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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.

Bloomberg, by Anthony Di Paola, April 2, 2021

Robert D. Bondurant serves as President and Chief Executive Officer of Martin Midstream Partners L.P. and is a member of the board of directors of its general partner.

Mr. Bondurant joined Martin Resource Management Corporation in 1983 as Controller and subsequently as Chief Financial Officer from 1990 through 2020 and continues as a member of its board of directors. Mr. Bondurant served in the audit department of Peat Marwick, Mitchell and Co. from 1980 to 1983.

He holds a bachelor of business administration degree in accounting from Texas A&M University and is a Certified Public Accountant, licensed in the state of Texas.

In this 2,889 word interview, exclusively in the Wall Street Transcript, Mr. Bondurant details his strategy for Martin Midstream Partners.

“From the IPO date of November 2002 through 2014, we had substantial growth through access to capital.

Some of this growth was in areas that had upstream energy exposure, such as gas processing and fractionation in East Texas, and investment in West Texas LPG, which is an NGL pipeline, a crude storage terminal in Corpus Christi, and natural gas storage in North Louisiana and Mississippi.

These investments were large and had nice early returns, but with the energy commodity price collapse that began in late 2014, we made strategic decisions in 2015 to sell assets that had volatile upstream exposure and refocus on what we do best — providing services to refineries, including logistics through land and marine transportation, as well as terminal services.

We also provide marketing services for the byproducts that refiners produce, such as sulfur and natural gas liquids.

As a result, we have four segments: terminalling and storage, sulfur services, transportation, and natural gas liquids. Although these four segments are different, they have a common thread — all of these segments are servicing refiners in some form or fashion.”

This emphasis by Martin Midstream on refinery servicing has lead to a focus on several businesses.

“Let me begin with the terminalling and storage segment. First, we have approximately 30 terminal facilities, mostly located along the Gulf Coast, with storage capacity of approximately 2.8 million barrels.

Our specialty terminals receive hard-to-handle products from refineries and natural gas processing facilities, storing them for delivery to our customers. These specialty products include asphalt, natural gasoline, sulfuric acid, and ammonia, just to name a few.

Also within this segment, we own and operate a small naphthenic lubricant refinery located in southern Arkansas that includes a lubricant packaging facility, where we blend and package private label lubricants for use in the automotive and commercial industries.

Finally, within this segment we operate facilities in Kansas City, Missouri, in Houston, Texas and Phoenix, Arizona, to process and package specialty grease products, such as post-tension grease.

Next is our sulfur services segment. Within this segment we have two business lines.

First, in what I like to refer to as the pure sulfur segment, we aggregate, store and transport molten sulfur from Gulf Coast refineries to our terminals in Beaumont, Texas. The molten sulfur is shipped by our own barge to Tampa, Florida, where it is used in domestic fertilizer production.

We also convert molten into prilled sulfur, which we store for our refinery customers.

Basically, the molten sulfur goes through a water bath process that converts the liquid to a small solid pellet. This prilled sulfur is eventually loaded onto dry bulk vessels for international delivery, where it is remelted for use in fertilizer production.

Based on a five-year average, approximately 70% of prilled sulfur exports from the U.S. Gulf Coast originate at our terminal in Beaumont.

The second business line within our sulfur segment is the production of sulfur-based fertilizers, which are marketed to wholesale fertilizer distributors and industrial users. Here we purchase molten sulfur from refineries and use it as a feedstock to convert to fertilizer. These sulfur-based fertilizers are used in corn crop production, making corn acres planted a key driver of this business.

Moving to our transportation segment, we own both land and marine assets. Our fleet of tank trucks service the petroleum, petrochemical and chemical industries. We deliver hard-to-handle products for refineries and chemical companies across the U.S. with our fleet of specialty trailers.

In addition, our land assets are utilized by our other business segments. For example, land transportation delivers sulfur from refineries to our sulfur terminals; NGLs for the natural gas liquids segment; and lubricants for the terminalling and storage segment.

On the marine side, we utilize both inland and offshore tows to provide transportation of petroleum products and petroleum byproducts. As within the land group, we handle specialty products for oil refiners and international and domestic trading partners.

Finally, our natural gas liquids segment purchases and stores NGLs, both from and for delivery to refineries, as well as industrial users and propane retailers.

Within this segment, we have approximately 2.1 million barrels of underground storage. Of that, approximately 400,000 barrels are used in our seasonal propane business.

The other 1.7 million barrels are dedicated to our butane optimization business. Refineries excess butane during the summer months, but require butane during the winter months for gasoline blending purposes.

This supply/demand imbalance creates opportunities for us to utilize our underground storage assets in service to the refineries.

Lastly within the NGL segment, we deliver natural gasoline from refiners and natural gas processors to our Spindletop terminal in Beaumont, Texas. This terminal then supplies the local petrochemical industry with natural gasoline for use as a feedstock.”

The Martin Midstream CEO sees a long term value for his company, despite recent trends toward renewable energy sources:

“Regarding the movement towards decarbonization, first, I believe this will take a considerable amount of time to implement.

Second, I believe our assets and the majority of our operations around the Gulf Coast refinery corridor are strategic longer term. Refineries in our area of operations are the largest and some of the most sophisticated refiners in the U.S.

There’s adequate crude supply to them by pipeline and by VLCCs. In fact, some of these Gulf Coast refineries have made investment decisions to expand over the next two to three years.

Because of these investment decisions, it appears they plan to operate the assets long term.

So my point is this: If there is a time in the future where there will no longer be any need for gasoline, diesel, jet fuel, marine fuels, or even asphalt, my view is that refineries we service in the Gulf Coast will be the last refineries to cease operation.”

The WallStreet Transcript, March 11, 2021

The market shock from the pandemic and the resulting crash in oil prices expectedly dragged down the net profit of the world’s biggest oil company and largest oil exporter, Saudi Aramco.  

The 2020 year of COVID also upended the development plans of the Saudi state oil giant at the oilfields it co-owns with other countries in the Gulf.

In early 2020, Saudi Arabia and Kuwait were preparing to significantly boost oil production in the so-called neutral zone between the two countries after ending a five-year spat over concessions. Both sides had grand plans to pump as much as 550,000 barrels per day (bpd)—or 0.5 percent of daily global oil supply—from the jointly owned fields by the end of 2020.

The unexpected events last year, however, led to the fields producing just around 120,000 bpd, which for Saudi Aramco means up to 60,000 bpd as output is equally divided between Saudi Arabia and Kuwait, Aramco’s president and chief executive officer Amin Nasser said on the call after the 2020 results release.

Not only did the pandemic slash Aramco’s profits in 2020, but it also put on ice its plans to quickly ramp up production from the fields it shares with Kuwait in the neutral zone. 

The so-called Partitioned Neutral Zone (PNZ) was established between Saudi Arabia and Kuwait in 1922 to settle a territorial dispute between the two neighboring countries. As of 2015, the oil production capacity in the neutral zone stood at a total of 600,000 bpd, equally divided between Kuwait and Saudi Arabia, according to the U.S. Energy Information Administration (EIA). Production from the zone averaged around 500,000 bpd just before the shutdown of the two oil fields, Al-Khafji and Wafra, in 2014-2015.

Operational differences and a worsening in bilateral relations led to the suspension of production back in 2015. The worsening came as Saudi Arabia renewed Chevron’s concession for Wafra. According to the Kuwaiti side, Riyadh did that without consulting it.

One of the upstream milestones Aramco boasted in its 2020 presentation was resumed operations at the Al-Khafji oilfield.

Just after the owner of Saudi Aramco, Saudi Arabia, broke the OPEC+ pact with Russia in March last year, contributing to the oil price crash in the demand collapse, Abdullah Mansi Al-Shammari, Deputy CEO Finance and Management at Kuwait Gulf Oil Company, told Reuters that total production from the two oilfields, Al-Khafji and Wafra, would hit 320,000 bpd by the end of 2020.

During the Saudi-Russia price war in March and early April 2020, Kuwait even exported its first cargo of Khafji crude oil, after the nearly five-year hiatus—during which the fields were not pumping oil.

But after the new OPEC+ deal entered into force in May 2020 to prevent another price collapse and help the market to rebalance in the face of plunging fuel demand, the Saudis, the Kuwaitis, and all OPEC+ members had to scale back oil production much more than they would have done had they kept the initial agreement.

The restart of production at the Al-Khafji oilfield last year marked the end of a five-year hiatus due to disputes. Still, the much lower-than-expected output from the neutral zone highlighted the challenges in ramping up production from oilfields that haven’t pumped oil in years, and operational decisions on major oilfields in the Middle East depend largely on OPEC’s policies, which is effectively led by Saudi Arabia.

The future OPEC+ policies on withholding oil supply from the market will determine whether the Al-Khafji and Wafra fields shared with Kuwait could return to pumping meaningful volumes of crude soon.

As of February, OPEC’s spare capacity, excluding Iran, stood at 7.7 million bpd, mostly in the Middle East, the International Energy Agency (IEA) said in its monthly report earlier in March, when it said that with “plenty to spare” capacity and still abundant supply, there is no supercycle for oil around the corner.  

Oilprice, by Tsvetana Paraskova, March 26, 2021

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.

OilPrice, by Alex Kimani, March 26, 2021

Downstream business comprises the biggest share of revenue.

ExxonMobil Corp. (XOM) is one of the biggest oil companies in the world. Its primary business is the exploration for, and production of, crude oil and natural gas, as well as the manufacture, trade, and transportation of crude oil, natural gas, petroleum products, and petrochemicals. It operates both upstream and downstream oil and gas segments, and a chemicals segment.

ExxonMobil operates within the highly competitive energy and petrochemicals industries. It faces competition from both private and state-owned companies around the world. Some of ExxonMobil’s main competitors include Netherlands-based Royal Dutch Shell PLC (RDS.A), Britain-based BP PLC (BP), France-based Total SE (TOT), Chevron Corp. (CVX), and Saudi Arabia-based Saudi Arabian Oil Co. (TADAWUL:2222), better known as Saudi Aramco.

Key Takeaways

• ExxonMobil explores for, and produces, crude oil and natural gas, as well as petrochemicals and other related products.
• The Downstream segment generates the most revenue, but the Chemical segment was the only one that made a profit in 2020.
• The company says it aims to be an industry leader in greenhouse gas performance by 2030 by drastically reducing emissions.
• ExxonMobil recently created a new business that will focus on carbon capture and storage.

ExxonMobil’s Financials

ExxonMobil’s operations were severely impacted by the COVID-19 pandemic in 2020 as the resulting global economic contraction led to a collapse in energy consumption. The company posted an annual net loss of $23.3 billion compared to net income of $14.8 billion in the previous year. Those figures include results for the company’s non-controlling interests.

Revenue for the year fell 31.5% to $181.5 billion. This figure includes sales and other operating revenue ( 98%), income from equity affiliates (1%), and other income (1%). The U.S. generated 35% of total sales and other operating revenue, while countries in the rest of the world generated 65% of the total, led by Canada, the U.K., and Singapore.

ExxonMobil’s Business Segments

ExxonMobil operates through three principal business segments: Upstream; Downstream; and Chemical. It provides a breakdown of sales and other operating revenue, and of earnings for each of these segments. The company also provides results for a corporate and financing segment, which includes interest revenue on cash and marketable securities as well as various expenses. This segment generated an immaterial amount of revenue and a loss of $3.3 billion. The corporate and financing segment and any negative amounts in the segment breakdowns below are not included in the pie charts above.

Upstream

ExxonMobil operates in 40 countries, producing approximately 4 million oil-equivalent barrels of net oil and natural gas per day. The company’s upstream business includes exploration, development, production, and marketing. It is organized into five separate value-chains: deepwater, unconventional, LNG, heavy oil, and conventional.

The Upstream segment posted a loss of $20.0 billion in 2020 compared to earnings of $14.4 billion in 2019.8 Sales and other operating revenue for the segment fell 37.1% to $14.5 billion, comprising about 8% of the total for the year.

Downstream

ExxonMobil is a leading manufacturer of fuels and lubricants, and sells approximately 5 million barrels per day of petroleum products. Its Downstream segment is comprised of a portfolio of well-known brands and high-quality products, such as its Mobil synthetic lubricant.

The Downstream segment posted a loss of $1.1 billion in 2020 compared to earnings of $2.3 billion in the previous year.8 The segment generates the majority of the company’s sales and other operating revenue at nearly 79% of the total. Sales and other operating revenue fell 31.2% to $140.9 billion in 2020.

Chemical

ExxonMobil is one of the world’s largest chemical producers, selling more than 25 million tonnes each year. The Chemical segment is comprised of a broad product portfolio that includes olefins, polyolefins, aromatics, and a variety of other petrochemicals.10 The segment is closely integrated with the company’s Upstream and Downstream businesses.

The Chemical segment was ExxonMobil’s only business that generated a profit in 2020. Earnings rose 231.6% to $2.0 billion.8 However, sales and other operating revenue for the segment fell 15.8% during the year to $23.1 billion, comprising about 13% of the total.

ExxonMobil’s Recent Developments

On February 1, 2021, ExxonMobil announced that it had created a new business, named ExxonMobil Low Carbon Solutions, to commercialize its extensive low-carbon technology portfolio. ExxonMobil plans to invest $3 billion through 2025 on lower emission energy solutions. The new business will initially focus on carbon capture and storage (CCS), a critical technology needed to achieve net-zero emissions, one of the major goals of the Paris Agreement on climate change. CCS technology captures CO2 from industrial activity and injects it into deep geological formations for permanent storage.

On February 24, 2021, ExxonMobil announced that it had signed an agreement to sell most of its U.K. and North Sea non-operated upstream assets to Norway-based private-equity fund HitecVision AS for more than $1 billion. ExxonMobil said it plans to focus on its advantaged projects. The deal is expected to close by the middle of 2021.

Investopedia, by Matthew Johnston, March 26, 2021

Fuel cell stocks have become the talk of the town. What’s fueling this enthusiasm?

Hydrogen fuel cells have recently garnered lots of interest from policymakers, environmental bodies, companies, and retail investors. That has driven stocks of fuel cell companies, including Plug Power (NASDAQ:PLUG) and FuelCell Energy (NASDAQ:FCEL), to astronomical highs in the last couple of years. Investors looking for multibagger returns jumped onto the hydrogen bandwagon, adding to the momentum in these stocks. However, with the market realizing the many risks that fuel cell companies face, these stocks have seen a major correction in the last few weeks.

But what’s behind the excitement? Let’s take a closer look at the factors fueling the enthusiasm for hydrogen and fuel cells.

Europe’s push for clean energy

In 2018, the European Union came out with a strategic vision for promoting hydrogen as a fuel. It envisioned as much as 14% of Europe’s energy coming from hydrogen by 2050. Europe has been advancing the use of clean energy for decades. In addition to climate change concerns, a key factor behind the union’s push for clean energy is its dependence on oil and gas imports.

The European Union, excluding the UK, spends more than $250 billion each year on fossil fuel imports. Moreover, Russia accounts for nearly 40% of all the natural gas and 26% of all the petroleum imports into the EU. The union thus realizes the importance of developing renewable energy sources internally to reduce this dependence as well as create local jobs. That’s one of the reasons fuel cell companies such as Plug Power are finding attractive partnership opportunities in the European region.

With the development of shale plays, things on the energy front aren’t as pressing for the U.S. However, hydrogen offers several benefits, making it a promising fuel for meeting global energy needs. Though hydrogen as a fuel has been around for decades, the falling costs of renewable energy generation have now made economically viable green hydrogen a real possibility.

Uses and advantages of hydrogen fuel cells

The easiest way to use hydrogen as a fuel is to blend it with natural gas. Existing natural gas transport infrastructure can support the transport of gas blended with a small fraction of hydrogen.  Another major use of hydrogen as a fuel is in the transport segment. This requires energy storage using fuel cells. A fuel cell uses hydrogen to produce electricity that can be used to power vehicles. As the only by-product of this process is water, it is a very environmentally friendly way to generate power — a key advantage of hydrogen fuel cells over gasoline or diesel-powered vehicles.

Further, fuel cells tend to be more compact and recharge faster than batteries. That gives fuel cells an edge over batteries, especially for large vehicles such as trucks. Moreover, in the shipping and aviation segments, where the use of batteries is not feasible, hydrogen fuel cells can be a great low-carbon option. In stationary power generation, too, the excess power can be used to generate hydrogen, through electrolysis, to store for future use. Electrolysis involves breaking water into hydrogen and oxygen using electricity.

Hydrogen fuel cells are thus seen as having a key role in the future energy mix. However, they are not without limitations.

Risks and limitations of fuel cells

First and foremost, using electrolysis to produce hydrogen and then using it again to produce electricity causes significant energy losses. Current battery technology is more energy-efficient. Hydrogen storage and transport also need to be done at low temperatures and high pressure, which itself requires substantial energy. Hydrogen’s highly combustible nature adds to the challenges in its storage and transport.

Another key limitation in the use of hydrogen fuel cells in the mobility sector is the limited availability of supporting infrastructure, such as filling stations. At the end of 2019, only 25,210 fuel cell electric vehicles were in use globally compared to 7.2 million battery electric vehicles. Similarly, there were only 470 hydrogen refueling stations worldwide at the end of 2019. In comparison, there were 0.8 million electric chargers, excluding 6.5 million private, slow chargers used mainly in homes. Higher penetration of battery-powered electric vehicles means that the incentive to develop infrastructure to support the development of fuel cells isn’t high. That may significantly limit the future adoption of fuel cells in transport applications.

In addition to the above risks, fuel cell stocks such as Plug Power and FuelCell Energy face several company-specific problems such as high customer concentration and persistent losses. For that reason, despite the attention these stocks are getting, it would be wise to exercise caution while deciding to invest in them.

The Motley Fool, by Rekha Khandelwal, March 26, 2021

The Saudi leadership is currently contending with the post-Donald Trump era’s new realities. U.S. President Joe Biden is the new sheriff in town, thus there is no longer an American president in the White House bending over backward to defend Saudi Crown Prince Mohammed bin Salman (MBS).

From Trump’s reaction to the murder of Saudi journalist Jamal Khashoggi to his administration’s strong support for the Saudi-led military campaign in Yemen, Biden’s predecessor was perhaps the most Saudi-friendly American president ever.

As a candidate, Biden made it clear that he would deal with the Saudi kingdom, which the former vice president called a global “pariah,” in very different ways. By temporarily freezing arms sales to Riyadh and ending U.S. support for Saudi Arabia’s “offensive” military operations in Yemen, Biden is to some extent making good on these campaign promises.

It is fair to ask how Riyadh might look to foster stronger relations with “alternative powers” in order to offset risks amid the Biden era. This raises questions about how Biden’s presidency might serve to push Saudi Arabia closer to Russia, especially if Riyadh seeks to further diversify its global partnerships at a time in which the kingdom is less confident in the U.S. as a security guarantor.

To be sure, the strengthening of relations between Saudi Arabia and Russia goes back a number of years, predating Biden’s presidency.

Although the Syrian crisis that erupted in 2011 fueled high levels of friction between Riyadh and Moscow, once the Saudi kingdom essentially came to terms with the fact that Bashar Assad’s government essentially “won” the civil war, Riyadh began looking at Moscow differently.

The Saudis did not welcome the Russian intervention in defense of the Iran-backed Damascus regime; however, the kingdom’s leadership did take stock of Moscow’s decisive action, which contrasted significantly from the Barack Obama administration’s decision in Syria, particularly regarding the “red lines” fiasco from 2013.

The lesson learned by various Arab regimes, including Saudi Arabia’s, was that Russia stands by its allies and partners in the region unlike the U.S., which more Gulf states began seeing as increasingly unreliable.

Moscow-Riyadh relations

King Salman’s historic visit to Moscow in October 2017 was a watershed in bilateral relations. While the Russians hosted Saudi Arabia’s ruler, the two countries signed 15 agreements with the Russian Direct Investments Fund (RDIF) and Saudis’ Public Investment Fund (PIF), agreeing to make investments worth more than $1 billion along with the launch of projects in domains that included energy, defense, petrochemicals, logistics, technology and transport infrastructure.

During the king’s visit, the Saudis signed an agreement to purchase Russia’s S-400 missile defense system – a troubling sign for Washington, which has staunchly opposed its allies and partners in the region such as Turkey and Iraq looking to the Kremlin for this air defense system.

One year later, the Khashoggi murder case afforded Russia’s leadership the chance to bring MBS closer to Moscow and further away from the West.

While the outrage over the dismemberment of Khashoggi at the Saudi Consulate in Istanbul in October 2018 severely damaged MBS’s reputation and image in the West, Putin’s government made it clear to Riyadh that this file would not interrupt the upward trajectory in Russian-Saudi relations.

The G-20 summit in Argentina, held less than two months after Khashoggi’s killing, highlighted this dynamic. This became especially apparent when Putin high-fived MBS at the event where Western officials were keen to avoid being cordial to the Saudi crown prince, at least when cameras and journalists were present.

The message is clear: Russia is content to continue investing in stronger ties with Saudi Arabia without allowing human rights issues to strain bilateral relations.

Putin’s response to the Aramco attacks of September 2019 was also illustrative of the Kremlin’s efforts to further capitalize on Riyadh’s growing unease with its reliance on Washington as the kingdom’s security guarantor.

Shortly after that episode, Putin was in Ankara with President Recep Tayyip Erdoğan and Iranian President Hassan Rouhani when he responded to the attacks on the Saudi oil infrastructure.

From the Turkish capital, Russia’s head of state took advantage of the opportunity to tell the Saudis that they ought to follow in Turkey and Iran’s footsteps in terms of deepening defense relations with Moscow.

Putin stated, “We are ready to provide respective assistance to Saudi Arabia, and it would be enough for the political leadership of Saudi Arabia to make a wise government decision – as the leaders of Iran did in their time by purchasing S-300 and as President Erdoğan did by purchasing the latest S-400 ‘Triumph’ air defense systems from Russia.”

He went further, maintaining that Russian weaponry would be able to protect Saudi infrastructure from any such future attacks.

Today, one month into the new U.S. administration, the Washington-Riyadh partnership is strained. The Saudis are not pleased about the fact that Biden, as a presidential hopeful in 2019, said the Saudi regime has “very little social redeeming value.”

Nor is it welcome news in the kingdom that the U.S. leadership plans to soon release an unclassified summary of findings of MBS’s purported role in Khashoggi’s killing.

Putin’s government has demonstrated to MBS that Moscow will not put any pressure on Saudi Arabia (or any Arab state) when it comes to human rights.

These dynamics give the Kremlin an opportunity to strengthen Russia’s relations with Riyadh – a factor which the Biden administration cannot ignore.

While Moscow continues pushing to create a more multipolar world, Russia will likely work hard to bolster its ties with Saudi Arabia at the expense of the Washington-Riyadh partnership as Saudi officials worry about the kingdom’s relationship with Biden’s administration.

Limits to the partnerships

Looking ahead, there is quite a bit about Putin’s foreign policy that MBS and others within the Saudi leadership will find appealing.

Furthermore, as Russia lacks the type of democratic institutions and civil society that exist in the U.S. and European countries, MBS knows that public opinion in Russia will have less bearing on Moscow’s dealings with Riyadh compared to the ways in which Washington and London approach their historic partnerships with the kingdom.

There is every reason to expect the Russians to continue promoting their brand in the Arab region with Saudi Arabia being an important part of this audience.

Nonetheless, it is unrealistic to expect the Russians to quickly replace the U.S. as Saudi Arabia’s most important partner on the international stage.

As Arman Mahmoudian, an expert on Russia who is an advisor at Washington-based geopolitical risk consultancy Gulf State Analytics, explained, “Saudi Arabia sees Russia as leverage over the United States more than an alternative power to the United States.”

Two important factors will prevent the Saudis from ever considering a permanent geopolitical pivot away from Washington that establishes Moscow as the kingdom’s top international partner.

First, Russia is less powerful than the U.S. as a military force in the Middle East, particularly in the Arabian Peninsula.

Second, Moscow has an Iran-friendly foreign policy that has fueled “a sort of genuine distrust toward Russia on the part of the Saudi leadership.”

Until these factors change, Saudi Arabia will likely remain far more under the U.S.’ influence than the Russians’.

The extent to which Putin can further capitalize on tensions between MBS and the West will be important to monitor when analyzing what comes next for Russia-Saudi Arabia relations.

Now that MBS no longer has Trump in the White House and there is a Democratic leadership in Washington, we could witness some strengthening of Moscow-Riyadh relations, albeit with real limitations.

*CEO of Gulf State Analytics, a Washington-based geopolitical risk consultancy

*Intern at Gulf State Analytics