2020 April 20 08:57

MABUX: Bunker market this morning, Apr 20

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 slightly increased on April 17:

380 HSFO: USD/MT 237.50 (+1.73)
VLSFO: USD/MT 275.00 (+3.00)
MGO: USD/MT 361.15 (+0.72)

Meantime, world oil indexes demonstrated irregular changes on Apr. 17.

Brent for June settlement increased by $0.26 to $28.08 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for May fell by $1.60 to $18.27 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $9.81 to WTI. Gasoil for May delivery added $4.50.

Today morning oil indexes continue to slide down as producers continue to grapple with a supply glut.

The market remain unconvinced that OPEC+’s cut of nearly 10 million barrels agreed to in early April will ease oversupply as countries continue to extend lockdowns imposed to prevent the spread of the COVID-19 pandemic, and economies contract. The output cut that supposed to see coming, isn’t sufficient to cover the 25 million to 30 million barrels of daily demand that’s being destroyed by Covid-19. There were also concerns that countries’ storage capacity is rapidly running out.

U.S. benchmark, West Texas Intermediate, has fallen to the $15 range as global economies remain on lockdown due to the COVID-19 pandemic, crushing crude demand. To add insult to injury, global oil storage is reaching its limits. The situation is so dire, in fact, that the Department of Energy is even considering paying domestic oil producers to keep crude in the ground.

At the same time, White House guidelines on reopening the U.S. economy and talk on what else oil titans Saudi Arabia and Russia could do for production cuts. The White House unveiled late on Apr.16 guidelines that governors of the 50 U.S. states could use in reopening businesses locked down for four weeks now in an attempt to control the Covid-19 outbreak that has infected more than 670,000 Americans and killed nearly 34,000 of them

Saudi Arabia and Russia, meanwhile, were ready to do more to help stabilize the global oil markets. Alexander Novak and Abdulaziz bin Salman, energy ministers for Riyadh and Moscow, said in a joint statement that they will "continue to closely monitor the oil market and are prepared to take further measures jointly with OPEC+ and other producers if these are deemed necessary”.

According to Baker Hughes, the U.S. oil rig count fell by 66 last week, indicating the massive production cuts undertaken by domestic oil drillers as crude prices hit near-19-year lows. Baker Hughes data showed oil rigs down to 438 last week from 504 the previous week (down 13%). Oil rigs are down by a total 245 since the week ended March 13, when there were 638 rigs. That constitutes a drop of more than 35%. The oil rig count, an early indicator of future output, is down 47% from the same week a year ago when 825 oil rigs were active.

Analysts at Raymond James projected total U.S. oil and natural gas rigs would collapse from around 800 at the end of 2019 to a record low of around 400 by the middle of the year and around 200 at the end of 2020. The investment bank forecast the rig count would average a mere 225 rigs in 2021. That compares with the current all-time low of 404 rigs during the week ended May 20, 2016, according to Baker Hughes data going back to 1940. In Canada, meanwhile, the total oil and gas rig count fell to 30, the lowest since at least 2000.

We expect bunker prices to demonstrate irregular changes today: 3-5 USD down for IFO, 2-4 USD up for MGO.