11-07-2016

MABUX: World bunker market in wait-and-see mood

Mabux

World fuel market turned into slight downward movement last week. There are still concerns over the economic impact of Britain’s vote to leave the European Union. Brexit influence is expected to last for quite a long time, increasing volatility in fuel prices.

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) turned into slight downward evolution in the period of June 30 – July 07:

380 HSFO – down from 245.00 to 238.00 USD/MT    (-7.00)
180 HSFO – down from 285.29 to 283.29 USD/MT     (-2.00)
MGO         – down from 497.21 to 484.07 USD/MT     (-13.14)

Independent estimate made by Rystad Energy says that the U.S. holds more oil re-serves than anyone else in the world, including Saudi Arabia, Russia, and Venezuela. Rystad estimates that the U.S. holds 264 billion barrels of oil, more than half of which is located in shale. That total exceeds the 256 billion barrels found in Russia, and the 212 billion barrels located in Saudi Arabia. The conclusion goes against conventional wisdom that Saudi Arabia and Venezuela hold the world’s largest oil reserves. On a global basis, Rystad estimates that the world has about 2,092 billion barrels of reserves, or about 70 years’ worth of oil at today’s production rate of 30 billion barrels per year.

In the week to July 01 U.S. stockpiles dropped to 526.6 million barrels, the lowest since March 11 (U.S. supplies climbed to an 87-year high of 543.4 million barrels in the last week of April). Production has slipped by 55,000 barrels a day to 8.62 mil-lion, the lowest since September 2014. Meantime, market intelligence firm Genscape was showing a build of 230,025 barrels at the Cushing, Oklahoma storage hub for U.S. crude futures

Baker Hughes’s data showing the fourth weekly rise in five for the U.S. oil rig count rendered pressure on the fuel prices. Producers added 11 oil rigs last week to 341 – the biggest increase since December, that signalled a near-two year rout in drilling may have ended.

Higher oil output is another factor that could cap prices. Russian oil output stood at 10.84 million barrels per day (bpd) in June, up from 10.83 bpd in May. It is intensifying competition in Europe as Iran boosts shipments to the region. Exports rose 4.9 percent to 5.55 million barrels a day in the first half of the year from the same period in 2015.

Chinese fuel export is expected to remain high in summer as domestic consumption is curbed by damaged roads and pipelines from rains and floods.

The two massive outages in Nigeria and Canada essentially tipped the global oil market from a supply surplus of about 1.3 mb/d into a deficit. At present Canadian output returning from outages could be enough to put the market back into oversupply side.

OPEC’s crude production increased in June as Nigeria finally raised output. Nigeria pumped an average 1.53 million barrels a day last month, a gain of 90,000 a day from May. Country was able to repair some pipelines after agreeing a cease-fire with rebels in the Niger River Delta. However, the Niger Delta Avengers militant group claimed five more attacks on oil installations in the region on Jul. 04.

Production in Saudi Arabia, the world’s biggest crude exporter, rose to 10.33 million barrels a day, a monthly gain of 70,000 a day. Output typically rises in summer months as country burns more crude to generate electricity to power air conditioners.

Iraq posted the biggest decline, with production falling 70,000 barrels a day to 4.3 million barrels a day. Iran’s output was stable at 3.5 million barrels a day, ending a five-month run of output gains since the start of the year following the lifting of sanctions.

A deal to unify Libya’s rival national oil corporations could pave the way for the OPEC member to boost output which currently stands at less than a quarter of pre-2011 levels of 1.6 million barrels per day. While it has made some progress, the country is still split down the middle between governing factions. Even after the agreement has been reached, the bulk of the country’s oil infrastructure is either damaged or straddles disputed territory, making a significant increase in output a remote prospect.

All in all the situation on the world fuel market is still unclear. We expect next week bunker prices may continue irregular changes.

905_Table 1

* 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)

567_Table 2
Source: Marine Bunker Exchange

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