World fuel indexes demonstrated irregular changes during the week, but turned upward after US inventory data. We can distinguish some signs, that prove market rebalancing. The U.S. crude oil stocks last week fell for an eighth consecutive week to their lowest since January 2016. The number of oil rigs also declined. At the same time, there are still some concerns of oversupply as domestic production in the US revealed to the highest level in over two years and supply from producers not participating in the accord, such as Libya and Nigeria, is rising.
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO at the main world hubs) had upward trend in the period of Aug. 17 – Aug. 24:
380 HSFO – up from 295.93 to 302.64 USD/MT (+6.71)
180 HSFO – up from 339.50 to 345.36 USD/MT (+5.86)
MGO – up from 504.86 to 508.50 USD/MT (+3.64)
U.S. crude inventories fell 3.3 million barrels last week, largely in line with expectations for a decrease of 3.5 million barrels. Overall U.S. crude stocks fell to 463.2 million barrels, a 14-percent drop from the peak of 535.5 million barrels at the end of March. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures, fell by 503 thousand barrels.
The number of active oil and gas rigs in the United States fell this week by 3 rigs: drillers proceed more cautiously as oil prices fail to sustain any significant increase. The number of oil rigs in the US decreased by 5 – to 763 (357 rigs above this time last year). Despite the falling average weekly gain in active US oil rigs, US crude oil production continues to increase, last week – by 26 thousand barrels per day (bpd), with average production averaging 9.53 million bpd.
On August 21, there was OPEC meeting in Vienna, where possible measures to tackle the fall in compliance with the global pact to cut output were discussed. July’s data showed OPEC compliance slipped to its lowest this year – to 94%. In addition, there are fears of falling demand for crude as the U.S. summer driving season nears an end while the number of U.S. rigs drilling for oil continued to fall suggesting that drillers are scaling back operations in the wake of lower oil prices.
At the same time OPEC oil supply is expected to fall by 419 thousand bpd -to average 32.8 million bpd- in August. The reason could be plans for lower exports by Saudi Arabia and reductions by other producers. Saudi Arabia has said its exports would drop to 6.6 million bpd this month, almost 1 million bpd below levels a year ago. In addition, the Saudis are also significantly cutting their crude oil exports to the United States. Tanker data suggests shipments from Iraq have also fallen in August.
Elsewhere, a shutdown of Libya’s Sharara oilfield due to a pipeline blockage provided some upside. Weighing in on fuel indexes uncertainty, market have been in a state of confusion over varying reports over the past three days as to the status of exports from Libya’s biggest producing oilfield.
Latest forecast said China would not reach peak energy demand until the year 2040.
Previous estimates predicted the peak would be reached in 2035, but new figures suggest, that five years later demand would be its highest at 4.06 billion tons of oil equivalent. Besides, China’s oil demand will grow at a rate of 2.7 percent annually until 2020, after which it will slow to 1.2 percent until the end of the next decade. Currently, China is second only to the United States in its overall energy consumption.
As a resume, oil indexes were lifted by indications that supply is gradually tightening, especially in the United States. Crude oil stocks in U.S. have been falling consistently in recent weeks. If the downtrend in oil inventories continues, it may cause oil indexes to increase. Together with OPEC+ supply restrictions it may lead to rebalance on oil market. Bunker prices may demonstrate slight upward deviation next week.
* 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)
Source: MabuxPrevious Next