The global chasm in crude oil quality supply shows no signs of narrowing, prompting refiners to lighten their slate and leading to a market awash with gasoline , naphtha and LPG. New restrictions next year on the amount of sulfur in global marine fuels may mean refiners buy even more US shale oil , but this may not put an end to a saturated light ends market. Much hinges on demand. The meteoric rise in US production over the past decade — almost doubling to record highs of around 12 million b/d — shows little sign of slowing in the near term. As light sweet US shale floods the market, producers of heavier, more acidic varieties have been cutting back due to OPEC-led output cuts to the tune of 1.2 million b/d. US sanctions on key exporters like Venezuela and Iran have choked off more than 1 million b/d and even cuts from the US’s northern neighbor Canada have tightened the sour oil market. There appear few answers to the supply side of the ledger. Even oil’s supermajors, once burned by forays into the Permian and other important shale plays, are muscling in once again on the US independents, while Middle Eastern producers are reluctant to cut back on what little sweet crude they export. Saudi Arabia and their Gulf allies are tacitly benefitting from higher prices for their heavier grades. Iran is likely to suffer further sanctions misery in May when the exemptions granted in November are most probably eased, while the full force of sanctions of state-owned PDVSA will be felt in the months ahead. The demand side, while complicated, could provide some respite to an off-kilter market. At the refinery level, there has been a changing diet to lighter, sweeter crude . This has been more challenging for the swath of sophisticated refineries which had invested in equipment to handle thicker, sourer varieties only to find themselves paying relatively higher prices. The spread between the light sweet S&P Global Platts Dated Brent benchmark and the medium sour Platts Dubai measure has narrowed considerably in the past few years, reflecting the growing disparity between sweet-sour grades. The Brent /Dubai Exchange of Futures for Swaps (EFS), which is a key indicator of ICE Brent’s premium to benchmark cash Dubai prices , has been paper thin. The Brent /Dubai EFS has averaged around 50 cents/barrel this year compared to $3.75/b in 2016, S&P Global Platts data shows. In Europe , naphtha cracks have been averaging minus $8-$9/b to Dated Brent so far this year, the lowest since 2009, according to Platts data. “Lighter average crude quality is increasing the supply of naphtha, but tightening residual fuel until IMO 2020 frees up high sulfur fuel oil,” S&P Global Platts Analytics said in a recent note. Demand divergence There is no doubt that demand for less sulfurous products is shifting, in particular less demand for fuel oil used in shipping as the International Maritime Organization ’s 0.5% sulfur cap comes into force at the start of 2020 from the current 3.5% limit. Refiners will have to meet additional shipping demand for diesel and low sulfur vacuum gasoil by snapping up lighter, sweeter crude and producing less fuel oil . Refineries becoming more complex can convert residual fuel oil into more valuable products, with companies such as Saudi Aramco telling Platts recently that it is targeting zero fuel oil output by 2024. But this doesn’t solve the riddle and may only exacerbate the glut in gasoline, jet fuel and naphtha. Looking at the proportion of products that come from a typical barrel of US shale oil and a typical barrel of heavier sour crude, the former can be almost 90% middle distillates or lighter, while the latter produces around 50% fuel oil. Moreover, greater refining of middle distillates will tend to mean more gasoline and naphtha is also produced. The recent International Energy Agency “Oil 2019” report doesn’t suggest the excess gasoline and light end cousins will be mopped up that easily. Demand growth for gasoline — the world’s most popular transport fuel — is expected to slow to below 1% a year to 2024 due to efficiency improvements and new fuel economy standards Wider spreads needed However, aviation and petrochemicals makes for lighter reading, with a 1.9% a year growth in jet fuel demand over the next five years and a 2.6% a year rise in LPG, ethane and naphtha demand in that period. ”Wider spreads between light, sweet products and heavy, sour ones will be required to allow more expensive rebalancing steps to be carried out economically,” wrote S&P Global Platts Analytics’ Rick Joswick in the latest Turning Tides special report. So while the looming IMO decision will encourage a shift to consume US shale and other light sweet grades, it could also lead to a gasoline glut as global demand across the barrel is predicted to slow down. The newer price dynamics for premium products may indeed become the new normal, with price once again the ultimate arbiter. One thing seems certain in the years ahead: crude quality and the fungible nature of crude can no longer be taken for granted. The post IMO 2020 may not solve crude oil quality riddle: Fuel for Thought appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/18/imo-2020-may-not-solve-crude-quality-riddle/
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Ulterra's SplitBlade wins @Hart_EPMag Special Meritorious Award for Engineering Innovation (MEA)! Click here to read more >> https://ulterra.com/drilling-technology-news/ulterras-splitblade-wins-the-2019-ep-special-meritorious-award-for-engineering-innovation/ … pic.twitter.com/YZOt0vP6yG source https://twitter.com/UlterraBits/status/1106625865486688256 from https://ulterra.blogspot.com/2019/03/ulterras-splitblade-wins-hartepmag.html As energy industry professionals gathered in Houston for CERAWeek, global oil politics was top of the agenda. Policymakers and market participants saw opportunities for the US to grow its oil and gas exports amid geopolitical turbulence. Developments on Iran sanctions were a key question hanging over the event, as the market awaits further news on waivers for key importers of Iranian crude. And the US’s request thatIndia cut its Venezuelan crude oil imports has raised the possibility that it could take a softer line on Indian purchases of Iranian oil. Meanwhile, Japan this week looked poised to take a last cargo of Iranian oil under the current waiver, as talks between Japan and the US on the sanctions continue. GRAPHIC OF THE WEEK US oil and gas rig counts have shown erratic patterns lately, but one reason for recent declines may be the increasing efficiency of operators. ENERGY TRANSITION EU parliament to approve anti-fossil energy laws by mid-April The European Parliament is on track to approve all outstanding draft EU energy laws by mid-April, ensuring that the push away from fossil fuels towards renewable energies will not be disrupted by its elections in May. OIL PRODUCTS Analysis: Gasoil a winner as India gears up for federal election India’s appetite for gasoil is set to witness robust growth in the second quarter as the country gears up for its federal election in April, prompting refiners to delay turnaround plans, limit exports and build stocks in expectation of a rise in incremental demand. AGRICULTURE Listen: What prompted Southeast Asia to return to the Black Sea for new crop wheat? Buyers in Southeast Asia have returned to the Black Sea to purchase new crop milling and feed wheat, three to four months ahead of the harvest. In this podcast, agriculture editors Takmila Shahid and Andrei Agapi examine the factors that triggered the buying appetite and whether the pace will pick up rapidly. THE LAST WORD “I’d venture to say the [US] Gulf of Mexico itself is on life support… We’re not putting enough money back in to grow supply five [to] 10 years from now.” – John Hess, CEO of oil company Hess Corp., speaking Monday at CERAWeek. The post Energy and commodities highlights: CERAWeek, US sanctions and EU energy laws appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/15/commodities-highlights-ceraweek-sanctions-eu-energy-laws/ Minerals producers have made fortunes over the last decade to slake China’s thirst for raw industrial metals. But in the future their profits could be hit by the Middle Kingdom recycling ever-greater quantities of its own ferrous scrap to meet industrial demand and, more importantly, cut dangerous pollution levels. It is an interesting time to be a scrap dealer in China. The market for recycled metal in the world’s second-largest economy is booming. Demand for steel scrap for smelting into new material in China surged by almost 40% in the first nine months of 2018 to around 150 million mt, according to the International Recycling Bureau’s latest figures. Stricter rules to reduce emissions, trade tariff wars on the import of waste metals from the US and the rise of China’s urbanised middle classes, who are now buying new white goods and throwing out old household appliances with greater frequency, have triggered a scrap metal revolution in the country. “Many believe scrap is the future,” said William Chin, senior vice-president and head of commodities at the Singapore Exchange (SGX), in an interview this week with S&P Global Platts. The exchange, which is a hub for iron ore trading in Asia, is considering launching a new scrap metals derivative contract, partly in recognition of the growing market in China. “Everyone I have spoken to has said scrap is going to be big,” said Chin. Emissions a political priority China’s war on pollution will require more metals to be recycled, a less energy intensive process than smelting ore. Despite a concerted effort by the government to clean up the country’s dirty air, emissions remain a major political and economic concern. Previously, China has been forced to shut down its factories when the air became unbreathable. The problem is particularly bad in cities like Tangshan, China’s equivalent of Sheffield during Britain’s heyday as a major global producer of iron and steel. The air in this city of almost 8 million people is often classified as unhealthy for humans by the closely watched Air Quality Index. China’s cities have outdone the grim image of dark satanic mills in England’s industrial north painted by LS Lowry. The annual meeting of the National People’s Congress, which kicked off this week, was shrouded in thick smog smothering Beijing. The high levels of pollution wafting in from neighboring industrial cities in Northern China will have served as a reminder to delegates in the Great Hall of the People to not relent on their campaign to clean up the environment. Premier Li Keqiang opened the gathering by vowing to sharply cut emissions of sulfur dioxide and nitrogen oxide, both major pollutants produced by the country’s dirty iron and steel foundries. Mixing scrap metal into their furnaces is a way for China’s steel mill owners to meet demand, while hitting new emissions quotas. Global impact China’s domestic supply of scrap metal should also help to reduce its dependence on imports of iron ore. The country accounts for over 70% of the 1.6 billion mt annual market for the steel-making ingredient. This will continue but the blend of imports is changing to take account of new environmental standards and the growing use of domestic scrap by Chinese smelters. The recycling drive also extends to non-ferrous metals such as copper. China’s decision last year to impose a 25% tariff on the import of US recycling materials including copper means domestic supply has to increase to help meet industrial consumption. The government has also introduced legislation to regulate imports of waste materials to prevent China becoming the world’s rubbish dump and last year already banned imports of mixed metal waste, with lower metal contents. However, China still needs more domestic metal and industrial scrap to keep its giant economy humming. Although exports suffered their biggest drop in three years last month, the government has unveiled almost $300 billion of tax cuts and stimulus measures over the last week, to help support growth. Despite the robust fundamentals to support the global ferrous metal scrap market, prices have remained weak, partly due to China’s growing use of its own domestic supplies instead of importing more waste material from overseas. The price of the Heavy Melting Steel benchmark assessed by S&P Global Platts has dropped by almost 15% to around $322/mt over the last year to date. However, the decline is mainly due to problems in the Turkish market, a major hub for scrap. China’s push to use more of its own scrap metal, to help clean up its dirty air and reduce foreign imports, will be an increasingly important factor for global commodities investors to consider and a way for this industrial powerhouse to prevent catastrophic levels of pollution from ruining its economic achievements. The post Toxic air catastrophe triggers scrap metal revolution in China appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/14/toxic-air-china-scrap-metal-revolution/ Life doesn’t seem to be getting any easier for hydrocarbon producers despite their return to bumper earnings from firmer prices. As energy executives prepare to face activist investors at annual general meetings next month, pressure for faster change seems to be coming from all angles. Already under siege to de-carbonise their long-term business models, Big Oil is still struggling to attract talent and overhaul its male-dominated management structures. With the AGM season fast approaching, climate-change related proposals from US investor groups alone are expected to hit a new record of over 90 this year, up from up from 36 in 2013, according to ISS Analytics. At the International Petroleum (IP) Week last month, an annual London gathering of traders and industry executives, corporate hand-wringing over the industry’s present and looming business woes was palpable. The key message from the headline speaker – the head state energy giant Saudi Aramco Amin Nasser – was clear; there is a “crisis of perception” that the global oil and gas industry has little future, risking a major energy supply crunch in the years ahead. “Facts and logic” over the need for hydrocarbons are being ignored and the importance of oil is “misunderstood” by both the public and climate activists, the event heard. Courting millenials Justified or not, public perceptions about the future for hydrocarbons are certainly hitting producer’s ability to hire and retain expertise. Oil majors have for years been lamenting their fading appeal to young minds as a future career path, as they struggle to shake off their image as a dinosaur industry ready for obsolescence. Concern is now growing within the industry that the digital revolution is hoovering up the best young talent. With more of the talent pool opting for alluring jobs in the technology sectors, new geologists and petroleum engineering graduates have been in short supply, putting pressure on wages and driving upstream costs. To compete, oil companies at IP Week talked up the need to engage new recruits with their own digital initiatives. Representations from BP, Total and Equinor all said they are looking to double down on efforts to embrace the “disruptive” potential of new tech such as quantum computing, artificial intelligence, and blockchain. “Millennials … are not motivated as much by money; they are driven by mission and meaning,” Mr Nasser said. “We need to inspire them … with the technology-driven enablers we are contributing to address some of the world’s greatest challenges.” Lagging on diversity Shareholders have also been increasingly targeting companies with little or no female representation on their boards. As representatives of blue-chip power, Big Oil is very much in the firing line. Last year, Legal & General Investment Management, one of the biggest investors in the UK stock market, announced it would step up pressure on companies by voting against the chairs of FTSE 350 firms at annual meetings if their boards were not at least 25 per cent female. Tellingly, during one IP Week session, an all-white male panel of industry executives was quizzed from the floor on how oil majors can tackle the lack of diversity in their boardrooms. Big corporations have spent billions of dollars attracting and managing diversity, but they still face discrimination lawsuits and, for many, their leadership ranks are stubbornly white and male. Overall, 22% of the global oil and gas sector’s workers are women, according to a 2017 study by Boston Consulting Group. Only the construction section fares worse. The problem is most visible, and arguably controversial, at the top of the corporate food chain: in the boardroom. An EY survey last year found only 11% of the world’s top oil and gas senior executives are women. Top female leadership roles are also the hardest to fill, with the retention of women beyond the mid-career, middle management levels a particular challenge. But to claim there has been a little progress in gender leadership roles is unfair. Government targets and the rising threat of shareholder action has already pushed most companies to take action. In the UK, female participation on boards in the FTSE350 has more than trebled to 27 % since the 2011 landmark Lord Davis review which set “soft” targets. Detractors point to the very low starting base, and many shareholders now focused on gender parity in the workplace are still frustrated by the slow pace of change. This poses a continued dilemma for international and national oil companies which – despite making progress on improving the ratio of top women to men – are still being labelled as big “boys’ clubs”. Gender equality aside, producers also face rising expectations that board diversity translates to stronger earnings. Simply put, more diversity is now seen as a performance driver critical to business success. So how should the energy industry respond to its new challenges? Perhaps simply claiming that its purpose and value is “misunderstood” due to a “crisis of perception” might not be the best way forward, BP’s upstream chief Bernard Looney suggested at the London event. “We run a slight risk of feeling misunderstand and therefore our response is to shout louder,” he said in response to a question on how oil companies can navigate the shift to clean energy. “I don’t believe that shouting louder is a way to articulate our purpose. We have to find a way to be more engaged, but not do it in a way that appears defensive.” That same prudence over the message will need to be in plentiful supply as oil majors face investors at AGM’s next month. The post Big Oil braces for fresh pressure over climate strategy, diversity appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/13/big-oil-pressure-climate-diversity/ Price differentials for heavy, sour Western Canadian Select on the US Gulf Coast have reached their highest levels on record as Albertan production curtailment, Venezuelan political upheaval and OPEC production cutbacks have created a tight supply of heavy sour grades in the region. WCS at Nederland, Texas, was assessed Monday at the NYMEX WTI CMA plus $3.50/b, its strongest ever differential, according to S&P Global Platts data going back to 2016. Since trading at parity with the WTI CMA on February 7, WCS at Nederland, Texas, has steadily strengthened as the market reacted to the high demand and short supply of heavy sours. Oil production in Alberta, where WCS is produced, was initially curtailed by 325,000 b/d in January after a provincial government mandate capped production at 3.56 million b/d. Since then, Alberta production levels have twice increased, to a total 100,000 b/d from the initial curtailment, in an effort to widen the differential between WCS at Hardisty and WTI. Since curtailment has taken effect, differentials for WCS at Nederland have strengthened by $4.40/b from trading at the WTI CMA minus $1.90/b on December 28. Venezuela sanctions On Thursday, the Trump administration said it was preparing new sanctions against Venezuela. It is anticipated these would include additional oil-related sanctions and potentially moving up the deadline banning dollar transactions with PDVSA that currently stands at April 28. Should these be put in place, WCS in the USGC is likely to continue its bullish performance. Venezuela produced 1.10 million b/d in February, 60,000 b/d lower than January, according to an S&P Global Platts survey released Thursday. Venezuelan oil production has plummeted by 910,000 b/d since 2017 and is at its lowest level since an industry strike in late 2002 and early 2003, according to S&P Global Platts survey data. Imports of Venezuelan crude have dropped significantly over the past few years as the country’s production has waned. US Imports of Venezuelan crude in 2018 were nearly 220,000 b/d less than the over 733,000 b/d imported in 2016, according to data from the EIA. The data shows US imports of Venezuelan crude fell precipitously in the first week of March, numbering only 83,000 b/d, down from an average of over 491,000 b/d in the three months prior to March. The ongoing power blackout in Venezuela is also expected to limit exports from the country. Also adding to the tight market for heavy sour crudes has been the 1.2 million b/d OPEC supply cuts that took effect in January 2019, and more significantly, a decline in Saudi imports to the US. Saudi Arabia imported 491,250 b/d of crude to the US in February 2019, down from an average of 881,000 b/d crude imported in the three months prior to February 2019, according to data from the EIA. This drop-off, assuredly an effect of OPEC cuts and a Saudi focus on Asian market share, has contributed to the strength of heavy sours in the USGC. Mars vs. WTI Midland These factors have also boosted US Gulf Coast sour grade Mars to a premium to WTI Midland crude at the Magellan East Houston terminal (MEH) this year for the first time in more than three and a half years. The heavy, medium grade typically trades at a discount to lighter, sweet crudes on the Gulf Coast. Mars reached a premium to MEH on January 17, when it was assessed at WTI cash plus $5.85/b, which was 25 cents/b over MEH on the same day. The last time front-month Mars was at a premium to MEH was May 7, 2015. The two grades have tracked closely together since January, with MEH at times reclaiming its premium to Mars. However, late last week Mars once again was heard trading at WTI plus $7.40/b, about a 20 cents/b premium to light, sweet MEH. Mars has averaged about an 8 cents/b premium over the past 30 trading days. That is compared with the average $2.70/b premium MEH held over Mars in 2018. The tight market for heavy sours has also had an impact for Latin American crudes. Last week Colombian heavy-sour Castilla Blend tenders were traded around minus $5.50-$5.00/b for April loadings compared with an average of $9.00/b traded for March shipments. Two separate tenders with Colombian medium-sour Vasconia for April loadings were heard done around minus $2.50-$2.25/b versus ICE Brent last week. Such levels were above the average of $5.30-$5.10/b recorded for March shipments of the same grade in the tender market. As a result of the strong demand, Vasconia reached its highest level in nearly six years. Castilla Blend and Vasconia compete for business with other heavy-sour grades in the US. In January-February, imports of Vasconia and Castilla amounted 10. 3 million barrels, 17% down from 12.4 million barrels in the same period of last year. The post In the LOOP: West Canadian Select price on US Gulf Coast hits new high appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/12/loop-west-canadian-select-usgc-high/ A strict sulfur limit for marine fuels starting in 2020 and its potential to boost US gasoline and diesel prices may have caught the White House off guard last year, but it’s not taking refiners or members of the shipping industry by surprise. US refiners say they have been preparing for the International Maritime Organization’s 0.5% sulfur cap for a dozen years by making billions of dollars of investments to their plants. They also think US oil producers are well positioned to meet new global demand for lower-sulfur fuels. Despite the industry’s confidence, Gulf Coast refiners are nevertheless skittish about one major wild card. The January 1, 2020 implementation date comes right in the middle of President Donald Trump’s re-election campaign, and this White House has shown a particular sensitivity to pump prices and their impact on voters. Trump has proved through his Twitter feed that he personally keeps a close eye on oil prices, even if he sometimes confuses ICE Brent and NYMEX WTI. Additionally, his administration weighs policy options with an understanding of how they might move gasoline and crude oil prices. Trump administration sources told the Wall Street Journal in October that the White House was considering ways to delay the IMO’s 0.5% sulfur cap beyond the long-scheduled January 1, 2020, implementation date. The story alone sent the stock market value of five US refining companies down by a combined $11 billion – hence their skittishness. Within weeks of the story, trade groups for refiners, oil and gas producers, LNG exporters and steelworkers created the Coalition for American Energy Security to educate White House officials and members of Congress about IMO 2020 and what US industries were already doing to prepare. “As we draw closer to implementation of IMO 2020, it’s essential that the president and his administration are fully aware of the job impacts and energy security benefits of implementing the standards on time,” said Ken Spain, spokesman for the Coalition for American Energy Security. “The American energy industry is ready to dominate the global market for these new fuels, and timely implementation is critical to achieving that objective.” The International Energy Agency and Energy Information Administration project modest price increases for diesel and jet fuel as a result of the tighter marine sulfur standards, but other analysts see more dramatic impacts coming at the end of the year. Short-term price spikes? Either way, the impending sulfur cap will bring big changes for the shipping, aviation, refining, oil production and power generation sectors. Go deeper: Read S&P Global Platts’ special report on the future of fuel oil after IMO 2020
IEA Executive Director Fatih Birol testified to Congress in February that there was a “bit of panic” in the oil industry about the impending regulations, but refiners are adjusting. “There may be some temporary price spikes for diesel and jet fuel prices, but we think the market will adjust, and we don’t expect those price spikes will be long-lasting and big,” he said. “There will be some adjustment period. But the refineries are today being configured according to the IMO rules, and the US is one of the leaders.” So if US pump prices or oil benchmarks spike ahead of implementation day, what can the White House do to delay IMO 2020? Not much at all – short of building a majority coalition supporting delay ahead of the IMO’s Marine Environment Protection Committee meeting in May. That looks very unlikely, though, after the panel in October already rejected a proposal for a soft rollout of the standards.
Trump does hold a few tools that he could use for domestic messaging purposes if prices spike: releasing fuel from the 1 million barrel Northeast Home Heating Oil Reserve or ordering an emergency crude oil drawdown from the Strategic Petroleum Reserve. Citigroup commodities strategist Eric Lee said that the White House wanting to lower fuel prices ahead of the November 2020 elections is the most notable policy risk surrounding implementation of the sulfur specs. “The headline risk alone could drive a selloff in diesel cracks and thus jet cracks, though we see a low probability of IMO 2020 actually being stymied or pushed back, and thus would expect such market reactions to reverse,” Lee wrote in a note to clients. Twitter effect In the year since Trump first used Twitter to complain about high oil prices, his oil-related tweets continue to move intraday prices in a big way. Lee’s analysis found an average 1.5% movement immediately after a tweet, with Trump’s February 25 tweet driving a 3-4% selloff within five hours. While Trump’s oil tweets may move the market for a day or two, Lee said the tweets have ultimately had little long-term effect in changing the course of oil prices. “It is not the first time a US president has tried to influence OPEC policy, but the speed of the new information hitting the market, the specific tone of Trump’s tweets, and the automation of trading orders, is driving more short-term and sharp reactions to such messaging for oil markets,” Citigroup’s Lee said. Goldman Sachs sees a “non-trivial probability” that the 2020 presidential election will have an influence on IMO implementation. “There is a risk on the horizon, but it is not our base case,” Jeff Currie, the bank’s global head of commodities research, told S&P Global Platts. “We wouldn’t discount any involvement if prices were to rise significantly.” The post Insight from Washington: US refiners worry about White House wild card as IMO 2020 nears appeared first on The Barrel Blog.
India and Pakistan’s tense relationship returned to the headlines recently, and while the latest incident had little impact on commodity markets, it brought into focus India’s role as a fast-growing market for raw materials. Saudi Arabia quickly set diplomatic wheels in motion to defuse the situation. Aside from the clear interest in preventing fresh conflict from erupting close to home, Saudi Arabia expects India to become an increasingly important export market for its oil, and is also planning huge refining and petrochemicals investments in India. Meanwhile the US is eyeing India as a potential sink for its rising oil output, with Indian refiners apparently keen to make regular purchases of American crude. Fluctuations in India’s agricultural production could provide opportunities for other global producers. This year an expected lower corn crop means the country is likely to need an additional 1.5 million mt to meet demand. Markets were watching for signs of progress in US-China trade discussions in the past week. Playing down expectations of a quick resolution, a member of a key government advisory committee laid out in stark terms the extent of the US’ requirements to come to an agreement with China. And in another twist in the US trade war saga, the Japanese sponge titanium industry was surprised to find itself the subject of a new section 232 investigation. The US International Trade Commission had previously cleared Japanese products in 2017. NORD STREAM 2 Russia’s Nord Stream 2 natural gas link to Germany is set to have to reveal data on its costs and tariffs under a draft accord to apply EU market rules to it. In this podcast, S&P Global Platts editors Siobhan Hall and Stuart Elliott analyze the main drivers and likely outcomes of this change in EU gas policy: GRAPHIC OF THE WEEK OIL OPEC Feb crude oil output falls 60,000 b/d to 30.80 mil b/d: Platts survey
Saudi Arabia’s continued output discipline and Venezuela’s struggles under US sanctions led OPEC’s crude oil production in February modestly lower to 30.80 million b/d, an S&P Global Platts survey of industry officials, analysts and shipping data found. RENEWABLES UK offshore wind sector to invest GBP250 million in supply chain
The offshore wind industry is to invest GBP250 million ($329 million) in the UK supply chain as the sector targets a fivefold increase in exports to GBP2.6 billion by 2030, the Department of Business, Energy and Industrial Strategy said Thursday. PETCHEMS Cracker outages in Europe to have mixed impact on Asian petrochemical market
Recent cracker outages in Europe resulted in an uptick in European prices of benzene and styrene, which market sources said could have some effect on trade flows and prices in Asia. Market sources said Dow Chemical shut down its steam cracker in Boehlen, Germany, due to some problems. SHIPPING Feature: Japan supports open-loop scrubbers, discourages bans on discharge
Japan has decided it will support the use of open-loop scrubbers aboard ships and discourage other jurisdictions from banning the discharge of water from such units as the deadline for the International Maritime Organization’s global sulfur limit rule for marine fuels draws nearer. THE LAST WORD “As far as we’re concerned there’s plenty more barrels in the sea.” – Andrew Austin, executive chair of UK independent upstream company, RockRose, discussing the company’s recent North Sea asset purchases with S&P Global Platts.
The post Energy and commodities highlights: All eyes on India, US trade talks, Nord Stream 2 appeared first on The Barrel Blog.
China represents a huge market for thermal coal, and for regional suppliers there is no way to avoid the dragon. That’s especially true for Indonesia, the world’s largest exporter of thermal coal. According to the Bank of Indonesia, in 2017 the mining industry contributed about 4.7% to the Indonesian economy, if the commodity is priced in US dollars. “It is China, China, China, then number four perhaps is India, followed by Korea, Japan and Taiwan,” said a market source when asked about the demand for Indonesian thermal coal. China is Indonesia’s top destination for total thermal coal sales (including bituminous coal, sub-bituminous coal and lignite), followed by India, S&P Global Platts data showed. Of the total 394 million mt thermal coal exported in 2018, about 31% headed to China and about 27% to India, according to S&P Global Analytics. “We can’t always sell into China, but it’s inevitable because of the volume,” said one Indonesian producer. Indonesian producers Platts spoke to said there is always the risk of ‘putting all the eggs in one basket’, leaving coal prices too dependent on China’s import policies. Late last year, several Chinese ports were reportedly closed for thermal coal seaborne imports and there were often no official statements on the policies, creating frustration for market players. According to China Customs January data, the country’s total coal import in December slumped 50% from 13.52 million mt in November and 57% on year from 15.8 million mt, showing the impact of the tightened grip. As 2019 began, customs clearance processes became smoother, but just before the lunar New Year holidays, several sources reported longer-than-usual delays for imported coking and thermal coal of Australian origin. While Indonesian thermal coal prices have rebounded from the beginning of this year, Australian thermal coal prices have been suppressed as a result of cautious buying. Though Indonesian coal has not been affected, worries about import curbs are still on the minds of market players, as China tries to keep the annual import volume at the level of 2017. In 2018, China imported a total of 281.23 million mt of all coal types, up 3.9% on year, China Customs figures showed. China imported 271 million mt of coal in 2017. Diversification Several sources said China is unlikely to totally close its door on coal imports as it needs the seaborne cargoes to supplement the domestic market. Nevertheless the Asian giant has embarked on a path to reduce the reliance on coal by boosting natural gas imports. In addition, China has also implemented coal-to-gas projects and is developing renewable energy, while at the same time increasing domestic coal output. This might not bode well for Indonesian exporters in the longer term. To deal with the risk of being too reliant on China given the uncertainty of imports, some market sources have taken proactive steps to diversify their portfolio. For some producers, diversification is already happening, even though it means selling to some other markets at prices below the prevailing market rate. “This is part of the market strategy of some Indonesian producers, to sell at a lower price level as they want to expand into the markets and build relations with the buyers,” said a Singapore-based trader. “Ideally, it’s good to diversify, as Southeast Asian countries, for example Vietnam, are on a growth phase,” said an Indonesian producer. The International Energy Agency forecasts that coal demand in Southeast Asia would grow by 5.7% through 2023, as countries including the Philippines and Vietnam are building new coal-fired power plants as their economies develop. A Singapore-based market source told Platts that it is possible to spread the demand geographically as the total export volume to other regions could add up significantly. “But much has to be done in terms of market development,” he said. “This would include setting appropriate credit terms, loan structures as well as allowing power plants in these countries to gain equity in the mines supplying the station,” he noted. Cutting production Diversification would not be a straightforward process as coal requirements at power plants in India, Vietnam or Southeast Asian countries might be different, one Singapore-based analyst noted. “Many of the plants might not be able to use the lower CV coal. While the mid to high CV thermal coal producers are able to diversify their markets, the lower CV ones would likely stick to the Chinese market,” he said. China is the main market for Indonesian lignite exports. Of the total 85 million mt exported in 2018, 80 million mt were exported to China, S&P Global analytics data showed. Of the total 263.5 million mt Indonesian sub-bituminous coal exported, China imported 35 million mt. For Indonesian thermal coal producers with over 90% of cargoes in their portfolio heading to China , it will still be business as usual for now. “We’ll export as usual, as there’s demand from China,” said a producer of low CV coal. Meanwhile, the Indonesian government recently set a 2019 coal production target of 480 million mt, compared with a target of 485 million mt in 2018. The government also requires coal miners to allocate about 26% of the production for the domestic market. Rather than diversify to minimise risk exposure, the Singapore-based analyst suggested that producers should cut output, saving the supply for future use as domestic demand in Indonesia and other Asian countries is expected to rise. “It is necessary to have a longer-term mindset and cut production significantly to meet future demand instead of increasing output and seeing prices plunge if China shuts its door again,” the analyst added. The post Indonesian coal faces uphill struggle to diversify exports away from China appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/07/indonesian-coal-diversify-exports-china/ Commodities markets expected the worst last week when tensions between India and Pakistan erupted in a blaze of dogfighting jets in the skies over Kashmir. A full-blown conflict between these old adversaries would be hard for resource producers, especially Saudi Arabia, to shrug off. That is why the Middle East’s biggest oil producing superpower was among the first to despatch its top diplomats to Islamabad to defuse the situation. Minister of State for Foreign Affairs, Adel Jubeir, was hastily sent with a letter addressed to Pakistan’s leadership from his master, the Crown Prince Mohammed bin Salman. The symbolism of the message sent directly from the heir to the Saudi throne was clear: Both sides – armed to the teeth with nuclear arsenals – must pull back from the brink. Despite the domestic political risks of seeming weak, Pakistan’s President Imran Khan can’t afford to ignore the kingdom’s voice. Riyadh recently pledged to invest $20 billion into his country’s struggling economy. Without Saudi Arabia’s support, his government would be almost untenable. It is hoped that the release before the weekend on the border of a battered and bruised Indian fighter pilot shot down in the recent skirmish will be enough of a peace offering to halt the calls for further bloodletting and retaliation coming from hard-line Indian nationalists. Still, tens of thousands of troops remain poised in a high state of readiness on either side of the frontier. Target market The Saudis have good reason to be anxious. Aside from the prospect of a nuclear clash occurring on their doorstep, its economy is expected to become increasingly dependent on India in the decades to come. The world’s biggest democracy now imports around 800,000 b/d of Saudi crude, accounting for just over 10% of its total shipments abroad. Supplies are also increasing. This is the main reason behind a colossal investment splurge on building new refineries and energy infrastructure that Saudi now plans in India. The kingdom aims to spend $100 billion in the coming years to help make its state-owned oil producer Saudi Aramco a “household name in India”, according to oil minister Khalid al-Falih. Saudi’s top oil official visited New Delhi earlier this month, just before the escalation of hostilities with Pakistan. India’s existing refineries are also being increasingly re-tuned to handle more of the heavier Saudi oil, which no longer has such a strong market in the US, amplifying the importance of their relationship. But Saudi is not the only major commodities producer exposed to geopolitical turmoil on the subcontinent. India will need enough refineries to process up to 10 million barrels per day of crude to meet the demand of its rapidly expanding and urbanised economy by 2040, according to the government’s own estimates. Demand for crude is surging in India at a time when traditional industrialised markets in Europe are turning away from oil as a transport fuel by heavily subsidising electric vehicles. India is expected to emerge as the world’s third-largest passenger vehicle market by 2021, with over 500 million people living in cities by the end of the next decade, according to McKinsey. Coal and gas However, oil is not the only reason India matters for commodities markets and producers. Despite efforts to build more solar power plants, India’s demand for thermal coal is still expected to grow by almost 4% through to 2023, according to projections from the International Energy Agency. Meanwhile, the government expects gas demand to almost triple by 2030. This will require a surge in imports by ship of liquefied natural gas from overseas. “India is a big player in the oil and LNG market,” said Kang Wu, head of Asia, at S&P Global Platts Analytics. “Pakistan is an emerging and key regional market to watch for LNG and fuel oil movements. So industry players will be keeping a very close eye on the situation there and how it develops.” Despite the obvious risks, analysts remain sceptical of a wider impact on commodities. India and Pakistan glared at each other for decades since their last all-out war in the early 1970s. The world has learned to live with these geopolitical risks since the countries were clumsily partitioned by Britain’s hasty withdrawal from its old empire in 1947. “I don’t see any immediate direct impact on demand but if the situation escalates, then things could be different,” warned Wu. The post India is too important for oil titan Saudi to ignore appeared first on The Barrel Blog. from https://blogs.platts.com/2019/03/06/india-important-oil-saudi/ |
About MeHi I am Robert Keasler 35 years old, I am mine Engineer currently attached with local petroleum exploration company. In free time mostly search for some better opportunity online. ArchivesNo Archives Categories |