow at a torrid pace, outstripping demand growth. It raises the question about whether or not OPEC+ will need to cut output by even more than currently.
US General Mark Milley said in a Senate hearing on Jul.11 that the US was crucial to ensuring that shipping lanes through the Gulf remained passable, adding that the US was indeed attempting to assemble a coalition to provide military naval escorts for commercial ships running through dangerous waters. As for the timetable, Milley added that the plan would be developed within a couple of weeks. Before President Donald Trump insisted that countries should take responsibility for protecting its own oil tankers through the risky Persian Gulf after two tankers were attacked off the coast of Oman and after last week’s incident where Iranian guard boards harassed a British tanker as it went through the Strait of Hormuz. Last comments indicates that Washington’s stance may have softened from the hard line over the responsibility of the United States to ensure safe passage through the world’s most critical oil chokepoint.
China’s crude oil imports in June averaged 9.63 million bpd, an increase of 1.7 percent from an average of 9.47 million bpd in imports in May, and a 15.2-percent increase from 8.36 million bpd in June last year. Despite weaker refining margins and a glut of refined oil products, demand for crude in China increased last month thanks to Hengli Petrochemical, which had a new refinery start up earlier this year and ramped up to full 400,000-bpd capacity at the end of May. However, China’s crude oil demand, and possibly imports, could be dragged down in the short term by signs of wobbling economy and refiners curtailing refinery runs in the third quarter as massive refinery start-ups and slowing domestic fuel demand have created a fuel glut in the country, hurting refining margins.
Global trade activity is slowing down, a warning sign for the health of the global economy. Freight shipping volumes are contracting at major hubs around the world, signalling tougher times for manufacturers amid escalating trade tensions and heightened uncertainty. Freight volumes in the United States were up by just 0.8% in the three months from March to May compared with the same period a year earlier. Volumes fell year-on-year in May, for the first time in more than two and half years. The process within the United States is part of a broader global downturn in freight which has spread across Europe and Asia. The slowdown in global trade and manufacturing is weighing on oil consumption growth, especially for middle distillates such as diesel.
The weekly U.S. oil rig count, an indicator of future production, fell for the second straight week. Drillers cut four oil rigs in the week to July 12, reducing the total to 784, the lowest since February 2018.
We expect bunker prices for IFO may stay stable today while prices for MGO in Europe, Middle East and Asia may add USD 5-10.
