Category: Nieuws

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Tighter Markets End Lucrative Oil Trade

From a super contango in April, the Brent Crude futures curve has flattened and flipped to backwardation for the nearest months, wiping out was is seen as one of the most lucrative oil trades Production cuts from Saudi Arabia to the U.S. shale patch, combined with recovering oil demand, have changed in recent weeks the oil futures curve more to the liking of the OPEC+ group.

From a super contango in April, the Brent Crude futures curve has flattened and flipped to backwardation for the nearest months, wiping out the most significant financial incentive for oil trading houses to profit from the price structure a when oil demand crashes.

During the ‘peak lockdown’ period when every major economy except China was under lockdown in late March and early April, the oil market was in a state of super contango. In this market situation, front-month prices were much lower than prices in future months, pointing to a crude oil oversupply and making storing oil for future sales profitable. Traders rushed to charter supertankers for floating storage for several months to a year so they could sell the oil at higher prices later.

In the middle of June, production cuts and an uptick in oil demand helped the Brent Crude price structure flip to backwardation, signaling a tightening of the physical oil market.

Backwardation – the opposite of contango – is the market situation that typically occurs at times of market deficit. In backwardation, prices for front-month contracts are higher than the ones further out in time.

Backwardation is currently only seen for the next two to three months, but analysts expect the full Brent futures curve to be in backwardation by the end of the year thanks to recovering demand. Bank of America (BofA) Global Research, for example, sees inventories in most regions beginning to draw down in the second half of this year, and the full Brent futures curve could flip by the end of the year to backwardation.

A backwardated futures curve is definitely the preferred market structure for OPEC and its allies, which rely on higher front-month prices to help draw down excess inventories and record floating storage, which would push oil prices higher if demand continues to improve.

At the same time, the new shape of the oil futures curve is already discouraging what was the most lucrative trade in the oil market two months ago at the peak of the demand loss.

“Quite simply the contango is no longer there, so it does not make any economic sense to enter into a new floating storage trade, unless the deal was locked in when the contango was sufficient to cover freight costs,” Richard Matthews, an analyst who monitors the trade at E.A. Gibson Shipbrokers, told Bloomberg.

This new phase in the oil market is in stark contrast to the wild rush for chartering oil tankers, either for floating storage incentivized by the super contango, or for the record volumes of Saudi oil that flooded the market in April.

Floating storage has started to recede from record-highs in April in almost every region as demand began to recover from the record plunge.

According to estimates from the International Energy Agency (IEA), floating storage of crude oil dropped in May by 6.4 million barrels to 165.8 million barrels, from its all-time high of 172.2 million barrels in April.

Estimates by Bloomberg showed earlier this month that floating storage of North Sea oil had started to shrink as most of Europe lifted their lockdowns.

Tanker operator International Seaways said last week that it estimates 160-180 million barrels are being stored on ships currently. The strong oil contango earlier this year made it profitable to store oil, “creating a demand for time chartered ships for storage, further reducing ship supply and increasing rates,” the tanker operator said in a presentation to its annual meeting of stockholders.

In recent weeks, however, the contango has decreased, and the short-term floating storage of crude oil is declining, International Seaways notes.

For tanker owners, the vanishing of the contango and the record cuts from OPEC+ is bad news for tanker demand and rates. They knew that the super trades with the super contango would not last long and would have to eventually face a new market reality with OPEC+ withholding supply to decrease the glut and increase oil prices.

For OPEC+ and for tanker operators alike, continuous demand recovery would be excellent news – if it holds.

Oilprice.com, Tsvetana Paraskova, June 29, 2020,
Photo by Kevin Harris (Unsplash)

Independent ARA Oil Product Stocks Rise on Week 30

July 28, 2020 – Total oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub have risen the past week, after falling to two-month lows in the previous week.

Stocks went up in the week to 22 July, but the overall increase masks contrasting moves across the different product groups surveyed. Fuel oil stocks rose after falling by around the same amount the previous week. No fuel oil cargoes departed ARA for either the Mideast Gulf or the key arbitrage market of Singapore, but cargoes did leave for the Mediterranean and west Africa. Fuel oil cargoes arrived in ARA from France, Norway, Russia, the UK and via ship-to-ship transfer off Skaw in Denmark.

ARA gasoil stocks fell on the week. High inventories at destinations along the Rhine continued to inhibit barge bookings from the ARA area to terminals inland. Barge flows from ARA to upper Rhine destinations reached their lowest level since January 2020, and the lack of activity weighed heavily on barge freight rates. Gasoil cargoes departed the ARA area for France, the Mediterranean and the UK, and arrived from Saudi Arabia and the US.

Gasoline inventories in ARA rose on the week. Shipments to the US increased, and gasoline cargoes also departed ARA for Canada and the Mediterranean. But this was more than offset by incoming cargoes from France, Latvia, Italy and the UK, and from floating storage in the North Sea. The gasoline held in North Sea floating storage has tended to discharge in Amsterdam when making its way back to onshore storage tanks. Gasoline-component barge traffic around Amsterdam and the rest of the region was notably low during the week to yesterday, with finished-grade gasoline still well-supplied in the region.

Naphtha inventories fell. A naphtha cargo departed ARA for Brazil, where it is likely to be used as a petrochemical feedstock at Braskem’s Camacari cracker. The volume of naphtha departing the ARA area for inland Rhine destinations also rose on the week, although demand from gasoline blenders remained low. Naphtha cargoes arrived from France and Norway.

Jet fuel inventories were the only surveyed product group to hit fresh all-time highs, for the fifth consecutive week. Stocks reached went up from the previous week. Demand from the aviation sector remained very low. A single jet fuel cargo arrived in the region having loaded via ship-to-ship transfer off Southwold in eastern England, and a tanker carrying jet fuel departed ARA for the UK.

By Thomas Warner

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Independent ARA Oil Product Stocks Hit Seven-Week Lows

02 July, 2020 – Total oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub fell on the week, dropping for a third consecutive week after reaching their highest since at least 2003 less than a month earlier, according to consultancy Insights Global.

Stocks fell back to levels last recorded during the week to 14 May, having peaked during the week to 11 June. Jet fuel inventories were the only surveyed product group to hit fresh all-time highs. Demand from the aviation sector remained extremely low while a gradual rise in European refinery runs buoyed supply levels. At least one cargo arrived from the UAE, and a tanker left the ARA area for the UK.

ARA gasoil stocks fell on the week, falling for the second consecutive week having reached ten-month highs the week before. Tankers arrived from the US, and tankers that had previously arrived from Singapore and Saudi Arabia discharged after extended periods of waiting offshore. Tankers departed for France, the Mediterranean, the UK and west Africa. Outflows to west Africa were the largest single factor causing the overall stock draw. Interest in gasoil barges from inland destinations and around the ARA appeared lower on the week, with inventories along the river Rhine also near record highs.

Gasoline inventories fell on the week. Gasoline blending activity in the ARA area fell on the week, dragging down the number of finished-grade and component barge movements. Outflows remained at elevated levels to further draw on local stock levels, supported by a rise in exports to the US. Tankers also departed for the Mideast Gulf, Canada, the Caribbean, Mexico and west Africa, and arrived from France, Italy, Russia, Sweden and the UK.

Naphtha inventories fell on the week. No tankers departed the area, and tankers arrived from Russia and the UK. Local demand for the product from gasoline blenders fell in line with the fall in overall blending activity. But interest in stored volumes from petrochemical end-users was firm, supported by European refinery runs still being significantly lower on the year. Low supply has brought naphtha refining margins to their highest level since December 2017.

Fuel oil stocks rose in the week to yesterday. Tankers departed for the Mediterranean and west Africa. Fuel oil cargoes arrived in the ARA area from Finland, France, Poland and Russia. No fresh fixtures emerged on the arbitrage route to Singapore.

Reporter: Thomas Warner

The Most Dramatic Year In The History Of Oil

There are very few industries in the world that have been hit as hard or are set to face as many consequences as the oil and gas industry in 2020. In a recent report, Fitch Ratings forecast that oil and gas exploration and production companies would lose $1.8 trillion in revenues this year, which is six times more than the retail sector is set to lose.

But the long-term consequences are going to be even more devastating. Perhaps the most visible change taking place in the oil and gas industry is the drastic cost-cutting measures being taken by the oil majors. BP has been forced to cut 10,000 jobs, or 15 percent of its workforce, as it tries to control costs in this new low oil price environment. Schlumberger had already slashed salaries and cut jobs in late March, while Shell and Chevron have announced plans to shrink their workforces.

And it isn’t just in the workforce where we are seeing unprecedented cuts. Shell’s decision to cut its dividend for the first time since 1945 was probably the single largest indicator of the long-term impact this pandemic will have on the oil industry. Shell and its fellow oil majors have prided themselves on paying out dividends regardless of market conditions in order to keep their shareholders happy. Its decision to cut its dividends marks a shift in strategy that suggests the oil major is now determined to cut its debt going forward and focus on financial sustainability rather than just pleasing shareholders.

It remains unclear if oil demand will ever return to pre-pandemic levels. From the destruction of the aviation industry to the transformation of workplace dynamics reducing daily travel and governmental pushes for renewable energy, oil demand is being attacked on all sides due to COVID-19. The oil majors seem to have recognized this global shift and are determined to make their operations as lean and sustainable as possible.

2020 is shaping up to be the most dramatic year in the history of oil markets, with a decade’s worth of change seeming to be taking place in just 365 days.

Author: Charles Kennedy, OilPrice.com – June 10, 2020

Trafigura posts record H1 oil trading earnings as market volatility soars

London — Trafigura, the world’s second-largest independent oil trader, said June 11 it benefited from “exceptionally strong” earnings from physical oil trading during the first half of the year when price volatility and supply dislocatoins spiked because of the coronavirus pandemic.

Register Now Reporting a 27% year-on-year jump in net profit for the first half to $542 million, Trafigura said its oil and petroleum products division delivered its highest H1 profit on record.

Gross profit from oil trading totaled $2.13 billion, up from $1.04 billion a year earlier and represented 68% of Trafigura’s total gross profit, the company said.

“At times like these, the physical trading and risk management activities of specialist companies such as Trafigura become more relevant than ever,” CFO Christophe Salmon said in a statement.

“The exceptionally strong performance in oil trading came in the context of significant volatility and dislocations in the global market for crude oil and refined products.”

Upbeat on H2

Trafigura said its shipping and chartering business also delivered a “very strong performance” having increased its fleet and equity position to benefit from anticipated IMO 2020 market disruption.

Brent crude prices dived over 60% over the first quarter to near two-decade lows after sweeping lockdowns hit demand and OPEC+ producers briefly abandoned their supply cut deal.

Demand for jet fuel was particularly hard hit, with 80% or more of the market disappearing as airlines grounded their fleets. Gasoline consumption also collapsed in many areas, Trafigura said.

“In the oil market, we saw, for a time, prices and curves moving from backwardation to contango and back again. Volatility broke all records,” Trafigura said.

Looking ahead, Trafigura said it expects to continue benefiting from market volatility in the H2 as the world economy slowly recovers from the pandemic.

“Trafigura is a highly resilient company that is providing reliable and valuable services to producers and consumers of vital commodities,” Salmon said. “…we see every reason to be confident that this will continue to be the case for the second half of our financial year.

Author: Robert Perkins, Editor: Felix Fernandez, Platts, June 11, 2020

Oil traders expect stocks to start falling this month

LONDON (Reuters) – Crude traders are anticipating a substantial reduction in global stocks over the next year as consumption recovers after the coronavirus epidemic and output cuts by OPEC+ and shale producers whittle away excess inventories.

Brent calendar spreads have tightened progressively since the middle of April as the major economies have begun to re-open after locking down in March and oil producers have started to cut output.

Brent futures’ six-month calendar spread has shrunk to a contango of less than $2 per barrel from a recent high of $12-$14 between late March and late April.

In the physical market, the five-week spread for dated Brent has flipped into a small backwardation of 15 cents per barrel from a contango of more than $6.

Brent spreads have historically been a good proxy for the global production-consumption balance as well as inventories in the United States.

Since the early 1990s, contango has corresponded with periods when the market was oversupplied and stocks have been rising year-on-year, while backwardation has correlated with falling stocks.

The recent shift from a wide contango towards a flat structure and even into backwardation for nearby dates therefore indicates stocks are expected to start falling soon, with the first draws in June or July.

Traders’ expectations expressed via the Brent spreads are consistent with the gradual drawdown in global oil stocks predicted by the major statistical agencies.

The U.S. Energy Information Administration forecasts U.S. crude inventories will fall by 230,000 barrels per day (bpd) in the second half of the year after increasing by more than 800,000 bpd in the first six months.

The agency predicts the U.S. market will move into a supply deficit of 200,000 bpd as early as July having been in surplus by 1.8 million bpd in April (“Short-Term Energy Outlook”, EIA, June 9).

U.S. commercial crude inventories (including stocks temporarily stored in the strategic petroleum reserve) are predicted to fall from 580 million barrels at end-June to 540 million by end-2020 and 510 million by end-2021.

OECD stocks of crude and products are forecast to decline almost 1.2 million bpd in the second half of 2020 and 0.8 million bpd in 2021, reversing an increase of 5.2 million bpd between March and May this year.

Globally, EIA forecasts inventories will fall by an average of 3.0 million bpd for the second half of 2020 after rising by at an average of 9.4 million bpd between January and May.

There is now a dominant view that the market will rebalance over the next 18 months, provided OPEC+ maintains its commitment to reduced production, U.S. shale output does not surge again, and there is no second wave of coronavirus.

(John Kemp is a Reuters market analyst. The views expressed are his own)

Author: John Kemp, Editor: Elaine Hardcastle, Reuters, June 10, 2020

New tests into degassing barges in North Sea Port successful

Testing of vapour processing installations began in Vlissingen, North Sea Port on Thursday 28 May. The aim is to enable inland tankers to process residual vapours safely and in a controlled manner with a newly developed installation. The initial tests were successful, North Sea Port says in a press release.

The industry has already achieved a significant reduction in emissions in recent years by introducing ’dedicated and compatible’ sailing, eliminating the need for degassing. However, this is not in itself sufficient to avoid degassing completely. In 2020, the prohibitions will therefore be gradually extended to a national ban that will reduce emissions of these harmful substances by 98%.

Degassing a vessel while sailing along inland waterways is bad for air quality, for the health of local residents and for people who work with these substances. Since 2015, the provinces of Zeeland, Noord-Brabant, Zuid-Holland, Utrecht, Noord-Holland, Gelderland and Flevoland have already introduced bans on the degassing of benzene and substances containing benzene.

The aim of the tests is to achieve cleaner air along the waterways with the help of innovative technologies. The tests at North Sea Port went well. The functioning of the equipment was monitored throughout the testing procedure.

These tests are the first of a series with different types of installations being rolled out in the ports of North Sea Port, Rotterdam and Amsterdam. The measurements are being conducted by an independent agency that will determine which installations meet the strictest requirements and where improvements are still needed. The results of the trials will be evaluated by the ‘degassing while sailing taskforce’, which will then advise the responsible Dutch minister on the further construction of the infrastructure.

The test in Zeeland is being supported by Shell Chemicals Europe. The site in Vlissingen has been provided by North Sea Port as part of its aim of achieving a more sustainable port. The province of Zeeland supports the project. Zeeland also currently holds the chairmanship of the national ‘degassing while sailing taskforce’. GreenPoint Maritime Services is supplying the vapour processing installation being used in the tests.

The Dutch Minister of Infrastructure and Water Management, Cora van Nieuwenhuizen, set up a ‘degassing while sailing taskforce’ in 2018 in order to ensure the smooth implementation of the national ban. From this year, the task force has been chaired by Dick van der Velde, a member of the Zeeland provincial executive. The task force includes representatives of central government, the provinces, ports, shippers, hauliers, storage companies and vapour processing firms. In order to facilitate the introduction of the national ban, it is important to build up an infrastructure consisting of innovative installations capable of processing or reusing the vapour cargo residues.

PortNews, June 9, 2020

Independent ARA Oil Product Stocks Hit Three-Week Lows

June 18, 2020 — Total oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub fell on the week after reaching their highest since at least 2003 a week earlier, according to consultancy Insights Global.

Stocks reached fresh record highs in each of the three previous weeks, supported by contango in the forward curves of the underlying crude futures and Ice gasoil contracts owing to the massive reduction in demand caused by the Covid-19 pandemic and related lockdowns. But stocks fell during the week to yesterday, amid rising demand for oil products within northwest Europe and in export regions.

Gasoline inventories fell. The amount of cargo movements, both on barges and on seagoing tankers, eased after an exceptionally frenetic week across the ARA area a week earlier. Exports to the US remained broadly stable on the week at a high level, but no tankers departed for China. Tankers also departed for Canada, the Mediterranean, Singapore and west Africa. Cargoes arrived from Finland, France and Russia. Congestion in the regional barge market eased, particularly around Amsterdam.

Fuel oil stocks fell heavily in the week to yesterday. Flows of high-sulphur fuel oil to the Middle East for power generation continued, with two Aframax tankers departing for Saudi Arabia during the reporting period. Tankers also departed for the Mediterranean. No fresh fixtures emerged on the arbitrage route to Singapore, and cargoes arrived in the ARA from the UK and Russia.

ARA gasoil stocks rose on the week, reaching fresh ten-month highs. At least one tanker carrying gasoil discharged in the ARA after having waited in the North Sea since 8 May. Steep contango across the product markets prompted the booking of tankers to store volume offshore, but total volumes are easing as end-user demand rises. High inventories in Germany weighed on barge flows from the ARA to destinations up the river Rhine, supporting stock levels downriver. Tankers departed for France and the UK, and arrived from Russia, Saudi Arabia and Singapore.

Jet kerosine inventories fell, and as with gasoil at least one tanker discharged following a period of use as floating storage. Tankers departed for the UK, and local demand rose as European civil aviation begins to restart following the outbreak of the Covid-19 pandemic.

Naphtha inventories fell. No tankers departed the area, but local demand for the product from gasoline blenders was firm during the reporting period, and several petrochemical end-users bought cargoes. Tankers arrived from Latvia, Russia and the UK.

Reporter: Thomas Warner

Independent ARA Oil Product Stocks Extend Highs

Total oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub rose on the week, the highest since at least 2003, according to consultancy Insights Global.

Stocks had already been at their highest since at least 2003 the previous week, after inventories of all surveyed products except gasoline had risen in the week to 27 May.

The week on week rise was driven by rising inventories of gasoline, as well as fuel oil and gasoil, while naphtha and jet kerosine inventories dropped lower.

Independently-held gasoline storage in ARA hit a fresh high since at least 2003 this week. Stocks rose as tankers arrived at ARA jetties from Estonia, Russia, France, Spain and the UK. Higher imports into ARA tanks could be a function of higher export demand, as sellers look to accrue supplies to assemble larger cargoes for long-haul voyages across the Atlantic or to Asia-Pacific. Gasoline was exported out of the ARA area to the US and Mexico, as well as the Mediterranean, over the past week. And more long-haul exports could follow in the coming week, with as many as 19 seagoing vessels spotted at jetties in the area, according to Insights Global.

ARA gasoil stocks rose, the highest since October 2019. Weaker inland demand prompted a drop in barge flows up the Rhine, according to Insights Global, while weakening refining margins could also be resulting in rising stocks amid a slowdown in demand. Inflows into the region remain high, with tankers arriving in ARA from Russia, India and the Middle East. No gasoil exports were recorded by Insights Global in the past week.

Fuel oil stocks rose in the week to 3 June, the joint highest on record. But stocks could decrease over the next week as long-haul export shipments materialise. The Torm Mathilde departed from Rotterdam with around 90,000t of fuel oil on 4 June for an onward voyage to Saudi Arabia, according to data from oil analytics firm Vortexa. Renewed Opec and non-Opec production cuts could result in higher flows of high-sulphur fuel oil to the Middle East for power generation as a replacement for crude oil. Suezmax tankers were also said to have been booked to load fuel oil from ARA for onward voyages to Singapore.

Jet kerosine inventories dipped as supplies were delivered to ARA storage from the UAE, while outflows were recorded to the UK. Jet fuel inventories could be decreasing as demand picks up in line with the gradual recovery of the aviation sector.

Naphtha stocks fell. Inland demand from the petrochemical sector remained weak, while stock levels could be decreasing as naphtha is taken out of storage tanks for processing at regional refineries.

Report: Robert Harvey

Independent ARA Oil Product Stocks Hit Fresh Highs

May 28, 2020 — The amount of oil products held in independent storage in the Amsterdam-Rotterdam-Antwerp (ARA) area rose during the past week to reac the highest level since at least 2003, according to consultancy Insights Global.

Inventories of almost all surveyed products rose on the week, supported by the crude market’s steep contango structure, where prompt prices are at a discount to forward values. The tank utilisation rate in ARA was between 70-75pc, but the 25-30pc not in direct use was unavailable to the market. Available commercial tank space in the area appears very limited until well into 2021.

Gasoline stocks bucked the trend, falling during the past week, driven by a rise in local demand and a week-on-week increase in arbitrage flows to the US and west Africa. Demand for gasoline in the US is rising ahead of the summer driving season. Gasoline cargoes also departed ARA for Puerto Rico, and arrived in the area from France, Italy, Spain and the UK.

Stocks of all other products rose, with naphtha and jet fuel both reaching their highest level since at least 2003. Jet fuel barge movements around the ARA area ticked up from a very low base, but demand from inland destinations along the river Rhine remained virtually non-existant.

Several European airlines have announced plans to increase passenger flights next month as travel restrictions brought in to tackle the Covid-19 pandemic are eased. But a global surplus of jet fuel means that market participants are still looking for floating storage for the product. Tankers carrying jet fuel arrived in the ARA area from the Mideast Gulf, South Korea and from Augusta in Italy during the past week, while one tanker departed the region for the UK.

Naphtha inventories rose on the week. Demand from petrochemical plants along the river Rhine was low, with prices of rival feedstocks becoming more competitive. And high gasoline inventories meant that there was little interest from gasoline blenders either.

Gasoil stocks rose on the week, the highest level since October last year, as traders looked to take advantage of a contango structure in Ice gasoil futures by putting product into storage. Gasoil flows up the Rhine to inland markets reached their highest weekly level since at least 2017 a week earlier, but fell back during the past week as stocks inland also approached storage capacity. Gasoil tankers departed ARA for the UK and west Africa, and arrived from the Mediterranean, Poland, Russia and Saudi Arabia.

Fuel oil stocks rose slightly. Demand in the ARA area for bunker fuels remained stable at a very low level, weighed down by the impact of Covid-19 on commercial shipping. Fuel oil cargoes arrived in ARA from the Black Sea, France, Germany and Russia, and departed for the Mediterranean and Port Said for orders.

Reporter: Thomas Warner