Friday, April 30, 2021

Copper price tops $10,000 a tonne for first time in ten years

Copper extends rally to $10,000 for the first time since 2011

Production of copper wire, bronze cable in reels at factory. (Stock Image) 

Copper topped $10,000 a tonne for the first time since 2011, nearing the all-time high set that year as rebounding economies stoke demand and mines struggle to keep up.

Prices rose as much as 1.3% to $10,008 a tonne on the London Metal Exchange, before slipping back to trade near unchanged. The metal hit a record $10,190 in February 2011.

Copper for delivery in May was down 0.3% midday Thursday, with futures at $4.4860 per pound ($9,8615 a tonne) on the Comex market in New York.

Analyst at CRU Group Robert Edwards believes copper has further to go:

”The copper price has gone stratospheric and probably has further to go, which is a boon for miners who are currently making at least two dollars for every one they spend getting metal out of the ground,”

Click here for an interactive chart of copper prices

The rally in copper, which has more than doubled in price from its covid-lows, has been fuelled by a widely-held belief that demand for the bellwether metal will receive a massive boost, not just from post-pandemic economic stimulus, but also from a worldwide push for decarbonisation. 

For Tai Wong, head of metals derivatives trading at BMO Capital Markets, the all-time high at $10,190 is just around the corner and now practically a “foregone conclusion,”

“This is a remarkable run for copper in terms of magnitude and consistency,”

Senior commodities strategist at ING Bank Wenyu Yao also believes the copper rally still has legs to go:

“The outlook for the US economy keeps getting better. Economic reopening coupled with massive stimulus, faster-than-expected vaccine rollouts, and supportive fundamentals all point to even higher prices,”

While almost all agree copper’s longer-term future is bright, there is much less consensus on how much the price of the metal will shine in the next few years.

A monthly poll conducted by FocusEconomics shows wide disparities in forecast prices by the investment banks, brokers, economists, and governments in the survey compiled April 13 –18.

(With files from Bloomberg)

Thursday, April 29, 2021

Oil Tanker Seized by U.S. Authorities for Illegal North Korean Trade 

The U.S. government has seized an oil tanker for involvement in ship-to-ship (STS) cargo transfers with a sanctioned vessel and other sanctions evading activity. The vessel Courageous (IMO: 8617524), owned and operated by a Singaporean citizen, stopped transmitting its AIS (Automatic Identification System) location signal between August and December 2019. During this period, the Courageous transferred oil cargo worth $1.5m to the North Korean flagged vessel Saebyol (IMO:8916293). Saebyol eventually discharged her cargo at the port of Nampo, North Korea.

In the period leading up to the STS cargo transfer, the movement activity of the Courageous placed it at the port of Kaohsiung throughout 2019. She idled in the anchorage of the Taiwanese port for considerable periods of time both before and after the STS with the Saebyol. After her prolonged period of not transmitting an AIS signal, the Courageous reemerged back on the radar in February 2020 at Kaohsiung and departed for Cambodia. On reaching the port of Kompong Som, in Cambodia in March, the vessel was held by Cambodian authorities and subsequently seized by the U.S.

As part of the STS operation with the Saebyol, the Courageous was also noted to have falsely identified itself as another vessel. She has previously operated under the name Sea Prima with the flag of St Kitts and Nevis.

The pattern of activity by the Courageous closely resembles that of another vessel, the Wise Honest, seized by the U.S. in 2019. The two vessels have a similar movement pattern used to evade sanctions ranging from AIS dark outages, STS cargo transfers and falsifying cargo documentation with which to transmit payments through the U.S. financial system. This latest seizure of the Courageous underlines the key sanctions evasion techniques highlighted in the Office of Foreign Assets Control (OFAC) advisory of May 2020 on 'Guidance to Address Illicit Shipping and Sanctions Evasion Practices'. The United Nations Security Council has also imposed economic sanctions on North Korea, prohibiting among other things the conduct of ship-to-ship transfers with DPRK-flagged vessels and the provision of petroleum products to North Korea.

Within the OFAC advisory a series of deceptive shipping practices were highlighted as operational recommendations for sanctions compliance teams to be aware of and to incorporate into their daily maritime screening processes. There is a strong correlation between OFAC's general practices for identifying shipping risk and the evasion of sanctions by the Courageous.

The core OFAC recommendations are:

  • Disabling or Manipulating a Ship's AIS Signal: The Courageous had minimal coverage under AIS, when its AIS was transmitting there was very little port call history, suggesting a vessel not fully engaged in normal shipping practices
  • Flag Hopping and Flag Changes: In 2019-2020, the Courageous changed flags on three separate occasions, flags of convenience were used in all cases
  • Vessel Name Changes: Between 2016 and 2019 a series of name changes to the vessel also occurred - Blue Sea, Sea Prima and finally Courageous
  • Age of the Ship: Older vessels have been identified as being more likely to be engaged with illegal maritime activity. The Courageous was built in 1987
  • Ownership and Management: Four different corporate entity changes occurred within the ownership structure of the Courageous between 2017-2020

Additionally, the vessel had no port state control inspection since 2004 and had been 'disclassed' by the Nippon Kaiji Kyokai ship classification society in 2011. While flags of convenience, vessel name or ownership changes do not always constitute red flags, when taken as a whole with a pattern of AIS outages, no hull inspection activity and prolonged periods of idling, the risk level increases for that ship.

For trade compliance teams to protect themselves, they must ensure they include in their toolbox the key lessons from the seizure of the Courageous and understand the types of activity such vessels engage in order to avoid transactional risk.

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Posted 27 April 2021 by Byron McKinney, Director - Product Management, Maritime & Trade, IHS Markit

Wednesday, April 28, 2021

Iron ore price surges to record high

Chinese steel futures also closed at all-time highs, underpinned by robust demand and concerns over production curbs. (Stock Image) 

Iron ore prices jumped to a fresh high on Monday on robust Chinese demand.

Iron ore futures on the Dalian Commodity Exchange, for September delivery, closed 4.3% higher at 1,145 yuan. The contract jumped 6.3% earlier.

According to Fastmarkets MB, Benchmark 62% Fe fines imported into Northern China (CFR Qingdao) were changing hands for $193.58 a tonne on Tuesday, up 3.93% from Friday trade.

The high-grade Brazilian index (65% Fe fines) also advanced to a record high of $226.90 a tonne.

“Iron ore prices are mainly supported by structural contradiction of supplies, there’s shortage in medium and high-grade products,” Zhuo Guiqiu, analyst with Jinrui Capital, told Reuters.

Even the low-grade Super Special Fines with 56.7% iron content is at over 1,200 yuan a tonne, which is more expensive than the most-traded futures contract, Zhuo added.

Chinese steel futures also closed at all-time highs, underpinned by robust demand and concerns over production curbs.

The northwest Shaanxi province recently urged local departments, as requested by China’s state planner and other authorities, to verify local steelmakers’ crude steel output in 2020 and explain those whose production exceeded designated capacity or didn’t meet it.

Another major steelmaking city Handan in the Hebei province recently issued a notice, asking mills to implement production-control measures in the second quarter.

Copper jumped to a 10-year high as commodities advance toward the highs of the last supercycle

The measures have sparked concerns of more curbs in the ferrous sector, lifting prices as demand is still strong during the peak season.

The most-active construction rebar on the Shanghai Futures Exchange, for October delivery, rose as much as 4.3% to 5,475 yuan ($843.63) a tonne. It closed up 2.3% at 5,371 yuan.

Top iron ore producers Rio Tinto, BHP, and Vale released disappointing output figures last week. And a weaker dollar is making commodities traded in the currency cheaper to buy.

Aluminum is surging and copper jumped to a 10-year high as commodities advance toward the highs of the last supercycle. Metals are benefiting as the world’s largest economies announce stimulus programs and climate pledges as they rebuild from the coronavirus shock.

“Biden’s new climate promises and at least lip service by China to greener domestic policies are keeping the demand picture rosy,” Tai Wong, head of metals derivatives trading at BMO Capital Markets told Bloomberg.

(With files from Bloomberg and Reuters)

Tuesday, April 27, 2021

Planned Refinery Outages Unlikely to Affect U.S. Transportation Fuel Supplies


Source: U.S. Energy Information Administration

Note: As of January 1, 2014, there were 133 operating refineries with atmospheric crude oil distillation units (ACDU) totaling capacity of 18.9 million barrels per stream day. Heavy capacity denotes refineries with coking capacity; light capacity denotes refineries without coking capacity.

According to EIA analysis, planned refinery outages during the second quarter of 2021 are unlikely to cause a significant shortfall in the supply of petroleum products in the United States, particularly in transportation fuels including gasoline, jet fuel, and distillate fuel.

Despite the severe winter storm in mid-February and related unplanned outages in the Midwest and Gulf Coast regions, adequate inventory levels and lower-than-average demand will enable refineries to meet supply requirements despite planned outages for maintenance in the second quarter of 2021.

To avoid supply disruption, refiners usually schedule planned outages for maintenance in late fall or late winter, when U.S. demand for petroleum products is relatively low and petroleum product inventories or imports could cover the temporarily reduced supply. Our analysis considers planned outages as reported by Industrial Info Resources (IIR).

Planned outages in the Gulf Coast region for the second quarter of 2021 are less than 5% of the region’s capacity. A refinery’s capacity refers to the maximum amount of crude oil designed to flow into the distillation unit of a refinery, also known as the atmospheric crude oil distillation unit (ACDU). The region’s total petroleum product inventory is currently higher than the previous 10-year (2011–2020) average and will likely be sufficient to offset the lost production from planned outages.

The Gulf Coast region contains more than half of U.S. refining capacity, and as a result, the region produces far more petroleum products than it consumes. The region’s surplus production supplies other U.S. regions, notably the East Coast and the Midwest, as well as international markets.

Although inventories are lower than average and planned outages for maintenance are higher than average, we do not expect inadequate supplies of gasoline, distillate, or jet fuel during the second quarter of 2021 in the Midwest, absent an unanticipated event that limits petroleum supply operations.

Planned outages in the Midwest for the second quarter of 2021 are near or higher than the 10-year average. Regional petroleum product inventories are also lower than average. The Midwest accounts for 22% of the nation’s refining capacity and 29% of total U.S. demand for petroleum products. As a result, Midwest refineries produce most of the gasoline and distillate fuel consumed in the region, but the region also receives supplies from the Gulf Coast.

Monday, April 26, 2021

Record copper scrap flows this year won’t plug deficit

 Record copper scrap flows this year won't plug deficit

Copper scrap prepared for recycling at copper smelter. Adobe Stock. 

Supplies of copper scrap will jump this year due to decade high prices but are unlikely to come fast enough to meet robust demand, leaving shortages that are expected to trigger stock draws and further price gains.

Copper prices around $9,400 a tonne are close to $9,617 hit in February, the highest since August 2011 and more than double the levels seen in March last year, when manufacturing activity crashed due to covid lockdowns.

Scrap typically accounts for about a third of global copper supplies at around 30 million tonnes, but quantities tend to vary according to prices.

“Scrap supplies are unlikely to rise as quickly as the market needs, given logistical constraints and an 8-month lag between price strength and copper scrap coming to market for processing,” said Citi analyst Max Layton.

“The market needs about 10.8 million tonnes of scrap this year compared with 9.3 million tonnes in 2019. Expect major refined metal inventory draws over the next 6 months.”

Citi expects global demand for the metal used widely in power and construction to grow 6.5% this year to 24.75 million tonnes, and sees a deficit of 521,000 tonnes.

Copper stocks held by producers, consumers and China’s state stockpiler are significant, but difficult to monitor.

For clues to draws, the market will watch stocks in London Metal Exchange-registered warehouses and those monitored by the Shanghai Futures Exchange, which currently total more than 360,000 tonnes.

Stocks are expected to start falling as soon as May, when demand accelerates ahead of a pick-up in construction activity over the summer months, which is when prices are likely to start ramping up.

Mine supply too is expected to rise this year, but also not at a fast enough pace to help make up the shortfall.

“Neither mine or scrap supply increases will be sufficient to push the refined copper market into a surplus,” said Bank of America analyst Michael Widmer.

Widmer expects scrap supply to hit records this year due to high prices and acceleration of manufacturing activity, and forecasts a copper market deficit at 315,000 tonnes.

(By Pratima Desai; Editing by Jan Harvey)

Friday, April 23, 2021

AET recognised with SRS Ship Owner of the Year at the Singapore International Maritime Awards (IMA)

AET Tankers Global Maritime Energy Logistics Company

AET is delighted to announce that it has won the SRS (“Singapore Registry of Ships”) Ship Owner of the Year Award presented at the Singapore International Maritime Awards (IMA) ceremony held on Monday, 19 April 2021 as part of the Singapore Maritime Week.

The SRS Award recognises an outstanding owner of quality Singapore registered ships and takes account of fleet size, growth, operational excellence, sustainable contribution to human capital development both ashore and at sea. This year, special emphasis was placed on the owner who has been able to demonstrate resilience by adapting its business activities and operations even amidst the global pandemic challenges.

The IMA ceremony was held as one of the key anchor events of the Singapore Maritime Week (19 - 24 April 2021) organised by the Maritime and Port Authority of Singapore (MPA). The biennial Singapore IMA seeks to recognise individuals and companies for their contributions to Singapore's development as a premier global port hub and an international maritime centre.

Receiving the Award on behalf of AET, President & CEO, Capt Rajalingam Subramaniam said:

“Being named SRS Ship Owner of the Year for the first time is a great recognition for AET and the entire MISC Group. I would like to thank the MPA for its steadfast support to the maritime community and their distinguished panel of judges for recognising AET and the work that we do as a team. This Award reflects on our commitment and contributions to the entire maritime ecosystem as a global company with Asian roots and as a leading player of responsible and sustainable shipping. I am honoured to accept this Award on behalf of all my colleagues at AET and the MISC Group, at sea and ashore, and I thank them for their hard work and dedication particularly during these challenging times. I would also like to express our appreciation to all stakeholders of AET for their continued support as always.”

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.