Monday, October 22, 2018

Houston Takes Center Stage as Major Crude Oil Trading Hub


Since the lifting of a decades-old ban on crude exports at the end of 2015, Houston has emerged as a major physical crude oil trading hub, overtaking the country’s primary crude benchmark (West Texas Intermediate, or “WTI”) pricing power long held in Cushing, Oklahoma due to access to major pipelines that run through it and ample storage space.

The surge in crude oil production can be tied to the shale boom, particularly in the Permian Basin in West Texas and New Mexico, where vast amounts of crude oil flow directly to the Gulf Coast – oftentimes bypassing Cushing altogether – to destinations such as Asia, Europe and Latin America.

Traders and market observers say WTI crude at Houston is a preferred futures contract hub over WTI Cushing because it better reflects global market balance and offers a more liquid market for export customers.

Since the lifting of the crude oil export ban, U.S. crude exports have surged nearly 350%, from 490,000 barrels per day (bbl/d) in January 2016 to a record 2.2 MMbbl/d in June 2018, according to the U.S. Energy Information Administration (EIA).

Rising oil production in the Permian Basin, which is estimated at around 3.5 MMbbl/d, along with increased U.S. light sweet crude exports to overseas customers, have prompted the launch of new physical futures contracts in Houston that are set to debut later this year.

In fact, the U.S. port district of Houston-Galveston earlier this year began exporting more crude oil than it imported for the first time on record, according to EIA statistics. In April 2018, crude oil exports from Houston-Galveston surpassed crude oil imports by 15,000 bbl/d. In May 2018, the difference between crude oil exports and imports increased substantially to 470,000 bbl/d.

On July 17, 2018, the Intercontinental Exchange Inc. (“ICE”) announced plans to launch in the third quarter of this year a physically delivered Permian WTI crude oil futures contract, deliverable in Houston. According to ICE, the new futures contract “is designed to provide price discovery, settlement and delivery at Magellan Midstream Partners LP’s terminal in East Houston.”

The contract is expected to provide ample liquidity for traders and brokers seeking flexible hedging and trading opportunities for export shipments.

Meanwhile, CME Group on September 24, 2018, announced that it intends to offer a new WTI Houston crude oil futures contract with three physical delivery locations on the Enterprise Houston system, pending regulatory review. WTI Houston crude oil futures will be listed with and subject to the rules of NYMEX, beginning with the January 2019 contract month.

The new WTI Houston crude oil futures contract expands CME Group’s already robust suite of crude oil futures and options and will complement its global benchmark NYMEX WTI Light Sweet Crude Oil futures. Participants will have the flexibility to make or take delivery of U.S. light sweet crude oil at the Enterprise Crude Houston (“ECHO”) terminal, Enterprise Houston Ship Channel (“EHSC”) or Genoa Junction through the new contract.

Enterprise has a network of 19 ship docks along the U.S. Gulf Coast and is the largest exporter of crude oil in the U.S. and the ideal provider of delivery points for this physical WTI Houston futures contract, according to CME Group.

Through its network of pipelines, storage and marine terminals, the firm has the capability to handle the flow of more than 4 MMbbl/d of crude oil. Participants will also benefit from access to a diverse group of refiners, storage facilities and export facilities through the Enterprise network.

What We’re Hearing

Opportune LLP’s Derivative Valuation group has heard very little from our existing clients about the new WTI Permian crude oil contracts delivered into Houston. Unfortunately, this is very common as we often deal with transactions that have already been executed.

That being said, we routinely see examples of hedging mismatches. For instance, some companies have marketing agreements that sell WTI at Cushing and are erroneously hedged with Brent crude contracts. These pricing relationships tend to deteriorate over time and eventually result in both losses on production and the hedge itself. These costly mistakes can easily be avoided.

Saturday, October 20, 2018

Suddenly Toxic, Saudi Prince Is Shunned by Investors He Courted



He was the man who sold the world on his vision of a Saudi economy no longer dependent on oil.

Now Crown Prince Mohammed bin Salman could become the biggest risk to his own project. Everything changed when Jamal Khashoggi walked into the Saudi consulate in Istanbul on Oct. 2 and didn’t come out. Allegations rapidly spread that the Washington-based journalist was murdered by a hit team sent from Riyadh. And suspicion naturally fell on the oil-rich kingdom’s de facto ruler, the 33-year-old heir to the throne.

Prince Mohammed, who’s denied any knowledge of Khashoggi’s fate, still has his defenders -– notably Donald Trump. The U.S. president and his top diplomat have cautioned against putting America’s decades-old Saudi alliance at risk while they await the results of a Saudi investigation. But that’s in sharp contrast to a growing chorus of outrage, putting pressure on the White House to act. In Congress, lawmakers from Trump’s own party denounced the prince personally and demanded sanctions.

And, crucially for Prince Mohammed’s economic plans, the global business leaders he courted are distancing themselves. The bosses of JPMorgan Chase & Co., Ford Motor Co. and Uber Technologies Inc. are among dozens of executives and policy makers scrapping plans to attend the prince’s business forum next week.

‘Official Complicity’

For a leader who’s staked his country’s future on a surge in foreign investment, that’s an ominous indicator.

“What appears to be Saudi official complicity in Jamal’s disappearance, and perhaps death, sends all the wrong signals to the people and groups MBS needs to change Saudi Arabia in the direction he wants,’’ said Gregory Gause, a Saudi specialist at Texas A&M University.

The investors the crown prince needs were already wavering. They were fine with showing up at lavish summits, at least until Khashoggi disappeared -– but the money wasn’t flowing.

Foreign direct investment slumped more than 80 percent last year. In an interview this month, the crown prince said early data suggested a partial rebound in 2018. But to meet his 2020 targets, FDI needs to soar.

Instead, even before the Khashoggi scandal, business leaders had seen enough in Prince Mohammed’s rule to unnerve them. At home, Saudi Arabia detained dozens of prominent local entrepreneurs as part of a supposed crackdown on graft. Abroad, it launched a boycott of Qatar, and got embroiled in disputes with Germany and Canada that threatened commercial deals with those countries.

When his father King Salman ascended to the throne in 2015, Prince Mohammed began to leapfrog a generation of more experienced uncles and cousins, and eventually became heir to the throne. On the way he grabbed control over the key levers of the economy, including the central bank and oil giant Aramco, as well as the Defense Ministry.

War in Yemen

The crown prince set out to change a strict religious culture, and he delivered on some promises, allowing women to drive cars and loosening Saudi social life by permitting cinemas and concerts. Those measures won him fanfares in the West.

Meanwhile, Prince Mohammed was abandoning a traditionally cautious foreign policy and seeking to assert Saudi power –- which led him to intervene in Yemen’s civil war. More than three years of Saudi bombing, directed against rebels said to be backed by Iran, has left thousands of civilians dead.
On the economic front, the prince wanted to ditch a model based on state handouts of oil cash, and build a new private sector. A key driver was Saudi Arabia’s slowdown after the crude-price shock of 2014. The economy contracted 0.9 percent last year, and while the government expects growth of 2.1 percent in 2019, that’s still only about half the average pace between 2000 and 2014.

Prince Mohammed worked hard to court U.S. executives who could potentially help meet his goals. During a visit earlier this year he met Amazon.com Inc. Chief Executive Officer Jeff Bezos and Microsoft Corp.’s Satya Nadella. But Prince Mohammed had to backtrack on some policies. His efforts to cut salaries and allowance met with signs of public opposition.

‘That Has Consequences’

And opposition to any of his initiatives hasn’t been tolerated, in a climate of fear. An economist who questioned the Aramco sale plan was arrested. So were women activists who’d campaigned for an end to the driving ban. So were dozens of people accused of collaboration with Qatar –- a charge also leveled at Khashoggi, before he disappeared.

“Was it a planned, horrendous killing, or an operation that has gone badly wrong?’’ said James M. Dorsey, a Middle East scholar at Nanyang Technological University in Singapore. The Saudi response to the crisis has been “abysmal,’’ he said, as authorities responded first with blanket denials and then with “conspiracy theories.’’

“They have lost any high ground,’’ Dorsey said. “That has consequences for MBS.’’

--With assistance from Ziad Daoud (Economist).

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Ben Holland, Bill Faries

Friday, October 19, 2018

Exclusive: OPEC, allies struggle to fully deliver pledged oil output boost - internal document

The flag of OPEC stands on a desk ahead of the 174th Organization Of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Friday, June 22, 2018. OPEC and its allies reached a preliminary agreement in the face of strong opposition from Iran to boost production by a theoretical 1 million barrels a day - the actual increase will be smaller as several countries are unable to raise output. Photographer: Stefan Wermuth/Bloomberg Photo: Stefan Wermuth / Bloomberg / © 2018 Bloomberg Finance LP

https://www.reuters.com/article/us-opec-oil-exclusive/exclusive-opec-allies-struggle-to-fully-deliver-pledged-oil-output-boost-internal-document-idUSKCN1MT1G0

OPEC is struggling to add barrels to the market after agreeing in June to increase output, an internal document seen by Reuters showed, as an increase in Saudi Arabia was offset by declines in Iran, Venezuela and Angola. 

The Organization of the Petroleum Exporting Countries and allies agreed in June to boost supply as U.S. President Donald Trump urged producers to offset losses caused by sanctions on Iran and to dampen rising prices. 

Saudi Energy Minister Khalid al-Falih said OPEC and non-OPEC would pump roughly an extra 1 million barrels per day (bpd) following the June agreement. The OPEC document seen by Reuters adds to signs they have yet to deliver the full amount. 

OPEC says it is on course to do so, although it hasn’t given a timeframe. “It is a work in progress,” OPEC Secretary General Mohammad Barkindo said earlier this week. 

The internal document prepared by OPEC’s Vienna headquarters for a technical panel meeting on Friday showed that OPEC members, excluding Nigeria, Libya and Congo pumped an extra 428,000 bpd in September compared to May. 

The OPEC and non-OPEC technical panel called the Joint Technical Committee reviews producers’ compliance with their oil supply pledges. 

Top exporter Saudi Arabia pumped most of the extra oil, raising output by 524,000 bpd in September compared to May, the document showed. Other increases came from Iraq, Kuwait and the United Arab Emirates. 

Iran, facing U.S. sanctions on its oil exports from Nov. 4, cut production by 376,000 bpd in September versus May, and has said OPEC and Saudi Arabia are not able to make up for a total loss of its exports. 

“There is no spare capacity,” Iran’s OPEC governor, Hossein Kazempour Ardebili, said last month.
Among other OPEC members, production fell by 189,000 bpd in Venezuela and by 17,000 bpd in Angola. 

The non-OPEC nations cooperating with OPEC pumped an extra 296,000 bpd since May, the OPEC document showed. Russia increased output by 389,000 bpd, although Kazakhstan, Mexico and Malaysia posted declines. 

Trump calls Fed his 'biggest threat'
 
Nigeria, Libya and Congo are not included in OPEC’s supply-limiting pact. Including them brings the increase in OPEC’s output in September to 628,000 bpd. 

Editing by David Evans

Thursday, October 18, 2018

Ghana Launches First Ever Competitive Bid Round



Ghana launched a licensing round on October 15. This is the first open and competitive bidding round that the country has held, previously choosing to hold direct negotiations with oil and gas firms for acreage. Ghana is offering up three blocks in its offshore Central Basin.

According to reports, the licensing round has already attracted interest from major E&P firms, which have been conspicuously absent in Ghana’s burgeoning oil and gas sector to date.

Initial indications from sources in the Ministry of Energy suggest that BP, ExxonMobil, Total, Chevron Texaco, Rosneft, Sinopec and CNOCC will all be participating in the bidding.

The tender process is specifically focused on expediting exploration activity in the Central Basin. Ghana is calling on firms with the financial capacity and technical competence, coupled with the timescale for work program activity. Fiscal terms, including royalty payments to the government and Ghana National Petroleum Corporation (GNPC) equity is also an important issue in the tender process, as well as the equity and skills transfer to local partners under the local content aspect.

Wednesday, October 17, 2018

Don't mention the oil price - U.S. legal threat prompts change at OPEC

Khalid Al-Falih, Saudi Arabia's energy and industry minister, arrives for the 171st Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday, Nov. 30, 2016. 
 Akos Stiller | Bloomberg | Getty Images
Khalid Al-Falih, Saudi Arabia's energy and industry minister, arrives for the 171st Organization of Petroleum Exporting Countries (OPEC) meeting in Vienna, Austria, on Wednesday, Nov. 30, 2016.


OPEC has urged its members not to mention oil prices when discussing policy in a break from the past, as the oil producing group seeks to avoid the risk of U.S. legal action for manipulating the market, sources close to OPEC said.

Proposed U.S. legislation known as “NOPEC”, which could open the group up to anti-trust lawsuits, has long lain dormant, with previous American presidents signaling that they would veto any move to make it law. 

But U.S. President Donald Trump has been a vocal critic of the Organisation of the Petroleum Exporting Countries, blaming it for high oil prices and urging it to increase output to relieve pressure on a market hovering around four-year highs. 

That has made OPEC and its unofficial leader, Saudi Arabia, nervous about what it might mean for NOPEC, or No Oil Producing and Exporting Cartels Act. 

The decision to refrain from discussing a preferred oil price level — one way the group can guide market expectations — underlines how Trump’s aggressive stance on the oil market is unsettling OPEC and testing ties between allies Riyadh and Washington. 

In July, senior OPEC officials attended a workshop in Vienna with international law firm White & Case to discuss the NOPEC bill, and the lawyers advised avoiding public discussion of oil prices and rather talk about the stability of the oil market, two sources familiar with the matter said. 

OPEC officials were also advised to explore diplomatic lobbying channels to try and prevent the NOPEC bill from becoming law, one of the sources said. 

On Aug. 1, the OPEC secretariat sent a letter to the ministers making a similar recommendation. 

“We solemnly believe that market stability, and not prices, is the common objective of our actions,” UAE Energy Minister Suhail al-Mazroui, who holds the rotating OPEC presidency this year, wrote in the letter, seen by Reuters. 

“I would like to call upon OPEC Member Countries, as well as our participating Non-OPEC colleagues, to refrain from any reference to prices in their commentary about our collective efforts or oil market condition,” he added. 

White & Case did not respond to a Reuters request for comment. 

Specifying oil prices is not the only way OPEC tries to guide the market. By cutting production it can support prices and by raising supplies it can do the opposite, for example. 

But the private coordination of how to communicate OPEC’s message to the market represents a departure from past practice, when Saudi Arabia would often signal a preferred price level when speaking about OPEC policy and seek to push through actions to achieve that.

TIES STRAINED

While chances of the law passing this year appear slim, concerns among OPEC members and other oil producers are growing that it may ultimately get the support of Trump, given his open criticism of OPEC and high oil prices. 

The OPEC letter came two months before U.S.-Saudi relations were further strained when a Saudi journalist disappeared during a visit to the kingdom’s consulate in Istanbul. 

Turkish officials say they believe Jamal Khashoggi, a critic of Saudi policies, was murdered and his body removed. Saudi Arabia has strongly denied killing Khashoggi. 

Some members of the U.S. Congress, which has long had a testy relationship with Saudi Arabia, have criticized the kingdom over the case. 

A Senate source familiar with the bill said renewed interest in NOPEC was likely, as lawmakers weigh any actions in response to Khashoggi’s disappearance. 

The source, who declined to be named, said that with lawmakers out of town for the next several weeks, it was difficult to measure current sentiment.

LITIGATION RISKS MAY BE BEHIND IPO DELAY

Over much of the last year, Saudi Arabia irked Washington by pushing OPEC to adopt measures to boost oil prices in a shift from its previous, more moderate stance. 

Industry sources have linked that shift to a desire to maximize revenues and raise the valuation of state energy giant Saudi Aramco ahead of a planned IPO, a key part of Crown Prince Mohammed bin Salman’s reforms aimed at diversifying the economy. 

The share float, expected by some to be worth up to $100 billion, has been put on hold, sources have told Reuters. 

Prince Mohammed said this month the float was postponed to 2021, and several industry sources say the delay was partly because of litigation risks if Aramco was listed in New York, a preferred venue by the Saudi crown prince. 

“There is a major fear NOPEC could turn into another JASTA,” one of the sources familiar with Aramco IPO preparations said, referring to the Justice Against Sponsors of Terrorism Act which allows victims of the Sept. 11, 2001, attacks to sue Riyadh. 

Saudi Arabia, which denies involvement in the attacks, had long had broad immunity from the lawsuits. That changed in 2016, when the U.S. Congress overrode then-President Barack Obama’s veto of JASTA. 

With close to $1 trillion in investments in the United States, including assets owned by Aramco, Riyadh has a lot to lose if the NOPEC bill was passed into law. 

It would revoke the sovereign immunity which oil producers, including OPEC members, currently enjoy from U.S. legal action. 

Washington-based legal firm Gibson Dunn and the Saudi embassy there signed a contract in late August, according to a copy of the contract filed to the U.S. Department of Justice. 

The contract outlines that among its other responsibilities, Gibson Dunn would be “opposing NOPEC”. 

Saudi Energy Minister Khalid al-Falih has also raised concerns over NOPEC with senior U.S. officials including U.S. Energy Secretary Rick Perry during private meetings, two sources familiar with the talks told Reuters, on condition of anonymity. 

Additional reporting by Jarrett Renshaw in New York and Yara Bayoumy in Washington; Editing by Mike Collett-White

Monday, October 15, 2018

Iranian Tanker Discharges Oil into Storage in China Ahead of U.S. Sanctions

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A vessel carrying 2 million barrels of Iranian oil discharged the crude into a bonded storage tank at the port of Dalian in northeast China on Monday, according to Refinitiv Eikon data and a shipping agent with knowledge of the matter.

Iran, the third-largest producer in the Organization of Petroleum Exporting Countries (OPEC), is finding fewer takers for its crude ahead of U.S. sanctions on its oil exports that will go into effect on Nov. 4. The country previously held oil in storage at Dalian during the last round of sanctions in 2014 that was later sold to buyers in South Korea and India.

The very large crude carrier Dune, operated by National Iranian Tanker Co, offloaded oil into a bonded storage site at the Xingang section of the port, according to a shipping source based in Dalian, adding this was the first Iranian oil to discharge into bonded storage in nearly four years.

The tanker left the Iranian oil port at Kharg Island on Sept. 12, according to ship-tracking data. The Xingang area is home to several tank farms including commercial and strategic reserves. China National Petroleum Corp (CNPC) [CNPC.UL] and Dalian Port PDA Co Ltd (601880.SS) both operate commercial storage in the area, according to information on their company websites.

An investor relations official at Dalian Port declined to comment.A manager at the bonded crude storage site operated by Dalian Port declined to comment whether Iranian oil were moved to the tanks, calling it the “worst time” to give any comment regarding Iranian crude because of the U.S. sanctions.

A person at the CNPC-owned storage site who refused to identify himself when contacted by Reuters said it is “impossible” that the oil is stored there.

A spokesman for CNPC said he had no information on this matter. An executive with the China office of National Iranian Oil Co (NIOC) declined to comment. NIOC also did not respond to an email request seeking comment if it is storing oil at Dalian.

The shipping source said there is no buyer earmarked for the cargo.

Three other NITC tankers are set to arrive in Dalian in the next week or two, the ship-tracking data shows. Some of those cargoes are also likely to end up in bonded storage as the refineries in the region, controlled by CNPC, are not equipped to process Iranian oil, said three sources at state-run Chinese refiners.

China’s Iranian oil buyers, including state-owned refiner Sinopec (0386.HK) and state trader Zhuhai Zhenrong Corp, have shifted their cargoes to vessels owned by NITC since July to keep supplies flowing as the U.S. sanctions have been re-imposed.

Keeping oil in bonded storage gives the shipment owner the option to sell into China or to other buyers in the region. In early 2014, NIOC leased bonded tanks in Dalian and oil from there was shipped to South Korea and India, Reuters reported.

Sunday, October 14, 2018

Saudi threatens to retaliate against any sanctions over Khashoggi disappearance

Missing Saudi Journalist's Apple Watch May Have Sent Evidence: Report


By Andrew Torchia

DUBAI (Reuters) - Saudi Arabia on Sunday warned against threats to punish it over the disappearance of journalist Jamal Khashoggi last week, saying it would retaliate against any sanctions with tougher measures, as international criticism increased.

Khashoggi, a U.S. resident and Washington Post columnist critical of Saudi Arabia, disappeared on Oct. 2 after entering the Saudi consulate in Istanbul. Turkey's government believes he was murdered inside the building and his body removed. Saudi Arabia has denied that.

U.S. President Donald Trump has threatened "severe punishment" if it turned out Khashoggi was killed in the consulate, though he said Washington would be "punishing" itself if it halted military sales to Riyadh, a key ally.

"The Kingdom affirms its total rejection of any threats and attempts to undermine it, whether by threatening to impose economic sanctions, using political pressures, or repeating false accusations..." the official Saudi Press Agency (SPA)quoted an unnamed government source as saying.

"The Kingdom also affirms that if it receives any action, it will respond with greater action, and that the Kingdom's economy has an influential and vital role in the global economy," the source added, without elaborating.

Britain, France and Germany told Saudi Arabia they were treating the case with "the utmost seriousness".

"There needs to be a credible investigation to establish the truth about what happened, and - if relevant - to identify those bearing responsibility for the disappearance of Jamal Khashoggi, and ensure that they are held to account," the foreign ministers from the three countries said in a joint statement.

"We encourage joint Saudi-Turkish efforts in that regard, and expect the Saudi Government to provide a complete and detailed response. We have conveyed this message directly to the Saudi authorities." 

The statement, by British foreign minister Jeremy Hunt, France's Jean-Yves Le Drian and Germany's Heiko Maas, made no mention of potential actions the countries might take.

The Saudi stock market lost $33 billion of its value on Sunday amid investor worries about deteriorating international relations, one of the first signs of the economic pain that Riyadh could suffer over the affair. 

In a column published just after the SPA statement, Saudi-owned Al Arabiya channel's General Manager Turki Aldakhil warned that imposing sanctions on the world's largest oil exporter could spark global economic disaster.

"It would lead to Saudi Arabia's failure to commit to producing 7.5 million barrels. If the price of oil reaching $80 angered President Trump, no one should rule out the price jumping to $100, or $200, or even double that figure," he wrote.

U.S. senators have triggered a provision of the Global Magnitsky Human Rights Accountability Act requiring the president to determine whether a foreign person is responsible for a gross human rights violation. The act has in the past imposed visa bans and asset freezes on Russian officials.

Anti-Saudi sentiment in the U.S. Congress could conceivably raise pressure to pass the so-called No Oil Producing and Exporting Cartels Act, which would end sovereign immunity shielding OPEC members from U.S. legal action.

A senior member of Saudi Arabia's ruling family, Prince Khaled al-Faisal, has met Turkey's President Tayyip Erdogan to discuss Khashoggi's disappearance, two sources with knowledge of the matter told Reuters without providing details of the talks.

On Friday, a source with links to the prince's family said Prince Khaled, the governor of Mecca, had been sent to Turkey in his capacity as special adviser to King Salman.

A Turkish official told Reuters on Sunday that the Saudis had said they would allow the consulate to be searched, and that this would happen by the end of the weekend, though he had conceded to "flexibility on this date."

"But Turkey is determined on the subject of entering the consulate and carrying out a criminal inspection. There is no alternative to carrying out this inspection. Time is important in terms of evidence," the official said. 

(Reporting by Aziz El Yaakoubi and Asma Alsharif; writing by Stephen Kalin; editing by Jason Neely/Robin Pomeroy)

Friday, October 12, 2018

Zero August US crude exports to China



This was a significant change to the export pattern seen since early 2017.

Chinese buyers, led by the world’s top tanker charterer, Unipec, were rumoured to have stayed away – and new data proves it, the organisation said.

Current rumours suggest that Chinese buyers returned early this month but to what extent will be clearer later.

Despite being left out of the ‘official’ trade war at the last minute, crude oil was removed from the Chinese $16 bill list before it came into force on 23rd August, 2018, crude exports are now taking centre stage.

BIMCO’s Chief Shipping Analyst, Peter Sand, explained: ”The tanker shipping industry is hurt when distant US crude oil export destinations like China, are swapped for much shorter hauls into the Caribbean and South, North and Central America.

“The trade war is all around us now. What appeared on the horizon half a year ago is now impacting many seaborne trading lanes. All commodities may be impacted regardless of them being officially tariffed or not. What we see in terms of crude oil transport, is harmful to the global shipping industry as well as cumbersome to the exporters and importers of the product,” he warned.

In 2017, Chinese imports accounted to 23% of total US crude oil exports. This year, they fell slightly to 22% during the first seven months. In August the share dropped to zero.

In September, total US crude oil exports, excluding to china, hit a new record at 6.96 mill tonnes.

Exports to Asia jumped in June and July, from a 43% share of total exports since the start of 2017 to reach a 56% share. In August, that share fell back to 46%.

The two other major importing regions are Europe (26%) and North and Central America (18%), while South America (5%), Caribbean (2%) and others (4%) make up the rest. (August share of exports in brackets).

Sand added: “For the crude oil tanker shipping industry distances often matter more than volumes. Even though volumes were a record high, tonne/mile demand dropped by 19% from July to August, due to the shift in trade patterns.

“Exports to Asia are by far the most important. When measuring the tanker demand in tonne/miles, exports of US crude oil to Asia generated 70% of tonne/mile demand on that trade in August– down from 78% in June and 75% in July,” he concluded.

Thursday, October 11, 2018

Here’s How Much Gas Prices Will Drop Thanks to Trump’s Ethanol Plan

Young woman refueling car at the gas station.

President Donald Trump wants to allow sales of gasoline with 15 percent ethanol, known as E15, year-round. Current law prohibits the sale of E15 during the summer — gas in the summer must contain no more than 10 percent ethanol — because the higher ethanol gas can produce more smog in warmer weather.
Farmers are lauding Trump’s plan because it would increase the demand for corn, a welcome change since prices have dropped due to Trump’s trade tariffs. An expected potential increase in ethanol demand from China has been stalled by China’s retaliatory tariffs on U.S. goods.
Although the percentage change could reduce the cost of a gallon of gas at the pump, the price difference is likely to be minimal.

Why Higher Ethanol Gasoline Won’t Dramatically Lower Prices

Sal Gilbertie, president and chief investment officer at Teucrium Trading LLC, said in an interview with MarketWatch that “a gallon of ethanol is about 70 cents cheaper than a gallon of gasoline, which means adding 5 percent more ethanol will reduce the price of a gallon of gasoline by about 3 ½ cents.” If demand for ethanol increases, the price could go up, negating the price advantage altogether.
GasBuddy reports that the average price for a gallon of regular unleaded gas in the U.S. was $2.904 on Tuesday, Oct. 9. Last year, the average was $2.472.

E15 Fuel Won’t Necessarily Help With High Summer Gas Prices

Ethanol isn’t the only factor in the changing price of gas from summer to winter. There is a higher demand for gas in the summer, but that’s just one factor. Summer-blend fuel is more expensive to make because the process takes longer and yields less per barrel of oil. These costs can tack on an estimated 3 to 15 cents per gallon, according to NACS, a convenience store and fuel retail advocacy group.

Potential Benefits of Using E15 Year-Round

According to the Iowa Renewable Fuels Association, E10 represents 97 percent of the gasoline sold in the U.S. The association said that E15 is “an environmentally friendly fuel that burns cleaner than gasoline,” and that raising the blend from E10 to E15 would “accelerate the use of renewable fuel, increase energy security, create U.S. jobs, reduce transportation costs, and improve the environment by displacing conventional gasoline with low-carbon ethanol.”

Subsea 7 Wins EPCI Offshore Ghana

Image may contain: sky and outdoor

https://www.petroleumafrica.com/subsea-7-wins-epci-offshore-ghana/

Subsea 7 was awarded a contract  by Tullow Oil for work on the Jubilee field offshore Ghana. The engineering, procurement, construction and installation (EPCI) contract is awarded under a consortium comprising Subsea 7 Volta Contractors and NOV Oil & Gas Services Ghana.

Subsea 7’s scope of work includes the installation of the Buoy Turret Loading (BTL) system from APL, a group within NOV Completion & Production Solutions, with associated suction piles and EPCI activities including two offloading lines for the BTL and the additional hang-off platform and skid for the FPSO. A significant part of the fabrication will be completed locally,  and the offshore installation will take place in 2020.

Gilles Lafaye, Subsea 7’s Vice President Africa Region, said: “This award reflects our early engagement in design and engineering and the consortium’s experience in comparable projects within the region. This project builds upon our presence in the Ghanaian market and our long-term relationship with Tullow.”

Wednesday, October 10, 2018

IEA urges OPEC to open the taps as oil market enters 'red zone'

 
Khalid Al-Falih, Saudi Energy and Oil Minister and Chairman of OPEC's Joint Ministerial Monitoring Committee (JMMC), speaks on screen during the 10th JMMC meeting in Algiers on September 23, 2018. (Photo by RYAD KRAMDI / AFP)RYAD KRAMDI/AFP/Getty Images


The International Energy Agency made a direct appeal to OPEC and other major oil producers to boost output, warning that high prices are inflicting damage on the global economy.

“We should all see the risky situation, the oil markets are entering the red zone,” IEA Executive Director Fatih Birol said in an interview on Tuesday. “Expensive energy is back at a bad time, when the global economy is losing momentum. We really need more oil.”

Oil prices rallied to a four-year high above $85 a barrel in London earlier this month on concern that U.S. sanctions on Iranian crude, along with chronic supply losses in Venezuela, could lead to a shortage. Traders are also worried that Saudi Arabia, the biggest member of the Organization of Petroleum Exporting Countries, isn’t acting quickly enough -- or may lack the capacity -- to fill any shortfall.

Prices were boosted further on Tuesday by storm Michael, which shut some oil fields in the Gulf of Mexico and threatened to hit the Florida panhandle as a major hurricane. West Texas Intermediate futures advanced 0.6 percent to $74.71 a barrel on the New York Mercantile exchange at 8:34 a.m. local time.

Hurting Demand

Emerging economies, most notably India, are bearing the brunt of the increase in energy prices, which comes when they’re already contending with currency depreciation and the fall-out from trade disputes, Birol said. With the drop in the rupee, Indian consumers are effectively paying as if oil were $100 a barrel.

“If there are no major moves from the key producers, the fourth quarter of this year is very, very challenging,” Birol said. "Demand is still very strong and we’ve been losing oil from Venezuela in big amounts, and also Iran is going down."

Venezuela’s oil production is in “free-fall” as an economic crisis takes its toll on infrastructure and workers, and could slump below 1 million barrels a day “very soon,” Birol said. The Paris-based IEA advises most major economies on energy policy.

Iran’s exports have dropped faster than most in the industry expected, with many major buyers halting purchases even before U.S. sanctions are enforced in November. To fill that gap and cool the price rally, Saudi Arabia has bolstered production to near record levels, pumping 10.7 million barrels of crude a day.

Tuesday, October 9, 2018

At Least One Major Country Won't Be Playing Ball With the U.S. on Iran Oil Sanctions



The U.S.’s sanctions on Iranian oil come into effect on Nov. 4, but at least one country says it won’t be playing ball.

India’s oil and natural gas minister, Dharmendra Pradhan, confirmed Monday that two Indian oil companies would be buying Iranian crude in November. Reuters had reported on Friday that India would buy 9 million barrels of Iranian oil next month.

India is the world’s third-largest oil importer, and Iran’s second-biggest oil customer after China. China is reportedly reducing its oil imports from Iran, though it’s not likely to fully comply with the U.S. demands.

The Indian orders have reportedly been placed by Indian Oil Corp (IOC) and Mangalore Refinery and Petrochemicals Ltd (MRPL). According to CNBC, Pradhan said India may use rupees rather than dollars to buy the oil, in an attempt to skirt the sanctions.

The U.S. is imposing the sanctions because Iran has reneged on a 2015 nuclear deal—a point on which other major powers disagree—and because it wants Iranian forces to pull out of Syria and Iraq.
The news of India’s continued importation of Iranian crude had a positive effect on oil prices, with Brent crude down 1.6% to $82.79 at the time of writing on Monday morning. The industry has been worrying that an entirely effective ban on Iranian oil exports would strain supplies.

Another factor easing those fears was a Friday Reuters report that cited an unnamed U.S. government official as saying the Trump administration is considering waivers on its sanctions for countries that agree to reduce their imports of Iranian oil.

White House National Security Advisor John Bolton said only last week that the administration wanted to avoid all waivers and see Iranian oil and gas exports entirely staunched, but that it might not be able to achieve that aim.

Pradhan reportedly said Monday that India does not know if it would get a waiver from the U.S.

Tehran says Saudi Arabia unable to replace lost Iranian oil

Iran's Oil Minister Bijan Zanganeh arrives for an OPEC meeting in Vienna, Austria, June 22, 2018. REUTERS/Heinz-Peter Bader/File Photo


DUBAI (Reuters) - Iran's Oil Minister Bijan Zanganeh has dismissed as "nonsense" claims by the Saudi crown prince that Saudi Arabia can replace sanctions-hit Iranian oil in the market.

"(Mohammed) bin Salman's remarks and such bragging can only satisfy (U.S. President Donald) Trump. No one else will believe him. Iran's oil cannot be replaced by Saudi Arabia nor any other country," Zanganeh was quoted as saying on his ministry's website. 

Prince Mohammed told Bloomberg on Friday that the kingdom had met its promise to Washington to make up for Iranian oil supplies lost through U.S. sanctions, reimposed when the United States exited a 2015 nuclear deal between Tehran and six powers.

Washington is pushing allies to cut imports of Iranian oil to zero and will impose a new round of sanctions on Iranian oil sales in November.

But Iran, OPEC’s third-largest producer, has repeatedly said that its oil exports cannot be reduced to zero because of high demand levels in the market and has blamed Trump for an oil price rally caused by imposing sanctions on Tehran.

"The price hike in the market is the best evidence to state that ... the market faces a supply shortage and it is worried," Zanganeh said. 

Zanganeh accused Tehran's regional rival Saudi Arabia of bowing to U.S. pressure, saying such remarks had no "real impact on the market" but were part of a psychological war launched against Iran.

"Any country that makes such claims ... just wants to display its support for the U.S. sanctions against Iran," Zanganeh was quoted as saying.

"What the Saudis had been supplying the market with, were not from Riyadh's spare capacity but from tapping its oil stocks," Zanganeh said, according to the website.

Iran has warned that if it cannot sell its oil due to U.S. pressure, then no other regional country will be allowed to do so either, threatening to block the Strait of Hormuz. 

A U.S. government official said on Friday that the administration was considering waivers on Iran's oil sanctions. Oil dropped to around $83 a barrel on Monday. 
 
(Writing by Parisa Hafezi; editing by Dale Hudson and Jason Neely)

Thursday, October 4, 2018

Saltpond Being Decommissioned / Ghana


https://www.petroleumafrica.com/saltpond-being-decommissioned/

Ghana’s state-run oil firm, GNPC, has reported that its longest producing field is in the process of being decommissioned.  According to GNPC, the actual process will start after the decommissioning plan has been finalized by a consultant and approved by the Minister of Energy.

GNPC General Manager, Geoscience, Benjamin Kwame Asante, in an interview with Ghana Business & Finance Magazine said that although operations had ceased at the field, there was a skeletal staff maintaining it ahead of the decommissioning, on the sidelines of the just ended 2018 Ghana Gas Forum.

The field is operated by the Saltpond Offshore Producing Company Limited (SOPCL).

Wednesday, October 3, 2018

U.S. crude oil shipments to China 'totally stopped' amid trade war: shipping executive

Crude oil trading terminal of Qingdao Port, China, China's crude oil imports in the largest berthing large 30-ton tanker Stock Photo - 23421171
Crude oil trading terminal of Qingdao Port, China, China's crude oil imports in the largest berthing large 30-ton tanker

https://www.reuters.com/article/us-usa-china-trade-oil/us-crude-oil-shipments-to-china-totally-stopped-amid-trade-war-shipping-executive-idUSKCN1MD0O1

U.S. crude oil shipments to China have “totally stopped”, the President of China Merchants Energy Shipping Co (CMES) said on Wednesday, as the trade war between the world’s two biggest economies takes its toll on what was a fast growing businesses.

Washington and Beijing have slapped steep import tariffs on hundreds of goods in the past months. And although U.S. crude oil exports to China, which only started in 2016, have not yet been included, Chinese oil importers have shied away from new orders recently. 

“We are one of the major carriers for crude oil from the U.S. to China. Before (the trade war) we had a nice business, but now it’s totally stopped,” Xie Chunlin, the president of CMES (601872.SS) said on the sidelines of the Global Maritime Forum’s Annual Summit in Hong Kong. 

Ship tracking data in Refinitiv Eikon confirmed that U.S. crude oil shipments to China ground to a halt in September. 

“It’s unfortunately happened, the trade war between the U.S. and China. Surely for the shipping business, it’s not good,” the CMES president said. 

601872.SSShanghai Stock Exchange
+0.16(+4.49%)
601872.SS
He also said the trade dispute was forcing China to seek soybeans from suppliers other than the United States, adding that China now bought most its soybeans from South America.

Tuesday, October 2, 2018

Bill allowing U.S. to sue OPEC drawing renewed interest



With oil prices hitting fresh four-year highs, long-dormant proposals to allow the United States to sue OPEC nations are getting a fresh look in Congress, though they were once considered a longshot to becoming law. 

A U.S. Senate subcommittee on Wednesday will hear testimony on the so-called No Oil Producing and Exporting Cartels Act, or NOPEC, which would revoke the sovereign immunity that has long shielded OPEC members from U.S. legal action. 

The bill would change U.S. antitrust law to allow OPEC producers to be sued for collusion; it would make it illegal to restrain oil or gas production or set those prices - removing sovereign immunity that U.S. courts have ruled exists under current law. 

Past U.S. leaders have opposed the NOPEC bill, but the possibility of its success may have increased due to President Donald Trump’s frequent criticism of the Organization of the Petroleum Exporting Countries, and as some predict that Brent crude, the international benchmark, could reach $100 a barrel before long. 

“OPEC is a pet peeve for him,” said Joe McMonigle, senior energy policy analyst at Hedgeye Potomac Research. “Everybody thinks he could easily support NOPEC.” 

Saudi Arabia is lobbying the U.S. government to prevent the bill’s passage, sources familiar with the matter said. Business groups and oil companies also oppose the bill, citing the possibility of retaliation from other countries. 

OPEC controls output from member nations by setting production targets. Prices are up 82 percent following the cartel’s decision to cut output at the end of 2016, hitting $84 a barrel on Monday, and lawmakers have trained their ire on the group, saying it is again harming consumers and represents interference in free markets. 

Wednesday’s hearing before the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights could give insight into the executive branch’s stance, McMonigle said. One of the witnesses will be Makan Delrahim, assistant attorney general for the Justice Department’s Antitrust Division, who has written in support of such legislation. 

A version of NOPEC passed both houses of Congress in 2007 but was shelved after President George W. Bush said he would veto the legislation. Chances of passage this year are slim, as the U.S. House of Representatives is scheduled to be in session only 16 days the rest of this year, leaving little time for anything but must-do legislation like keeping the government funded. 

Saudi Arabia, the world’s top oil exporter, is worried that NOPEC could turn into another Justice Against Sponsors of Terrorism Act (JASTA) law, which allows victims of the Sept. 11 attacks in the United States to sue Riyadh, the sources said. The JASTA law is seen as key to why state-run Saudi Aramco was hesitant in publicly listing its shares on U.S. markets in an IPO that has since been shelved. 

With close to $1 trillion in investments in the United States, Riyadh has a lot to lose if NOPEC becomes law. Saudi Energy Minister Khalid al-Falih raised concerns about it with U.S. officials, including U.S. Energy Secretary Rick Perry, during private meetings in recent months, two sources told Reuters on condition of anonymity. 

Earlier this year, the U.S. Chamber of Commerce and American Petroleum Institute told Congress they opposed the bill, saying surging U.S. energy output had mitigated OPEC’s influence. 

Since the U.S. renewed sanctions on Iran this May, other nations, including Saudi Arabia, have agreed to increase production. However, that has not yet stopped oil’s upward climb.

Monday, October 1, 2018

China LNG Tariff Casts Shadow Over New U.S. Export Terminals


China set a 10 percent tariff on U.S. liquefied natural gas (LNG) imports, extending a trade dispute into energy and casting a shadow over U.S. export terminals that would propel the United States into the world's second-largest LNG seller.

Beijing on Tuesday said it would tax U.S. products worth $60 billion effective Sept. 24 in retaliation for tariffs imposed by U.S. President Donald Trump in an escalating trade war.

The rate was smaller than the 25 percent tariff China had touted earlier, which offered some relief and helped shares in listed U.S. LNG companies climb.

The tariffs undermine Trump's drive to use U.S. shale oil and natural gas to turn the United States into a global energy leader. The U.S. is on track to export over 1,000 billion cubic feet (bcf) of gas as LNG in 2018. One billion cubic feet is enough to fuel about 5 million U.S. homes for a day.

But China, which purchased about 15 percent of all U.S. LNG shipped in 2017, is now on track to buy less than 100 bcf of U.S. LNG in 2018, less than last year, according to Thomson Reuters vessel tracking and U.S. Department of Energy data.

The country has taken delivery from just four vessels since June versus 17 during the first five months of the year.

Proposed U.S. export terminals, many expected to supply Chinese customers, were expected to account for 60 percent of all new LNG production coming to market by 2023, according to industry data.

LNG, which involves super-cooling natural gas so it can be transported by ship rather than pipeline, has become one of the fastest growing commodity trades as nations seek cleaner fuels.

The tariff's extension to an energy commodity much in demand in China was a worrisome sign for trade relations and for billions of dollars in proposed U.S. terminals, said trade group executives.