Category: Nieuws

Brent prices and particularly calendar spreads are being hammered by the rising number of confirmed coronavirus cases around the world, which is threatening tougher international travel restrictions and renewed domestic lockdowns.

Brent spreads have slumped since the start of November, roughly two weeks after the seven-day average new case count started rising in the middle of October, according to global statistics compiled by Our World in Data.

There has been an inverse correlation between the two since the start of the year, as the ebb and flow of infections produces a relaxation and tightening of quarantines and other restrictions impacting oil consumption.

Brent’s calendar spread between futures contracts for February and March 2022 has slumped to a backwardation of just over 20 cents per barrel, down from a peak of more than $1.20 at the start of November.

The seven-day average number of new confirmed cases around the world has climbed to almost 620,000 per day from just 400,000 in the middle of October.

The new wave of infections is likely being driven by a combination of seasonal factors (respiratory diseases spread more rapidly in the northern hemisphere winter) and the emergence of the more transmissible Omicron variant.

The seasonal increase was widely anticipated by policymakers and traders, but the scale and suddenness was not, prompting an abrupt tightening of quarantines and social-distancing controls.

TIDE OF ANXIETY

Previous waves of new coronavirus infections in February-April and June-August also produced a softening of Brent calendar spreads.

But the most recent wave has coincided with growing concerns about rising inflation, the health of the global economy and the outlook for oil consumption in 2022.

And the earlier oil price rise between August and October has triggered a belated release of emergency reserves, led by the United States, adding to supply in the next few months.

The result has been a huge swing in spreads, accelerated and amplified by liquidation of a large number of hedge fund positions, most of them concentrated in nearby futures contracts.

If coronavirus behaves like other respiratory infections, the number of new cases is likely to continue rising for at least another month, though social distancing, health regulations and vaccinations may blunt the increase.

While new cases are accelerating, pressure for greater restrictions on the number of social contacts and cross-border movements will continue to weigh on forecasts for oil consumption.

Brent prices and calendar spreads are therefore likely to remain under pressure until there are clearer signs the new wave is being brought under control by some combination of controls, the arrival of spring weather, or growing acquired immunity in the first quarter of next year.

Reuters by David Evans, December 17, 2021

Recovering economies this year have resulted in a robust rebound in oil demand, disproving some projections from the onset of the pandemic in 2020 that the world had already seen peak oil demand.

Despite scares of new variants, such as Delta and lately, Omicron, global oil demand is on track to reach pre-pandemic levels within months and to further rise in coming years. Peak oil demand is not in the cards in the near future, analysts say.  

Oil investors surveyed by Bloomberg Intelligence in November have also significantly recalibrated their expectations of peak oil demand over the past two years.  

Two and a half years ago, a fifth of oil investor clients polled by Bloomberg Intelligence said that oil demand would peak by February 2021, BloombergNEF’s Chief Content Officer Nathaniel Bullard notes. In June 2019, another one-third of oil investors thought we would see global oil demand peak by 2025. In previous surveys, most investors expected peak oil demand by 2030. 

But the latest survey from last month showed a stark difference in the general timeline to peak oil demand compared to the previous four polls.

Currently, just 2 percent of oil investors believe peak oil demand will occur by 2025, and fewer than 40 percent see that peak before 2030. One-third of investors expect oil demand to peak between 2025 and 2030, but another one-third think that peak would be after 2030, at some point between 2030 and 2035.  

Mid-2030s is currently OPEC’s timeline for peak oil demand. Global oil demand is expected to continue to grow into the mid-2030s to 108 million barrels per day (bpd), after which it is set to plateau until 2045, OPEC said in its 2021 World Oil Outlook (WOO) earlier this year. OPEC sees oil demand growing “strongly” in the short- and medium-term before demand plateaus in the long term. 

Despite expected plateauing demand in the long run, oil will continue to be the fuel with the single largest share of the global energy mix by 2045, meeting 28 percent of energy demand then, OPEC Secretary General Mohammad Barkindo said last month, stressing the need for investments in oil supply to meet consumption. 

Demand is set to grow, as the world still runs on fossil fuels which account for around 85 percent of total global energy demand. 

The most meaningful dent to oil demand is likely to come from electric vehicles (EVs), which, in some countries, have started to eat away at oil demand for road transportation. 

Nevertheless, it will take years to see road fuel demand globally severely impacted by electrification in transportation. 

According to BloombergNEF’s Electric Vehicle Outlook 2021, EVs of all types are already displacing well over 1 million barrels of oil demand per day. In its Economic Transition Scenario, BloombergNEF sees oil demand from road transport overall peaking in 2027 and then declines steadily from there.  

EVs have the potential to displace some oil demand, but the world as a whole is not there yet, other analysts say. 

“When the impact of the pandemic on world oil markets was at its height, there was talk that we had already passed the point of “peak demand”, and consumption would never again be higher than it was in 2019. Wood Mackenzie analysts did not believe it at the time, and their scepticism is being vindicated,” Ed Crooks, Vice-Chair, Americas at Wood Mackenzie, wrote in October. 

“Peak demand will come only through long-term structural changes, most immediately in light road transport, and those take time. There are signs that the surge in EV sales in Europe may be starting to chip away at road fuel demand there, but most of the world is not there yet. As the impact of the pandemic continues to fade, that is likely to become increasingly apparent,” Crooks noted. 

OilPrice by Tsvetana Paraskova, December 15, 2021

Mexican energy sector regulator CRE has implemented a sweep of inspections in the retail fuel sales market, leading to new actions against Valero and Bulkmatic de México. 

US officials have complained about inspections that have involved the national guard.

Private firms have been subject to inspections for months, aimed at squeezing them out of the local fuel sales market and quashing the rollout of private gasoline stations that began with the implementation of the 2013-2014 energy reforms.

Former CRE commissioner Montserrat Ramiro told BNamericas CRE’s strategy “is negative for the development of the country” and “bad news” for consumers.

“Not only is it placing an excessive burden on the Mexican state and public finances, it’s hanging up a sign to show the world just how unwelcome private investment is in Mexico,” she added. 

According to daily Reforma, CRE seized 480,000b, or 73.6Ml, of fuel planned to be sold at ExxonMobil and Marathon service stations. The fuel was stored at a hydrocarbons facility owned by logistics firm Bulkmatic. 

If the fuel is not released, some Exxon and Marathon stations would run dry during the week, Bulkmatic México president Alejandro Doria said in a statement. 

Ramiro said the restricted supply will lead to rising prices. “The role of the regulator is to protect consumers and citizens and that is not happening now.”

CRE inspected various private fuel import terminals Friday and Saturday, also closing Valero’s rail terminal and storage facility in Nuevo León state, according to local outlet Oil & Gas Magazine.

The site is a key distribution center for fuel arriving to the Monterrey area and critical for Valero’s US$1bn plan to boost its fuel distribution and sales network.

These two incidents follow similar ones in August and September with CRE shutting down privately owned hydrocarbons storage terminals in Tuxpan, Veracruz, in Puebla state, and in Hermosillo, Sonora state. 

Investments in those storage terminals are estimated at US$1.5bn, as reported by energy news outlet Energía a Debate.

CRACKDOWN RATIONALE

Government officials have framed the crackdown as part of efforts to halt the illegal fuel market trade. 

However, it comes after 18 months of slowed permitting for sales, transportation, distribution, and storage fuel retailers. Also, legislation, albeit mostly challenged in the courts, is looming that would make it more difficult to compete with national oil company Pemex and its stations.

Consultancy eServices estimated that 1,000 such permits remain pending CRE approval, of which 50% correspond to gas stations, adding that the lack of permitting has cost the industry roughly US$100mn.

Critics are already framing the latest moves as a broad effort to use the regulators, who arrived at sites backed by national guard troops, to generally undermine private sector participation, given President Andrés Manuel López Obrador’s (AMLO) statist vision. 

CONSEQUENCES

In response to the closure of the Bulkmatic terminal in Salinas Victoria, Doria told Reforma that litigation is underway. “Right now, while the search is in progress, nothing is moving, because it is exhaustive, they’re checking under the rug.”

Bulkmatic’s Salina Victoria 2, also located in Nuevo León state, typically stores 87 and 92 octane gasoline and diesels.

Reforma quoted IHS data service OPIS as reporting that the CRE audits are coming just as Mexico is implementing actions to reduce illegal fuel imports and Pemex is losing market share.  

Even the US market is concerned because the crackdown could imply the suspension of operations at US refineries, whose products are sold in key markets such as Monterrey. “Big companies like Exxon and Valero are not going to import fuel illegally or off-spec,” OPIS cited one fuel broker as saying. 

US ANGER

On November 17, Louisiana senator John Neely Kennedy sent a letter to US energy secretary Jennifer Granholm, pressing for action to halt threats to US energy firms’ operations in northern Mexico. 

Kennedy, a ranking member of the US senate appropriations energy and water subcommittee, urged her to address the shutdown of US fuel storage facilities in Mexico.

“Recent reports indicate that AMLO is using a militarized police force to prevent the operation of US businesses … AMLO’s strategy includes undermining other privately-owned, American renewable energy facilities,” the letter said.

“It is obvious what is going on here – AMLO’s shutting down all foreign competition for his state-owned company, Pemex, and so far he’s getting zero resistance from US officials in the Biden Administration,” Kennedy wrote. 

Texas governor Greg Abbott sent a letter to President Joe Biden the same day, saying Mexico’s actions to curtail competition for Pemex have steadily escalated, He cited recent reports that Mexico was using national guard troops to shut down fuel storage assets owned by Texas-based Monterra Energy.

“Other American companies face similar operational threats,” wrote Abbott. “Despite these companies’ continued efforts to work with Mexican regulators, multiple facilities remain closed and under the supervision of the militarized police force, leaving Texas companies and their employees in an untenable situation.” 

Abbott urged Biden to “immediately engage” with Mexico and facilitate the “immediate withdrawal of the Mexican military from US-owned business interests and convey that no further actions to undermine energy development, production, or transmission activities will continue.”

AMLO met Biden and Canada’s Prime Minister Justin Trudeau in Washington DC for a USMCA summit on November 18, but it is not known if the matter was discussed.

By BNAmericas, November 30, 2021

Asian oil refiners are starting to see a recent resurgence in profitability go into reverse, eroding a source of demand strength that helped drive crude prices to a seven-year high last month.

Margins from processing crude across Asia slipped from recent highs this month as the return of some Covid-related travel curbs in China hit jet-fuel consumption, undermining progress made in opening up travel between countries with high vaccination rates. 

At the same time, an early rush for back-up winter heating fuels including diesel has eased as concerns over natural gas and coal shortages abate, and panic over energy crises in China and India ebbs. As the fuel-buying frenzy — backed by anticipated gas-to-oil switching — gives way to a more moderate pace of consumption, Asian refiners are taking a hit to their profits. 

Those dynamics offer another headwind to oil prices that are already faltering because of concerns about governments dropping strategic petroleum reserves into a market in which supplies are soon expected to pick up anyway.

“The market overreacted to the whole gas-to-oil switching, assuming a cold winter and reduced refinery supplies,” said Sri Paravaikkarasu, Asia oil lead at FGE. “Refineries globally are returning from maintenance and a big switch to oil hasn’t happened yet.”

FGE sees profits from converting crude to oil products for complex refiners in Asia at $4.25 a barrel in November, coming off from October when they stood at $5.10. The industry consultancy expects them to dip to $3.20 in December, before sliding further in January and February.

Last month, the region’s margins received a boost from a strong diesel market as China raced to produce and hoard more of the fuel that’s used in heavy vehicles, industries as well as in small-scale power generation sets. Skyrocketing coal and natural gas prices had prompted the rush, amid a near-crisis situation that China eventually averted through a series of initiatives to halt exports, boost imports, raise refinery output and ration pump sales.

Total exports of gasoline, diesel and jet fuel from China in October at about 564,000 barrels a day were a third lower than the average shipments in the previous nine months, according to Vortexa. Outbound diesel shipments saw the biggest decline as the country sought to preserve supplies for winter. The world’s largest oil importer also ordered an aggressive ramp up of coal production, which took more pressure off diesel. 

Chinese fuel-export policy is the wild card, Bloomberg Intelligence analysts Horace Chan and Henik Fung said in a note on Thursday. The Asian refining giant’s presence in regional gasoline and diesel markets has faded since July, but overseas shipments may increase if fuel cracks rise and the country’s domestic power shortage eases, they said.

A cold winter could turn things around for refiners again, said Paravaikkarasu. Asia’s total oil product demand is likely to rise by 5.8% next year, the firm estimates. On top of that, regional fuel margins are likely to find some support since China slashed exports of diesel and gasoline.

“As manufacturing and industrial activity gathers more pace, we expect regional gasoil demand to recover to pre-pandemic levels in the first quarter of 2022,”she said.

Rigzone by Saket Sundria, November 25, 2021

When President Joe Biden ordered the release of 50 million barrels of oil from America’s strategic reserve to help reduce energy costs, he was taking aim at a growing burden for millions of Americans.</h4>

The step announced Tuesday, done in a rare coordination with several other nations, is among the few things a presidential administration can do to try to lessen the squeeze — and the political threat — of rising inflation. The likelihood of providing meaningful relief in the near future, however, is probably low. Still, any help in easing fuel prices, even modestly, would be welcomed by many Americans.

Here is a look at what’s involved:

What is the oil reserve?

America’s Strategic Petroleum Reserve holds about 605 million barrels of oil in underground salt caverns in Texas and Louisiana. It was created following the 1970s Arab oil embargo to store oil that could be tapped in an emergency. But the dynamics of the global oil industry changed dramatically in recent years: Now the U.S exports more oil than it imports.

There’s a limit to how much can be released at once. In the past the government has released about 1 million barrels per day. At that rate, the promised influx of 50 million barrels of crude could last about two months.

Why tap the reserve?

The idea is that by putting more oil on the market, prices will fall. That hasn’t happened yet. But depending on what happens in the rest of the world, there’s still a chance it could work.

Oil prices rose slightly after the announcement. Traders were anticipating the news, and may have been underwhelmed by the details, said Claudio Galimberti, senior vice president for oil markets at Rystad Energy.

“The immediate price reaction is not the final judgment on the effectiveness of this effort,” said Jim Burkhard, vice president at IHS Markit. “It will really be in the months ahead.”

Whether the move is effective depends on several factors.

What about OPEC?

The OPEC oil cartel and its allies will be meeting in about a week to decide whether to increase production or to hold back, a strategy the group often employs to boost prices. Earlier this month, Biden had hoped OPEC nations, led by Saudi Arabia, would agree to significantly boost production. But they only made modest increases.

If OPEC decides next week that it wants higher prices, its members could take oil off the market. “Just overnight, they could just offset it,” Burkhard said. “So that’s a big question mark, is how they react to this.”

The coalition Biden assembled — bringing together India, China, Japan, South Korea and the U.K. to tap their strategic oil reserves — is unprecedented, Galimberti said. Altogether, the group could be adding 70 million to 80 million barrels of oil onto the market, he estimates.

“It’s kind of a coalition of oil importers,” he added. “But can they really supplant, or can they really represent a rival to OPEC-plus? The answer is absolutely not.” That’s because the group of importers are using their strategic petroleum reserves, which are limited. On the other hand, OPEC and its allies have oil reserves that can last for decades. “So there is no comparison between the two,” Galimberti said.

Cheaper gas?

What many consumers want to know is what’s going to happen to gasoline prices at the pump. Many factors go into the price of gasoline. Refineries buy crude oil in advance, so they’re still working with more expensive oil, and states have differing tax rates that impact the price. Nevertheless, if OPEC doesn’t respond by curtailing production, the influx of oil could lead to a gasoline price decrease of 10 cents to 15 cents per gallon, said Kevin Book, managing director at Clearview Energy Partners. Even if the price drop doesn’t happen, Biden can make the case that he tried.

“Really, what we’re talking about are the most price-sensitive consumers in the economy,” Book said. “They may not show up in GDP numbers or recessions, but they show up in vote counts as marginal voters, who may or may not respond in the next election cycle, and I think if we get down to it that’s really what this is about.”

Why does oil matter?

The future of oil and gas in the U.S. is a political flashpoint and source of tension, especially as companies and government agencies grapple with climate change and the transition to cleaner sources of energy.

On the one hand, the U.S. oil and gas industry has been praised by some political leaders for creating energy independence. Where the U.S. once relied heavily on imports, other nations now rely on the U.S. for oil. It’s also a job supplier: The oil and gas industry employs more than 10 million people in the U.S. and contributes about 8% of the nation’s gross domestic product, according to the American Petroleum Institute. Any impact resulting from Biden’s release of oil from the strategic reserves “is likely to be short-lived unless it is paired with policy measures that encourage the production of American energy resources,” the API said in a statement.

Companies that supply oil benefit from higher prices. But consumers don’t like it when those higher prices trickle down to the pump.

“The broader drama is this new variable in the oil market: It’s the tension between aspirations to decarbonize and the practical concern to have low gasoline prices,” Burkhard said. “And there there’s a conflict between those two forces. And that’s why we’re going to continue to see dislocations between demand and supply.”

Longview News-Journal, November 25, 2021

In the Port of Rotterdam, the first companies are busily preparing for the storage, processing and transit of hydrogen: a promising energy carrier that will allow companies to make the transition to climate neutrality.

Tank terminals at Europoort

This is one of the findings of a study conducted by the Port Authority into the development of hydrogen import terminals in Rotterdam. The Port Authority held consultations with a large number of Rotterdam-based companies and asked several research agencies to carry out sub-studies into the necessary preconditions in the fields of navigation, safety, the environment and space.

Good starting position

The Port of Rotterdam is in an excellent position to embark on the import, transit and transhipment of this new energy carrier:

• By 2050, demand for this relatively clean energy carrier is expected to increase to 20 Mtonnes, around 18 Mtonnes of which will be imported.
• Rotterdam is already familiar with hydrogen in industry and the transhipment of hydrogen carriers such as ammonia. In addition, the port has experience in the transhipment of cold energy carriers such as LNG and chemicals such as methanol. This experience can be applied to the new forms of hydrogen that are anticipated: liquid hydrogen, ammonia and LOHCs. Rotterdam’s extensive, existing tank storage and infrastructure for hydrogen and hydrogen carriers add to the port’s appeal as an import location. Companies will be able to develop existing fossil energy assets for hydrogen and hydrogen carriers.
• All port areas – from Pernis to Maasvlakte 2 – have the potential to import hydrogen. Depending on the volumes, the import of hydrogen is possible in all of these port areas, both in terms of space and safety, and from an environmental and navigational point of view. Four companies working in refining, energy and tank storage are actively preparing to import hydrogen. It looks like they will have both the physical space and the licences to import, process and export hydrogen in various forms by 2025. In addition, several companies are preparing to free up physical and/or environmental space by restructuring their existing product portfolio.
• The unique navigational access means there are no restrictions to the safe shipment of hydrogen in Rotterdam.

By HellenicShippingNews, November 23, 2021

A release of oil from the U.S. Strategic Petroleum Reserve would likely have only a short-lived impact on oil markets, the acting head of the U.S. Energy Information Administration said on Tuesday.

The Biden administration has considered tapping the reserve to cool rising oil prices that are helping to fuel inflation. But Stephen Nalley, the acting EIA chief, told a Senate hearing: “Ultimately the amount of impact would be relatively short-lived, and would depend on how much was released.”

Nalley said the impact on oil markets could last only a few months and that other dynamics in the market would overtake any decrease in prices.

An EIA analysis showed that a release of 15 million to 48 million barrels from the reserve could bring prices down about $2 a barrel and push gasoline prices at the pump down about 5 cents to 10 cents per gallon for a short period of time, Nalley said.

U.S. oil prices hit a seven-year high in late October of nearly $85.50 a barrel. They were trading at about $80.60 a barrel on Tuesday as forecasts for an increase in global production in coming months put pressure on the market.

Reuters by Timothy Gardner, November 22, 2021