Category: Nieuws

NEW YORK — Charles Sussman, managing director and co-head of global oil trading at Bank of America Merrill Lynch (BAML), has left after nearly 10 years with the firm, two sources familiar with the matter said on Wednesday.

A spokeswoman for BAML declined to comment. Sussman did not respond to a request for comment.

Wall Street often sees staffing changes around this time of the year after bonuses are handed out.

Bonuses for some traders at BAML were largely flat even though the bank’s trading desk had positive returns last year, one of the sources said.

Bank of America cut some of its staff in the global banking and markets division last week, Bloomberg News reported.

It was not immediately clear whether Sussman’s departure was related to the cuts.

Reuters, by Devika Krishna Kumar , March 16, 2021

NEW YORK – Oil prices were mixed on Thursday with U.S. crude edging up to its highest close since 2019 as Texas refineries restarted production after last week’s freeze, while Brent eased on worries that four months of gains will prompt producers to boost output.

Earlier in the day, an assurance that U.S. interest rates will stay low and a sharp drop in U.S. crude output last week due to the winter storm in Texas, helped boost both U.S. crude and Brent to their highest intraday prices since January 2020.

Brent futures for April delivery fell 16 cents, or 0.2%, to settle at $66.88 a barrel. The April Brent contract expires on Friday.

U.S. West Texas Intermediate (WTI) crude, meanwhile, ended 31 cents, or 0.5%, higher at $63.53, its highest close since May 2019.

Analysts said WTI increased late in the day as more Texas refineries started to return to service, including Valero Energy Corp’s Port Arthur plant and Citgo Petroleum Corp’s Corpus Christi plant.

The freeze caused U.S. crude production to drop by more than 10%, or a record 1 million barrels per day (bpd) last week, while refining runs tumbled to levels not seen since 2008, the Energy Information Administration said. [EIA/S]

“The more refineries return to service, the more crude oil they will burn through, and the less crude oil will go to storage,” said Bob Yawger, director of energy futures at Mizuho in New York.

Overall, however, analysts noted price gains slowed on Thursday.

“With momentum appearing to slow a week before the next OPEC+ meeting, crude may be positioning for a small correction,” said Craig Erlam, senior analyst at OANDA, noting “There’s still plenty of downside risks in the market and one of them is OPEC+ unity coming under strain in the coming months.”

The Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, are due to meet on March 4.

Analysts noted recent higher oil prices – both Brent and WTI have gained more than 75% over the past four months – could encourage U.S. producers to return to the wellpad and OPEC+ to loosen its production reductions.

The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.

Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.

Meanwhile, an assurance from the U.S. Federal Reserve that interest rates would stay low for a while helped support oil prices earlier in the day and should boost investors’ risk appetite and global equity markets.

Reuters, by Scott DiSavino, March 16, 2021

As European and American oil companies face increased pressure and scrutiny on new climate restrictions, the Gulf has so far been avoided the heat.

ExxonMobil appointed a climate-minded activist investor to its board of directors after investment firm Engine No. 1 called on the American oil and gas giant to overhaul its board with expertise on climate change to drive its industrial transformation. The current business model is exposed to “immense risk” in the global realignment toward cleaner energies, Engine No. 1 said. In Europe, British oil and gas firm BP aims to become an “integrated energy company” and pledged to reduce its oil and gas production by over 40% by 2030.

There has been no such comparable trend in the Gulf. Saudi Aramco, the region’s largest state-owned oil company, did not include emissions from many refineries and petrochemical plants in its self-reported carbon footprint, misleading investors’ climate risk assessments. Aramco is “one of the few large, listed oil companies” that does not disclose Scope 3 emissions — produced when customers use its fuels — which typically account for “more than 80%” of oil companies’ total emissions,” Bloomberg reported. The emission rates make Aramco a world leader in carbon emissions.

Saudi Aramco did not respond to a request for comment..

“I have no regrets; it is a minor factor about how I think about Aramco,” said Saleh Al Omar, a Saudi retail investor who bought shares of Saudi Aramco during its initial public offering in 2019.

He told Al-Monitor carbon disclosures are “really not a factor” for Saudis who invest in the local stock market. Moreover, the government sponsoring the IPO had convinced him that shares would be “protected” from any significant downtrend.

Aramco’s disclosures nonetheless exceed the standards for regional and non-Western producers. “There is way more transparency from Aramco than any of the other oil and gas companies in the Gulf,” Jim Krane, energy fellow at Rice University’s Baker Institute, told Al-Monitor. Oman’s largest oil producer, Petroleum Development Oman, did not respond to a request for comment.

“Saudi oil is cleaner than oil produced in America.”

Saudi Aramco and other Gulf producers are unlikely to face pressure from the US administration for further disclosures despite US President Joe Biden’s pledge to “lead the world to address the climate emergency.”

Indeed, the Saudi oil giant could reply that its oil is “probably the cleanest source of petroleum on earth,” implying that “Saudi oil is cleaner than oil produced in America,” Krane said.

Despite Saudi Aramco having produced 4.38% of the world’s carbon emissions since 1965, drilling a barrel of Saudi oil generates significantly fewer emissions than other producers — half that in the United States — Aramco’s IPO prospectus shows. 

“It is not something I would expect the Biden administration to highlight,” Krane said. 

A US State Department spokesperson told Al-Monitor the United States is “engaging the rest of the world — bilaterally and multilaterally — to step up climate action” and will therefore also “engage with the Kingdom of Saudi Arabia” on this issue.

Saudi Aramco was added in November 2020 to a list of 167 companies targeted by Climate Action 100+, one of the world’s leading investor groups. It aims to push companies responsible for much of the world’s greenhouse gas emissions to take action on climate change, including emissions cuts and improved climate-related disclosures.

Yet, unlike BP or energy giant Total, neither Saudi Aramco nor other Gulf oil companies have formulated net-zero targets, rather expressing aim to tighten their grip on global demand for oil and petroleum-based products. The crown prince of Abu Dhabi said in 2015 preparations are on to “ensure that our resources remain sustainable until the last drop of oil.”

Environmentalists argue Western oil companies’ net-zero claims — which mean removing the quantities of emissions produced from the atmosphere — are insufficient to limit global warming and fail to address the need to reduce carbon emissions.

The lack of environmental transparency is not limited to Gulf national oil companies. In November 2020, dozens of oil and gas companies committed to reporting more accurately on methane emissions under the European Union-United Nations-led Oil and Gas Methane Partnership, but Russian producers are not involved, nor any national oil companies apart from the United Arab Emirate’s Abu Dhabi National Oil Company.

Population remains “poorly informed” on oil industry’s impact

According to the US Environmental Protection Agency, the oil and gas industry is “the largest industrial source of emissions of volatile organic compounds,” including air toxics, pollutants that are known or suspected to cause cancer or other serious health effects.

The United Nations Environment Programme estimates that air pollution, partly caused by the emissions and activities of oil and gas companies, is the most important environmental health risk of our time, causing one in nine deaths globally.

In the Gulf, although environmental awareness is on the rise, a “significant portion” of the population remains “poorly informed,” read an analysis by BCG, one of the world’s leading management consulting firms. About half of 18- to 24-year-olds said they “had never heard of or were unsure of the meaning of ‘carbon footprint,’” the 2021 BCG study found. 

Lack of understanding of climate issues coupled with restrictions over freedom of expression prevents most citizens from questioning the impacts of oil companies on public health.

In China, the world’s largest emitter of greenhouse gases, the government has declared a war on air pollution, yet the green targets of state energy producers lag behind those set by European energy majors despite PetroChina’s target for near-zero emissions by 2050, Reuters reported.

Reason to hope

To highlight the importance of corporate environmental transparency, environmental, social and governance (ESG) investment can play a role. However, “The Middle East is very much behind the curve in terms of ESG investing,” said green finance strategic adviser Jessica Robinson, founder of Moxie Future, a platform that seeks to empower women investors.

An “exceptionally meagre 7% of investors” in the region say they always take ESG factors into consideration in their investments, HSBC reported. Robinson told Al-Monitor that sovereign wealth funds should ultimately be the ones initiating a change in investment philosophy. “They are the one who sits at the top of the investment value chain, so once we get them to engage in the ESG agenda, it has ripple-through effects throughout the system.”

As a sign of goodwill, four of the six founding members of the One Planet Sovereign Wealth Fund Working Group are entities controlled by Gulf states, including Saudi Arabia’s Public Investment Fund. The international coalition of sovereign wealth funds aims to integrate environmental considerations in the management of large, long-term asset pools. 

“We’ve got a long way to go but I am hopeful,” Robinson said.

AL-Monitor, by Sebastian Castelier, March 11, 2021

Oil prices rose early on Friday, adding to big gains overnight after OPEC and its allies agreed to not increase supply in April as they await a more solid recovery in demand from the coronavirus pandemic.

MELBOURNE: Oil prices rose early on Friday, adding to big gains overnight after OPEC and its allies agreed to not increase supply in April as they await a more solid recovery in demand from the coronavirus pandemic.

U.S. West Texas Intermediate (WTI) crude futures climbed 17 cents, or 0.3per cent, to US$64.00 at 0128 GMT, holding below a 13-month high hit on Thursday.

Brent crude rose 10 cents, or 0.2per cent, to US$66.84 a barrel, but down from a high of US$67.75 hit on Thursday.

Both contracts soared more than 4per cent on Thursday after the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, extended oil output curbs into April, with small exemptions to Russia and Kazakhstan.

“It just goes to show how much of a surprise the OPEC+ discipline is,” said Michael McCarthy, chief market strategist at CMC Markets.

“What makes the gain even more impressive is that it comes against a risk-off backdrop and a higher U.S. dollar,” he said.

Oil prices usually fall when the dollar rises as a higher greenback makes oil more expensive for buyers with other currencies.

Investors were surprised that Saudi Arabia had decided to maintain its voluntary cut of 1 million barrels per day through April even after oil prices rallied over the past two months.

“The group’s supply discipline shows that Saudi Arabia’s preference for caution is being adhered to,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

Analysts are reviewing their price forecasts to reflect the continued supply restraint by OPEC+ as well as U.S. shale producers, who are holding back spending in order to boost returns to investors.

“Oil prices could rip higher now that a tight market is likely up through the summer. WTI crude at US$75 no longer seems outlandish and Brent could easily top US$80 by the summer,” OANDA analyst Edward Moya said in a note.

CNA, by Himani Sarkar, March 11, 2021

Crude oil prices dropped today after the Energy Information Administration reported what can only be described as a colossal crude oil inventory build of 21.6 million barrels for the week to February 26.

This was in stark contrast to the estimated 7.356-million-barrel build reported by the American Petroleum Institute and analyst expectations of an inventory draw of 1.85 million barrels. For the previous week, the EIA had estimated a crude oil inventory build of 1.3 million barrels.

The market yesterday shrugged off the API estimate of a crude inventory build thanks to a massive draw in gasoline stocks, at 9.93 million barrels and a similar-size decline in middle distillate stocks. Both draws resulted from refinery outages caused by the Texas Freeze that hit the state in February, hurting its oil and gas production and refining operations.

The EIA reported a 13.6-million-barrel decline in gasoline stocks for the last week of February, and an average production rate of 8.3 million bpd. This compared with virtually unchanged gasoline stocks—at 257.1 million barrels—for the third week of the month and a production rate of 7.7 million bpd.

For middle distillates, the EIA reported an inventory decline of 9.7 million barrels for the last week of February, versus a drop of 5 million barrels for the previous week. Distillate production averaged 2.9 million bpd last week, compared with 3.6 million bpd a week earlier.

Oil prices have been extra-volatile this week ahead of the OPEC+ meeting tomorrow, as internal divisions persist and deepen, and traders suspect the voices for production increases may gain the upper hand.

India has added fuel to the debate by calling on OPEC+ to drop the “artificial” cuts in production and let prices fall.

“Artificial cuts to keep the price going up is not something we support,” a Ministry of Petroleum and Natural Gas told media earlier this week.

Yet Middle Eastern oil producers desperately need higher oil prices to reduce deepening deficits and return to growth. Even so, they may have to consent to some form of production increase and turn the fight for prices into a fight for market share

Oil Price, by Irina Slav, March 11, 2021

Europe’s diesel market is crawling toward recovery, mirroring an uncertain and uneven re-emergence of the continent’s largest economies from Covid-19.

The fuel’s premium to crude — how profitable it is for oil refineries — stands at about $6.20 a barrel, according to ICE Futures Europe data. While that’s up from a low of $2 in September, it’s still by far the weakest for the time of year in over a decade. Another gauge, reflecting tightness of supply, briefly pointed to a tighter market around the middle of February as freezing U.S. weather lifted the global market. It has since flipped back to indicating surplus.

Bad But Less Bad

European diesel margins are recovering from a low base , while the market’s pickup from late last year reflected a global freight boom as people diverted spending toward goods and away from services, the next leg of diesel’s recovery hinges on how fast the region’s economies can ease restrictions to combat the spread of Covid-19. To that end, the paths of the continent’s four largest — Germany, the U.K., France and Italy — look mixed.

“As lockdowns ease and confidence returns, we can expect to see stronger diesel demand even within the next few weeks,” said Jonathan Leitch, director of EMEARC consulting at Turner, Mason & Co. “However, mobility is still depressed so any increase is likely to be slow until we see more of Europe open up as we move through to summer.”

Mixed Messages

In Germany, Chancellor Angela Merkel has backed a relaxation of coronavirus restrictions despite a stubbornly high infection rate, acknowledging that many Germans are weary of curbs on daily life after months of lockdown. The U.K. has now given almost a third of its population at least one vaccine shot and is aiming to reopen schools on Monday as part of a wider restart program. By contrast, France is considering tighter restrictions on 20 regions while Italy is tightening measures in some areas after a surge in cases.

The four countries’ combined diesel consumption of 2.13 million barrels a day last year accounted for 17 percent of all OECD Europe’s oil demand, according to figures from the International Energy Agency, the Paris-based adviser to governments.

The fate of diesel matters beyond the confines of a narrow group of European fuel traders. The petroleum product, often viewed as an indicator of economic health, is central to the profitability of the region’s refiners, which in turn help to fire global demand for crude. The Organization of Petroleum Exporting Countries and allied nations will on Thursday meet to discuss whether or not to add oil supply to the global market.

Overall, Europe’s consumption of diesel-type fuels is expected to average about 6.5 million barrels a day during February-June, according to Energy Aspects Ltd., an industry consultant. While that’s an increase from January, it’s still down by about 5% from 2019 levels.

The views of oil company traders and analysts are mixed about what comes next. Of half a dozen spoken to for this story, two saw little sign of any imminent demand recovery, two others talked about it picking up in April, one saw high demand in OECD Europe, and another said he thought German demand was rising.

But even if demand does return, there are other headwinds for diesel. Europe’s oil refineries are currently thought to be curbing the amount of crude they process, something they could quickly change if consumption picks up. Similarly, Covid-19 saw a buildup of stockpiles of the fuel, and those need to be cleared before the market can normalize — even if that’s beginning to happen.

“The incremental month-on-month increase, for us, is going to be relatively low,” said Koen Wessels, an oil products analyst at Energy Aspects. “Even if there is a pick up in, say, ultra low-sulfur diesel demand, this will be somewhat offset by seasonally softer heating oil demand.”

Bloomberg, by Jack Wittels, March 11, 2021

Global oil demand is recovering and could return to around pre-pandemic levels next year, the chief executives of Saudi Aramco and Chevron Corp told an oil and gas conference on Tuesday.

The coronavirus pandemic last year wiped out a fifth of worldwide demand for fuel as billions of people stopped traveling and sheltered at home.

Global demand for oil has recovered to around 94 million barrels per day (bpd) and could reach 99 million barrels per day (bpd)in 2022, said Aramco CEO Amin Nasser at IHS Markit’s online CERAWeek conference.

Economies are improving in China, India and East Asia, with vaccine deployment as “cause for optimism” in the West, Nasser said. “I see demand and the market continuing to improve from here, especially from the second half of this year,” he said.

Diesel demand is at or above pre-pandemic levels due to door-to-door deliveries, though jet fuel lags as people avoid long flights, said Chevron CEO Michael Wirth, who spoke on a panel with Nasser.

Both executives are bullish on natural gas. Saudi Arabia has targeted generating half of its electricity from natural gas and half from renewables by 2030.

Emissions of methane – a potent greenhouse gas that is the main component of natural gas – should be reduced and robustly monitored, Wirth said, adding that he expects greater regulation from the Biden administration.

Reuters, by Jennifer Hiller , March 11, 2021

As the pandemic rages, so do oil prices, reaching levels not seen since January 2020, when the virus was still a gleam in the epidemiologists’ eyes.

Saudi Aramco is reportedly seeking to extend a $10-billion loan, according to Reuters, which cited unnamed sources familiar with the matter, who confirmed an initial report by a Reuters-related news outlet.

Aramco took the loan from a group of banks last year in May to finance its acquisition of Sabic, the Saudi petrochemicals major, which cost the energy company some $69 billion and wrapped up in June 2020.

The loan was supposed to be repaid from the proceeds of a bond that Aramco issued later last year. However, the company did not repay the Sabic loan. It raised $8 billion from the bond. It was the second bond Aramco issued in as many years, after placing a $12-billion bond with international buyers in 2019.

Saudi Arabia, like its fellow Gulf oil producers, has taken to raising debt to weather the effects of two oil price crises in the past ten years—the more recent one particularly devastating. For Aramco, debt is a better option than reducing its dividend, as most of this goes into the rulers of the Kingdom, who are also majority owners of the company.

The news that the world’s largest oil company by reserves wants to extend the loan suggests it has not yet recovered enough to start paying its dues even though Brent is still trading above $60 a barrel.

In addition to loans, however, Aramco has also put some assets up for sale, notably its pipeline business. The company was even reportedly ready to offer prospective buyers a loan of up to $10 billion to secure a deal.

According to the latest reports, bidders for the pipeline business, which Aramco will only sell a part of, include Apollo Global Management and Global Infrastructure Partners. Bloomberg reported last month that BlackRock, Brookfield Asset Management, and China’s Silk Road Fund Co. had also submitted non-binding bids for the assets.

Oil Price by Irina Slav, March 11, 2021

As the pandemic rages, so do oil prices, reaching levels not seen since January 2020, when the virus was still a gleam in the epidemiologists’ eyes.

A variety of reasons have been given for this trend, including recovering demand and suppressed supply, the vaccine roll-out, and falling inventories. Indeed, the futures price has returned to backwardation, with the current contract nearly $1 higher than the 4th month contract, almost the same as early 2020.

Which is a bit perverse, given that the fundamentals do not—at this point—seem to justify such prices, let alone backwardation. Backwardation, when current prices are above future prices, implies that the market is tight, which is why current contracts have a premium. (Remember that futures prices are not predictions of the price in the future but what people are willing to pay today for barrels at a future date.) The figure below shows the prompt (1st month) contract minus the fourth month contract, and for most of the past year, the market was in contango: prompt prices were discounted, reflecting the glut in the market.

Without a doubt, the market has been tightening, thanks to the efforts of OPEC+ and the recent voluntary 1 mb/d reduction by the Saudis. Low oil prices have also reduced North American production by as much as 2 mb/d, only some of which can be restored quickly. Still, it might be argued that the price is reflecting the combination of tighter inventories and an optimistic economic outlook.

But, and it is a big but (no snide remarks, please), market fundamentals have hardly recovered. It would be nice to know what global oil inventories are, but that data doesn’t really exist—most non-OECD nations do not report them in a timely way, if at all, and even OECD data is badly lagged. The mid-January Oil Market Report from the IEA shows inventories for end-November, at which point they were about 200 million barrels above normal. For them to have fallen to levels of end-2019 would have required a 3 mb/d inventory draw in December and January, which is not impossible but would certainly be unusual.

The table below compares the oil market in early January 2020, the last time prices were this high, with the current (lagged) data. The best indicators of market fundamentals do not suggest these prices are warranted: spare capacity in OPEC and Russia is much above year-ago levels, implying recovering demand will not tighten markets but allow a relaxation of quotas. (At $60/barrel, some growth in U.S. shale is possible, although the increase by year’s end should be modest.)

Inventories are also a primary indicator of market fundamentals, since they represent the difference between supply and demand, at least kind of, in a vague way. Unfortunately, as mentioned, OECD inventory data is lagged, but the U.S. less so, and traders often focus on that info the way drunks look for their keys under the street light. U.S. inventory data is very timely and does not show a balanced market by any means, which does not support a bullish price outlook.

Some would object that U.S. inventories are a mere 5% above the level of a year ago, which is true, but as petroleum economist Meryl Streep would say, “It’s complicated.” For one thing, actual usable inventories are much smaller than the total, as I discussed last year. Some Clarity On Oil Storage Capacity Estimates (forbes.com) Oil in pipelines remains at a constant level; you can’t draw them down without emptying the pipeline. And storage tanks have to maintain certain minimum levels to operate, so that the amount which can be drawn upon, the ‘usable inventory,’ is a fraction of the total. Thus, with inventories up by 5%, the usable inventories have probably doubled.

A further complicating factor is that the absolute inventory level is less important than the relative level. If demand drops, as it has done lately, less inventories are needed. Expert traders pay sharp attention to inventories in days of consumption or, for crude oil, days of refinery runs. Both are shown in the table above and given the depressed level of demand it is hardly surprising that relative inventories have increased significantly.

Of course, there are two other drivers of oil prices that need to be considered. First are the expectations of traders for future supply and demand, which arguably are having a bullish effect. However, the possibility of a tight market in the fourth quarter of this year should not be elevating prices to the extent seen now (I think, guess, speculate, okay not speculating). This implies to me that oil prices are higher in part because of asset inflation due to the extraordinary fiscal stimuli being enacted (or promised) around the world, including the U.S.

Which suggests to me that current prices might be inflated, such that I wouldn’t expect them to go much higher in the next six months, but the gradually tightening market also implies that they won’t drop significantly. But, and it is another big but, I have been wrong before and there is always the possibility that day traders on social media will talk us into another bubble.

Forbes by Michael Lynch, February 26, 2021