Bunker prices slide may take a break next week, mixed trend expected, expert says
The Bunker Review is contributed by Marine Bunker Exchange
Oil prices steadied on Thursday after a larger-than-expected draw in U.S. crude and gasoline stocks was balanced by a stronger dollar, making fuel more expensive for holders of other currencies.
Benchmark Brent crude oil LCOc1 was up 30 cents a barrel at $53.68 by 0805 GMT, after settling 8 cents higher in the previous session. U.S. crude CLc1 was down 1 cent at $48.78, after ending the previous session up 81 cents, or 1.7 percent.
"Oil is consolidating," said Carsten Fritsch, senior oil analyst at Commerzbank. "U.S. stocks data were supportive but the dollar strength is putting a brake on the market."
Oil prices have more than halved over the last year as key Middle East producers have pumped near record levels, creating a huge oversupply and filling storage tanks around the world.
The Organization of the Petroleum Exporting Countries pumped around 3 million barrels per day more than demand in the second quarter and shows no sign of trimming production to prop up prices.
Bunker prices will remain low for a long time. The oversupply and the lack of sufficient demand will last for over a year. Storage tanks oil tankers are getting full which means storage space is getting short. Sooner or later someone has to reduce its production of crude. Alternatives are 1) less production from the shale oil producers in the U.S. 2) OPEC reduction 3) or Russia reduction. But nobody of the major three seems to be interested in reducing any capacity, which means the present situation will worsen.
We are in for low bunker prices for a very long time.
The low oil prices are starting to bite.
Royal Dutch Shell Plc said it’s preparing for a “prolonged downturn” by cutting thousands of jobs and slashing billions of dollars in investments over the next two years. The shares gained the most in almost six months.
The company, which in April said it was confident prices would return to $90 a barrel in three years, on Thursday said that “today’s oil price downturn could last for several years.” Shell is cutting 6,500 jobs this year and plans to reduce capital investment by $7 billion, it said in a statement.
Bunker price outlook for the coming week: we expect bunker prices and oil market to take break with mixed price movements.
* MGO LS
All prices stated in USD / Mton
All time high Brent = $147.50 (July 11, 2008)
All time high Light crude (WTI) = $147.27 (July 11, 2008)