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MABUX: Bunker market this morning, Dec.02

Monday, 02 December 2019 | 12:00

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) demonstrated irregular changes on Nov.29:

380 HSFO – USD/MT – 338.69(-0.36)
180 HSFO – USD/MT – 381.77(-2.22)
MGO – USD/MT – 668.12(+1.43)

Meantime, world oil indexes fell on Nov.29 as Russia sent out mixed signals on its commitment to extend production cuts and U.S.-China tensions.

Brent for February settlement decreased by $1.44 to $62.43 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for January delivery fell by $3.08 to $55.17 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $7.26 to WTI. Gasoil for December delivery lost $14.25.

Today morning oil indexes rise as signs of rising manufacturing activity in China pointed to increasing fuel demand and hints that OPEC may deepen output cuts at its meeting this week indicated supply may tighten next year.

Russian Energy Minister Alexander Novak said on Nov.29 it is too early to talk about extending the OPEC+ crude production agreement and the producer group should take a decision closer to April. His comments are likely to be opposed by most of OPEC’s members, who are aiming to agree at the cartel’s upcoming Dec. 5-6 meeting on the current OPEC+ deal to cut 1.2 million barrels per day. OPEC+ is struggling to prop up prices against weak demand growth, fragile market sentiment and strong gains in non-OPEC supply.

Data from the Energy Information Administration on Nov.29 showed the U.S. exported 89,000 bpd more than it imported in September, solidifying its status as a net exporter of crude and petroleum products under government records that began in 1949.

Meanwhile, oil indexes were under the pressure on concerns that talks to end the trade war between the United States and China, the world’s two biggest oil users, would be disrupted by U.S. support for protesters in Hong Kong. China reacted furiously on Nov.28 to Trump’s signing of bills in support of the Hong Kong demonstrators, summoning the U.S. ambassador to protest and warning the move would undermine cooperation with Washington. Hong Kong, a former British colony that was granted semi-autonomy when China took control in 1997, has been rocked by six months of sometimes violent pro-democracy demonstrations.

Today oil prices are supported by factory activity in November in China. The world’s biggest oil importer increased factory active for the first time in 7 months because of rising domestic demand amid government stimulus measures.

Indexes were also supported after Iraq’s oil minister said on Dec.1 that OPEC and allied producers will consider deepening their existing oil output cuts by about 400,000 barrels per day (bpd) to 1.6 million bpd. OPEC+, are expected to at least extend existing output cuts to June 2020 when they meet this week. Current quotas for OPEC members only cover crude production, while non-OPEC participants in the deal were allowed to include their condensate production when determining their baseline for cuts. Disputes over definitions of condensate have cause friction between OPEC members in the past.

Fears about a shortage of diesel and other middle distillates stemming from new marine pollution regulations have receded, with distillate premiums falling to some of the lowest levels for two years. From the start of 2020, ocean-going ships will be required to use low-sulphur fuels or employ exhaust gas cleaning systems, known has scrubbers, under pollution control rules approved by the International Maritime Organization (IMO). Fuel traders and shipowners have warned for several years that the switch from high-sulphur fuel oil (HSFO) to low-sulphur fuel oil (LSFO) or marine gasoil (MGO) could lead to shortages and rising prices.

Distillate consumption is closely correlated with the economic cycle, so the slowdown in global manufacturing and trade during 2018/19 has taken much of the predicted heat out of the distillate market. If the global economy had been growing strongly at this point, distillate consumption would have been significantly higher and a price spike would have been much more likely. Instead, the trade war between the United States and China and the resulting global slowdown has created more headroom to introduce the new fuel standards without risking a fuel shortage. New pollution regulations are almost always accompanied by warnings about shortages and costs, which often turn out to be exaggerated.

We expect bunker prices may demonstrate downward changes today: 5-7 USD down for IFO, 14-17USD down for MGO.
Source: MABUX

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