Category: Nieuws

Europe is set to ban imports of Russian oil products on Feb. 5 in a move that is already causing massive shifts in global diesel trading.

Buyers are rushing to fill European oil storage tanks with Russian diesel, with flows this month on track to hit a one-year high.

The European Union banned seaborne Russian crude imports from Dec. 5 and will ban Russian oil products from Feb. 5, in a move aimed at depriving Moscow of revenue.

The Group of Seven nations (G7), Australia and the 27 European Union countries also implemented on Dec. 5 a price cap on Russian crude.

This allowed non-EU countries to continue importing seaborne Russian crude oil, but it will prohibit shipping, insurance and re-insurance companies from handling cargoes of Russian crude around the globe, unless it is sold for less than $60.

Russian Urals crude prices fell in December. Russian crude was sold to countries such as India well below the $60 per barrel price cap, according to trading sources, despite Russia saying it would not abide by the cap even if it has to cut production.

Vessels carrying Russian crude loaded before Dec. 5 and unloaded at their destination before Jan. 19 will not be subject to the price cap, according to the U.S. Treasury Department.

The G7 including the United States, Australia and the EU, are designing a similar price cap mechanism for Russia’s refined fuels such as diesel, kerosene and fuel oil, from Feb. 5.

There will be on products trading at a premium to crude oil as well as those trading at a discount, according to a G7 official.

But experts have struggled to see how the price cap will work for refined fuels. Capping oil product prices is more complicated than setting a price limit on crude, because there are many oil products and their price often depends on where they are bought, rather than where they are produced.

DIESEL PRICES

Since Europe is heavily reliant on Russian diesel imports, the Feb. 5 ban is expected to support profit margins for the fuel, analysts say.

WoodMac expects European diesel margins, the profit that a refiner theoretically makes from refining crude into diesel, to average $38 a barrel in the first half of the year, more than double the 2018-22 average based on Reuters calculations.

DIESEL FLOWS

European diesel imports have averaged 700,000 barrels per day (bpd) so far this year, their highest since March 2021, according to oil analytics firm Vortexa, as traders rush to fill tanks ahead of the ban.

At the same time, Europe has been raising its diesel imports from Asia and the Middle East, the two regions expected to shoulder most of its exports after the ban comes into place.

The longer voyages, however, and higher demand for tankers shipping the fuel into Europe, has meant that freight rates are rising, adding to the cost for consumers.

NEW REFINERIES

New refinery projects are expected to raise global diesel production, boosting flows to Europe later in the year and helping to ease the crunch, analysts say.

New additions include expansion of the 400,000 bpd Jizan refinery in Saudi Arabia, Dangote’s 650,000 bpd oil refinery in Nigeria which is expected to come on stream in the first quarter, the new 615,000 bpd al-Zour refinery in Kuwait and a number of sites in China.

Reuters by Ahmad Ghaddar, January 20, 2023

Minister of Energy Csaba Lantos called the strengthening of energy sovereignty a priority task in a program on Radio Kossuth, where he also said that the mild winter had resulted in low gas consumption, which is why the levels of gas storage facilities in Europe and Hungary are very high.

Csaba Lantos said that although Russian gas is still arriving in Europe, it cannot be ruled out that the war will last for a long time, nor that gas prices will rise.

Asked about Ursula von der Leyen, the President of the European Commission’s prediction in December, when she said that there could be a shortage of up to 30 billion cubic meters of gas on the market, the minister said that there are about 25 major LNG terminals under construction in the EU, which could ease the energy crisis and replace natural gas from Russia.

He added that: when the terminals are completed, it will be possible to say that Europe is truly independent from Russian gas. Construction of the terminals has started, but 2023-2024 will be a tough year for Europe.

The minister pointed out that Hungary’s situation is a little different, as it has a relatively large number of gas storage facilities.

As long as the Serbian pipeline is in operation, these storage facilities will be filled, he noted. He also spoke of strengthening Hungary’s energy sovereignty, saying that “we are very dependent on foreign countries for energy, and we need to decrease this dependence.”

As an example, he said that: In 2021, Hungary consumed around 10 billion cubic meters of natural, while 1.5 billion cubic meters could be extracted from Hungarian soil.

The government’s ambition is to reach two billion cubic meters per year. In addition, they will continue to exploit weather-dependent renewable energy sources, such as solar energy and, as a complement, wind energy.

Lantos added that financial resources will be available to achieve these goals. He pointed out that the Hungarian recovery plan was considered one of the best by the European Union, so they hope that “this EU money will come in.”

If for some reason it does not, then other sources will have to be found to implement the program to strengthen energy sovereignty.

Meanwhile, despite the energy crisis, Hungarian households’ energy bills are still among the lowest in Europe.

According to the Hungarian Energy and Public Utility Regulatory Authority, Hungarian households paid the second cheapest price (9.02 euro cents per kilowatt-hour) for electricity in the last month of the year for average consumption in the protected price category (2,523 kilowatt-hours per year) among European capitals.

Households consuming 20 percent more than the average annual consumption were able to access electricity at 10.40 euro cents, also the second cheapest price in Europe, they said.

Regarding natural gas, it was the cheapest in Hungary in December at a reduced price of 2.48 euro cents per kilowatt hour (up to 63,645 megajoules per year). Hungarian households had access to gas at 5.04 euro cents per kilowatt-hour, the second cheapest price in Europe when consumption was 20 percent above the capped amount.

By Hungary Today, January 19, 2023

Global monthly oil production peaked on a monthly basis in November 2018, and there are now real questions as to whether oil output will ever hit those heights again.

A combination of spending discipline and regulatory hurdles appears to have ended the shale boom, but shale production growth may well have slowed anyway.

There have been plenty of ‘peak oil’ predictions in the past, but with growing regulatory resistance, the death of U.S. shale, and less tier-one acreage, this really could be it.

Prior to the pandemic-induced downturn in world oil production, U.S. oil production growth was responsible for 98 percent of the increase in world production in 2018 (as reported in 2019).

Almost all of that growth resulted from rapid increases in shale oil production which accounted for 64 percent of U.S. production (as of 2021).

Fast forward to today when Oilprice.com has declared that “The U.S. Shale Boom Is Officially Over.”

The reasons cited mostly have to do with management “discipline” regarding capital expenditure in favor of shareholder payouts and complaints about “anti-oil rhetoric” and “regulatory uncertainty.”

But there might just be another reason for the slowdown in shale oil production in the United States: There isn’t as much accessible and economical shale oil underground as advertised.

Earth scientist David Hughes laid out his case for this view in his “Shale Reality Check 2021.” (For a summary of Hughes’ report, see my piece from December 2021 entitled, “U.S. shale oil and gas forecast: Too good to be true?”)

There may be other sources of oil worldwide that will somehow make up for the significantly lower growth in U.S. shale oil production.

But no other source seems set to provide the kind of growth U.S. shale oil provided, that is, 73.2 percent of the global increase in oil production from 2008 through 2018.

The world has actually been getting along with less oil for some time now. World oil production proper (crude oil including lease condensate) peaked on a monthly basis in November 2018 at 84.58 million barrels per day (mbpd).

In August 2022 production was 81.44 mbpd. That’s after a pandemic-induced shock that saw production fall to 70.28 mbpd in June 2020.

Neither the U.S. shale oil companies nor OPEC seem ready to increase production significantly (assuming that they can). Russia, among the world’s top three producers, is under heavy sanction and may not be able to produce more oil for export anytime soon.

(Again, it is not certain that Russia can significantly increase production. Except for the pandemic-induced drop Russia has long been on a production plateau of between 10 and 11 mbpd.)

No doubt some new oil savior will be announced soon whether credible or not. In the meantime, the world economy will be faced with limited oil supplies that do not simply grow to meet our fantasies of what we want. The result will be high prices, that is, higher than has been historically the case.

A recession won’t change this dynamic and, in fact, may reinforce it as oil companies are likely to reduce drilling activity when demand for oil slumps. That will make it doubly difficult for those companies to supply growing demand coming out of the next recession.

This is the way things might very well be for a long time if not indefinitely. Many of us who foresaw this day said that we would only see peak world oil production in the rearview mirror. It may take a few more years to determine if November 2018 marked the all-time peak.

OilPrice.com by Kurt Cobb, January 19, 2023

Both ExxonMobil and Chevron have sold off non-core assets in other parts of the world in recent years.

Exxon and Chevron are betting big on oil and gas assets in the Americas as they seek to capitalize on abundant resources with good returns closer to home.

Both U.S. supermajors have said in their releases about the 2023 capital budget allocation that they would focus on the Permian and a handful of oil and gas projects in North and South America.

Over the past year, Exxon quit Russia after the Russian invasion of Ukraine, and Chevron saw its concession agreements in Indonesia and Thailand expire.

In the past few years, Chevron has sold assets in the UK, Denmark, and Brazil, among others, according to The Wall Street Journal. Exxon, for its part, has either sold or is trying to sell assets in Nigeria, Egypt, and Chad, among others.

In its corporate plan through 2027, Exxon said last month that its investments in 2023 were expected to be in the range of $23 billion to $25 billion “to help increase supply to meet global demand.”

More than 70% of Exxon’s capital investments will be deployed in strategic developments in the U.S. Permian Basin, as well as in Guyana, Brazil, and LNG projects around the world.

By 2027, upstream production is expected to grow by 500,000 oil-equivalent barrels per day to 4.2 million oil-equivalent barrels per day, with more than 50% of the total coming from these key growth areas.

Some 90% of the upstream investments that bring on new oil and flowing gas production are expected to have returns greater than 10% at prices less than or equal to $35 per barrel, Exxon said.

Chevron continues to bet on the Permian, too. Its upstream capex—out of organic capex of $14 billion for 2023—includes more than $4 billion for Permian Basin development and roughly $2 billion for other shale and tight assets.

More than 20% of upstream capex is for projects in the Gulf of Mexico, Chevron said last month.

Oilprice.com by Tsvetana Paraskova, January 19, 2023

The supermajors’ record quarterly earnings have drawn repeated criticism from President Joe Biden and officials from his Administration.

The surge in oil and gas prices will translate into record-high 2022 earnings for the two U.S. supermajors, Exxon and Chevron, with their combined yearly profits hitting nearly $100 billion, analysts say.   

The two oil and gas giants benefited from the soaring price of oil and gas following the Russian invasion of Ukraine.

Although oil prices traded below $90 per barrel in the last weeks of 2022 and prices increased on an annual basis by only around 10% last year compared to 2021, extreme volatility and the frequent surges above $100 per barrel helped all oil firms, including the biggest American integrated companies, generate record or near-record quarterly profits and cash flows.    

The yearly earnings for Exxon and Chevron are also expected to be at record highs. Exxon is set to report a record of as much as $56 billion in profit for 2022, while Chevron’s earnings are projected to exceed $37 billion, also a record-high, per estimates compiled by S&P Capital IQ cited by the Financial Times.

The supermajors’ record quarterly earnings have drawn repeated criticism from President Joe Biden and officials from his Administration, who have slammed company strategies to boost share buybacks and raise dividends instead of “passing on the savings” to “lower the prices at the pump” for American consumers.  

Exxon and Chevron’s quarterly earnings after the Russian invasion of Ukraine were already an indication that the yearly profits for 2022 would be at record highs. 

Chevron posted its highest-ever quarterly profits for the second quarter, thanks to high oil and gas prices and tight fuel markets driving multi-year high refining margins.

For Q3, Chevron recorded its second-highest quarterly profit ever on the back of increased oil and gas demand and increased U.S. production. Exxon booked a record $19.66 billion profit for the third quarter, beating the previous record of $17.9 billion it booked for the previous quarter. 

Chevron is “on track to beat” in 2022 its free cash flow record from 2021, chief financial officer Pierre Breber said on the Q3 earnings call in October. 

Chevron said last month its 2023 organic capex would be $14 billion for 2023, consistent with its “long-term plans to safely deliver higher returns and lower carbon,” according to chairman and CEO Mike Wirth. 

“Our capex budgets remain in line with prior guidance despite inflation,” Wirth said. “We’re winning back investors with capital efficient growth, a strong balance sheet, and more cash returned to shareholders.” 

Exxon’s corporate plan through 2027, also unveiled in December, maintains annual capital expenditures at $20-$25 billion, while growing lower-emissions investments to around $17 billion. Investments in 2023 are expected to be in the range of $23 billion to $25 billion to help increase supply to meet global demand.

“We view our success as an ‘and’ equation, one in which we can produce the energy and products society needs – and – be a leader in reducing greenhouse gas emissions from our own operations and also those from other companies,” said chairman and CEO Darren Woods. 

Even if they raise investments in clean energy solutions, both supermajors say that they would continue to deliver oil and gas as the world will still run on fossil fuels for years, and decades, to come. 

The strategy, however, has been slammed by both environmentalists and the White House. Campaigners accuse oil majors of greenwashing, while the Biden Administration is accusing the companies of “war profiteering” and of not investing in American supply, threatening windfall taxes for those who don’t. 

If oil firms don’t invest in increasing production and refining capacity, “they’re going to pay a higher tax on their excess profits and face other restrictions,” President Biden said in October.  

With the decline in U.S. gasoline prices in recent weeks, the rhetoric of blaming the oil industry has subsided at the expense of the Administration taking credit for the falling prices at the pump. 

On several occasions, the American Petroleum Institute (API) has issued statements after criticism from the Biden Administration. In one of the most recent from end-October, API President and CEO Mike Sommers said, “Rather than taking credit for price declines and shifting blame for price increases, the Biden administration should get serious about addressing the supply and demand imbalance that has caused higher gas prices and created long-term energy challenges.” 

“Oil companies do not set prices—global commodities markets do. Increasing taxes on American energy discourages investment in new production, which is the exact opposite of what is needed.”  

Oilprice.com by Tsvetana Paraskova, January 19, 2023

Demand for renewable ethanol in the EU will increase by 13% from now until 2030, according to a new report from the European Commission.

The EU Agricultural Outlook for Markets, Income and Environment 2022-2032, published by the Commission’s DG for Agriculture and Rural Development, forecasts that demand for renewable ethanol will increase to 7.7 billion litres per year in 2030 before levelling out and decreasing slightly to 7.4 billion litres per year in 2032.

According to ePURE, the outlook compiles both recent statistics and projections for the EU27 production, consumption, and trade of agricultural products.

For biofuels, the report notes that while petrol and diesel consumption are expected to decrease by 18% and 21% respectively in 2032 compared to the 2020-2022 average, increasing biofuel blending rates will hold up demand for biofuels during this period.

To achieve this, more EU countries could introduce E10 (with up to 10% renewable ethanol) as the standard petrol grade. Already 15 EU countries plus the UK have adopted the standard.

According to the Commission figures, corn will remain the main feedstock used in the EU for ethanol production by 2032, followed by wheat and sugar beet, while the share of waste and residues in the feedstock mix will grow from 7% to 15% between 2022 and 2032.

The outlook also foresees a decrease in EU protein demand of 4.7%, but the demand for medium-protein feed, feed with an average protein content of 27% (such as ethanol co-product DDGS) will remain stable and even slightly increase.

The report also expects EU imports of ethanol to remain stable while exports will grow at 3.3% annually.

With petrol and hybrid cars continuing to make up an important part of the EU automobile fleet, it’s clear renewable ethanol has a vital role to play in transport decarbonisation – an immediate, cost-effective, sustainable and socially inclusive emissions reduction solution.

By biofuels international, January 19, 2023

Vopak focuses on hydrogen imports in Rotterdam with German company.

Tank storage company Vopak and German hydrogen company Hydrogenious are starting a joint venture in the storage, transport and supply of hydrogen via hydrogen carrier benzyltoluene.

Through LOHC Logistix, the companies are committing to building a plant in Rotterdam that can initially decouple 1.5 tonnes of hydrogen per day from this carrier.

No final decision on the investment has been made yet. This will first require, among other things, the licensing process to be completed successfully. Both parent companies have, however, committed financially to the project.

In June 2022, Vopak announced that it would invest €1 billion in new energy and sustainable commodities until 2030.

LOHC Logistix’s ambition is to ‘take hydrogen logistics to the next level’. It does so based on the LOHC technology developed by Hydrogenious.

LOHCs (liquid organic hydrogen carriers) facilitate the transport and storage of hydrogen by binding it to a chemical compound, a hydrogen carrier such as a paste or an oil. Without such a carrier, the transport of hydrogen would require a temperature of -253°C.

By comparison, for LNG (liquefied natural gas) this is -160°C. In addition, storing hydrogen without a carrier requires tanks that can withstand extremely high pressures. When using an LOHC, this is not necessary.

By Hydrogen Central, January 19, 2023

First-nearby crude futures contracts, also known as the spot month contract, closed at just over $80 per barrel on the last day of trading in 2022. What might be in store for 2023?

The U.S. benchmark crude oil price, most visibly seen in the CME Group West Texas Intermediate (WTI) Light Sweet Crude Oil futures contract price, settled out 2022 at $80.26 a barrel for the February 2023 contract, which is currently the spot month.

The spot month futures contract represents the closest price of physical crude oil currently traded by the people who buy and sell actual crude oil barrels as producers and consumers.

Eighty dollars a barrel, according to the above referenced December 30, 2022 settlement price on the CME, is about the current price for liquid black gold, as it’s called by some. But what will the price be a year from now at the end of 2023?

Futures prices are just that, they are prices that represent what the collective marketplace believes today the price of crude oil will be at some point in the future.

Interestingly, the price of the February 2024 CME crude oil futures contract, the one that will be the spot contract one year from now on the last day of trading of 2023, settled at $76.30/bbl.

This means that crude oil futures markets expect the price of crude oil to drop by just about five percent over the course of the year to come. That’s good news for inflation and consumers.

But it’s a one-point-in-time snapshot of expectations, not a predictor for the ups and downs that oil markets will surely have between now and next year’s New Year’s Eve.

Some believe crude oil markets are poised to go higher in 2023, back towards the $100/bbl mark, due in part to China’s reopening and Russia’s threatened production cuts.

Others, like this writer, believe that an economic downturn promulgated by Europe’s disastrous wintertime energy costs and the resulting global fallout (all of which will come with the arrival of cold weather) will push crude oil prices closer to $50/bbl.

Based upon last year’s oil price volatility, the most likely scenario is that both of the above price projections will be realized in calendar 2023. Anything can happen and perceptions of the future will change, but as of right now, New Year’s Eve 2022, futures markets are projecting a slight year-over-year crude oil price decline in 2023.

Forbes by Sal Gilbertie, January 10, 2023

Europe’s gas prices are slumping as the combination of mild weather and reduced industrial consumption has produced an unusual seasonal increase in inventories which threatens to overwhelm the storage system.

Inventories in the European Union and the United Kingdom (EU28) are at the second-highest for the time of year in the last decade and on course to end the northern hemisphere winter at an exceptionally high level.

Plentiful inventories at the end of winter 2022/23 will reduce the amount of gas that needs to be put into storage this summer in preparation for winter 2023/24.

There will not be enough storage demand to absorb all the excess production over the summer months if prices remain at high levels.

Left unchecked, prices would fall sharply over summer to encourage more consumption, discourage production and slow imports.

But the futures market is forward-looking and prices are already falling to reduce the pace of inventory accumulation and preserve space for stocks to be added this summer.

SEASONAL NOT STRATEGIC STORAGE

Some policymakers have continued to call for intense gas and electricity conservation to secure supplies for winter 2023/24.

But Europe’s storage is designed to cope with seasonal swings in consumption; it is not a strategic stockpile to cope with embargoes or blockades.

EU28 gas storage is very different from the U.S. Strategic Petroleum Reserve and emergency petroleum stockpiles maintained in other countries.

Given finite capacity in the gas storage system, there is a limit to how much conservation in winter 2022/23 can improve supply security in winter 2023/24.

Slumping gas prices imply the limit is close to being reached.

EU28 inventories rose by 9 terawatt-hours (TWh) between Dec. 23 and Jan. 2 compared with an average seasonal depletion of 26 TWh in the same period over the previous 10 years.

Stocks are now 218 TWh (+30% or +1.98 standard deviations) above the prior 10-year seasonal average up from a surplus of 92 TWh (+10% or +0.86 standard deviations) when the winter season started on October 1.

Inventories are on course to fall to around 562 TWh before the end of winter, with a likely range of 435 TWh to 743 TWh, based on seasonal movements over the past 10 years.

This would still be the second-highest winter-end stock in the past 10 years (stocks ended winter 2019/20 at 609 TWh) and far above the average of 345 TWh.

Moreover, the storage surplus has been increasing, not reducing, this winter, as high prices, industrial shutdowns and warmer than average temperatures have curbed consumption and attracted record LNG inflows.

Total storage capacity is only 1,129 TWh so the system is on track to end winter 50% full (with a probable range of 39% to 66%).

This would not leave much volume for additional gas to be added during the low-consumption refill season from April to September.

INVENTORY AND PRICE CORRECTION

The current inventory trajectory is unsustainable.

Traders no longer anticipate inventories might fall critically low before winter ends. Instead, prices are falling to encourage more consumption and redirect LNG to more price-sensitive buyers in South and East Asia.

Futures prices for gas delivered at the end of winter in March 2023 have slumped to 68 euros per megawatt-hour (MWh) from 135 euros on Dec. 15 and 194 euros at the start of winter on October 1.

The end-of-winter calendar spread between March and April 2023 has fallen into a contango of more than one euro from a backwardation of one euro on Dec. 15 and almost 10 euros at the start of the winter season.

Policymakers have criticised very high prices for gas that prevailed for much of 2022 following Russia’s invasion of Ukraine.

But high prices forced reductions in consumption and maximised LNG imports, removing the threat gas supplies would run out in winter 2022/23.

Europe’s gas market worked.

Now the focus has turned to ensuring a smooth transition of prices and stocks ahead of winter 2023/24.

Reuters By John Kemp, January 10, 2023