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MABUX: Bunker market, June 10

Monday, 10 June 2019 | 16:00

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) continued firm downward trend on June 07:

380 HSFO – 394.26(-1.20)
180 HSFO – USD/MT – 435.57(-1.42)
MGO – USD/MT – 646.90(-3.29)

Meantime, world oil indexes extended their recovery on Jun.07 as Saudi Arabia assured markets that the production cut agreement between OPEC and allies led by Russia would be extend.

Brent for August settlement rose by $1.62 to $63.29 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for July delivery increased by $1.40 to $53.99 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of 9.30 to WTI. Gasoil for June added $16.00.

Today morning oil indexes continued moderate upward trend.

Saudi Arabia said that OPEC and its allies should extend oil production cuts at around current levels as the kingdom did not want a fight for market share with the United States or a repeat of the price collapse five years ago. It was also added that OPEC was close to agreeing to extend a pact on cutting oil supplies beyond June, although more talks were still needed with non-OPEC countries that were part of the production deal. The Organization of the Petroleum Exporting Countries plus Russia and other producers, an alliance known as OPEC+, have a deal to cut output by 1.2 million barrels per day (bpd) from Jan. 1. The pact ends this month and the group meets in coming weeks to decide their next move.

Russia says its oil production will increase after June. Russia’s recent decline of production was caused by a combination of refinery maintenance and contaminated oil flowing through the Druzhba pipeline—issues that will be resolved after June, coincidentally when the oil production cut deal is set to expire. Meanwhile, Russia’s largest oil producer, Rosneft, is in talks with the government for possible compensation for losses should OPEC and its allies decide in June to extend the output cuts.

U.S. Secretary of State Mike Pompeo is confident that Nicolas Maduro will eventually be toppled, but is uncertain when this could happen because the U.S. has found uniting Venezuelan opposition more difficult than initially thought. Earlier this year, the United States and many other western countries recognized opposition leader Juan Guaido as Venezuela’s interim president and supported him in the power struggle over the country. The U.S. slapped sanctions on Venezuela’s oil industry and exports in an attempt to deprive the Maduro regime of as much oil revenues as possible. Venezuela’s oil industry continues to suffer, with May exports slumping by 17 percent after the country shut down almost all of its crude oil upgraders.

Fuel indexes were supported by reports that the United States may consider delaying the tariffs it has threatened to impose on Mexico. The original plan was to eventually increase the tariffs to 25% by October, with incremental increases if Mexico fails to successfully implement a plan to stop migrants from flooding into the United States. The United States imported an average of 712,000 barrels per day of crude oil and petroleum products in March 2019, most of which is crude oil. The value of the oil imported from Mexico to the US totaled about $15 billion in 2018.

US oil industry keeps accelerating its oil production. New records are expected both when the final numbers for May emerge and at the end of the year. Rystad Energy is raising its forecast for US crude output to 13.4 million barrels per day (bpd) by December 2019. For May 2019, crude oil production is averaging 12.5 million bpd. If U.S. oil production continues to grow even as oil prices slide, that will make a rebound for Brent and WTI all the more difficult.

Rystad Energy also estimates OPEC crude oil production of 29.9 million bpd for May, the lowest monthly output level in more than five years and an astonishing 2.6 million bpd below October 2018 reference levels. For 2019 as a whole, it is expected that OPEC crude production will be of 30.3 million bpd, down 1.6 million bpd year-on-year.

The IEA highlighted the growing importance of natural gas around the world in a new report, estimating that global demand would rise by 10 percent over the next five years. Roughly 40 percent of that would come from China.

We expect bunker prices will turn into upward trend today in a range of plus 5-12 USD.

Source: MABUX

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