Fujairah bunker traders feel ripple effect of crude price collapse
22nd April 2020 00:17 GMT

Low sulfur fuel oil prices in Fujairah fell by more than $40/mt Tuesday, as the ripple effect of negative WTI was felt in the Persian Gulf port, market participants said.

While some Middle East traders downplayed the impact of US benchmark West Texas Intermediate trading in negative territory for the first time in history, others noted the psychological blow to an already fragile oil market, weakened by extended lockdowns and travel bans due to the coronavirus pandemic.

“The paper market's dynamics has nothing to do with the actual physical cargo,” said a Kuwaiti trader. “But this is going to have a shock effect for people and it will cause more panic.”

On Monday, NYMEX WTI contracts for May delivery crashed to negative $40/b, marking the first time the front-month contract had fallen in to negative territory, where it largely remained on Tuesday.

On Tuesday, front-month Brent crude dropped below $20/b for the first time in 18 years while other major benchmarks across the world tumbled. The prompt-month international crude benchmark slipped as low as $18.10/b, before recovering slightly to trade around $19.50 by mid-afternoon in Europe.

Middle East traders said there is no more crude storage capacity in the region, and most VLCCs are now full. Any more crude produced may have to be sent to refiners for processing.

“Storage and tanks are full, it will be very gloomy days if producers don’t stop, the glut will go from crude to clean products such as gasoline and that will be a big a problem,” said an Oman-based trader.

Bunker traders noted a steep decline in very low sulfur fuel oil prices in Tuesday trading in Fujairah, with trades heard below $180/mt, compared with $220/mt on Monday.

“Fujairah is following Singapore’s [Platts Market on Close assessment process], the assessment of the market in Singapore was down $40 so Fujairah followed,” said a Fujairah bunker trader. “I was asked to compete, with bunker fuel falling as low as $177/mt, but I dropped it, it traded in that range.”

However, some market participants remained optimistic that the current prices are temporary.

”As soon as we step into May and start trading June/July the numbers should come up, instead of selling today I will sit and wait for the market to recover and sell again above $200,” another Fujairah trader said.



Bunkerworld .,
22nd April 2020 00:17 GMT