Friday, October 18, 2019

Iranian Suezmax attack - insurance implications

Iranian state television reported the alleged attack resulted in an oil leak, which they say was later plugged. (SHANA via AP)
Iranian state television reported the alleged attack resulted in an oil leak, which they say was later plugged. (SHANA via AP)

http://www.tankeroperator.com/ViewNews.aspx?NewsID=11205

Amidst heightened tensions in the Middle East, an Iranian Suezmax was damaged by an alleged rocket attack later last week in the Red Sea. 
 
The explosion caused an oil spill, which was brought under control, according to Iranian news agency, IRNA and the crew was reported to be safe.

Jonathan Moss, DWF Head of Marine & Trade, outlined the potential cost to the insurance market.

He said: "Marine insurance, Cargo and Hull & Machinery cover incorporating War Risks, is uncontrollably linked with geopolitical conflict. This latest incident will drive insurers to raise further War Risk insurance rates for vessels operating in the region, over and above the tenfold increase to rates since the attacks on tankers in May. 

“Shipping companies operating in the region will be forced to absorb these added costs with affordable insurance in this high risk zone becoming harder to find. This could lead to cost-cutting measures in other areas of maritime trade.

"The events leading to the attack in the Red Sea, off the coast of Saudi Arabia, are uncertain. There were reports that missiles struck the tanker and an accusation that Saudi Arabia had committed an act of terrorism while the vessel was carrying oil to Syria.

“Whether this was an act of terrorism or indeed a breach of international sanctions is of crucial significance in determining  whether and how cover might respond, if at all.

“What is certain, however, is that the continued instability and unpredictability in the region will have an adverse effect on sea trade, will reinforce the argument that the UK has too few naval assets to protect its interests in the area, and will add to the growing trend of increasing marine insurance premiums," he warned.

Thursday, October 17, 2019

Oil price holds firm despite massive stockpile increase

Cushing, Oklahoma storage tanks

https://247wallst.com/energy-economy/2019/10/17/oil-price-holds-firm-despite-massive-stockpile-increase/

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Thursday morning, showing that U.S. commercial crude inventories soared by 9.3 million barrels last week, maintaining a total U.S. commercial crude inventory of 434.9 million barrels. The commercial crude inventory is about 2% above the five-year average for this time of year. Over the past four weeks, the U.S. crude stockpile has added nearly 17 million barrels.

Wednesday evening, the American Petroleum Institute (API) reported that crude inventories increased by 4.13 barrels in the week ending October 10. For the same period, analysts expected crude inventories to rise by about 2.9 million barrels. Gasoline and diesel fuel inventories both fell, by 934,000 and 2.86 million barrels, respectively, according to the API. The EIA reported that gasoline inventories dropped by 2.6 million barrels last week and distillate inventories dropped by 3.8 million barrels.

West Texas Intermediate (WTI) crude traded at a high of $62.90 a barrel following the drone attack on Saudi oil processing facilities in mid-September. Crude had not traded at that level since late May.

WTI traded at around $53.20 Thursday morning, while May 2020 futures traded at $52.53. In May of this year, the difference between the spot price and the six-month forward price was about $3 a barrel. That market position, known as backwardation, is slowly giving way to the more usual position where future prices are higher than current spot prices (called contango).

However, concerns about a continuing trade war and an accompanying global economic slowdown have stifled any optimism for rising crude oil prices. Hedge funds cut their long positions in Brent crude by 10% last week and, until there’s some good news on trade relations between the United States and China, oil prices will continue to trade in a narrow band around $53 a barrel, barring further black-swan events like the drone attack. Even those, however, will generate primarily modest and short-lived price spikes.

Wednesday, October 16, 2019

Billion-Dollar Acquisitions Are Taking The Permian By Storm

Permian


Whiting Petroleum is talking acquisition with Abraxas Petroleum Corp., a Texas-based company with operations in the Permian, unnamed sources told Reuters.

According to one of the sources, the mostly likely scenario was for an all-stock acquisition. According to another, the tie-up would boost Whiting’s acreage in the Permian and also help it spread its overhead costs over greater oil production, Reuters noted.

Neither of the companies confirmed or denied the report, and the Reuters sources said that reaching a deal is far from guaranteed.

Consolidation among U.S. oil independents has been a topic of discussion for analysts for a while now, with many of the opinion that both independents and Big Oil would be willing to exit other shale plays in the U.S. to focus on the already crowded Permian where production is rising the fastest.

Earlier this year, Bloomberg reported that a wave of M&A was coming to the Permian as the larger players sought to expand their presence there. Indeed, Big Oil majors have been selling their operations in Europe to focus on the Permian at home. Yet if the Reuters report is confirmed, it would highlight that it’s not just Big Oil that is doubling down on the Permian. Independents are growing bigger, too.

Related: Iraq's Return To Oil's Top Table

Yesterday, Parsley Energy announced that it would buy rival Jagged Peak Energy for $1.62 billion in an all-stock deal. The acquisition would boost Parsley’s Permian acreage.

Shareholders don’t seem like they are too happy about this consolidation drive. Reuters reported on Monday that Parsley shares fell by as much as 11 percent following the deal announcement. On the other hand, consolidations usually cut costs, which should sit well with investors that have yet to see the higher returns they have been insisting on.

Besides the Permian, Abraxas Petroleum also has assets in the Rocky Mountains and in the Powder River Basin in Wyoming.

By Irina Slav for Oilprice.com

Tuesday, October 15, 2019

Oil Spreads Weaken as Freight Surge Menaces World’s Crude Flows

9532161 FS ENDEAVOR

https://www.bloomberg.com/news/articles/2019-10-14/oil-spreads-weaken-as-freight-surge-menaces-world-s-crude-flows
  • Brent and WTI spreads decline as global shipping costs soar
  • Benchmark supertanker rates topped $300,000-a-day on Friday
The spectacular surge in the cost of chartering oil tankers is rippling through the crude market, as fears that shipments will be constrained begin to weigh on gauges of market strength.

The nearest WTI contract is trading at a discount to the following month -- a bearish market structure known as contango -- while its Brent equivalent also slumped last week. The move reflected concerns that the usual shipments of key grades of crude from the North Sea, Russia, West Africa and the U.S. will be crimped, leaving an excess of oil with nowhere to go, traders said.
Crude spreads weaken as shipping costs soar
“The huge thing in the markets right now is the strong disruption on freight,” said Olivier Jakob, managing director at consultant Petromatrix GmbH. “That is limiting quite significantly the flows of crude oil and that is putting some pressure on the time-spreads.”

Benchmark shipping rates surged to about $300,000 a day on Friday, while one vessel was booked for more than $15 million last week and Indian Oil Corp. said the costs oblige it to cut spot purchases. The shift occurred following an attack on an Iranian oil tanker in the Red Sea, which exacerbated U.S. sanctions on units of China’s COSCO Shipping Corp. that had already clamped a chunk of the world’s fleet.

About 367,000 barrels-a-day of crude left the North Sea heading to the lucrative Asian market in September, according to ship-tracking data compiled by Bloomberg. About 1.2 million barrels of U.S. crude was exported to Asia daily in July, about 45% of total American exports, Energy Information Administration data show. Other crude grades that are shipped on long-haul journeys to Asia include Urals from Russia and oil from West Africa and the Middle East.

Freight-Based Slump

Though traders said that the surge in freight was limiting the viability of many of those trades, there’s only so long that situation is likely to last. Middle East producers may discount their crude to persuade oil refineries in Asia to take it instead of more local barrels, according to Jan-Jacob Verschoor, London-based director of Oil Analytics Ltd., which keeps track of the margins of hundreds of refineries around the world.

The premium for Brent December futures over the January contract fell to as little as 25c early on Monday; that was the weakest level in just over 2 months. At the same time, the nearest WTI time-spread reached a bearish contango of as much as 10c on Friday, falling as much as 21c from its highest level last week.

Though time-spreads often drop seasonally in the fall as refinery maintenance lessens demand for crude, the most recent slump is freight-based, said Tamas Varga, an analyst at PVM Oil Associates.
“It’s all to do with the freight rates,” he said. “Refiners will have to draw down on their product stocks.”

Monday, October 14, 2019

Want to Make a Big Bet on Oil Prices? Try Measuring Shadows | WSJ

Saudi Oil Attacks Send OPEC+ Compliance Soaring Past 200%

OPEC


OPEC and its non-OPEC allies in the production cut deal achieved a compliance rate of more than 200 percent with their cuts in September, mainly due to last month’s attacks on vital oil infrastructure in OPEC’s largest producer Saudi Arabia, sources with knowledge of the matter told Reuters on Monday.

Last month, Saudi Arabia witnessed an unprecedented attack on its oil infrastructure, which knocked 5.7 million bpd - or 5 percent of global oil supply - offline.

Due to this attack, OPEC’s total production slumped by 1.318 million bpd from August to 28.491 million bpd in September, according to the secondary sources in OPEC’s closely-watched Monthly Oil Market Report.

This figure, reported by OPEC last week - is very close to the Platts survey from earlier last week which found that OPEC pumped 28.45 million bpd of crude oil last month, down by 1.48 million bpd from August - the steepest monthly drop in nearly 17 years.

According to OPEC’s secondary sources, production in Saudi Arabia plunged by 1.28 million bpd to 8.564 million bpd in September. The Saudis, however, self-reported to OPEC that production was down by just 660,000 bpd in September from August, at 9.129 million bpd.

Among other members with lower production as per OPEC’s secondary sources, non-compliant Iraq and Nigeria cut some of their overproduction last month but were still off target. Related: Inventory Build Sends Oil Prices Lower

Crude oil production in Iran further declined, by 34,000 bpd to 2.159 million bpd, amid the U.S. sanctions restricting Iranian oil exports. Venezuela’s crude oil production plunged again, by 82,000 bpd to average just 644,000 bpd in September, according to OPEC’s secondary sources.

The largest non-OPEC producer part of the pact, Russia, saw its oil production inch down in September, to 11.25 million bpd from 11.29 million bpd in August, but still above Moscow’s cap under the deal. Russia has vowed that it is still looking to comply with its share of the cuts.

By Tsvetana Paraskova for Oilprice.com

Saturday, October 12, 2019

ExxonMobil Hands Out $13 Billion in Contracts for Rovuma LNG





https://www.petroleumafrica.com/exxonmobil-hands-out-13-billion-in-contracts-for-rovuma-lng/


ExxonMobil awarded a JGC Corp.-led group a contract to develop its Mozambique liquefied natural-gas project, which is set to be the biggest-ever private investment in Africa. The consortia taking the award, JFT, is made up of JGC, Fluor Corp. and TechnipFMC Plc.

JFT will develop Mozambique’s Rovuma LNG project in Area 4, according to Exxon Senior Vice President for LNG Peter Clarke in a speech given at an industry event in Maputo this week.

The complex will consist of two natural gas liquefaction trains, with a total LNG nameplate capacity of 15.2 million tonnes annually as well as associated onshore facilities. LNG production of the complex is expected to commence in 2025.

Area 4, which produces feed gas for the onshore LNG production complex to be built in Cabo Delgado, is operated by Mozambique Rovuma Venture S.p.A. (MRV), an incorporated joint venture owned by Eni, ExxonMobil and CNPC, which holds a 70 percent interest in the Area 4 exploration and production concession contract. Galp, KOGAS and Empresa Nacional de Hidrocarbonetos E.P. each hold a 10 percent interest.

The overall cost of the project is estimated to be somewhere between $23 and $27 billion.

Unprecedented Blackouts And $6 Gasoline: California’s Energy Crisis

Gas pump

https://oilprice.com/Energy/Energy-General/Unprecedented-Blackouts-And-6-Gasoline-Californias-Energy-Crisis.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1570850529&_p_c=1

Millions of Californians may have just suffered an unprecedented, induced blackout by the state's largest (and bankrupt) utility, PG&E, just so it isn't blamed for starting even more fires causing it to go even more bankrupt... but at least the price of gas is soaring.

According to Fox5NY, citing figures from AAA and the Oil Price Information Service, the average price of a gallon of regular gasoline in Los Angeles County was $4.25 on Wednesday, 4.5 cents higher than one week ago, 57.6 cents more than one month ago and 37.1 cents greater than one year ago. It has also risen 86.4 cents since the start of the year. What is more troubling is that as California gas prices reached the highest level in the state since 2015, some Los Angeles area gas stations are charging more than $5 a gallon.
The gas price spike started last month after Saudi Arabia oil production facilities were attacked, and accelerated after three Los Angeles-area refineries slowed or halted production due to maintenance issues and no imported gasoline was available to make up for the shortfall, according to Jeffrey Spring, the Automobile Club of Southern California's corporate communications manager.


The shortage was made worse after local refineries cut back production of summer-blend gasoline in anticipation of switching to selling the winter blend beginning Nov. 1.

But wait, there's more: America's most "environmentally conscious" state got a harsh lesson in electrical engineering when many of the tens of thousands of people hit by this week's blackout learned the hard way that solar installations don't keep the lights on during a power outage. Related: Largest Oil Traders: Oil Prices Aren’t Going Anywhere
That, as Bloomberg reports, is "because most panels are designed to supply power to the grid, not directly to houses. During the heat of the day, solar systems generate more juice than a home can handle. However, they don’t produce power at all at night. So systems are tied into the grid, and the vast majority aren’t working this week as PG&E cut power to much of Northern California to prevent wildfires."

Of course, the only way for most solar panels to work during a blackout is pairing them with batteries, however as Tesla has found out the hard way, that market is just starting to take off and even so it's having a very difficult time making headway. The largest U.S. rooftop solar company, Sunrun, said hundreds of its customers are making it through the blackouts with batteries. Alas, the total number of those affected - and without power - is in the hundreds of thousands.

"It’s the perfect combination for getting through these shutdowns," Sunrun Chairman Ed Fenster said in an interview. He expects battery sales to boom in the wake of the outages.

For those wondering if their appliances can work of the power generated by a Tesla, the answer is no, at least without special equipment. Incidentally, without electricity, a Tesla itself won't run. So those Californians who still have "uncool" internal combustion engines are in luck; they just may have to pay nearly $6 per gallon soon to fill up.

By Zerohedge.com

Thursday, October 10, 2019

OPEC cuts oil demand growth forecast for a third consecutive month

GP: OPEC 180620
The OPEC logo is seen at the Organization of the Petroleum Exporting Countries (OPEC) building in Vienna on June 20, 2018.
Omar Marques | SOPA Images | LightRocket via Getty Images

https://www.cnbc.com/2019/10/10/oil-prices-opec-downgrades-2019-oil-demand-growth-forecast.html
  • In a closely-watched monthly report, OPEC cut its forecast for global oil demand growth for the remainder of this year to 0.98 million barrels per day (b/d).
  • That’s down 40,000 b/d from its September estimate.
  • The report comes as the U.S.-China trade war continues to cloud prospects for the global economy and fuel demand.
OPEC trimmed its forecast for oil demand growth for the third month in a row on Thursday, citing weaker-than-expected data in the Asia Pacific region as well as advanced economies in the Americas.
The move is likely to add to growing pressure on the Middle East-dominated group to impose a deeper round of production cuts at its December meeting.

In a closely-watched monthly report, OPEC cut its forecast for global oil demand growth for the remainder of this year to 0.98 million barrels per day (b/d). That’s down 40,000 b/d from its September estimate.

The group, which consists of some of the world’s most powerful oil-producing nations, kept its forecast for 2020 in line with last month’s projections. It expects world oil demand to grow by 1.08 million b/d next year.

The report comes as the U.S.-China trade war continues to cloud prospects for the global economy and fuel demand.

High-level negotiators from the world’s two largest economies will resume trade talks on Thursday, seeking to secure a breakthrough to end their long-running dispute.

However, China, the world’s largest importer of oil, has tempered expectations for a trade resolution.
President Donald Trump has said tariffs on Chinese imports will increase on October 15 if no progress is made in this week’s bilateral trade negotiations.

Oil prices

International benchmark Brent crude traded at around $58.24 a barrel on Thursday, down around 0.1%, while U.S. West Texas Intermediate (WTI) stood at $52.56, little changed from the previous session.

Over the last 12 months, Brent crude prices have fallen from a peak of around $84 per barrel amid fears of a repeat of rising supply and faltering demand — the same situation that precipitated a dramatic fall in oil prices from mid-2014 to 2016.

In an attempt to stabilize oil prices, OPEC and allied producers — including Russia — agreed to reduce output by 1.2 million b/d at the beginning of 2019. That deal replaced a previous round of production cuts that began in January 2017.

The group sometimes referred to as OPEC+ reaffirmed their commitment to cutting production in July, extending output cuts to March 2020.

OPEC and non-OPEC producers will hold their next meeting in Vienna, Austria in early December.
— CNBC’s Holly Ellyatt contributed to this report.

Curfew, Emergency Declared in California Due to Wildfire Threat; Power Shut Off for 500,000

  • Pacific Gas and Electric started shutting off power early Wednesday morning.
  • Santa Clara County declared a state of emergency because of the power shutoffs.
  • One city announced a curfew for Wednesday night as well.
  • PG&E power lines have been blamed for several high profile fires in recent years.
Power is being shut off to nearly 800,000 Pacific Gas & Electric customers in Northern California due to the threat of wildfires, and in some areas, officials declared emergencies and curfews to deal with the blackouts.

A state of emergency was declared for Santa Clara County as the area prepared for additional outages on Wednesday, according to KRON-TV. Meanwhile, in the city of Morgan Hill, a curfew was in place from 7 p.m. Wednesday night until 6:30 a.m. Thursday as authorities worked to reduce the possibility of crime in blackout areas, according to the Associated Press.
Driving is permitted during the curfew in the city of about 45,000, the report added.

Schools and universities were closed in some areas and residents stocked up on groceries, batteries and gas ahead of the blackouts, which PG&E said could last as long as five days.


Some 540,000 homes and businesses in northern California were already without power as of 7:30 p.m. EDT Wednesday, according to poweroutage.us. PG&E's website had crashed due to high traffic.
The National Weather Service has issued fire alerts across much of California, prompting Pacific Gas and Electric to shut off power to some 8,000 customers.
(NOAA)
The preemptive outage stands to be one of the largest in the state's history as windy, dry conditions raise the risk for wildfires in the coming days. Many of those affected are in the San Francisco Bay area and the northern part of the state, including San Jose, Oakland, Fremont, Santa Rosa, Hayward, Berkeley and San Mateo.

The shutoffs started at 12 a.m. PST Wednesday morning, with the first phase expected to impact about 500,000 customers in 22 counties, PG&E said in a news release.

A second phase was expected to start at noon with another 230,000 customers affected, but PG&E announced that the shutoffs would be delayed until later in the day. A third phase covering about 40,000 customers is also being considered.

In all, parts of some 34 counties in northern, central and coastal California face blackouts. The utility said the shutoffs were being considered based on a fire weather watch from the National Weather Service. Winds up to 65 mph were expected in some areas, prompting the NWS to issue alerts for elevated, critical and extreme wildfire chances across large swaths of the state.

Windy conditions can cause power lines to spark fires when they are blown down, or to come into contact with trees or other vegetation. PG&E power lines have been blamed for several high profile fires in recent years, including the blaze that killed 86 people last year in Paradise, California.

Researchers have such said catastrophic fires could become more common as climate change leads to warmer weather and longer fire seasons.


While the outages will impact 800,000 PG&E accounts, many more actual individuals could be affected. Millions could face days without electricity, the San Francisco Chronicle estimated.
Armando Espinoza delivers paper products to a cafe in downtown Sonoma, California, where power was turned off, on Wednesday, Oct. 9, 2019.
(AP Photo/Noah Berger)
Hospitals, municipalities and other agencies across the affected areas were prepared to have generators on stand by and were warning residents to stockpile supplies. Those who use medical equipment that relies on electricity were being warned to prepare for the outages and call for assistance if needed, and residents were being told to have go bags and emergency kits on hand.

Local police departments were warning drivers to beware of nonfunctioning traffic lights.

Elected officials and residents expressed anger over the blackouts.

"People should be outraged, as we are," said California Gov. Gavin Newsom. "No one is satisfied with this. No one is happy with this. But we have to get through this fire season."

Newsom has called on PG&E to upgrade infrastructure to make it less vulnerable and prevent massive outages such as this one.

Oakland Mayor Libby Schaaf asked residents not to flood 911 lines with non-emergency calls, the AP reported. The city canceled all days off for police officers days in preparation for the outages.
"We all know the devastation that fires can cause," Schaaf said.

PG&E says safety is its first priority.

"This is a last resort," Sumeet Singh, head of the utility's Community Wildfire Safety Program, told the Chronicle.

At the Dollar General store in Paradise, the town that was mostly burned to the ground by the Camp Fire, shoppers were grabbing candles, gas cans, ice, flashlights, batteries and canned food. Ice chests were sold out Tuesday morning, manager Ben Humphries told the AP.

Humphries, who lost his home in last year's blaze, saw some irony in PG&E's aggressive preemptive power outages in the area now, after the company opted not to turn off the power ahead of the Camp Fire.

"I understand their concerns. But in my opinion, it's too little too late. We already had our town burned to the ground," Humphries said.

In addition to the 800,000 or so PG&E customers who could be impacted, more than 100,000 Southern California Edison customers in eight counties could also see preventive outages in southern portions of the state, according to the AP.

Tuesday, October 8, 2019

China ‘strongly urges’ US to remove sanctions and stop accusing it of human rights violations

RT: Xi Jinping 190607
Chinese President Xi Jinping delivers a speech during a session of the St. Petersburg International Economic Forum (SPIEF), Russia June 7, 2019.
Maxim Shemetov | Reuters

https://www.cnbc.com/2019/10/08/china-strongly-urges-us-to-remove-sanctions-and-stop-accusing-it-of-human-rights-violations.html
  • “We strongly urge the U.S. to immediately stop making irresponsible remarks on the issue of Xinjiang” and to “stop interfering” in “China’s internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible,” a spokesperson from the Ministry of Commerce said.
  • The U.S. blacklisted a slew of Chinese companies due to alleged human rights violations against Muslim minorities in China’s far-western region of Xinjiang.
  • “China will also take all necessary measures to resolutely safeguard China’s own interests,” the spokesperson said.
China’s Ministry of Commerce said Tuesday that it “strongly urges” the U.S. to stay clear of the country’s domestic issues, after the White House blacklisted a slew of Chinese companies due to alleged human rights violations against Muslim minorities in China’s far-western region of Xinjiang.

“We strongly urge the U.S. to immediately stop making irresponsible remarks on the issue of Xinjiang” and to “stop interfering” in “China’s internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible,” a spokesperson from the ministry said Tuesday in a statement, according to a Google translation.

“China will also take all necessary measures to resolutely safeguard China’s own interests,” the spokesperson said.

The comment came after tensions between the U.S. and China rose ahead of the highly anticipated trade talks this week. The U.S. on Monday banned 28 Chinese companies from doing business with American firms without being granted a U.S. government license due to human rights issues.

The Trump administration on Tuesday put visa restrictions on Chinese officials “who are believed to be responsible for, or complicit in, the detention and abuse” of Muslim minority groups in Xinjiang.

“The United States calls on the People’s Republic of China to immediately end its campaign of repression in Xinjiang, release all those arbitrarily detained, and cease efforts to coerce members of Chinese Muslim minority groups residing abroad to return to China to face an uncertain fate,” Secretary of State Mike Pompeo said Tuesday in a statement.

Markets were bracing for stiff retaliation as Chinese Foreign Ministry spokesman Geng Shuang said earlier Tuesday to “stay tuned” for China to fight back. Reports from China also said the Chinese delegation may cut short its planned stay in Washington and depart on Friday, dimming hopes for a trade deal.

The tempered optimism sparked a sell-off in the markets with the Dow Jones Industrial Average tanking as much as 300 points.

Hu Xijin, editor-in-chief of the Global Times followed by markets for insight on the trade war, said Tuesday that China now has “low expectation for real breakthrough.”

Global Times is a tabloid under the People’s Daily, which is the official newspaper of the Communist Party of China.

Monday, October 7, 2019

Oil slips as US-China trade talks loom



GP: Iran Salman Oil Field 190422
Workers cross walkways between zones aboard an offshore oil platform in the Persian Gulf’s Salman Oil Field, near Lavan island, Iran, on Jan. 5. 2017.
Ali Mohammadi | Bloomberg | Getty Images


Oil prices ended the day little changed on Monday as U.S.-China trade talks loomed.

Brent crude rose 13 cents or 0.2% to $58.50 a barrel, while U.S. West Texas Intermediate (WTI) crude settled down 0.1% at $52.75 per barrel.

Both futures contracts ended last week with a more than 5% decline after dismal manufacturing data from the United States and China, with the trade row between the world’s top economies undermining global economic prospects.

U.S. and Chinese officials meet in Washington on Oct. 10-11 in a fresh effort to work out a deal, which U.S. President Donald Trump said his administration had a “very good chance” of achieving.

On the supply side, deadly anti-government unrest has gripped Iraq, the second-largest producer among the Organization of the Petroleum Exporting Countries. The unrest helped buoy oil prices earlier in the day, with Brent and WTI gaining more than 1% each at one point.

Iraq’s oil exports of 3.43 million barrels per day (bpd) from Basra terminals could be disrupted if instability lasts for weeks, Ayham Kamel, Eurasia Group’s practice head for Middle East and North Africa, said in a note.

“Any oil production disruption would occur at a time when Saudi Arabia has lost a significant part of its energy system redundancies (spare capacity),” he said.

The major Buzzard oil field in the British North Sea was also shut for pipe repair work, China’s CNOOC said on Friday, while Shell maintains force majeure remains on exports of Bonny Light crude in Nigeria.

Still, Total’s giant Johan Sverdrup offshore oil field started up in the North Sea this month with a goal of achieving 440,000 bpd at peak production.

Libya’s National Oil Corporation (NOC) said on Sunday it would close the Faregh oil field at Zueitina port for scheduled maintenance from Monday until Oct. 14.

But analysts said the resumption in Saudi Arabian production after Sept. 14 attacks could undermine a price rally.

“The Saudi attacks have quickly been forgotten about and global growth is back to being the main driver of oil markets,” said Craig Erlam, senior market analyst at OANDA.

“Such complacency could come back to bite oil traders as another aggressive spike will likely accompany any further escalation in the region.”

Despite Monday’s gains, Brent is still down more than 20% from the 2019 peak of $75.60 a barrel recorded in April.

But OPEC Secretary-General Mohammed Barkindo said it was still too early for the group to discuss deeper oil output cuts to support prices, Russian news agency TASS reported on Monday.

Friday, October 4, 2019

Ecuador In State Of Emergency: End Of Fuel Subsidies Sparks Mass Protests


https://www.npr.org/2019/10/04/767164081/ecuador-in-state-of-emergency-end-of-fuel-subsidies-sparks-mass-protest

The news agency adds, "Diesel prices rose from $1.03 to $2.30 per gallon on Thursday, while gasoline rose from $1.85 to $2.39."

Some roads remain blocked on Friday, after indigenous rights groups, students and unions all worked to shut down traffic and disrupt commercial activities, aided by truck, bus and taxi drivers.

The news agency adds, "Diesel prices rose from $1.03 to $2.30 per gallon on Thursday, while gasoline rose from $1.85 to $2.39."

Some roads remain blocked on Friday, after indigenous rights groups, students and unions all worked to shut down traffic and disrupt commercial activities, aided by truck, bus and taxi drivers.

On Friday morning, Interior Minister María Paula Romo announced that the national police have arrested Jorge Calderón, president of the Federation of Taxi Drivers of Ecuador — a group closely tied to the mass protests.

In addition to the impact on their livelihoods and pocketbooks, critics of Moreno's fuel plan and other policies complain that austerity measures are being imposed on their country because of a multi-billion-dollar loan agreement with the International Monetary Fund.

In his response to the protests, Moreno accused the organizers of being in league with his political opponents and seeking to destabilize his government.

The US Oil Export Boom Is Only Just Getting Started

Oil tanker

https://oilprice.com/Energy/Crude-Oil/The-US-Oil-Export-Boom-Is-Only-Just-Getting-Started.html

U.S. crude oil exports jumped by nearly 1 million bpd in the first half of 2019 from the same period in 2018 to average 2.9 million bpd between January and June this year, the Energy Information Administration (EIA) said on Thursday.

Average U.S. exports of crude oil rose by 966,000 bpd in the first half of 2019, compared to the first half of 2018. In June this year, the U.S. set a monthly average record of 3.2 million bpd of crude oil exports, EIA data showed.
Canada stayed the top foreign destination of U.S. crude oil, with U.S. exports rising by 3 percent year on year in H1 2019.

U.S. exports to Asia and Oceania jumped by 58 percent, with exports to South Korea, India, and Taiwan more than doubling.

A notable exception from the rising trend of U.S. crude sales in Asia was China— U.S. crude oil exports to China averaged 248,000 bpd in the first half of 2019, down by 64 percent from the same period last year, as Chinese buyers have been reluctant to buy U.S. crude oil amid the U.S.-China trade war, fearing that tariffs may come any moment, disrupting their plans and making the imported oil more expensive.

U.S. crude oil exports to Western Europe surged by 66 percent to average 824,000 bpd in the first half of 2019, EIA data showed.
Despite soaring crude oil exports, the United States is still one of the world’s biggest crude oil importers, EIA noted. U.S. net crude oil imports—that is imports less exports—averaged 4.2 million bpd in the first half this year, down by 6.1 million bpd for the first half of 2018, thanks to rising U.S. domestic crude oil production. Related: Is Libya’s Oil Output Set For A Steep Drop?

The United States briefly overtook Saudi Arabia as the world’s number one gross oil exporter at one point in June this year, the International Energy Agency (IEA) said last month.  

“A reminder to the producers that competition for market share is getting tougher comes from preliminary data showing that in June the US momentarily overtook Saudi Arabia and Russia as the world’s number one gross oil exporter,” the IEA said.

Although U.S. shale growth has hit a wall in recent months, production from the United States continues to grow year on year, adding to the current surplus on the market.

Even at a lower production growth pace, U.S. oil exports are expected to increase in the near future, because of reduced takeaway constraints from the Permian to the U.S. Gulf Coast, EIA said in its Short-Term Energy Outlook (STEO) for September. The Cactus II crude oil pipeline added an estimated 670,000 bpd capacity and the EPIC Midstream contributed another 400,000 bpd to takeaway capacity out of the Permian.  

By Tsvetana Paraskova for Oilprice.com

Wednesday, October 2, 2019

Oil shipping rates from U.S. to Asia hit three-year high, quieting November trade - sources

FILE PHOTO: A view a VLCC supertanker in the waters off Jurong Island in Singapore


By Collin Eaton and Devika Krishna Kumar

HOUSTON/NEW YORK (Reuters) - Freight rates for U.S. crude tankers bound for Asia were bid up to a more than three-year peak this week as U.S. sanctions on a Chinese transport giant cut vessel availability, traders and shipbrokers said. 

The United States last week imposed sanctions on two units of China's COSCO for alleged involvement in ferrying crude out of Iran. That action prompted U.S. Gulf Coast exporters to hold back chartering COSCO-linked vessels, traders and shipbrokers said. 

One of the units - COSCO Shipping Tanker (Dalian) - owns and manages at least 36 tankers for crude and refined products, including 18 very large crude carriers (VLCCs), according to shipping sources and Refinitiv data. 

This week, suggested rates for VLCCs from the U.S. Gulf Coast to China vaulted to $9.8 million, up from $6.2 million in early September, according to ship broker McQuilling Services. VLCCs carry around 2 million barrels each. 

To attract a ship into the Atlantic market, it's going to cost about $10 million for U.S. Gulf Coast shipments bound for China or South Korea, said another U.S. shipbroker who brokers about 20 vessels per month. 

Friday's highest quote was at $9.5 million for charterer Atlantic Trading & Marketing, a unit of Total SA , to book a VLCC from the U.S. Gulf Coast to China, shipbrokers said. The deal did not go through, the brokers said, and Atlantic Trading declined to comment. 

No transactions for supertankers from the U.S. Gulf Coast to Asia have been executed this week, shipbrokers said.

Occidental Petroleum Corp last week replaced a COSCO-operated supertanker, Coswish Lake, following the U.S. sanctions, by chartering smaller vessels from Texas to destinations in Asia, shipbrokers said. 

The Coswish Lake had anchored off Corpus Christi, Texas, since Sept. 23 and departed on Sunday without loading crude, according to Refinitiv Eikon data. 

Occidental did not respond to requests for comment.

The surge in freight costs has narrowed the window to profitably export U.S. crude to Asia and left some U.S. crude exporters reluctant to book vessels at the higher rates. That could limit November loadings and exports unless more vessels become available in coming weeks, traders said. 

"People are nervous about locking freight in at these high levels, which is why the last week has been so quiet," one U.S. crude oil trader said.

Similarly, freight rates for supertankers loading West African crude in October for Asia have also risen more than 20% to nearly 90 Worldscale points. 

The rise in freight rates is driving up crude costs for Asian refiners and threatening to make shipping oil to Asia unviable, traders said. 

"Currently, West African and Latin American crude are too expensive," a source with a North Asian refiner said. Economics of U.S. crude are good, but freight has become an issue, the source said. 

Buyers may turn to more crude from the Asia Pacific and Middle East, which have shorter shipping distances, or spot premiums for long-distance cargoes will have to fall to displace the higher freight costs, a Singapore-based trader said. 

(Reporting by Collin Eaton in Houston and Devika Krishna Kumar in New York; Additional reporting by Florence Tan in Singapore and Noah Browning in London; Editing by Lisa Shumaker and Tom Hogue)

Tuesday, October 1, 2019

OPEC oil output sinks to lowest since 2011 after Saudi attacks: Reuters survey

Workers are seen at the damaged site of Saudi Aramco oil facility in Abqaiq, Saudi Arabia, September 20. — Reuters


OPEC oil output has fallen to an eight-year low in September after attacks on Saudi oil plants cut production, deepening the impact of a supply pact and U.S. sanctions on Iran and Venezuela, a Reuters survey found.

The 14-member Organization of the Petroleum Exporting Countries (OPEC) has pumped 28.9 million barrels per day (bpd) this month, the survey showed, down 750,000 bpd from August’s revised figure and the lowest monthly total since 2011. 

The Sept. 14 attacks on two Saudi oil plants shut down 5.7 million bpd of production and sent crude prices up 20% to $72 a barrel on Sept. 16. The price has since fallen to $61, near levels before the Saudi attack, pressured by a rapid production restart and concern about slowing demand. 

“Traders are clearly not particularly concerned about risk premiums in oil,” said Craig Erlam, analyst at online broker OANDA. “The focus again seems to be shifting back to the demand dynamics and the risk of further downgrades.” 

OPEC, Russia and other oil producer allies, known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from the start of this year. OPEC’s share of the cut is 800,000 bpd, to be delivered by 11 members, with exemptions for Iran, Libya and Venezuela.

The 11 OPEC members bound by the agreement, which now runs until March 2020, have easily exceeded the pledged cuts. Compliance has been at 218% in September, up from 131% in August, the survey found. 

Two of the three exempt producers also pumped less oil than they did the previous month.
The biggest drop was in Saudi Arabia, which supplied 9.05 million bpd, or 700,0000 bpd less than in August.

RELEASED INVENTORIES

The drop would have been even larger but for state oil company Aramco releasing stored crude from its inventories to limit the decline. Sources in the survey put Saudi production at between 8.5 million bpd and 8.6 million bpd. 

Before this month’s attack, Saudi Arabia was already restraining output by more than called for by the OPEC-led supply deal to support the market. 

Output fell further in Venezuela, which is contending with U.S. sanctions on state oil company PDVSA - aimed at ousting socialist President Nicolas Maduro - as well as a long-term decline in output owing to a lack of investment and maintenance. 

PDVSA this month suspended some crude blending and cut production in response to a build in domestic inventories while the sanctions have proved a deterrent to customers and shippers. 

The survey found a mixed trend among Iraq and Nigeria, both of which have pledged to boost their compliance. 

Iraq trimmed exports from its southern and northern ports, the survey found, but Nigeria boosted supply slightly and continued to produce above its OPEC target by the largest margin. 

Among other countries raising output, Libya pumped more because of a higher contribution from the country’s largest oilfield, El Sharara, after outages that curbed output in August. 

 
There was little change to supply from the United Arab Emirates and a small increase in Kuwait, the survey found. 

September’s output was the lowest by OPEC since 2011, when the Libyan civil war caused a collapse in the country’s oil output, excluding membership changes that have taken place since then, according to Reuters surveys. 

The survey aims to track supply to the market and is based on shipping data provided by external sources, Refinitiv Eikon flows data and information provided by sources at oil companies, OPEC and consulting firms. 

Editing by David Goodman