Marathon Petroleum earnings blast past forecasts

http://www.marketwatch.com/story/marathon-petroleum-earnings-blast-past-forecasts-2017-02-01

Marathon Petroleum Corp.'s fourth-quarter earnings and revenue surged past expectations, the latest indication that the energy sector could be recovering.

Shares of the company climbed 2% in premarket trading to $49.

Many energy analysts have been raising their oil-price projections for the first time in nearly half a year, as the Organization of the Petroleum Exporting Countries has trimmed output by more than 1 million barrels a day.

Marathon reported a quarterly profit of $227 million, or 43 cents a share, up from $187 million, or 35 cents a share, a year earlier. Revenue improved 10.7% to $17.28 billion.

Analysts surveyed by Thomson Reuters expected a profit of 26 cents a share on revenue of $14.54 billion.

Last month, Marathon announced plans to accelerate so-called drop-down deals and conduct a strategic review of its Speedway assets, months after hedge fund Elliott Management Corp. raised concerns with the energy company.

Marathon said it would significantly accelerate a drop-down of assets with about $1.4 billion of annual earnings before interest, taxes, depreciation and amortization to MPLX LP, a master limited partnership formed by Marathon Petroleum to buy, develop and operate midstream assets.

The company also said a special committee of its board would conduct a review of Speedway, its brand of company-owned and operated convenience stores and gas stations.

Austen Hufford contributed to this article

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

U.S. Petroleum Trade With Latin America Flips To Surplus For First Time Ever

 

http://oilprice.com/Latest-Energy-News/World-News/US-Petroleum-Trade-With-Latin-America-Flips-To-Surplus-For-First-Time-Ever.html

In a change of trade patterns, the United States booked a surplus in its trade of crude oil and refined products with Latin America for the first time since records began in 1993, but a proposal of a border tax is a major wild card for the coming U.S.-Latin America petroleum trade flows.

According to data by the U.S. Energy Information Administration compiled by Bloomberg, the U.S. recorded its first ever petroleum surplus with Latin America in October last year at 89,000 barrels a day. The surplus then increased to 184,000 bpd in November.

The shift in trade patterns with Latin America comes as Mexico, for example, imports growing volumes of gasoline because its refineries are unable to meet surging demand.

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Crude oil production dropped last year in Venezuela, Colombia, Mexico and Argentina, on the back of low oil prices that sped up the natural decline of some oil fields. Among the large Latin American nations, production rose only in Brazil.

As for Mexico, according to EIA’s This Week in Petroleum issue from January 25, the volume of gasoline trade between Mexico and the United States is significant to U.S. refineries. Mexico is currently implementing an energy reform to switch pricing to market-based prices instead of government-set prices. The reform has led to soaring retail prices.

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Moreover, Mexico’s refineries have historically been running at low utilization rates because they are challenged to produce clean gasoline and distillate fuels from the available marginal barrel of heavy sour crude oil. Outages have also hampered Mexico’s six refineries recently. For the first 10 months of 2016, U.S. exports to Mexico accounted for 54 percent of total U.S. gasoline exports.

However, the so-called Border Adjustment Tax (BAT) is expected to have a huge impact on U.S. crude: it would not only impact import flows, but exports and domestic production as well.

By Tsvetana Paraskova for Oilprice.com

Ghana's only oil refinery shut after explosion

http://www.theafricareport.com/West-Africa/ghanas-only-oil-refinery-shut-after-explosion.html

Ghana's only oil refinery, the Tema Oil Refinery, is shut after an explosion at a newly installed 5.8-million-euro crude oil heating unit, a senior union official said on Friday.

The blast at the crude distillation unit, which caused no casualties, is the latest problem to hit the refinery, which has for decades performed below its capacity of 45,000 barrels per day.

"It was a damper failure. It failed to open to allow heat to escape through the chimney and that led to the explosion," one source said.

"The new furnace is now scrap," said a union leader who declined to be identified.

The plant will restart after reconfiguration through a second furnace but output will drop to 30,000 barrels per day, the union leader said.

Planned expansion of refinery

The state-owned refinery has been dogged by underinvestment, lack of maintenance and debt, which has caused it to perform below capacity.

The new government of President Nana Akufo-Addo said in its manifesto that it would expand the refinery.

Read the original article on Theafricareport.com : Ghana's only oil refinery shut after explosion | West Africa

 
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Zenith Energy to Develop Fuel, LPG Rail, Storage Terminals in Mexico

Zenith Energy, an international liquids and bulk terminaling company, said on Wednesday that it has signed an agreement with one of the largest companies in Mexico to market and develop existing logistics assets for oil storage and distribution in Mexico to support the growing demand for oil products.

The agreement provides for the use of certain facilities in Mexico of CEMEX, S.A.B. de C.V., a global building materials company. Zenith has been awarded the rights to develop these sites for fuel and LPG storage and distribution.

These terminals will receive fuel and LPG primarily from the Gulf Coast and Texas via rail but Zenith believes there are some marine facilities that could be available for international delivery by vessel, Jay Reynolds, chief commercial officer of Zenith, told OPIS.

This is the first time Zenith is working in Mexico, but the Zenith management team has previous Mexican experience, he said. Zenith has established a company in Mexico with an on-the-ground representative and former terminal manager for Exxon Mobil in Mexico.

CEMEX's facilities in Mexico include more than 90 storage and distribution locations, in both inland and coastal cities, most of them connected to the Mexican railroad network, many with unit train capability, and include both operational and dormant locations. The development of these sites will not interfere with CEMEX's normal business activities in Mexico.

Zenith's preliminary plans and layouts include significant development at the terminals in Mexico, Reynolds said. The work will include building tanks together with associated infrastructure such as loading and unloading facilities.

"We have had a number of initial conversations with potential customers which have been very positive and the next step is to fine tune our plans. It is worth noting that we are developing these assets because of their potential and the significant market demand," he said.

"Our development time is likely to be significantly less than other competitors, primarily because we will not have to add rail tracks. Depending on the final plans, we could have a facility fully operational in 12-18 months. This is clearly dependent on permitting and customer requirements," Reynolds said.

The capacity is flexibility and location dependent with some locations having capacity of up to 1 million barrels and unit train handling and other locations being smaller with manifest rail capabilities, he said.

The total capacity will be driven by customer demand and market size, Reynolds said. If all locations are developed, Zenith could have several million barrels of storage in Mexico over the next couple of years. The pace and scale of development will necessarily depend on the evolution of related regulations and other external factors.

"Based on the advantaged locations in major metropolitan areas and the customer demand for reliable operating facilities in Mexico, we believe that this solution will be very attractive to the market, particularly those looking for alternatives to uncertain and expensive pipeline projects," said Reynolds.

Jeffrey Armstrong, CEO of Zenith, said, "we are excited to announce this initiative at this important time in Mexico's ongoing energy reform. We see a growing number of promising opportunities to invest in the country's developing midstream sector, particularly with the ability to utilize existing assets in key distribution markets inside the country."

With headquarters in Houston, Zenith Energy is an international liquids and bulk terminaling company that owns and operates over 15 million barrels of crude oil and petroleum products storage in Amsterdam, Ireland and Colombia.

Zenith is pursuing opportunities to buy, build and operate terminals primarily in Latin America, Europe and Africa. The company is focused on the storage and distribution for petroleum, refined products, natural gas liquids and petrochemicals. The company also will acquire and operate logistics and distribution assets that support terminals, such as pipelines, truck racks and barges.

In August 2014, Warburg Pincus, a leading global private equity firm focused on growth investing, led a line-of-equity commitment in Zenith of up to $600 million.

https://www.tankterminals.com/news_detail.php?id=4188&utm_medium=email&utm_campaign=Subscribers%20-%20Week%205&utm_content=Subscribers%20-%20Week%205+CID_fa942cae4318cf5a3b411a9e4c411cde&utm_source=Weekly&utm_term=Zenith%20Energy%20to%20Develop%20Fuel%20LPG%20Rail%20Storage%20Terminals%20in%20Mexico 

Rate drop forecast across all tanker types

http://www.tankeroperator.com/ViewNews.aspx?NewsID=8324

Crude and residual fuel tonne/mile demand is projected to increase by about 0.7% on an annual basis from 2017-2021, claimed a new report. 

 

According to McQuilling Services’ 20^th ‘2017-2021 Tanker Market Outlook’, this year, demand growth is expected to be 0.3% amid lower oil output from participants in the OPEC and non-OPEC production cut agreement and a pick-up in global inventory draws. 

Meanwhile, clean product tonne/mile demand is expected to see a marginal increase of 0.22% in 2017. 

On the basis of supply side risks, McQuilling forecast that 2017 will see a drop in rates for all tanker classes with VLCCs averaging around $27,000 per day and about $12,500 per day for MR2s on a triangulated basis. 

However, earnings in 2018 are expected to improve slightly across all tanker segments, given a decelerating supply outlook and increasing oil supply, the report said.

MR earnings on a round-trip basis are expected to be mixed with TC2 TCEs averaging $8,400 per day this year, while the USG/Carib round trip voyage is estimate at $12,400 per day. TC14 earnings are forecast to be the lowest of the trades tracked at $4,300 per day; however, on the triangulated basis (TC2/TC14) owners will earn around $12,400/day in 2017, increasing to $14,200 per day by 2019.

The relationship between timecharter rates and spot market earnings was strong in the analysis and formed the foundation for the timecharter forecasts, the consultancy explained. For VLCCs, one-year and three-year timecharter rates are expected to average $30,000 and $32,000 per day in 2017, respectively. 

McQuilling’s 2017 price forecast for the five-year old crude tanker sectors saw VLCC values averaging $59 mill, a 14% decrease from the 2016 average price of $68.8 mill and a 1.6% decrease from current levels. Modern Suezmax tankers are projected to demand $38 mill this year; however, by 2021 the values of these tankers were forecast to reach $51 mill amid a pickup in earnings. Panamax values are likely to fall to $20 mill in 2017, with further contraction expected to 2021.

Clean tankers in this age group are expected to see lower prices relative to their 2016 averages. For LR2s, McQuilling forecast a 2017 average price of $30.5 mill, a 33% decrease from the average price recorded in 2016, while the LR1 sector is expected to decline by a more modest 20% to $25.9 mill. MR2s are likely to depreciate by 21.8% to $20.5 mill; however, a recovery to 2016 levels is expected to occur in the medium term.

In the ‘2017-2021 Tanker Market Outlook’ McQuilling said it had incorporated a variety of new features to provide clients with a more robust view of global trade flows and major tanker trades:

§  Incorporated the use of ‘big data’ by using remotely sensed vessel position data to track real-time demand, fleet deployment and utilisation across the various tanker sectors.

§  Expanded the five-year forecast for freight rates and TCEs by one additional trade (USG/Carib) for MRs (38,000 tonne cargo), totalling 19.

§ Increased the capture and scrutiny of non-OECD country bilateral trade through continued collaboration with clients and other parties, as well as the use of industry datasets, enabling 95% plus coverage of global trade flows.

§ Developed bunker price forecasts on a regional basis to provide clients with the most accurate trade-specific TCE earnings.

§ Through the use of enhanced database techniques, data distillation processes for tanker supply and demand development has been streamlined, reducing manual interventions and data inconsistencies and thereby increasing data integrity.

This 200-page report provides a five-year spot and TCE outlook for eight vessel classes across 19 benchmark tanker trades, plus two triangulated trades. Also included in the report is a robust five-year asset price outlook as well as a one and three-year timecharter forecast through 2021. 

Crude correlations about crude oil can shed light on changes

http://blogs.platts.com/2017/01/25/crude-oil-correlations/

Statistical correlations are interesting things.

One of my favorite websites, and now a book, is Spurious Correlations. The site’s author looks at seemingly unrelated data sets that correlate in interesting ways. For example, there is a high degree of statistical correlation between the per capita consumption of chicken and total US crude imports.

Or, my personal favorite, you can look at the correlation between the annual number of swimming pool drownings in the US and the number of films actor Nicholas Cage has appeared in.

Unsurprisingly, there’s also a high degree of correlation between various regional and global crude oil crude benchmarks. And while correlation doesn’t equal causation, those relationships have changed in interesting ways over the past year.

Historically, there was a strong correlation between the cash differentials for Light Louisiana Sweet crude and the Brent-WTI spread. Since restrictions around US crude exports have been lifted, those statistical relationships have just about vanished.

Looking back to 2012, on average there was an 85% correlation between the differential between LLS and WTI and the Brent-WTI spread, meaning that for the most part when the Brent-WTI spread widened, the LLS-WTI spread also widened.

This relationship made a lot of sense. At the time, WTI was landlocked in Cushing, Oklahoma, and LLS reflected the market for light sweet crude among the Gulf Coast refiners, which account for more than half of total US refining capacity.

Gulf Coast refiners looking at a light sweet barrel had a few options: either buy LLS, or a related domestic grade, or import a similar barrel that would almost certainly be priced in relation to Brent crude, which was generally more reflective of supply and demand in the international crude market.

At time, Brent was traded $15-$20/b above WTI, which was essentially limited to the US Midwest refining market. At the time, Cushing was oversupplied with domestic and Canadian crude, which had no way to reach refiners in the Gulf Coast.

So it made a lot of sense for LLS to fetch a market price much closer to Brent than WTI. Refiners were looking to pay Brent-level prices for import crudes, why would domestic sellers offer LLS at $15 under that market? That’s how markets work.

The correlation between LLS and Brent diverged somewhat in 2013 and 2015, as new pipeline projects came online, providing access for Gulf Coast refiners to more light sweet crude from West Texas and Cushing.  The Seaway Pipeline reversal project, which converted crude line to carry oil from Cushing to Freeport, Texas, helped drive the WTI-Brent spread back under $10/b. In 2015, the correlation between the two averaged at 84%.

Then, in December 2015, the US announced change to its crude export policy. With US crude now freely exportable, the correlation 2016 dropped to average just 1%.

In 2016, the Brent-WTI spread averaged $1.35/b, compared to $4.67 in 2015 and $7.05/b in 2014. This is one logical outcome of the change to US export policy.

If the WTI-Brent spread becomes too wide, then US producers will find international buyers for cheaper-WTI linked crude (like LLS). At the same time, with more than 1.5 million b/d of pipeline capacity from Cushing and West Texas to the Gulf Coast, there are plenty of light, sweet alternatives to LLS should the differential widen out again. This keeps essentially provides something of a ceiling on both LLS and the Brent-WTI spread.

Correlation doesn’t equal causation, but it can shed some light on the relationships that make up these markets.

Dow Jones industrial average reaches new high, tops 20,000 level for first time

 

https://www.washingtonpost.com/news/business/wp/2017/01/25/dow-jones-industrial-average-reaches-new-high-tops-20000-level-for-first-time-2/?utm_term=.95c97bc854c0

The closely watched Dow Jones industrial average reached historic levels on Friday, breaching 20,000 points for the first time in a week when President Trump began to put his agenda in place.

Shortly after the election, investors dubbed a surge in stock prices the “Trump rally,” pushing U.S. stocks to new heights in anticipation that the new president would work with the Republican-led Congress to lower taxes and pass more business-friendly policies. But just as the Dow appeared ready to breach the 20,000 threshold, there was a retreat.

Then, this week, as Trump vowed to rewrite trade agreements and revive pipelines, the markets began to rev again.

For the Dow, an index of 30 large publicly traded companies, topping the 20,000 level holds more symbolic than practical value. But Wall Street has been anticipating the rise could give investors the psychological boost to keep stock prices climbing even further.

The broader Standard & Poor’s 500 and the tech-heavy Nasdaq have also been trading at record levels. The recent run-up in stock prices has added about $1 trillion in market value since the election to companies that make up the S&P 500.

 

Stocks staged a remarkable rebound in 2016, starting the year with massive sell-offs as investors worried about China’s rocky economy and falling oil prices and then panicked when Britain voted to leave the European Union.

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Each sell-off was followed by a recovery that pushed stock prices back into positive territory. After sagging as much as 10 percent in 2016, the Dow jumped 13 percent for the year, more than half of the rise coming since the election. The S&P was up about 10 percent last year, while the Nasdaq grew about 9 percent.

The markets’ rise “becomes self-fulfilling momentum,” said Art Hogan, chief market strategist for Wunderlich. “Whether you’re an individual or an institution you start chasing momentum.”

But, some market analysts say, stock prices may have already risen too far too fast. Investors are ignoring potential stumbling blocks that lie ahead for the U.S. economy, including that the Federal Reserve is beginning to raise interest rates — it bumped up a key lending rate last week, a move that traditionally has added costs for businesses. And it is unclear whether Trump will be able to implement all of his campaign promises, including lowering corporate taxes.

The rise in stock prices has also coincided with a sell-off in the bond market, a traditional safe haven during economic turbulence. The interest rate on a 10-year government note has risen from about 1.7 percent before the election to about 2.4 percent recently as investors demand a bigger return in exchange for locking up their money for a long period. When the interest rate rises, the price of the bond falls.