Wednesday, May 23, 2018

Americans face high gas prices, crowded roads this Memorial Day weekend

114880689KD005_Over_35_Mill
 
  • A record number of Americans are planning to travel this Memorial Day weekend, despite high gas prices.
  • Gas prices currently average $2.93 per gallon nationally and could climb this weekend.
  • There are certain days and times you may want to avoid the roads and airports in major U.S. cities.
https://www.cnbc.com/2018/05/23/americans-face-high-gas-prices-crowded-roads-this-memorial-day.html 
 
If you plan to hit the roads this Memorial Day weekend, get ready to pay more at the pump.
Gas prices are poised to be the highest for the holiday weekend since 2014, according to travel organization AAA. Those prices averaged $2.93 nationally per gallon as of Tuesday.

"Gas prices are nearly 60 cents more expensive than last year and will likely jump a few more pennies heading into Memorial Day weekend," said AAA spokeswoman Jeanette Casselano. "As nearly 37 million Americans travel by car this weekend, motorists will find gas for $3 or more at 25 percent of all gas stations across the country."

Those costs are not likely to deter many travelers, Casselano said, many of whom booked their trips months in advance.

A record number of Americans — more than 41.5 million — are expected to take to the roads, tarmacs and water on the weekend that kicks off summer, according to research released by AAA earlier this month.

That's the highest number of travelers in more than 12 years and about a 5 percent increase from last year.

The good news for travelers is that airfares have fallen 7 percent from last Memorial Day to an average of $168 for a round-trip flight for popular domestic routes, AAA said.
A daily car rental will cost an average of $59, about 11 percent cheaper than last year and the lowest rate in the past four years.

The busiest days for travel over the holiday weekend are expected to be this Thursday and Friday.
Here are the worst days and times to travel, according to global analytics company INRIX, which partnered with AAA for the study.

Worst times to travel

Metro area Worst day for travel Worst time for travel Delay multiplier of normal trip
Atlanta Thursday, May 24 3:30 - 5:30 p.m. 1.6x
Houston Thursday, May 24 4:30 - 6:00 p.m. 1.5x
Boston Thursday, May 24 4:30 - 6:30 p.m. 1.8x
Washington, D.C. Thursday, May 24 4:30 - 7:00 p.m. 2.3x
San Francisco Friday, May 25 3:00 - 5:30 p.m. 1.7x
Los Angeles Friday, May 25 3:30 - 5:30 p.m. 1.9x
New York Friday, May 25 3:30 - 6:30 p.m. 2.7x
Detroit Friday, May 25 4:00 - 5:30 p.m. 1.5x
Chicago Friday, May 25 4:00 - 6:00 p.m. 2.1x
Seattle Friday, May 25 4:00 - 6:00 p.m. 1.8x 

The report also looked at the top Memorial Day destinations based on advance travel bookings made through AAA.

Here are the cities that will get more crowded over the four-day weekend.

Top Memorial Day destinations

Rank City
1 Orlando, Florida
2 Seattle, Washington
3 Honolulu, Hawaii
4 Las Vegas, Nevada
5 Anchorage, Alaska
6 Phoenix, Arizona
7 Anaheim, California
8 Boston, Massachusetts
9 Denver, Colorado
10 New York, New York
The popularity of Seattle and Anchorage as destinations point to the popularity of Alaskan cruises, Johnson said.

Tuesday, May 22, 2018

Forget About Oil at $80. The Big Rally Is in Forward Prices

opec oil ministers discuss caps

Iraq Prime Minister Haider al-Abadi left, listens to Oil Minister Jabar Ali al-Luaibi, right, during the Iraq Energy Forum in Baghdad, Iraq, Wednesday, March 28, 2018. Iraq says OPEC will decide by the end of this year whether to extend production cuts and by how long.
AP/Karim Kadim

  • Brent five-year forward prices outpace gains in spot prices
  • Investors question the ‘lower for longer’ oil price mantra

Brent crude oil grabbed all the attention after spot prices hit $80 a barrel last week. And yet, almost unnoticed, a perhaps more important rally has occurred in the obscure world of forward prices, with some investors betting the "lower for longer" price mantra is all but over.

The five-year Brent forward price, which has been largely anchored in a tight $55-to-$60 a barrel range for the past year and a half, has jumped over the last month, outpacing the gains in spot prices. It closed at $63.50 on Friday.

"For the first time since December 2015, the back end of the curve has been leading the complex higher," said Yasser Elguindi, a market strategist at Energy Aspects Ltd. in New York. "It seems that the investor community is finally calling into question the ‘lower for longer’ thesis."

Bob Dudley, the chief executive of oil giant BP Plc, coined the "lower for longer" mantra in early 2015, warning of a protracted period of cheap crude. He later clarified that he meant "lower for longer, but not forever."

More to Run

While spot prices fluctuate wildly, often driven by geopolitics such as U.S. sanctions on Iran, the five-year forward usually trades in a narrower range, anchored by longer views about future supply and demand.

Over the past three years, long-dated prices had been weighed down by the belief the growth in U.S. shale production, combined with the adoption of electric vehicles, would keep prices under control.

Investors are now questioning that hypothesis, pushing up forward prices. Over the past month, Brent five-year forward futures gained 11 percent, compared with a 6.8 percent increase in futures for immediate delivery.

"We think there is more to go for the longer date contracts,” SEB chief commodities analyst Bjarne Schieldrop said. “This will send very positive price signals into the whole oil space with higher confidence, optimism and evaluations as a likely consequence."

Demand Surprise


There are several reasons for the sudden surge in forward prices. Oil consumption is expanding much faster than anticipated, adding growth in two years that would normally take three. At the same, oil investment has dropped significantly over the past three years, particularly in projects that take longer to develop such as ultra-deep water offshore, raising doubts about future supply growth despite the gains in Texas, North Dakota and other U.S. shale regions.

Moreover, a change in marine fuel oil specifications by 2020, which should increase significantly the demand for diesel-like refined products, is further reinforcing the belief among some investors that the oil market will be tighter than expected in the future.


The buying has sparked a rally in later-dated contracts in the past week-and-a-half that traders say is even more impressive than Brent’s march past $80. The grade for delivery in December 2022 has surged 10 percent since to beginning of the month to nearly $64 a barrel. The December 2023 has risen above $63 a barrel.

The higher forward prices are also catching the attention of some equity investors as they usually use longer-dated prices to value energy companies.

Despite the rally in forward prices, oil exploration and production companies, which typically hedge their production further out in the curve, have remained reticent to buy in, according to John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. Oil producer selling typically puts pressure on the back of the curve.

Investors aren’t just buying outright long-dated futures, but also betting through the options market on much higher prices in the early part of next decade by buying call options. The contracts, which give investors the right to buy at a predetermined price, are popular among commodities hedge funds.
Call options that would profit from Brent rising to $130 a barrel by the end of 2020 traded 2,000 times on Friday. That follows a similar amount of $100 contracts for the same period trading over the past two weeks.

“The war premium at the front of the market masked the fact that future significant demand increases and questions over supply levels equate to higher prices down the line,” said Richard Fullarton, founder of commodity focused hedge fund, Matilda Capital Management Ltd.

— With assistance by Jessica Summers, and Sheela Tobben

Monday, May 21, 2018

Conoco Aims To Seize Oil Cargoes Near Citgo's Aruba Terminal

Image may contain: cloud, sky and outdoor

U.S. oil company ConocoPhillips has brought new court actions to seize two cargoes of crude and fuel near a terminal operated by PDVSA subsidiary Citgo Petroleum in Aruba, the Aruban government confirmed on Tuesday.

Conoco is moving aggressively to enforce a $2 billion arbitration award over the 2007 expropriation of two oil projects in Venezuela, creating unease in the Caribbean, where many islands depend on fuel produced by state-run PDVSA.

The Aruba refinery has said that an embargo on two Citgo oil cargoes was introduced last night. Citgo is claiming the crude as its own, and is fighting at court to demonstrate the product is not PDVSA’s,” said Prime Minister Evelyn Wever-Croes in a statement. “Independent of any outcome, this is not going to affect Aruba,” she said.

The cargoes seized included 500,000 barrels of crude oil on the Grimstad and about 300,000 barrels of jet fuel, gasoline and diesel on the Atlantic Lily, according to a source at the Aruba terminal and Thomson Reuters vessel tracking data.

Citgo, the U.S. refining unit of PDVSA, has leased the 209,000 barrel-per-day (bpd) Aruba refinery and its 13 million-barrel terminal from the government since 2016 to store Venezuelan and other crudes for supplying its U.S. refineries.

As the refinery remains idled since 2012 while a major refurbish project is underway, Citgo regularly supplies the island with imported fuel.

Wever-Croes told journalists government officials and the management of the refinery were organizing a contingency plan to avoid a situation similar to Curacao and Bonaire, where inventories were blocked by Conoco’s legal actions.

No fuel shortages have been reported in the Caribbean but officials are trying to import from other sources.

Conoco in recent days seized the 10-million-barrel BOPEC oil terminal owned by PDVSA in Bonaire and fuel inventories at the 335,000-bpd Isla refinery operated by the Venezuelan firm in Curacao. Both islands are in talks with Conoco to free fuel for domestic consumption.

What belongs to Citgo belongs to PDVSA, but a judge has to rule on it,” Wever-Croes said.

Daren Beaudo, a Conoco spokesman, said on Tuesday that the company sent representatives to the Caribbean this week to meet with local officials and address their concerns over Conoco’s efforts to enforce the arbitration award by the International Chamber of Commerce (ICC).

PDVSA did not immediately respond to a request for comment.

Last week, Curacao officials said the Isla refinery would have to halt refining operations once its available inventories were exhausted.

It is PDVSA that has failed to honor our award by ignoring the judgement of the ICC tribunal and other local court orders,” Beaudo said in a statement.

Conoco Chief Executive Ryan Lance on Tuesday said the firm is far from recovering all of the $2 billion ICC award. He said legal actions have been brought in Hong Kong and London to have the ruling recognized following a similar move last month in a New York court.

Friday, May 18, 2018

Tanker Markets - VLCC recycling continues

Image result for vlcc ship breaking pakistan


Following the official reopening of the Pakistani market for tankers, the offloading of the plethora of unsold tanker/VLCC tonnage continued at pace last week, as interested Pakistani Buyers eagerly filled their plots. 
 
There were further VLCC sales concluded, gradually bringing the total number of units sold through 2018 towards the 30 mark, a figure which looks likely to be reached before the end of May - not even halfway through the year - GMS said in its weekly report.

There is a noteworthy dissimilarity in pricing a VLCC versus MR/Aframax/Suezmax types, as very few end buyers in the Indian sub-continent are capable of opening such large US dollar value Letters of Credit (LC).

Under the current market conditions, this can easily amount to an around $18 mill LC on roughly 40,000 ldt unit, GMS said.

Given the limited number of capable end buyers who are able to do this (translating into a lower demand), VLCCs are discounted far more than the average tanker for which, a greater number of buyers are open/available to negotiate.

Moreover, VLCCs usually take between six to eight months to fully recycle, resulting in a significant exposure for the respective buyer who will likely endure multiple market peaks & troughs over this period. Only a recycler with a strong financial standing is generally willing/able to withstand these fluctuations.

Pakistan and Bangladesh - both of which have reached saturation point - tend to be the main buyers for large ldt tonnage, while Indian recyclers prefer smaller vessels that can be quickly dismantled, thus minimising there market exposure, due to the generally volatile nature of steel plate prices and currency fluctuations.

Finally, those owners who opt to sell their large ldt ships into India for Hong Kong Convention green recycling, such as Ridgebury Tankers last week, there is normally a large discount to contend with, compared to conventional recycling, GMS said.

The sale of the 1999-built VLCC ‘Ridgebury Pioneer’ for a reported $408 per ldt on the basis of ‘as is’ Khor Fakkan, gas free and with 300 tonnes of bunkers ROB was said to have been concluded at a $500,000 discount.

Other deals reported by brokers included the 2000-built VLCC ‘Greek Warrior’ sold to undisclosed interests for $430 per ldt, ‘as is’ Singapore, gas free for man entry and with 480 tonnes of bunkers ROB and the 2001-built VLCC ‘Silver Glory’ for $436.5 per ldt with delivery Indian sub/cont.

The 1997-built Aframax ‘Oil Runner’ was said to be sold to undisclosed interests for $470 per ldt, ‘as is’ Khor Fakkan with 70 tonnes of bunkers ROB and with various equipment, including two propellers.

In addition, the 1999-built LR1 ‘Amazon Guardian’ was reported committed for $455 per ldt to Pakistan recyclers, ‘as is’ Khor Fakkan, gas free for hot works and with 400 tonnes of bunkers ROB.
Finally, the 1991-built MR ‘Divine Mercy’ was reported sold to Pakistan interests for an undisclosed price.

GMS has supported the publication of a booklet entitled - ‘The Recycling of Ships’  - written by consultant Nikos Mikelis.

It contains a list of the world’s recycling facilities and chapters on the economic drivers behind the decision to recycle, sale & purchase with end-of-life ships, the Hong Kong Convention, EU Ship Recycling Regulation and standard improvements within the ship recycling industry.

The booklet is available to download as a pdf at www.gmsinc.net

Thursday, May 17, 2018

More Pain May Come for Nigeria's Loss-Making Oil Behemoth


  • Abuja-based NNPC made operating losses of $246 million in 2017
  • Financial woes contrast with state firms from Norway to Saudi
It’s meant to be a cash cow, but the state oil company of Africa’s biggest producer is bleeding money.

Nigerian National Petroleum Corp., the Abuja-based behemoth that dominates the OPEC member’s energy industry, has made losses for at least the last three years, statements on its website show. It will probably register another in 2018, according to Ecobank Transnational Inc., as its refineries and fuel-retailing arm fail to generate profit.

The pain for NNPC, which produces oil and natural gas in partnership with Royal Dutch Shell Plc, Exxon Mobil Corp. and Chevron Corp., comes even as national energy firms from Norway to Saudi Arabia thrive with crude prices recovering from their crash in 2014. And it lays bare President Muhammadu Buhari’s difficulty in fulfilling his pledge to modernize a company that’s been a byword for inefficiency and opacity since its creation in the 1970s.

With oil accounting for more than half of government revenue and 90 percent of export income, the company is a primary target of those seeking access to state funds and is vulnerable to political interference.

Tensions erupted last year between Emmanuel Kachikwu, the chairman of NNPC, and Maikanti Baru, the managing director, over how more than $20 billion of contracts were agreed.

“The very public power tussle shows the difficulties in reforming the organization,” Malte Liewerscheidt, an analyst at Teneo Intelligence, said in an email from Abuja. Until a pending but long-delayed law designed to overhaul the petroleum sector and split up parts of NNPC comes into effect, “political considerations will continue to interfere with vital business needs,” he said.

The state oil company doesn’t publish full financial results, though it releases limited numbers on its operating performance. These include earnings for core units, but exclude items such as taxes and dividends from a 49 percent shareholding in Nigeria LNG Ltd., one of the world’s biggest exporters of liquefied natural gas.

Those numbers show that NNPC made an 82 billion naira ($246 million) operating loss in 2017. That was an improvement from 2015 and 2016, but still far from the operating income it budgeted for of 600 billion naira. In each of the past three years, NNPC forecast a profit and finished in the red.

Higher oil prices have boosted exploration and production, the most profitable part of NNPC and which earned almost $600 million in 2017. But its ill-maintained refineries, which operate at a fraction of their combined capacity of 445,000 barrels a day, lost about $100 million. Even bigger shortfalls came in the fuel-retailing business, which has to contend with the government’s cap on gasoline prices, and the corporate headquarters unit, which lost almost $400 million, more than any other part of the company.

While NNPC’s extraction business will probably improve this year, the refineries and retailing subsidiaries will continue to be a drag, especially if the government maintains the ceiling of $0.40 a liter for gasoline, according to Ecobank. The bank predicts that NNPC will make an operating loss of as much as 80 billion naira in 2018.

Ndu Ughamadu, a spokesman for NNPC, said that while the refineries are struggling to make money, the company’s overall performance will probably be better this year. He declined to say if NNPC was forecasting a return to profit. It made a loss of 1.6 billion naira in January, the latest month for which results have been released.

The problems at NNPC offset the benefits to Nigeria’s struggling economy of Brent crude’s more than 50 percent rise in the past year to almost $80 a barrel. Still, there have been improvements within the company and the country’s overall oil sector, according to Moody’s Investors Service.
NNPC’s reduction of debts owed to joint-venture partners may help increase Nigerian oil production to around 2.5 million barrels a day by 2020 from 2 million today, said Aurelien Mali, an analyst at Moody’s.

“The clearing of arrears is a huge step forward that will unleash extra investment from international oil companies,” Mali said in an interview in Lagos, the commercial capital, on May 9. “NNPC is key for the government. It’s going in the right direction.”

It has some catching up to do. Its financial position contrasts with those of state oil firms in other major producers. Saudi Aramco is gushing cash, making net income of $34 billion in the first half of 2017 alone, according to numbers seen by Bloomberg. Brazil’s Petrobras, Mexico’s Pemex and Norway’s Statoil all improved their results in 2017 and made operating profits. So did Angola’s Sonangol in 2016, when it last published data.

Wednesday, May 16, 2018

Morgan Stanley Says a Shipping Revolution Has Oil Headed for $90

Morgan Stanley's lower global outlook rattles world markets

https://www.bloomberg.com/news/articles/2018-05-16/morgan-stanley-says-a-shipping-revolution-has-oil-headed-for-90

Forget Iran and OPEC -- there’s another issue that will keep oil prices supported for the next two years, according to Morgan Stanley.

Brent crude will reach $90 a barrel by 2020 as new international shipping regulations take effect, overhauling the types of fuels produced by refiners, the bank’s analysts said in a report.

The changes, which force vessels to consume lower sulfur fuels beginning in January of that year, will lead to a boom in demand for middle distillate products including diesel and marine gasoil, triggering the need for more crude, they said.

“We foresee a scramble for middle distillates that will drive crack spreads higher and drag oil prices with it,” wrote Morgan Stanley analysts including Martijn Rats.

While crude has already received a boost due to supply cuts by the Organization of Petroleum Exporting Countries and geopolitical events including the U.S. decision to reimpose sanctions on Iran, the rule changes add to the impact. Global benchmark Brent, which neared $80 a barrel earlier this week, is trading at the highest levels since late 2014. Futures for the January 2020 contract are at about $66.60 a barrel.

The rules from the International Maritime Organization call for ships to reduce the maximum sulfur content of their fuels to 0.5 percent, from 3.5 percent in most regions currently, in an effort to curb air pollution that has been linked to respiratory diseases and acid rain. The changes are expected to create an oversupply of high-sulfur fuel oil while sparking demand for IMO-compliant products, putting pressure on the refining industry to produce more of the latter fuels.

Repsol SA, Reliance Industries Ltd., Valero Energy Corp. and Tupras Turkiye Petrol Rafinerileri AS are among those who stand to benefit most, according to Morgan Stanley.

“The refining systems of these companies are highly geared towards middle distillates” and minimal high-sulfur fuel oil output, which is “the most advantageous combination after 2019,” the bank said in a related report.


Middle distillate markets are already showing signs of tightness. Diesel and gasoil stockpiles in key storage hubs in Europe, the U.S. and Asia are below their five-year seasonal averages. At the same time, middle distillate demand has grown at an annual rate of about 600,000 barrels a day since 2011, accelerating to 800,000 barrels a day in recent quarters, Morgan Stanley estimates.

Increased Demand

With the IMO ship-fuel regulations expected to boost demand by an additional 1.5 million barrels a day by 2020, traders will seek to get the right product supplies, which should boost crude prices, according to the bank. While global crude production will rise, it probably won’t increase by the 5.7 million barrels a day needed by 2020 to meet the additional demand for fuels, the analysts said.

“The last period of severe middle distillate tightness occurred in late-2007/early-2008 and arguably was the critical factor that drove up Brent prices in that period,” Rats wrote, referring to the period when crude oil approached levels close to $150 a barrel.

U.S. oil output, now at a record, likely won’t come to the rescue, since the crude pumped in America’s shale regions is light and not ideal for producing middle distillates, Morgan Stanley noted.
“We expect the crude oil market to remain under-supplied and inventories to continue to draw,” the bank said. “This will likely underpin prices.”

Tuesday, May 15, 2018

Crude oil futures rise again on risk, OPEC demand forecasts; July ICE Brent at $79.14/b, June NYMEX $71.61/b

https://s.tradingview.com/x/iRYjwfri/


Crude oil futures pushed higher again in European morning trading Tuesday, with geopolitical risk remaining elevated and the market still digesting OPEC's higher forecasts for global demand this year.

At 1100 GMT, ICE July Brent crude futures were trading at $79.14/b, up 91 cents from Monday's settle, while NYMEX June WTI crude futures were 65 cents higher at $71.61/b.

OPEC in its latest monthly report on Monday increased its world demand forecasts for 2018, with growth in consumption revised up by 25,000 b/d to 1.65 million b/d from the previous report.

OPEC also said OECD commercial crude oil stockpiles had declined in March to 9 million barrels above the five-year average.

The revised demand growth predictions come at a time when the global crude market is also facing other significant supply-side question marks, such as the impact of the imposition of US sanctions on Iranian output and the ongoing struggles of the Venezuelan oil sector.

Venezuela's production dropped 40,000 b/d to 1.44 million b/d in April, according to secondary sources.

While there are doubts over Iranian and Venezuelan production, US crude production has continued to rise in recent months. According to analysts, once certain logistical issues are solved in the US, its crude production can help fill the gap left by production declines elsewhere.

"The rapidly growing US shale oil production is currently helping to plug the supply gap to only a limited extent because pipeline bottlenecks are preventing some of the oil from reaching the refineries and export terminals on the US Gulf Coast," said Commerzbank analysts in a note.

"Once the pipeline problems have been resolved and supply is available again, this will have a dampening effect on prices."

In the short term, there are expectations of a further decline in US stockpiles for the week ended May 11. An S&P Global Platts survey of analysts indicates US crude stocks are expected to fall by 2.3 million barrels.

Official data on US crude and product stocks will be released by the Energy Information Administration on Wednesday. The American Petroleum Institute meanwhile will release its weekly inventory numbers later Tuesday.

--John Morley, john.morley@spglobal.com

--Edited by Alisdair Bowles, alisdair.bowles@spglobal.com