Wednesday, November 29, 2017

US breaks into China's top 10 crude oil supplier list

Singapore (Platts)--28 Nov 2017 1000 pm EST/300 GMT

China's crude oil imports from the US in October surged 77.3% month on month to average of 208,000 b/d, or a total of 878,623 mt, making the US the country's ninth top crude supplier, data released Monday by China's General Administration of Customs showed.

In the same month last year, no US crude oil imports were recorded.

The US inflow in October was likely due to buying from state-owned refiners, as arrivals for independent refiners was down 42% from September at 163,000 mt, an S&P Global Platts survey showed.

Unipec had been actively offered US crude, according to state-owned Sinopec.
Unipec is the international trading arm of Asia's biggest refiner, China Petroleum and Chemical Corp., or Sinopec. Sinopec's Qilu refinery in October received its first cargo of US crude, a cargo of Mars crude.

China's total crude oil imports fell to a 12-month low of 31.03 million mt (7.34 million b/d) in October, down 18.9% from September. China's crude imports typically fall in October.

Russia remained China's top crude supplier in October, though shipments fell 26.8% month on month to 4.65 million mt.

Saudi Arabia climbed to the second place in October from third in the previous month and was the only supplier among the top three to register a month-on-month increase.


China's crude imports from the US are expected to grow next year, according to trade sources.

In the first 10 months of 2017, China's imports from North America surged to 150,000 b/d, or 6.22 million mt, from just 15,500 b/d a year ago, led by higher volumes from the United States .

This expanded the region's market share in China to 1.8%, from 0.2% in the same period last year.

Unipec is forecast to double its imports from the US in 2018 to 200,000 b/d, but expects China's total crude imports to grow at less than 5% next year, the company's general manager Chen Bo said last week at the China International Oil and Gas Trade Congress in Shanghai .

China imported 8.42 million b/d of crude oil in the first 10 months of this year, up 12.2% year on year, the latest data from the General Administration of Customs showed.

The market share of OPEC members fell to 55.1% in the January-October period from 57.9%, while Middle Eastern producers also saw their market share falling to 43.3% from 48.4%. But Africa's market share rose by two percentage points from last year to 20%.

-- Oceana Zhou,

Tuesday, November 28, 2017

U.S. oil falls on Keystone restart, doubts about Russia's resolve

U.S. oil prices fell more than 1 percent on Monday, easing from two-year highs on prospects of higher supply from a planned restart of the Keystone crude pipeline and uncertainty about Russia’s resolve to join in extending output cuts ahead of this week’s OPEC meeting.
FILE PHOTO: Equipment used to process carbon dioxide, crude oil and water is seen at an Occidental Petroleum Corp enhanced oil recovery project in Hobbs, New Mexico, U.S. on May 3, 2017. Picture taken on May 3, 2017. REUTERS/Ernest Scheyder/File Photo 
TransCanada Corp (TRP.TO) said it will restart its Keystone crude oil pipeline at reduced pressure on Tuesday after getting approval from U.S. regulators. 

Calgary-based TransCanada shut down the 590,000 barrel-per-day pipeline, one of Canada’s main crude export routes to the United States, on Nov. 16 after 5,000 barrels of oil leaked in South Dakota. Keystone carries crude from Alberta’s oil sands to U.S. refineries. 

Brent futures LCOc1 ended down just 2 cents at $63.84 a barrel while U.S. crude CLc1 settled 84 cents, or 1.4 percent, lower at $58.11 a barrel. 

On Friday, U.S. crude touched $59.05 a barrel, its strongest since mid-2015, following the spill. 

In post-settlement trading the front month spread for U.S. crude spread hit a session low of negative 10 cents a barrel, after Transcanada’s restart announcement. 

Oil prices have surged in recent months due to output cuts by the Organization of the Petroleum Exporting Countries, Russia and other producers. However, higher prices have encouraged greater output among U.S. producers. 

OPEC and its allies cut production by 1.8 million bpd in January and have agreed to hold down output until March. OPEC meets on Thursday to discuss policy and most analysts expect a deal to extend the cuts. 

On Friday, Russia said it was ready to support extending an output cut deal. Still, Russia has not given a timeline, and on Monday there were signs Russia may find it hard to comply. 

Oil output from Russia’s Sakhalin-1 project is set to rise by about a quarter to 250,000-260,000 barrels per day (bpd) from January, sources with knowledge of the plan said. 

“It’s the OPEC parlor game that we’re all playing,” said John Kilduff, partner at Again Capital LLC in New York, “The Russians being quiet about their intentions about the OPEC deal is a little unsettling.” 

Oil markets will rebalance after June 2018 at the earliest, an OPEC working panel concluded last week, OPEC sources said on Monday, signaling the need to extend existing production cuts well into next year. 

Analysts at Barclays expect OPEC to keep output limits for another six or nine months. However, they said this was widely expected, so prices still might fall after the OPEC meeting. 

Harry Tchilinguirian, head of oil strategy at French bank BNP Paribas, also saw “plenty of room for disappointment.” 

“Should the outcome of the next OPEC meeting fall short of expectations, the large net-long speculative position on oil futures can unwind, sending prices lower and volatility higher.” 

Additional reporting by Christopher Johnson in London, Henning Gloystein in Singapore; Editing by David Gregorio, Edmund Blair and Mark Potter

Monday, November 27, 2017

Why $84 Billion From China Can't Buy a U.S. East Gas Hub

During President Donald Trump’s visit to Asia this week, a Chinese energy company pledged to spend almost $84 billion helping West Virginia build an entire supply chain that would bring the benefits of America’s shale gas boom to bear.

Much of it will probably never materialize. Here are the reasons why.

Storage Hub

In July, Senator Joe Manchin, a West Virginia Democrat, joined other policy makers to pitch a $10 billion Appalachian storage hub to Trump. The proposal outlined underground storage in Pennsylvania, Ohio and West Virginia, plus pipeline to link storage and petrochemical plants. A report from the American Chemistry Council found that, if approved, it could create more than 100,000 jobs and nearly $36 billion in capital investment.

As shipping gas southeast becomes more expensive, any opportunity to store gas locally may stoke desire for the cheaper fuel there, said Stephen Schork, president of Schork Group Inc., a gas industry consultant in Villanova, Pennsylvania.

"It would be more than competitive," Schork said. "The price of natural gas in the Marcellus shale is really advantageous."

And the MOU with China Energy Investment may be one step toward that. According to the West Virginia Department of Commerce, the company has already made “several trips” to the state. On Thursday, Governor Jim Justice described the agreement as proof that “the tides are turning in West Virginia.

The Returns

China Energy Investment Corp. and West Virginia have grand -- albeit non-binding -- plans to build new gas-fired power plants, along with complexes to store the fuel and chemical plants to help turn it into plastics. Based on a statement from West Virginia’s Department of Commerce, China Energy Investment would spend $83.7 billion over 20 years, or more than $4 billion annually.

China Energy Investment was formed from the combination of Shenhua Group Corp., the nation’s largest coal miner, and China Guodian Corp., one of its top-five power generators, making the combined power company the world’s biggest.

As Bloomberg Intelligence energy analyst Michael Kay points out, not even U.S. energy pipeline giant Kinder Morgan Inc. budgets that much for growth projects. There just isn’t enough infrastructure with high enough returns to make it worthwhile.

That’s not going to happen,” Kay says. “The problem isn’t necessarily anything other than financial.”

On the surface, a massive build-out of infrastructure in Appalachia -- a region that now supplies more than a third of America’s natural gas -- makes sense.

Companies and politicians have been pushing for more pipelines and plants there since the shale boom unleashed a flood of gas from formations like the Marcellus a decade ago. West Virginia, in the heart of Coal Country, could especially use the help after a market collapse forced shut hundreds of U.S. mines. Another plus -- the region offers an alternative to the hurricane-prone Gulf Coast.

The Rival

One reason more projects haven’t taken off: The Gulf Coast is an easier and often cheaper alternative with existing pipelines to power plants, chemical plants and storage tanks. Meanwhile Texas is home to its own giant shale plays, including the Permian Basin where 9 billion cubic feet of gas is pulled from oil wells every day.
When you already have a market established in the Gulf Coast, it’s easy to expand it -- you have a lot of storage, you have a lot of supply,” said Prachi Mehta, a natural gas liquids analyst for Wood Mackenzie Ltd. In Appalachia, “you have a lot of constraints.”

The Opposition

But by far the biggest constraint that energy companies face in the eastern U.S. is the regulatory process.

Some project developers have spent over a year waiting for federal approval as landowners and environmentalists there lodge complaints and stage protests. Even as politicians push for more investments, pipeline giants from Energy Transfer Partners LP to Williams Partners LP are being forced to delay projects because of regulatory setbacks and legal challenges.

Even Dave Spigelmyer, president of a coalition that’s been pushing for the kinds of projects China Energy Investment has pledged to build, acknowledges the challenges.

"We need to make sure we have our A-game on, because folks are going to go where they have certainty on the return on investment,” Spigelmyer said. “When you talk about investment in Pennsylvania, it takes over 100 days to get a drilling permit.”

The Money Spent

Another reason West Virginia shouldn’t get its hopes up, Kay said, is the fact that much of the major investments that Appalachia’s energy market needs may have already been made.

Enough pipelines are coming online to increase the region’s take-away capacity by about a third. And so much gas-fired power generation has been built in the area that Moody’s Investors Service has warned of “a gas-driven apocalypse” in the power market.

Later this year, Dominion Energy Inc. will bring online a liquefied natural gas export terminal in Maryland, and an ethane export terminal at Marcus Hook, Pennsylvania, is already sending cargoes overseas.

The truth is,” Kay said, “we need to see these projects coming online to see if we do need more infrastructure.

To be sure, a record volume of gas keeps flowing out of the Marcellus and Utica shale formations of the eastern U.S. IHS Markit forecasts that, between 2026 and 2030, the region will produce enough natural-gas liquids to supply as many as four more chemical plants that “crack” the ethane in natural gas streams into a chemical widely used by manufacturers.

Mexico's Plan to Open Up Fuel Logistics Still Mired

A commissioner from Mexico's energy regulatory commission (CRE) said technical challenges and a highly complex environment were to blame for months of delay in the opening up of state-run Pemex's fuel infrastructure.

The CRE is in charge of opening up Pemex's existing fuel transport and storage infrastructure to third parties through a program of gradual and regional open seasons.

US independent refiner Andeavor, formally known as Tesoro, won capacity in Pemex's first open season in the northwestern states of Baja California and Sonora in May.

But subsequent open seasons have been suspended indefinitely, and are now several months behind schedule.

"The first open season was fairly straightforward, with little operative complexity," CRE commissioner Montserrat Ramiro Ximenez said this week. But commissioners have found the second open season for all other northern border states particularly challenging.

Many pipelines arrive directly inside Pemex's refinery, Ramiro said, requiring permits that were not under the authority of the CRE and causing further delays.

Whether the capacity volume Pemex wanted to offer was big enough to make the open season viable was another thorny issue, with an operator reluctant to abandon its infrastructure on one side, and new participants eager to acquire capacity on the other.

"The open season presupposes that Pemex has enough capacity for others to transport their fuel, but in many cases, we [Pemex and the CRE] have conflicting opinions about what can be made available or not," Ramiro said. "Logistics in Mexico is a very complicated cocktail."

Ramiro was answering other panelists at the Mexico International Energy conference, who echoed some of the main worries in the industry. Since independent fuel imports were allowed in April 2016, as a result of a groundbreaking energy reform, they have remained fairly low.

In October, the latest available data, independent gasoline were growing but still only accounted for 0.8pc of all gasoline imports that month, at 147,800 bl (or 4,764 b/d).

"When it comes to logistics, we are in total darkness," a former manager of Pemex fuel retail stations, Juan Lopez Huesca, said on the same panel. "Without the opening of the owner's infrastructure it cannot work."

Carlos Rodriguez, operations manager at Bulk Shipping Mexico, a company that moves products, said a number of potential clients had approached him to export fuel to Mexico.

"They want to bring product to Mexico, but we have nowhere to put it, it all belongs to Pemex," Rodriguez said.

Both argued that postponing the open seasons without clear explanations since May has sent a red flag to investors. While new projects for fuel storage terminals are underway, investment in new pipelines remain scarce.

Ramiro acknowledged that the CRE had to fix the open season delay and send a positive signal to the industry. But the commissioner argued that investors need not wait for the open season to invest in infrastructure.

"It became clear that we need more infrastructure, that Pemex's infrastructure is insufficient and that, on top of that, it is very complex to try and share with somebody who does not want to lose its market and that has not separated its logistics arm from its refinery arm," Ramiro said. "It is easy to make a viable case for new infrastructure."

Wednesday, November 22, 2017

Snapshot -- Brent crude oil volatility: November outlook

Saudi Arabia 'swaps assets for freedom' after arrests

Saudi authorities are striking agreements with some of those held in an alleged anti-corruption crackdown, asking them to hand over assets and cash in return for their freedom, according to sources familiar with the matter.

The deals involve separating cash from assets, such as property and shares, and looking at bank accounts to assess cash values, one of the sources told the Reuters news agency.

Dozens of princes, senior officials and businessmen, including cabinet ministers and billionaires, have been arrested in this month's sweeping crackdown, which is being seen as an attempt to strengthen the power of Crown Prince Mohammed bin Salman.

Among those arrested was billionaire Prince Alwaleed bin Talal, one of the kingdom's most prominent businessmen.

One businessman reportedly had tens of millions of Saudi riyals withdrawn from his account after he signed the deal. In another case, a former senior official consented to hand over ownership of four billion riyals (roughly $1.06bn) worth of shares, the source said.

The Saudi government earlier this week moved from freezing accounts to issuing instructions for "expropriation of unencumbered assets" or seizure of assets, said a second source familiar with the situation.

There was no immediate comment from the Saudi government on the deals, and the sources declined to be identified because the agreements are not public.

Analysts say the deals could help to end uncertainty about the crackdown, but they could also have an affect on Saudi Arabia's risk perception among investors.

"Eliminating uncertainty about what the Saudi authorities are going to do goes a long way towards giving the market comfort that the regime is getting its house in order and plugging its deficit," said Louis Gargour, founder and senior portfolio manager at the London-based hedge fund LNG Capital.

Riyadh has been cutting spending while raising taxes and fees to curb a state budget deficit caused by low oil prices. The deficit, which hit $98bn in 2015, is shrinking, but at a high cost to the economy; data in late September showed Saudi Arabia in recession during the second quarter.

The Saudi government has in recent years been pressing wealthy individuals to invest more in the kingdom and bring home some of their wealth from overseas.

Washington monitoring situation

The United States is closely watching the situation in Saudi Arabia, US Treasury Secretary Steven Mnuchin said on Friday.

Asked about agreements to hand over wealth for detainees' freedom, Mnuchin told CNBC: "I think that the Crown Prince [Mohammed bin Salman] is doing a great job at transforming the country."

According to Gargour, "from a civil liberties point of view, obviously incarcerating people doesn't give us comfort, and that's why we've seen spreads on Saudi bonds go 50 basis points or so wider".

Funds started selling Middle East bonds early this month after Saudi Arabia arrested dozens of senior officials and businessmen in an unprecedented crackdown, which the government said was aimed at tackling corruption.

Credit spreads and the cost of insuring debt against default have increased not only for Saudi Arabia and Lebanon, but across the six-nation Gulf Cooperation Council, which includes Qatar, Kuwait and Abu Dhabi.

"From a trading point of view, you want to identify the private companies most impacted and short or sell them, and conversely public sector companies will benefit," Gargour said.

The market value of the portfolio of Saudi equities held by the Public Investment Fund, the kingdom's sovereign wealth fund, has gained, even as the arrest or questioning of more than 200 people in the inquiry caused stocks in many privately controlled firms to slump.

Reuters could not immediately verify a Financial Times report stating that in some cases, the government is seeking to appropriate as much as 70 percent of suspects' wealth to channel hundreds of billions of dollars into depleted state coffers.

Saudi authorities have help from international auditors, investigators and people with experience in tracing assets. Bank representatives are on hand to execute the decisions immediately, one of the sources said.

Hundreds held

Saudi authorities said they have questioned 208 people in an anti-corruption investigation and estimate that at least $100bn has been stolen through fraud, an official said last week, as the inquiry expanded beyond the kingdom's borders into the United Arab Emirates.

Those held include other high-profile businessmen, such as Mohammad al-Amoudi, whose wealth is estimated by Forbes at $10.4bn, with construction, agriculture and energy companies in Sweden, Saudi Arabia and Ethiopia; and finance and healthcare magnate Saleh Kamel, whose fortune is estimated at $2.3bn.

Crown Prince Mohammed bin Salman is trying to use the purge as a way of boosting his popularity with the Saudi population, said Jason Tuvey, a Middle East economist at Capital Economics.

"But he may have realised that by doing this, he's gone a step too far and ruffled too many feathers, and he is maybe trying to find a way out that means these people don't end up in prison forever and can carry on their business operations as before."

Monday, November 20, 2017

Keystone XL Approval May Open Door for Foes to Fight Route

Nebraska’s approval of an alternative route could throw more uncertainty into the mix for the long-delayed Keystone XL oil pipeline.

The Public Service Commission approved TransCanada Corp.’s project on a three-to-two vote, removing one of the last hurdles to the Calgary-based company’s construction of the $8 billion, 1,179-mile (1,897-kilometer) conduit, which has been on its drawing boards since 2008. The decision, though, wasn’t wrinkle-free: The panel mandated an alternative route that was immediately targeted by the project’s opponents as lacking adequate vetting.

TransCanada is now "assessing how the decision would impact the cost and schedule of the project,” Russ Girling, TransCanada’s chief executive officer, said in a statement. The company’s shares rose 1.3 percent to C$63.35 at 12:24 p.m. in New York trading.
Source: Nebraska Public Service Commission
The uncertainty expressed by Girling was quickly reflected in analyst notes.

"While today’s Keystone XL pipeline approval is an important milestone, it does not provide certainty that the project will ultimately be built and begin operating," said Gavin MacFarlane, a vice president at Moody’s Investors Service. “Pipeline construction would negatively affect TransCanada’s business risk profile through increased project execution risk, and would likely put pressure on financial metrics."

Jane Kleeb, president of the environmental advocacy group Bold Alliance, said green-lighting the alternative may have helped the commission reach a "middle ground solution.” But it opens new questions that she said her group would likely explore in federal court.

That view mirrored a dissenting opinion from Commissioner Crystal Rhoades. The alternative route needed more study on both the state and federal level, she said before the final vote, and it failed to give landowners along that different path the ability to address the commission.

The commissioners who supported the route change said it would impact fewer threatened and endangered species, fewer wells, less irrigated cropland, and that it included one less river crossing.

Additionally, they wrote, “it is in the public interest for the pipelines to be in closer proximity to each other, so as to maximize monitoring resources and increase the efficiency of response times” with “issues that may arise with either pipeline.”

South Dakota Spill

The decision came just days after a spill on TransCanada’s existing Keystone line in South Dakota on Thursday sparked new attacks by environmentalists who pointed to the event as something the state could expect if the project is approved.

In its post-hearing brief, TransCanada told the panel its "preferred route was the product of literally years of study, analysis and refinement by Keystone, federal agencies and Nebraska agencies," and that no alternate route, even one paralleling the Keystone mainline as the approved path does, was truly comparable.
Demonstrators hold a rally against the Keystone XL pipeline outside of the White House on Jan. 10, 2015. 
Photographer: Pete Marovich/Bloomberg
Producers in the Alberta oil sands region and elsewhere in Western Canada are facing pipeline bottlenecks, forcing increased volumes onto rail cars. Since rail is a more expensive form of transport, heavy Canadian crude prices will need to trade at a bigger discount to West Texas Intermediate futures.

That discount widened to more than $15 a barrel Monday from less than $10 in August. Keystone XL construction, along with Kinder Morgan Inc.’s Trans Mountain expansion and Enbridge Inc.’s Line 3 expansion, could narrow the gap to less than $10 by early next decade, Tim Pickering, chief investment officer at Auspice Capital Advisors Ltd., said in a telephone interview. 

Mexico, Venezuela

The pipeline may also be more commercially viable given declining heavy oil production in Mexico and ongoing instability in Venezuela, said Zachary Rogers, a refining and oil markets research analyst at Wood Mackenzie, said in a statement. Canadian producers are an alternate source of heavy crude for U.S. Gulf Coast refiners.

Brett Harris, a spokesman for Calgary-based Cenovus Energy Inc., a committed oil-sands shipper on the proposed pipeline, said the approval “is in the best interest of the industry, best interest of Canada and the best interest of the U.S. as well. We are pleased to see that decision.”

Dennis McConaghy, former executive vice president of corporate development at TransCanada, said he would expect senior management to announce they will go ahead with the project by year’s end with construction by the later half of 2019. Completion of the line would come a couple years later.
“The project could have been very seriously set back if they hadn’t got this approval today,” he said.

Volume Needed

McConaghy said he believes the company has secured the volume needed to make the project economically viable. But he added that “there is no question there is going to be all kinds of legal obstruction that will be resorted to by opponents.”

Nebraska’s decision overrode the objections of environmental groups, Native American tribes and landowners along the pipeline’s prospective route. The project had the support of the state’s governor, Republican Pete Ricketts, its chamber of commerce, trade unions and the petroleum industry.

With Nebraska’s go-ahead in hand, TransCanada still must formally decide whether to proceed with construction on the line, which would send crude from Hardisty, Alberta, through Montana and South Dakota to Nebraska, where it will connect to pipelines leading to U.S. Gulf Coast refineries. The XL pipeline would add the ability to move 830,000 barrels a day, more than doubling the existing line’s capacity.

Shipping Commitments

The company’s open season for gauging producers’ interest closed late last month, and TransCanada executives have indicated that they’ve secured enough shipping commitments to make the project commercially worthwhile.

President Barack Obama’s administration rejected the pipeline in 2015. President Donald Trump vowed to reverse that determination and, in January, invited the company to reapply. Approval was quickly granted. He also championed completion of the Energy Transfer Partners LP-led Dakota Access Pipeline, which runs from northwestern North Dakota to Illinois via South Dakota and Iowa.

The panel heard testimony and took in evidence during a four-day August hearing. Its power over the project is drawn from the state’s constitution.

The case is In the Matter of the Application of TransCanada Keystone Pipeline LP for Route Approval of the Keystone XL Pipeline Project, 0p-0003, Nebraska Public Service Commission (Lincoln).

Friday, November 17, 2017

VLCC Markets - Waiting for the Winter

November’s VLCC Meg programme was concluded last week with some 132 cargoes fixed, volumes not seen since January. 
We are currently between months and as usual activity is a bit subdued, Fearnleys said in its weekly report.

A couple of December deals were done, but basically BOT cargoes and rates  were concluded at last done levels.

Saudi stem-confirmations could possibly be out by the end of this week.

WAfrica/East activity was also a bit slower, but owners were resilient and rates remained stable, as optimism was still in place for the winter.

Suezmaxes experienced steadily eroding rates over the past week, with WAfrica slipping from the low WS80’s down to WS72.5 for TD20. End November cargoes were thin on the ground and other areas remained quiet allowing tonnage to build up.

Owners earnings were further eaten into by increasingly expensive bunkers adding to the pain. The earnings are now below the $10,000 per day threshold.

Thus far, the Turkish Straits delays have been unseasonably minimal, although this is expected to change in the weeks ahead of the winter months.

There is a glimmer of hope in the Med and Black Sea, where there was a sudden flurry of action with Aframaxes and lists tightened. This was the trigger a year ago for Suezmaxes and owners will be watching with keen interest for any opportunity to capitalise.

The week ahead has a softer feel but this could turn around on increased volume or weather delays. Norwegian meteorologists are guessing that there will be a warm start to this winter season, and North Sea and Baltic Aframax markets should be moving sideways heading towards December.

The fact that there is a five- day maintenance period coming up at Primorsk undermines the ’bold’ statement above.

The Med and Black Sea softened last week and has remained rather flat ever since. However, it is looking to firm up next week again, as tonnage is quickly being picked up for early 1st decade, leaving the cross-Med cargoes with fewer options going forward, Fearnleys concluded.

Crude tanker freight rates are expected to decline further next year, following a sharp decline in 2017, according to the latest edition of the Tanker Forecaster, published by shipping consultancy Drewry.

Although crude tonnage supply growth is expected to be low next year after surging in 2017, this will not be enough to push tonnage utilisation rates higher, as demand growth is expected to be sluggish. A slowdown in global oil demand growth and a likely decline in China’s stocking activity will keep growth in the crude oil trade moderate next year.

After a sharp decline in 2016, freight rates in the crude tanker market have declined further this year, despite strong tonnage demand growth in the two years, thanks to a surge in tonnage supply.

Fleet growth is expected to come down to 3.2% in 2018, after increasing by close to 6% per year in 2016 and 2017. However, this is unlikely to provide any respite to owners, as rates will continue to decline in 2018 on account of a slowdown in crude oil trade growth. Global oil demand growth is expected to fall to 1.4 mill per day in 2018 from 1.6 mill per day in 2017, Drewry said.

In addition, a likely slowdown in China’s stocking activity poses a big risk to crude tonnage demand. This activity, which remained one of the leading factors behind the strong growth in the crude oil trade over the last two years, may fall significantly in 2018.

According to the IEA’s data on China’s implied stock changes, the country should have accumulated close to 520 mill barrels since 2015, well above the total special petroleum reserve (SPR) capacity that was supposed to come online fully by 2020.

A sharp decline in stocking activity in the third quarter of this year to 0.5 mill barrels per day from 1.2 mill barrels per day in the second quarter suggests that we might see a significant decrease in the inventory build-up by China in 2018, Drewry concluded.

In the products trades, Asia’s front-month regrade (a measure of jet fuel’s relative strength to gasoil) recently eased from last Thursday’s 19-month high of $1.58 per barrel but remained relatively strong at $1.32 per barrel, Ocean Freight Exchange (OFE) reported.

While the surge in the Asian regrade can be partly attributed to seasonality during the winter heating oil demand season, the bulk of support is coming from the ongoing slump in the gasoil market.

Regional refineries have been running hard on the back of robust refinery margins, as well as the end of turnaround season, flooding the market with excess supplies. Unusually high diesel exports from India, despite the end of monsoon season, have added length to an already-pressured market, OFE said.

The jump in Indian gasoil exports can be attributed to Indian Oil’s 300,000 barrels per day Paradip refinery running at full capacity, as well as the ramp-up of BPCL’s 310,000 Kochi refinery and HMEL’s 230,000 barrels per day Bathinda refinery after recent expansions.

Sentiment in the Asian high sulfur gasoil market weakened further after the release of a new batch of Chinese export quotas, as well as China’s domestic ban on diesel with sulfur content greater than 10 ppm, which are likely to result in higher exports of high sulfur diesel.

The increase in cargo demand is reflected in the firm North Asian MR segment. Rates for a South Korea/Singapore trip basis 40,000 are currently assessed at $460,000, some 13% higher than at the start of the month.

An increasingly narrow gasoil EFS and relatively high freight rates have closed the arbitrage window to Europe, leaving Singapore as one of the few viable outlets for excess barrels.

As such, onshore middle distillate inventories in Singapore stood at 11.55 mill barrels for the week ending November 9, up by 9.7% month-on-month, OFE concluded.

Elsewhere, TEN has taken delivery of the Ice Class Aframax ‘Bergen TS’, the last in the 15-vessel pre-employed newbuilding programme.

The ship was built by Daewoo-Mangalia and started a long-term charter immediately after its delivery.

The fleet expansion resulted in a 30% increase of TEN’s fleet over the last 18 months.

The first ship from the tranche, the 300,000 dwt VLCC ‘Ulysses’ was delivered in May, 2016. She was followed by nine Aframaxes, two LR1s, a DP2 Shuttle tanker, another VLCC and an LNGC.

With 65 vessels fully operational, TEN’s minimum revenue backlog comes to 1.3 bill with average contract duration of 2.5 years, the company claimed.

“With the largest growth in the company’s history, successfully and timely completed, TEN is well positioned to take advantage of market opportunities as they will appear,” Nikolas Tsakos, TEN President & CEO, said. “The fully employed renewal programme is expected to significantly contribute to TEN’s bottom line and solidify the fleet’s income visibility and cash generation from now and into the future.”

In the charter market, the 2012-built VLCC ‘Trikwong Venture’ was believed fixed to Koch for $27,500 per day, while the 2012-built Suezmax ‘Decathlon’ was taken by Total for 12 months at $19,000 per day.

In the Aframax sector, the 2006/07-built ‘NS Captain’ and ‘NS Columbus’ were thought fixed to Clearlake for 12, option 12 months at $15,500 per day each. Vitol was said to have taken their near sister, the 2003-built ‘Petrozavodsk’ for six months at a similar rate. PBF Energy was said to have taken the 1998-built ‘Eagle Austin’ for 12 months at $15,000 per day and the 2004-built sisters, ‘Adafura’ and ‘Ashahda’ were reportedly fixed to undisclosed interests for $14,500 per day each.

The recently delivered LR1 ‘Cielo Blanco’ was reported as fixed to Trafigura for six, option six months at $13,750 per day, while Navig8 was believed to have taken the 2004-built ‘Theodosia’ for 12, option 12 months at $11,750 per day. 

In the MR sector, Golden Stena Weco was thought to have fixed the 2017-built ‘Altair’ for two years at $15,000 per day, while Chevron was said to have taken the 2009-built sisters ‘Nave Orbit’ and ‘Nave Equator’ for 12, option 12 months at $13,500 per day.

ST Shipping was very active.This charterer was believed to have fixed the 2005-built MR ‘Kriti Emerald’ for 12 months at $16,000 per day, the 2004-built ‘Jasmine Express’ for 12 months at $12,750 per day, plus the 2008-built Handysize ‘Hector N’ for 12 months for $12,000 per day.  

In the S&P market, brokers said that the 2003-built Aframax ‘Singapore Voyager’ had been committed to Greek interests for $9 mill, while Indian buyers were said to have committed $9.8 mill for the 1998-built Suezmax ‘Cap Georges’.    

Thursday, November 16, 2017

Saudi Retreat From U.S. Oil Market Cuts Exports to 30-Year Low

For a generation, the huge, whitewashed storage tanks at America’s largest oil refinery in Port Arthur, Texas, have stored almost nothing but Saudi crude.

The plant is owned by Saudi Arabia’s state-run oil company, Aramco, and since it first bought a stake in 1988, the Motiva refinery guaranteed the kingdom a strategic foothold in the world’s largest energy market. The tankers carrying millions of barrels a month of Arab Light crude from Saudi export terminals to Port Arthur were testament to the strength of the energy and political ties binding Riyadh and Washington.

All of a sudden, there are very few Saudi ships arriving in Texas. Since July, Aramco has constricted supply, attempting to drain the crude storage tanks at Motiva -- and many others across America -- part of a plan to lift oil prices, even at the cost of sacrificing its once prized U.S. market.

While Motiva is most affected, the rest of the U.S. oil refining system, from El Segundo in California to Lake Lake Charles in Louisiana, has also taken a hit. The result: Saudi crude exports into America fell to a 30-year low last month.

"The drop is huge," said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. "It’s not just that Saudi exports are low, but they have been low for several months.”
At a stroke, the freedom from Saudi oil that’s been a rhetorical aspiration for generations of American politicians, from Jimmy Carter to George W. Bush, is within reach -- even if it’s largely the choice of supplier rather than customer.

The U.S. imported just 525,000 barrels a day of Saudi crude in October, the lowest since May 1987 and down from 1.5 million barrels a day a decade ago, according to Bloomberg News calculations based on custom data.

The export drop was part of a wider undertaking by the Organization of Petroleum Exporting Countries to fight a global glut that has weighed on oil prices. OPEC and its non-OPEC allies including Russia are scheduled to meet later this month to discuss prolonging the cuts through 2018.

Saudi Arabia, which for decades fought hard to be the second-largest oil supplier to the U.S. after Canada, last month dropped to fourth position for the first time since at least 1990, falling behind Iraq and Mexico.

The drop in supplies has been so dramatic that Motiva bought in July almost exactly the same amount of crude from Saudi Arabia (4.01 million barrels) as it did from Iraq (3.96 million), according to custom data.  Saudi crude that month accounted for just 36 percent of Motiva’s imports, down from a typical 70-90 percent in the past.In August, the most recent monthly data available at company level, Saudi crude accounted for less than half of Motiva’s imports.

The combination of falling Saudi oil exports into the U.S. last year, cheap crude and higher exports of American weapons had already turned upside-down the trade relationship between the two countries. Last year, the U.S. enjoyed its first trade surplus with Saudi Arabia since 1998 -- only the third in 30 years, according to data from the U.S. Census Bureau. The sharper cuts in oil exports since the summer will likely amplify that trend.
As Saudi supplies fell, U.S. crude inventories dropped sharply over the summer and autumn to their lowest since January 2016. Oil prices have followed and Brent, the global benchmark, traded at a two-year high above $60 a barrel this month.

"The policy has been a tremendous success," said Anas Alhajji, a Dallas-based oil consultant who tracks Saudi oil policy. "The U.S. is the only country in the world that publishes oil inventories data on a weekly basis and investors closely follow it. Saudi Arabia needed to focus on the data that matters to investors, and it did by lowering exports to the U.S."

Saudi officials said that oil exports are set to drop even further in this month and next, with shipments into the U.S. expected to fall another 10 percent from November.

"The cuts show that when the Saudis say they will do ’whatever it takes’ they mean it," said Helima Croft, global head of commodity strategy at RBC Capital Markets LLC and a former analyst at the Central Intelligence Agency.

Yet, driving its exports into the U.S. to a three-decade low isn’t without risks for Riyadh. Once a country gives up its market share, it can be costly to recover it. The drop in Saudi shipments also reflects the changing U.S. energy market as rising shale production reduces the overall need for foreign oil. The EIA expects U.S. output to reach an all-time high of 10.1 million barrels a day by December 2018.

"Our import dependence has collapsed," said Bob NcNally, a former White House oil official and head of consultant Rapidan Energy Group LLC. "What should worry Riyadh is if they need to sustain the cuts not a few more months, but a lot longer.”

The International Energy Agency painted a rosy outlook for U.S. domestic production up to 2025 in its annual World Energy Outlook flagship report, saying the surge in oil and gas output in America is the biggest boom in history.

However, owning Motiva gives Saudi Arabia a route to regaining market share, traders and refining executives said.

"Motiva has taken the brunt of the Saudi cuts, so Riyadh would be able to increase exports to the U.S. relatively easily in the future as and when they decide to reverse the policy," said Sen at Energy Aspects.

For the Saudi Arabian Oil Co., as Aramco is formally known, the loss of market share comes at a delicate moment. The company is preparing for an initial public offering that Riyadh hopes will value the company at an eye-watering $2 trillion.

The American market has long been Aramco’s most prized, and the Port Arthur refinery is one of the company’s jewels -- nearly $10 billion was spent expanding its capacity in 2013. In preparation of its initial public offering, scheduled for the second half of 2018, Aramco earlier this year paid to $2.2 billion to take full control of Motiva, dissolving a 50-50 joint-venture it held with Royal Dutch Shell Plc.

Aramco declined to comment.

At any other time, the loss of U.S. market share would have worried the Saudi regime, fearing a loss in political influence. But with President Donald Trump, the Saudis believe the strength of their relationship with the White House is as good as it’s been in decades, said David Goldwyn, a Washington-based energy consultant and former U.S. State Department top oil diplomat.

"The Saudis are not worried about the need to have U.S. oil market share to secure themselves diplomatically," Goldwyn said.

The shift away from the U.S. show the increasing important of Asian markets for Saudi Arabia, most notably China, but also India, Indonesia, Japan and South Korea. While Saudi exports to the U.S. plunged, sales in Japan earlier this year jumped to a 28-year high.

"Saudi Arabia doesn’t care any more about its market share in the U.S -- it’s going after the Asian market," said Jan Stuart, an oil economist at consultant Cornerstone Macro LLC in New York.

Wednesday, November 15, 2017

Sinking Rich: Speedboat Racing Through a Failed State

Ghana in Talks with ExxonMobil

The government of Ghana and US supermajor ExxonMobil are in talks aimed at allowing the US firm to launch an exploration program off the West African country’s coast.

In 2015 ExxonMobil and Ghana signed a MoU to assess its Deepwater Cape Three Point region, where the water depths range up to 13,000 ft.

The country’s deputy oil minister, Mohamed Amin Adam, was quoted in a Reuters report as saying that the government chose direct negotiation with the US firm over a competitive tendering process due to the peculiar nature of the oilfield.

The block was relinquished twice by Vanco Energy and Lukoil and that has since increased its risk profile, according to the Ministry. A release from the Ministry described the block as “one of the ultra-deep water blocks, which severely tests the limits of modern technology and would take research and development to optionally develop and exploit any discovered resources.”

Tuesday, November 14, 2017

Gunvor USA Secures USD 875 Million Borrowing Base Facility

Gunvor USA LLC, a subsidiary of Gunvor Group, has successfully closed the syndication of its USD 875 million Borrowing Base Credit Facility.

The facility will support the company’s established operations in the United States, as well as planned expansion into Canada. Gunvor USA LLC has two main offices, located in Houston (TX) and Stamford (CT), which are focused on trading refined products, crude oil and natural gas.

Our expanded facility enables Gunvor USA to build on our trading activities across the commodities space in North America,” said Chris Morran, Treasurer of Gunvor USA. “The oversubscription of the transaction and 75% increase in the facility amount demonstrate the level of confidence our banking partners have with our North American strategy.

The new facility is jointly lead arranged by Rabobank, which will also serve as Administrative Agent and Active Bookrunner, and ABN Amro Capital USA LLC as Joint Bookrunner. ING Capital, LLC, Natixis, New York Branch, and Société Générale join as Joint Lead Arranger in the transaction.
The syndicate also includes Credit Agricole Corporate and Investment Bank, Deutsche Bank AG, New York Branch, Mizuho Ltd. and Sumitomo Mitsui Banking Corporation.

Gunvor USA has grown rapidly since its launch in 2016, and has significantly expanded its bank group as part of the refinancing,” said David Garza, President of Gunvor USA and Managing Director for its North American operations. “In the last year, Gunvor USA has hired more than 60 people for its North American operations, and opened trading offices in Houston and Stamford, and now a rep office in Calgary. We’ve been able to grow at an accelerated pace with the support of our banking partners.

Gunvor USA LLC is a wholly-owned indirect subsidiary of Gunvor Group Ltd., one of the largest independent energy commodity traders in the world.

Monday, November 13, 2017

What the Saudi Arrests Mean for the Kingdom's Oil Policy

We may never fully know what lies behind Crown Prince Mohammed bin Salman's decision to arrest more than 200 Saudi citizens, including 11 princes and four government ministers, on corruption charges, just as tensions with Iran are escalating.

What we do know is that his move simultaneously boosted the oil price and undermined the attractiveness of Aramco to potential foreign investors. But it would be a mistake to conclude that this political decision also heralds a shift in Saudi oil policy, or permanently damages the prospects of the state oil company's IPO. 

Crude prices always rise in response to unrest in the Middle East, even when the countries involved produce little or no oil. That it has done so now, in the wake of the arrests in the region's biggest producer and the threats against Lebanon and Iran in response to a missile launched from Yemen, should come as no surprise.

The jump, which took oil prices to their highest level in more than two years immediately after the arrests, might be expected to boost support for a pause before OPEC and its friends decide whether to extend their current deal on production cuts until the end of 2018. There are some, including Russian President Vladimir Putin, who have said that it is too early to decide what should be done beyond the deal's current expiry in March. 

But dissenting voices are likely to fade into the background when the groups meet in Vienna on Nov. 30. The output cuts do not target a specific oil price -- as Saudi oil minister Khalid Al-Falih said in June, the aim is to reduce excess inventories. That problem has not yet been resolved.

MbS, as the crown prince is widely known, is already setting the kingdom's oil policy. He turned on its head Saudi Arabia's earlier stance of boosting oil supply in an attempt to drive out higher-cost producers, and he has placed his country at the forefront of output cuts aimed at draining excess inventories, cutting production by more than required under the agreement. He has already expressed support for extending the production deal. Only by returning global oil inventories to more normal levels can Saudi Arabia, and OPEC, hope to return to a world where their actions influence the market. 

The Saudi anti-corruption purge should change nothing for the kingdom's oil policy. MbS is surely mindful that an extension of the current output deal has already been priced into the market, and failure to deliver it at the end of the month would kill the recent rally in prices, despite the elevated tensions in the Middle East.

Assessing the impact of the detentions on the Saudi Aramco IPO is less straightforward. Ninety-five percent of the shares will remain the property of what is now clearly an unpredictable government. If the arrests turn out to be no more than a purge of opponents to the crown prince's accession to the throne, potential investors will run for cover.

But perhaps the anti-corruption purge is the first step towards creating a more open and dynamic business environment in Saudi Arabia. If it truly marks the beginning of the end of the of the rentier state that has crippled the country's development then it could even improve the prospects for inward investment, and boost the attractiveness of the shares.

Foreign investors' appetite for a piece of a partially-privatized Saudi Aramco will not depend on whether the price of oil at the time of listing is $50, $60, or $70 a barrel. A decision to invest in the company will depend much more on the dividend and taxation policies of the major shareholder -- the Saudi government -- and the investor's view of the long-term future for oil.
Indeed, it could be argued that over the longer term Aramco would benefit from a lower oil price, which simultaneously boosts demand for crude and makes alternative energy sources less attractive while undermining other, higher-cost oil supplies. That ought to give the best outlook for production as Aramco still extracts some of the lowest cost oil on the planet. If Saudi Arabia's "Vision 2030" plan to wean the kingdom off its dependence on oil revenues is even partly realized, Aramco will be relieved of much of its burden of supporting government expenditure. That should serve to burnish the appeal of the shares.

To realize his dream of privatizing Aramco -- and the planned 5 percent offering may be only the beginning -- the young crown prince will need to show hoped-for investors that his recent purge of the kingdom's elite really is a first step on the road to a brave new Saudi Arabia.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners. 

To contact the author of this story:
Julian Lee in London at

To contact the editor responsible for this story:
Jennifer Ryan at

Friday, November 10, 2017

CNBC Investigates A Venezuelan Oil Deal | CNBC

Shipping Markets - Older VLCCs in favour

The VLCC market remained flat during the past week for modern tonnage, as charterers focused more on older units.
These older vessels tended to be ex drydock with no SIRE, etc, which were willing to accept a tempting rebate of some WS12-15 points for east voyages, Fearnleys said in its weekly report.

The rebate closed in as the week progressed and increased resistance from owners was seen. Looking ahead, owners’ sentiment remained strong as the remaining 3rd decade cargoes were being worked. Delays were still evident in the Far East, which added further pressure.

The Suezmax market also came under pressure over the past week. Activity in West Africa slowed to a trickle and naturally the tonnage list grew allowing charterers to chip away at levels from the early WS100s down to the low WS80s.

The Black Sea and Med weather delays were minimal and again cargo activity was been scarce allowing TD6 to fall sharply to WS90.

Current market conditions are bucking the normal 4Q17 more healthy market trend and owners are running out of time with December dates rapidly approaching. It is going to take a large volume of cargoes to soak up the current tonnage back log, Fearnleys said.

However, a higher oil price is pushing up the bunker costs, which in turn is eroding earnings. This could be the brake to stop further rate slippage ahead.

Aframaxes trading in the North Sea and Baltic experienced an ongoing decrease in rates this week. Less cargo activity, coupled with an oversupply of available tonnage, gave charterers the upper hand and an opportunity to push down rates.

Going forward, we see an even further downside before the market will firm again.

Last week, owners in the Med and Black Sea were holding out for high numbers. But as the market fundamentals pointed towards a softer market, the only thing keeping rates at such high levels was owners’ persistence.

By the start of this week, owners realised the list of available tonnage was too long to play hard to get, and caved in one at the time. The market has now dropped WS40 points and we could see it going below WS100 by the end of this week, Fearnleys concluded.
The recent Iraq/Kurdish conflict heralds the return of the geopolitical risk premium in oil prices, Ocean Freight Exchange (OFE) reported.
While the ongoing rally in crude prices is underpinned by fundamentals, such as robust demand growth, ongoing OPEC supply cuts and falling US crude inventories, growing tensions in the Middle East have been playing an increasingly significant role.

With Iraq seizing control of the disputed Kirkuk region on 16th October, Brent crude futures jumped to a three-week high of $57.82 per barrel, as production at two major oilfields was shut. According to Bloomberg, Kurdish crude exports fell by around 300,000 barrels per day in October, due to supply disruptions.

Spurred by the sudden and unexpected purge in Saudi Arabia, oil prices surged to their highest in two and a half years, as Brent crude futures crossed the $64 per barrel mark on Monday.

The anti-corruption crackdown is viewed by many as a move by Crown Prince Mohammed bin Salman to further consolidate his power at home, as he pushes through major reforms, such as ‘Vision 2030’, which includes the Saudi Aramco IPO.

Concerns over potential instability in the Kingdom and investment climate have added a geopolitical risk premium to oil prices.

If anything, the Saudi purge can be viewed as bullish for oil prices as it further cements Saudi Arabia’s commitment to reduce the global glut. Crown Prince Mohammed bin Salman has made his stance on extending the ongoing OPEC cuts of 1.8 mill barrels per day clear, as higher oil prices would benefit the IPO, OFE said.

The rollover of the OPEC production curbs for the whole of 2018 is likely to further delay any significant recovery in the tanker market, which is already facing headwinds from persistent overcapacity.
Lower cargo volumes ex-AG have contributed to the drop in average VLCC earnings this year, which are currently around 40% less than that of 2016. The backwardated market structure has also led to the ongoing decline in VLCC floating storage, which has released more tonnage into the trading fleet, OFE concluded.
Meanwhile, the 2006-built MR ‘Pretty Scene’ is due to be publicly auctioned at Durban, South Africa on 5th December this year.
Bowman Gilfillan is handling the auction, which has materialised as a result of a judicial arrest.
Monjasa has confirmed that it is to charter an SKS Tankers Holding ‘D’ class Aframax.
The 119,000-dwt tanker will form part of Monjasa’s operations covering West Africa, which comprises 15 tankers delivering a total of 1.5 mill tonnes of marine fuel anually.
Several advanced technical features and the ability to load, discharge and blend multiple grades of cargo simultaneously, made this vessel an interesting proposition, the company said.   

Group CEO, Anders Østergaard, explained:“It’s a pioneering move to apply an SKS D-class tanker as a floating storage and this first-class vessel becomes the largest ever member of Monjasa’s fleet.

"The aim is to strengthen the backbone of our West Africa logistics and offer more flexibility for our customers taking bunkers in the region. For this purpose, we see her as an excellent solution for current and future trading requirements,” he said.

The vessel has six double valve segregations and is equipped with Framo deepwell cargo pumps for each individual tank.

Monjasa will take delivery of the vessel in Europe, and she will be fully operational off West Africa during December, 2017.

In other chartering news, Koch was said to have fixed the 2011-built VLCCs ‘Maersk Heiwa’ and ‘Mercury Hope’ for two years at $29,000 per vessel.

The 2007-built Aframax ‘Bai Lu Zhou’ was believed taken by Trafigurafor 12 months at $13,500 per day, while ST Shipping was thought to have taken the 2009-2010-built sister Aframaxes ‘SN Claudia’ and ‘SN Olivia’ for 12 months at $15,500 per day.

Petrobras was said to have chartered the 2005-built MR ‘Aris’ for 30 months at $14,350 per day.

In the S&P sector, Greek interests were said to have taken the newbuilding Suezmax ‘RS Aurora’ for an undisclosed fee, while Aegean was thought to have bought the 1999-built Aframax ‘Althea’, which brokers said was an old sale. 

Central Shipping was believed to have ordered one, option one MR at Hyundai Mipo for a reported $32-$35 mill per ship and delivery in 2019.

Thursday, November 9, 2017

Saudi AG reveals corruption close to $100 billion, 208 individuals called in for questioning

Attorney General Saud Al-Mojeb

JEDDAH: Saudi Arabia has uncovered corruption to the tune of $100 billion.

In a statement on Thursday, Attorney General Saud Al-Mojeb said: “The investigations of the Supreme Anti-Corruption Committee are proceeding quickly ... The potential scale of corrupt practices which have been uncovered is very large.”

Based on the investigations over the past three years, Al-Mojeb estimated that “at least $100 billion has been misused through systematic corruption and embezzlement over several decades.”

He said a total of 208 individuals have been called in for questioning so far. Of them, “seven have been released without charge.”

Al-Mojeb, who is also the member of the anti-corruption committee, said the evidence for “this wrongdoing is very strong and confirms the original suspicions which led the Saudi authorities to begin the investigation into these suspects in the first place.”

He said given the scale of the allegations, the Saudi authorities, under the direction of the Royal Order issued on Nov. 4, had a clear legal mandate to move to the next phase of “our investigations, and to take action to suspend personal bank accounts.”

“On Tuesday, the governor of the Saudi Arabian Monetary Authority (SAMA) agreed to my request to suspend the personal bank accounts of persons of interests in the investigation,” he said.

Al-Mojeb admitted that there has been a great deal of speculation around the world regarding the identities of the individuals concerned and the details of the charges against them.

“In order to ensure that the individuals continue to enjoy the full legal rights afforded to them under Saudi law, we will not be revealing any more personal details at this time,” he said.

“We ask that their privacy is respected while they continue to be subject to our judicial process.”

He reiterated that it was important to repeat, as all Saudi authorities have done over the past few days, that normal commercial activity in the Kingdom is not affected by these investigations.

“Only personal bank accounts have been suspended. Companies and banks are free to continue with transactions as usual,” he said.

Al-Mojeb said: “The Government of Saudi Arabia, under the leadership of King Salman and Crown Prince Mohammed bin Salman, is working within a clear legal and institutional framework to maintain transparency and integrity in the market.”

Saudi Corruption Crackdown Topples Oil Kingpins


Saudi Crown Prince Mohammad bin Salman’s unexpected crackdown has shattered the tranquility of the kingdom.

After Saturday’s news emerged that a long list of high-profile Saudi royals, military leaders and multi-billionaires were arrested or confined to their quarters, all seemed to be only an implementation of the crown prince’s open threat that “no-one is above the law, whether it is a prince or a minister.”

The current list of arrests include names like Saudi billionaire Prince Al-Waleed bin Talal, one of the most media-loved Saudi businessmen, and Prince Miteb bin Abdullah, former head of the Saudi National Guard. At the end of the weekend, the impact was clear: The new Saudi power broker isn’t cutting anyone slack.

Just after that, in an effort to clean house in one fell swoop, Mohammad bin Salman (MBS) announced—by royal decree—a new anti-corruption committee.

At the moment, most eyes are on the anti-corruption narrative, which is being pushed by the Saudi government and media. The announcement of the arrests, made over Al Arabiya, the Saudi-owned satellite (whose broadcasts are controlled by the state), showed MBS’s willingness to address corruption. Clearly, corruption and a lack of transparency is still a significant issue in Saudi Arabia, and MBS is taking a risk in challenging it.

It seems the crown prince is far from finished, as news has emerged that one of the Arab world’s leading broadcasters, MBC, has been put under government control. Part of its management was removed and the owner detained. News is also emerging that even the former Saudi Minister of Oil Ali Al Naimi, Saudi Arabia’s media face for decades, has been forcibly confined to his quarters. 

Other sources state that a travel ban has been imposed for Saudi officials, including some figures within Saudi Aramco. The latter have been informed that travel requests are currently on hold. More interesting is that the Saudi Monetary Agency (SAMA) has ordered a freezing of accounts of individuals linked to corruption. SAMA reiterated the respective accounts of companies have currently not been frozen.

Regarding the Saudi royals, most princes and princesses are currently prohibited to travel, except with the permission of King Salman. Foreign money transfer also has currently been limited to $50,000 per month, with a two-month limit.  Security sources indicate that Saudi princes in Tabuk, Eastern Province and Mecca have been put under house arrest. At the same time, Saudi special forces have moved to surround the residencies of Prince Mishal bin AbdulAziz, Prince AbdulAziz bin Fahd and Prince Khalid bin Sultan.

These developments are going further than the original anti-corruption crackdown. The already long-foreseen power struggle to take the Saudi throne seems to be entering its second phase. Crown Prince bin Salman seems—supported by signs of support coming from Washington, Moscow and even Arab neighbors—to take the chance to overwhelm his local opponents by shockwave tactics. Some indicate that they expect a possible change of guard at the top in the next couple of days.

Each day’s developments grow more significant. MBS was able to increase his own position dramatically this weekend, and continues to remove remaining opposition by the dozen.

Although short-term volatility could occur, overall stability and change inside of the kingdom is to be expected, as MBS and his supporters are holding not only the military and security forces in their hands, but have also gained the trust and support of the majority of the Saudis.

MBS has the same charisma as John F. Kennedy had when took the U.S. presidential office.  The crown prince has gained an almost movie-star popularity under the young Saudis, who form the majority of the population.

These current developments didn’t come out of nowhere. The basis for the anti-corruption crackdown was supported by the success of the Future Investment Initiative 2017. Dubbed “Davos in the Desert”, this high-profile gathering of the world’s leading financial power brokers happened in Riyadh last week.

At the event, MBS received the green light to pursue his Saudi Vision 2030 dream to wean the kingdom from its hydrocarbon addiction. In the same week, U.S. president Trump and his administration increased their support for the Saudi hardline position to Iran, IRGC and Hezbollah. Washington also increased its pressure on Qatar to soon move away from Tehran.

These regional and geopolitical developments have bolstered the views of the MBS to pursue his strategy of confronting Iran and its proxies. It’s no coincidence that the start of the crackdown popped up at the same time that Lebanese prime minister Hariri took refuge in the kingdom. Thus, the link with Hezbollah-Iran and Lebanon isn’t difficult. 

Without trying to assess the present situation as dire and threatening, all signs show that the region, under influence of Saudi’s new de-facto ruler, is heading toward a full confrontation with Iran. The internal Game of Thrones of Saudi royals is now being slowly but obviously transformed to a full-scale showdown with Iran and its proxies.

Saudi Arabia—supported by the UAE, Bahrain and likely Egypt—was openly given the green light by Trump’s secretary of treasury and secretary of state. The silence on the Russian front indicates a possible change of heart in Putin’s coterie, as well. Saudi Arabia and others openly stated that Iran has committed several acts of war against the kingdom. The ballistic missile attack by Houthi rebels on the airport of Riyadh is directly linked to an act of war by Iran, perceived to be the provider of these systems.

The coming days are crucial for the region’s stability and future. The ongoing power struggle in the kingdom, which is currently openly on the streets, not only targets corruption, but is a move to consolidate power by Crown Prince bin Salman. His movement is clear, and should perhaps be supported in full, as it could lead the change that young Saudis want. The outcome will decide the further steps needed by all parties involved.

Considering the signs, the most positive outcome would be a consolidation of the position of MBS as the main power broker, leading to a full implementation of Saudi Vision 2030. In the short term, this won’t prohibit the Saudis and their allies to react and act with full military power against the Iranian power projections and its proxies in Yemen, Lebanon and Iraq.

Stability and security in Saudi Arabia is seen as a leading factor in MBS’s power strategies. Confrontations inside and outside the kingdom aren’t seen as a no-go area. After decades of listening to U.S., European or Russian advice, MBS is creating his own future. Short-term financial or economic instability and geopolitical risks have increased substantially in the last 24 hours.  

By Cyril Widdershoven for