VLCC spike to end?

http://www.tankeroperator.com/news/todisplaynews.asp?NewsID=3446

The VLCC rate rise seen since the start of March could soon come to an end, a leading consultancy has warned.

VLCC rates and TCE revenues have been elevated to levels that owners perhaps thought had been consigned to history.

In the market of elevated bunker prices, oversupply of tankers and declining Iranian export volumes, the steady increase seemed to have caught some market participants by surprise, McQuilling Services said in its latest report.

Although there are factors that should provide a floor to rates, some circumstances that have been supporting rates are likely to gradually vanish in the coming weeks.

For example, in the Middle East, the inauguration of the single point mooring (SPM) facility at Iraq’s southern port of Basra recently experienced several technical issues. This resulted in some 20 vessels waiting to load cargoes, for as long as 25 days.

However, reports have indicated that these issues have now been resolved, resulting in the dissipation of the backlog, as the vessels re-enter the spot market.

Further support for liftings out of Iraq is augmented by recently published data from Iraq’s State Oil Marketing Organisation. Data from March showed that exports hit 2.32 mill barrels per day, the highest level seen since 2003.

However, optimism could be tempered from early April reports of a pipeline explosion in Northern Iraq that carries 500,000 barrels per day of crude to Ceyhan, Turkey, slashing export volumes. This will have a greater impact on the Aframax market while highlighting the potential for instability in that country.

Other loading delays in the Middle East stemmed from drier than usual conditions combined with windstorms. Reports have also surfaced that a lack of ullage is prohibiting some tankers with cargoes of Arab Heavy from discharging in the US Gulf.

These short-term effects have supported the market but should now gradually disappear, McQuilling said.

The widespread adoption of slow steaming is also reducing available vessel capacity. Previously, this method of cost savings was not employed by all owners and some charterers kept the speed requirements in charter parties at the same level as in previous years.

However, the steady rise of bunker prices and tight market conditions means that charterers may be required to pay a premium for any optional speed increases.

The slower speeds prevalent in today’s market results in an additional supply capacity, which can be quickly reactivated by raising sailing speeds. If the high freight rates persist this situation could materialise, McQuilling warned.
The tightening sanctions against Iran have resulted in ships being sent further afield for loadings, especially for discharge in India and China. These loading areas are primarily in the Americas, Caribbean and West Africa.

During the first three months of 2012, loadings from these regions have increased almost 10%, according to McQuilling’s proprietary data. Western sanctions have also removed almost all of the 25 VLCCs operated by NITC.

Some 300,000 barrels per day of Iranian crude oil exports is being taken out of the market and the vessels are believed to be currently employed for floating storage.

In response to security of supply issues, the importance of maintaining strategic petroleum reserves (SPR) is of utmost importance to governments - China included.
The EIA has forecast that China has some 79 mill barrels of SPR to fill in 2012, which is equivalent to about 220,000 barrels per day, or one VLCC every nine days.
The decision to purchase barrels for SPR is influenced by several factors, but one can reasonably assume some vessel capacity is being absorbed, McQuilling said.

Tanker pools and owners of large fleets are also having a significant effect on rising rates. This category includes seven tanker owners and fleet pools that control about 180 vessels.

After dismal 2011 earnings, these operators are closely monitoring returns and not simply accepting rates that cover operating expenses. In an effort to push rates higher these owners are allocating their assets to counterparties that pay a premium.

Looking ahead, if Iran resists the pressure to dissolve their nuclear programme, further disruptions to oil supplies will occur. This sourcing of new supplies should benefit tanker owners, as vessels will be employed on longer haul routes.
Rates out of the AG could experience a boost, as some vessels would likely ballast out of the region.

However, the delivery schedule from previous years’ orderbooks hangs over these positive developments like a dark cloud, the consultancy warned.

Through the end of March, 11 VLCCs were delivered from shipyards, which compared to McQuilling’s year-to-date expectation of 16, had limited the pressure on the market and helped boost rates.

However, with the possibility of 62 VLCCs entering the market this year, there is still plenty of concern regarding vessel supply.

Owners of older tankers (1993-1997) will continue to feel the pressure of terminal and charter requirements, which could raise the exit profile.

"Based on these factors, we do not forecast a massive improvement in rates in the coming weeks and believe the market cycle has yet to make an upward turn," McQuilling concluded.

Porter plans Canada's first commercial biofuel flight

http://thefuelhandler.com/index.php?option=com_content&view=article&id=67&Itemid=60&item_id=4810

Canadian air carrier Porter Airlines is due to fly a commercial, biofuel-powered aircraft later this month, making it the nation's first carrier to do this.
The flight comes after Porter's biofuel test flight, which took place in February earlier this year.

Porter will operate one of its Bombardier Q400 turboprop airliners on a 50/50 blend of biojet and conventional fossil aviation fuel.

According to the airline, these aircraft already offer reduced emission output compared to other craft. They consume 40% less fuel and produce up to 40% fewer emissions than the older aircraft previously used by Porter.

The biofuel portion of the jet fuel was produced from two varieties of oilseed – Camelia sativa and Brassica carinata.

During Porter's trial flight the aircraft performed a series of manoeuvres to test engine performance. The results showed that the biofuel mix had no negative impact on aircraft performance, as it successfully completed engine-out climbs, rapid engine accelerations and cruising.

Porter's commercial flight will take place around the same time as Earth Day to highlight the importance of biofuels towards helping the aviation industry meet the CO2 targets imposed by the International Air Transport Association.

Gold Becomes Pricier Than Platinum, That's Rare And Scary

http://www.forbes.com/sites/greatspeculations/2012/04/12/gold-becomes-pricier-than-platinum-thats-rare-and-scary/

Adrian Ash, Contributor

It’s more than “interesting” that platinum prices are lagging gold. Gold has risen nicely since the meltdown following Lehman’s collapse, with the gold price in dollars rising 130%. Until last summer, however, platinum had done better still.

Indeed, a trader “could have made a lot of money buying platinum and selling gold since Lehman Brothers,” as Philip Klapwijk, executive chairman of GFMS said Wednesday, taking analyst questions after launching the precious-metals consultancy’s new Gold Survey 2012 at Thomson Reuters‘ HQ in London.

Over the 34 months to August 2011, the white metal rose 150%, recovering faster at first even than the gold price. But it needed to, however, after it dropped two-thirds of its dollar price between March and December 2008.

Since last summer, platinum has slipped faster than gold. More notably, it’s slipped below the gold price itself, something seen for only three trading days in December 2008 in the immediate aftermath of Lehman’s bankruptcy. Before that, you have to go back to the recession of 1991…the peak of the “strong dollar” disinflation of 1984…the global stock market’s once-in-a-generation low of 1982…and gold’s big tops of Jan. 1980 and Dec. 1974 to find platinum trading cheaper than the gold price.

Gold’s latest incursion above the platinum price is “interesting,” said GFMS’s Klapwijk on Wednesday. But scary might be closer to it. Running for 145 of the last 172 trading days, it’s getting to be something of a habit, too.

“There’s a case to be made for the white metal being priced at a premium to gold,” as Klapwijk said. The two metals’ scarcity in the earth’s crust is about the same, but platinum deposits tend to be more diffuse, making extraction more costly. On the demand side, it is clearly more “useful” than gold too, with one third of annual output going to industry and another third going to make auto-catalysts according to platinum experts Johnson Matthey. Fully 85% of global gold demand, in contrast, is for store-of-value or adornment. And there’s the rub.

The vast majority of investors will always prefer gold over platinum, as Klapwijk noted this week, because its store-of-value use is so very much greater than platinum’s. You could ascribe that to 50 centuries of habit, gold being “the universal prize in all countries, all cultures and in all ages,” as physicist and polymath Jacob Bronowski put it in his Ascent of Man.

Today that history is supported by the second, stronger point which Klapwijk made Wednesday: gold’s relative lack of industrial use. That makes it a far better defense against the kind of economic turmoil suffered since our financial crisis broke in mid-2007 (platinum up 24%, the gold price up 153%), as well as the economic crises of the mid-1970s and early ’80s.

Over the last 9 months in particular, Europe’s economic crisis has affected its vehicle demand, GFMS points out. That means lower demand for diesel engines and thus platinum-based catalysts worldwide. Gold may have suffered similarly lower demand amongst Western jewelry consumers, but Eurozone investors have stepped in to pick up that slack. And their counterparts in Asia are buying gold with both hands, according to GFMS’s new Gold Survey 2012, along with pretty much anyone else who cares to look.

WAfrica Crude-Qua Iboe stable, but cargoes unsold

http://www.reuters.com/article/2012/04/11/markets-oil-westafrica-idUSL6E8FB4XT20120411

* Nigerian Qua Iboe steady at dated plus $2.30-$2.50
* Pertamina buys Girassol via tender

LONDON, April 11 (Reuters) - West African crude oil
differentials for the benchmark grade were steady on Wednesday,
but traders said they could succumb to further pressure given
the number of unsold May cargoes.
Traders said that two cargoes of the light sweet Qua Iboe
grade were unplaced for May, out of a total of around 20
Nigerian cargoes remaining.
"All grades are under pressure, specifically in Nigeria,"
said a West African crude oil trader.
The trading arm of Indonesian state-owned refiner Pertamina,
bought Libyan Amna crude for the first time in a tender, trade
sources said, further cutting demand for West African grades.

NIGERIA
* Qua Iboe: Traders said that two Qua Iboe cargoes were
unsold for May, including tankers for loading May 8-9 and 19-20.
Traders said it was highly unusual for tankers from the first 10
days of May to remain at this stage in the month.
* The grade was assessed between dated plus $2.20 and dated
plus $2.50 a barrel.
* Amenam: Two tankers held by Glencore and Trafigura were
unsold. Total is expected to use its May 29-30 Amenam cargo for
its own refineries.
* Bonny: Shell sold its May 25-26 cargo to a Mediterranean
buyer, traders said. Rising Asian demand for Libyan cargoes may
be boosting Mediterranean demand for West African crudes,
traders said.

ANGOLA
* Nemba: Galp sold its May 9-10 cargo to CPC, traders said.
The trading level was unclear, but traders estimated the grade
to be around dated minus 50 cents.
* Plutonio: Unipec has bought a tanker from BP for loading
May 23-24, traders said.

TENDERS
* Petral bought a tanker of Girassol from Repsol for June
delivery via a tender, sources said.
* India's state-run Bharat Petroleum Corp issued a tender to
buy sweet crude for lifting in the first half of June, a tender
document showed on Tuesday. Part I of the tender closes on
Friday and part II on Monday. It will be awarded on April 17. In
a previous tender for May, BPCL bought Akpo from Glencore.

* India's IOC also issued a tender for light, sweet crude
for loading in the second half of May or early June, a tender
document showed. Offers for the two-part tender are valid until
April 12. "IOC could take two VLCCs," said one trader. "That is
what I would expect, and they'll probably be Nigerian barrels."

DATABASE
For a database of oil supply and demand fundamentals
upstream and downstream, Reuters subscribers can click on:
here

(Reporting by Emma Farge, editing by Jane Baird)

Vessels compete for space at Ghana’s oil-city port

http://www.ghanabusinessnews.com/2012/04/11/vessels-compete-for-space-at-ghanas-oil-city-port/

Inadequate facilities and undue delays at the Takoradi Port have compelled oil service providers supporting operations on the Jubilee Field to redirect their vessels to neighbouring countries.

Currently, supply vessels at the port are still competing with cargo vessels for space.

This is notwithstanding additional space provided by the Home Port of the Western Naval Command to take care of the increasing number of vessels.

Industry players who spoke to graphic.com.gh said the delays encountered before they entered the port to take supplies cost them as much as $30,000.

Container traffic at the Takoradi Port over the past three years continues to increase, without a corresponding increase in the facilities at the port.
Records indicate that container traffic at the port increased from 47,828 in 2009 to 53,041 in 2010 and 56,595 in 2011.

In the case of vessels, traffic at the port increased from 956 in 2009 to 1,798 in 2011.

The Takoradi Port currently has six berth spaces. One of them has been dedicated to vessels for the export of manganese and another has been leased to the lead operators among the Jubilee partners.

At the moment, the anchorage of the port, which used to be very free, is inundated with supply vessels and other vessels trying to enter the port.

The deepest part of the port has been allocated for the discharge of bulk cargo and, therefore, other vessels have to wait at the anchorage at a great cost to shippers.
The country, according to some of the agents of vessels, could lose huge businesses and revenue to neighbouring countries unless immediate steps were taken to expand the facilities.

Some of the agents said the port had reached its limit and that expansion work had to start immediately.

When contacted, the Director of the Takoradi Port, Mr Gordon Anim, acknowledged the problem, saying the current berth space at the port could not contain the flow of traffic.

The port authority, he said, had realised that since the oil find, supply vessels that called at the Takoradi Port had increased without a corresponding increase in the berth space for them.

Mr Anim said to save the situation, the port was doing everything possible to ensure that the supply vessels were given more attention to ensure quick turnaround time to support the offshore operations.

Asked what would be the permanent solution to the problem, Mr Anim said the best would be to expand the port, a solution which had been part of the authority’s agenda.

He said the port was very much aware of the need for not only more berth space but also deeper berth place to contain the flow of traffic.

When contacted, the Western Regional Manager of the Ghana Shippers’ Authority (GSA), Ms Monica Josiah, acknowledged that the port was busy and its shippers had some challenges.

She said the important thing to look at immediately was to ensure that services at the port did not delay in order not to add up to the congestion.

Ms Josiah advised members of the GSA to ensure that their documentation was up-to-date to reduce long delays of their vessels at the port.
Source: Daily Graphic

OIL FUTURES: Crude Down On China Economy Worries, Iran Talks Hopes

http://online.wsj.com/article/BT-CO-20120410-703954.html

--Worries over slowdown in Chinese economy pressure crude prices
--Iran nuclear talks resumption also pushes oil futures lower
--Analysts expect US crude inventories to have risen last week

By Konstantin Rozhnov
Of DOW JONES NEWSWIRES

LONDON (Dow Jones)--Oil prices fell Tuesday on disappointing Chinese trade data, hopes that tensions over Iran's disputed nuclear program will ease as the Islamic Republic resumes talks, and in anticipation of another increase in U.S. crude inventories.

At 0954 GMT, the front-month May Brent contract on London's ICE futures exchange was 87 cents, or 0.7%, lower at $121.80 a barrel. The front-month May contract on the New York Mercantile Exchange was trading down 55 cents, or 0.5%, at $101.91 per barrel.
China, the world's second-largest oil consumer, reported a wider-than-expected March trade surplus, sparking fears of a slowdown in the economy, which could result in lower demand for oil.
"With Chinese GDP data due out later this week, there are concerns that China is in for a 'hard landing' which could potentially harm global growth and shift the focus on Asia," London Capital Group said in a note.

At the same time, strong Chinese crude oil imports suggest Brent and Nymex crude futures are unlikely to fall below the $120 a barrel mark and the $100 a barrel mark respectively, Commerzbank said.

"China raised prices at the pump for gasoline and diesel in March, improving profitability for the refineries and thus pointing to continued high levels of crude oil imports to the country," the bank said in a note.

Meanwhile, the resumption of nuclear talks between Iran, a leading oil producer, and the five permanent members of the U.N. Security Council plus Germany, pressures oil prices.

The talks could lead to an oil embargo against Iran being loosened, said Torbjorn Kjus, oil market analyst at DnB NOR

"Traders look to be unwinding earlier supply tightening trades," said London Capital Group.

Weak U.S. payrolls data released last Friday also continue to pressure crude prices, as the numbers weren't priced in due to a holiday in the U.K., said Kjus.

The U.S. is the world's largest oil consumer, and an economic slowdown in the country--as well as in China--could significantly cut global demand for oil.

Later Tuesday, market participants will focus on a U.S. crude inventories survey by the American Petroleum Institute, an industry body. The data are due 2030 GMT.

Six analysts surveyed by Dow Jones Newswires expect the inventories to have risen by 1.7 million barrels in the week ended April 6.

At 0954 GMT, the ICE's gasoil contract for April delivery was up $5.75, or 0.6%, at $999.00 per metric ton, while Nymex gasoline for May delivery was 100 points, or 0.3%, lower at $3.2867 per gallon.

-By Konstantin Rozhnov, Dow Jones Newswires; +44 207 842 9956; konstantin.rozhnov@dowjones.com

Natural gas glut means drilling boom must slow

http://news.yahoo.com/natural-gas-glut-means-drilling-120019501.html

NEW YORK (AP) -- The U.S. natural gas market is bursting at the seams.
So much natural gas is being produced that soon there may be nowhere left to put the country's swelling surplus. After years of explosive growth, natural gas producers are retrenching.

The underground salt caverns, depleted oil fields and aquifers that store natural gas are rapidly filling up after a balmy winter depressed demand for home heating.

The glut has benefited businesses and homeowners that use natural gas. But with natural gas prices at a 10-year low — and falling — companies that produce the fuel are becoming victims of their drilling successes. Their stock prices are falling in anticipation of declining profits and scaled-back growth plans.

Some of the nation's biggest natural gas producers, including Chesapeake Energy, ConocoPhillips and Encana Corp., have announced plans to slow down.

"They've gotten way ahead of themselves, and winter got way ahead of them too," says Jen Snyder, head of North American gas for the research firm Wood Mackenzie. "There hasn't been enough demand to use up all the supply being pushed into the market."

So far, efforts to limit production have barely made a dent. Unless the pace of production declines sharply or demand picks up significantly this summer, analysts say the nation's storage facilities could reach their limits by fall.

That would cause the price of natural gas, which has been halved over the past year, to nosedive. Citigroup commodities analyst Anthony Yuen says the price of natural gas — now $2.08 per 1,000 cubic feet — could briefly fall below $1.

"There would be no floor," he says.

Since October, the number of drilling rigs exploring for natural gas has fallen by 30 percent to 658, according to the energy services company Baker Hughes. Some of the sharpest drop-offs have been in the Haynesville Shale in Northwestern Louisiana and East Texas and the Fayetteville Shale in Central Arkansas. But natural gas production is still growing, the result of a five-year drilling boom that has peppered the country with wells.

The workers and rigs aren't just being sent home. They are instead being put to work drilling for oil, whose price has averaged more than $100 a barrel for months. The oil rig count in the U.S is at a 25-year high. This activity is adding to the natural gas glut because natural gas is almost always a byproduct of oil drilling.

Analysts say that before long companies could have to start slowing the gas flow from existing wells or even take the rare and expensive step of capping off some wells completely.
"Something is going to have to give," says Maria Sanchez, manager of energy analysis at Bentek Energy, a research firm.

U.S. natural gas production has boomed in recent years as a result of new drilling techniques that allow companies to unlock fuel trapped in shale formations. Last year, the U.S. produced an average of 63 billion cubic feet of natural gas per day, a 24 percent increase from 2006. But over that period consumption has grown half as fast.

The nation's storage facilities could easily handle this extra supply until recently because cold winters pushed up demand for heating and hot summers led to higher demand for air conditioning. Just over half the nation's homes are heated with natural gas, and one-quarter of its electricity is produced by gas-fired power plants.

But this past winter was the fourth warmest in the last 117 years, according to the National Oceanic and Atmospheric Administration. It was the warmest March since 1950.

Between November and March, daily natural gas demand fell 5 percent, on average, from a year earlier, according to Bentek Energy. Yet production grew 8 percent over the same period.

"We haven't ever seen a situation like this before," says Chris McGill, Vice President for Policy Analysis at the American Gas Association, an industry group.

At the end of winter, there is usually about 1.5 trillion cubic feet of gas in storage. Today there is 2.5 trillion cubic feet because utilities withdrew far less than usual this past winter.

There is 4.4 trillion cubic feet of natural gas storage capacity in the U.S. If full, that would be enough fuel to supply the country for about 2 months.

If current production and consumption trends were to continue, Bentek estimates that storage facilities would be full on October 10.

Storage capacity, which has grown by 15 percent over the past decade, cannot be built fast enough to address the rapidly expanding glut. And analysts note there is little financial incentive to build more anyway.

The low price brought on by the glut has increased demand for natural gas among industrial users and utilities.

Makers of chemicals, plastics and fertilizers that use natural gas as a feedstock are expanding. Garbage trucks, buses and delivery vehicles are using more natural gas. Electric power producers are switching from coal to natural gas whenever possible.

This won't add up to enough new demand quickly enough to relieve the pressure on storage facilities this summer.

Scorching temperatures this summer would do the trick, but Mother Nature is not expected to cooperate.

Temperatures this summer are forecast to be about normal, and much cooler than the last two summers, says David Streit, a meteorologist at Commodity Weather Group expects.

Sultry winters, he said, do not usually develop into sultry summers.

Jonathan Fahey can be reached at http://twitter.com/JonathanFahey .