Mixed movements of bunker prices expected next week, MABUX says
The Bunker Review is contributed by Marine Bunker Exchange
Benchmark crude oil prices have barely moved for more than two months, implying the market has found a temporary equilibrium after the enormous price shock in the second half of 2014 and early 2015. – Over the last 30 trading days, the range between the highest and lowest closing prices for front month Brent futures has been just $4.50 per barrel. The highest close for the front month futures contract was at $66.54 per barrel May 21 and the lowest close was $62.01 June 29.
The trading range is the smallest since the shock began in June 2014, and down from a peak of almost $40 per barrel in early January 2015.
The Brent crude oil has stabilized around $60-65 per barrel, which will gradually bring supply and demand back into balance, which seems sensible. The low variations will also help cementing short –and medium term expectations for producers and consumers at around the current level.
Expectations are not always correct but price convergence within a fairly narrow range makes it
easier for producers and consumers to formulate budgets for the rest of 2015 and 2016. The huge price shifts in the second half of 2014 and the first three months of 2015 made detailed planning almost impossible for oil producers and also for consumers but to a lesser extent. The only safe assumptions about oil and fuel prices were the most conservative ones.
But the recent stabilization of prices at $60-65 per barrel makes it far easier to produce some planning assumptions with appropriate scenarios around that level.
The market has discovered a new short- to medium term trading range. – Prices below $50 are unsustainably low because they cause too much production to be lost and strong growth in demand.
- Prices much above $70-75 would be likely to prompt widespread reactivation of shale drilling and
possibly curb fuel demand. The result of this reasoning could be that producers and consumers will therefore probably end up employing a baseline forecast of around $60 – 65 for the rest of 2015 and into 2016, with a low price scenario of $50 and a high one of $75, which is good enough for most planning purposes.
Back to today’s trading activities. Oil prices were broadly unchanged from their previous close in early trading on Thursday after tumbling 4 percent a day earlier as U.S. stockpiles rose for the first time in months on the back of high production.
Following Wednesday’s drop, front month U.S. crude futures were trading at $56.95 per barrel at 00.15 GMT, down 1 cent from their last settlement.
Heading into the second half of the year, U.S. crude has been testing support on the lower range of a $57-62 per barrel price channel where it has been trading since early May.
Brent crude futures were trading at $62.15 per barrel, up 14 cents, but the contract remains within a downward trend that has been in place since early May and which has seen prices fall more than 8 percent.
The tumble in U.S. crude came after government data showed inventories rose by 2.4 million barrels last week, marking the first weekly build since April. The stock build came on the back of strong U.S. production.
Bunker prices will likely continue to trade within the above explained price channels, which means irregular 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)
