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How Kinder Morgan Is Transitioning to the Future of Energy

Kinder Morgan is currently one of the largest energy-infrastructure companies in North America. It operates 70,000 miles of natural gas pipelines, nearly 10,000 miles of oil and refined-products pipelines, and has an extensive storage footprint. The bulk of its assets transport, process, and store fossil fuels, which are vital to supporting the U.S. economy.

However, the economy is slowly transitioning to cleaner fuel sources. That could impact Kinder Morgan’s business in the coming years unless it joins the transition. The company’s management team addressed these concerns during its recent fourth-quarter conference call. Here’s what they had to say about the company’s plans for the energy-market transition.

Focused on the cleanest fossil fuel
Kinder Morgan is already a step ahead of many fossil fuel-focused companies because it generates the majority of its revenue by operating natural gas infrastructure. That’s key because it’s a cleaner fuel, and its increased usage is important for reducing greenhouse gas (GHG) emissions. It’s also why electric utilities are investing in new natural gas power plants.

These plants currently have a competitive advantage over renewable energy in that they produce steady electricity. By contrast, renewables can be intermittent because the sun isn’t always shining and the wind doesn’t always blow. However, as the costs for battery storage come down, this competitive advantage will fade away.

Still, as CEO Steve Kean stated on the call, the company’s large-scale natural gas business “will continue to be needed to serve domestic needs and export facilities for a long time to come and continue to reduce GHG emissions as we expand its use around the country and the globe.” In the near term, the value of this business “increases as more intermittent resources are relied on for power generation” because “natural gas is clean, affordable, and reliable. And pipelines deliver that commodity by the safest, most efficient, most environmentally sound means.”

Looking ahead to the energy transition
While natural gas will remain vital to the economy for a long time, Kinder Morgan is already looking toward the future of energy. Kean noted that:

Also among the energy transition businesses that we participate in today is the storage handling and blending of liquid renewable transportation fuels in our products pipelines and terminals segments. We’ve handled ethanol and biodiesel for a long time. Today we’re handling about 240,000 barrels a day of a 900,000 barrel a day ethanol market, for example. We also handle renewable diesel today. That’s part of our business that is ripe for expansion on attractive returns.

As the CEO notes, Kinder Morgan has already started to pivot some of its liquids assets toward renewable fuel sources like ethanol, biodiesel, and renewable diesel. That’s beginning to open up new expansion opportunities.

For example, it’s investing $18 million to expand its market-leading Argo ethanol hub to add 105,000 barrels of ethanol-storage capacity and enhance the system’s ability to load this fuel into transportation vessels like rail and barges. Meanwhile, as demand for these fuels rise, the company should be able to leverage its existing footprint to capture additional expansion opportunities.

Kinder Morgan sees several other adjacent opportunities to participate in the energy transition in addition to what it’s already doing. Kean stated that:

Moving out the next concentric circle of opportunities is a set of things that we can largely use our existing assets and expertise to accomplish. Those include things like blending hydrogen in our existing natural gas network and transporting and sequestering CO2. A further step out would be businesses that we might participate in if the returns are attractive, such as hydrogen production, renewable diesel production, and carbon capture from industrial and power plant sources.

Hydrogen could be a massive opportunity since it could eventually replace natural gas as an emission-free fuel source. In addition to that, the company already has expertise in transporting and sequestering carbon dioxide since it uses that greenhouse gas to produce oil out of legacy fields in Texas. Thus, it’s well-positioned to potentially capture it from industrial sources and use it for oil production, or sequester it in abandoned oil and gas fields to reduce the economy’s carbon footprint.

While the company plans to participate in the energy transition, Kean made one thing clear: “[A]s always, we will be disciplined investing when returns are attractive in operations that we are confident we can build and manage safely, reliably and efficiently.” He said that the company “will not be chasing press releases” because “energy transitions for a variety of reasons take a very long time.” The company plans to “look hard as we lead” and will “evolve to meet the challenges and opportunities.”

A key theme to watch in the coming years
Kinder Morgan currently focuses on the infrastructure needed to transport and store the fossil fuels vital to supporting the economy. However, it’s well aware that the economy is moving toward cleaner fuel sources. That’s why it’s also beginning to transition its business to support the future of energy.

While it’s taking small steps now, Kinder Morgan will need to continue making strides to keep up with this change, which investors need to watch closely in the coming years.

The Mootley Fool, Editor: Matthew DiLallo, January 27, 2021

IEA Says Oil Market Outlook Clouded by Vaccine Roll-Out Variables

Oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, an official with International Energy Agency (IEA) said.

“Producers are grappling with huge uncertainty about where this goes from here,” said Tim Gould, head of energy supply outlooks and investment.

“That’s not just in terms of economic recovery but indicators we wouldn’t necessarily normally be looking at: (such as the) levels of trust in different countries about vaccines.”

OPEC and allied countries such as Russia agreed this month to cut crude production through March in a bid to match abundant supply with demand which has sagged amid surging virus cases while vaccination programmes get underway.

While the pandemic has prompted some energy majors and watchdogs to predict that a peak in the world’s demand for oil has been brought nearer or may have already come and gone in 2019, Gould said the IEA disagreed.

“As things stand, with the pace of change we see on the structural side is not enough in our view to deliver a peak anytime soon.”

“Growth in the economy, recovery in the economy will sooner or later bring oil demand back to 2019 levels. The 2020s in our view are the last decade in which you’re likely to see increasing oil demand,” he added.

Reuters, Editor: Noah Browning, January 27, 2021

OPEC Says Its Outlook for the Oil Market Is Still Clouded by Pandemic Fears

The closely watched oil market report comes as coronavirus cases continue to surge worldwide, with new lockdowns imposed in Europe and parts of China. OPEC said it expected global oil demand in 2021 to increase by 5.9 million barrels per day year over year to average 95.9 million bpd.

“Anyone who keeps his or her finger on the pulse of the oil market knows that prices are currently driven by expectations and not by immediate realities,” said Tamas Varga, senior analyst at PVM Oil Associates.

Oil producer group OPEC on Thursday kept its 2021 forecast for global crude demand growth unchanged, but warned uncertainties over the impact of the coronavirus pandemic remain high.

The closely watched oil market report comes as Covid cases continue to surge worldwide, with new lockdowns imposed in Europe and parts of China.

In recent weeks, optimism about the mass rollout of coronavirus vaccines appears to have been tempered by the resurgent rate of virus spread.

It has resulted in oil producers trying to orchestrate a delicate balancing act between supply and demand as factors including the pace of the pandemic response continue to cloud the outlook.

“Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior,” OPEC said Thursday.

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

The 13-member group said it expected global oil demand in 2021 to increase by 5.9 million barrels per day year on year to average 95.9 million barrels per day. The forecast was unchanged from last month’s assessment.

The group said world oil demand growth in 2020 declined by 9.8 million barrels per day year on year to average 90 million barrels per day. The group noted the fall was marginally less than expected in December.

OPEC said its 2021 forecasts “assume a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

Oil prices ‘driven by expectations’
OPEC and its non-OPEC allies, an alliance sometimes referred to as OPEC+, cut oil production by a record amount in 2020 in an effort to support prices, as strict public health measures worldwide coincided with a fuel demand shock.

OPEC+ initially agreed to cut output by 9.7 million bpd, before easing cuts to 7.7 million and eventually scaling back further to 7.2 million from January. OPEC kingpin Saudi Arabia has since said it plans to cut output by an extra 1 million barrels per day in February and March to stop inventories from building up.

International benchmark Brent crude futures traded at $55.77 a barrel on Thursday, down 0.5% for the session, while U.S. West Texas Intermediate futures stood at $52.76, around 0.3% lower. Oil prices are currently on pace for their third consecutive week of gains.

“Anyone who keeps his or her finger on the pulse of the oil market knows that prices are currently driven by expectations and not by immediate realities,” Tamas Varga, senior analyst at PVM Oil Associates, said in a research note.

“Those who disagree are recommended to have a quick look at the forecasts of H1 2021 oil demand over the past few months and compare these estimates with price developments,” he added.

Ahead of Thursday’s publication of its oil market report, OPEC had steadily lowered its demand growth forecasts for 2021.

Other major forecasters, including the International Energy Agency and the U.S. Energy Information Administration, have also downgraded their oil demand growth estimates for 2021 in recent weeks.

CNBC, Editor: Sam Meredith, January 27, 2021

The U.S. Remains Important in the Oil Market, Even if Biden is Less Vocal than Trump: UAE Energy Minister

The U.S. will remain important in oil markets, even if President-elect Joe Biden is less vocal than President Donald Trump, says UAE Energy Minister Suhail al-Mazrouei.

Outgoing President Trump used to post on Twitter about crude oil and even communicated with OPEC leaders Saudi Arabia and Russia during the oil price war last year. Biden is expected to take a different approach.
Al-Mazrouei also weighed in on the timeline for a recovery in the oil market.

The U.S. will always play an important role in global energy markets, even though President-elect Joe Biden is likely to be less vocal than President Donald Trump about oil, the UAE’s energy minister told CNBC ahead of Inauguration Day.

“The United States of America is a major player now … with its production, with the fact that this industry that has been developed through shale oil and gas has created lots of jobs and created an economy by itself,” said Suhail al-Mazrouei.

That won’t change under a new U.S. president who is expected to focus more on renewable energy and less on oil, he said.

President Trump used to post on Twitter about crude oil and even communicated with OPEC leaders Saudi Arabia and Russia during the oil price war last year. Biden is likely to take a different approach, but al-Mazrouei said the U.S.’s leading role in energy markets is likely to remain.

“Whether President Biden and the new administration [will] be vocal on Twitter or not … the role of the United States will be always important,” he told CNBC’s Hadley Gamble on Tuesday as part of the virtual Atlantic Council Global Energy Forum.

Timeline for Oil Market Recovery
Separately, the UAE energy minister said he’s “optimistic” that the oil market will recover before OPEC+ cuts expire in April 2022.

The oil-producing group and its allies in April reached an agreement to cut a historic 9.7 million barrels per day in an effort to support crude prices after the coronavirus pandemic destroyed demand. The cuts will taper gradually until April 2022, when the deal will expire.

In view of the continuing global health crisis, the alliance in December agreed to raise production by 500,000 barrels per day instead of the initial 2 million bpd. This month, OPEC+ agreed to hold output largely steady, while Saudi Arabia announced an additional voluntary cut of 1 million bpd for February and March.

Al-Mazrouei said there are still many barrels of oil in storage and the market is not balanced yet.

“We continue drawing down on the inventories until we reach some reasonable levels, and hopefully that will be done by … the timeframe that we set, which is April 2022,” he said.

“I’m optimistic that we would reach it before [that],” he added. “But let’s say, even if it takes us … to that date, then I think that will take us to balance.”

Oil prices have somewhat recovered on the back of vaccine hopes and production cuts, but are still down from pre-Covid levels and are expected to average just above $50 per barrel this year.

The International Energy Agency this week cut its forecast for global oil demand in 2021, pointing to surging Covid-19 cases globally and fresh lockdowns that will further limit mobility.

CNBC, Editor: Abigail Ng, January 27, 2021

Oil Majors Are Eyeing A Suriname Offshore Boom

Majors are eying Suriname as the next big oil player. With recent success in neighbouring Guyana, Suriname offers hope for low-cost oil exploration and production going into 2021. Exxon Mobil, Royal Dutch Shell, Total, Apache are all showing interest in the South American state, hoping Suriname will provide oil for as little as $30 to $40 a barrel thanks to lower production costs. This is well below the average US production cost of almost $50 per barrel.

After years of political unrest, Suriname is eager to make a name for itself in the oil world and encourage economic stability and growth. The hard-hit economy has been further hampered by the Covid-19 pandemic, with the new government looking at the country’s oil potential to drag them out of economic disaster.

Attracting oil investment from foreign companies only became possible after the successful discovery of oil in deep wells in 2015, following around 60 years of failure in shallow waters. At present, state-owned Suriname’s national oil company Staatsolie controls most of the industry.

To encourage investment, Suriname is offering companies 30-year production-sharing agreements, around 10 years longer than those of Latin America’s other oil-rich countries. Following a difficult 2020, emerging oil states such as Suriname and Guyana are expected to dominate licensing rounds this year with such attractive terms.

Oil experts believe there to be at least three to four billion barrels of reserves in Suriname’s waters, providing foreign companies with a bet worth taking for the future of the region’s oil.

Earlier this month, Total and Apache Corporation made an important oil and gas discovery off the coast of Suriname at the Keskesi East-1 well, in Block 58. This brings the total number of oil discoveries in the country to four in 2020, or 1.4 billion barrels of oil equivalent. Total’s Senior Vice President Exploration Kevin McLachlan stated “We are… excited, as new operator of the block, to start the appraisal operations designed to characterize the 2020 discoveries, while in parallel start a second exploration campaign on this prolific block in 2021.”.

In addition, ExxonMobil announced oil and gas finds in Suriname in December. Mike Cousins, Exxon’s Senior Vice President of exploration and new ventures, explained “Our first discovery in Suriname extends ExxonMobil’s leading position in South America, building on our successful investments in Guyana. We will continue to leverage our deepwater expertise and advanced technology to explore frontier environments with the highest value resource potential.”

One recent partnership that’s caught attention in the region is the contract between Maersk Drilling and Total E&P, valued at $100 million. The partnership’s deepwater oil rigs Maersk Valiant and Maersk Develop in Block 58 are expected to start operations this month.

Suriname hopes to follow in the footsteps of neighbouring Guyana, which has attracted significant foreign investment in its oil industry in recent years. Exxon in particular has been investing heavily in the region, commencing production in Guyana’s Liza oilfield in 2019; an area capable of pumping 120,000 bpd. Exxon is now looking to develop the Stabroek Block, having signed a sharing agreement with the government, expected to produce 750,000 bpd by 2026.

Oil production in Guyana could extend beyond the next 30 years, presenting an attractive opportunity for longer-term exploration and low-cost production. In 2020, Guyana had an anticipated economic growth of around 50 percent, mainly owing to its burgeoning oil industry. According to the IMF, the country can expect an average annual real GDP growth of around 13 percent over the next four years.

As companies are less willing to become entangled with neighbouring Venezuela, due to its complex political situation and current US sanctions, with the country’s oil exports falling to its lowest levels in 77 years in 2020, Guyana and Suriname offer a bright alternative.

While it is early days for drilling in Suriname, success in Guyana and a clear interest from international oil majors could put the small South American state on the map.

OilPrice.com, Editor: Felicity Bradstock, January 27, 2021

What Would Green Hydrogen Imported from Sunny Deserts Cost?

In a former article we explored six renewable commodities that might power the emissions free world of the future. Among those, green hydrogen has gained most attention in recent months. What would it cost to import green hydrogen?

Conflation of goals
The shift to renewable energy often is advertiser as a shift to energy independence as well.

That might work for some countries with large potential for hydro, wind or solar power but for most countries it is a conflation of goals. Global reduction of carbon emissions is much more important than national energy independence. If part of a country’s energy demand can be met cheaper via imported low carbon energy, low carbon energy will be traded.

Cheap solar power spurs renewable energy export ambitions

Over the last decade, the price of solar panels has decreased at an unimaginable pace. In regions like the Middle-East and South-America the cost of producing solar power consequentially has dropped below 2 dollarcents per kilowatt-hour (kWh). It is to be expected that solar installations in Australia and the Sahara-region soon will follow.

Solar power in these desert regions is available for prices far below wholesale power prices in Europe, the United States, Singapore and Japan. Logically, proposals arise to get this cheap renewable energy to aforementioned markets. Some think enormous new power lines may be the best way to distribute cheap solar power around the world. Others propose converting cheap power to hydrogen, for transport via pipelines or ships.

Shipping in the short term is most probable
The solar potential in desert regions is that big, and the challenge of the energy transition in densely populated northern regions that large, that all routes will probably come to fruition someday.

Despite the extra energy losses in transport and liquefaction, transport of hydrogen via ships will probably be the first viable option. Dutch tank storage giant Vopak in 2019 announced an investment in in the German startup Hydrogenious (developing a liquid organic carrier able to bind hydrogen). Vopak also joined a feasibility study for conversion of gaseous hydrogen to liquid ammonia, for use as a marine fuel. In July 2020 Air Products announced a $5 bln plant for production of ammonia using wind an solar power in Saudi-Arabia. Starting in 2025 it would export the renewable commodity to global markets.

Estimates for the cost of green hydrogen produced in the Middle-East

If by 2025 renewable hydrogen or hydrogen derivatives would indeed be available in ports all over the world that would off-course be great for the global energy transition. In the following an attempt to estimate the costs of one kilogram of hydrogen, originating from a 1 gigawatt solar electrolysis plant in Saudi-Arabia.

Basic assumptions and bandwidths:

  • Solar power generation cost. 1 up to 2 dollarcents per kilowatt-hour (kWh);
  • Solar capacity factor. ±20%;
  • Electrolyzer cost. For long, the estimate of the cost of electrolyzers has been about $1,000 per kilowatt. Recent reports have claimed cost could fall rapidly with growing deployment, $200 per kilowatt might even be possible before 2025;
  • Electrolyzer efficiency. 65 to 80%;
  • Design lifetime electrolyzer: 10-15 years;

Cost of power per kilogram of hydrogen:

At the mentioned efficiency, 50 up to 60 kWh of solar power is required for every kilo of hydrogen produced. At 1 up to 2 dollarcents per kWh this results in a power cost of $0.50 to $1.20 dollarcents per kilo of hydrogen;

Cost of the electrolyzer per kilogram of hydrogen:

In order to convert all solar power originating from 1 gigawatt of solar panels into hydrogen, an electrolyzer capacity of 1 gigawatt is required. This would cost $200 mln up to $1 bln. At a capacity factor of 20% and over a 10 to 15 year lifespan the electrolysis plant would convert 17,5 up to 26,3 billion kilowatt-hour into hydrogen. Given the efficiency of 50 up to 60 kWh per kilogram that would result in 290 million up to 525 million kilograms of hydrogen over the project lifetime. That gives a spread of $0.40 up to $3.50 of ‘electrolyzer cost’ per kilogram of hydrogen produced.

What would it cost to get the hydrogen to Europe?

The production cost* of solar hydrogen in the Middle-East would end up somewhere just under a dollar to up to five dollar per kilogram. Natural gas derived ‘grey hydrogen’ is prized between one and to dollar per kilogram. Mostly depending on the real cost and lifespan of electrolyzers, solar derived hydrogen might all-ready be competitive with fossil fuel derived hydrogen.

The question remains what it would cost to get this fairly affordable hydrogen to customers all over the world. Estimates for the cost of either liquefaction of hydrogen or conversion of hydrogen to ammonia are hard to find. The cost for liquified natural gas (LNG) might give an indication. Liquefaction of natural gas, shipping between the Middle-East and Rotterdam, handling and one month of storage would cost around $120 per tonne LNG, or about 1 cent per kilowatt-hour of energy content imported.

LNG is about 7 times denser than liquid hydrogen, resulting in significantly less hydrogen transported for a given ship type. Furthermore these estimates for LNG assume consumption of local energy mix for liquefaction and regular marine fuels for shipping. If the hydrogen produced is also to serve for its own liquefaction, transport and processing, more than 30% of the hydrogen would be consumed in the process, resulting in considerably higher costs.

*Aside from power cost, fresh water and labour cost will add to the price of hydrogen. Several optimizations (adding wind power, extra solar power and/or batteries) might help bring down the estimated cost.

ARA Oil Product Stocks Rise (Week 3 – 2021)

January 21, 2021 – The total amount of oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose over the past week, according to consultancy Insights Global.

The overall rise was the result of significant increases in stocks of gasoil and fuel oil.

Low end-user demand for diesel made tank storage an attractive option for northwest European refiners, and inventories climbed to reach their highest level since 5 November.

Road fuel consumption has fallen so low in northwest Europe that some market participants in the region have been blending diesel into heating oil cargoes.

Demand for heating oil in northwest Europe is receiving some seasonal support from low temperatures. Gasoil cargoes arrived into the ARA area from Finland and Russia, and departed for the UK and France.

Fuel oil inventories rose by even more than those of gasoil, owing to an influx of cargoes from the Baltic area. Stocks rose, as Aframax tankers arrived into the ARA area from Russia and Estonia, with smaller cargoes arriving from Latvia and France.

Fuel oil demand within the ARA area is under pressure this week from poor weather around Antwerp, which is disrupting bunkering activity.

Gasoline inventories rose, supported by a week on week downturn in outflows from the region. No gasoline tankers departed for west Africa and
transatlantic exports fell on the week.

Tankers did depart for the Mideast Gulf and the Mediterranean, and arrived from Finland, Italy, Sweden and the UK. Some blending components arrived from France, while some finished grade material went up the Rhine into eastern France on barges.

Naphtha stocks fell back from the six-month highs reached the prior week, dropping as barge flows from the ARA area to inland Rhine destinations held steady at a high level. The fall in stocks came despite the arrival of tankers from Algeria, France and Norway.

Jet fuel inventories were virtually unchanged on the week, as the departure of a few small cargoes to the UK was largely offset by the arrival of a single cargo from the Mediterranean.

Reporter: Thomas Warner

ARA Oil Product Stocks Went Up (Week 2 – 2021)

January 14, 2021 – The total amount of oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose over the past week, with a rise in naphtha stocks offsetting a downturn in gasoil inventories, according to consultancy Insights Global.

Naphtha stocks reached their highest since June 2020 during the week to yesterday, with inflows to the region being supported by firm demand from petrochemical end-users around northwest Europe. An LR2 arrived from Algeria and cargoes also arrived from Russia, while no naphtha departed the region on seagoing tankers.

The volume departing the region on barges for petrochemical sites along the river Rhine was stable on the week at a high level, with naphtha pricing well below the level of rival petrochemical feedstocks.

A fall in gasoil stocks largely offset the rise in naphtha inventories. Gasoil stocks fell as well, weighed down by the departure of tankers for west Africa and France, where refinery shutdowns are weighing heavily on overall production. Only three of the country’s seven refineries are currently processing crude.

France also received some gasoline from the ARA area, delivered by barge along the river Rhine, while gasoline barge flows into the ARA area from German refineries remained steady at a high level. The overall volume of gasoline held in independent storage rose despite the arrival of barges from Germany and gasoline tankers from France, Russia, the UK and Ireland, as tankers departed the region for Canada, west Africa and the US. Tonnes of European gasoline was booked to head transatlantic last week, a one-month high.

Fuel oil stocks were up, with the departure of low sulphur cargoes to the Mideast Gulf and Mediterranean areas being more than offset by the arrival of an aframax from Estonia and smaller cargoes from France, Germany, Norway, Russia and the UK. Jet fuel stocks fell. A part cargo arrived into the ARA area from the Mideast Gulf on board the Ploutos, which had sailed round the cape of Good Hope to take better advantage of the contango in the Ice gasoil forward curve.

Reporter: Thomas Warner

ARA Oil Product Stocks Fall (Week 1 – 2021)

January 7, 2021 — The total amount of oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub dropped over the past week, with steep falls in fuel oil, naphtha and jet fuel inventories more than offsetting gasoline and gasoil stock builds, according to consultancy Insights Global.

Stocks of gasoline and gasoil rose during the week to 6 January as the resurgence of Covid-19 in Europe prompted another round of lockdown measures in key markets, including Germany.

Gasoline stocks went up, buoyed by the arrival of cargoes from France, Portugal, Russia, Spain and the UK. Outflows to the US fell on the week.

Tankers carrying gasoline also departed ARA for the Mediterranean, Mexico and west Africa.

Gasoil stocks increased, with the arrival of cargoes from the Baltic states and Russia offset by the departure of cargoes for France and Germany.

The volume of diesel heading inland on barges was steady on the week, but more heating oil made its way inland as temperatures dropped.

Stocks of all other surveyed products fell. A very-large crude carrier (VLCC) loaded fuel oil in Rotterdam for the first time since May 2020, according to Vortexa data.

The Haburt loaded fuel oil in Rotterdam on 3 January before heading to Scapa Flow in Scotland to load some Kraken crude, and then departing for Singapore.

Kraken is a heavy crude grade that some Asian buyers have been using for fuel oil blending. Fuel oil cargoes also departed ARA for Saudi Arabia, the Caribbean and the Mediterranean, and arrived in smaller quantities from Denmark, Poland, Russia and the UK.

Naphtha stocks, having risen the previous week. High naphtha demand from petrochemical plants along the river Rhine prompted a week-on-week increase in naphtha volumes heading inland on barges from the ARA area. Naphtha cargoes arrived in ARA from Norway and Russia.

Jet fuel stocks fell, dipping back below 1mn t. No jet fuel arrived in the ARA area from elsewhere while two small cargoes departed for the UK.

Reporter: Thomas Warner

ARA Oil Product Stocks Tick Back Up (Week 50 – 2020)

December 10th, 2020 — Inventories of oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub have risen over the past week, according to data from consultancy Insights Global, after reaching their lowest since April a week earlier.

Total oil product stocks rose in the week to 9 December, reversing some of the losses recorded the previous week when product stocks suffered their steepest week on week decline since January. European demand remains under heavy pressure from lockdown measures in key markets France and Germany.

A slight week on week recovery in Rhine water levels helped bring more refined products into the ARA area from the European hinterland.

Gasoline stocks were lower, with outflows from the region rising on the week. Tankers departed for South Africa, the US and west Africa.

The volume of gasoline blending components coming into the region from the European hinterland was stable at a high level for a third consecutive week, supported by the rise in Rhine water levels. Component flows into the ARA from inland Rhine destinations was very limited for the preceding two months before rising in late November.

Fuel oil inventories also fell, reaching three-month lows. As with gasoline, the drop in stocks was the result of high outflows to regions where end-user demand is firmer.

Tankers departed for the Mediterranean, west Africa and Saudi Arabia. The tanker which departed for Saudi Arabia was an Aframax, probably containing high sulphur fuel oil.

Stocks of all other surveyed products rose. Low local demand for road fuels combined with a seasonal slowdown in the northwest European market to limit flows from the ARA area up the Rhine into Germany. Tanker inflows also fell on the week, with relatively low volumes arriving from the USA and Saudi Arabia.

But tanker outflows were also low, with just one cargo departing for the UK.

Naphtha stocks leapt on the week, after falling a week earlier. The recovery in inventory levels was the result of cargoes arriving from the Russian Baltic and Algeria against a backdrop of poor demand from gasoline blenders in the ARA area. Flows of naphtha up the river Rhine to petrochemical end-users slowed on the week, but flows on the route are unlikely to stay low owing to naphtha’s competitive pricing relative to other feedstocks.

Jet fuel stocks rose after reaching their lowest weekly level since August a week earlier. The arrival of tankers from Kuwait, North Sea floating storage and the UAE offset a rise in westbound transatlantic departures, as well as the departure of cargoes for the UK and Ireland.

Reporter: Thomas Warner