Thursday, April 22, 2021

Iron ore price surges to 10-year high after Vale, Rio miss on output

Iron ore price soars to ten-year high on improving steel margins and disappointing output

Port of Qinqdao, China. Stock image. 

Port of Qinqdao, China. Stock image.

Iron ore prices jumped more than 4% on Tuesday, extending gains spurred by improved steel profit margins in China and disappointing output figures from Rio Tinto and Vale.

According to Fastmarkets MB, Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $189.61 a tonne on Tuesday, up 4.29% from the previous day – the highest level since 2011.

The high-grade Brazilian index (65% Fe fines) also advanced to a record high of $222.80 a tonne.

September iron ore on China’s Dalian Commodity Exchange ended the daytime trading session 3.6% higher at 1,100 yuan ($169.28) a tonne, following news that China’s crude steel production jumped 19% last month from a year earlier to near a record.

The nation’s output of the alloy is booming at the same time as a pollution crackdown has lifted prices and benefited profit margins at mills.

“The short-term outlook for iron ore prices remained strong”

Daniel Hynes, senior commodities strategist, ANZ Banking Group

“Incredibly healthy Chinese steel margins have been the real driving force behind iron ore’s move higher over the past week,” managing director at Navigate Commodities in Singapore Atilla Widnell told Reuters.

Rio Tinto’s iron ore output in the March quarter dropped 2% on an annual basis, while production at Vale fell 19.5% from the previous quarter.

BHP Group Ltd on Wednesday reported a near 2% dip in third-quarter iron ore production but said full-year output is expected to be at the upper end of its forecast.

“With the market relatively tight at the moment, it will certainly see any failure to meet current guidelines as relatively positive for the price,” Daniel Hynes, senior commodities strategist at ANZ Banking Group told Bloomberg.

Vale and Rio both maintained their forecasts for full-year production, though a slower-than-expected recovery at Vale could see the market reset its expectations, he said.

Rio cautioned that its guidance for the annual output of up to 340 million tonnes was subject to logistical risks associated with bringing 90 million tonnes of replacement mine capacity on stream. It also said that Tropical Cyclone Seroja had impacted its Pilbara mine and port operations in April.

It was a “mediocre quarter” for Rio, Tyler Broda, mining analyst at RBC Capital Markets, said in a note. Quarterly production was 6% less than the bank’s estimate.

“Not all that much is going in the right direction from a bottom-up basis for Rio Tinto as they continue to tackle the various challenges at their operations and projects, but main commodities iron ore and aluminum are both benefiting from the China decarbonisation theme,” Broda said.

The iron ore market has kept a wary eye on the still-tight global supply in the wake of a Vale tailings dam disaster in 2019 that had prompted mine closures for safety checks in Brazil.

However, real-time shipping data showed an improvement in cargo volumes from the world’s top suppliers. Iron ore shipments by Australia and Brazil recovered last week after two weeks of declines, according to Mysteel consultancy.

The short-term outlook for iron ore prices remained strong, ANZ’s Hynes said, with Chinese steel mills content to accept current high prices for their main feedstock while their margins were so strong. However, he added the cost of ore was now well above fair value, with the risk of a pullback later in the year if Beijing’s plans to curb steel production to control greenhouse gas emissions start to impact demand.

“If we saw a 1% fall in Chinese steel production that would potentially wipe out about 15-20 million tonnes of iron ore,” said Hynes.

(With files from Reuters and Bloomberg)

Wednesday, April 21, 2021

The Impact of changing supply and demand balances on tank terminals

 The world’s hottest storage hotspots

As the world is slowly emerging from the Covid-19 pandemic, it is safe to say that the corona virus has had a profound impact on nearly every aspect of our daily lives. Besides the more visible effects on public health, society, and transportation, Covid-19 also sent a shockwave through the global economy.

This shockwave also had its effects on tank terminals: As soon as the true scope of the Covid-19 pandemic became apparent, the oil market shifted from a backwardated market into a deep contango. Needless to say, this contango immediately led to a significant increase in demand for tank storage.

The road less traveled?

The demand for road and jet fuels has been affected most by the Covid-19 pandemic. While the short-term effects of national lockdowns on demand for fuels are relatively straightforward (fuel consumption is strongly linked with people’s mobility patterns), it will be the longer-term effects that are the most interesting to keep an eye on.

Large corporations like banks, IT companies, and insurers are already preparing for a ‘new normal,’ where their staff will work more from home after Covid-19 than they did before (source). As people will commute less to their offices, a decline in overall car traffic volume could be expected. Together with the ongoing electrification of road vehicles, we expect that the current surplus for gasoline will increase further.

When we take a look at diesel consumption, reversed dieselization of passenger cars will lead to a faster decline than we will see for gasoline. That being said, because the electrification of trucks is not expected to happen in the coming years, there will still be a large volume of diesel consumption left. 

For jet fuel, we forecast that the current deficit for North-Western Europe will grow at a slower pace. While it is expected air travel will largely recover, analysts forecast it will take at least towards 2023 until air travel is back at pre-pandemic levels (source).

Electric vehicles

Over the past few years, the market for electric mobility has seen incredible growth. In 2019, the global electric car fleet exceeded 7.2 million, up 2 million from the previous year. With more and more electric car models being introduced to the market and charging infrastructure improving, this strong growth is only expected to increase. The IEA estimates that by 2030, there will be over 250 million electric vehicles (excluding three/two-wheelers) on the world’s roads. According to the IEA, the projected growth in the Sustainable Development Scenario of electric vehicles would cut oil products by 4.2 million barrels/day. (source)

While battery electric vehicles (BEVs) are considered the preferred solution for short-distance and light vehicles (passenger cars, delivery vans) because of their high energy efficiency, their batteries have a limited energy density compared to traditional fuels. This means that for vehicles with high power demands, such as ocean liners, long-haul trucks, and airplanes, batteries are highly impractical. 

Alternative fuels

With an energy density that’s comparable to fossil fuels, e-fuels and green hydrogen are poised to play a crucial role in our transition to sustainable mobility. E-fuels are produced by electrolyzing water, creating hydrogen and oxygen. While hydrogen gas in itself is an excellent renewable energy carrier, it can be synthesized further with carbon dioxide or nitrogen into more stable and easier to handle e-fuels. When using electricity from renewable sources and circular carbon dioxide (such as direct capture from the air), net emissions are close to zero.

While this process’s overall energy efficiency is lower than that of chemical batteries used in BEVs, the much higher energy density of e-fuels makes them much better suited for applications with high power demands, like shipping, trucking, and aviation.

Circular economy

As the call for reducing plastic waste gets louder and louder, the concept of circular economy is gaining traction. While the market for recycled plastics is growing rapidly and will have its effect on the demand for chemicals, it is not foreseen yet that consumption of virgin material will decrease the coming years.

What’s next?

It is clear that both the covid-19 pandemic as well as the transition to sustainable fuel sources will greatly impact the tank storage terminals. The market outlook for the oil and chemical industry will see significant shifts in supply and demand, while the Covid-19 pandemic only adds further complexities to the market. That’s why market intelligence should be on the radar of every terminal operator. During our regular Market Update webinars, we offer our expert outlook on supply, demand, and trade flows and their impact on tank storage demand. 

Tuesday, April 20, 2021

Glencore faces shareholders revolt over CEO’s pay

 Glencore shareholders revolt over CEO’s pay

Gary Nagle. (Image: Glencore | Twitter.) 

Proxy adviser Glass Lewis, one of Glencore’s (LON: GLEN) top shareholders, is pushing investors to vote against the company’s plans to pay its new chief executive Gary Nagle up to $10.4 million.

In a report for clients, Lewis said it was concerned that the remuneration package for Nagle was “excessive for a newly appointed CEO with no previous experience of running a publicly listed company.”

Glencore announced in December that Ivan Glasenberg, its long-serving CEO, was to step down this year and be replaced by Nagle, who was head of its coal mining business.

The Swiss miner and commodities trader group has only had three chief executives since founded in 1974. Glasenberg had received a flat annual salary of $1.5 million since Glencore listed in 2011, so Nagle will be the first subject to a conventional pay arrangement. The bulk of his remuneration, however, would from short and long-term incentive schemes.

Nagle, who is set to take over Glasenberg at the end of June, is effectively set to receive up to $6.4 million in any one year, as 40% of his bonuses will be held back until two years after he leaves post. This ignores any share price changes, distributions or share awards.

“We consider a base salary of $1.8 million in conjunction with a short-term incentive opportunity of 250% of salary and an RSP opportunity of 225% of salary, to be excessive,” Glass Lewis said.

Glencore had said in its latest annual report it considered Nagle’s proposed remuneration to be sensible and aligned with shareholder interests.

Climate goals

Another bone of contention Glencore faces at the upcoming annual general meeting, scheduled for April 29, is to obtain approval for its newly set emissions targets.

The firm revealed in December an ambitious plan to reach net-zero emissions by 2050 through reducing its direct and indirect carbon footprint by 40% by 2035, compared to 2019 levels.

Glencore, one of the world’s largest coal producers, also said it would focus on investing in metals considered “vital” for the transition to a lower carbon world.

While the company noted that thermal coal’s weight on the group’s earnings has dropped between 10% and 15%, from 25-40%, it said it did not believe that selling its coal mines would help reduce associated emissions.

The company has already made some concessions. It promised last year to cap coal production, not to make any further coal acquisitions that would add to overall output, and to align its business strategy with Paris climate targets.

Glencore, also a major cobalt and copper miner, has highlighted its current exposure to those two metals, which are essential in the production of electric vehicles batteries and renewables.

Both the CEO pay scheme and the “greener” objectives are just some of the challenges Glencore needs to overcome. The company faces pressure on multiple fronts, including corruption probes, pollution accusations, and a share price that has lost half its value over the past decade.

Friday, April 16, 2021

Efforts Underway for Release of Iranian Tanker Seized by Indonesia: Spokesman

Efforts Underway for Release of Iranian Tanker Seized by Indonesia: Spokesman 

TEHRAN (Tasnim) – Tehran is proceeding with efforts for the release of an Iranian oil tanker that was seized in Indonesian waters in January, the spokesperson for the Iranian Foreign Ministry said.

Saeed Khatibzadeh said on Saturday that consultations are underway for the release of the Iranian oil tanker ‘MT Horse’.

“The case is being pursued by engaging a lawyer and through legal proceedings, and will continue until achieving the final result,” he noted.

The spokesman said “extensive investigations” suggest that the Iranian-flagged oil tanker has not committed any violations.

“Therefore, the authorities of the friendly state, Indonesia, are expected to take action for the immediate settlement of the problem,” Khatibzadeh stated.

Indonesia’s coast guard seized the Iranian-flagged MT Horse and the Panamanian-flagged MT Freya vessels over suspected illegal oil transfer in the country’s waters on January 24.

Indonesia’s coast guard spokesman claimed the two tankers concealed their identity by not showing their national flags, turning off automatic identification systems and did not respond to a radio call.

Thursday, April 15, 2021

Copper price scales $9,000 after Goldman calls it the new oil

Copper price scales $9,000 after Goldman calls it the new oil

Copper resumed its rally on Wednesday, as analysts and executives expect increasing demand and likely low supply to drive prices even higher.

Copper for delivery in May was up 2.51% in afternoon trade, with futures at $4.1310 per pound ($9,088 a tonne) on the Comex market in New York.

Click here for an interactive chart of copper prices

The industrial bellwether metal is crucial in the global push for a greener economy, and right now, the market is facing a supply crunch.

US’s post-pandemic recovery and the Biden Administration’s infrastructure plan are helping to build momentum for base metals.

Goldman Sachs sees prices average $11,000 per tonne over the next 12 months, according to the Business Insider. By 2025, the metal could be priced at $15,000 a tonne, a rise of 66%, Goldman said in a report titled “Copper is the new oil”.

“Discussions of peak oil demand overlook the fact that without a surge in the use of copper and other key metals, the substitution of renewables for oil will not happen,’ the bank said.

Demand will therefore significantly increase, by up to 900% to 8.7 million tonnes by 2030, the bank estimates. Should this process be slower, demand will still surge to 5.4 million tonnes, or by almost 600%.

BHP president of minerals for the Americas, Ragnar Udd, expressed his optimism for a growing demand in the future at the CRU World Copper Conference in Chile.

“A great example is electric vehicles. Policy signposts for rapid electric vehicle (EV) adoption were distinctly favourable over the last (12) months and we have revised our internal EV penetration forecasts upwards,” he said.

“These vehicles use four times as much copper as petrol-based cars, and they will also need more infrastructure to connect charging stations to the grid.”

BHP expects the world’s Paris-aligned emissions reduction targets to more than double the demand for copper and quadruple for nickel over the next 30 years.

“It’s all copper, copper, copper, copper, copper, copper,” said mining magnate Robert Friedland during the CRU World Copper Conference.

Mining companies will have to be “real heroes” and governments will need to accept the industry if the world is to successfully transition to clean energy and transport, said the co-chairman of Ivanhoe Mines.

Goldman Sachs metals strategist Nicholas Snowdon says environmental policies will drive a capex boom on par with the 1970s and 2000s over the course of the next decade and copper is the core of the green energy transition.

“We estimate nearly $16 trillion would have to go into green-focused infrastructure to achieve decarbonisation targets, compared to just $10 trillion in China during the last supercycle.” said Snowdon.

Tuesday, April 13, 2021

Russian oil producers struggle to contain gas flaring 

Russian oil producers reduced gas flaring only slightly last year and failed to reach a targeted level by a large margin, hampered by a lack of necessary infrastructure at new oilfields, a draft government document seen by Reuters showed.

Flaring, or the combustion of gas generated by various processes in the oil industry, generates carbon dioxide emissions.

Climate change poses a series challenge for Russia, with the economy heavily reliant on oil and gas production, as well as mining, and the government is under pressure to cut emissions.

The draft document, outlining oil industry developments until 2035, showed that the utilisation of the associated petroleum gas (APG) oil companies produce as a byproduct of crude extraction, rose to 82.6% in 2020 from 81.5% in the previous year - well below the 95% target which was expected to be achieved in the mid-2010s.

The document cites lack of infrastructure needed to transport and utilise APG, as well as a number of incidents at refining facilities as the main reasons for the high level of gas flaring.

The rate of APG utilisation in Russia rose to 88.2% in 2015 from 76.2% in 2013 but has declined since then, according to the document.

The World Bank found Russia, Iraq, the United States, and Iran accounted for 45% of all global gas flaring in 2017-2019.

Gas flaring rates dipped across most of the top 30 gas flaring countries in early 2020 due to the pandemic.

The Russian document shows Surgutneftegaz had the most success in containing gas flaring, with its APG utilsation rate rising to 99.5% last year. At Russian gas giant Gazprom , it stood at 98.9%, but was just 73.1% at energy major Rosneft.

Russian APG utilisation rose to 94.7 billion cubic metres (bcm) overall in 2020 from 94.1 bcm in 2019. The rest was flared into the atmosphere. (Reporting by Oksana Kobzeva and Olesya Astakhova; writing by Vladimir Soldatkin; Editing by Kirsten Donovan)

Monday, April 12, 2021

North Dakota Oil Pipeline Prevails Over Environmentalists 

The Dakota Access Pipeline will not be ordered to shut down while pending review, government lawyers told U.S. District Judge Brian Boasberg on Friday, much to the ire of environmentalists who have long called for the pipeline to be shut down.

According to Ben Shifman, a Justice Department Attorney, the government is still reserving the right to shut down the pipeline at any time during the environmental review by the Army Corps of Engineers.

That review is not expected to be complete until this time next year. For DAPL, that’s a lot of uncertainty.

The Dakota Access Pipeline has been embroiled for years in a bitter battle with environmentalists and indigenous groups on one side, and the oil and gas industry on the other.

It was Judge Brian Boasberg that canceled the DAPL’s permit given by the Trump Administration that allowed it to move crude oil. And it was Judge Brian Boasberg that ordered DAPL to empty and shut down, claiming its environmental review was insufficient. And it was Judge Brian Boasberg that voiced his “surprise” that President Biden decided not to shut down the pipeline today.

But an appellate court reversed Boasberg’s earlier decision to shut down the pipeline, and allowed DAPL to continue while the Army Corps of Engineers conducts its review. At that time, the Army Corps of Engineers decided not to shut DAPL during its re-review.

Today, President Biden declined to enforce a temporary shutdown of DAPL pending this review, which could still take a year. But this would have meant stopping the flow of a pipeline that has been moving oil for years, and not even President Biden and his vocal green agenda is so bold as that.

But DAPL’s tough road isn’t over. Judge Brian Boasberg said on Friday that he would decide for himself whether to keep the pipeline open. Energy Transfer Partners, DAPL’s owner, has ten days to submit its comments to the court as to the effects of a shutdown.

By Julianne Geiger for

Friday, April 9, 2021

Iran likely to release seized S. Korean tanker, captain as early as next week: source

This photo, captured from DM Shipping's website, shows South Korean oil tanker MT Hankuk Chemi, which was seized by Iran on Jan. 4, 2021. (PHOTO NOT FOR SALE) (Yonhap)

This photo, captured from DM Shipping's website, shows South Korean oil tanker MT Hankuk Chemi, which was seized by Iran on Jan. 4, 2021. (PHOTO NOT FOR SALE) (Yonhap) 

SEOUL, April 2 (Yonhap) -- Iran is likely to release a seized South Korean oil tanker and its captain as early as next week, a diplomatic source said Friday, noting "considerable progress" in the negotiations to end nearly three months of the seizure.

In early January, Iran's Islamic Revolution Guards Corps seized the vessel, MT Hankuk Chemi, and its 20-member crew over alleged oil pollution. In February, the Iranian authorities agreed to set free all sailors except for the captain for the ship's management.

"I understand that there has been considerable progress in negotiations with Iran over the seizure issue," the source told Yonhap News Agency on condition of anonymity. "MT Hankuk Kemi and its captain are likely to be released in the near future."

At the time of the seizure, the vessel was carrying 20 crewmembers -- 11 Myanmarese, five Koreans, two Indonesians and two Vietnamese.

Of them, only the South Korean captain remains in custody while the others are still in Iran for the maintenance of the vessel or have left the country.

It remains unknown why Iran agreed to release the ship and its captain, but speculation has emerged that Seoul and Tehran might have made headway in addressing the Middle Eastern country's call to unlock its funds -- worth US$7 billion -- frozen in Korea under U.S. sanctions.

The two countries have been consulting over how to release part of Iran's funds through a Swiss humanitarian trade arrangement designed to facilitate the flow of humanitarian goods to the Iranians.

Speculation has persisted that the seizure is linked to Iran's anger over the frozen funds. Tehran denies the speculation, stressing that it was purely a technical issue.

Thursday, April 8, 2021

China Started More Coal Plants Than The Entire World Retired In 2020


Smoke belches from a coal-fired power station near Datong in northern China's Shanxi province, Nov. 19, 2015. 

Despite commitments to become a net-zero emission economy by 2060, China—the world’s biggest carbon emitter—commissioned more coal-fired capacity last year than the rest of the world retired, a new report showed this week.

China’s coal boom in 2020 more than offset the retirements in coal capacity in the rest of the world, leading to the first increase in global coal capacity development since 2015, a report led by Global Energy Monitor (GEM) found.

China commissioned 38.4 gigawatts (GW) of new coal plants in 2020, offsetting the record-tying 37.8 GW of coal capacity retired last year, the report showed.

China’s coal boom accounted for 76 percent of the global 50.3 GW new coal capacity. Globally, commissioning of new plants plunged by 34 percent annually in 2020 due to difficulties obtaining financing and delays due to the pandemic. India, which continues to rely on coal, saw coal power capacity increase by just 0.7 GW in 2020, with 2.0 GW commissioned and 1.3 GW retired, according to the report.

China also has 88.1 GW of coal power under construction. Another 158.7 GW is proposed for construction. Meanwhile, the rest of the world is retreating from coal capacity and is announcing coal retirements.

Last year, the retirements were led by the U.S. with 11.3 GW and the EU with 10.1 GW of retired coal capacity.

“President Trump’s promised coal boom was a bust as U.S. coal plant retirements during Trump’s four-year term rose to 52.4 GW, exceeding the 48.9 GW retired during President Obama’s second term,” Global Energy Monitor said.

Related: OPEC+ Was Wise To Ease Output Cuts Despite Demand Concerns

Commenting on China’s coal boom, Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air (CREA), said: “Dozens of new coal power projects, equal to the total coal power capacity of Germany and Poland combined, were announced last year in China.”

“Cancelling them would put the country on track to the low-carbon development the leadership says it wants to pursue,” Myllyvirta noted.

China’s coal-fired power generation increased last year as growing electricity demand outpaced the installations of new clean power capacity, making China the only G-20 country with rising coal generation, climate and energy think tank Ember said in a separate report last month.

By Tsvetana Paraskova for

Wednesday, April 7, 2021

Iran tankers with 3M barrels of crude oil head to Syria, defying US sanctions 

Millions of crude oil barrels are on their way to Syria from Iran, violating U.S. sanctions.

According to a civilian naval intelligence firm, there are four vessels with more than 3 million barrels combined on their way to the Baniyas oil refinery, near the Mediterranean coast.

A satellite photo captured two days ago over the southern section of the Red Sea shows four vessels: Arman 114, Sam 121, Daran and Romina.

The Arman 114 is formerly known as the Adrian Darya 1, a vessel in the center of the U.S.-Iran standoff in the summer of 2019. It was sanctioned by the Trump administration in August 2019, following its attempts to transfer the oil to Syria.


Syria has been struggling with an oil shortage, relying primarily on Iranian help. However, with the burdening sanctions on the two countries, the shortage has turned into a crisis, causing power outages and rationing petrol.

Once the vessels arrive, analysts believe they will supply Syria with enough oil for three weeks.

"Currently, one of four Iranian tankers has traversed the Suez Canal carrying crude oil for Syria's refinery in Baniyas," Samir Madani, co-founder of Tanker Trackers, told Fox News. The Romina has switched off its AIS, a familiar move by the Iranian tankers to avoid tracking.


"Only the first 900,000 barrels are now in the Mediterranean and could reach Syria by Wednesday at the soonest. The recent delays in the Suez Canal due to the EVER GIVEN as well as today's mishap have exacerbated the crisis for a population of 17 million," Madani said.

FILE - An Iranian flag flutters on board the Adrian Darya oil tanker, formerly known as Grace 1, off the coast of Gibraltar on August 18, 2019. (Photo by JOHNNY BUGEJA/AFP via Getty Images)

FILE - An Iranian flag flutters on board the Adrian Darya oil tanker, formerly known as Grace 1, off the coast of Gibraltar on August 18, 2019. (Photo by JOHNNY BUGEJA/AFP via Getty Images) 

Saeed Khatibzadeh, the spokesman of the Iranian foreign ministry, told reporters in his weekly press briefing on April 5 that Iran has already been able to sell crude oil in defiance of the sanctions. "As for taking back Iran's share in the oil market, we have never waited, and you can see it in the official and unofficial statistics," he said.


Iranian Press TV reported on Monday, according to an unnamed source, that Iran will agree to return to commitments under the nuclear deal only if the U.S. removes all sanctions imposed against it.

"Iran will start its measures to return to JCPOA commitments only after the removal of all US sanctions and verifying it," the report said.

Talks resumed Tuesday in Vienna.

Tuesday, April 6, 2021

Copper Prices Jump After Leading Producer Chile Closes Its Borders

Copper wire 

Copper price jumped on Monday as investors assessed the decision by Chile to close its borders during April due to a spike in covid-19 cases.

Copper for delivery in May was up nearly 4% in afternoon trade, with futures at $4.1390 per pound ($9,125 a tonne) on the Comex market in New York.

The world’s top exporter of the metal closed its borders for a month as reported a daily record of 7,830 infections last week, an all-time high for occupied hospital beds, and a nationwide positivity rate of 11%.

Chilean citizens and foreign residents are forbidden from entering or leaving the country. All truck drivers are required to present a negative PCR test carried out in the 72 hours before entering the country.

The stepped-up border restrictions may disrupt mining activities by delaying equipment replacement.

Chile’s copper mines produced 430,100 tonnes in February, a decline of 4.8% compared to the same period of 2020.

Last week, Codelco clinched a deal with workers at its Radomiro Tomic mine after they accepted a new contract offer, defusing worries about a potential strike.


Monday, April 5, 2021

Abu Dhabi Makes a Bold Bid to Create New Global Oil Benchmark

 Adnoc Drilling completes first Umm Lulu offshore oilfield well

Abu Dhabi started trading futures contracts for Murban crude, its biggest oil grade, in a bid to create a benchmark for the energy market.

The aim is “to make sure that Murban is a globally freely traded commodity and allows everybody around the world to use it either for pricing or hedging their risk,” Khaled Salmeen, executive director of supply and trading at government-run Abu Dhabi National Oil Co., said in an interview with Bloomberg Television. “It provides an additional tool that the market has been looking for.”

The start of Murban trading on an Abu Dhabi exchange on Monday marked the first time a Persian Gulf OPEC member has allowed its oil to be freely sold and shipped anywhere in the world. Atlanta-based Intercontinental Exchange Inc. is operating the platform known as ICE Futures Abu Dhabi.

Establishing a benchmark isn’t immediate as traders want to see a sufficient volume of deals over time that lead to prices investors deem fair. Creating a forward curve, or bids and asks for crude in future months, will also be a key test for the new Murban exchange.

On its first trading day, volume in Murban for June, the first month for which cargoes will be available, and for July both exceeded 2,200 lots, with more than 1,100 August contracts changing hands and several hundred for September. Each lot represents 1,000 barrels. The contract for June delivery traded at $63.78 a barrel as of 2:50 p.m. in Abu Dhabi.

Murban’s first trading day has “been a real success so far,” Stuart Williams, president of ICE Futures Europe, said in a Bloomberg Television interview. “We have greater aspirations for this contract,” Williams said of the ambition to establish Murban as a regional benchmark. Once trading volumes and liquidity are established, ICE and Adnoc will seek to advance talks with other national oil companies in the region about adopting Murban futures as a pricing reference for their sales.

The region’s main producers, including Saudi Arabia, Iraq and the United Arab Emirates, of which Abu Dhabi is the capital, tend to stop buyers from reselling their oil. They also use benchmarks from outside the Middle East to price much of their crude.

In attempting to make its mark, Murban faces competition for regional benchmark status. S&P Global Platts publishes widely used price assessments for Dubai oil and the Dubai Mercantile Exchange trades futures for Omani crude. Both act as benchmarks for Middle Eastern shipments to Asia.

What’s more, oil traders dislike change, especially when they believe markets already do a good job matching supply and demand. Platts backed away from plans to revamp its Dated Brent contract after comments from traders earlier this year.

Adnoc can produce about 2 million barrels of Murban crude a day and has pledged to guarantee at least 1 million barrels of daily exports to support trading on the exchange.

Murban’s available volumes mean supply will be “enough to establish this benchmark, and then you will see other crude in this region being benchmarked against it,” Patrick Pouyanne, chief executive officer of French oil major Total SE, said in an interview in Abu Dhabi Monday.

Total is a partner with Adnoc in Abu Dhabi’s onshore fields where Murban crude is produced and is a partner in the new exchange. Brent’s declining output means Murban is “serious competition” and the Middle Eastern grade could one day become as famous as its European counterpart, Pouyanne said.

Adnoc CEO Sultan Al Jaber said at a ceremony for the start of trading in Abu Dhabi that the company now sells Murban to more than 60 customers in 30 countries, a leap from its “humble” beginnings in the late 1950s when just 4,000 barrels were pumped daily from one well. Trading Murban will help Abu Dhabi and the UAE get more value out of its barrels, he said.

The UAE is the third-largest producer in the Organization of Petroleum Exporting Counties, which cut supplies last year as the pandemic crushed energy demand.

OPEC+, a broader group including countries like Russia, meets this week to discuss whether to further ease the production cuts that began last May. Those supply curbs and the rollout of vaccines have caused the established global benchmark, Brent crude, to surge roughly 65% since the start of November to about $63.50 a barrel. Still, the rally has faded this month amid a new wave of virus cases, which may push some members of the producer group to argue that the cartel can’t raise output just yet.

Price levels in the range of $60 a barrel are “a sustainable average,” Salmeen said.

Last week’s closing of the Suez Canal after the Ever Given container ship ran aground won’t cause major issues for oil markets, he said. Markets are well supplied and buyers can draw from high inventories to avoid any shortages, he said. 

Mexico Moves to Strip Fuel Market Permits


Mexico’s government has proposed legislation that would allow the energy ministry and energy regulatory commission (CRE) to more easily strip fuel market participants of their operating permits.

The move is the latest manifestation of the government’s rollback of a 2014 energy reform package that opened Mexico’s long-cloistered oil industry.

The bill, presented to congress yesterday, is likely to pass because President Andrés Manuel López Obrador’s Morena party holds the simple majority in the legislature required for approval.

Under the proposed legislation, an expanded group of holders of permits issued under the 2014 hydrocarbons law for fuel imports, exports, marketing, distribution, retail, transport and storage of fuels, crude and natural gas would be required to prove compliance with a minimum fuel storage policy. The existing law mandates that most participants have inventories for gasoline and diesel equivalent to five days of sales.

The government can currently sanction companies that do not comply with the storage policy but allows them to keep operating. Under this proposal, the permits would be revoked almost immediately. The proposal also expands this obligation to fuel transporters, while it currently only applies to fuel traders, importers, distributors and retailers.

The wording of the bill is ambiguous, as “all permits” could include crude and gas permits, while only gasoline, diesel and jet fuel have a stated minimum storage policy.

Because of the nature of the regulated activities, some existing permits would be unable to comply with the requirement, said Diego Campa, partner at Campa and Mendoza, a Mexico City-based law firm specialized in energy and natural resources.

As the bill is currently drafted, on the first day of the legislation’s approval, the energy authorities could revoke all permits from firms that are out of compliance. Under current requirements, some companies have already been struggling to comply with the minimum storage mandate because of ambiguities in existing regulations, and the government has also delayed permits to build new storage infrastructure.

One safe harbor for companies to provide proof of its storage could be to show storage credits bought from other companies, known as tickets. The bill presented yesterday does not indicate if that would be allowed.

The bill also does not address the current exemptions of certain permit holders from the storage mandate, in light of Mexico’s prohibition on retroactive application of laws.

The bill adds a new article to the hydrocarbons law (Article 59 Bis) to include, define and state the cause of a permit suspension. With this addition, the energy ministry and CRE can “suspend permits temporarily when foreseeing an imminent danger to the country’s national security, energy security or the national economy.”

If a permit is revoked, the bill would give state-owned oil company Pemex and utility CFE exclusive access to the associated infrastructure. If the permit of a privately owned fuel storage terminal is suspended, for example, only Pemex or CFE could use it. Authorities do have to justify the suspension for a valid cause in writing, and if the permit holder modifies the reason under which the permit was suspended, authorities must reinstate the permit.

The bill also proposes to include smuggling and illicit traffic of hydrocarbons, refined products and petrochemicals as immediate cause to revoke a permit, as well as any second offense to the hydrocarbons law.

If the controversial government-sponsored electricity bill serves as a guide, the fuel permitting bill could be swiftly passed through the congress without any major changes, with lawmakers following party lines and the president’s instructions. But it could also be challenged in Mexican courts, which have stopped the electricity bill through a wave of injunctions.

Friday, April 2, 2021

God Bless Everyone Today!

‘It’s going to hurt us’: Heating oil industry fights effort to eliminate Mass. Rebates

 Michael Mcgrath Inc

Michael Mcgrath Inc



$2.50 / 4/2/2021


The proposal from the council, chaired by the State Energy Resources Commissioner, follows a series of recommendations made by the Baker administration in December for Massachusetts to achieve a “net zero” carbon emissions standard by 2050. The changes are also in line with aggressive greenhouse gas emission reduction targets contained in a comprehensive new climate bill passed by lawmakers and signed by Governor Charlie Baker last week. A provision in this law would enable municipalities to issue net-zero building regulations for new buildings that could, for example, block fossil fuel integration in these projects.

In order to achieve this ambitious target for 2050, significant changes would have to be made in the heating of buildings. State officials and environmentalists hope to encourage the introduction of electric heat pumps into households and cut fossil fuels. The consequences could be enormous for the 700,000 plus homeowners in the state who use heating oil and the businesses that serve it. Massachusetts electricity tariffs are now among the highest in the United States, almost twice the national average.

With this in mind, the Massachusetts Energy Marketers Association, which represents the state’s 400 or so fuel oil dealers, faces the loss of Mass Save discounts of between $ 400 and $ 800 per installation, as well as access to the popular, uninteresting HEAT loans to subsidize Oil systems. (The Council recommends studying the impact on low-income households before changing their incentives.)

Heating oil companies argue that their customers should pay surcharges on their electricity bills to the Mass Save program and get discounts for upgrading their heating systems. Ferrante said he feared the utilities working with state officials to design the program have no incentive to support his industry. He said his association intends to challenge the changes in court when they are final.

“We are under the microscope to be erased from the card,” said Ferrante.

Ferrante noted that many heating oil suppliers have taken steps to address the environmental impact by switching to biofuel blends with much lower carbon emissions. For example, nearly 80 dealerships are participating in a government program to encourage the use of biofuel, mostly discarded cooking oil, that can be blended with standard heating oil. They receive incentives funded by penalties that electricity companies pay for failing to meet renewable energy targets.

Among the participants: Cubby Oil & Energy. President Charlie Uglietto said nearly all of the Wilmington company’s approximately 6,000 customers burn a 50/50 blend of petroleum and used cooking oil. Uglietto said it costs homeowners about $ 50 more a year than unblended heating oil. Some customers use fuel made entirely from discarded cooking oil.

John Alefantis works for the heating oil company Cubby Oil in Boston.David L. Ryan


From Uglietto’s point of view, biodiesel is a more cost-effective method of combating emissions than heat pump systems, which, according to state authorities, should be prioritized in the new Mass Save Plan.

“Neither the state nor Mass Save nor many people recognize the value of liquid renewable fuels,” said Uglietto. “Why are we getting people to buy $ 25,000 worth of heat pump equipment when we can just switch the fuel that goes into people’s oil burners and get greenhouse reductions for pennies on the dollar today? I just do not understand. “

Caitlin Peale Sloan, Massachusetts director of policy efforts for the Conservation Law Foundation, said there is not enough discarded cooking oil from restaurants to rely solely on for the fuel oil industry to rely on as a solution.

The elimination of oil discounts is one of many proposed changes to the Mass Save program, which is regulated by the state and funded by surcharges on electricity and natural gas bills. They are now being used by the state’s major electricity and natural gas suppliers to formulate a new plan for the next three years with the aim of taking the climate benefits into account.

“We are carefully reviewing all of our fossil fuel incentives and will be careful about which fossil fuel incentives are retained in the next plan. This is not just about heating oil, ”said Patrick Woodcock, the state commissioner for energy resources. “We believe heat pumps should be integrated across the state. … It is a technological breakthrough that Massachusetts is about to seize. It’s only a matter of time. We believe the time is now. “

Amy Boyd, a member of the Efficiency Council, said the panel and utilities will have a final version out by the end of October. She notes that heating oil customers could continue to use mass save funds for other efficiency measures, such as insulating their homes.

“Using Ratepayer money to buy things that will keep fossil fuels around longer is wasting Ratepayer money,” said Boyd, policy director at Acadia Center, a climate think tank. “I am really happy that the EEAC is taking a stand on the need for electrification.”

However, Emerson Clauss, co-owner of Allegiance Construction & Development in Northbridge, said the switch to electrical heat is still heavily reliant on natural gas, the most widely used fuel source for New England power plants. Clauss said he was also concerned about the net-zero language of the new climate law for new buildings because it could exclude heating oil, propane and natural gas as a heat source.

“More than half of our electricity comes from natural gas,” said Clauss, president-elect of the Massachusetts Home Builders and Remodelers Association. “It sounds like we’re doing a great thing and we’re moving in the right direction. But aren’t we just moving to where the smoke burned? “

Jon Chesto can be reached at Follow him on Twitter @jonchesto.

Thursday, April 1, 2021

Oil Traders Made A Killing Last Year

Oil traders in Houston. Creative Commons photo/Oil Industry News.

Retail investors with long positions in crude oil markets had to endure one of the most volatile years on record in 2020 thanks to the Saudi-Russia oil price war, oil price crash, and a global pandemic that dealt a massive blow to energy demand.

However, it was yet another annus mirabilis for large oil traders who took full advantage of the choppy markets and a massive spike in volatility to make a killing on oil trades.

Bloomberg reported that dozens of large oil traders made billions of dollars in profits in 2019, with many posting record earnings thanks to a rocky oil market. 2020 was more of the same, only better this time after top oil and commodity traders posted record profits mostly by leveraging the famous contango plays.

Dutch energy and commodity trading company Vitol LLC netted record profits of ~$3 billion in 2020 as per Bloomberg.

Vitol is the world’s largest independent oil trader, moving ~8 million barrels of petroleum products each day to meet the needs of the UK, Germany, France, Spain, and Italy.

Record profits

Vitol made a significant chunk of its oil fortunes during the tumultuous second quarter when global lockdowns due to Covid-19 sent oil prices crashing to historic lows, allowing traders with ample storage, including floating storage and underground caverns, to capitalize.

Vitol has yet to close its 2020 accounts, and the final profit figure may still change if, for instance, the company decides to use some of last year’s earnings for writedowns, thus lowering the final net income figure. Still, the company is expected to report a net income of ~$3B for FY 2020, considerably higher than the FY 2019 figure of $2.3B.

Vitol’s independent trading peer Trafigura reported record profits of $1.6 billion for FY 2020, which ended in September, while Glencore Plc is also said to have had a bumper year.

But it’s not just independent traders who were laughing all the way to the bank as the majority of oil companies teetered on the brink of bankruptcy. In-house trading houses of public oil companies such as Royal Dutch Shell Plc (NYSE:RDS.A), BP Plc (NYSE:BP), and Equinor ASA (NYSE:EQNR) also proved their mettle in the game.

Shell doubled its crude and refined products trading profits in 2020, with earnings from the Oil Products division rising to nearly $2.6 billion from $1.3B the previous year. Shell managed to stay in the black despite an 87% plunge in profits thanks to the juicy trading profits.

Meanwhile, BP’s trading arm made nearly $4 billion in 2020, almost equalling the record trading profit in 2019. The profits were able to provide some support to the company’s full-year results, with BP reporting a net loss of $5.7 billion, excluding writedowns.

Contango plays

Norwegian National Oil Company (NOC), Equinor ASA, also stood out for its ability to leverage high volatility during the second quarter.

Equinor has reported a surprise adjusted net income of $646M for the second quarter, trouncing Wall Street’s expectations for a loss of $250M thanks to huge trading profits despite a 53 percent plunge in revenue to $8.04B.

Equinor’s marketing division delivered record-high results, with Q2 adjusted earnings for the company’s marketing, midstream and processing division clocking in at $696M vs. just $74M a year ago.

Equinor’s impressive quarter can be squarely chalked up to the perfect execution of the so-called contango oil plays.

When oil prices tanked in April, the price difference between a Brent contract for six-month forward contract and one for immediate delivery– a key measure of the degree of contango–plunged to a record of nearly -$14 a barrel, surpassing the last major contango witnessed during the 2008-09 financial crisis.

Equinor pounced on the opportunity and started storing millions of barrels of the commodity; filling its oil tankers with crude, turning them into floating storage facilities and renting onshore storage elsewhere. The company did this in anticipation that it would be able to flip its oil inventory at a profit when prices later recovered in the famous contango play.

And recover they did.

After averaging a multi-year low of $18.38/barrel in April, Brent prices have staged a significant recovery, averaging $29.38 in May and later crossing and holding above the $40/barrel mark in late June. Equinor took advantage of the oil price bounce to sell its inventories which, combined with other oil trading activity, helped deliver a record of about $1.16 billion in pre-tax adjusted earnings in just a single quarter.

“The increase was mainly due to the contango market during the quarter and good results from liquids trading,” the company said during its Q2 2020 earning report.

Obviously, a key component of a successful contango play is access to ample storage. Luckily, Equinor is well endowed in that department, with its Mongstad, Eldar Saetre underground caverns capable of holding nearly 9.5 million barrels. The company also said it had rented storage capacity in Korea for years and also used floating storage extensively.

Unfortunately, lack of storage space is the key reason why prices dipped into negative territory in April–and the reason why many other traders will continue being locked out of the juicy contango profits. 

Monday, March 29, 2021

PDVSA's Bonaire Oil Terminal Declares Bankruptcy, Citing U.S. Sanctions on Venezuela

 Maduro entrega coronavirus a PDVSA para bajar su producción

 Nicolas Maduro

[Reuters] A unit of Venezuelan state oil company PDVSA on the Dutch Caribbean island of Bonaire has declared bankruptcy, citing the impact of U.S. sanctions on Venezuela, a court filing showed.

In a March 9 filing published last week by the Court of First Instance of Bonaire, Sint Eustatius and Saba, PDVSA-owned Bonaire Petroleum Corporation (BOPEC) said it could no longer pay its debts because sanctions had cut off its “access to international trade,” as well as cash held in bank accounts.

The court granted BOPEC’s request for a moratorium on creditor payments in a filing that noted BOPEC said it was negotiating with “a party that may make the necessary liquid assets available” to allow the company to “satisfy its preferred creditors and offer a settlement to its unsecured creditors.”

Neither PDVSA nor Venezuela’s oil ministry immediately responded to requests for comment.

At its peak, BOPEC had the capacity to store some 10 million barrels of oil and load large vessels from its deep water docks. The company last year was ordered to remove stored oil due to the risk of leaks from its tanks.

The bankruptcy filing is the latest blow to PDVSA’s key network of refining and logistics assets in the Caribbean. The company is struggling to pay debts and maintain basic operations in Venezuela amid U.S. sanctions aimed at ousting President Nicolas Maduro. The sanctions have added to the impact of years of low investment and mismanagement.

PDVSA’s contract to operate Curacao’s 335,000 barrel-per-day Isla refinery and a neighboring storage terminal ended in December 2019, and PDVSA unit Citgo Petroleum Corp – now under the control of the U.S.-backed opposition to Maduro – last year transferred control of Aruba’s San Nicolas refinery to the island’s government.

Last year, Refineria de Korsou – which owns the Isla refinery – had sought to seize BOPEC to collect on debts owed by PDVSA. 

Oil Giant Saudi Aramco Sees 2020 Profits Drop to $49 billion

Crown Prince of Saudi Arabia Mohammad bin Salman (Photo: Bandar Algaloud via Getty)

Crown Prince of Saudi Arabia Mohammad bin Salman (Photo: Bandar Algaloud via Getty)

DUBAI, United Arab Emirates (AP) — Saudi Arabia’s state-backed oil giant Aramco announced Sunday that its profits nearly halved in 2020 to $49 billion, a big drop that came as the coronavirus pandemic roiled global energy markets.

Saudi Arabian Oil Co. released its annual financial results a year after the pandemic sent the price of oil crashing to all-time lows as people stopped moving around the world to stem the spread of the virus. In recent weeks, however, the price has edged up as movement restrictions ease, commerce increases and more people get vaccinated against COVID-19. Still, analysts caution that a peak in demand may still be far off.

Despite the 44% drop in net income, Aramco said it would stick to its promise of paying quarterly dividends of $18.75 billion — $75 billion a year — due to commitments the company made to shareholders in the run-up to its initial public offering. Nearly all of the dividend money goes to the Saudi government, which owns more than 98% of the company. Aramco’s policy to pay dividends significantly higher than its 2020 free cash flow of $49 billion stands in sharp contrast to other oil giants that have cut payouts. Seeking a cash infusion to pay the billions of dollars in the face of dwindling revenue, Aramco recently has issued international bonds.

The public figures, obligatory ever since the mostly state-owned company listed a sliver of its worth on Riyadh’s Tadawul stock exchange in 2019, offer valuable insight into the health of the region’s largest economy. Despite Saudi Crown Prince Mohammed bin Salman’s efforts to diversify the economy away from oil, the kingdom remains heavily dependent on oil exports to fuel government spending.

Saudi Aramco profit of $49 billion in 2020 is down from $88.2 billion in 2019 and $111.1 billion in 2018. Still, Aramco remains one of the world’s most valuable companies.

“In one of the most challenging years in recent history, Aramco demonstrated its unique value proposition through its considerable financial and operational agility,” President and CEO Amin H. Nasser said in a statement. “As a result, our financial position remained robust.”

The company produced the equivalent of 9.2 million barrels per day of crude oil over the course of the year, its annual results said. Capital expenditure was down in 2020 to $27 billion compared to $32.8 billion the year before. Aramco expects to spend $35 billion this year, some $5-10 billion lower than previous estimates.

Aramco facilities have come under increasing attack as Yemen’s Iran-backed Houthi rebels across the southern border target the kingdom’s oil refineries and export terminals. In an interview with Saudi-owned al-Arabiya TV on Sunday, Nasser said an Aramco facility in the capital of Riyadh struck by drones days before “has started to return to service,” adding that the company “has contingency plans to deal with any assault.”

In recent months, oil prices have made a major comeback from April 2020, when the price of international benchmark Brent crude dipped below $20 a barrel. For the first time in a year, the price of Brent surpassed $60 a barrel last month and traded over $64 a barrel Sunday.

The price increase has come as Saudi Arabia seems determined to curb output and support crude markets even as demand rises, with nations lifting lockdowns and accelerating vaccination campaigns.

Nasser struck an optimistic note about the year ahead, saying that Aramco is “seeing a pick-up in demand in Asia and also positive signs elsewhere.”

“We remain confident that we will emerge on the other side of this pandemic in a position of strength,” he added.

Earlier this month, the kingdom said it would extend its voluntary production cut of 1 million barrels a day through to April. Most OPEC oil cartel and allied countries likewise left their production cuts in place — in stark contrast to March of last year when a price war between Saudi Arabia and Russia prompted the two oil giants to unleash an onslaught of crude on the market as demand dipped. Saudi officials have urged caution, arguing that global economic recovery may still be undermined by new coronavirus restrictions and fast-spreading virus variants.

Before December of 2019, when Aramco floated 1.5% of its shares on the stock exchange, the firm was owned directly by the Al Saud ruling family and didn’t need to announce results. Initially, Aramco listed at 32 riyals ($8.53) a share, becoming the world’s most valuable listed company, with a market valuation of $1.7 trillion. Since then, however, Aramco lost its stock exchange crown to Apple as its value declined. On Sunday it traded around 35 riyals ($9.30) a share.

As oil prices fell and the virus coursed across the world, the Saudi economy has shown signs of strain. It shrank more than 4% last year, according to the government statistics agency. Despite spending cuts and efforts to ramp up non-oil revenue — including by tripling the value-added tax to 15% — the government deficit widened. Last year, Saudi Arabia needed an oil price of more than $76 a barrel to balance its budget. 

Friday, March 26, 2021

14 states sue Biden administration over oil, gas lease pause

 The states accuse President Joe Biden of attacking oil and gas jobs when he signed executive orders pausing the leasing of new projects in late January. Pool photo by Shawn Thew/UPI 

"By executive fiat, Joe Biden and his administration have single handedly driven the price of energy up -- costing the American people where it hurts most, in their pocketbooks." Landry said in a statement. "Biden's Executive Orders abandon middle-class jobs at a time when America needs them most and put our energy security in the hands of foreign countries, many of whom despise America's greatness."

During a press conference Wednesday, Landry described their lawsuit as "an opening salvo against Joe Biden's declared war on America's oil and gas workers."

"By executive fiat, Joe Biden and his administration have single handedly driven the price of energy up -- costing the American people where it hurts most, in their pocketbooks." Landry said in a statement. "Biden's Executive Orders abandon middle-class jobs at a time when America needs them most and put our energy security in the hands of foreign countries, many of whom despise America's greatness."

During a press conference Wednesday, Landry described their lawsuit as "an opening salvo against Joe Biden's declared war on America's oil and gas workers."

The 54-page lawsuit argues the orders Biden signed to ban new leases on federal land violate the Outer Continental Shelf Lands Act and the Mineral Leasing Act that direct executive agencies to further oil and gas development.

The attorney generals argue Biden's order undercuts his own intention to protect the environment as leases signed under these two acts return billions of dollars to coastal states for reclamation and environmental restoration projects.

"Executive Order 14008 glistens with irony," the Louisiana suit states. "It purports to protect the environment but it constitutes what is likely the single-largest divestment of revenue for environmental protection projects in American history."

During the press conference, Landry also accused Biden's executive order of picking "winners and losers" as it bans new leases on federal lands while allowing Native Americans to conduct such energyextraction on their own land.

The lawsuit also accuses the Biden administration of failing to adhere to rule-making procedures by bypassing comment periods and other such steps prior to the pauses going in to effect.

Landry during the press conference called the moves by Biden an "aggressive, reckless abuse of presidential powers that threaten our families, livelihoods and our national security."

When asked about the lawsuit Wednesday, Jen Psaki, the White House press secretary, told reporters that oil and gas jobs "aren't going anywhere" as existing leases will continue.

"This will not affect oil and gas production or jobs for years to come," she said.

The Department of Interior explained the day the executive orders were signed that existing oil and gas operations would not be impacted nor does it restrict energy activities on private or state lands.

The order, the department said, will provide a time to review oil and gas programs after the former Trump administration "conducted a fire sale of public lands and waters."

Thursday, March 25, 2021

Time is of the essence in restoring Suez Canal oil flows

 ever given suez canal

Energy intelligence firm Vortexa has so far identified ten tankers carrying around 13mn bbl of Middle East crude that could be affected by the blockage of the Suez Canal - caused by a container ship accident in the narrow waterway.

More oil flows could be at risk unless the interruption is quickly resolved.
“A short-term disruption of a day or two will not seriously impact oil markets,” said Clay Seigle, managing director at Vortexa in Houston, pointing to ample crude inventories and general weakness in European oil markets caused by new lockdown measures.
The key question is how soon until regular traffic is restored. If it’s delayed, then some refineries could be caught short, especially of high-sulphur “sour crude” from sources like Saudi Arabia and Iraq.
“Time is of the essence,” Seigle explained.
Most crude flows from the Mideast Gulf head to eastern destinations, or to western ones by sailing all the way around Africa, and therefore are not directly affected by a Suez disruption.
If the disruption persists, however, secondary effects could spread worldwide.
“Oil can bypass the Suez Canal by pipeline, but it still needs tankers to reach the refineries. If there aren’t enough available tankers in the Mediterranean, then some oil might not be delivered on time.”
Seigle also mentioned concern for delayed tankers’ next assignments, comparing the situation to airline flight delays that occur at one airport often spreading across a wider area.
“If today’s loaded tankers are significantly late in making deliveries, then they’re also going to be late for their next mission. That could be a scheduled delivery in Asia, which today seems safe from Suez canal problems

Monday, March 22, 2021

Oil Firms Discuss Return To Venezuela As Maduro Promises Monopoly

Managers of foreign oil companies have been visiting Caracas recently to negotiate a possible return of international firms to Venezuela’s embattled oil industry after Nicolas Maduro began promising earlier this year he would end the monopoly of state oil firm PDVSA, Bloomberg reported on Friday, citing sources familiar with the talks.

Venezuela is opening up to foreign investment in its oil industry, Maduro said in January, in a bid to reverse a catastrophic drop in its output under the weight of U.S. sanctions. PDVSA already has overseas partners, but foreign investments in Venezuela’s oil industry are capped at 49 percent of any given project to protect state control of the sector.

Now, with the industry—and Venezuela’s whole economy—in tatters, this may have to change.  

Venezuela’s crude oil and refined product exports plummeted in 2020 to their lowest level in 77 years, as the U.S. continued to step up sanctions against Maduro’s regime and anyone found dealing with it. Last year, Venezuela’s oil exports plunged by 37.5 percent, reaching just 626,534 barrels per day (bpd), the lowest level since the early 1940s, according to data from Refinitiv Eikon and internal documents from PDVSA, cited by Reuters.

Earlier this month, Maduro said the Venezuelan National Assembly would consider reforms to the country’s oil law that would open the door to “new business models.”

Foreign companies have expressed interest in getting their hands on some of Venezuela’s massive oil reserves, the biggest crude reserves in the world. But most international oil firms, especially the biggest ones with exposure to the U.S. stock and banking markets, will wait for U.S. sanctions to potentially ease before trying to enter the Venezuelan oil sector again.

“There is some easy potential to increase production if sanctions enforcement declines,” Francisco Monaldi, an expert on Venezuela’s oil sector and a lecturer in energy economics at Rice University’s Baker Institute for Public Policy, told Bloomberg.

A massive rebound in Venezuela’s oil industry, however, would only occur—if ever—with tens of billions of U.S. dollars of additional investment.

By Charles Kennedy for