MABUX: Bunker market this morning, Dec 20
The Bunker Review was contributed by Marine Bunker Exchange (MABUX)
MABUX World Bunker Index (consists of a range of prices for 380 HSFO, 180 HSFO and MGO (Gasoil) in the main world hubs) slightly rose on December 19:
380 HSFO: USD/MT – 367.46 (+1.19)
180 HSFO: USD/MT – 408.51 (+0.87)
MGO: USD/MT – 691.44 (+3.55)
Meantime, world oil continued slight upward changes on Dec.19 supported the previous day’s news that U.S. crude inventories declined and as U.S.-China trade tensions continued to ease.
Brent for February settlement increased by $0.37 to $66.54 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for February rose by $0.25 to $61.18 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $5.36 to WTI. Gasoil for January delivery added $4.75.
Today morning oil indexes are stable as the China-U.S. trade talks showed signs of progress.
Prices were buoyed by China’s Dec. 13 decision to cancel a plan to impose additional tariffs on U.S. imports on Dec. 15 and the Phase 1 deal between Washington and China, which has eased trade tensions. The deal between the world’s two largest economies has improved the global economic outlook, lifting prospects for higher energy demand next year and underpinning oil prices. In a further sign of thawing relations, China’s finance ministry on Dec.19 published a new list of six U.S. products that will be exempt from tariffs starting on Dec. 26. The exemption will be in force for 12 months, ending on December 26, 2020.
However, if U.S. and Chinese officials will not provide concrete details about their efforts to reach a trade agreement, oil prices could lose their upward movement. The uncertainty around what’s happening on the trade front may start to add more resistance.
Another reason for oil prices upward changes was the agreement this month between the Organization of the Petroleum Exporting Countries and non-OPEC producers such as Russia to deepen production cuts by a further 500,000 barrels per day (bpd) from Jan. 1 on top of previous reductions of 1.2 million bpd. Both JP Morgan and Goldman Sachs raised their 2020 oil price outlook earlier this week as OPEC led output cuts and an improved global trade outlook led to more optimism.
Oil indexes also got support from the Energy Information Administration weekly report. Data showed U.S. crude inventories dropped 1.1 million barrels the last week, while gasoline and distillates stockpiles rose. Refiners are back turning out products at full gusto and that’s causing steady buildups in gasoline and distillates, which don’t necessarily have runaway demand at this time of year. It was expected a drop of about 1.3 million barrels.
News that the U.S. House of Representatives voted to impeach President Donald Trump received some attention today, but had little impact on markets as the decision was largely expected. Trump is the third president to be impeached in U.S. history but is likely to survive a trial in the GOP-led Senate.
Singapore’s marine gasoil demand is unlikely to receive a significant boost going into 2020 despite its rapidly narrowing price gap to low sulfur fuel oil in the lead-up to the International Maritime Organization’s 0.5% sulfur cap on marine fuels from January. The delivered MGO 0.5%/MF 0.5% spread narrowed to a record low of $1/mt Tuesday, after hovering just above that level for a week since hitting first $1/mt on December 10, Platts data showed. The spread has crunched to average $12/mt to date in December from $38/mt over November, the data showed.
The LSFO bunker price has indeed exceeded the MGO price in some cases, it really depends on stem size and delivery date. Barging is tight for LSFO now, so the price could easily exceed MGO delivery if it’s for very prompt LSFO delivery. While LSFO is likely to remain the more popular option going into early 2020, availability issues could still divert some demand to MGO, traders said. Fuel quality and compatibility of the 0.5% sulfur marine fuel remain key concerns for market participants in 2020.
We expect bunker prices will increase today: 1-3 USD up for IFO, 3-5 USD up for MGO.
