Wednesday, November 25, 2020
Photographer: Karim Sahib/AFP via Getty Images
The UAE may not be serious about quitting the oil cartel, but its tantrum is a timely reminder of the group's deep fractures.
All is not well in the house of OPEC.
As the cartel’s oil ministers prepare to meet in just over a week to decide on the next step in their record-breaking output deal, officials in the United Arab Emirates, normally a loyal Saudi ally, are privately questioning the benefits of participating, and may even be considering whether to leave the Organization of Petroleum Exporting Counties.
The deliberations, leaked to the press on Wednesday, may be nothing more than an attempt to get the producer group to review the Persian Gulf country’s quota. If so, it seems unlikely to succeed. Worse, it risks throwing a wrench into the discussions over how producers should respond to the conflicting pressures from positive vaccine news and the negative impact of renewed coronavirus lockdown restrictions on travel and economic activity.
Questions about the UAE’s future in OPEC, even if they are only preliminary internal deliberations, come at an awkward time for the group and its OPEC+ allies. Tensions are emerging over what to do about output targets, which are set to be eased from the beginning of next year.
The answer seems obvious. Covid-19 vaccines are unlikely to affect oil demand any time soon and stockpiles remain high. Meanwhile, Libya, an OPEC member emerging from civil war, has added about 1 million barrels a day to supply in a matter of weeks. As a result, the OPEC+ alliance is expected to extend the current output cuts for another three to six months.
But there’s a spanner in the works: Not everyone is respecting their commitments. So the UAE, already chafing at the restrictions, says there shouldn’t be any decision until all members have fully implemented their agreed cuts.
Russia has avoided criticism despite being the group's second biggest over-producer
Figures presented at last week’s meeting of the Joint Ministerial Monitoring Committee, which oversees the OPEC+ output deal, show that fewer than half of its signatories have done so.
While over-producers like Iraq, Nigeria and the UAE itself have come under intense pressure from OPEC’s de facto leader Saudi Arabia to compensate for past failings with deeper “compensation cuts,” one country has remained conspicuously absent from the roster of cheats: Russia. Despite being the OPEC+ group’s second-largest over-producer, the country has faced no public criticism whatsoever.
Long seen as the Saudis’ most reliable ally in OPEC, it’s easy to understand why the UAE chafes at this apparent favoritism towards Russia — regarded for decades as a competitor. Especially considering the very public humiliation inflicted in September on UAE Energy Minister Suhail Al-Mazrouei by his Saudi counterpart.
The UAE seems to feel aggrieved that it’s making deeper cuts than everyone else. Officials support that complaint by comparing the country’s output target with its production in April, the month the deal was hammered out.
When compared this way, the UAE has to make deeper cuts than anyone else
But that’s a cheap shot. April was when everybody opened the taps in a damaging free-for-all. None of the output targets was based on those levels. Plus, the UAE agreed to its baseline when it signed up to the deal, so it’s a bit rich to start quibbling about it seven months later.
Revisiting the UAE’s target would open up a can of worms. Iraq wants special treatment too, because of its costly fight against the so-called Islamic State. Nigeria wants some crude reclassified to remove it from its quota. Considering everyone’s grievances would set in motion a rapid unravelling of the entire OPEC+ deal.
It’s unlikely, but not impossible, that the UAE would decide to quit OPEC. Others have done so — some repeatedly — and the country doesn’t have the moral handcuff of being a founding member of the group. The political and economic stakes would be high though. In one stroke such a move would destroy the goodwill between the UAE and Saudi Arabia, which could prove costly.
After a day of public silence following the press reports, Mazrouei on Thursday said the UAE “has always been a committed member” of OPEC. The statement sounded very backward-looking and avoided any denial that it was reconsidering its membership.
Even if the issue blows over, it serves as a reminder of the fractures within the producer group ahead of a decision that will determine the course of oil prices in the coming months.
But if it doesn’t, other countries would certainly follow in ending production restraint. The impact of an extra 1.6 million barrels a day of UAE crude might not be catastrophic for oil prices, but add another 7 million barrels from the rest of the group and March’s price collapse to just below $20 a barrel would look positively benign.
Tuesday, November 24, 2020
Oil tanks in America’s most important crude storage hub are filling to the brim once again, quickly approaching the critical levels reached in May after prices crashed. Stockpiles at Cushing, Oklahoma, the delivery point for West Texas Intermediate futures, stood at 61.6 million barrels as of Nov. 13, or about 81% of capacity, according to the most recent U.S. government data. That’s 3.83 million barrels shy of the levels seen in May.
Though a repeat of the negative oil prices seen in April is unlikely, the mounting supply glut brings home how lockdown measures to contain the Covid-19 pandemic may soon force traders to store oil in every nook and cranny available, including ships and pipelines. Some are already doing that.
The reasons behind the buildup are similar to what happened before: Refineries are still coping with lackluster demand as coronavirus cases surge anew. On top of that, some of them have also been undergoing seasonal maintenance.
“Even as those facilities come back online, we are seeing excess inflows into Cushing overshadowing increased demand,” said Hillary Stevenson, a research director at Wood Mackenzie Ltd.
With states reimposing restrictions, demand for gasoline fell by half a million barrels a day last week, the biggest week-over-week decline since May, data from the Energy Information Administration show.
The structure of oil’s so-called futures curve has also motivated traders to store barrels. WTI has been in contango, when nearer-dated contracts are at a discount to later-dated ones. That means that, if the gap is wide enough, traders can make a profit by storing crude to sell it at a higher price later, when the glut eases.
Bets on an eventual vaccine have provided a buffer, though. And a lot has changed since the historic crash of April 20, when WTI collapsed to settle at minus $37.63 a barrel.
In the months following WTI’s plunge below zero, changes swept through the oil market in the hopes of avoiding a repeat. Many clearinghouses took it upon themselves to limit how much exchange-traded funds and passive oil funds can accumulate in the nearest contract. Models have also been adjusted to account for negative prices that, up until April, were unprecedented.
All the while, the supply and demand dynamics for oil have also improved in the U.S. Domestic oil output has meaningfully declined as the pandemic spurred bankruptcies and other financial hardships in America’s shale industry. On the other side of the equation, while demand remains well off pre-Covid levels, it has gradually improved from the depths of its slump.
Since then, some investors fled volatility. Oil producers from the Permian to the Bakken formations pared down output. Plus, the lockdowns are not as severe as in the immediate weeks following the pandemic outbreak.
Earlier this month, Royal Dutch Shell Plc pulled the plug on its Convent refinery in Louisiana. Unlike many oil refineries shut in recent years, Convent was far from obsolete: it’s fairly big by U.S. standards and sophisticated enough to turn a wide range of crude oils into high-value fuels. Yet Shell, the world’s third-biggest oil major, wanted to radically reduce refining capacity and couldn’t find a buyer.
America has been top of the refining pack since the start of the oil age in the mid-nineteenth century, but China will dethrone the U.S. as early as next year, according to the International Energy Agency. In 1967, the year Convent opened, the U.S. had 35 times the refining capacity of China.
The rise of China’s refining industry, combined with several large new plants in India and the Middle East, is reverberating through the global energy system. Oil exporters are selling more crude to Asia and less to long-standing customers in North America and Europe. And as they add capacity, China’s refiners are becoming a growing force in international markets for gasoline, diesel and other fuels. That’s even putting pressure on older plants in other parts of Asia: Shell also announced this month that they will halve capacity at their Singapore refinery.
here are parallels with China’s growing dominance of the global steel industry in the early part of this century, when China built a clutch of massive, modern mills. Designed to meet burgeoning domestic demand, they also made China a force in the export market, squeezing higher-cost producers in Europe, North America and other parts of Asia and forcing the closure of older, inefficient plants.
“China is going to put another million barrels a day or more on the
table in the next few years,” Steve Sawyer, director of refining at
industry consultant Facts Global Energy, or FGE, said in an interview.
“China will overtake the U.S. probably in the next year or two.”
But while capacity will rise is China, India and the Middle East, oil demand may take years to fully recover from the damage inflicted by the coronavirus. That will push a few million barrels a day more of refining capacity out of business, on top of a record 1.7 million barrels a day of processing capacity already mothballed this year. More than half of these closures have been in the U.S., according to the IEA.
About two thirds of European refiners aren’t making enough money in fuel production to cover their costs, said Hedi Grati, head of Europe-CIS refining research at IHS Markit. Europe still needs to reduce its daily processing capacity by a further 1.7 million barrels in five years.“There is more to come,” Sawyer said, anticipating the closure of another 2 million barrels a day of refining capacity through next year.
Chinese refining capacity has nearly tripled since the turn of the millennium as it tried to keep pace with the rapid growth of diesel and gasoline consumption. The country’s crude processing capacity is expected to climb to 1 billion tons a year, or 20 million barrels per day, by 2025 from 17.5 million barrels at the end of this year, according to China National Petroleum Corp.’s Economics & Technology Research Institute.
India is also boosting its processing capability by more than half to
8 million barrels a day by 2025, including a new 1.2 million barrels
per day mega project. Middle Eastern producers are adding to the spree,
building new units with at least two projects totaling more than a
million barrels a day that are set to start operations next year.
One of the key drivers of new projects is growing demand for the petrochemicals used to make plastics. More than half of the refining capacity that comes on stream from 2019 to 2027 will be added in Asia and 70% to 80% of this will be plastics-focused, according to industry consultant Wood Mackenzie.
The popularity of integrated refineries in Asia is being driven by the region’s relatively fast economic growth rates and the fact that it’s still a net importer of feedstocks like naphtha, ethylene and propylene as well as liquefied petroleum gas, used to make various types of plastic. The U.S. is a major supplier of naphtha and LPG to Asia.
These new massive and integrated plants make life tougher for their smaller rivals, who lack their scale, flexibility to switch between fuels and ability to process dirtier, cheaper crudes.
The refineries being closed tend to be relatively small, not very
sophisticated and typically built in the 1960s, according to Alan
Gelder, vice president of refining and oil markets at Wood Mackenzie. He
sees excess capacity of around 3 million barrels a day. “For them to
survive, they will need to export more products as their regional demand
falls, but unfortunately they’re not very competitive, which means
they’re likely to close.”
Global oil consumption is on track to slump by an unprecedented 8.8 million barrels a day this year, averaging 91.3 million a day, according to the IEA, which expects less than two-thirds of this lost demand to recover next year.
Some refineries were set to shutter even before the pandemic hit, as a global crude distillation capacity of about 102 million barrels a day far outweighed the 84 million barrels of refined products demand in 2019, according to the IEA. The demand destruction due to Covid-19 pushed several refineries over the brink.
“What was expected to be a long, slow adjustment has become an abrupt shock,” said Rob Smith, director at IHS Markit.
Adding to the pain of refiners in the U.S. are regulations pushing for biofuels. That encouraged some refiners to repurpose their plants for producing biofuels.
Even China may be getting ahead of itself. Capacity additions are outpacing its demand growth. An oil products oversupply in the country may reach 1.4 million barrels a day in 2025, according to CNPC. Even as new refineries are built, China’s demand growth may peak by 2025 and then slow as the country begins its long transition toward carbon neutrality.
“In an environment where the world has already got enough refining capacity, if you build more in one part of the world, you need to shut something down in another part of the world to maintain the balance,” FGE’s Sawyer said. “That’s the sort of environment that we are currently in and are likely to be in for the next 4-5 years at least.”
Monday, November 23, 2020
Sunday, November 22, 2020
Friday, November 20, 2020
hortages of gasoline in Venezuela in March 2017. Reference photo from Wikimedia Commons.
MARACAIBO, Venezuela (Reuters) - Venezuelans, desperate for fuel after months of shortages, have begun stealing crude from idled fields owned by state oil company Petroleos de Venezuela [PDVSA.UL] and distilling homemade gasoline, according to two PDVSA workers and a half dozen people familiar with the practice.
The amount of crude stolen is a tiny fraction of Venezuela’s output. But the activity is testament to the crises at PDVSA, which can no longer supply the country’s population with fuel.
Venezuela’s once-formidable 1.3 million barrels per day (bpd) refining network has collapsed, oil and refining installations have little security or maintenance, and the firm is unable to retain qualified workers as salary values erode.
The company has hit a new low this year. Under pressure from U.S. sanctions - part of Washington's effort to oust President Nicolas Maduro - Venezuela's crude output fell to just 397,000 bpd in September, down from 1.2 million bpd before the sanctions were imposed in January 2019 and the lowest level since the 1930s. PRODN-VE
The sanctions have targeted gasoline imports, forcing Venezuelans to wait in snaking lines outside gas stations. Many citizens regard that as a bitter indignity in an OPEC producer, which has, by some measures, the world’s largest crude reserves.
The supply chain for the so-called “artisanal gasoline” begins at oil fields such as La Concepcion in the western state of Zulia, which produced more than 12,000 bpd of high-value light crude 15 years ago.
The field has been idled for two years as PDVSA, once one of the top 10 oil companies in the world by crude output and a major exporter, has collapsed into a shell of its former self.
Small tubes now jut out of holes drilled into pipelines that were built to carry La Concepcion’s crude to storage tanks and export facilities. The tubes bring the oil to rudimentary refineries in backyards of a nearby town, according to Danny, a PDVSA worker who asked to be identified by his first name.
PDVSA employees, earning just a few U.S. dollars per month, accept small bribes to turn a blind eye to the theft, Danny said. Security forces barely bother to guard the dormant facilities, a pattern replicated across Venezuela, where equipment theft from oil fields has become common during the country’s six-year economic collapse.
“It is obvious that people are stealing the oil, which is the only source of wealth we have,” Danny said.
PDVSA did not respond to a request for comment. A former company executive estimated that less than 1,000 bpd of crude is stolen, less than 1% of total output.
PDVSA has spent months trying to fix refineries that have fallen into disrepair due to a lack of funding for maintenance and to buy spare parts. The efforts and have been plagued by oil spills, gas leaks, and fires that have injured workers.
The company managed to restart gasoline output at its 310,000 bpd Cardon and 146,000 bpd El Palito refineries in June and July, respectively, but both have suffered multiple unplanned outages in the months since, resulting in intermittent fuel output.
“We cannot perform such demanding activities if we’re hungry,” said Freddy Camacho, an engineer who has worked on the effort to restart the Cardon refinery, and repairs refrigerators for extra cash.
Maduro blames sanctions for the gasoline shortages, but says Venezuela must boost fuel production.
Until this year, Venezuelans had no need to steal crude to make their own fuel.
Similar activities have long been common in Nigeria, where dozens of illegal refineries process crude stolen from pipelines. In other Latin American oil producers, such as Mexico and Brazil, it is common for criminal gangs to steal fuel from pipelines coming out of refineries, rather than take the raw material.
In Venezuela, abundant fuel had for decades been essentially free thanks to subsidies. But that situation was a distant memory by early August, when Jaime - a dairy farmer in Zulia - needed to send cheese to market in state capital Maracaibo, but could not find any gas to drive there.
A neighbor suggested he call a man named “El Flaco” - Spanish for “The Skinny Guy” - in the nearby town of La Concepcion. Jaime did not ask ‘El Flaco’ where the gasoline came from, but he was aware of the growing crude theft and makeshift refining taking place in Zulia.
“They get it out of oil wells here in La Concepcion. They boil it and pass it through copper tubes, and then sell you the liquid that drips out,” Jaime told Reuters on the condition his last name not be published.
Danny, as well as another PDVSA worker and several people whose relatives are engaged in the activity, described the process to Reuters.
At the field, thieves puncture pipelines, and, holding a blowtorch below the pipe, heat up the crude so it flows into smaller tubes they insert into the punctured hole.
Videos of the clandestine refineries have circulated on social media here. In one, a small fire is seen burning under two black canisters held in a rusted barrel, with a series of small tubes transporting clear liquid into buckets. A larger tube, buried underground, transports that liquid into white gas cans.
Jorge Leon, an engineer specializing in industrial security for the oil industry, said the fluid the makeshift refiners were extracting was chemically volatile and lacked the additives normally added to gasoline to ensure safety for car engines.
“Not only can it damage the engine, but it could cause explosions,” Leon said.
The artisanal gasoline Jaime bought from El Flaco did not turn out to be a viable solution.
“The truck drove fine for a couple days, but three days after, the engine started to sputter,” Jaime said. “Now it won’t turn on.”
Reporting by Mariela Nava in Maracaibo, Venezuela and Luc Cohen in New York; Additional reporting by Mircely Guanipa in Maracay, Venezuela; Editing by Simon Webb and Marguerita Choy
Thursday, November 19, 2020
First of 12 Vessels Ordered to Service Trade Between U.S. and China.
The first of an order of 12 Very Large Ethane Carriers (VLECs) now being built to ABS Class has been delivered to Zhejiang Satellite Petrochemical (STL) by Samsung Heavy Industries (SHI).
The Seri Everest, the largest VLEC ever built with more than 98,000 cbm capacity, is the first of a phase-one order by STL which was subsequently sold to MISC Berhad (MISC). A second phase of the order also includes six vessels, bringing the total to 12, scheduled for trade from the U.S. to China to support STL’s Ethane Cracker facility in Jiangsu province.
This is the first VLEC to be delivered with the LNG Cargo Ready notation that was released by ABS in 2019. The notation provides assurance to owners and charterers that the VLEC can be upgraded to trade LNG cargoes in the future.
“As part of the shale gas revolution, shipping of liquefied ethane is developing into a significant new market. At ABS we have supported this development from the early stages and are happy to see that this leadership role is being recognized in the current VLEC market,” said Christopher J. Wiernicki, ABS Chairman, President and CEO.
Mr. Yee Yang Chien, President and Group Chief Executive Officer of MISC, said: “We are proud to welcome Seri Everest, our first VLEC into MISC’s existing fleet. With this first delivery, our VLEC has set a new benchmark in the ethane market. Seri Everest has the capacity of transporting large scale ethane over long distance while ensuring the highest level of safety and reliability. We hope to continue to capitalize on this opportunity as we are confident that we will gain a strong foothold to cater to the increasing demand in this niche segment. We are also pleased that Seri Everest is delivered according to schedule amidst the disruption caused by the global COVID-19 pandemic.
“This successful delivery reflects the industry’s resilience in picking up its momentum with the commitment to safety by all parties. I would like to thank everyone who has contributed to this achievement.”
Hohyun Jeong, SHI Executive Vice President, Engineering Operations,
said: “It has big implications to have the VLEC delivered successfully
on time during the pandemic as well as the good performance with the
newly introduced ABS notation ‘LNG Cargo Ready’ applied. The VLEC has
been built with a cargo containment system for dual cargo loading and
the cargo handling system can be converted for LNGC at any time, as
needed. It has been all thanks to the close cooperation with ABS, STL
and MISC working from anywhere, regardless of location, based on
non-face-to-face technologies well-prepared in advance.”
ABS is the leader in provision of classification services to VLEC owners. ABS was the classification society of choice for the very first order of the six dedicated VLECs by Reliance Industries in 2014. The 87,000 cbm VLECs have been successfully trading and laid the foundation for the next generation of larger VLECs.
Wednesday, November 18, 2020
Both WTI and Brent crude prices, based on the front-month contracts, were on track to mark their highest settlements since early September, FactSet data show.
The Energy Information Administration reported Wednesday that U.S. crude inventories rose by 800,000 barrels for the week ended Nov. 13.
That was bigger than the 100,000-barrel climb forecast by analysts polled by S&P Global Platts, but the American Petroleum Institute reported on Tuesday a much larger 4.2 million-barrel increase.
Both WTI and Brent crude prices, based on the front-month contracts, were on track to mark their highest settlements since early September, FactSet data show.
The Energy Information Administration reported Wednesday that U.S. crude inventories rose by 800,000 barrels for the week ended Nov. 13.
That was bigger than the 100,000-barrel climb forecast by analysts polled by S&P Global Platts, but the American Petroleum Institute reported on Tuesday a much larger 4.2 million-barrel increase.
The EIA data also showed crude stocks at the Cushing, Okla., storage hub edged up by 1.2 million barrels for the week.
Gasoline supply, meanwhile, rose by 2.6 million barrels, but distillate stockpiles dropped by 5.2 million barrels. The S&P Global Platts survey had shown expectations for a supply climb of 300,000 barrels for gasoline and decline of 1.8 million barrels for distillates.
December natural gas NGZ20, 0.93% traded at $2.722 per million British thermal units, up 1.1%.
Traders also continue to weigh developments around the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+. A committee on Tuesday failed to announce a recommendation on output curbs for the OPEC Conference on Nov. 30 and OPEC and non-OPEC ministerial meeting on Dec. 1.
“The delay in guidance on production policy wasn’t a surprise” and there will be “more clarity” at the end of the month, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch.
OPEC+ is scheduled to ease up on curbs beginning Jan. 1, but speculation has grown for a delay on worries the continued rise in COVID-19 cases will allow a surge in supplies barring further restraint.
“OPEC is leaving all doors open to see how much demand does get hit in the weeks ahead,” said Zahir. “It is also worth noting Libya oil production continues to increase with no restrictions on them until they hit their previous production levels.”
For now, energy prices “will continue to see weakness as further [COVID-related] restrictions are implemented here in the U.S.,” he added.
Tuesday, November 17, 2020
Monday, November 16, 2020
Ghana President Jerry Rawlings
Jerry Rawlings, Ghana’s Former President, died at the age of 73 on Thursday, Nov 12 in an Accra hospital. The death was announced in a statement by the country’s president, Nana Akufo-Addo, citing an undisclosed illness.
As a young military officer at the age of 32, Rawlings was behind two coups to seize control of the government in Ghana. He was subsequently jailed but escaped shortly after. He was then successful in bringing down the government and seizing power and went on to lead the African country for 20 years.
He later became regarded as the driving force behind Ghana’s emergence as a stable democracy. Rawlings oversaw Ghana’s transition to multi-party democracy, winning elections in both 1992 and 1996 before stepping down in 2001.
Friday, November 13, 2020
The oil cartel lowered its 2020 demand forecast by 0.3M barrels per day
The oil cartel revised its 2020 demand forecast lower by 0.3 million barrels per day to slightly above 90 million. The new forecast projects a decline of 9.8 million bpd on an annualized basis.
“As new COVID-19 infection cases continued to rise during October in the US and Europe, forcing governments to re-introduce a number of restrictive measures, various fuels including transportation fuel are thought to bear the brunt going forward,” OPEC said in its November 2020 report released Wednesday.
More than 580,000 new COVID-19 infections were reported on Nov. 6, the last day worldwide figures were available. The virus has infected 51.7 million people globally and almost 1.3 million.
While shutdowns aimed at slowing the spread of the virus are expected to curb demand, supply will increase as OPEC members and their allies reduce the size of their supply cuts, and production from Libya continues to normalize, after the lifting of a force-majeure blockade.
The so-called OPEC+ group is set to reduce its current 7.7 million bpd supply cut by around 2 million bpd beginning in January. OPEC could still extend the cuts at its upcoming meeting on Dec. 1.
The alliance in April agreed to slash production by a record 9.7 million bpd as governments around the world ordered citizens to eliminate nonessential travel amid the early months of the pandemic, resulting in global oil demand falling by 25 million to 30 million bpd.
The demand shock caused oil prices to plunge with Brent crude oil, the international benchmark, plunging by as much as 77% from its January peak to $15.98 per barrel and West Texas Intermediate crude oil, the U.S. standard, hitting a record $41.65, respectively, as demand has returned to the market.
OPEC remains concerned the “structural impact of the pandemic” will linger well into 2021 despite the possibility a vaccine will be distributed during the first half of the year.
Thursday, November 12, 2020
Photo Credit : Italian Navy, crew of Federico MARTINENGO - F 596
Operations within the Gulf of Guinea are often conducted against the backdrop of heightened risk. This is partly due to the prevalence of piracy in the region, and the relative lack of both counter piracy resources and activity. The recent flurry of incidents within the Gulf of Guinea has increased the risk profile to a unique and exceptional level. The risk profile for all maritime operations within the Gulf of Guinea at this time is CRITICAL (incidents are highly likely, expected daily).
The sustained and elevated nature of the risk currently arises from several key factors. In the past 5 days there have been 6 failed attacks against vessels within two distinct areas: specifically, the waters south of Cotonou and the Southern Niger Delta. In both instances, attacks have occurred within the offshore domain at a distance of 60+nm. We've been tracking the locations of the incidents via our online platform Atlas Inform, which shows well-developed trends that strongly indicate an increase in incidents occurring beyond the Niger Delta area, the traditional heartland of piracy within the Gulf of Guinea. The incident timings and locations indicate the presence of two separate attack groupings, potentially originating from the same Pirate Action Group (PAG).As the rate of failed attacks increases, the perpetrators are highly likely to increase in desperation. This is likely to be because of the increased risk to themselves from Naval counter piracy activity, but from logistical strain also;
latter of which may be negated if a mothership is being used.
Heightened desperation also means that attempts against vessels are
highly likely to continue, further supported by a sustained period of
favourable weather. Smaller vessels and those of a vulnerable design are
increasingly prone to opportune targeting. Typically, vessels of this
nature, particularly fishing and offshore supply vessels are less
commonly targeted despite their opportunistic nature.
The uniqueness of the risk profile currently stems exclusively from the high rate of failed incidents and the sustained attempts by the pirates to secure their objective, which is highly likely to be the kidnap and ransom of crew. The relative constant threat of piracy within the Gulf of Guinea crates a heightened risk profile for maritime operations, however it remains rare for a sustained and clearly identifiable threat to exist. You can explore previous incident reporting in the Gulf of Guinea via Atlas Inform which allows you to filter by incident e.g. kidnap, boardings, burglary etc. Book a demo by clicking the button below.
It is vital that the CRITICAL risk profile is however held in context. Since 2018, while the number of incidents within the Joint War Committee HRA over the period from January to September have decreased by 4-10% each year, the number of kidnapping incidents increased by 50% from 2018-2019 and by 16% from 2019-2020. The SW Monsoon period typically ends at the beginning of September, improving the regional weather conditions in favour of pirate activity. Since 2018, our data has shown that 25% of 2018’s and 35% of 2019’s total incidents occurred in this post-SW monsoon period from September to December. In addition, incident numbers from the beginning of September to November 11 this year are tracking 10% higher than the same period in 2019 and 37% higher than that of 2018.
It is vital that all vessels operate within this area at a heightened posture maintaining the highest levels of vigilance whilst implementing full hardening / mitigation in accordance with BMP West Africa where possible. You can download a copy of the BMP West Africa, by clicking the button below:
Wednesday, November 11, 2020
Shell will halve the crude oil processing capacity of its largest wholly owned refinery in the world, Pulau Bukom in Singapore, as part of its ambition to be a net-zero emissions business by 2050 or sooner, the supermajor said on Tuesday.
Pulau Bukom hosts the largest wholly-owned Shell refinery globally in terms of crude distillation capacity, 500,000 barrels per day (bpd), and it also has an ethylene cracker complex with a capacity of up to a million tons per year and a butadiene extraction unit of 155,000 tons annually.
As Shell is looking to cut carbon dioxide (CO2) emissions and is transforming its refining business for the new future, it will cut the crude processing capacity at Pulau Bukom by about half, the company said. In that new future, the Pulau Bukom Manufacturing Site will be one of Shell’s six energy and chemicals parks, and will pivot from a crude-oil, fuels-based product slate towards new, low-carbon value chains.
“Our businesses in Singapore must evolve and transform, and we must act now if we are to achieve our ambition to thrive through the energy transition. Our decisive action today will help Shell in Singapore stay resilient and build a cleaner, more sustainable future for all of us,” said Aw Kah Peng, Chairman of Shell Companies in Singapore.
The reduced refinery capacity in Singapore will result in fewer jobs at the site, Shell said, while a Shell spokeswoman told Reuters that the supermajor would cut around 500 jobs by the end of 2023. Currently, Pulau Bukom employs around 1,300 people.
Shell is implementing a new downstream strategy to reshape its refining business towards a smaller, smarter refining portfolio focused on further integration with Shell Trading hubs, Chemicals, and Marketing.
As part of this strategy, Shell has sold the Martinez Refinery in California to PBF Holding Company for US$1.2 billion.
Shell is also set to shut down its 211,000-bpd refinery in Convent, Louisiana, after failing to find a buyer for the site.
By Tsvetana Paraskova for Oilprice.com
Tuesday, November 10, 2020
China’s crude oil imports fell by 4.88 percent last month from a month earlier, data analytics provider OilX reported. At 10.96 million bpd, imports were more than 560,000 bpd lower than the average for September. On an annual basis, however, the October average was higher, by 3.47 percent or 367,000 bpd.OilX’s analysts also reported that tanker congestion at Chinese ports has continued to ease. The level of oil in storage at facilities operated by the International Energy Exchange has also declined.
The tanker congestion in China followed a major buying spree earlier this year when crude oil was even cheaper. By the time the cargos reached China, it had become clear that demand will not rebound as strongly as hoped, causing delays in unloading and a shortage of storage capacity.
This situation is improving now, according to OilX, with oil in floating storage around China at 40 million barrels. INE storage has also declined—after falling for nine weeks in a row the amount of oil at these facilities is now more than 10 million barrels below the record highs registered in July, OilX said.
China’s crude oil imports have fallen in recent months from their record high of nearly 13 million barrels per day in June. However, imports continue to be considerably higher compared to last year’s monthly levels, according to data from the Joint Organisations Data Initiative (JODI).
Going forward, analysts expect that Chinese imports will not be as strong in the fourth quarter, as storage space remains quite full despite the decline in INE oil storage levels. At the same time, the demand for fuels in the regions China exports them to remains weak. In the final quarter of the year, Chinese crude oil imports could shed 14.5 percent from the third-quarter levels, equal to 1.7 million bpd, according to IHS Markit analysts.
Monday, November 9, 2020
Friday, November 6, 2020
Thursday, November 5, 2020
FILE - In this Sept. 17, 2019, file photo, a gas pump reflecting current prices is seen in Orlando, Fla. On Thursday, Feb. 13, 2020, the Labor Department releases Consumer Price Index for January. (AP Photo/John Raoux, File) (Copyright 2019 The Associated Press. All rights reserved)
Gas prices in Ohio have continued to drop over the last week, according to gasbuddy.com.
Currently the average in Ohio is $1.95 a gallon. That's about 55 cents less than the average one year ago.
But the question of those prices continuing to drop is currently in the air. The petroleum analyst with GasBuddy believes that there are a variety of factors that could play into where prices could go over the last two months of the year, including who ultimately is elected president of the United States.
"There could be policy shifts in the days and weeks ahead, and even when it comes to the coronavirus, that is affecting prices," said Patrick DeHaan. "If the situation doesn’t improve, demand will probably be lower for gasoline. That should keep gas prices over the next month or two fairly similar to where they’ve spent the last six or so months - somewhere around two dollars a gallon."
The national average for gasoline sits at $2.12 a gallon.
Wednesday, November 4, 2020
FILE PHOTO: A flag with the Organization of the Petroleum Exporting
Countries (OPEC) logo is seen during a meeting of OPEC and non-OPEC
producing countries in Vienna, Austria September 22, 2017.
LONDON (Reuters) - The Organization of the Petroleum Exporting Countries
and Russia are considering deeper oil output cuts early next year to
try to strengthen the oil market, one OPEC source and one source
familiar with Russian thinking said on Tuesday.
OPEC and allied producers, led by Russia, together known as OPEC+, are scheduled to reduce output cuts of 7.7 million barrels per day (bpd) by around 2 million bpd from January.
But the impact on energy demand of movement restrictions from the second wave of the COVID-19 pandemic is forcing a rethink.
“It looks like we will have to cut deeper in Q1,” the source familiar with Russian thinking said, speaking on condition of anonymity.
Producers are “exploring many options beside a rollover (of existing cuts),” the OPEC source said.
But the source said a deeper cut would be a “hard call,” as it would hand more market share to producers outside OPEC+.
Earlier on Tuesday, Algeria, holder of the rotating OPEC presidency, backed an extension of existing supply cuts.
Algerian Energy Minister Abdelmadjid Attar said keeping current cuts into the first half of 2021 could be considered at the next OPEC+ meetings, according to state news agency APS.
The second wave of COVID-19 meant the oil market faced a “very dangerous” situation, he said.
On Monday, representatives of Russian oil companies and Russian Energy Minister Alexander Novak held talks that also raised the possibility of maintaining rather than easing the output curbs, two industry sources said.
While Russia is the biggest of the non-OPEC allies, Saudi Arabia, the biggest OPEC producer, said at a meeting last month no-one should doubt the group’s commitment to providing support for the market.
“We will not dodge our responsibilities in this regard,” Saudi Energy Minister Prince Abdulaziz bin Salman said.
Analysts say the tougher movement restrictions as coronavirus cases surge mean OPEC and its allies will hesitate to increase supply by reducing output curbs.
“We believe that additional supply from OPEC+ may not be needed just yet and the alliance might choose to delay the ... tapering decision by a quarter,” JP Morgan said last week.
OPEC+ is scheduled to meet over Nov. 30 and Dec. 1 to set policy.
Reporting by Ahmad Ghaddar; Writing by Raya Jalabi; Editing by David Goodman, Barbara Lewis and Jane Wardell
Tuesday, November 3, 2020
The National Oil Corporation (NOC) announced the ending of the blockades at all Libyan fields and ports as of October 26. NOC has given instructions to the operator, Mellitah Oil & Gas B. V., to resume production in Al Feel (The Elephant) Oil Field and the gradual return of Mellitah crude to its normal level in the next few days.
In this regard, the National Oil Corporation Chairman Mustafa Sanalla stated that Libyans understood that the blockade had been very negative on their lives and they strongly support production resumption on a firm footing.
Force majeures have recently been lifted at the Sidra and Ras Lanuf Ports as well as at the Al Sharara oil field
In a related context, the Chairman urged on the importance of controlling the media discourse related to production emphasizing that the only reliable source for announcing the expected production quantities is issued by the National Oil Corporation (NOC) in accordance with the arrangements applicable in the Joint Ministerial Monitoring Committee (JMMC) and OPEC +.
Monday, November 2, 2020
Oil traders are scouting for newly built supertankers to store diesel for the next few months as they brace for lower demand in Europe amid renewed restrictions aimed at battling the COVID-19 pandemic, shipping and trade sources said.
Trading companies, including oil majors, are making enquiries to charter very large crude carriers (VLCC) to carry diesel with 10 parts-per-million (ppm) sulphur for up to six months, they said, indicating that diesel floating storage could rise again.
Several such supertankers, able to carry 2 million barrels of oil each, have been booked since the second quarter of this year to ship diesel from Asia to the West and others were used to store diesel when demand first tanked earlier this year.
With renewed lockdowns in Europe, traders are concerned that diesel consumption in heating, industrial and transport sectors could be hit. It is unusual for traders to store diesel for months during peak winter demand season.
“Due to a possible second or third wave of coronavirus, inventory storing can be happening under a low freight environment,” a Singapore-based diesel trader said.
“As these are newbuilts, they can sail to demand centres, usually in West Africa or Europe or even the U.S. (to wait for demand to pick up).”
Floating storage is also economical for some traders at current low freight rates and as the benchmark 10ppm gasoil in Singapore has stayed in a contango structure since late-July.
A contango market, where prompt prices are lower than those for future delivery, tends to encourage holders of physical barrels to store a product for selling later to secure higher prices.
For new and clean supertankers coming out of yards, the rate is around $38,000-40,000 per day, two shipping sources said.
Shipowners of newly built VLCCs, which are in abundance this year, are also pricing them at low enough prices for traders to conduct maiden voyages on them, a second trader said.
Saudi Arabia’s Aramco Trading Co. is on track to hit 6 million b/d of crude and petrochemical products volume within the next three years, President and CEO Ibrahim Al-Buainain said in a video released Oct. 27.
“Our vision is on track. We are expanding, if we aggregate the trading volumes, which are around 3 million b/d today, with Motiva [refinery in the United States], which is 1.8 million b/d, we are almost at 5 million b/d,” Buainian said in an interview with Gulf Intelligence. “With Jizan [refinery] coming onstream and other systems are increasing their capacity, we’ll be reaching 6 million within the next three years.”
The long-delayed 400,000 b/d Jizan refinery and petrochemical project on the Red Sea coast is expected to start up in Q1 2021, Saudi Aramco CEO Amin Nasser said in August.
During the oil price crash earlier this year, Aramco Trading took advantage of the contango in the market to buy crude from abroad for storage, Buainain said.
“This year around 40% of our traded volume is bought from a third party, to sell to a third party,” Buainain said. “We’ve been increasing gradually the third-party trading in the market.”
Saudi Aramco established Aramco Trading in 2010. It has offices in the kingdom, Singapore and Fujairah in the UAE. In February 2020, it also opened an office in London, which it said would serve Europe and provide a launching pad for operations in Africa.
Friday, October 30, 2020
- Exxon Mobil reported its third straight quarter of losses.
- During the third quarter, the company lost $680 million, although Exxon said results improved on a quarter-over-quarter basis thanks to “early stages of demand recovery.”
- On an adjusted basis, Exxon lost 18 cents per share during the third quarter while generating $46.2 billion in revenue.
Exxon Mobil on
Friday reported its third straight quarter of losses as depressed oil
demand sparked by the coronavirus pandemic weighed on the company’s
During the third quarter, the company lost $680 million, although Exxon said results improved on a quarter-over-quarter basis thanks to “early stages of demand recovery.”
On an adjusted basis, Exxon lost 18 cents per share during the quarter while generating $46.2 billion in revenue. The Street was expecting a 25 cent loss per share and $46.01 billion in revenue, according to estimates from Refinitiv.
A year earlier, the company earned 75 cents per share on $65.05 billion in revenue. During the second quarter of 2020, Exxon lost 70 cents per share on an adjusted basis, while revenue came in at $32.61 billion.
“We remain confident in our long-term strategy and the fundamentals of our business, and are taking the necessary actions to preserve value while protecting the balance sheet and dividend,” Chairman and CEO Darren Woods said. “We are on pace to achieve our 2020 cost-reduction targets and are progressing additional savings next year as we manage through this unprecedented down cycle.”
Exxon previously announced a reduction in its capital spending program — from $33 billion to $23 billion — and the company said it’s ahead of schedule due to increased efficiencies and a slower project pace, among other things. The company is targeting to spend $16 billion to $19 billion in its 2021 capital program.
Exxon also said Thursday it intends to reduce its U.S. staff by around 1,900 employees, with global workforce reductions potentially rising to as much as 15%. As of the end of 2019 Exxon had a global workforce of 88,300, including 13,300 contractors.
As oil and gas companies grapple with the ongoing demand loss from Covid-19, some companies have announced dividend reductions in an effort to slash costs.
Exxon has repeatedly said its dividend remains a priority, and on Wednesday the company maintained its fourth-quarter dividend at 87 cents per share. But it was the first time since 1982 that the company didn’t raise its payout. The company currently yields 10.56%.
Research firm Edward Jones noted that there’s an increasing risk that Exxon will have to cut its dividend in 2021 if demand doesn’t fully recover.
It’s been a difficult few months for Exxon. In August, the company was removed from the Dow Jones Industrial Average. Chevron recently surpassed Exxon for the first time to become the most valuable U.S. energy company based on market capitalization, although Exxon’s current market valuation is higher. Chevron also reported a difficult quarter on Friday.
Shares of Exxon were flat in premarket trading Friday. For 2020, shares have declined 52%.
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Thursday, October 29, 2020
Russian Central Bank
- Global central banks were net sellers of 12.1 tons of gold (XAUUSD:CUR) in Q3 vs. net purchases of 141.9 tons a year earlier, according to the World Gold Council. The last quarter in which central banks were net sellers was Q4 of 2010.
- Among the sellers were Uzbekistan and Turkey, and Russia was a net seller for the first time in 13 years.
- Putting things in a bit of perspective, Q3's sales come following record purchases by central banks in 2018 and 2019. The sales come alongside record prices for gold, and also came at a time when a few governments were under some fiscal pressure thanks to the pandemic panic.
- Q3's sales were part of an overall slowing in bullion demand in Q3, which fell 19% year-over-year to the weakest since 2009. Jewelry demand, in particular, has been weak throughout 2020.
- Gold this morning is flat at $1,877 per ounce. It started Q3 at about $1,775, eventually rising to $2,100 in early August.
- Some related ETFs: GLD, IAU, PHYS, SGOL, UGLDF, BAR, UGL, GLDM, AAAU, GLDI
Wednesday, October 28, 2020
(Reuters) - Venezuela’s state-run oil company PDVSA this week began using a new location near La Borracha island in the Caribbean sea for transferring Venezuelan crude from one ship to another for exports, according to tanker tracking data seen by Reuters.
PDVSA [PDVSA.UL], whose exports have been hit by U.S. sanctions, in late 2018 tested the spot near La Borracha, about 16 kilometers (10 miles) off the coastal city of Puerto la Cruz, but it had not used it until now, according to shipping sources.
In recent weeks, the company informed customers about the possibility of moving a portion of the ship-to-ship (STS) transfers it now does near its Amuay refinery on Venezuela’s western coast to a new location away from shore off Los Monjes islands, near the maritime border with Colombia.
Conducting STS operations at these new areas further from shore is more expensive and results in less supervision from Venezuelan authorities, according to the shipping sources and PDVSA customers consulted by Reuters.
PDVSA and Venezuela’s oil ministry did not immediately reply to requests for comment.
The STS operation currently underway near La Borracha involves a vessel that loaded 700,000 barrels of Venezuelan heavy crude at PDVSA’s Jose port in mid-October, according to vessel monitoring firm TankerTrackers.com. The tanker took a “dark voyage” to Venezuela, meaning its transponder was off during its entire trip, making it difficult to identify.
A transponder transmits a ship’s unique registration number, name, location, origin, destination and cargo to a satellite.
The other tanker had been anchored off Venezuelan waters in the Caribbean sea for days before sailing to the STS spot, TankerTrackers.com added.
Photos taken from a nearby tanker seen by Reuters showed the two vessels doing the transfer on Monday. The receiving vessel, which had its transponder online as of Oct. 27, has not departed, according to Refinitiv Eikon data.
Reporting by Marianna Parraga; editing by Grant McCool
Tuesday, October 27, 2020
Monday, October 26, 2020
One million bpd of oil will be piped from west of the Persian Gulf to Jask in the mouth of the Sea of Oman as part of a project to enable Iran's oil exports from the east of the Strait of Hormuz.
Iran’s new 1000-kilometer-long Goreh-Jask oil pipeline in
the southern Hormozgan province, which will provide the country with an
alternative route for crude oil exports that are currently
transferred through the Strait of Hormuz, has registered over 60 percent
of physical progress and is underway with full force.
The project, which is aimed at expanding the oil transport capacity in
the south of the country to one million barrels a day, was inaugurated
in late June by President Hassan Rouhani.
Addressing the inaugural ceremony of the project, President Rouhani said this project was currently the country’s most strategic project.
Rouhani said a total of $300 million has so far been invested in the project while another $800 million to $850 million is needed for its full operation.
“We hope that exports from Jask will begin as the government’s most strategic project by the end of this [calendar] year (March 20, 2021),” the president noted.
According to the head of Iran’s Petroleum Engineering and Development Company (PEDEC), considering the current rate of progress in the Goreh-Jask oil pipeline project, National Iranian Oil Company (NIOC) will be able to export its first oil cargo from Jask terminal by the end of the current Iranian calendar year.
Touraj Dehqani, who visited the project on Sunday, held several meetings with contractors and project managers and was briefed about the details of the project progress; during these meetings, the official emphasized the completion of the project on schedule.
Regarding the overall progress of the project, he said: “The project is being followed up with the aim of completing and launching it before the end of the year, and considering that the project progress has reached about 60 percent, so we focus more on the sectors in which the project operations are facing difficulties and need more attention.”
According to the official, currently, about 650 kilometers (km) of pipes have been provided to the project site.
“It is necessary for pipe manufacturing companies to make extra efforts for timely delivery of the entire length of pipes required for the project within the next three months and send it to the workshop,” he stressed.
Regarding the pump houses No. 2 and 4, which are important parts in the first phase of the project and have priority, more attention has been paid to the supply of required items and deficits. Delivery of the main pumps needed for the launching of this phase is also planned by domestic manufacturers for late November, Dehqani explained.
“Also, in the storage tanks section of Jask terminal, parts of sheets have been made and the welding operations of the tanks have started about one month ago”, the official added.
The PEDEC head also referred to the consequences of the outbreak of the coronavirus and said: “In such circumstances, we have always tried to monitor the health and safety protocols to ensure the health of our colleagues.”
Goreh-Jask pipeline will transfer one million barrels of heavy and light crude oils per day to Jask oil terminal in the southern Hormozgan province to be exported.
China’s flow of crude oil into storage accelerated in September, reversing two months of declines, as the world’s biggest importer of the fuel continued to work its way through massive volumes purchased during a brief April price war.
The flow of crude into commercial and strategic stockpiles was about 1.75 million barrels per day (bpd), according to calculations based on official data for crude imports, domestic output and refinery runs.
China doesn’t disclose flows into the nation’s Strategic Petroleum Reserve (SPR) or commercial storage tanks, but an estimation can be made by deducting the amount of crude processed from the total amount of crude available from imports and domestic output.
China’s crude output was 16.1 million tonnes in September, while imports were 48.48 million tonnes, giving total available crude of 64.58 million tonnes, or about 15.71 million bpd.
Refinery throughput in September was 57.35 million tonnes, equivalent to about 13.96 million bpd, leaving the difference between the two at 1.75 million bpd.
That was up from 1.1 million bpd in August, but lower than 1.92 million bpd in July, and well below the 2.77 million bpd seen in June.
The September storage flows were also slightly below the 1.83 million bpd average for the first nine months of the year, although still higher than the 940,000 bpd for 2019 as a whole.
The rise in flows into storage tanks in September was largely driven by higher crude availability, given that refinery processing was more or less steady, with September’s 13.96 million bpd only just below August’s 14.0 million bpd.
September crude imports were 11.8 million bpd, up 620,000 bpd from 11.18 million bpd in August, and also marking the fifth consecutive month imports have exceeded 11 million bpd.
It’s no secret that the high levels of crude imports by China are the result of a buying spree during the brief price war between top exporters Saudi Arabia and Russia in April.
That price war, coupled with the economic hit caused by lockdowns to combat the spread of the novel coronavirus, sent global benchmark Brent crude to the lowest in 17 years in late April.
While the Saudis and Russians, and other members of the group known as OPEC+ soon reached an agreement to extend and deepen crude output cuts, the price war allowed China to gorge on cheap oil.
So much oil was purchased that tankers were waiting for more than a month outside Chinese ports to discharge cargoes.
However, the overhang of imports is almost over, with Refinitiv Oil Research estimating about 2.7 million tonnes, or about 635,000 bpd, remains to be offloaded in October.
WHAT WILL “NORMAL” LOOK LIKE?
With imports likely to return to more “normal” levels from November onwards, it’s also likely that China’s storage flows will drop as well.
What’s not clear is whether Chinese refiners will prefer to use up accumulated inventories over the northern winter, or whether they will continue to import crude at rates more akin to the 10.5 million bpd level that prevailed prior to the coronavirus outbreak.
While China’s fuel demand has largely recovered since the lockdowns of the first and second quarters, it also seems evident that refiners are capping monthly processing at around 14 million bpd.
Even this level likely exceeds actual domestic consumption, meaning fuel inventories are probably increasing as well.
This is especially the case since China’s refiners are unable to export excess refined products, given weakness in much of the rest of Asia, where several countries are still battling to control the coronavirus pandemic.
Exports of refined products were 3.95 million tonnes in September, down 7.7% from August’s 4.27 million and 30.5% weaker than the 5.68 million tonnes in September 2019.
The risk for crude oil prices, and for products too, is that China has built up large inventories of both and will take some time to work through the excess.