Author: Greta

U.K. Union Could Seek Ballot on Strike at Stanlow Next Week

(Bloomberg) — The Unite union could decide as early as
next week to hold a ballot on strike action at Essar Stanlow
refinery, Regional Coordinating Officer Mick Chalmers says by
phone.
* Workers have until Monday to decide on whether to take
voluntary redundancy
* Majority of workers on the site are in the union
* NOTE: Essar is offering voluntary redundancies to about 184
employees that could be affected by the closure of chemicals
operations on the site
* NOTE: Union said March 15 that it would hold a vote on a
strike
* NOTE: Stanlow refinery can process 195k b/d, according to data
compiled by Bloomberg

Reporter: Bill Lehane

Gasoil, jet fuel lead rise in ARA stocks

Argus — Oil product stocks held in independent storage tanks in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose in the week to 21 March, as higher gasoil and jet fuel stocks offset declines in other products.

Gasoil inventories hit 21-week highs following arrivals from India, Russia and the US, data from consultancy PJK showed. The Primorsk diesel-loading schedule for March has been robust. And while some inland Rhine demand emerged, mild European temperatures are generally curbing heating oil requirements, whilst seasonal demand from the agricultural sector has yet to materialise. Gasoil was exported from the ARA region to the UK during the week.

Jet fuel stocks rose following the arrival of the Golden Shiner, carrying product from the Mideast Gulf. Viable arbitrage economics has brought jet fuel into Europe from the east of Suez and the US this month. Imports are set to slow in the coming weeks. At least 1.3mn t has been booked on this route so far for April, but most arrivals are scheduled for the second half of the month. The market appears to be prepared for lower import levels, however, with stocks currently at 26-week highs. Contango in underlying Ice gasoil futures over the past week, and in the swaps structure for most of the year, has encouraged firms to put jet fuel into tanks.

Fuel oil inventories fell to one-year lows, as a backwardated swaps structure ahead of the International Maritime Organisation’s (IMO) 2020 sulphur cap has supported selling interest and drained tanks in recent months. Fresh export demand to the US also weighed on inventories across the whole of Europe, as the fuel oil market tightened in the US ahead of sanctions against Venezuela — the largest fuel oil supplier of the US. The Shell-chartered Maran Canopus is currently loading in Rotterdam to take cracked fuel oil to Singapore. Fuel oil arrived into the ARA trading hub from France, Russia and the UK during the week, and was exported to Suez for orders.

An uptick in demand from west Africa is helping clear stocks of European gasoline. Inventories in west Africa’s largest demand hub, Nigeria, have fallen by around 20pc since the presidential election last month. Tankers loaded with product were provisionally booked with west African discharge options between 9-15 March, shipping reports show, the highest weekly tally since October last year. Viable arbitrage economics to send gasoline to the US from northwest Europe led to some cargo loadings from the ARA region in the past week. But these were lower than expected, as many fixtures booked on this route will load towards the end of the month.

Naphtha arrived into the trading hub from Estonia, France, Russia, the UK and the US during the week. A cargo exported ARA naphtha to Brazil. Buying interest from the gasoline blending sectors in northwest Europe kept Rhine demand steady.

Reporter: Rowena Caine

Tank Terminal Market Model – Part 1

Last week was a short review of the profit drivers for physical traders, where we explained in short how traders make profit. There are a lot of different factors influencing the tank storage sector. Mostly the imbalances in the sector create opportunities for financial players. The market appears to be complex and demonstrating a lack of transparency. PJK International has developed a Tank Terminals Commercial Performance Model to quickly gain insight and a higher proficiency of the tank storage market. This is the first part related to the Tank Terminal Market Model, next week we will publish the second part for you to be able to connect the dots.  

MARKET FUNDAMENTALS

First we describe the market fundamentals as shown in the image below. Relevant market fundamentals for the oil storage business are the shape of the forward curve, the competitive market structure and the logistical factors supply, demand, imbalances and trade flows. The shape of the forward curve is determined on oil futures markets. The oil price forward curve can be upward sloping (contango) or downward sloping (backwardation). In a backwardated market is less demand for tank storage than in case of a contango. Inventory levels are also lower in a backwardation compared to a contango. Both demand and tank availability are therefore affected and this influences the commercial setting.

Furthermore the competitive market structure consists of a supply-side and demand-side market structure. Tank capacity and market shares of various terminal operators are key factors that determine the supply-side competition. The number of players, their size and diversity are key factors on the demand-side of the market. Both demand- and supply-side competition influence commercial performance of the terminals. And also Tank terminals are part of the oil products supply chain and therefore logistical factors such as local product demand, regional refinery output, imbalances and trade flows are very relevant. Developments in these factors influence the demand and requirements for tank terminal capacity.

MARKET DYNAMICS

Besides the market fundamentals we have to take into consideration the market dynamics. Relevant market dynamics are inventory levels, arbitrage and trade flows, changes in product specifications and variation in vessel sizes. These market dynamics have a direct influence on operations and on terminal requirements. A terminal that can accommodate and can adapt better and faster to these dynamics compared to competitors will likely show superior commercial performance. From the previous section you could already see that market dynamics are linked to market fundamentals.

CONCLUSION

The market fundamentals and the market dynamics are important building blocks for Insights-Global’s commercial performance model. If you have any questions regarding the above mentioned subject please do not hesitate to us. 

ARA Fuel Oil Stockpiles Slump to 1-Year Low as Exports Rise

(Bloomberg) – ARA fuel oil stockpiles slumped to their
lowest level in a year on higher exports to Asia and West
Africa, according to PJK International.
* Fuel oil stockpiles fell in past week, lowest
since March 15 of last year
** VL Prime and Nave Electron, both VLCCs, loaded in Rotterdam
within past week and sailed for Singapore; a third vessel,
Suezmax Summit Spirit, also loaded fuel oil for West Africa,
says Lars Van Wageningen, operations manager at PJK
* Naphtha stockpiles rose, highest since Oct. 25
** Higher imports in past week, including Suezmax shipment from
Algeria; some volumes could be destined for gasoline blending:
Van Wageningen
* Jet fuel stockpiles rose, highest since Jan. 31
** Imports arrived from U.A.E. in past week, while flight
cancellations in Amsterdam amid bad weather may have affected
demand: Van Wageningen
* Gasoil stockpiles drop for third week, fell;
lowest since Feb. 7; lowest for time of year since 2014
** While past week saw a lot of imports in ARA, most volumes
went onwards to other parts of NW Europe as well as to West
Africa, Van Wageningen says; notes that ICE gasoil deliveries,
to be reported next week, will offer signal on level of demand
for physical transport inland along the Rhine

Reporter: Bill Lehane

ARA Independent Product Stocks Rise

London, 7 March (Argus) — Oil product stocks held in independent storage tanks in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose slightly owing to higher naphtha and jet fuel inventories.

Naphtha stocks climbed to their highest level since 25 October. The northwest European naphtha’s discount to benchmark North Sea Dated crude narrowed by $3.75/bl to $4.93/bl in the month to yesterday, reflecting firming demand in the region. Prices have also been supported by a rise in outflows to the Asia-Pacific region, where demand has also been firmer. Tankers arrived in the ARA area from Algeria, Estonia, France, Russia, Spain and the UK.

Jet fuel stocks rose. The Zefyros arrived from the UAE in the past week and offloaded a 35,000t cargo. Tankers departed for the UK and Ireland. Northwest Europe remains an attractive destination for jet fuel cargoes arriving from east of Suez amid ample supply in the Mediterranean and rising supply in the US.

Gasoline inventories were broadly stable, but higher volumes flowed in and out of the area. Northwest European outflows to the US have been supported by falling gasoline stocks on the US Atlantic coast. They fell by 4.2mn bl to 250.7mn bl in the week to 1 March, according to the most recent data from the EIA.

Gasoil inventories were stable too. Overall barge flows to the European hinterland were steady on the week but increasing volumes heading to storage terminals in Strasbourg caused some congestion in the area.

Fuel oil inventories fell to their lowest since 15 March 2018. The two very large crude carriers (VLCCs) Nave Electron and VL Prime departed Rotterdam for Singapore in the past week, while smaller tankers left for west Africa.

Reporter: Thomas Warner

Functions of tank terminals

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Introduction

During the coming weeks we will provide you with relevant information regarding the tank storage market and its influences and opportunities. This week we will focus on the different functions a tank terminal. It is the first of 5 blog articles for you to be able to better understand the drivers of this sector and help you with your commercial decisions.

Functions of a terminal

Tank terminals can have various functions, although commercial clients’ operational requirements tend to focus on the logistics/hub and trading platform functions. These three main functions are:

  • Logistics/hub – function
  • Trading platform
  • Strategic storage

Logistics/hub function

The logistics/hub function is firstly related to the make/break and bulk of the product(s). In addition we can observe an integrated approach between transport modalities such as sea, rail, road and pipeline. Also the correct integration with an industrial complex and buffer stock(s) are considered to be part of the logistical chain of a tank terminal.

Trading platform & Strategic storage

The tank storage activities can also be influenced by the financial markets, as investors, traders and other financial intermediates are active on various trading platforms. How do traders make money and why are they interested in the tank storage industry? Mainly by taking a physical (&paper) position(s), traders take advantage of a price differences between two or more instruments. They will make profit if there is a combination of matching deals that capitalize upon the imbalance. As a trading platform four important factors can be described:

  1. Physical arbitrage
  2. Blending
  3. Contango storage
  4. Optionality

How does physical arbitrage work? During arbitrage the global commodity traders seek to identify and respond to supply and demand differentials between linked markets. Trading firms are essentially in the business of transforming commodities in space (logistics), in time (storage) and in form (processing). Traders with access to physical oil and storage can profit in a contango market, as the futures price of a commodity is above the expected spot price, and people are willing to pay more for a commodity at some point in the future than the actual expected price of the commodity. Besides this also optionality is very important as it builds in flexibility to profit from market opportunities and limits losses if the market turns against positions.

Conclusion

By focussing on the things that matter we can understand better how our clients are making money. As a result it can help shape your business, to have a better insight and to be able to make better operational and commercial decisions. By watching market indicators like the oil price level, market volatility and the forward curves it will provide a better picture of the market. This directly provides in-depth insights into the tank storage market developments. Our weekly report is specifically designed to clarify the mentioned above, and to provide a weekly market snapshot. If you would like more information please do not hesitate to contact me.