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As OPEC and non-OPEC producers meet in Vienna today to give their verdict on a proposed further 1.5 million barrels per day cut in oil production aimed at halting the relentless slide in crude oil prices, there has been some volatility this week in marine gasoil and very low sulphur fuel oil prices in the key global bunker ports but trends in differentials between these grades are beginning to appear.

OPEC+ members agreed yesterday (5 March) on a deep 1.5 million b/d oil production cut in a bid to stem an almost 25% fall in the price of crude oil since the start of the year caused by fears over the impact of coronavirus and a massive reduction in China’s oil demand. The proposed oil production cut will require Russia’s buy-in and that is by no means a done deal. The nervousness of the world’s largest oil producers over the current and projected oil supply/demand scenario is evident, with Bloomberg reporting that Saudi Aramco has taken the unprecedented step of postponing its 5th of the month announcement for the following month’s official selling price until after OPEC signals its final decision on production cuts today.

In the period between 27 February and 6 March, the prices for HSFO in the main bunker hubs have shown some volatility, perhaps reflecting some ongoing tightness in avails, but they have ended the week only a few dollars down across the board. The largest fall amongst the main global ports was in Rotterdam, which, according to the Bunkerspot Price Index, saw a $21 per metric tonne (mt) decline.

Prices for MGO and VLSFO would seem to have reflected the downwards drift of crude oil prices over the week. Across the key ports, VLSFO price drops have remained within a $20 to $40 band, with the exception of two ports in the Americas. VLSFO prices in Los Angeles have tumbled $90 across the week, while a slightly less dramatic decline – around $55 – has been seen in Panama.

While bunker industry experts are cautioning that the ‘real’ price of VLSFO will not be seen until the end of Q2, some patterns do seem to be emerging over regional price variations and the VLSFO/MGO spread in some of the key ports.

The differential between VLSFO and MGO is still narrow in some Asian ports. On 6 March, it was $5 in Hong Kong and $15 in Singapore. At the other end of the scale, however, there was an $87 spread in Shanghai, with MGO priced at $522 p/mt and VLSFO at $435 p/mt.

As at 6 March, Los Angeles is showing a significant $90 differential, with MGO at $575 and VLSFO, seen at $575 at the end of last week, now at $485 p/mt. The spread between these grades is $52 at Panama and $55 at Houston.

The price for MGO at Fujairah is still high compared to the other key bunker supply hubs - $598 compared to $608 a week ago, while the VLSFO/MGO differential is $45. An easing in VLSFO prices from the spike at the turn of the year looks to be continuing with a $37 fall across the week from $480 p/mt to $443 p/mt, and there does seem to be increasing alignment between VLSFO prices at this Middle East supply hub and the other main flow port.

The VLSFO/MGO price differential has widened slightly at Rotterdam this week, increasing from $51 on 27 February to $57 on 6 March. The price for VLSFO at Rotterdam has shown some volatility in recent days and has ended the week some $35 down, at $365 p/mt, which is still by far the cheapest price for this grade among the main supply hubs.

GLOBAL: WoodMac: ‘Coronavirus complicates OPEC's options as China's oil demand plunges’

GLOBAL: High and low sulphur fuel prices tumble since IMO 2020 tipping point

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