Nigerian crude oil values plummeting on limited buying interest

 

http://www.platts.com/latest-news/oil/london/nigerian-crude-oil-values-plummeting-on-limited-26275799

The Nigerian crude oil market remains under pressure -- many grades have lost around $1/b in value since the start of October -- as an abundance of sweet crude and high freight rates have failed to excite interest from refinery buyers.

With traders also saying Nigerian grades account for the bulk of the estimated 65 million barrels or so still unsold from November and December West African crude programs, flagship Qua Iboe hit a 10-month low Wednesday with smaller grade Escravos at a 6-1/2 year trough, Platts data showed.

"There is a big overhang, with such cheap Urals and Azeri [Light in Europe] for instance, European refineries can take closer grades and that is clearly affecting WAF grades," one European refinery trader said.

Qua Iboe was assessed Wednesday at Dated Brent plus $0.20/b, the lowest since January 13 and down from Dated Brent plus $1.25/b at the start of October. Escravos at Dated Brent minus $0.15/b, its lowest value since April 17, 2009, when it was assessed at Dated Brent minus $0.175/b.

Bonny Light and Forcados, also premium Nigerian grades, are down $1.00/b and 90 cents/b, respectively, since the beginning of October, with the latter at Dated Brent plus $0.20/b -- the lowest since mid-July.

Bonga -- which has dropped 90 cents/b since the beginning of October to Dated Brent plus $0.10/b -- was offered by Vitol both Tuesday and Wednesday in the Platts Market on Close assessment process, without attracting interest even as an offer for an early December cargo dropped to Dated Brent minus $0.15/b Wednesday.

Other Platts-assessed Nigerian grades -- Agbami, Akpo, Brass River, Erha and Usan -- have also weakened. Naphtha-rich grades Agbami and Akpo are now both a $1/b discount to Dated Brent.

COMPETITORS

The loss of value can be attributed to a number of factors -- pressure from high freight rates, competing Mediterranean and North Sea grades and general weakness in refinery margins, which have improved over the past week but not enough to counteract the glut of sweet crude.

Additionally in Europe, Urals' values are at their lowest levels in more than a year, providing better margins than sweets and, as a result, a number of European refineries have switched slates to heavier, sourer grades.

India, which normally takes numerous Nigerian cargoes every month, has been taking some additional December-loading cargoes for its January tenders, said traders, but the amount will not be enough to clear the overhang.

"It is quite a difficult time to be a seller," a crude trader said.

INDIRECT US ARBITRAGE

Arbitrage to the US is always being considered, traders said, though Europe will likely be the final destination.

"The US will resist buying Dec because of [year-end] inventory closing...[so] the arb to US is not open, but it works indirectly because the US can siphon off some Azeri and Urals and when that does not remain cheap, as it is currently, WAF can price in [to Europe]," one crude trader said.

--Gillian Carr, gillian.carr@platts.com
--Edited by Dan Lalor, daniel.lalor@platts.com

China gets back to buying West African crude in November

A worker walks past oil pipes at a refinery in Wuhan, Hubei province as China loadings of West African crude are seen bouncing back in November. Photo: Reuters

http://www.scmp.com/business/commodities/article/1874654/china-gets-back-buying-west-african-crude-november

China’s loadings of West African crude oil were set to bounce back in November from a multi-year low hit the previous month, a Reuters survey of oil traders and shipping fixtures showed, due to more

importing companies there and higher refinery margins.

The boost helped press overall exports to Asia to 1.74 million bpd, a three-month high. But they remained anaemic compared with earlier in the year. In April, a spike in buying in India pressed West African bookings to Asia to 2.4 million bpd.

China, a major buyer of West African crude oil, went cold as a buyer in October amid plummeting Asian refining margins and a build up in stored oil.

Buyers in Europe and the US stepped in, with the latter taking more than two dozen West African cargoes for October loading.

But a bounce back in Asian refinery margins, as well as a new slate of domestic Chinese refineries allowed to import oil, helped to boost demand for November-loading oil.

“The US and Europe carried the candle in October,” one trader said of West Africa loadings. “But now China is back and showing interest.”

Traders said there would be more Chinese storage space free by the time the cargoes booked now would arrive, in contrast to the 4 million barrels that were stranded off an eastern port earlier this month.

Additionally, China also more than doubled, to 87.6 million tonnes, the 2016 crude oil import quota for non-state companies.

Despite this, the 918,000 barrels per day (bpd) booked to load in West Africa in November for the world’s largest energy consumer was still relatively subdued compared with earlier in the year, and stood below the 2015 running average of 965,000 bpd.

The slip in November bookings to India added to a backlog of nearly 15 million barrels of unsold Nigerian oil.

Angolan oil, which is favoured by buyers in China, has fared somewhat better, but prices for some grades, such as Pazflor, are still under serious pressure.

Rising US Inventories Drive Crude Oil Prices Sharply Lower

http://www.wsj.com/articles/rising-us-inventories-drive-crude-oil-prices-sharply-lower-1447294575 

Crude oil prices fell sharply overnight as rising U.S. inventories continue to be a major theme driving this market, says ANZ in its morning note. “API [American Petroleum Institute] data suggest U.S. crude oil inventories rose 6.3 million barrels last week.” The note adds Iraq has loaded around 10 tankers in recent weeks to deliver crude to U.S. ports in November, which is also increasing pressure on U.S. shale producers. However, prices have bounced off lows in early trading with Nymex prices now up 27 cents at $43.20/barrel, Brent prices are up 27 cents $46.08/barrel. 

Write to Lucy Craymer at Lucy.Craymer@wsj.com

Strain of low oil prices apparent even at plush Gulf meeting

http://finance.yahoo.com/news/uae-energy-minister-oil-prices-081153060.html

ABU DHABI, United Arab Emirates (AP) -- On stage only a short time after the United Arab Emirates said it would increase its oil production despite low worldwide prices, the oil and gas minister of neighboring Oman didn't pull any punches.

"This is (a) man-made crisis in our industry we have created. ... And I think all we're doing is irresponsible," Mohammed bin Hama al-Rumhy said as his Emirati counterpart forced a smile next to him.

Even among friends, the bottoming-out of oil prices, which are down more than 50 percent since the middle of last year, has strained both budgets and relationships across the Gulf and other oil-producing countries.

And while Emirati officials at the annual Abu Dhabi International Petroleum Exhibition and Conference said Monday they believed prices will head back up into next year, others offered a more pessimistic view.

"It's a movement of an era of scarcity to one of abundance; it's a movement from a world of unexpectedly strong demand and tight supplies to a world of ample supplies — even oversupplies — and weaker demands," said Daniel Yergin, vice chairman of IHS and the author of a Pulitzer Prize-winning book on the history of oil.

"OPEC's not the only balance of the market. The United States is back in the role of swing producer, a role it hasn't exerted in six decades," he said.

Fluctuating oil prices are nothing new, but this time the U.S. has found itself roaring back into the industry with the mass production of shale oil and reduced dependence on imports.

U.S. shale, a weakening economy in China and other factors have pushed prices down. On Monday, Brent crude, a benchmark for international oils, was at $47.63 in London, down from well over $100 a barrel last year.

While the U.S. production has dialed back due to low prices, even more oil will soon enter the market, including an expected flood of Iranian exports once sanctions are lifted under a landmark nuclear deal.

Despite that, the Emirati energy minister said he believed prices would rise in 2016, even as he said his country planned to ramp up production to 3.5 million barrels of oil a day from a current 2.9 million.

The Emirates was the world's sixth-largest oil producer in 2014, according to the U.S. Energy Information Administration. That 3.5 million barrel production will come in the "next two to three years," said Abdulla Nasser al-Suwaidi, the director-general of the Abu Dhabi National Oil Co.

"We are hopeful that we will see in 2016 ... a correction," Emirati Energy Minister Suhail Mohamed al-Mazrouei said. "Don't ask me how big, that's for the market to decide. Don't ask me who is going to play that role. It's not going to be OPEC only. This is an international effort. Everyone has a role to play."

But speaking in Qatar at the same time, Saudi Prince Abdulaziz bin Salman bin Abdulaziz, deputy minister of petroleum and mineral resources, cautioned against making too many cuts amid the swing in prices.

"As we saw back in 2008, high oil prices proved to be unsustainable, and the price fell sharply following the great financial crisis. But this works in the opposite direction," the prince said, according to a copy of his speech carried on the state-run Saudi Press Agency. "A prolonged period of low oil prices is also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise."

None of that placates al-Rumhy of Oman, whose country is the biggest Mideast oil producer outside of OPEC with around 1 million barrels a day. Oman has been highly skeptical of OPEC, led by Saudi Arabia, which has kept its own production high, further depressing prices.

"It's like you and your wife at home, cooking for 10 people and you eat a little bit and the rest of it you throw it in the dustbin," al-Rumhy said. "I cannot justify that, that this loss is by the grace of God. This loss is because we are not responsible. ... We are waiting for the cyclone that is hitting us to change course. And it will not happen."

His comments drew sustained applause in Abu Dhabi, with his Emirati counterpart responding that the low prices are everyone's responsibility. Yet even afterward, surrounded by reporters, al-Rumhy kept up his criticism, while smiling and saying: "They're my friends."

___

Follow Jon Gambrell on Twitter at www.twitter.com/jongambrellap

Obama quashes Keystone XL in bid to boost climate leverage

http://www.aol.com/article/2015/11/06/obama-quashes-keystone-xl-in-bid-to-boost-climate-leverage/21260472/?icid=maing-fluid|amp-bon10|dl1|sec1_lnk2%26pLid%3D1106048528#fullscreen

Obama's decision marked an unambiguous victory for environmental activists who spent years denouncing the pipeline, lobbying the administration and even chaining themselves to tractors to make their point about the threat posed by dirty fossil fuels. It also places the president and fellow Democrats in direct confrontation with Republicans and energy advocates heading into the 2016 presidential election.

The president, announcing his decision at the White House, said he agreed with a State Department conclusion that Keystone wouldn't advance U.S. national interests. He lamented that both political parties had "overinflated" Keystone into a proxy battle for climate change but glossed over his own role in allowing the controversy to drag out over several national elections.

"This pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others," he said.

Although Obama in 2013 said his litmus test for Keystone would be whether it increased U.S. greenhouse gas emissions, his final decision appeared based on other factors. He didn't broach that topic in his remarks, and State Department officials said they'd determined Keystone wouldn't significantly affect carbon pollution levels.

Instead, the administration cited the "broad perception" that Keystone would carry "dirty" oil, and suggested approval would raise questions abroad about whether the U.S. was serious about climate change.

"Frankly, approving this project would have undercut that global leadership," the president said.

Obama will travel to Paris at the end of the month for talks on a global climate agreement, which the president hopes will be the crowning jewel for his environmental legacy. Killing the pipeline allows Obama to claim aggressive action, strengthening his hand as world leaders gather in France.

Though environmental groups hailed Friday as a "day of celebration," Obama's decision was unlikely to be the last word for Keystone XL. 

TransCanada, the company behind the proposal, said it remained "absolutely committed" to building the project and was considering filing a new application for permits. The company has previously raised the possibility of suing the U.S. to recoup the more than $2 billion it says it has already spent on development.

"Today, misplaced symbolism was chosen over merit and science. Rhetoric won out over reason," said TransCanada CEO Russ Girling. His criticism was echoed by Republicans including House Speaker Paul Ryan, who said Obama had rejected tens of thousands of jobs while railroading Congress.

"This decision isn't surprising, but it is sickening," Ryan said.

On the other side, climate activists noted the widespread assumption early in Obama's presidency that he'd eventually approve Keystone, and said his apparent about-face proved how effective a no-holds-barred advocacy campaign could be.

"Now every fossil fuel project around the world is under siege," said Bill McKibben of the environmental group 350.org.

Already, the issue has spilled over into the presidential race. The Republican field is unanimous in support of Keystone, while the Democratic candidates are all opposed — including Hillary Rodham Clinton, who oversaw the early part of the federal review as Obama's first-term secretary of state.

TransCanada first applied for Keystone permits 2,604 days ago in September 2008 — shortly before Obama was elected. As envisioned, Keystone would snake from Canada's tar sands through Montana, South Dakota and Nebraska, then connect with existing pipelines to carry more than 800,000 barrels of crude oil a day to specialized refineries along the Texas Gulf Coast.

But Democrats and environmental groups latched onto Keystone as just the type of project that must be phased out if the world is to seriously combat climate change. Meanwhile, Republicans, Canadian politicians and the energy industry argued the pipeline would create thousands of jobs and inject billions into the economy. They accused Obama of hypocrisy for complaining about a lack of U.S. infrastructure investment while obstructing an $8 billion project.

Amid vote after vote in Congress to try to force Obama's hand, the president seemed content to delay further and further. Most pipelines wait roughly a year and a half for permits to cross the U.S. border, but Keystone's review dragged on more than 5 times as long as average, according to a recent Associated Press analysis.

The first major delay came in 2011, when Obama postponed a decision until after his re-election, citing uncertainty about the proposed route through Nebraska. When Congress passed legislation requiring a decision within 60 days, he rejected the application but allowed TransCanada to re-apply. He delayed again in 2014 — this time indefinitely — in a move that delayed the decision until after the 2014 midterm elections.

Obama's decision on Friday risks creating a fresh point of tension in his relationship with Canada's new government. After speaking by phone with Obama on Friday, Canadian Prime Minister Justin Trudeau said he was "disappointed by the decision" but pledged to pursue a "fresh start" with Obama nevertheless.

For TransCanada, the financial imperative to build Keystone may have fallen off recently amid a sharp drop in oil prices that could make extracting and transporting the product much less lucrative. TransCanada has insisted that wasn't the case.

___

Associated Press writers Julie Pace, Matthew Daly, Kathleen Hennessey and Matthew Lee in Washington and Rob Gillies in Toronto contributed to this report.

Markets - US in the driving seat for change

http://www.tankeroperator.com/ViewNews.aspx?NewsID=7126

With just two months to go until the start of a new year, for shipping this will bring a fresh wave of legislation some confirmed and some almost ratified. The beginning of next year also heralds the final demise of the few single-hull tanker left from being able to trade in conventional trades, EA Gibson said in a recent report. 

 

Perhaps of more significance is the possibility that we will finally see some movement on the Ballast Water Management Convention (BWM), which will enter into force 12 months after ratification by 30 flag states, representing 35% of world merchant shipping tonnage.

According to the latest IMO figures, 44 states have ratified the convention, representing 32.86% of the merchant fleet. As a result, it would only take one moderate size flag state to sign up, which would compel owners of every ship type and size to consider their options - scrap or commit to the additional expenditure, which in some cases could be costly.

One owner estimated that the cost for a VLCC would be around $2.5 mill, which could be in addition to other possible renewals discovered during drydocking.

Once the convention is ratified, all vessels would be required to install an appropriate BWM system at their first scheduled drydocking survey, following the 12 month grace period.

Some owners have advanced their drydocking schedules in order to get around this piece of pending legislation, which could provide older vessels with an extended grace period, Gibson said.

However, the US has a slightly different approach to BWM from the rest of the world. Vessels trading to the US are already required to have BWM systems in place ahead of the global IMO ratification.

Further emission regulations are also taking effect in the US from January. The control of NOx emissions will be further reduced from marine engines, which will be applicable to ships built on or after 1st January, 2016 operating in the North American ECA and the US Caribbean Sea ECA.

Tier III is a further tightening of US NOx regulations previously implemented in 2000 (Tier I) and 2011 (Tier II), which already apply to existing ships operating in the North American ECA. The new emission permissible limits are considerably lower than the previously tier limits. Again this regulation appears to have stimulated more ordering activity to avoid the additional costs in complying with the new regulations, Gibson said.

Another US initiative is to look at LNG as an alternative bunker fuel resulting in the Government subsidising several projects to build Jones Act tonnage with dual fuel Capability. The first vessel, a containership, was completed last month by NASSCO.

Also in October, NASSCO christened the first of five ECO tankers for American Petroleum Tankers. Scheduled for delivery in December, the ‘Lone Star State’ a 50,000

DWT, LNG-conversion ready MR, offers improved fuel efficiency and the latest environmental protection features, including a ballast water treatment system.

Thus, the US is very much leading the way on environmental issues, which are heavily supported by its shale oil/gas revolution.

However, the recent lower fuel oil prices seen, have eroded much of the cost differential over the Henry Hub gas price. This appears to have applied the brakes on further dual fuel ordering activity other than for LNGCs, Gibson concluded.

Markets-Rates on the rise again

http://www.tankeroperator.com/ViewNews.aspx?NewsID=7125 

Rates for MEG VLCCs rose to around $70,000 per day earlier this week from a low of $40,000 per day seen only two weeks ago. Sentiments have changed rapidly, in both directions, making it tough to pick the right timing for both owners and charterers, Fearnleys said, which clearly indicates that it is a finely balanced market today. 

 

MEG volumes have picked up, but nowhere near what we saw last month and it is thought that a larger portion of the normal volumes were taken on own tonnage.

 

Volumes West Africa/East continued to be stable and correlated closely in earnings terms

with Meg/East. Caribbean/East also continues stable with steady activity and firm rates.

 

Owners’ expectations for the ‘winter market’ is hence far from diminished, the broker said.

 

A week of decent activity for Suezmaxes as the rates rose to WS120 levels after being stable at WS80-85 for WAfr-UK/Cont/Med voyages. However, rates seemed to have reached the top and have settled at slightly lower levels .

 

The recent activity in Black Sea/Med has also firmed rates, due to large cargo numbers along and delays in Turkish straits.

 

North Sea and Baltic Aframaxes remained active last week, but due to a balanced tonnage scenario, no changes in rates were evident. Going forward we expect an increase in rates, mainly due to continued activity, more weather delays and ships moving away from the area.

 

In the Med and Black Sea, the Aframax market was stable at around WS107.5 for the past week. Delays in the Turkish straits and some Italian ports helped to maintain rates at these levels.

 

As Caribs and W Africa were looking firm and activity is expected to increase towards end of this month month in Black Sea/Med, this market has some upward potential, Fearnleys concluded.

 

Among the fixtures reported recently by broking sources, Vitol was reported to have fixed the 2009-built VLCC ‘New Talent’ for two years at $42,250 per day, while Clearlake was said to have taken the 2007-built VLCC ‘Spyros K’ for two years at $47,500 per day and Koch was believed to have fixed the 2001-built VLCC ‘Formosapetrol Challenger’ for 12 months at $40,000 per day.

 

IOC was reported to have fixed the 2000-built Suezmax ‘Jag Lateef’ for two years at $29,500 per day.

 

Singapore-based Mitsubishi subsidiary Diamond Tanker reportedly fixed the 2009-built Aframax ‘Sea Bay’ for 12 months at $22,500 per day.

 

LR1s seem to be in vogue as BP was said to have fixed the 2008-built ‘Energy Centurion’, plus the 2009-built ‘Gulf Castle’ for two years each at $22,500 per day and $23,000 per day, respectively.

 

In the S&P sector, brokers said that the Ahrenkiel-managed Handysize tankers - ‘Conti Benguela’, ‘Conti Greenland’, ‘Conti Agulhas’, ‘Conti Humboldt’ and ‘Conti Guinea’ had been committed to Clearwater Marine.

 

However, some doubt has been expressed whether this deal was signed. It also appears that the Hafnia/Geden deal did not get off the ground.

 

One deal that was confirmed was Mumbai-based Elektrans Shipping’s (formerly Doehle Danautic) acquisition of the Suezmax ‘Distya Akula’, which will be co-owned with Arya Industries.

The 1995-built tanker will be flagged in India and bring’s the company’s fleet up to three vessels. Elktrans and Arya have invested $40 mill for vessel acquisitions.

Daniel Chopra, Elektrans managing director, said, “Acquisition of ‘Distya Akula’ further consolidates Elektrans’ position as a full-service maritime company. We have embarked on an aggressive acquisition plan to increase the ownership fleet size.

“Besides owning oil and gas tankers, we are watching the drybulk segment, which holds promise. Such an expansion plan, especially in today’s tough market scenario, demands, in addition to the technical, commercial and human expertise, steadfast leadership and focus,” he said.

Elektrans also offers crew management, technical management, ship recycling, chartering and shipbroking services.

Elsewhere, Greece’s New Shipping was thought to have purchased the 1999-built VLCC ‘GC Guanzhou’ for $30-31 mill.

Leaving the fleet was the 1992-built Aframax ‘Jelita Bangsa’ reportedly sold to undisclosed breakers for $320 per ldt on the basis of ‘as is’ Indonesia and the 1985-built Handysize ‘Moskovskiy C’ also reported as sold to undisclosed recyclers for $205 per ldt on the basis of ‘as is’ Cuba.

 

As for newbuildings, Orient Shipping & Investment was said to have ordered two VLCCs at Hyundai Samho at $94.5 mill each for 2017 delivery.

 

Consolidated Marine Management was said to have ordered two, option two MRs at Hyundai Mipo at $35.5 mill each, while Stena Bulk was thought to have contracted up to five high-spec MRs at $40 mill each from CSSC Offshore & Marine Engineering.

VLGCs were also in the news with Tokyo-based Astomos Energy Corp ordering three 82,200 cu m LPG carriers at two Japanese shipyards on the back of long tertm charters, bringing its order book up to 10 newbuildings.

The company has ordered two VLGCs at Kawasaki Heavy Industries that are scheduled for delivery in the first half of 2019 and placed the third at Mitsubishi Heavy Industries Shipbuilding of 83,000 cu m capacity.

NYK and its partners have signed a five-year charter agreement with Astomos for the three vessels.

In addition, Shanghai Zhenrong has ordered two VLGCs from Jiangsu New Yangzijiang at $76 mill each for 2018 deliveries, while KSS has declared an option for another VLGC from Hyundai at $77 mill.

Gener8 Maritime has confirmed that it took delivery of the ECO VLCCs - ‘Gener8 Athena’ and ‘Gener8 Strength’ - from Daewoo Shipbuilding & Marine Engineering and Shanghai Waigaoqiao Shipbuilding, respectively.

They represent the second and third of 21 ECO VLCCs due to be delivered to Gener8 Maritime's. Upon their delivery, they entered into Navig8's VL8 Pool.   

Meanwhile, Jacksonville-based Crowley Maritime Corp has christened the ‘Ohio’, the first of four new LNG-ready Jones Act product tankers being built at Aker Philadelphia Shipyard.

The 50,000 dwt, 330,000-barrel-capacity ship is the first tanker ever to receive ABS LNG-Ready Level 1 approval, giving Crowley the option to convert the tanker to LNG propulsion in the future.

Another three product tankers are also being built by APSI for Crowley and scheduled for delivery through 2016.