MABUX: Bunker market this morning, October 19
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) demonstrated slight irregular changes on Oct.16:
380 HSFO - USD/MT - 298.38 (+1.15)
VLSFO - USD/MT – 354.00 (+1.00)
MGO - USD/MT – 417.13 (-0.76)
Meantime, world oil indexes also demonstrated irregular changes on Oct.16 amid fears that the Covid-19 pandemic will cause the global market to slip into surplus again next year.
Brent for December settlement decreased by $0.23 to $42.93 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for November declined by $0.08 to $40.88 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $2.05 to WTI. Gasoil for November delivery added $3.25.
Today oil indexes decline after China released data showing a smaller-than-expected rise in GDP during the third quarter.
China reported a 4.9% growth in GDP year-on-year for the third quarter earlier in the day, smaller than the 5.2% growth in forecasts. However, other indicators showed a strong recovery overall for the world’s second largest economy. Industrial production grew 6.9% year-on-year and retail sales grew 3.3% year-on-year. The unemployment rate was 5.4%, down from the previous quarter’s rate of 5.6%. There were hopes that positive data from China, a top oil importer, would be indicative of recovery and outweigh ongoing concerns over fuel demand as the number of global COVID-19 cases continues to increase, as well as increasing supply. Chinese oil purchases are expected to slow down during the current quarter as the country continues to fight a COVID-19 outbreak in the city of Qingdao, and as independent refiners face high inventories as well as limited import quotas.
The OPEC+ Joint Technical Committee during the meeting on Oct.15 reportedly warned that a prolonged second wave of the COVID-19 in Europe and a jump in Libyan output could lead to oversupply in 2021, in the worst-case scenario. In September, the panel had not seen a surplus under any scenarios it considered. The gloomy outlook could see changes to OPEC+’s plans to ease output cuts, which would see 2 million barrels per day added to the market in 2021.
The coalition of crude producers gathers on Oct.19 to assess the state of the market. No supply decisions are expected until Dec. 1 but leading members Saudi Arabia and Russia are already stepping up diplomacy. President Vladimir Putin and Saudi Arabia Crown Prince Mohammed Bin Salman have spoken twice by phone in a week.
Another factor complicating the supply picture is the return of Libyan production after months of disruption from civil war. Libya, which is an OPEC member but which isn't covered by the output restraint deal, is now producing some 500,000 barrels a day and some forecasts say it could rise to 700,000 b/d or more by year end.
Meanwhile, U.S. House of Representatives Speaker Nancy Pelosi set a Tuesday deadline for Congress to pass the latest stimulus measures ahead of the Nov. 3 presidential elections, around two weeks away. President Donald Trump also renewed his offer to increase the measures’ price tag.
According to the Energy Information Administration, U.S. crude stockpiles tumbled 3.8 million barrels last week after rising by just over 500,000 barrels the previous week. The EIA also reported that distillates inventories plunged by 7.2 million barrels for the week ended Oct. 9 versus a slide of just 962,000 in the week to Oct. 2.
This week’s global spike in Covid-19 caseloads has also raised alarm across markets. Infections in Italy again moved near the danger zone last seen in March, while the U.K. and France imposed new movement restrictions. In the United States, new cases are up in 39 of the 50 U.S. states.
Baker Hughes reported on Oct.16 that the number of oil rigs in the United States rose the last week by 12 to 205—a gain that may push prices down further. The total number of active oil and gas rigs increased for the week by 13, with oil rigs rising by 12 and gas rigs rising by 1. Total oil and gas rigs in the United States are now down by 569 compared to this time last year.
We expect bunker prices may demonstrate little changes today: 1-3 USD down for IFO and 1-3 USD up for MGO.
