MABUX: Bunker market this morning, Mar 06
The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) continued downward evolution on March 05:
380 HSFO: USD/MT 344.10 (-2.88)
VLSFO: USD/MT 469.00 (-3.00)
MGO: USD/MT 554.45 (-3.10)
Meantime, world oil indexes fell on Mar.05 as the coronavirus epidemic showed no signs of slowing, and while major producers agreed on deeper output cuts to bolster prices, they could not immediately secure Russian support for the decision.
Brent for May settlement decreased by $1.14 to $49.99 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for April fell by $0.88 to $45.90 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $4.09 to WTI. Gasoil for March delivery lost $6.25.
Today morning global oil indexes continue slight downward movement.
OPEC agreed to cut oil production by 1.5 million barrels a day to offset the huge demand hit from the coronavirus epidemic, but it was unclear whether its key ally Russia will follow cartel. Ministers from the Organization of Petroleum Exporting Countries reached an agreement at talks in Vienna on Mar.05, but Russian Energy Minister Alexander Novak wasn’t present at the conference. It is expected, that the 1.5 million barrel-a-day cut will include Russia and other non-OPEC allies. Those countries will arrive in the Austrian capital on Mar.06 to discuss an agreement. If Moscow continues to withhold its backing, it’s unclear whether the cut would actually be implemented.
President Putin hinted earlier that Russia may once follow the pact, which would have a more solid effect on prices than if OPEC decided to go it alone and slash 1.5 million bpd of production without Russia’s participation. Yet at the same time, he said Russia was comfortable with current price levels. Russia’s budget for this year is based on an oil price of $42.40 per barrel. This compares with $83 for Saudi Arabia. That’s quite a gap in acceptable oil prices but it is not out of the question that oil could fall below Russia’s comfort level, too. As per some forecasts, oil could fall as low as $30 a barrel and the reason for this will be demand for oil, already hurt severely by the coronavirus outbreak that prompted flight cancellations and other travel restrictions that affected fuel demand.
Concern over demand growth remains. Morgan Stanley updated its oil demand forecast for this year, saying it expected it to be close to zero in China after the devastating coronavirus epidemic. It expected global oil demand this year to grow by a modest 500,000 bpd, which is a revision from 800,000 bpd. That’s a drop in demand growth of at least 300,000 bpd, which is generally in tune with the oil demand growth forecasts of the EIA, the IEA, and OPEC. All three last month revised their oil demand growth forecasts down, with the IEA being the most pessimistic, expecting a dip in oil demand in the first quarter, at 435,000 bpd, which would be the first demand contraction in a decade.
The European Commission proposed on Mar.04 enshrining the European Green Deal’s commitment for carbon neutrality by 2050 into legislation, as part of the European Union’s heightened focus on climate action and policy. Under a European Climate Law, the 2050 carbon neutrality target would become legally binding, and all EU institutions and member states will be collectively bound to take the necessary measures at EU and national level to meet that target. Under the Green Deal, the EU will support investments in sustainable businesses, technologies, and solutions and in greener energy and electricity generation. The Deal also includes a so-called Just Transition Fund to support with money packages regions and/or countries heavily reliant on coal.
Libya believes there is no need for a further 600,000 b/d OPEC+ cut because the market has lost more than 1 million b/d production from the North African country, which has been under a blockade since January 18. Libya is currently producing around 121,000-123,000 b/d because of the blockade. The self-styled Libyan National Army, led by General Khalifa Haftar, imposed the blockade on five key oil terminals as it jostles with the UN-backed Government of National Accord for control over the country’s oil industry and revenues.
Since the start of the year, Lloyd’s Register BQS Service has noted a large number of discrepancy incidents and shortages in bunker surveys. While acknowledging that the contributory factors to this issue have varied from port to port, FOBAS highlights that one of the main reasons for the situation could be that very low sulphur fuel oils (VLSFO) are not stabilising in barge and vessel sounding pipes. This can lead to inaccurate or false readings of the measured fuels due to poor flow of the liquid caused by low temperatures (ambient and fuel) causing waxy conditions. Lloyd’s Register advises that a bunker quantity surveyor should be appointed for all bunker operations when VLSFO fuels are being loaded.
We expect bunker prices may continue firm downward trend today in a range of minus 6-11 USD.
