Friday, February 28, 2020

US stock markets continue to plunge over coronavirus uncertainty

The Dow Jones Industrial Average plummeted more than 350 points during a volatile trading day on Friday, as financial markets continue to dive on uncertainty over the spread of the novel coronavirus.

The Dow suffered its worst week since the financial crash of 2008.

The Dow was down by 1.37% at closing. The S&P 500 and Nasdaq experienced similar volatility Friday, with steep drops during mid-morning trading. The S&P 500 closed down just 0.82% and the Nasdaq closed up by 0.01%.

Overall, the Dow has lost more than 3,500 points this week, or more than 12%.

As markets plunged, Federal Reserve Chair Jerome Powell issued a rare statement Friday, saying they was "closely monitoring" the situation and "will use our tools and act as appropriate" if needed.

"The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity," Powell said. "The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy."

Prior to Powell's statement, the Dow was briefly down by more than 900 points during intraday trading Friday.

Experts and analysts emphasize it is the uncertainty about the outbreak and its full financial impact that is driving the market volatility.

"Ultimately, it is the uncertainty that is most difficult to price in, so people are selling in the advance of concrete information," Chris Zaccarelli, the chief investment officer for Independent Advisor Alliance said Friday.

"Based on what we know now, it remains our belief that the impact to the economy will be severe, but not enough to create a recession," he added.

Mark Hamrick, the senior economic analyst at Bankrate, noted that for long-term investors, "This jolt is a bump in the road that will eventually only be a memory."

"As with the outbreak, we cannot be confident of the depth or duration of the market’s decline or the economic impacts in the short-term," he added in a note Friday. "But also similar to the spread of the virus, we know that it will have a conclusion. It will take some time to arrive at that point."

Hamrick added that, "long-term investors with the ability and fortitude to remain in the market should do just that."

"This is for certain: One locks in a loss by selling," he said.

The plunge comes as the U.S. Food and Drug Administration announced it's been alerted to the first manufacturing shortage of a drug due to a viral coronavirus outbreak that began in China and has now reached American soil.

Officials also warned Americans earlier this week to prepare for community spread of coronavirus in the U.S., and companies have warned investors of supply chain issues related to the outbreak.

Among the worst performers Friday were the Boeing Company, J.P. Morgan Chase and the Travelers Companies, which fell by 4.4%, 4.3% and 3.4%, respectively.

The best performers were Exxon Mobil, Microsoft and Dow Inc, which gained by 3.25%, 2.42% and 2.17%, respectively.

Thursday, February 27, 2020

Coronavirus increases demand for Eastern European crew

RT: Oil tanker Front Altair file photo

As global restrictions due to the coronavirus outbreak begin to impact the shipping industry, crewing specialist Danica reports an increase in enquiries from shipping companies seeking to employ Eastern European crew but says, as yet, salaries have not been affected by any shortages.
Danica, which has manning recruitment offices across Eastern Europe, advises that it is increasingly having to step in to assist with crewing problems, especially where crew changeovers are overdue. 

Danica Managing Director Henrik Jensen said: “We are getting requests for help from shipping companies which would normally employ seafarers of Chinese nationality because crew members are not able to join the vessels due to the travel bans. 

“Fortunately we have so far been able to cover these requests as the increased demand is relative small compared to the large number of Eastern European crew available in the countries we cover. As a result, this shortage is not currently impacting salary levels.”

He added: “All our seafarers joining these vessels are informed about the precautions to be taken and we have not yet experienced any reluctance from Eastern European seafarers to join vessels. However, we do see some disturbances in the flow of crew changes of all nationalities due to vessels being idle off the Chinese coast or in countries where travel restrictions prevent seafarers from joining or leaving vessels.

“We are monitoring this fast-changing situation daily and keeping all our owners, vessels and crew up to date with the latest situation.”

Wednesday, February 26, 2020

Venezuela: What happens when socialism fails

Hugo Chávez and Nicolas Maduro 
Hugo Chavez - Nicholas Maduro

In 1998, a career military officer was elected president of the wealthiest country in Latin America on a platform of socialism. It was an election victory that shocked the world, as many believed that the catastrophic failure of the Soviet Union had closed the book on socialism as a form of government.

"The philosopher Francis Fukuyama famously declared that history itself had ended," narrated Fox News anchor Bret Baier in Fox Nation's  "The Unauthorized History of Socialism."

"Western liberal democracy had emerged, as what he called, the final form of human government," continued Baier, "But did the collapse of communism really mean the end of socialism?"

Today, Hugo Chavez is gone, but his socialist "Bolivarian Revolution" drags on, trapping oil-rich Venezuela in an escalating state of crisis.

After assuming power, Chavez instituted a traditional socialist agenda, hiking taxes, nationalizing private industries and increasing spending on social programs to 40 percent of GDP.

From 2007 to 2010, the Chavez regime seized majority control of four massive oil projects and American-owned oil rigs, and implemented a new tax on oil production, among other measures.

"Chavez won four national elections in a row," said Baier in the Fox Nation piece, "But when oil prices fell, the flaws of what was now called Chavismo were starkly revealed."

"What happens is that concentrated power and coercion that is a necessary part of socialism will distort the economy and then breed the need for more power for the government in the future to try to correct the inefficiencies that they've created in the past," argued American Enterprise Institute scholar Mark Perry.

"Once the government starts to take over the economy, and uses force and coercion and creates distortions that breed future government interventions to correct their past mistakes, and then you're down the road to serfdom," said Perry.

Chavez died in 2013 and his successor, Nicolas Maduro, a former bus driver, doubled down on Chavismo.

In 2018, 80 percent of the country was living below the poverty line and the annual rate of inflation reached 1 million percent, rendering the wealth of most Venezulan's nearly worthless.

A study published by the United Nations on Sunday found that one of out every three people in Venezuela is unable to secure enough food to meet their daily basic dietary requirements.

The assessment, conducted by the U.N.'s World Food Programme, found that 9.3 million people are "food insecure." Seventy percent of Venezuelans said that while food is available, they cannot afford it.

"The economy imploded and the country has collapsed to the point that it is generating more refugees now than the Middle East, than Syria," said Niall Ferguson, a senior fellow at the Hoover Institution.

In fact, in the last three years, 15 percent of the population of Venezuela has fled the country.

"It's been a catastrophe and it's a catastrophe that was predictable if you understood what socialism does," concluded Ferguson. "I think it is important because so few people on the left in Europe and in the United States recognized Chavez for what he was."

To watch the entire six-part series, "The Unauthorized History of Socialism" go to Fox Nation and sign up today.

Monday, February 24, 2020

Mexico's Pemex Signs Contracts for New Oil Projects -CEO

Pemex Logo

Mexican national oil company Pemex has begun signing contracts with oilfield service firms specifically invited to submit bids for a new batch of priority exploration and production projects, the state-owned company’s chief executive said.

EO Octavio Romero said on the sidelines of an energy event in Ciudad del Carmen, home to numerous Pemex installations in the southern Gulf Coast state of Campeche, that the closed bidding process offers Pemex cost savings.

“We invite the companies, who form consortia to carry out these comprehensive projects, from construction of the facilities, the drilling of wells, laying both marine and onshore pipelines … and the consortium that offers the best price wins,” Romero told reporters late on Thursday.

The CEO said he expects all the related contracting for this year’s projects to be finalized by the middle of this year.

Romero, a close confidant of President Andres Manuel Lopez Obrador, has previously said Pemex aims to discover and develop 20 new oil and gas fields each year, targets viewed as extremely optimistic by industry analysts.

Only three of the 20 priority projects selected last year reported crude production as of last December, according to data from Mexican oil regulator CNH.

Last year marked the first full year of the government of Lopez Obrador, a leftist nationalist who has pushed a state-centric energy model while rejecting the need for transparent oil auctions open to private producers championed by his centrist predecessor.

Romero added in brief comments to Reuters that he does not expect a quick resolution to talks between Pemex and U.S.-based Talos Energy Inc TALO.N over which firm will run operations for a major, shared oil find in the southern Gulf.

The so-called Zama offshore discovery was made in 2017 by a Talos-led consortium which also includes Germany’s Wintershall Dea and Britain’s Premier Oil PMO.L.

Late last year, Talos formally notified the government that the deposit likely extends into Pemex’s neighboring block. Both companies claim to hold the majority of the nearly 700 million-barrel find, which is another point of contention the ongoing negotiations are aimed at resolving.
“I think that’s going to still take more time,” said Romero.

The struggle over who will run the Zama operations has emerged as a major test case for Lopez Obrador, who has repeatedly pledged to boost Pemex and downplayed the role of private oil companies.

Friday, February 21, 2020

U.S. gasoline prices rise as fire, outages hit six refineries

HOUSTON (Reuters) - U.S. gasoline prices on Tuesday continued a week-long climb as unplanned weekend refinery outages compounded earlier shutdowns at major U.S. Gulf Coast and East Coast plants, gasoline traders said. 

Over the weekend, four refineries in Texas and Louisiana shut units directly making gasoline or portions of it, according to refinery sources and energy industry intelligence service Genscape. 

Those new outages are expected to tighten U.S. gasoline supply as refineries prepare for planned shutdowns that typically begin in spring and prepare the plants for summer driving-season production. 

The average retail price for a gallon of unleaded gasoline was $2.45, up from $2.33 a year ago, according to petroleum analytics firm Gas Buddy. Prices have been falling this year as inventories rose and crude oil prices slumped. 

On Tuesday, unleaded gasoline futures rose 1.47%, or 2.30 cents, to $1.6066 a gallon on the New York Mercantile Exchange. The futures are up nearly 7% since Feb. 12, when a major fire shut most of Exxon Mobil Corp’s Baton Rouge, Louisiana, refinery, the fifth-largest in the United States. 

Exxon aims to restore production at three shut crude distillation units (CDUs) as quickly as possible and raise production on a fourth, which is operating at a minimal level, said sources familiar with operations. CDUs convert crude oil into feedstock for all other production units. 

An Exxon spokesman said operations continue but declined to comment on the status of individual units. 

That outage accounted for most of the increase in gasoline prices while adding to the market impact of the Feb. 7 shutdown of the gasoline-producing unit at Phillips 66’s Bayway Refinery in Linden, New Jersey, the largest on the East Coast. Repairs there are expected to last until early to mid-March, according to sources familiar with plant operations. 

A company spokesman said planned maintenance was underway. 

Over the three-day Presidents Day holiday weekend, the gasoline-producing units at Houston-area refineries operated by LyondellBasell Industries and Chevron Corp were shut, according to refinery sources and Genscape. 

Restart timelines for those units were not available from sources or the companies. Neither Chevron nor Lyondell replied to requests for comment. 

Reformers, which produce octane-boosting components mixed into gasoline, also were shut at Royal Dutch Shell Plc’s Convent, Louisiana, refinery and Marathon Petroleum Corp’s Galveston Bay Refinery in Texas City, Texas, over the weekend. Shell declined to comment on the unit’s status. Marathon was not immediately available to comment. 

Restart timelines were also unavailable for those units. 

Reporting by Erwin Seba, additional reporting by Stephanie Kelly and Laura Sanicola in New York; Editing by Steve Orlofsky

Thursday, February 20, 2020

Seized Oil Cargo Is Latest Twist in Venezuela’s Political Fight

File:Bow of Gerd Knutsen.jpg
  • Citgo weighs insurance claim over seized crude oil cargo
  • Cargo returns to Venezuela after floating for a year
A crude tanker stuck at sea for over a year has become the latest front in the battle over Venezuela’s oil riches after being seized last week.

Citgo Petroleum Corp., led by appointees of Venezuelan opposition leader Juan Guaido, was weighing filing an insurance claim last week for theft after a tanker holding almost 1 million barrels of oil was seized by Venezuela, according to a person familiar with the matter.

The contested oil, purchased by Citgo and loaded on the tanker Gerd Knutsen, floated offshore Venezuela for more than a year. In December, a shadow board of Citgo directors chosen by President Nicolas Maduro attempted to seize the cargo but was blocked by a U.S. court. The roughly 960,000 barrels of Venezuelan crude that was once bound for a Citgo refinery in the U.S. was instead discharging in the Port of Jose at a terminal run by Petroleos de Venezuela SA, the national oil company controlled by Maduro, according to people familiar with the matter and ship-tracking data compiled by Bloomberg.

Tuesday, February 18, 2020

Why gold prices topped $1,600 and may soon hit a more than 7-year high

 Gold futures topped $1,600 on Tuesday for the first time since 2013.

Gold futures surpassed $1,600 an ounce on Tuesday and analysts believe the precious metal has the fuel it needs to climb to its highest level in more than seven years.

Gold’s big move on Tuesday “isn’t due to worries over a greater economic fallout from the coronavirus, but rather in anticipation of the flood of central bank stimulus that is all but guaranteed by the effects to date,” said Brien Lundin, editor of Gold Newsletter.

Gold’s rally is due to ‘anticipation of the flood of central bank stimulus that is all but guaranteed by the effects [of COVID-19] to date.’ Brien Lundin, Gold Newsletter

On Tuesday, the April gold futures contract GCJ20, +1.17%  rallied by $17.20, or 1.1%, to settle at $1,603.60 an ounce after touching an intraday high of $1,608.20. The settlement was the highest for a most-active contract since late March 2013, according to FactSet data. Prices also posted for their biggest one-day dollar and percentage gain since Jan. 3 of this year.

The sharp rise for gold comes as the World Health Organization reported on Tuesday 73,332 confirmed cases of COVID-19, the new coronavirus that was first identified late last year in Wuhan, China. There have been at least 1,873 deaths from the virus, WHO said.

China has taken steps to boost its economy, and the People's Bank of China reduced its one-year lending rate on Monday.

“The interest rate cut in China and other stimulus measures were expected, but equity markets have become a safe haven in US,” said Jeff Wright, executive vice president of GoldMining Inc. “Risk and exposure to global economy is bad reason to use equities for safety.”

Given that, Wright said he believes “folks are waking up to reality that coronavirus will impact US GDP and global consumption, so gold is moving up as a true safe haven” as the U.S. might need the Federal Open Market Committee to provide support as well. 

He expects gold prices to trade even higher, but they may hold ground in the $1,550 to $1,650 range “for awhile,” he said. 

“Further bad news from the spread of the virus will help boost gold, but I think investors should remember that the U.S. markets were already searching for some excuse to demand ‘more cowbell’” from the U.S. Federal Reserve, said Lundin, referring to a pop-culture catchphrase that suggests the need for more action. “This epidemic is providing the perfect justification,” he said.

“From a technical standpoint, an inverted head-and-shoulders pattern in gold is pointing toward a target of $1,665, which I think is easily achievable from a fundamental standpoint as well,” he added.
A gold futures settlement at that level would be the highest since Feb. 8, 2013, according to FactSet data.

Monday, February 17, 2020

Fugro Picks-Up Ghana’s Pecan Field Survey Award

The study area, Axim, in context of Ghana's offshore oil fields (Reproduced from:

Aker Energy has awarded Fugro a contract for geotechnical and geophysical survey services in relation to the Pecan field, offshore Ghana.

The surveys will obtain critical seabed and sub-seabed information to facilitate the planning and emplacement of the Pecan subsea infrastructure and the floating, production, storage and offloading (FPSO) ship. ‘This project will build on the extensive experience that our vessels and staff have gained in Ghana and the wider West Africa region, and we look forward to using this knowledge to execute a safe and successful campaign,’ said Jaco Stemmet, Fugro’s Director for Africa.

The contract includes surveys performed from two state-of-the-art vessels for a 10-week period starting in March, and subsequent laboratory testing. Geophysical survey data will be acquired using the Fugro Searcher and one of Fugro’s fleet of deepwater AUVs, Echo Surveyor VI; the geotechnical vessel Fugro Scout, specifically designed for geotechnical operations in water depths of up to 3000 m, will then follow to provide drilling, and seabed sampling and in situ testing.

“For Aker Energy, this contract is an important next step as we prepare for the ramp up of the Pecan project,” said Olav Henriksen, Senior Vice President for Projects at Aker Energy. “We are eager and excited to get started and Fugro’s services are world class, making them a natural choice to partner with.”

As part of the contract, an emphasis has been placed on local involvement via Fugro’s Ghanaian office. The shore base for the two ships will be Takoradi, in the west of the country, materials will be locally sourced where possible, and the Fugro team will comprise at least one trainee surveyor and one experienced surveyor from Ghana. In addition, a series of educational and capacity-building activities will be rolled out through partnerships with Ghanaian educational institutions and the Petroleum Commission of Ghana.

Friday, February 14, 2020

The Coronavirus May Mark The End Of Russia-OPEC Cooperation

Chinatopix, via Associated Press

A week ago, at an emergency meeting of the OPEC’s Joint Technical Committee, Russia refused to agree to the cartel’s proposal to reduce production by an additional 600 000 barrels per day (bpd). Explaining Russia’s position, Energy Minister Alexander Novak said that in order to make such a decision, it takes time to evaluate the effect of coronavirus on the oil market.

It is really not yet clear how much the coronavirus will reduce global demand for crude oil. In February, amid the unfolding epidemic, OPEC lowered its demand growth forecast for 2020 by 230 000 bpd to 0.99 million bpd. The Oxford Institute for Energy Studies is more pessimistic: according to its estimates, in China alone, demand in Q1 2020 will decrease by at least 500 000 bpd. Russian Energy Minister Novak, on the other hand, retains moderate optimism, believing that the global decline will not exceed 200 000 bpd.
An Elusive Asian Market

However, even if the coronavirus turns out to cause more damage than the most pessimistic estimates, Russia should still not further reduce its oil production - on the contrary, it’s time to start preparing for a phased exit from the OPEC+ deal. This is first of all, due to increasing competition in the Asian market, where Russian companies have redirected exports in recent years. According to BP, from 2016 to 2018, Russia reduced oil supplies to Europe by 14 percent (from 177.4 million to 153.3 million tons), while increasing exports to China and India by more than a third (from 52.8 million to 73.8 million tons). A similar strategy was employed by Saudi Arabia, which over the same period managed to compensate for the reduction in supplies to Europe (by 1.7 million tons) with their total increase to India and China (by 4.7 million tons). The same applies to the United States, which last year reduced its exports to China by more than twice their original value due to trade war (5.8 million tons compared to 12.6 million tons in 2018, according to Refinitiv). In the next couple of years, the U.S. will inevitably increase exports, as a result of the Phase 1 trade deal, in which China pledged to purchase $52.4 billion worth of oil, liquefied natural gas (LNG), and other energy products from the United States by the end of 2021.  

The increasing competition will complicate entry into Asian markets for Russian companies that intend to monetize East Siberian oil reserves through exports. This is not only the Kuyumbinskoye field of Gazprom Neft and the Yurubcheno-Tokhomskoye field of Rosneft, but also the Lodochnoye, Tagulskoye, Vankorskoye and Payakhskoye fields, which are the basis of the Vostok Oil project, which in itself is worth 10 trillion rubles (over $157 billion), which will increase Russian GDP by 2% annually, according to the estimates of Rosneft CEO Igor Sechin. The increase in production at these fields will inevitably lead to non-compliance with the OPEC+ output cut deal, which the cartel hopes will keep oil prices above $60 per barrel. However, such a price level is disadvantageous for the Chinese and Indian economies, which in 2019 showed the lowest growth rates over the past 30 and 11 years, respectively (6.2% and 4.8%), according to data from IHS Markit. This, in turn, slows down oil demand - the International Energy Agency predicted a quarterly decline for China back in December (from 13.84 million bpd in Q4 2019 to 13.53 million bpd in Q1 2020), when the coronavirus had not yet affected the commodity markets.

The US Market: A Dangerous Alternative
In this regard, the fall in oil prices will certainly spur demand in India and China, and may therefore be beneficial for Russia, for which the Asian market is the only reliable alternative to supplies to Europe. The American market can hardly claim the role of being such an alternative in the long run, even if in 2019, Russia entered the top three largest suppliers of oil and petroleum products to the United States, increasing exports from 9.9 million bpd in January to 20.9 million bpd in October, according to the US Energy Information Administration (EIA). This jump in exports can be credited to the U.S. sanctions on Venezuela, which since July 2019 has not delivered a single barrel of oil or petroleum products to the United States. The same applies to Iran, whose crude exports fell from 1.2 million bpd in January 2019 to 0.1 million bpd in January 2020, according to Refinitiv.

If the geopolitical situation changes, traditional suppliers will surely return to the American market (which is a risk for Russian companies), and at the same time they will face a decrease in US dependence on commodity imports. In reality, this is already happening: in September, American exports of oil and petroleum products exceeded imports for the first time since 1973, when statistical observations began. In November, net exports (exports minus imports) reached 771 000 bpd in the United States - in 2020 it will increase to 790 000 bpd, according to the February forecast by the EIA, and in 2021 this number is expected go up to 1.16 million bpd. It is likely that the actual figures will exceed forecasts, as consolidation has already begun in the American shale industry, which will in turn contribute to its financial recovery. This is evidenced not only by the acquisition of Anadarko by Occidental ($57 billion), which agreed to take over the debt of its former competitor, but also by the recent transactions between relatively small oil-producing companies in the Permian basin - Callon and Carrizo ($2.74 billion), WPX and Felix ($2.50 billion), as well as Parsley and Jagged Peak ($2.27 billion). 

Coronavirus as a Catalyst for Change

Improving financial stability will not only support the growth of oil production, but also future exports. Besides consolidation in the shale patch, increasing investment in the U.S. Gulf Coast export facilities is expected to boost exports to 8.4 million bpd by 2024, according to last year’s IEA forecast. This will help the United States come closer to Russia and Saudi Arabia in terms of export volume (5.5 million and 7.2 million bpd, according to the BP data for 2018). For OPEC and Russia, it is better to prepare for such a turn ahead of time than to wait for the moment when the policy of reducing production will finally lose its economic meaning. In this context, the coronavirus is just a catalyst for processes that have been taking place in the market for a long time. It is self-evident for Russia that it should move towards a phased exit from the OPEC+ deal in order to prevent losing market share to its competitors.

For OPEC, this is nothing new. It has seen its share in global oil production fall from 38.6 percent in Q4 2016 (when the first OPEC + agreement was signed) to 34.1 percent in Q4 2019, according to Refinitiv, while the share of OECD countries grew from 27.6 percent to 32.4 percent. A further decrease in market share will inevitably reduce the cartel's influence on oil prices. Therefore, it is reasonable for Russia to shift the responsibility for reducing oil production entirely to Saudi Arabia, which, within the framework of existing agreements, can expand its own quota for reducing production by 400 000 bpd (up to 900 000 bpd to the level of October 2018).

Such a decision could be a first step towards a gradual suspension of the agreements, which will allow Russia to compete in the global oil market, and not just remain a passive witness.

By Dr. Fares Kilzie for

Thursday, February 13, 2020

Sanctioned North Korean tanker caught in ship-to-ship transfer near China: Japan

A sanctioned North Korean oil tanker was photographed conducting a ship-to-ship (STS) transfer off the coast of Shanghai in mid-January in violation of UN resolutions, according to the latest in a series of reports on such activities from the Japanese Ministry of Foreign Affairs (MOFA).

Japan concluded that the Chon Ma San (IMO number: 8660313), a vessel designated by the U.S. Treasury and the UN in early 2018, was likely engaging in a STS transfer with another vessel “of unknown nationality.”


The ship began broadcasting its location again in October after an over-two-year hiatus, revealing at least four trips through the strait between Korea and Japan and, notably, a four-day period of circling in the strait following the January STS transfer.

A photograph taken by the Japanese Tokiwa replenishment tanker around midnight of January 11-12 showed the Chon Ma San linked up with a ship with the name “明波5 (Ming Bo 5)” written in Chinese characters on its hull.

The location of the suspected STS transfer was “around 240km eastern offshore of Shanghai,” the MOFA report, released on Friday, said.

STS transfers “of any goods or items that are being supplied, sold, or transferred to or from the DPRK” were banned under UN Security Council (UNSC) Resolution 2375 passed in September 2017.


The Chon Ma San and its managing company, the Korea Achim Shipping Co., were added to the U.S. Treasury Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list in February 2018.  

On the very same day, it was photographed by Japan Maritime Self-Defense Force aircraft engaging in a STS transfer with the Maldivian-flagged tanker Xin Yuan 18 around the same location off Shanghai as in the latest case.

The UNSC North Korea sanctions committee followed in March that year by taking the recommendations of a member state and voting to also sanction both the Chon Ma San and the Korea Achim Shipping Co., resulting in an asset freeze on the vessel and a ban on port calls to member states. 

The U.S. continued to pursue the North Korean tanker’s activities, and in August 2018 sanctioned two Russian entities connected to a Russian-flagged vessel called the Patriot that was found to be engaging in STS transfers with the Chon Ma San.

Treasury sanctioned the Primorye Maritime Logistics Co Ltd and Gudzon Shipping Co LLC, the Patriot’s “registered ship owners and managers,” after the vessel in early 2018 conducted a STS transfer of “2,000 tons of oil to the North Korea-flagged M/V CHON MA SAN.”

“The ultimate buyer was UN- and U.S.-designated Taesong Bank, a North Korean entity subordinate to the UN- and U.S.-designated Workers’ Party of Korea Office 39, which engages in illicit economic activities for North Korean leadership,” the Treasury report added.

In another recorded instance of the Chon Ma San engaged in an STS transfer, the 2018 UN Panel of Experts (PoE) report on North Korean sanctions detailed a case of the vessel around December 5 2017 linked up in the East China Sea with the Sierra Leone-flagged tanker Jin Hye (IMO No. 8518572).

“The Chon Ma San disguised its identity by painting the names ‘Whale’ and ‘Freetown (Sierra Leone)’ over the original name and port of registration and changing the “3”s to “8”s in the IMO number on the superstructure (8660313 to 8660818),” the report said, adding that “the flag of the [DPRK] on the funnel was also painted over with white paint.”

The 2019 PoE report said that, according to an unnamed member state, the Chon Ma San was one of six of the “most active” vessels “accounting for 50 per cent of all transfers” among 23 DPRK tankers being tracked for STS transfer activity.

Additional cases in the report that the Chon Ma San also “engaged in ship-to-ship transfers with and received fuel from the Myong Ryu 1 and the Jin Yang 36 (金洋36), both of unknown nationality, on 4 June and 25 June 2018.”

Friday’s report from the Japanese MOFA was its 16th public report on North Korean STS transfers since the UN resolution came into effect, covering the 24th such individual event witnessed by Japanese and partner naval forces.


After disappearing from Automatic Identification System (AIS) tracking services since June 2017, the Chon Ma San reappeared on October 18 heading west through the Korea Strait towards China, according to the Ship Tracker tool from NK News‘s sister site NK Pro.

This was the first of four instances in the months since where the tanker broadcast its location when heading through the strait, likely in order to avoid collisions in the narrow waters as the AIS system is intended.

DPRK ships are otherwise known to turn off their broadcasting systems to avoid detection while conducting shipments considered illegal under UN sanctions.

Following the initial mid-October broadcast, the Chon Ma San was then seen heading east through the strait between November 30-December 1, presumably back towards one of North Korea’s east coast ports, before being spotted heading back towards China through the strait again from December 22-23.


It did not broadcast its location again until after the January 12 reported STS transfer, but when it did show up again in the Korea Strait at the end of the month, it exhibited rather unusual activity.

NK Pro’s Ship Tracker shows the Chon Ma San circling a large area in the strait between South Korea’s Jeju Island and Japan’s Tsushima Island between January 27-30 before finally heading east, presumably back to the DPRK east coast, on January 31.

The instance raises questions because the area is not a known hot spot for STS transfers, and due to the large area covered across the four days compared to past loitering of DPRK ships near the Chinese coast.
One potential explanation is that the ship’s journey and possible scheduled return to the DPRK east coast was interrupted by North Korea’s work to disinfect ports amid nationwide efforts to prevent the spread of the novel coronavirus.

North Korea’s party-run daily the Rodong Sinmun reported on January 26 that the country was “tightening sanitary and quarantine inspection at border areas, ports and airports to block the disease in advance.”

It is not clear if the end-of-January journey through the strait was its first trip to North Korea after the January 12 STS transfer, though it is a possibility given apparently consistent location broadcasting since October in the high-traffic strait. The Chon Ma San may have also traveled to the DPRK east coast port of Nampho in the interim.

Edited by Oliver Hotham

Wednesday, February 12, 2020

Massive Exxon Refinery Fire Poses a New Threat to Oil Demand

BATON ROUGE - A large fireball erupted within the Exxon refinery in north Baton Rouge late Tuesday night, and as of 6:45 a.m. Wednesday the blaze was completely extinguished.

(Bloomberg) -- A fire broke out early Wednesday at Exxon Mobil Corp.’s Baton Rouge oil refinery in Louisiana, halting production at the fifth-biggest fuel-making plant in the U.S.

The outage at the massive complex -- which supplies fuels across the southeast U.S. and all the way to New York Harbor -- means the refinery needs fewer barrels of crude oil, depressing a market already reeling from the coronavirus crisis in China. But it could help ease a gasoline glut in the Gulf Coast, where stockpiles hit a record in late January.

The Baton Rouge fire is the third blaze in the Gulf Coast region for Exxon in less than a year, and comes after the company posted the worst quarterly profit in almost four years. Earnings at its refining and chemical business slumped by a combined $6.5 billion in 2019, and the oil giant is pursuing asset sales and even cracking down on employee travel to tide over the turmoil.

Heavy Canadian oil fell from a four-month high after the Baton Rouge refinery shutdown, while Gulf Coast and New York gasoline strengthened. Consumers could feel the impact of higher prices as soon as Thursday morning.

The latest blaze erupted in a natural gas line, affecting first one and then all of the facility’s crude distillation towers -- which heat and break down raw oil into products -- according to people familiar with operations. As a result, other units such as the catalytic cracker and the chemical plant had to cease operations.

The fire has been extinguished and there were no injuries, according to Exxon. Operations continue at the refinery and chemical plant, spokesman Jeremy Eikenberry said. The facility is located along the Mississippi River about 80 miles (129 kilometers) northwest of New Orleans, can process more than 500,000 barrels of crude a day and accounts for about 15% of Louisiana’s refining capacity.

The local WAFB TV station’s website showed images of the fire, and said local people reported their houses being shaken by the incident. There was no initial off-site impact to air quality, or an immediate call for an evacuation of the nearby area, WAFB said.

The complex’s chemical plant has shut, including its olefins unit -- which takes feedstocks such as naphtha, butane, propane and ethane from the oil refinery and converts them into ethylene and propylene that are used to make plastics.

Western Canadian Select crude’s discount to U.S. West Texas Intermediate widened to $16.75 a barrel on Wednesday. The Baton Rouge refinery uses heavy crude produced in the Kearl oil sands mine operated by Imperial Oil Ltd., which is majority owned by Exxon.

Gasoline in the Gulf Coast spot market rose 1.25 cent per gallon to an 8-cent discount to Nymex Rbob futures Wednesday afternoon. Futures of the motor fuel jumped the most in almost five months.
Exxon is in the process of a massive expansion of the plastic-ingredient capacity on the chemical side of the Baton Rouge complex that’s scheduled to begin output next year. The combined refining and chemical operations account for one in every 10 jobs in southwest Louisiana region, according to the company.

U.S. refineries handled an average of about 16.5 million barrels a day of crude so far this year, Energy Information Administration data show.

(Updates with background in third paragraph and market reaction in fourth.)
--With assistance from Joe Carroll, Bill Lehane and Robert Tuttle.

To contact the reporters on this story: Barbara Powell in Houston at;Jeffrey Bair in Houston at;Rachel Graham in London at
To contact the editors responsible for this story: David Marino at, Pratish Narayanan, Joe Carroll

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Tuesday, February 11, 2020

Exxon Cracking Down on Employee Travel After Profit Collapse

Eight new Mobil stations have opened in the Bajío.

(Bloomberg) -- Exxon Mobil Corp. has been scrutinizing employee-travel budgets since the largest North American oil explorer posted its worst quarterly profit in almost four years, according to people with knowledge of the matter.

Auditing teams have fanned out to some divisions to analyze travel requests involving industry conferences, according to the people, who asked not to be identified because they aren’t authorized to talk publicly. An Exxon spokesman didn’t respond to a request for comment.

The austerity measures are unusual for Irving, Texas-based Exxon, one of the few major explorers to avoid job or dividend cuts during the 2014-16 oil slump. The restrictions may also signal intensifying concern among Exxon leadership about the prospects for a recovery as China’s coronavirus outbreak slams global energy demand.

Although Exxon has thus far shielded its sacrosanct dividend from the oil-price slump, chinks began to appear in the crude giant’s armor as far back as 2016, when S&P Global Inc. revoked the company’s gold-plated credit rating for the first time since the Great Depression. Although Exxon has steadily raised annual dividends, cash flow hasn’t kept pace, forcing the company to use borrowed money and asset sales to fund the payouts.

“It’s only prudent,” said Jennifer Rowland, an analyst at Edward D. Jones & Co. in St. Louis who has a ‘hold’ rating on the shares. “Commodity margins across the board are at decade low and oil and gas prices are also down. What’s in their control is costs.”

Exxon has been punished by investors since disclosing fourth-quarter results on Jan. 31 and warning that conditions in its chemical business will remain “challenging” for the rest of this year. Since that report, the company shed about $17 billion in market value.

The company’s stock rose 1.2% to $60.67 at 11:55 a.m. in New York.

U.S. oil and gas explorers large and small are straining under the dual pressures of weak commodity prices and investor demands for richer returns. In January, Chesapeake Energy Corp. terminated a deferred-compensation plan as part of broader cost-cutting efforts, just weeks after warning it may go bust. Meanwhile, Oasis Petroleum Inc. has cut executive salaries and incentive payouts.

‘Unique Position’

Apache Corp., Halliburton Co. and Pioneer Natural Resources Co. have also made deep cost cuts as the sector’s outlook has darkened.

“Exxon is in a unique position among the majors right now in growing and spending aggressively in a counter-cyclical manner,” said Matt Murphy, an analyst at Tudor, Pickering, Holt & Co., who has a ‘hold’ rating on the stock. “In this environment, to continue to grow the dividend, it makes sense to wring out non-core costs and strip that outspend down a little bit.

Murphy estimates Exxon will outspend cash flow to the tune of $10 billion this year.
(Updates with analysts’ comments in fifth, 10th paragraphs)
--With assistance from Kevin Crowley.

To contact the reporters on this story: Lucia Kassai in Houston at;Joe Carroll in Houston at

To contact the editors responsible for this story: Simon Casey at, ;David Marino at, Joe Carroll, Carlos Caminada
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Monday, February 10, 2020

Exxon's Market Value Has Crumbled by $184 Billion

ExxonMobil used to have bragging rights as the world’s most valuable public company. Now, America’s largest oil company is in steady decline.

A stunning $184 billion has been wiped off Exxon’s market valuation since its 2014 peak. That’s equivalent to the entire value of Boeing, or nearly1.5 Teslas.

Exxon’s stock plunged to nine-year lows Tuesday after posting dreadful results that suggest a turnaround is unlikely any time soon.

The oil giant’s recent struggles are driven by a confluence of unfortunate factors — none of its major businesses are firing on all cylinders. Oil prices are in a bear market. Natural gas is dirt cheap. Margins in Exxon’s massive chemical business have crumbled. And refining is under pressure, too.

Bigger picture, Exxon’s shrinking market value is emblematic of the broader problems facing Big Oil — even as the United States has been crowned the world’s leading producer of both oil and natural gas. The shale revolution has left the world brimming with oil and gas, so much so that prices have been depressed.

“Sentiment towards oil companies is as bad as it’s been in a long, long time,” said Ben Cook, a portfolio manager at BP Capital Fund Advisors.

The energy sector of the S&P 500 was easily the biggest loser over the last decade, generating a total return of just 34%, according to Refinitiv. The next closest sector, materials, climbed five times as much in that same timeframe.

That decline also reflects the world coming to grips with the climate crisis. Energy stocks are in the penalty box because of heightened concerns about carbon emissions and the rise of socially-conscious investing.

“Fossil fuels have a PR issue,” said Cook. “As long as the market perceives them to be the culprit for carbon emissions, they will have a difficult time.”
Exxon was late to the shale boom

Exxon’s decline is stunning considering it was the world’s most valuable company as recently as 2012, the year it was dethroned by Apple.

Yet Exxon made some investment decisions that, with the benefit of hindsight, look poorly-timed. In 2009, it agreed to spend $41 billion to buy natural gas behemoth XTO Energy. That takeover backfired badly tas natural gas prices plummeted.

And Texas-based Exxon was late to capitalize on the shale oil boom that took place in its own backyard. Like other oil majors, Exxon focused instead on expensive and long-term drilling projects overseas rather than fracking in North Dakota and Texas.

Today, Exxon is valued at about $262 billion, well behind companies including Visa, Procter & Gamble and Walmart as well as the $1 trillion valuations sported by Apple, Microsoft, Alphabet and Amazon. Saudi Aramco, the crown jewel of Saudi Arabia, went public last year with a valuation of $1.7 trillion.

Not surprisingly, Exxon’s market value topped out at $446 billion in mid-2014 when oil prices were above $100 a barrel. Since then, the company has lost $184 billion, or 41%, of its value. By comparison, the S&P 500 spiked by 72% over that timeframe. And Apple’s market capitalization has nearly tripled to $1.35 trillion.

Again, Exxon is hardly the only oil company struggling these days. In 2008, when oil prices spiked above $140 a barrel, the energy sector comprised 16% of the S&P 500, according to Bespoke Investment Group. Now, energy accounts for less than 4% of the benchmark index.

Goldman Sachs: Sell Exxon stock

Yet Exxon’s recent stumbles suggest it is more out of favor than some of its peers. For instance, while Exxon stock plunged to the lowest level since August 2010, rival Chevron is merely at a 14-month low.

Morgan Stanley told clients in a note Monday that it prefers Chevron because Exxon is “most exposed” to negative headwinds in the industry, including oversupply in oil, natural gas and liquefied natural gas.

Goldman Sachs slapped a “sell” rating on Exxon this week and slashed its price target to $59 from $72.

“We do not see a compelling case to own XOM relative to other energy stocks with more attractive returns profile,” Goldman analyst Neil Mehta wrote.

Wall Street has pressured oil companies to hunker down by spending less and returning cash to shareholders. The goal is to avoid a repeat of the 2014-2016 oil crash, when prices plummeted 70%, driving dozens of oil companies into bankruptcy.

Exxon, backed by a stronger balance sheet than its peers, is taking the opposite approach. The company is spending aggressively on new projects to bolster its drilling prospects.

Early signs suggest that Exxon’s spending is paying off. Production in the Permian Basin, the prolific West Texas shale oil field, has spiked 79% since 2018. And Exxon has discovered more than 8 billion barrels of oil in Guyana– a find that led Rystad Energy to name Exxon its explorer of the year in both 2018 and 2019.

“We believe strongly that investing in the trough of this cycle has some real advantages,” Exxon CEO Darren Woods told analysts during a conference call last week. “We have a very healthy balance sheet, which was built for times like this.”

Exxon’s beloved dividend is on ‘crutches’

Yet even Exxon has limitations to how much it can spend, especially if it wants to keep paying the generous dividend that shareholders covet.

Lately, Exxon has had to rely on asset sales and borrowing to keep paying that dividend, which the company has proudly raised 37 consecutive years.

Exxon’s “deteriorating financial conditions” required it to cover 64% of its dividend in 2019 with funds from asset sales and borrowing, according to a report by the Institute for Energy Economics and Financial Analysis. That’s well above Exxon’s 10-year average of 30%.

“The one thing that keeps investors tethered to companies like ExxonMobil is its quarterly dividend checks,” IEEFA wrote in the report. “It is a dividend that requires crutches.”

Goldman Sachs warned that Exxon’s free cash flow won’t cover its dividend paments through 2025.

Some reliable dividend payers including General Electric, Kraft Heinz and beer king ABInBev have recently had to slash their dividends because of financial stress. However, analysts think Exxon’s dividend is safe, at least for now.

“It would be unthinkable for Exxon to cut its dividend,” said Pavel Molchanov, an energy analyst at Raymond James. “That would only happen in an Armageddon scenario.”

Exxon has stressed its support for the dividend. Woods said last week that the company feels “very firmly that we’ve got a commitment with our shareholders to provide a reliable and growing dividend.”

Climate crackdown

Still, Exxon faces enormous challenges because of intensifying concerns about climate change. Major cities including New York and London have vowed to dump their fossil fuel stocks.

“Exxon has a target on its back,” said Molchanov.

Exxon has not ignored this pressure. In last week’s earnings call, the company highlighted its efforts to develop new, lower emissions technologies “to help address the risk of climate change.”

“While renewables like wind and solar play an important role,” Woods told analysts, “they don’t solve the emissions challenge for every market, geography or application.”

Last month, BlackRock, the world’s largest asset manager, promised to ditch investments it considers to be a sustainability risk and double its offering of ETFs that track companies that meet environmental, social and governance (ESG) criteria.

“The market is beginning to place an ‘ESG discount’ on the cash flow stream for Big Oil companies,” Morgan Stanley analysts wrote.

Investors want to put their money behind companies they see as clean energy solutions, like Tesla — not companies viewed as part of the problem. That trend will likely broaden in coming years, posing a powerful obstacle for Exxon to navigate.