Analysis: Will Green Ammonia Become a Shipping Fuel of the Future?

June 7, 2021

Shipowners and industry analysts expect green ammonia to play a critical role in the future of marine fuels, but there's a crucial caveat: no vessels are currently equipped to use it as fuel and production is as yet on a small scale.

Green ammonia refers to ammonia produced through a process that emits zero or a minimal amount of carbon dioxide (and other greenhouse substances) in the environment.

Technologies for green ammonia production, which are in the emerging stage, are technically and environmentally quite opposite to the modern-day conventional ammonia technologies that, depending on the type of carbon-bearing fossil materials used to make ammonia, produce 1.5-2.5 metric tons of carbon dioxide per metric ton of ammonia, according to data from IHS Markit.

Currently, around 80% of ammonia produced is used in the manufacture of fertilizers. Global production of ammonia is expected to expand to nearly 290 million mt/year by 2030 from around 180 million mt/year in 2021, according to a recent policy briefing entitled Ammonia: zero-carbon fertilizer, fuel and energy store by The Royal Society.

"By 2050, we expect green ammonia and bio-methanol to end up with a strong share of the market; so they are currently the most promising carbon-neutral fuels in the long run," said Hendrik Brinks, principal researcher of zero-carbon fuels at Norwegian shipping classification society DNV Maritime.

"However, if 30% of shipping switched to ammonia as a fuel, then current production would have to nearly double," Brinks said.

While the International Maritime Organization (IMO) prepares to discuss new measures to steer the development of decarbonization in shipping, it is becoming clear that no single fuel will solve the industry's zero carbon needs.

"It will be hard to identify clear winners among the many different low carbon fuel options," said DNV Maritime in a recently published forecast out to 2050.

"Our models suggest that fossil LNG will be prominent until regulations tighten around 2030. Bio-MGO, e-MGO, bio-LNG and e-LNG might emerge as drop-in fuels for existing ships."

Meanwhile, different vessels have different fuel requirements, according to Magnus Jordahl at DNV Maritime. Ferries can potentially run entirely on batteries for shorter routes, but these would not be suitable for long haul voyages. Hydrogen is also being considered as a potential fuel for short-haul journeys, while ammonia could be an option in deep sea shipping. Commercial viability is heavily dependent on the business case for these fuels and needs to take into account the vessel type and individual trading pattern, said Jordahl.

A handful of analyst groups are committed to researching into just these kind of business cases. On June 2, the Nordic Green Ammonia-Powered Ship (NoGAPS) consortium, developed by the Global Maritime Forum and Fuerstenberg Maritime Advisory, launched their study, revealing a promising outlook for green ammonia-powered vessels.

"Our study finds that using green ammonia as a fuel is both practical and feasible," said Jesse Fahnestock, project director at the Global Maritime Forum. "The focus should now be on measures that can strengthen the business case for zero-emission ammonia. Understanding the technologies and business models needed to deliver zero-emission shipping is key."

The use of ammonia as a fuel has made rapid progress over the past few years, and the maritime industry is a major driver of this development. But it comes with its own challenges, according to a recent study from IHS Markit, the parent company of OPIS.

Ammonia has lower energy density than the current marine fuels, according to Julia Wainwright, a senior research analyst at IHS Markit. Ships using ammonia as fuel will need much larger fuel tanks. Also, the toxicity of ammonia makes it less viable for passenger ships and creates potential obstacles at existing port facilities, said Wainwright.

On April 19, leading companies from across all segments of the maritime industry gathered together as part of a project managed by the Maersk Mc-Kinney Moeller Center for Zero Carbon Shipping. The goal was to develop the safety parameters and protocols necessary to accelerate the safe adoption of ammonia as a fuel for the shipping industry.

"In the eagerness to decarbonize the shipping sector, proper risk management is critical, and safety must not become an afterthought," said Claus Winter Graugaard, head of Onboard Vessel Solutions. "This project will provide mature understanding of safety risks enabling industry guidance towards future safeguards, design and adequate operational guidelines. We believe that our research will enable the safe...deployment of ammonia as a marine fuel."

All eyes are now on the Marine Environment Protection Committee (MEPCC) meeting on June 10-17, during which the IMO will announce new guidelines and mandatory measures to reduce the carbon footprint of shipping. Whether or not green ammonia will emerge as a winner remains to be seen.


--Reporting by Benita Dreesen,;

--Editing by Rob Sheridan,

Copyright, Oil Price Information Service

Suez Canal Container Ship Successfully Afloat, Moves Away for Inspection

March 29, 2021

The container ship that has blocked the Suez Canal for almost a week has been successfully re-floated and is set to move along the Canal to undergo a full inspection, according to a media statement from the vessel's technical managers, Bernhard Schulte Shipmanagement Monday.

"Bernhard Schulte Shipmanagement (BSM) as the technical managers of the containership Ever Given, can confirm that the vessel was safely re-floated at approximately 3 p.m. local time on March 29," BSM said in the statement. "The Ever Given will now to head to the Great Bitter Lake where she will undergo a full inspection."

The Ever Given, a containership with a deadweight of 200,000 metric tons and some 400 meters long, according to IHS Markit Commodities at Sea data, ran aground in the Canal on March 23 around 7 a.m. local time. A dust storm and wind speeds of 40 knots caused the containership to lose control of its steering, with bow wedged in the wall of the canal, according to a shipbroker report.

"Evergreen Line is pleased to confirm that Ever Given has been successfully refloated within the Suez Canal," owner Taiwanese shipping company Evergreen Marine said in a statement Monday. "In order for the Canal to resume normal operation, the vessel is leaving the grounding site with assistance of tugboats."

Evergreen Marine claimed responsibility for recovery expenses, third-party liability and repair costs in a statement last week.

The Great Bitter Lake is used by vessels transiting the Canal to change position or turn round. There is a large fleet of ships currently waiting in the Lake to resume their journey along the Canal, according to IHS Markit Marine Intelligence Network data (MINT). The Ever Given is now underway, moving at a speed of 7.5 knots, MINT data showed.

"The transit convoys and traffic will resume after the grounded vessel arrives at Great Bitter Lake and the backlog of...vessels in the Bitter Lakes/Suez and Port Said areas is cleared," GAC said in the statement, quoting SCA information. "The convoy system will change temporarily until transits are back to normal, expected in three to four days."

Still, a significant number of vessels waiting to transit the Canal remain at anchor, while their owners deal with issues and expenses from late arrivals and delays in loading and discharging cargoes. Some owners have elected to re-route ships along longer routes, incurring extra logistical and fuel costs, while charterers and shipbrokers have seen freight rates soar along certain routes, as the pool of available spot vessels dries up.

A.P. Moller-Maersk has redirected 15 vessels around the Cape of Good Hope at the southern tip of Africa, away from the Suez Canal, as a result of the halting of Canal transits because of the grounded container ship.

The Danish shipping giant has three vessels queuing mid-transit along the Canal and 30 more ships waiting to enter the canal, with more expected to reach the blockage Monday, according to a press statement.

"Once the [Ever Given] is safe at anchorage, the vessels currently at anchorage in the Lake - three of them Maersk vessels - will sail out of the canal in a convoy," Maersk said in the statement. "The current situation remains that the canal is not yet free for passage...We are monitoring the situation closely, as Maersk and partners have 34 vessels at anchorage waiting."

Two LNG tankers and three containerships, including the 20,000-TEU Ever Greet, also operated by Evergreen Marine Corp., have now diverted course due to the blockage, according to IHS Markit data. Two Very Large Gas Carriers are currently in mid-transit along the Suez Canal, according to a shipbroker report, while some six gas carriers are located south of the canal and two more to the north, according to OPIS tracking data.

Long/Large Range 1 and LR2 freight rates, which had been firming since late February, have jumped over the last week for tankers heading East of the Middle East Gulf, as the queue of vessels waiting to transit the Canal lengthened before the container ship was refloated.

LR1 tankers loading 55,000 mt from the Middle East Gulf to Japan, a route referred to as TC5 by the Baltic Exchange, rose to 133.57 worldscale points Monday, a week-on-week gain of 8.7% from March 22, Exchange data show.

LR2 tankers loading 75,000 mt for the Middle East/Japan voyage, known as TC1, rose to 138.33 worldscale points or $32.27/mt Monday, from 96.67 worldscale points or $22.55/mt a week earlier, Exchange data showed. Rate costs in dollar per metric ton surged by 43% over four sessions. Lump sums for LR2s hauling 80,000 mt from the Mediterranean to the Far East, or TC15, shot to $2.5 million Monday, up by 24% from March 22, Exchange data show.

Westbound freight LR freight climbed higher due to the delays, although the gains were less marked. Freight for LR1 tankers loading 65,000 mt from the Middle East Gulf to northwest Europe, a route referred to as TC8 by the Baltic Exchange, climbed to $29/mt Monday, a 15% week on week increase.

Some 193 vessels are waiting at Port Said for the southbound convoy and 201 at Suez for the northbound convoy, with another 43 at the Bitter Lakes, according to GAC data.

About 10% of global seaborne trade transited the Suez Canal in 2020, according to IHS Markit data.

IHS Markit is the parent company of OPIS.


--Reporting by Trisha Huang,, Rob Sheridan,;

--Editing by Yazdi Merchant,

Copyright, Oil Price Information Service


Aramco Dovetails Kingdom Policy of Output Restrain With Higher April Asia OSP

March 8, 2021

Saudi Aramco, the world's largest crude oil exporter, raised its April official selling price (OSP) to Asian term buyers by more than expected as it backed the kingdom’s view that market fundamentals were not strong enough for OPEC+ to open their oil taps, nudging consumers to dip into their inventories if short.

At the OPEC+ meeting last week, where ministers agreed to a rollover of quotas apart from modest hikes to Russia and Kazakhstan output, the Saudi Energy Minister Prince Abdulaziz bin Salman struck a cautious note while extending the kingdom’s voluntary 1 million b/d cut into April from February and March. Global oil inventories remain well above 2015-19 levels and need to be brought down to the five-year average, he said.

ICE Brent crude has surged past $70/bbl since the OPEC+ decision to hold back market anticipated production hikes of up to 1.5 million b/d, including rescinding the unilateral Saudi output cut, at the March 4 meeting. At 1.528 billion barrels, OECD crude stocks are 109.8 million barrels higher than a year ago and 81.2 million barrels above the five-year average (2015-2019), data from the most recent monthly OPEC report showed. Tanks are also brimming in major consumers such as China and India.

Aramco raised the April Asia OSP of its flagship Arab Light (AL) crude by $0.40/bbl, about $0.10/bbl above the top end of expectations, Arab Extra Light (AXL) by the biggest at $0.60/bbl and Arab Super Light (ASL) by $0.50/bbl, according to its price announcement on Sunday. Arab Medium was increased by $0.20/bbl while Arab Heavy was kept unchanged from March. The Aramco OSP is the first announced by a Middle East producer and is typically closely followed by the others in the region.

“The OSP increase seems to be in line with the Saudi plan to continue their 1 million b/d production cut in April So they had to increase prices and to keep nominations low, which will encourage refiners to draw down their own inventories,” said one trading source.

Saudi Aramco has so far kept up most of its term obligations with many buyers already seeking less volume for February, March and/or April loading as the Asian refining sector enters the spring maintenance season with a hectic schedule penned this year among operators in India, Japan, South Korea and China, trading sources estimate.

Saudi Arabia Crude Oil Shipments
Source: Commodities At Sea

Preliminary data from IHS Markit Commodities At Sea (CAS) show crude oil shipments from Saudi Arabia dipped slightly in February to 6.51 million b/d from 6.57 million b/d in January despite an estimated 870,000 b/d output cut versus its stated aim of reducing production by 1 million b/d.

OPEC+ shipment was estimated at 24.5 million b/d up sharply from 22.7 million b/d in January, the most since March 2020, as seaborne exports from Russia, the biggest Plus member, surged to 4.5 million b/d from 3.4 million b/d a month ago, the CAS report showed.

At their meeting on March 4, the producer group agreed to keep production quota unchanged for all members except Russia and Kazakhstan, which will be allowed to increase production by 130,000 b/d and 20,000 b/d, respectively, OPEC said in a statement at the end of the meeting.

"The Meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3 billion barrels of oil by end of January 2021, accelerating the oil market rebalancing," it said in the statement.

Asian refiners were saddled with surplus diesel and gasoline following a dull Lunar New Year holiday as people stayed put, especially in China following government advice, in fear of contracting COVID-19. Fresh outbreaks of the virus led authorities to keep a tight leash on movements during the Spring Holidays which curbed transport fuel consumption.

However, the unexpected winter freeze in the U.S. caused European refiners to divert their gasoline shipments across the Atlantic leaving Asia to cover the West Africa market and beyond, trading sources said. The opening of the arbitrage to the West was a much-needed boost which allowed refiners in Asia to maintain runs instead of having to cut as margins picked up, they added.

This little purple patch was a much-needed boost for the industry which now enters the spring maintenance season in a better shape with fewer producers needing to get rid of unwanted products, the sources said. The crude oil output cuts, they added, ties with the turnaround closures.

Speaking at the end of the OPEC+ meeting on Thursday, Prince Abdulaziz said the U.S. shale oil policy of “drill, baby, drill,” a slogan used in Republican campaigns, is gone forever. However, some analysts caution that while a price of around $60/bbl did not trigger a huge rush of fresh tight oil barrels, crude at closer to $80/bbl might be a different proposition and could pose fresh supply challenges to the producer group.

“We will see what the market requires,” he was quoted as saying in the post-meeting media conference. “We are not required to bring it back fast or furious. We will bring it back at our convenience. It is our voluntary cut, it is for us to decide.”

--Reporting by Raj Rajendran,
--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Adnoc Breaks Mould in Preparing Ground for IFAD Murban Crude Futures Launch

March 4, 2021

Abu Dhabi National Oil Co. (Adnoc) removed destination restrictions on all its crude and published monthly export forecast for its flagship Murban as the producer breaks the mould in bringing openness and transparency to the trade ahead of the launch of the contract on the ICE Futures Abu Dhabi (IFAD) exchange.

The ground-breaking move means that the premium that is slapped on top of the monthly official selling price (OSP) for destination-free crudes will be gone, said trading sources, which would be a first by a Middle East producer for its entire output. Currently most major Gulf producers place destination restrictions on their crude with some like Iraq allocate small volumes that can be openly traded, which inevitably secure premiums.

“By lifting destination restrictions, Adnoc crude grades will become more attractive to global customers and the wider trading community. This is another important step as we prepare for the launch of the new Murban futures contract on March 29,” Khaled Salmeen, Adnoc’s executive director of downstream industry, marketing and trading directorate said in a March 3 statement.

Destination restrictions will also be removed on its other Upper Zakum, Das and Umm Lulu crude grades, which will commence at the same time as when the futures trading starts, i.e. from June 2021 loadings, it said.

In its Murban monthly export availability forecast report, Adnoc projected shipments to exceed 1 million b/d from June, the first delivery month, through March 2022 with a monthly average of 1.066 million b/d. However, it is this projection that has raised concerns among some market participants.

“We are now in March, if IFAD is trading right now it would be for May barrels. What if in the next OPEC+ meeting they decide to cut output, would Murban barrels be affected. May trading would be over by then, we cannot then be told that there will be less volume available,” said one trader, adding that the reverse would also apply if output was increased.

Some said that it is this possibility of supply inconsistency, or uncertainty, which is rankling with them. The sources said that Adnoc has to make it absolutely clear that Murban shipments will not be in any way affected by OPEC+ decisions.

In such a case, when United Arab Emirates’ (UAE) production is tweaked to meet new OPEC+ decisions, the other grades would then be disproportionately affected, they said. Ultimately, the equity partners or term buyers of the remaining three grades will have to manage the producer group agreements, the sources added.

This concern aside, most participants welcome the Murban futures contract and all the efforts Adnoc has taken to give the new hedging toll every chance of success.

“Adnoc is making all the right moves. They are creating a strong instrument for trading that is meaningful and relevant for Asia refiners. Liquidity should be good with these announcements,” said one trading source in Singapore.

Murban Sold to Diverse Destinations

 raj 0305

Source: Commodities At Sea

Adnoc and ICE have over the past few months been busily laying the ground for the launch of the contract on March 29. In its latest statement, the producer said that new agreements were made with Rongsheng Petrochemical Co. Ltd. and Unipec to explore using the Murban futures contract, similar to that signed with others in the U.S. and Japan.

Last November, it signed memorandum of understandings (MOUs) with Occidental, Chevron and Trafigura to also explore potential opportunities to price U.S. crude exports to Asia using the futures contract. In January, Adnoc announced similar accords with Cosmo Oil Co. Ltd., Japan's third-largest refiner with about 500,000 b/d of processing capacity, and other Japanese end-users.

“We believe that ICE Murban crude oil futures will play an important role in global crude oil pricing and bring more reliability, stability, transparency and liquidity to the market,” said Meng Fanqiu, general manager of Rongsheng Petrochemical Singapore Pte Ltd in the statement.

A unit of Rongsheng, Zhejiang Petrochemical Co., is the operator of one of the largest independent refining-cum-petrochemical complexes in China with an 800,000 b/d crude processing capacity.

“IFAD will provide us with more alternatives to hedge and optimize our crude pricing portfolio,” said Leo Yang, the trading general manager of Unipec Asia, “This is another innovation, injecting vitality to the trading world and enhancing the price discovery mechanism of light crude grades.”

Adnoc said that by 2030 it expects its Murban grade crude to contribute almost 50% of the company’s 5 million b/d of production capacity target. 

Adnoc, bp, GS Caltex, INPEX, ENEOS, PetroChina, PTT, Shell, Total and Vitol are partnering with ICE to support the launch of IFAD, several of whom are also equity producers in Murban.

The producer said that the contract will be used to set the OSPs of all four of its crude export grades, but so far no other Middle East producer has announced a similar change to their OSPs.

While Murban price will be known two months ahead, Adnoc will continue to publish the OSP differentials one month in advance as is the case currently. In this scenario if the postings are made after Saudi Aramco announces its OSPs then the world’s largest crude exporter would not lose its leader status in setting the monthly price for Middle East crude, trading sources said.

"Murban is closest to Arab Extra Light (AXL), which is not Aramco's biggest grade, it is about 700,000 b/d. Aramco can still set a differential for it if they wish," one source said earlier, adding that output of flagship Arab Light is over 3 million b/d.


--Reporting by Raj Rajendran,;

Editing by Carrie Ho,


Copyright, Oil Price Information Service



South Africa to Import Record Oil Products in February on Refinery Outages

15 February 2021

South Africa is set to ramp up petroleum product imports in 2021 following the unexpected and prolonged closure of two refineries with a third due for maintenance in the second quarter, according to trading sources and IHS Markit data.

Sub-Saharan Africa's largest fuel market will take delivery in February about 280,000 b/d of oil products, led by diesel and gasoline, a monthly record in IHS Markit Commodities At Sea (CAS) data going back to October 2016. Imports averaged 130,000 b/d in 2020 with a low of 46,000 b/d in May, the CAS data show.

Seaborne Petroleum Product Shipments to South Korea

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Source: Commodities At Sea 

Deliveries took off at the tail-end of last year after Engen Petroleum brought down its 125,000 b/d Durban refinery, the second-largest in the country, following a fire and an explosion on Dec. 4 on the heels of the closing of the 110,000 b/d Cape Town Astron Energy facility in July, also after an explosion.

Fuel shipments jumped to 195,000 b/d in December, up sharply from 123,000 b/d in November and rose further to almost 220,000 b/d in January, according to the CAS data. The higher purchases were mostly covered from nearby sources in the Middle East and west coast India (WCI), according to shipping sources and the CAS data.

Outside these neighboring refiners, fuels were also sourced from Malaysia, the Netherlands on a regular basis with occasional cargoes arriving from Singapore, South Korea and China among others, the data show.

Regular Fuel Suppliers to South Africa

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Source: Commodities At Sea 

"This will give good support to the clean tanker market," said one shipping source, adding that medium-range rates on the Middle East-WCI route got a boost when demand from South Africa first spiked a couple of months ago.

Oil traders said that with only two working refineries the nation will be looking to the overseas market for fuel for much of this year, especially amid talks that the investment costs involved in fixing the Engen refinery might convince majority-owner Petronas to go ahead with plans to convert the site into an import terminal.

According to IHS Markit research, prior to the closing of the two sites, local producers with crude processing capacity totaling 520,000 b/d and synthetic refineries with output of 200,000 b/d were able to supply 85% of domestic demand between 2012-2019.

"Growing demand in a context of unchanged refining capacity will increase South Africa's dependence on oil product imports," it said in the May 2020 report.

The country's largest facility, the 180,000 b/d Durban site, a Shell-BP joint venture, is due to shut for maintenance in May, while the Astron refinery is only likely to resume operations in 2022 and the future of the Engen plant is shrouded in uncertainty amid rebuild costs, according to trading sources and media reports.

"Necessary upgrade work at refineries to meet increasingly strict emission limitations may push less competitive refineries to shutdown instead of carrying out expensive interventions," the IHS Markit report said.

IHS Markit does not expect the implementation of the Clean Fuels 2 legislation (CF2), which was delayed in 2017, before 2025 at the earliest. The mandate calls for lower 10 ppm sulfur motor fuels.


--Reporting by Raj Rajendran,;

--Editing by Lujia Wang,

Copyright, Oil Price Information Service

Exxon Mobil Joins BP in Closing Australia Refinery as Fuel Demand Erosion Bites

10 February 2021

ExxonMobil Corp. has joined fellow oil major BP to shutter its Australian refinery in the face of shrinking margins as competition from larger and more sophisticated sites elsewhere in Asia makes it more economical to import fuels instead of producing them locally.

"The decision was made following an extensive review of operations at Australia's smallest refinery, which commenced operation in 1949. The review considered the competitive supply of products into Australia, declining domestic crude oil production, future capital investments and the impacts of these factors on operating earnings," ExxonMobil said in a long-expected statement on Wednesday.

The conversion of the 90,000 b/d Altona refinery, operated by Mobil Australia near Melbourne, into an import terminal follows a similar announcement by bp in October 2020 on winding down its 152,000 b/d Kwinana site in Western Australia over six months. Similar shutdown news emerged from the Philippines, Japan and Singapore as the refining sector grapples with the demand decimation inflicted by COVID-19 on the back of new complex plants coming up in China, India and Southeast Asia.

"In Asia, we are expecting a total of about 1.5 million b/d of shutdowns in the next couple of years. This is inclusive of the announcements," said Premasish Das, IHS Markit research and analysis director in Singapore, adding that the two remaining facilities in Australia are likely to continue operating.

In December last year, Ampol Ltd. declined a government handout to keep open its 109,000 b/d Lytton site in Brisbane citing uncertainties, unlike Viva Energy Group Ltd., which accepted the subsidy and is now committed to keeping its 120,000 b/d Geelong site running.

"Ampol will defer a decision on receipt of the production payment until it becomes clear that Ampol can meet the terms of the production payment, which is likely to be when a final decision is made on the future of the Lytton refinery," it said in a statement on Dec. 15, 2020. The refiner expects to complete its review by the end of the first half of 2021.

The Australian refiner is not the only one in the midst of an operations review. Next door, Refining NZ is also conducting a study on keeping its 135,000 b/d Marsden Point site, the sole refinery in New Zealand, open or also convert it into an import terminal. An update is due from the company during its full-year results announcement later this month.

In August last year, Royal Dutch Shell said it would shutter its near 60-year-old 110,000 b/d Tabangao refinery in the Philippines and turn it into an import terminal, becoming the first Asian casualty of COVID-19. Shell subsequently announced the halving of crude processing at its mega Pulau Bukom site in Singapore from 500,000 b/d.

"The transformation of our business in Singapore, and in particular our largest refinery on Pulau Bukom into one of our approximately six energy and chemicals parks, is crucial to Shell's ambition of becoming a net-zero emission energy business by 2050 or sooner, in step with society and our customers," Shell said in a statement, signposting a path other traditional oil majors are also embarking on.

In Japan, home to many refineries that were built in the 50s and 60s, closures on top of closures are to be expected as the industry there continues to rationalize operations, trading sources said. Even prior to the pandemic, Eneos Holdings, the country's largest refiner, shuttered its 115,000 b/d Osaka refinery, turning the facility into an asphalt-fueled electric power station.

Last month, Eneos said it would permanently shut a 120,000 b/d crude unit and secondary units at the 270,000 b/d Negishi site by October 2022. The site will have 150,000 b/d of crude processing capacity following the closure.

Such drastic moves have come amid a slew of new facilities coming onstream or due to start within the next year in China and India with work still ongoing to restart the much-troubled Petronas-Saudi Aramco 300,000 b/d Pengerang refinery in Malaysia, which suffered two major fires since first attempting to begin commercial operations in April 2019.

China has brought online and will bring online at least 1 million b/d of capacity led by the highly integrated Zhejiang Petrochemical (ZPC), which began trial runs of a third 200,000 b/d crude unit in November with the aim of doubling this by the middle of this year. Once completed its 800,000 b/d refining-cum-petrochemical complex will be among the largest in the country and a major source of gasoline.

Another sophisticated project is the 800,000 b/d Yulong project, which is championed by the Shandong provincial government in its scrap-and-build initiative that is aimed at closing aging, pollutive standalone units. Several independent refiners in the area have bought into this scheme and have shuttered their plants.

In India, Hindustan Petroleum Corp. Ltd. (HPCL) for example, said that work to expand the Visakhapatnam refinery to 15 million mt/year, or about 300,000 b/d, will now be commissioned around mid-2022, while that to boost refining capacity to 9.5 million mt/yr at Mumbai will be completed ahead of that.

Sources of Oil Product Shipments to Australia

raj 0210

Such challenges are the main reason for refiners opting to shut their older facilities, which is turning out to be a boost for clean tanker owners. Data from IHS Markit Commodities At Sea show that oil product exports to Australia are recovering slowly but jet-kerosene shipments lag behind that of 2019 considerably.

Deliveries in January totaled 15.8 million bbls after arrivals dipped to a low of 11.1 million bbls in September because of COVID-19.

"Australia will have to import more products after this closure and bp's," said one trading source, referring to the shuttering of Altona and Kwinana.

ExxonMobil will also have to find outlets for its light-sweet Gippsland crude produced from the nearby Bass Strait, the source said. Production began in early 1970s and is currently at about 50,000 b/d and ExxonMobil and BHP each hold 50% equity, according to the company.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Saudi Output Cuts Help Stave Off Crude Slide Amid Asia Refinery Turnarounds

January 27, 2021

A heavier spring maintenance schedule, resurgence of COVID-19 cases and likely lower Asia refinery run rates took the sting out of the unilateral 1 million b/d Saudi Arabia output cuts as crude prices were propped up rather than propelled skywards in the face of softer fuel demand.

While outright ICE Brent crude has hovered around the $55/bbl mark after shooting up by almost $5/bbl following the surprise Saudi announcement, differentials in the physical Asia market have not done as well. For example, Russian Far East ESPO, a staple of Chinese refiners, is changing hands at a premium of around $1/bbl for March loading compared with plus $2.50-$3/bbl for February loading, a trading source said.

At the same time, the Dubai forward M1/M3 inter-month spread, a key indicator used in the Saudi Aramco crude oil official selling price (OSP), averaged $0.49/bbl so far in January, down slightly from $0.56/bbl in December. Physical Middle East barrels traded earlier this month at a discount to their respective OSPs before recovering to flat and later small premiums, suggesting limited buy pressure.

"The Saudis made a good call, they saw that demand could be affected by COVID-19 and they were right," said one trading source, adding that aside from the slowdown in fuel consumption due to new government travel restrictions in many countries, the large refinery maintenance schedule also crimped crude demand.

After the OPEC+ meeting, which was extended by a day to Jan. 5, Energy Minister Prince Abdulaziz bin Salman said the kingdom made the voluntary cuts to support both the Saudi economy and the oil market. Saudi Arabia had a conservative view of demand recovery while a Russia-led a group was far more optimistic in the wake of vaccine rollouts in many countries.

"I want to urge caution, even in this generally optimistic environment. The level of uncertainty in the world remains high," Prince Salman said at the opening of talks on Jan. 4, adding, "do not put at risk all that we have achieved for the sake of an instant, but illusory, benefit."

The market was bolstered in the days after that meeting by frigid weather in Northeast Asia, which led to higher runs as refiners cranked up production to meet rising heating fuel demand. This also led to increased purchases by Japanese buyers, which gave Middle East crudes a boost, trading sources said.

Crude runs in Japan, against the country's nameplate 3.46 million b/d capacity, rose to 80.8% in the week to Jan. 23, the highest since 81% in the week ended Dec. 19, from 77.9% in the previous seven days, according to data from the Petroleum Association of Japan (PAJ) on Wednesday.

Middle East Dominate Japanese Crude Oil Imports

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Source: IHS Markit Commodities At Sea

However, runs are getting trimmed as the winter demand eases and social distancing measures take center stage, particularly in the region's largest consumer, China. Restrictions and even lockdowns by local authorities to curb the spread of COVID-19 ahead of the Lunar New Year in February appear to have paid dividend as the nation recorded its lowest daily tally at 75 cases, official data showed on Wednesday.

This new wave has crimped domestic transportation fuel demand and in an environment where the regional market is equally well supplied, the Chinese refiners don't have many options but to tweak rates lower, trading sources said.

The colder winter-inspired higher crude throughput in December and January, especially in Japan, which is also in the midst of a state of emergency until Feb. 7, may just be the last hurrah for the industry for a few months, they said. Refiners are looking to mitigate an increasingly inevitable fuel demand drop by shutting plants for maintenance.

India, the world's third-largest crude importer, has a busy season scheduled.

For starters, HMEL, a public-private venture between steel tycoon Lakshmi N. Mittal and state-run Hindustan Petroleum Corp. Ltd (HPCL), shut its entire 225,000 b/d Bathinda refinery in northern Punjab state this week for about 40 days of maintenance.

Next in line to shut for a major maintenance is the 120,000 b/d Bharat Petroleum Corp. Ltd. (BPCL) Mumbai refinery from mid-March to mid-April, which is dovetailed by closures at around the same time by Indian Oil Corp. (IOC)-affiliated Chennai Petroleum Corp. Ltd. (CPCL) at its Manali site and HPCL at Mumbai, affecting 80,000 b/d and 70,000 b/d of crude processing capacity, respectively, a source said.

In April, a significant event is the closing of the 300,000 b/d IOC Paradip refinery from mid-April to mid-May. Throughput at the facility fell in December by 31.7% on-year and 26.3% on-month to 976,530 mt due to the shutdown of an Indmax unit, the Ministry of Petroleum & Natural Gas said, referring to a unit that converts residue to light olefins, high octane gasoline and LPG.

IOC also plans to shut its 160,000 b/d Mathura refinery for scheduled turnaround from mid-April to early-May, the source said. There are several other smaller crude unit closures during this period.

In South Korea, GS Caltex intends to shut its 330,000 b/d No. 4 crude distillation unit (CDU) at the 800,000 b/d Yeosu refinery from mid-March to end-April, while the largest refiner, SK Energy, kept runs near record lows at 60-65% at the 840,000 b/d Ulsan site, company officials said.

Eneos, the largest refiner in Japan, plans to take two of three CDUs offline at its 350,200 b/d Mizushima refinery in February for maintenance works. It will shut the 95,200 b/d Mizushima B No. 2 CDU until the end of April and the 105,000 b/d B No. 3 plant until end-May.

In China, China National Offshore Oil Corp. (CNOOC) plans to shut a 200,000 b/d CDU at its 440,000 b/d Huizhou refinery for maintenance in February-April, while Sinopec has works penned at the 160,000 b/d Changling Petrochemical and Jiujiang Petrochemical facilities.

Elsewhere in the region, Thai Bangchak Corp. plans to shut its 120,000 b/d refinery in Bangkok from mid-February for 39 days, Petron Corp. its 180,000 b/d facility from the second half of January, Refining NZ its 135,000 b/d Marsden Point site for four weeks in late February.


--Reporting by Raj Rajendran,;

--Editing by Trisha Huang,

Copyright, Oil Price Information Service

China December Crude Oil Imports Tumble, 2020 Purchases Soar on Bargains

January 14, 2021

China's crude oil imports fell sharply in December as buyers tapped their inventory for cover in the face of dwindling quotas while shipments for the whole year rose 7.3% following a massive spring/summer shopping spree as prices collapsed amid the COVID-19 pandemic and initial OPEC+ disagreements.

In December, imports fell to 38.47 million mt, or about 9.06 million b/d, down 15.4% from 45.48 million mt a year ago and 45.36 million mt in November, according to data from General Administration of Customs (GAC) as cited in media reports.

“The teapots ran out of quotas near the end of the year,” said one trading source, adding that there was a lot opportunistic buying earlier in the year when ICE Brent plunged below $30/bbl in March after Saudi Arabia and other Middle East producers opened their collective oil taps following a breakdown in OPEC+ output reduction talks.

It then fell to below $20 in April as the COVID-19 pandemic enveloped the world grinding air travel to a halt and decimating fuel demand before staging a recovery after the producer group agreed to reign in output.

These opportunistic purchases, backed by a surge in refining capacity including two mega 400,000 b/d complexes, led to bumper imports in 2020. China brought in a record 542.4 million mt, or 10.85 million b/d, last year up from 505.7 million mt in 2019, the GAC data show.

“The country has put about 2 million b/d of crude into its crude storage tanks this year, according to IHS Markit estimates, an impressive figure made possible by the completion of 98 million bbl of additional storage capacities this year, as well as the significantly enhanced utilization rate in its existing storage sites,” IHS Markit said in the December China short-term crude oil market outlook.

China Seaborne Crude Oil Imports by Port

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“We expect relatively strong crude imports in the first quarter as China’s buying impetus is revitalized with the new crude import quota granted,” said Sophie Fenglei Shi, downstream research associate director at IHS Markit in Beijing, and co-author of the report. OPIS is a unit of IHS Markit.

Last month, the China Ministry of Commerce (MOC) issued the first 2021 batch of crude oil import quotas for non-state buyers that totaled 894.9 million bbls, or 136.9 million bbls more than the initial batch in 2020.

Hengli Petrochemical and Zhejiang Petrochemical (ZPC), operators of the mega refineries, each secured a 102 million bbl quota, equating to 70% of their allowance to refine imported crude. Both refineries have fully utilized their quota in 2020.

ZPC is expected to be granted additional allowance to refine imported crude in 2021 as its capacity is expected to double to 800,000 b/d with its second phase, which is due to start commercial operation in the second quarter of 2021, according to IHS Markit.

China’s crude imports are expected to re-enter a growth trajectory, although the magnitude and duration may not be comparable with those when storage economics were strong in the first half of the year, according to the report.

“On a yearly average basis, we reckon that in 2021, there will be several factors challenging China to duplicate its growth miracle for crude imports seen in the past few years, when above 800,000 b/d were recorded despite of market turbulences,” Shi said.

“Those challenges include high stock levels for both crude and products, as well as uncertainties on internal and external product demand associated with lingering COVID-19 cases, which could put pressure on refinery utilization despite the capacity additions,” she noted.

A resurgence of COVID-19 cases has led authorities to lock down four cities, placing over 22 million people under restriction. In its Jan. 14 briefing the nation’s National Health Commission reported 138 new cases, the biggest spike since March last year as well as the first death in eight months.

These rising cases, despite strict social distancing measures, are likely to dent fuel demand in China, trading sources said, adding it will probably hurt peak seasonal demand during the Lunar New Year and Spring Festival.

“This year, an expectedly much colder winter due to the La Niña effect, together with the pandemic’s repercussions, is likely to add huge uncertainties to the seasonal demand pattern,” IHS Markit said in the report.

While seasonal downsides for diesel remain in the picture, the upsides for gasoline and jet fuel could be weakened owing to the pandemic’s lingering impacts on discretionary holiday trips, and a cold winter could even give those trips further drags, it said.

The voluntary 1 million b/d output cut by Saudi Arabia in February and March, followed by a larger-than-expected rise to its February official selling price (OSP), is likely to squeeze the sour market, especially medium sour grades, leading to Chinese purchases from farther sources such as U.S. West Texas Sour and Thunder Horse, Baltic Urals and various sour North Sea grades, trading sources said.

Data from IHS Markit Commodities at Sea (CAS) show that China will take in a record 11.1 million b/d of crude oil via its ports in January, of which 3.6 million b/d has already been delivered. In all likelihood, fresh port congestions and other logistical issues including the new outbreak of COVID-19 will probably put a dent on this, they said. CAS data show seaborne shipments at a high of 10.8 million b/d last June.

Customs data also show that China's oil products exports fell to 5.9 million mt, down 13% from a year ago, while total 2020 shipments amounted to 61.83 million mt, down 7.5% from 66.85 in 2019.

The colder-than-usual temperatures led to a surge in natural gas imports, including liquefied natural gas (LNG) and pipe gas, to a record 11.23 million mt in December, according to the data. Full-year gas imports rose 5.3% to an all-time high of 101.66 million mt.

--Reporting by Raj Rajendran,

--Editing by Carrie Ho, 

 Copyright, Oil Price Information Service

Libya Cranking Up Oil Output Points Toward OPEC+ Production Cut Rollover in January

October 26, 2020

A move by Libya to raise oil output to 1 million b/d within the next four weeks, no matter how realistic or sustainable the ambition, has raised expectations of a rollover in OPEC+ output cuts in January instead of an easing as agreed amid unpredictable demand recovery, market participants said.

Even as the industry heads into the peak northern hemisphere winter heating and year-end holiday seasons many do not expect significant demand growth due to fresh outbreaks of COVID-19 cases, particularly in Europe, where many heavyweight nations including the UK, France and Spain have announced new social distancing measures that are bound to crimp fuel consumption.

The Libyan National Oil Corp. (NOC) announced on Friday that it was lifting force majeure from Sidra and Ras Lanuf ports with instructions given to begin production at fields that feed into the two sites, i.e. Waha and Harouge. Output will reach 800,000 b/d in two weeks and exceed 1 million b/d in four weeks, it added. Libya currently pumps around 500,000 b/d.

However, NOC cautioned in the statement that due to its inability to carry out maintenance and repair works during the eight-month blockades, which also impinged its financial resources, "the possibility of sustaining the mentioned-above production levels and at any case getting production levels to those that exist before the blockades will not be possible."

IHS Markit Commodities At Sea (CAS) data shows that Libya shipped 195,000 b/d in September compared with the monthly average of around 110,000 b/d since February following the closure of ports at the start of the year and well down from the average 850,000 b/d before that.

In October, about 365,000 b/d were exported so far of which 140,000 b/d have already landed at its customers. Of this, 2 million barrels are destined for China while around 3 million barrels of September loadings showed up in the Malaysian Sungai Linggi transshipment area, the CAS data showed, which should also end up in China, shipping sources said.

Libya Crude Oil Exports

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China is stepping up its purchases of Libyan crude, which could reduce imports other long-haul arbitrage barrels such as from the U.S. Gulf Coast and the North Sea with even Middle East spot staple Murban crude seen vulnerable should production from Libya actually reach and stabilize near the 1 million b/d mark, the sources said.

"Libya reduced their October OSP very aggressively, they are looking to regain market share that they have lost," said one trading source. NOC slashed the official selling price (OSP) of its bigger grades such as Es Sider and Sharara by $0.90/bbl to a discount of $2.30/bbl and $1.50/bbl, respectively, to Dated Brent.

Consequently, these ended up being extremely competitive vis-à-vis other similar light grades for Asian refiners with shipping fixtures showing several bookings by Unipec for October-loading cargoes.

Unipec has Suezmaz tankers lined up to load million-barrel parcels from Zuetina, Marsa El Hariga, two lots from Zuetina, Brega and Mellitah totaling 7 million bbls, shipping fixtures show.

"The extra volume coming out of Libya will make OPEC+ rethink their agreement to increase supply in January. With the extra million-barrel from Libya and another 2 million b/d from OPEC+ --the market is not ready for this," a source said.

However, Russia leader Vladimir Putin said last week that the group may roll over its output cuts into January, according to a Reuters report. OPEC+ are due to loosen production restrictions by 2 million b/d in January after already doing the same in September. Cuts were shrunk to 7.7 million b/d from an initial 9.7 million b/d.

The absence of strong, sustained fuel demand recovery in many countries will force the producer group to re-think their timetable, they said. In Asia, aside from China and India, which are recording strong domestic consumption, most other nations are facing a patchy recovery at best with many cutting back imports due to ample inventories while those with large refining systems such as Japan, South Korea and Singapore are runs at lower levels.

"The forward markets are pricing in a rollover," said the source, pointing to fairly flat Dubai timespreads, which were heavily in contango two-three months ago when supplies were abundant. "It should be a deeper contango in 1Q if they price more OPEC+ supplies."


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Murban Must be a Truly Free-Float Crude Oil for Success in Futures Trading

October 13, 2020

The launch of a Murban crude futures contract may finally give Asian refiners, traders and Middle East producers a risk management tool that has eluded the industry for many decades. But there are hurdles to overcome such as shocks in the form of a surprise OPEC output cut, market participants said.

OPEC output decisions could also give the producer, Abu Dhabi National Oil Co. (Adnoc) and its partners, unfair knowledge of future production plans as supply decisions are formulated within the group, which may ultimately undermine the credibility of the contract even if it is only a perception, they said.

At the same time, a shift by Adnoc, which it previously said it would, to use the Murban contract in place of its existing official selling prices (OSP) for all four export grades, will be a challenge for term buyers, especially traditional refiners who are used to next month OSPs instead of two-month forward futures pricing. This means buyers will have to come up with new risk-hedging strategies, they said.

With an output of about 1.7 million b/d Murban is the single-largest spot traded Middle East crude oil blend. This large free float and widespread use among refiners across Asia-Pacific makes the crude an ideal candidate for futures trading and as a benchmark, the sources said.

"Murban has to be untouchable, we cannot have it trading on an exchange and then Adnoc announces a 30% cut. The surprise cannot be there," said one trading source, adding that this may not be an easy obstacle for Adnoc to clear as the UAE would then have to disproportionately trim production at its other fields to be compliant, which would then be unfair to those equity partners.

In such an instance, Adnoc may have to bear the burden exclusively on their own, the source added. In late August, Adnoc announced a surprise 30% cut to October term loadings and later a 25% reduction to November-liftings to compensate for exceeding its OPEC+ quota during the summer months.

The OPEC cuts are "an irritation, derivatives are currently used as a proxy to speculate OSP changes and OPEC actions," another source said, adding that if the new Murban contract comes with a level playing field then it would have a greater chance to become a proper hedging tool similar to Brent or WTI futures.

The Intercontinental Exchange (ICE) on Oct. 12 said it plans to start trading the contract in the first quarter of 2021 after COVID-19 delayed initial aims for a launch in the first half of this year. ICE and the Abu Dhabi National Oil Co. (Adnoc) first announced the creation of the platform, ICE Futures Abu Dhabi (IFAD), last November.

Adnoc and ICE are partnering with BP, GS Caltex, Inpex, JXTG, PetroChina, PTT, Shell, Total and Vitol to launch IFAD, some of whom are equity partners in the Murban oil field.

Industry sources have long held that the Murban contract has a much better chance of success unlike previous attempts to launch a Middle East sour crude futures contract and the current Oman crude oil futures that is trading on the Dubai Mercantile Exchange (DME).

"Unlike Oman, where almost 80% of it is bought by Chinese refiners, Murban has a wide base of buyers," one trader said earlier. "It is a light, sour grade similar to those arbitrage barrels that are coming to Asia from the U.S. and the North Sea, so it is a very suitable pricing tool. This crude goes everywhere in Asia, it is familiar to everyone."

Murban Crude Exports by Destination


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According to IHS Markit Commodities At Sea (CAS), over the past year around 350 million bbls of Murban was shipped out to 34 different countries, the bulk of which ended up in Asia, Australia and New Zealand.

This broad spread even among the biggest refiners in Asia including China, India, Japan and South Korea shows the buy-side is not dominated by one player, the sources said.

According to CAS data, at least 250 million bbls of sour crude were shipped to Asia from the U.S. and the North Sea in the past year, including 94 million bbls of Johan Sverdrup and 45 million bbls of Forties as well as 51 million bbls of WTI Midland and 33 million bbls of Thunder Horse. Murban could be used as a hedge against these purchases, the traders said.

Adnoc holds a 60% equity share in the Murban concession with the remaining 40% held by other partners such as BP, Total, INPEX of Japan, GS Caltex of Korea, CNPC and Zhenhua of China, company data on the field show.

Adnoc has paved the way for more Murban crude to made available for open trading. Its Crude Flexibility Project is expected to be completed in 2022, which will allow the company to process as much as 420,000 b/d of its medium-sour Upper Zakum, or similar crude types from the market at its Ruwais refinery.

It is also building more storage capacity in Fujairah, the delivery point for the IFAD Murban contract, to hold an additional 42 million bbls in an underground facility. The site is also due to be operational in 2022.

These moves, traders said, will ensure that no one player will dominate on the sell side either.

"The contract offers a natural hedge for equity producers and refiners that process Murban, so there will be volume but we will have to wait to see how Adnoc balances with OPEC. The market needs to be reassured," said the first trading source.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Libya El Sharara Force Majeure Lifting Means OPEC+ Has to Rethink Plans to Ease Output

October 12, 2020

The lifting of a force majeure by Libya on production from the 300,000 b/d El Sharara oil field will give OPEC+ more food for thought when they next meet within a week as global supplies pick up after strike actions ended in Norway and storms blew over in the U.S. Gulf Coast.

Libya state-owned National Oil Corp. (NOC) announced the lifting of the force majeure at its largest producing field in a statement on Sunday after an agreement was reached with the Petroleum Facilities Guards (PFGs). The resumption has the potential to double current output of almost 300,000 b/d to over 600,000 b/d if El Sharara and the nearby El Feel sites reach full operational capacity.

"Instructions have already been given to Akakus Oil Operations (AOO), the operator, to start production arrangements subject to the standards of general security and safety precautions and the safety of the operations," it said in the statement. NOC did not mention the operational status of El Feel, or the elephant field.

It could take Libya 3-4 months to achieve the higher output level as operational issues will need to be resolved along the way as production is raised, one of the sources said. Prior to the troubles, which began at the start of the year, Libya was pumping around 1.2-1.3 million b/d.

Market participants are still concerned of the new supply source, in the wake of the swift resumption of oil production in Libya, plus the end of strike action in Norway, which threatened to shut almost a quarter of the country's oil and gas output including the massive 470,000 b/d Johan Sverdrup field, and U.S. Gulf Coast operators getting back to their feet after the battering of Hurricane Delta.

"The Norway strikes got resolved and Libya lifting force majeure on El Sharara, its mostly bearish news," said one trading source, adding that the extra crude oil from Africa is mostly likely to end up in Asia as refiners in the Mediterranean have mostly covered their immediate needs.

Trading sources said that a slowdown in incremental purchases by Chinese refiners is having the biggest impact on the market as sellers scramble for outlets in an ever decreasing Northeast Asian market with South Korea, Japan and Taiwan all operating at below full capacity.

Chinese imports are set to rebound in September at close to the record volumes seen earlier this year at 12.9 million b/d in June and 12.02 million b/d in July, according to customs data. Purchases in August fell to 11.2 million b/d.

But beyond that imports are set to drop in the final quarter as refiners worked through their brimming crude oil inventory amid signs that Chinese traders have pulled back from picking up long-haul cargoes particularly from the North Sea, Baltics and even in some cases West Africa, they said.

Consequently, sellers were forced to offer these cargoes to other refiners in the region with limited luck as China maintained its recent policy of picking up more of its incremental barrels from the United States.

Throughput in Japan, for example, fell 6.1% on-week to 16.24 million bbls in the week to Oct. 3, the smallest since the week ended Sept. 12, data from the Petroleum Association of Japan (PAJ) showed. Runs against the country's nameplate 3.52 million b/d capacity also declined to 65.9% from 70.2% in the prior seven days.

Import data from South Korea, the first in the region to publish September figures, showed that purchases were largely stagnant. The world's fifth-largest crude importer bought 77.6 million bbls, or 2.59 million b/d, last month, down 2.2% from a year earlier, preliminary government data showed. In August it bought 78.9 million bbls, or 2.55 million b/d.

These figures and buying patterns so far do not paint a rosy picture with only India showing signs of larger purchases in the final quarter. Forecast of a colder-than-usual winter has raised hopes of higher refinery runs in Northeast Asia but this has yet to be translated into bumper crude purchases.

As a result, the OPEC+ group, which will meet on Oct. 15 by way of the Joint Technical Committee (JTC) and then on Oct. 19 with the Joint Ministerial Monitoring Committee (JMMC), will have a lot to ponder over, market participants said.

"OPEC+ will probably have to take this into consideration if they have any thoughts of increasing output in their next meeting," said one source, referring to the additional supplies coming from Libya.

One thing that is working for the group is that compliance has been good with that in September likely to track closely to the 101% achieved in August, based on IHS Markit Commodities At Sea (CAS) data.

Market participants said that, at worse, the weight of the extra cargoes coming out of Libya might fall on Saudi Arabia pushing the kingdom to pick up the slack and endure unilateral cuts similar to that they undertook in June.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service 

Falling Bunker Sales, Credit Squeeze Sparks Buyouts, Bankruptcies: Sources

October 5, 2020

A global decline in marine fuel sales is tightening cashflows for small to medium-sized trading firms and suppliers, pressuring their sources of credit, which is expected to result in closures, bankruptcies and acquisitions in the coming months, industry sources told OPIS.

The COVID-19 global pandemic has slowed industry output and reduced international trade flow, leading to marine fuel demand destruction sand a collapse in bunker prices, prompting traders to reduce their exposure and shore up financing for their operations.

Very low sulfur fuel oil (VLSFO) barges loading in Rotterdam have collapsed to $314.50/metric ton on October 1 compared to $587/mt on January 2, OPIS pricing data showed.

"Credit availability from banks and large physical suppliers such as oil majors is a problem, more so for mid-sized to small traders with little in the way of assets," said Jason Silber, managing director of SeaCred LLC, a global marine credit reporting agency based in New York. "Big banks that have been involved in commodity credit finance in general and bunkers in particular for years are pulling out of the business, following a procession of high-profile collapses."

Following the demand plunge and price crash in crude earlier this year, Singapore oil trading firm Hin Leong Trading (HLT) was placed under judicial management with liabilities totaling about $4.05 billion while its assets were valued at $714 million as of April 9, according to a debt moratorium court filing seen by OPIS. Hin Leong operates a bunkering unit, Ocean Bunkering Services, ranked among the top three bunker suppliers in Singapore in 2019.

Dubai-based trader and physical bunker supplier GP Global has undertaken financial restructuring after failing to obtain full support from lenders to fund its business, it said in a statement in July. However, GP Global has since said it is confident it will attract new investment to assist its current cashflow position.

"I expect small-to-medium-sized bunker supplies, with exposure to credit risk and lack of a diverse portfolio, would be pressured to restructure or [else] have difficulty finding credit," said Stephen Jew, associate consulting director downstream at IHS Markit.

Marine transportation services company KPI Bridge Oil acquired Glencore subsidiary OceanConnect Marine, an oil trading company, in July.

"Peninsula, Trafigura, Minerva and Vitol - they'll continue to have access to credit. It's mainly the small to mid-size bunker traders who are seeing their liquidity sources drying up," Silber added. "Expect closures, acquisitions and bankruptcies in coming months."

--Reporting by Stacy Irish,
--Editing by Rob Sheridan,

Copyright, Oil Price Information Service

China LCO Demand Subsides Amid Ullage Issues, Local Retail Diesel Price Cut

September 22, 2020

Chinese light cycle oil (LCO) imports, used as a cheaper diesel blending component due to local tax quirks, is likely to slow down further for the rest of 2020 due to tight availability of clean product tanks in most Chinese ports and a reduction in diesel demand, said trading sources.

The situation is compounded by the 300 yuan/mt cut to retail diesel prices from Sept. 19 by the National Development and Reform Commission (NDRC).

"As China's domestic refining and blending margins remain narrow in recent months compared with in the second quarter especially after the government lowered the diesel price cap. We are expecting narrowing profit for regional LCO trade, said Shi Fenglei, associate director of oil markets, midstream and downstream at IHS Markit in Beijing.

China imported 7.85 million mt of LCO from January to July of which 4.62 million mt was imported from South Korea, according to the General Administration of Customs. This is far more than the 3.66 million mt that landed in the first seven months of 2019. The lack of onshore tanks to fill the cargoes, especially the 1.48 million mt that arrived in July, is evident, based on the custom data.

The current shortage of storage space has also led to around 20 medium-range (MR) tankers each laden with around 35,000 mt waiting to discharge in Nansha, said a trader. There are 24 CPP tankers waiting to offload in Zhoushan, according to IHS Markit Market intelligence Network (MINT).

These MR tankers are mostly carrying LCO and the waiting time could be one-to-two weeks before they are able to discharge, said Chinese shipping agents. MR demurrage fee is estimated at $13,500-$14,000/day, which could erode profit margins, the shipbrokers added.

LCO is still $2-$3/bbl above 500 ppm gasoil in Singapore, the main grade used by independent refiners to yield 10 ppm diesel. A tax loophole, however, exempts imported LCO from hefty duties that are levied on finished fuel. China charges a value-added tax of 13% on finished fuel products.

"However, some base volume of LCO trade to China are still expected, especially considering the product enjoys tax advantages," added Shi.

Some ports that do have unloading issues such as Zhanjiang and Qingzhou could still have onshore storage tanks for hire at reasonable rates, said a Chinese trader.

Apart from blending into diesel, LCO is also used as a petrochemical feedstock and a sulfur cutter in marine fuels. But ample supply of very low sulfur fuel oil (VLSFO) and cheaper alternative blending components meant that LCO is rarely used in China as a VLSFO blendstock.

--Reporting by Thomas Cho,
--Editing by Raj Rajendran,

Copyright, Oil Price Information Service

LPG Shipping Companies Report Big Profits in the Face of COVID-19

September 10, 2020

LPG shipping companies managed to yield sizable second-quarter financial returns on better-than-expected fundamentals and low-cost bunker fuel, despite coronavirus disease 2019 (COVID-19) lockdowns and the threat of lower U.S. and Middle East exports.

Moreover, very large gas carrier (VLGC) freight rates will continue to stay strong during the second half of the year, according to Joanna Campos, senior consultant at IHS Markit's Waterborne Commodity Intelligence.

IHS Markit is the parent company of OPIS.

"[This is due to] increased demand from colder weather, and holidays [leading to] more cooking. In addition, vessels delivered in 2015-2016 need to dry-dock so this will create tightness depending on how many go in at the same time," Campos said.

Ship owner Dorian LPG registered a 100% rise in second-quarter profits while avoiding any "significant effect on our operating activities" due to COVID-19.

While Dorian LPG's profits amounted to a sizable $12 million, BW LPG took home $62 million in net income, which is 134% more than its profits last year. Avance Gas's Q2 profits, though down 32% on the year, remained in positive territory at $7 million.

Meanwhile, Navigator Holdings, which had suffered an $8 million loss same time last year, recovered to record $3 million in profits this year.

This second-quarter financial performance by the shipping companies is in stark contrast to those of oil and gas majors caught in the crossfire between lower energy prices and ample stocks.

According to Campos, five contributing factors shaped this exceptional shipping performance in the face of COVID-19: healthy vessel utilization rates, low-cost bunker fuel, limited COVID-19 effects on residential/commercial LPG demand, steady U.S. LPG exports, and delays in discharge at Indian ports.

Data from Avance Gas showed that second-quarter Middle East VLGC exports held relatively steady on the year at 7.8 million metric tons versus 7.9 million metric tons last year, against expectations of a decline following an OPEC+ decision to cut crude oil production.

In addition, U.S. Gulf Coast and East Coast second-quarter LPG exports of 9 million metric tons surpassed the 8.5 million metric tons shipped out in the second quarter of last year.

Meanwhile, LPG shipping companies have also benefitted from a fall in bunker fuel prices.

The decrease in bunker prices was unaffected by the IMO sulfur regulations effective from 1 January, which has led to very-low-sulfur fuel oil (VLSFO) replacing heavy fuel oil (HFO) as the standard fuel in time-charter equivalent
(TCE) rates published by third parties.

VLSFO prices averaged $272 per mt from Singapore and Fujairah during 2Q 2020, down from $414 per mt for heavy fuel oil over 2Q 2019, Dorian LPG reported.

A recovery in VLGC freight rates in the second quarter also helped shore up shipping profits.

According to BW LPG, VLGC freight markets saw a recovery in July after shifting down in May: "This is supported by a variety of factors: recovering LPG exports, firming import demand from both Europe and Asia, as well as significant reductions in fleet supply due to slow steaming of vessels, longer voyage routes from the U.S. to Asia by the Cape of Good Hope and a higher than normal number of vessels dry-docked for their special survey."

Gain greater perspective on global spot prices for naphtha, propane and butane with the OPIS Europe LPG & Naphtha Report. Dive deeper into the global supply chain by connecting OPIS’ benchmark Mont Belvieu assessment with spot prices worldwide to enrich your understanding of the LPG landscape. Get your free trial here.

--Reporting by Cuckoo James,
--Editing by Karen Tang,

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Opportunistic Chinese Crude Buys Shine Through in Deft Supply Source Switches

August 27, 2020

The ebb and flow of crude oil from Saudi Arabia, the U.S. and North Sea switching between China and the rest of East Asia depending on the temperature of ties between Beijing and Washington is to be expected, but the influence of arbitrage economics and nimbleness of Chinese buyers are also evident.

Data from IHS Markit Commodities At Sea (CAS) and national customs show the wider impact opportunistic purchases by Chinese traders such as when loading up record volumes from Saudi Arabia in April following the collapse in oil prices and bumper exports from the Kingdom, or the equally impressive purchases for May-lifting barrels from the U.S.

That massive purchase of Saudi barrels in April translated to a record near 2.2 million b/d imports in May, the largest from a single producer and an almost 95% jump from year-ago, Chinese customs data showed.

This rush to buy, which was mirrored with equally copious purchases from other Middle East producers such as Iraq, Kuwait and the United Arab Emirates, was triggered by the collective opening of the Gulf oil taps and a big cut to their official selling prices (OSPs) after output cut talks with Russia broke down.

The consequence was a drop in volumes from West Africa, Brazil, the North Sea and a nascent tiny amount from the U.S. after a five-month hiatus, the customs and CAS data show.

On the flip side, other East Asia nations boosted their imports from these same areas as when China is not competing for those barrels, they obviously become available at more competitive prices, trading sources said.

“This is a big spike in from China in April, it shows the opportunistic buying when OSPs were historically low,” said one trading source, referring to the deep cuts Saudi Aramco made to its April OSP.

Saudi Arabia Crude Oil Exports to Major Asian Buyers

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A closer look at the purchase patterns of Asian refiners show both their reaction to Aramco’s OSP adjustments but also their views of domestic demand, which at times may not pan out.

 India, for example, significantly reduced May and June loadings which translated to reduced arrivals in June and July with overall imports last month dropping to the lowest in a decade, data from the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas showed.

However, a rebound is on the cards based on CAS data of July loadings which could take as long as 10 days to arrive at refineries in the east coast amid congestion at some ports.

“The rise from India for July probably reflects their optimism of a quick recovery back in June but that didn’t materialize,” the source said.

South Korea was the only buyer among the big four to clearly reduce liftings from Saudi Arabia in July from June, which some sources said may be due to a reaction to the unexpected increase in the July OSP.

It does, however, dovetail with CAS data showing its renewed interest in North Sea barrels from May onward after a lengthy absence when China dominated purchases from Norway and the U.K.

North Sea Crude Oil Exports to East Asia

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China slashed its North Sea purchases on the back of these record purchases from Saudi Arabia and the U.S., which is still causing a backlog at ports, leading to severe congestion that are only now slowly easing.

The world’s largest crude oil importer, took in bumper, even record volumes, in May, June and July culminating in an all-time high of 53.18 million mt, or about 12.9 million b/d in June, before tapering to a still hefty 12.02 million b/d in July, according to customs data.

As a result, Chinese traders have become selective in their purchases in the second half of this year in the search for bargains and holding out for competitive offers as there is no pressure on them to snap up purchases, in other words, becoming less of a price taker, trading sources said.

U.S. Crude Oil Exports to East Asia

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China took in a record amount of around 860,000 b/d of U.S. crude in July, according to customs data, while at the same time cutting purchases from Saudi Arabia to around 1.25 million b/d, a far cry from the near 2.2 million b/d that arrived in May and down over 40% from June, the data show.

Saudi Arabia was relegated to third spot in the top supplier list in July, the first time in two years, as Russia and Iraq moved up with the latter enjoying its position as supplier of the most favored crude on the Shanghai International Energy Exchange (INE).

The CAS data shows that in August a slight rebound of shipments from Saudi Arabia to China are on the cards while flows from the U.S. are also likely to remain close to the highs seen in July, while exports from the North Sea are set to flow to other East Asian refiners including South Korea.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

VLCC, Three Suezmax Join List of Newly-Built Tankers to Ferry Asia Gasoil, Jet Fuel to Europe, Americas

August 25, 2020

One very large crude carrier (VLCC) and three Suezmax are the latest in the list of newly-built dirty tankers to ferry diesel and jet fuel in their maiden voyages as traders work the East-West arbitrage amid cheaper freight rates and a supply overhang in Asia.

The Spyros was booked by Vitol to load on Aug. 20 from South Korea at a cost of $2.25 million for Europe while the Yuan Dong Hai was chartered by Vitol to load from Dalian on Sept. 6 for West Africa or Europe at $1.6 million and $1.625 million, respectively, according to a tanker fixture released last week.

The Ayse C, which was initially chartered by Glencore for Aug. 29 pickup from South Korea for West Africa or Europe at $1.9 million and $2.25 million, respectively, was listed in a Tuesday list as having failed. A separate report showed BP failing the same tanker on a booking to load 10 ppm diesel from the Middle East on Sept. 19.

All three tankers were chartered to load 120,000-130,000 mt cargoes.

The VLCC Yuan Hua Yang was provisionally chartered by Unipec to load 240,000 mt of gasoil from East Asia on Sept. 19 to Europe for an undisclosed sum, a fixture list on Tuesday showed.

The Yuan Hua Yang, a Cosco group tanker built in August 2020, is anchored in Chinese waters outside Dalian, according to data from IHS Markit Market Intelligence Network (MINT) ship tracking data. The tanker has been on sea trials since Aug. 17.

The Spyros, on sea trials since mid-August, is currently anchored in waters off South Korea near the city of Mokpo, according to MINT data. The vessel has a September 2020 build date, the data showed.

The Ayse C is also on sea trials and currently moored outside Ulsan in South Korea waters, MINT data show. The Suezmax has an August 2020 build date, according to the data.

The Yuan Dong Hai, another Cosco group tanker, is at the Dalian outer anchorage, MINT data show. The August 2020 built vessel appears to have completed its sea trials having set out from the same port in end-July, the data show.

Several other such supertankers were chartered in the past months and are yet to deliver their wares. These include:

VLCC Silverstone: The July-built very large crude carrier (VLCC) left South Korea in mid-July, stopping in Singapore waters to refuel on July 23-24, MINT data show. It carried out ship-to-ship (STS) transfers with the Bluebird, Clearocean Appolon and Athinea in the Middle East from Aug. 7, MINT data show.

Draft levels indicate that the tanker is now fully laden having completed its final STS activity on Aug. 24 and is now leaving the Gulf of Oman but has yet to signal its next destination. It is loaded with jet fuel and diesel, traders said.

Suezmax Zeynep: The tanker, which now has an August 2020 build date, a month later than previously stated, is on sea trials in waters off South Korea and has been on these test runs since mid-July, according MINT. It has taken on bunker twice.

The tanker is on charter by Trafigura to pick up 120,000 mt of clean petroleum products (CPP) on Aug. 17 from South Korea for Europe or West Africa at a cost of $1.75 million or $1.4 million, respectively, according to a fixture list.

VLCC Hunter Idun: The July built tanker, picked up a cargo via STS transfer that finished on July 24 at Nipah anchorage with the Barramundi, which previously called at Ras Laffan in Qatar, MINT data show. It also called at Pengerang, site of a large tank farm in southern peninsular Malaysia, after which its draft rose to 17 meters from 11 meters.

The VLCC left Singapore waters on July 25 and is currently midway through the South Atlantic Ocean off north eastern Brazil signaling Freeport in the Bahamas as its next destination, with an estimated arrival of Sept. 6, MINT data show.

It is loaded with jet fuel and diesel.

VLCC Hunter Disen: The June built vessel, eventually left Fujairah on Aug. 3 after undertaking STS activities with three smaller vessels, the Sundoro, Athinea and Star Z, the Athinea had called at the Reliance Jamnagar refinery, according to MINT.

The fully-laden VLCC is now three days away from its signaled destination of Lome in West Africa, the data show. It is loaded mostly with 10 ppm diesel, traders said.

VLCC Babylon: The June-built VLCC Babylon completed its loading via three STS transfers with the Abu Dhabi-III and Ionic Ariadne in the Middle East and the STI Excel in the Strait of Singapore, MINT data showed. The tanker is chartered by Trafigura, according to ship broker sources.

It left Fujairah on July 30, initially signaling Rotterdam as its next destination, but on Aug. 12 changed it to STS Philadelphia for Sept. 7 arrival, MINT data show. It is currently in the South Atlantic Ocean, off north eastern Brazil.

During the year, a few other VLCCs completed similar clean product runs.

VLCC CSSC Liao Ning: Arrived in the Bahamas in mid-July and took on numerous lightering activities. Two of the smaller vessels signaled New York next while a third was headed to Amsterdam and a fourth called at San Juan in Puerto Rico, MINT data show. It is now leaving the region laden with crude oil signaling for Kaohsiung in Taiwan.

VLCC Landbridge Wisdom: Anchored off Lome since July 28 and been involved in a bunch of lightering activities with vessels that called at various ports all along the western coast of Africa, according to MINT.

VLCC Elandra Kilimanjaro: One of the first newly-built VLCC to make this journey this year carried out as many as 15 STS transfers in Lome in April/May in a major bulk-breaking exercise with much of the barrels sold to the inland West African markets, according to MINT data and trading sources.

In 2019, a total of about 10-12 newly-built VLCCs were used to carrying clean products in their maiden voyage before they went on to ply in the crude oil market.

The coronavirus disease 2019 (COVID-19) pandemic and increases to refining capacity in the Middle East and Asia led to a surge in distillate shipments over the past few months with the bulk ending up in Europe or West Africa, or kept on the waters as floating storage, traders said.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service


No Respite in China Oil Port Congestion, Brimming Tanks; INE in Steep Contango

August 18, 2020

Oil port congestions and vessel wait time in China have not eased significantly as imports continue to outpace handling and refining capacity leading to brimming tanks and a massive contango on the Shanghai futures exchange that may impact demand later in the year.

China, the world’s largest crude oil importer, took in bumper, even record volumes, in May, June and July culminating in an all-time high of 53.18 million mt, or about 12.9 million b/d in June, before tapering to a still hefty 12.02 million b/d in July, according to customs data.

Yet data from IHS Markit Commodities At Sea show that there are still a fair number of cargoes that were loaded in June and July that have yet to be delivered. As much as 3.2 million b/d of crude oil that was lifted in June are still on the waters after 7.9 million b/d made it onshore, the CAS data show.

Of the July loadings, a massive 5.9 million b/d are on their way to China on top of the 3.3 million b/d that was delivered, according to the data.

“We observed no material alleviation of port congestion by the third week of August, and it doesn't seem likely for the current situation to get any better until late September considering most VLCC berths/coastal working storage/pipeline/refineries are running at full capacity,” said Feng Xiaonan, IHS Markit downstream analyst in Beijing.

“Because of the severe port congestion, the reported import figure will be kept artificially high in August and even September as cargo discharge gets constantly pushed back into later months, this will to some extent mask the trend of slowing fresh arrivals,” she added.

Crude Oil Shipments to China by Load Month

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The anticipated slower arrivals, due to sky-high imports and reasonable refinery run rates meant that a significant volume ended up in the nation’s commercial and strategic stockpile, which is not publicized. China accumulated an unheard-of 440 million bbls of crude oil in the first half of 2020, according to an IHS Markit estimate in June.

Consequently, industry consensus is for imports to slow down later this year, a timing that keeps getting pushed back due in part to the port congestion but also to sustained Chinese bargain hunting, said trading sources.

August loadings so far total 7.2 million b/d, matching the year-low recorded in March and down 1.1 million b/d from the 8.3 million b/d average chalked up in the last quarter of 2019, the CAS data show. This leaves ample room for numbers to increase in the coming days as Middle East and regional barrels start to arrive, they said.

Moreover, a wave of tanker bookings over the past two weeks show that as many as 11 VLCCs were provisionally booked to load in September from the USG and terminals in Panama bound for China, according to shipping fixtures. Some sources attribute this to the possible resumption of trade talks while others point to cheap freight costs and bargain offers.

Either way, this suggest that expectations for a major slowdown in purchases later in the year may not materialize as a similar increase in shipments from the North Sea was also noted recently as Chinese traders picked up barrels that were in floating storage for months, trading sources said.

Chinese ports are clearly struggling to clear the huge backlog built up from the spring buying spree that has led to the summer now autumn delivery chaos, trading sources said.

“The delays in China are almost similar to last week, not much has changed. There are still long delays, it is still uncertain particularly in Qingdao and Yingkou,” said one ship broker.

In the first 10 days of August, crude oil throughput of coastal ports increased by 26.4% year-on-year, according to data from the China Ports Association. Growth rates at Ningbo Zhoushan, Rizhao and Tianjin ports exceeded 20%, down from the 50% a month ago.

“From a month-on-month perspective, crude oil throughput in the first half of August increased by 10.5% from the second half of July. Port inventory increased by 38.3% year-on-year, and the storage capacity of local ports remains tight,” it said.

In Qingdao, a total of 27 oil tankers are anchored within the port vicinity out of which 11 are VLCCs and 10 are Suezmax, according to data from IHS Markit MINT ship tracker. It showed the list of VLCCs waiting to discharge reaching seven at Rizhao, eight at Dongjiakou and four at Yingkou.

This numbers and wait times are little changed from a month ago.

 Tankers as Crude Oil Floating Storage in Waters Near China

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According to data from IHS Markit’s Commodities At Sea there are 80 VLCCs, 36 Suezmax and 52 Aframax drifting in Northeast Asian waters as floating storage, laden with a total of about 214 million bbls.

Chinese refiners processed 59.56 million mt of crude oil last month, up 12% from a year ago, data from the National Bureau of Statistics (NBS) showed last week. That works out to 14.02 million b/d, just under the all-time high of 14.08 million b/d in June. The nation produced 14.46 million mt of crude oil last month.

The resulting high levels of inventory led to a super-contango on the Shanghai International Energy Exchange (INE) with the month 1-6 time spread at a wide near $8.00/bbl compared to $2.30/bbl on Dubai swaps, data from brokers and the INE show. The contango on ICE Brent and WTI for the same period is at a smaller $1.90/bbl and $1.50/bbl, respectively.

Stockpiles at the exchange rose to a hefty 44.79 million bbls in the week to Aug. 14, an INE weekly inventory report showed. A month ago, 39 million bbls of crude oil were stored in its tanks.

The composition of the crude stored showed about 18 million bbls of Basrah Light, 10 million bbls of Upper Zakum and 9.4 million bbls of Oman. The volume of Basrah Light is down around 4 million bbls from a month ago with the other two grades notching almost a similar increase, the INE data showed.

This high storage level is due to their convenient locations, said Feng.

Earlier this year, the exchange increased its overall storage capacity to almost 60 million bbls and expanded participating delivery depots to at least 14 locations across the nation including major refining centers such as Shandong, Zhejiang, Liaoning and Guangdong.

“We believe it is simply because whatever coastal storage space that’s available is now being utilized to hold the massive crude arrivals,” she said.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

 Copyright, Oil Price Information Service

Aramco Cuts September Crude OSP to Asia by Less Than Expected, Outlook Murky

August 7, 2020

Saudi Aramco reduced its September official selling price (OSP) to refiners in Asia, the first cut since May, in line with month-long changes but below market expectations that was built on weakness seen in the tail-end of July just as China trimmed imports last month, latest customs data show.

The world's largest crude oil exporter cut the OSP of its largest grade, Arabian Light, to buyers in Asia by $0.30/bbl, according to a price list released on Thursday. A $0.50/$0.60/bbl reduction was expected by most participants but based on full-month average forward Dubai prices the drop should be as little $0.20-$0.30/bbl, as OPIS reported on Monday.

Expectations for a bigger drop was fueled by fresh outbreaks of the coronavirus disease 2019 (COVID-19) that weighed on prices pushing some crude oil markets back into contango. It also led to volatile refining margins in Asia as traders reacted to news of new lockdown measures that are set to eat into transportation fuel consumption.

"It was probably hard for Saudi Aramco to reduce the OSPs too much, it will be too bearish a signal for an already shaky market," said one trading source.
"For refiners it is neutral to slightly bearish, he added."

"Bearish because they were expecting slightly more reduction, given where the structure was in the last five days but cracks seem to be moving sideways. In the end, if flat price holds, then a 30 cts reduction is still 30 cts cheaper feedstock."

The Saudi Aramco OSP, the first to be announced among Middle East producers, sets the trend for the others including Iraq, Kuwait, Iran and the UAE to follow. Consequently, the price will impact more than 12 million b/d of crude shipments.

Recently, sellers of spot barrels from the Gulf including Upper Zakum and Basrah Light were hard pressed to find outlets, leading to cuts to their differentials, trading sources said earlier. At the same time, the broader Brent and WTI future moved into contango.

The smaller cut will lead to Middle East OSP differentials going more negative, one source said.

"Traders may take a hit from this smaller OSP reduction because a lot of them were expecting a bigger cut and have positions that reflect this view," the source added.

The oil market is on edge amid increased OPEC+ output and signs of a slowdown in the demand recovery due to new COVID-19 cases. The uncertainty is illustrated by flat prices holding at above $40/bbl for ICE Brent even as a contango developed while the gasoline crack whiplashed between positive and negative in Asia.

Global crude oil supply will be increased from August, after the OPEC+ group agreed to loosen curbs by cutting output by a smaller 7.7 million b/d compared with the deeper 9.7 million b/d level that was extended from June to July.

Many nations face a resurgence of COVID-19 including in Australia, Vietnam, the Philippines and Japan, while others such as India, South Africa, Brazil and the U.S. are grappling with a continued surge in cases while in Europe, a key demand center for Asian jet fuel and diesel, worries of fresh outbreaks are surfacing in the UK and Spain.

The unpredictability and swift spread of COVID-19 has made the demand outlook extremely murky, they said. However, in some major consuming nations such as India and Japan, refiners are either cutting runs or holding pat on signs that the demand recovery has lost its momentum.

Indian Oil Corp., the nation's largest refiner, will scale back operations to 75% of capacity from as high as 93% in early July, according to local media reports citing its chairman S.M. Vaidya. The lower run rate ties in with the closing of its 300,000 b/d Paradip refinery for a three-week maintenance from July 25.

Reliance Industries, India's second-largest refiner, brought forward the maintenance of a 380,000 b/d crude unit at its export-oriented 705,200 b/d refinery.

In Japan, crude runs against the country's nameplate 3.52 million b/d capacity are holding at around the 60% mark over the past month, according to Petroleum Association of Japan (PAJ) data even as the state of emergency was lifted amid fresh COVID-19 outbreaks.

Last week throughput fell to a seven-week low of 57.7%, down from 60.2% a week ago, according to the PAJ data.

Even purchases from the world's largest importer, China, has slowed down as the nation works to clear hefty crude oil purchases made in the spring that are still clogging its ports, terminals, pipelines and storage tanks. Purchases are forecast to drop going forward as demand plays catch up with the bumper bargain hunting.

China imported a hefty 51.29 million mt, or about 12.1 million b/d, in July, up 25% from a year ago but down 3.6% from June, according to preliminary data from the General Administration of Customs (GAC).

It took in an all-time high of 53.18 million mt, or about 12.9 million b/d, in June, easily bypassing the previous record 11.3 million b/d that landed in May, GAC data showed.

"We expect China's crude buying spree to slow from August and beyond," said Sophie Fengli Shi, downstream associate director at IHS Markit in Beijing. OPIS is a unit of IHS Markit.

The Chinese oil demand loss may narrow to 600,000 b/d in 2020 compared with earlier forecast of 1 million b/d on the back of a recovery recorded since the middle of the second quarter, Shi said.

Saudi Aramco kept prices to the U.S. unchanged for all grades while that for Northwest Europe and the Mediterranean were reduced by $2.10-$2.50/bbl for Arabian Light in the face of cheaper competing Russian Urals.

In Asia, the price for Extra Light was reduced by $0.50/bbl, which opened up a gap between it and the Light and Medium grade, which traders said reflected weaker demand for gasoline and naphtha.

--Reporting by Raj Rajendran,
--Editing by Carrie Ho, 
Copyright, Oil Price Information Service

China Tanker Queue, Floating Storage Barely Lifts Soft Freight Market

July 21, 2020

Record number of tankers queuing to unload crude oil at Chinese ports, some waiting for more than a month, have not triggered a spike in freight rates as ample tonnage due to lower supplies and demand kept shipping costs in check, according to trading sources and shipping data.

In the past, freight rates soared to the stratosphere whenever the pool of tankers were crimped such as during the U.S. ban on Cosco vessels, but this time even though just as many very large crude carriers (VLCCs) are loitering outside Chinese ports waiting to discharge on top of an armada that's acting as floating storage, rate gains are modest.

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"July and August are typically when freight rates remain at much lower levels compared to the rest of the year. This seasonality adds to what the market is experiencing primarily due to the significantly fewer cargoes to be lifted," said Fotios Katsoulas, principal analyst at IHS Markit's Commodities At Sea.

"Moreover, with weak Japan and Korean imports and India still under pressure due to COVID-19, fundamentals do not support optimism to develop," he added.

Output cuts by the OPEC+ group has reduced global oil flows considerably, shipping sources said. They slashed crude oil production by 9.7 million b/d for three months and will from August lower it by 7.7 million b/d in efforts to match the demand erosion caused by the coronavirus disease 2019 (COVID-19).

This pulled down freight rates and reverberated across the global fleet to include from VLCCs to smaller medium range clean tankers, they said.

For example, time charter earnings on TD3C (VLCC on ME-China route) fell to $27,139/day on July 20, according to data from the Baltic Exchange. On June 30, the TCE was at $21,720/day.

Earnings on the East Asia route soared to high of $264,072/day on March 16 after Bahri snapped up several large tankers on the back announcements of bumper exports in April by Middle East producers led by Saudi Aramco. That's the highest since the Exchange started recording data from Feb. 2, 2008.

In China the loading bottleneck was caused by extensive bargain hunting in spring that has ended up in record shipments in the summer that is likely to be extended to the autumn, trading sources said.

The world's largest crude importer took in an eye-watering 53.18 million mt, or about 12.9 million b/d, in June, easily bypassing the previous record 11.3 million b/d that landed in May, according to preliminary data from the General Administration of Customs (GAC).

In spite of the bumper intake, Chinese ports are still struggling to clear a huge backlog that's built up as a result of those massive purchases earlier this year and new records are likely to be set in July and maybe even August, trading sources said.

In the first 10 days of July, crude oil throughput of coastal ports increased by 26.8% year-on-year, according to data from the China Ports Association.

Growth rates at Rizhao and Tianjin ports exceeded 50% while at Yantai and Guangzhou they were more than 30%.

"Port inventory decreased month-on-month, but increased by 28.2% compared with the same period last year. In particular, the inventory of Yantai port increased by nearly 30% year-on-year and Dalian Port increased by more than 40%," it said.

It is this increase in port tank storage levels that raises concerns as it adds to the congestion woes in the face of limited ullage space, which are quickly filled by the queuing tankers, shipping sources said.

In Qingdao, a total of 27 oil tankers are anchored within the port vicinity out of which 10 are VLCCs and eight are Suezmax, according to data from IHS Markit's MINT ship tracker. It showed the list of VLCCs waiting to discharge reaching seven at Rizhao, five at Dongjiakou and five at Yingkou.

According to data from IHS Markit's Commodities At Sea there are 94 VLCCs, 38 Suezmax and 36 Aframax drifting in Northeast Asia acting as floating storage.

Chinese refiners processed a record 57.86 million mt of crude oil last month, up 9% from a year ago and 0.8% from May, data from the National Bureau of Statistics (NBS) showed last week. That works out to 14.14 million b/d, surpassing the previous all-time high of 13.83 million b/d in December 2019.

"The crude runs in June is around 75% and it is expected to remain unchanged in July and August," said April Tan, IHS Markit associate director in Singapore, said at that time.

"China has a lot of crude import backlog as indicated by record high imports in May and June. This caused congestion at the port and build up at onshore storage tanks. Refiners will have to continue to consume these crude so that further space can be made," she added.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

New-Build VLCC Hauls Oil Product Cargo to Caribbean Amid Inventory Glut

July 15, 2020

A newly-built very large crude carrier (VLCC), the CSSC Liao Ning, fully laden with gasoil, diesel and jet fuel is signaling for Freeport, Bahamas in the U.S. despite already huge distillate stocks in the region, according to market sources and satellite tracking data.

Launched in May this year, the CSSC Liao Ning initially signaled St. Croix in the U.S. and then Lome in West Africa, an active STS lightering spot for transshipment of cargoes, before switching to Freeport on 25 June, according to IHS Markit Market Intelligence Network (MINT) ship tracking data.

U.S. distillate fuel inventories are currently around 177 million bbl, about 26% above the five-year seasonal average, according to Energy Information Administration data. The VLCC is expected in Freeport on 18 July and is indicating a draft of 20.7 meters of a maximum 21.8 meters, MINT data show.

The diversion to the U.S. may be to cover lost barrels from the 130,000-b/d Canadian refinery Come by Chance, which stopped production due to coronavirus disease 2019 (COVID-19) concerns in early-April, said a market source. The source added it made sense to move product to regions with high stocks if pockets of demand are in place.

"There's a few factors at play, the HOGO spread was strong when the vessel was fixed to the U.S., so at the time it made economic sense," said a trader. "The market is still in contango with marginal costs to carry," he added. The HOGO or ICE Heating Oil/Low-Sulfur Gasoil Futures spread enablers traders to manage price risk for cargoes moving between the U.S. and Europe.

Freeport in the Caribbean is the home to Buckeye Bahamas Hub, the largest product hub in the western hemisphere with 26 million barrels of storage capacity and eight berths, including two where VLCCs can dock, said service provider Global Marine Terminals.

The CSSC Liao Ning previously undertook a ship-to-ship transfer with the heavily laden, Long/Large Range 2 tanker the Clearocean Apollon on 3 June, according to MINT data. The Clearocean Apollon, chartered by Mabanaft, departed Sikka in India in mid-May with 90,000 metric tons of ultra-low-sulfur diesel (ULSD), shipbroker data showed.

Trafigura Maritime Logistics operates the CSSC Liao Ning, according to MINT, but Trafigura declined to comment when previously contacted by OPIS.

A second laden newbuild VLCC, the Landbridge Wisdom chartered by BP, is en route to Lome in West Africa with an estimated arrival of 24 July, MINT data showed.

The Landbridge Wisdom loaded refined product in the Middle East Gulf, trading sources commented. STS operations were carried out off the coast of Fujairah in United Arab Emirate (UAE) waters with the Gulf Crystal and Golden Shiner at the end of June, according to MINT data.

The Landbridge Wisdom could continue to Rotterdam, despite weak demand in the region, market sources said. The VLCC flipped its signal from Lome to Rotterdam in the Netherlands on 30 June, then back to Lome on 15 July.

VLCCs occasionally ship a refined oil product cargo on their maiden voyage to offset the fuel costs incurred when travelling to its destination after leaving the shipyard.


--Reporting by Jen Caddick,;

--Editing by Rob Sheridan,

Copyright, Oil Price Information Service

Asia Refiners Boost U.S. Crude Oil Purchases as OPEC+ Output Cuts Bite

June 22, 2020

The OPEC+ output cuts have renewed buying interest for U.S. crude among Asian refiners with cargoes bound for northeast Asia returning close to the one million b/d mark for loadings in April and May, according to data from IHS Markit and trading sources.

According to data from IHS Markit's Commodities at Sea (CAS) shipments from the U.S. to northeast Asia fell to a low of 390,000 b/d in March but loadings rebounded sharply for April and May liftings as refiners in China and South Korea faced big reductions to their term allocations from Middle East producers.

Of the loadings in April and May 912,000 b/d and 907,000 b/d, respectively, are heading for northeast Asia, the CAS data show. South Korea bought about 345,000 b/d of crude oil that was loaded in those two months, while over the same period, China purchased 260,000 b/d and 560,000 b/d, according to the CAS data.

According to the CAS data, China did not take delivery of any U.S. crude oil that were loaded between October 2019 and April 2020.

Trading sources said this lined up with pricing economics at that time as well as shipping fixtures, which showed the increased volumes heading to China among the loadings made in May.

"A lot of the Asia-Pacific refiners got a heads up on the cuts so that they could go out and cover their requirements without getting squeezed," said one crude oil trading source, adding that buyers more recently also picked up heavier grades such as Mars Blend, Southern Green Canyon and Thunder Horse in addition to the usual lighter WTI, which made up the bulk of their purchases.

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Traders said there are signs that this buying spree was extended to June loadings after the OPEC+ group extended deeper cuts of 9.7 million b/d into July, which meant that refiners in Asia were not able to get their usual volumes with some facing as much as a 10-20% cut to their term allocations.

China's crude oil imports from the U.S. will reach a monthly record high of 2.68 million mt in July, or about 630,000 b/d, according to a report by China National Petroleum Research Institute (ETRI) published on Monday.

The increased purchases will go some way towards China raising its purchases of U.S. goods as part of a trade agreement they signed early this year, which so far has been wreaked by the coronavirus disease 2019 (COVID-19) as imports were skewed by the destruction to domestic energy demand.

According to the ETRI report, Sinopec has launched its first of seven crude oil storage project across the country in Xinjiang. The company launched construction, which is expected to be completed by the end of the year, it said.

The project is made up of eight tanks capable of storing a total of 800,000 cubic meters of crude oil.

China's crude oil imports that went into storage climbed to 1.88 million b/d from January to May, an increase of approximately 670,000 b/d from a year ago, the ETRI report showed.

China will build up a record 440 million barrels of crude oil inventories in the first half of this year, according to an IHS Markit research released last week.

The massive stock build dwarfs the largest ever six-month increase in U.S. inventories to date which was during late 2014 and early 2015 when stocks increased by 111 million barrels, just 25% of the increase underway in China currently, the IHS Markit report showed.

"The world has never seen an increase of this magnitude in such a short period of time. Crude oil in storage has increased around the world as demand has fallen this year. But no geography --not even floating storage-- matches the scale of China's inventory increases," said Jim Burkhard, IHS Markit vice president and head of oil markets.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Saudi Raises May Crude Exports to South Korea, U.S. Flows Drop on Freight

June 15, 2020

Saudi Arabia extended its position as the largest crude oil exporter to South Korea in May on the back of higher freight rates that made long-haul cargoes more expensive and lower Middle East official crude selling prices (OSPs) for April, according to customs data and trading sources.

South Korea, the world's fifth-largest crude importer, raised purchases from its biggest supplier by 15.5% on-year to 3.92 million mt, or about 926,000 b/d, the customs data showed. At the same time, purchases from the U.S. shrank by 33.2% to 956,686 mt to the lowest since November 2018.

"This lines up with Saudi Aramco slashing their OSPs for April and the higher loadings. Freight was also expensive so the arbitrage flows were affected in that period," said one trading source.

In June, South Korea will take in 135,000 b/d of U.S. crude oil of which about half has already delivered, according to data from IHS Markit's Commodities at Sea (CAS). This would be the least since July 2018.

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On the other hand, seaborne shipments from Saudi Arabia will increase to 821,000 b/d in June, of which 319,000 b/d has already arrived, the CAS data showed. The data placed imports in May at 812,000 b/d, just under the official customs data.

Even though Saudi Aramco raised its official selling price (OSP) for May-loading barrels, higher freight rates and crude prices in the U.S. kept Middle East cargoes competitive, trading sources said.

Freight rates on the long-haul USGC to East Asia route was extremely volatile over the past 3-4 months with very large crude carriers (VLCCs) chartered at the start of March costing less than $6 million, according to shipping fixtures.

This rate jumped to more than $18 million by the end of March for a 1H May loading cargo as huge tanker tonnage was taken out of the market by bumper bookings from Saudi Arabian shipping company Bahri and as the market flipped to a super contango which spurred many companies to adopt storage trading strategies.

Last week, VLCC rates fell back to about $7.5 million for an end-May/early June loading cargo, fixture lists showed, as the contango narrowed and supply tightened with the OPEC+ output cuts leading to some of the floating storage tankers to discharge their cargoes and resume plying.

Overall, South Korean crude oil imports fell to 2.5 million b/d, down 6.2% from a year ago, according to the customs data, on the back of planned refinery turnarounds and reduced domestic fuel demand due to the coronavirus disease 2019 (COVID-19).

In late May, Hyundai Oilbank (HOB) completed works at the 360,000 b/d No. 2 CDU and a 53,000 b/d fluid catalytic cracker (FCC) at its Daesan refinery, as reported earlier.

The turnaround, along with SK Energy's maintenance of its 260,000 b/d No. 5 CDU and other facilities including the 57,000 b/d No.1 residue fluidized catalytic cracker (RFCC) at the 840,000 b/d Ulsan refinery, reduced crude imports in May, according to the ministry.

Earlier this month, data from the Ministry of Trade, Industry and Energy on Monday showed that imports in May fell 8.2% on-year to 77.2 million bbls, or 2.57 million b/d. That was the smallest since October 2014, data from Korea National Oil Corp. (KNOC) showed.


--Reporting by Raj Rajendran,;

--Editing by Sok Peng Chua,

Copyright, Oil Price Information Service

Saudi Aramco July OSP Hike Offers Long-Haul Arbitrage Crude to Asia a Window

June 8, 2020

The sharp increase in the Saudi Aramco July crude oil monthly official selling price (OSP) to Asian refiners is likely to open wider the arbitrage window for cargoes from the U.S. Gulf Coast, North Sea and Baltic to head to the region, trading sources said.

Holders of these surplus barrels are eager to offload their cargoes in the face of a narrowing of the forward curves with none of the contango now large enough to pay for storage costs when they roll over, the sources said.

"The OSP increase was not too surprising," said one source. "Seems like the U.S. looks to be the most attractive now, I think North Sea and the Mediterranean are still a little tight for August and September arrivals."

On Sunday, Aramco raised the OSPs for all its grades to Asia in line with the significant gains chalked up in Dubai market structure with its main Arabian Light crude up by $6.10/bbl to a $0.20/bbl premium to the Oman/Dubai price, according to a price list.

The world's largest crude oil exporter also flattened the price gap of its three bigger grades such that the Arabian Extra Light, Light and Medium were all at plus $0.20/bbl, rising by $6.70/bbl, $6.10/bbl and $5.90/bbl, respectively, the list showed. Arabian Heavy was priced at a $0.10/bbl discount to Oman/Dubai.

"The flattening is mostly because gasoline demand has been bottoming out across the world," said Feng Xiaonan, IHS Markit downstream analyst in Beijing, who expects Chinese refiners to pick up incremental cargoes from outside the Middle East due to the output cuts.

Aramco, as previously reported, announced its July OSP after the OPEC+ group agreed on Saturday to extend a deeper 9.7 million b/d cut by one month to the end of July. The group originally agreed to loosen the cut to 7.7 million b/d from July-December.

Saudi Arabia last month unilaterally announced that it would cut another 1 million b/d of its output in June to hasten the re-balancing of the market, a move that was joined by the UAE and Kuwait, which also triggered the shipment of some distressed cargoes dotted around the globe.

The output cuts raised ICE Brent futures to surge past $40/bbl for the first time in two months, narrowed the contango to almost flat and dragged differentials into the positive territory, market sources said.

U.S. cargoes appear to be best placed to exploit the latest tightness to Middle East supplies because of the heavy load of unsold cargoes in North America, which only began to clear the overhang last month, unlike Urals, which were shipped out in record volumes to China as early as late March.

Chinese customs data show that no U.S. crude oil arrived at its shores in the first four months of this year despite the two nations agreeing on a trade pact that involved Beijing raising energy and agriculture purchases from the U.S.

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Data from IHS Markit's Commodities At Sea (CAS) show that there no cargoes were picked between December and March for delivery to China, however, 4.2 million barrels were loaded in April and have already been discharged, which would appear in the May or even June customs data.

There are 16.7 million barrels on the water bound for China that were loaded in May, according to the CAS data. These cargoes include WTI Midland, Eagle Ford, Thunder Horse and Alaskan North Slope (ANS), the data showed.

"This fits in with what I understand. The tariff waivers for crude imports from the U.S. were granted/confirmed in early March. Only after that did the Chinese start to arrange loadings," one source said.

If all the May loadings do end up in China it would be the largest monthly lifting since the U.S. began exporting crude oil, according to the CAS data going back to October 2016. However, tankers are known to divert mid-voyage and South Korea, a stone's throw from China, is also a big buyer of U.S. crude oil.

Trading sources said that as Saudi Arabia did not extend its June unilateral cut into July, the opportunities for these long-haul cargoes, especially those still floating on board tankers, will depend on the pricing economics.

"We still think Q3 arrivals will slow from Q2 arrivals, but we may see imports from certain regions grow...China is importing a lot of non-Middle Eastern sour grades to replace the lost barrels because of the supply cut," said Feng.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,


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Two Newbuild VLCCs Said to Load Refined Oil Cargo as Charterers Eye Storage

June 5, 2020

Two newbuild Very Large Crude Carriers (VLCC) have been chartered to load cargoes of refined oil products, amid a global storage glut and falling prices due to collapsing demand, according to satellite data and broker sources.

The CSSC Liao Ning, a VLCC that was built in May this year, appears laden with an almost maximum draft, according to IHS Markit Market Intelligence Network (MINT) data. The newbuild tanker is signaling for St. Croix in the US, home to a 34-million-barrel crude and petroleum products storage and marine terminal facility, according to owner Limetree Bay Ventures.

The VLCC undertook a ship-to-ship transfer with the heavily laden, Long/Large Range 2 tanker the Clearocean Apollon on 3 June, according to MINT data. The Clearocean Apollon, chartered by Mabanaft, departed Sikka in India on 16 May with 90,000 metric tons of ultra-low-sulfur diesel, shipbroker data show. Many onshore storage tanks are full, because the coronavirus disease 2019 (COVID-19) pandemic spurred authorities across the globe to clamp down on travel, curbing demand for transportation and other refined fuels.

"The [VLCC] may head west but will possibly float to make the most of the structure," said one broker, referring to the practice of floating storage whereby oil cargoes are kept onboard tankers, providing a contango market pricing structure makes this practice viable.

Daily Time Charter Equivalents (TCEs) for VLCCs have slumped after peaking in March this year, according to data from the Baltic Exchange. VLCC TCE rates fell to $34,808/day on 4 June, the lowest since 26 May and an 87% slump since 16 March. A VLCC can hold around 270,000 mt of oil.

The contango structure of the low-sulfur gasoil futures curve between June and December has ballooned, incentivizing the prompt purchase of product for sale further out, according to sources. The December low-sulfur gasoil futures contract traded $43.75/mt above June by 4.30 p.m. U.K. time on 4 June, compared with a narrower six-month contango of $14.25/mt on 4 March, Intercontinental Exchange data show.

The differential versus front month low-sulfur gasoil futures for a northwest European CIF delivered jet fuel cargo has plunged, averaging minus $25.13/mt in June to date, after a plus $27.16/mt average in February, according to OPIS data.

A second newbuild VLCC, the Landbridge Wisdom, is in transit to the United Arab Emirates, where it is also expected to load a refined oil product cargo, market sources told OPIS.

"The vessel may pick up jet or diesel [in Ruwais], but storage economics for jet [are] better," said one broker.

The contango between northwest Europe CIF jet fuel cargo June and October swaps was assessed at $19.75/mt on 4 June, compared to a contango of $3.50/mt between northwest Europe CIF diesel cargo swaps over the same time frame.

The Landbridge Wisdom departed Dalian in China on 23 May on its maiden voyage and is now signaling for Ruwais in the United Arab Emirates, with an estimated arrival of 15 June.

BP Shipping operates the Landbridge Wisdom and Trafigura Maritime Logistics operates the CSSC Liao Ning, according to MINT data. Trafigura declined to comment when contacted by OPIS. BP did not respond to a request for comment by press-time.

Civilian airlines suspended flights and grounded aircraft in the wake of lockdowns across the globe. Overall air travel demand fell off a cliff in April, plunging by an average of 94% year on year, the quickest and steepest decline since at least 1990 when records began, according to International Air Transport Association data.

Plummeting demand for gasoline and diesel due to COVID-19 pandemic travel restrictions caused retail prices for these two fuels to fall by an average of 20.6% year-on-year in May across the five largest European economies, OPIS NAVX data show.


--Reporting by Jen Caddick,;

--Editing by Rob Sheridan,

Copyright, Oil Price Information Service

Analysis: Tighter OPEC+ Cuts Will Point to Higher July OSPs Amid Overhang

June 2, 2020

The unilateral decision by Saudi Arabia to deepen crude oil output cuts in June, followed by the UAE and Kuwait, led to a sharp recovery in prices but it also opened an arbitrage for distressed barrels from around the world to work their way to major Asian consumers, particularly China, said trading sources.


This double-edged reaction suggests Middle East producers may reconsider making similarly big cuts in July as the group catches up with other producers at the OPEC+ meeting due on June 4, which would set the scene for Saudi OPEC+ Aramco's July official selling price (OSP) and term allocation, they said.

A likely outcome at the meeting is for the group to extend the bigger 9.7 million b/d production cut in May and June into July, which some producers including Saudi Arabia are pushing for, instead of pulling back to the earlier agreed smaller cut of 7.7 million b/d that was to be made from July through December, the sources said.

"There are still a lot of barrels out there in storage that are unsold, so the pressure is there to rollover this cut to July," said one trading source, adding that at current levels only distressed barrels are more economical than that from the Middle East for buyers in Asia.

Signs of stronger market fundamentals are plentiful, the sources said, including big jumps to flat prices, with front-month ICE Brent hovering around $38/bbl compared with a low of about $20/bbl in late April and a sharp narrowing of the contango to the point where it was no longer profitable for some participants to rollover their storage cargoes.

Crude oil differentials to benchmarks have also flipped into the positive with the spread between Dated Brent and ICE Brent futures shrinking to around $1/bbl from about $10/bbl in the past month, they add.

"The producers have done a good job in the damage control," said one trader, adding that the stage was set for a rollover of the output cut which could push oil towards the $40-$45/bbl range.

Against a patchy backdrop of fuel demand recovery, they said, it would be premature for producers to scale back their production restrain.

"There are still a lot of middle distillates that are floating around in tankers. The demand picture has not improved enough to absorb all of that, not when refiners are already raising their runs," another trading source said, referring to the flotilla of tankers laden with diesel and jet fuel dotted across the globe.

Brimming onshore tanks filled with crude oil and on board tankers suggest that purchases for delivery in Asia in the second half of this year will slow down, the market sources said.

"We expect crude demand may come off from the peak in May and June in arrival terms as the stock build slows," said Feng Xiaonan, IHS Markit downstream analyst in Beijing, referring to Chinese crude oil purchases.

"Downstream demand is almost back to pre-outbreak levels, but the strong crude imports in Q2 may have front loaded buying from later in the year. So crude imports is rebounding more strongly that that of demand and runs may slow in the second half," she added.

Consequently, the general view is that producers will continue to hold a tight reign over output to prevent another round of price-destroying inventory build ups.

"The price structures point to an increase in the Saudi Aramco July OSP," said the trading source, adding that the market will feel the impact if the extra 1 million b/d of Saudi cut is taken away although the price falls would not be huge.

Aramco may raise their July OSP by as much as $4-$6/bbl given the shape of the forward Dubai curve and the large premiums that several of the spot traded grades have achieved against their respective OSPs, the trading sources said.

The improvement to gasoline demand in particular, and to a lesser extent gasoil, will also mean that the lighter grades will get a bigger boost with the spread between the light and heavy blends possibly returning to parity, they add.

However, a lot depends on the outcome of the OPEC+ meeting and if the deeper output cut is extended into June, the sources said.


--Reporting by Raj Rajendran,;

--Editing by Sok Peng Chua,

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Rare Demand Pockets in Asia Keep Europe-to-East Gasoline Flows Brisk

May 28, 2020

Rare export flows of gasoline from Europe to the East has gathered pace over the past few weeks on the emergence of demand pockets in Asia that are typically covered by regional plants, according to sources and fixtures data, while European buying remains subdued.

At least 170,000 metric tons of gasoline or its components were seen booked this week for the west-to-east route, following similar volumes seen last week.

Three 37,000-ton cargoes -- on the vessels Zefyros, Elandra Fjord, and Wisby -- and one 60,000-ton cargo on the Jag Amisha were booked this week, according to fixtures data seen by OPIS. The vessels are due to load in the Amsterdam-Rotterdam-Antwerp (ARA) hub in the first week of June, with destination so far specified as either Singapore, China or Australia.

The product is of varied quality and includes reformate, aromatics or low-octane gasoline, which is used in certain countries in the Asia Pacific region.

According to sources in Europe, the increase comes from rare buying interest surfacing into Pakistan, Indonesia and New Zealand as regional supply has fallen.

"Chinese and Indian refineries are not fully back on stream, so the supply that would normally go from there is coming from Europe," one European source explained.

The pull comes as European demand as well as supply remain low as most of the continent is still under a form of a partial lockdown.

OPIS reported last week that Vitol chartered the Long/Large Range (LR2) vessel SKS Dee to load 90,000 mt in late-May from Europe to Singapore at a cost of $2.6 million, while BP booked the Front Tiger to load a similar volume in early-June for the same voyage at the same price, according to fixtures data.

OPIS further reported in mid-March that three clean product tankers heard to be carrying gasoline or naphtha were booked from Europe to Asia or the Arab Gulf.

The LR2 Sloane Square is signaling position near Malaysia on Thursday, while another LR2, STI Gauntlet, left the ARA hub early April and is nearing Sri Lanka, and the smaller LR1, Marinor, went to Singapore, according to OPIS tanker tracking.

The pull for low-octane mogas has added strength to the European naphtha market, as the light-end is used as a blending component to produce low-octane gasoline. The June/July naphtha contango narrowed from minus $12/t on May 1 to minus $3.50/t on Wednesday, OPIS data shows.

"We had all these extra naphtha cargoes and now they are sold," a second source told OPIS.


--Reporting by Paulina Lichwa-Garcia,;

--Editing by Karen Tang,

Copyright, Oil Price Information Service

Fuel Oil Tanker Armada Heads to U.S. Gulf Amid Three-Year High Inventories

May 21, 2020

Oil tankers hauling around 550,000 metric tons of fuel oil cargoes are heading for the U.S. Gulf Coast, possibly destined for bunker markets should demand start to thaw from the recent freeze caused by the coronavirus disease 2019 (COVID-19).

The fuel oil shipments could arrive at a time when residual fuel oil stocks are already at healthy levels, however. Residual fuel oil inventories are pegged at 37.4 million bbl, the highest level in three years, according to the latest U.S. Energy Information Administration data.

Bulk fuel oil prices have strengthened in recent weeks with firming crude oil markets. Bulk fuel oil prices had bottomed out in April as WTI benchmark front month crude oil futures prices went into negative territory at expiry for the first time in history. OPIS assessments for Houston 0.5%S bulk fuel (FOB) this week have averaged around $245/mt, or $36.55/bbl, after tanking in late April to levels below $160/mt, or below $24/bbl.

The Seaprincess oil tanker was expected to arrive in the Port of New Orleans May 22 with a 97,000-mt fuel oil cargo, according to broker data and IHS Markit's Market Intelligence Network (MINT) ship tracking data. The Minerva Ellie was steaming toward Port Arthur in Louisiana with a 103,000-mt fuel oil cargo, according to MINT. The ship was expected to arrive May 23. Other fuel oil cargoes with indicated destinations in the Gulf Coast region over the next couple of weeks include the Searunner, Sea Beech and Navig8 Precision.

The Searunner was indicating Southwest Pass for orders and expected to be in the region May 24 with its 109,000-mt fuel oil cargo. The Sea Beech tanker, carrying 89,000 mt of fuel oil, was headed for the Greater Baton Rouge region and expected around May 29, while the Navig8 Precision showed Houston as a destination around June 8 with 90,000 mt of cargo.


--Reporting by Eric Wieser,;

--Editing by Rob Sheridan,

Copyright, Oil Price Information Service

VLCC Owned by Hin Leong's Ocean Tankers Idles Off U.K. South Coast

May 15, 2020

A Very Large Crude Carrier operated by Ocean Tankers, the sister unit of financially-beleaguered Singapore-based oil trader Hin Leong Trading, was currently anchored off the U.K. coastline, fully laden with cargo, according to satellite tracking data.

The VLCC Qi Lian San was built in January 2012 and sources suggested the tanker was being used as a storage unit for a refined oil product cargo, although this could not be confirmed.

The Qi Lian San arrived at the U.K. May 5, and anchored off the coast of Southwold, satellite data showed. The vessel draft was showing as 21.4 meters of a 22.6-meter maximum, according to IHS Markit data, indicating the crude tanker was fully laden.

Ocean Tankers filed for a six-month debt moratorium on April 17, according to its affidavit, a copy of which was seen by OPIS. Ocean Tankers sought court protection arising from Hin Leong Trading's recent financial difficulties. The filing showed that Ocean Tankers could be exposed to liabilities of as much as $2.67 billion from Hin Leong Trading's debts, which totaled around $3.85 billion.

Both Ocean Tankers and Hin Leong Trading are owned by the Lim family, headed by founder, Lim Oon Kuin and his two children, Lim Chee Meng and Lim Huey Ching.


--Reporting by Selene Law,, Rob Sheridan,;

--Editing by Eric Wieser,

Copyright, Oil Price Information Service

VLCC Freight Slumps to Pre-Price War Levels as OPEC+ Output Cuts Kick-in

May 6, 2020

Very large crude carrier (VLCC) freight rates tumbled to levels last seen before Middle East producers opened their oil taps to flood the market, resulting in a super contango and triggering a massive tanker demand for both regular voyages and as floating storage, trading and shipping sources said.

Rates on the busy Middle East to China VLCC route (TD3C) slumped to Worldscale (WS) 59.75 points on Tuesday, which works out to a time charter equivalent (TCE) of $55,586/day or less than half of that seen on April 29 at $126,266/day, data from the Baltic exchange showed. They have been on a decline since April 22.

Freight jumped to WS 223.58 on March 16 in the immediate aftermath of the twin Saudi Arabia-led action of boosting supplies and slashing official selling prices. As oil prices tumbled, tankers were snapped up for use as floaters and also put on long-haul voyages. Just prior to this supply glut, TD3C rates were at WS 54.58 on March 9.

"I think in the short term at least there will be a downside to the freight levels, the effect of a 10 million b/d cut is now being felt," said one ship broker referring to the OPEC+ output cuts. "The market was driven by the flooding of crude cargoes and the resulting contango. Now that both these factors have been removed the market is correcting," he added.

The accord by a group of producers, known as OPEC+, on April 12 cut global oil output by 9.7 million b/d for May and June, which is more than four times larger than the previous record set in 2008.

These output cuts were clearly seen in the market by way of loading programs released by producers including for Russia Urals, Angolan and Nigerian grades as well as term allocations by Middle East producers to their buyers.

Consequently, the ICE Brent six-month July-January spread shrank considerably to $4.60/bbl, which is not enough to cover freight rates for the same period as part of a contango storage trading strategy, market sources said.

The previous six-month spread, June/December was at $10.70/bbl in April and narrowed to $8.90/bbl last week before the expiry of the June contract, one source said.

"June was the month that was really weak," he added.

Shipping sources said the scale of falls seen on VLCCs was not mirrored on the smaller Aframax market, which fell to WS 146.11 on the Middle East to Singapore (TD8) route compared with a high of WS 202.22 on April 22, Baltic data showed.

This is the lowest since April 20 at WS 136.39.

One ship broker said that the Aframax market was holding its own in part due to strong regional demand in Asia as well as the switch by owners to ply their tankers in the clean market where rates have soared after many were booked to store surplus diesel, jet fuel and even gasoline cargoes.

"In the past 1-2 months about 15-20 Aframax tankers have switched from dirty to clean, provided they are fully or partially coated," the ship broker said.

Fully coated tankers, after they have been cleaned would be able to carry all fuel products but those that have partial coatings can only transport gasoil, he said.

There are 1-2 shipowners that are still willing to make this switch at the moment but they would only do so if the charterers bear the cleaning costs, which could cost up to $300,000, he added.

The sources said that VLCCs rates are likely to track around current levels in the near-term as vessel demand shrinks due to the ongoing output cuts and more tankers are released from use as floaters in the face of an anticipated recovery in fuel demand.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Gulf Producers Juggle Demand to Meet Output Cuts, Keep China Market Share

April 24, 2020

Middle East oil producers are adhering to their OPEC+ output cuts without losing market share in China, their biggest customer, by allowing refiners in countries already facing severe demand decimation to defer their term cargoes and giving Chinese buyers their full entitlement, market sources said.

The producers, led by Saudi Arabia, made deep cuts to their May-loading official selling price (OSP) to refiners in Asia, thereby ensuring that their cargoes would be competitive after losing out to cheaper long-haul arbitrage barrels last month, they said.

"The Chinese refiners are getting their usual volume, we didn't hear of anyone cutting theirs. We don't think Saudi cut allocations in May to China," said one trading source.

Saudi Arabia is committed to a base output of 8.5 million b/d in May and June, which represents a massive 3.8 million b/d cut from their peak production of 12.3 million b/d in April, according to the agreement. Fellow Middle East producers such as the United Arab Emirates (UAE), Kuwait and Iraq have also made similar hefty output cuts.

Their respective state-owned companies have also followed Saudi Aramco's lead and made huge cuts to their OSPs to Asian buyers while raising them for refiners in the U.S. and Northwest Europe, which sources said was a clear signal of their intention to secure their market share in Asia after the recent large arbitrage flows.

A sharp drop to Dated Brent prices and a slump to Urals differentials led to the opening of an arbitrage that saw at least 14 million barrels shipped from the Baltic to China within a short period between end-March to early April, according to estimates from IHS Markit's Commodities at Sea (CAS), ship tracker MINT and tanker fixtures.

"Urals will be missing from imports to China this time because the Middle East OSPs are a lot more competitive," said Feng Xiaonan, IHS Markit downstream analyst in Beijing. "Chinese refiners will take their usual contractual volume, it would probably mean that they may be less active in the long-haul arbitrage market."

China has consistently been importing significant volumes in the first three months of this year with shipping data also pointing toward bumper volumes in April, which Feng said suggest that there is a lot more empty storage space available than estimates from industry consensus show.

"China's crude storage is a lot bigger than previously estimated, I think there was also an under estimation of refinery runs and over estimation of stock build in the past. The pace of the stock building is huge, averaging 1 million b/d in the first quarter," she added.

The numbers, Feng said, suggest that going forward China may look to slow down incremental purchases.

Chinese refiners have raised their run rate from as low as 54% in February to 61% in March and 62% in April, according to latest IHS Markit estimates.

China's total operating capacity was pegged at over 17 million b/d, with runs working out to about 10.5 million b/d in absolute terms.

For now, the economics of importing Urals do not look good as Russia has reduced supplies of its biggest crude grade leading to higher prices and less attractive arbitrage especially as freight costs remain high, the sources said.

Reduced Urals availability and a decision by UAE to reduce Upper Zakum flows by about 15% has tightened the supply of medium-sour crude, a staple of Chinese refiners, which pushed up their values, they said. Chinese buyers were also heard to have drawn heavier grades from their tanks in Southeast Asia to cover shortfalls, they said.

The cushion of stable demand from China has allowed these Middle Eastern producers including Saudi Aramco, Abu Dhabi National Oil Co. (Adnoc), Iraq's State Oil Marketing Co. (SOMO) and Kuwait Petroleum Corp. (KPC) to accommodate requests for term cargo deferrals for pick up later in the year.

Indian refiners are leading the pack to significantly cut their imports in the face of an almost tank-top situation in the country as they slash runs by as much as 50% this month - a massive amount considering they purchase about four-fifth of their 4.5 million b/d crude oil imports from the Middle East.

In March, refiners in India processed 21.204 million mt, or 5.01 million b/d, down 5.7% from a year earlier, the Ministry of Petroleum & Natural Gas said in a statement on Thursday.

Market sources said that other Asian refiners including those in Japan and South Korea have not been overtly seen asking for significant cutbacks, but added that given the reduced run rates in both countries, a drop in imports is to be expected.

South Korean crude throughput fell 4.3% to 2.826 million b/d in March, the lowest since October 2019, as local petroleum products consumption slid 7.4% to 71.347 million bbls, the smallest since April 2016, according to data from the Korea National Oil Corp (KNOC).

Throughput are expected to fall further in both countries as refiners have maintenance lined up in the coming months.

For example, Hyundai Oilbank (HOB) started on April 15 turnarounds at the 360,000 b/d No. 2 crude distillation unit (CDU) and a 53,000 b/d fluid catalytic cracker (FCC) at the Daesan refinery as scheduled, which is due to finish on May 7.

In mid-March, GS Caltex shut its 155,000 b/d No. 2 CDU and other facilities such as a 90,000 b/d naphtha splitter and an 81,000 b/d catalytic reformer for maintenance, which is set to last until the end of April, as reported earlier.

Market sources said that the spring maintenance programs in Northeast Asian countries is another tool that refiners will use to manage declining domestic demand that ties in nicely for the moment with Middle East producers' need to sell less oil.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Tankers Opt For Longer Routes as Jet Fuel Pricing Structure Favors Storage

April 7, 2020

A widening contango on the jet futures curve is enticing charterers of tankers hauling jet fuel cargoes from East of Suez loadports to take the longer route around the Cape OF Good Hope into Europe, according to IHS Markit Marine Intelligent Network (MINT) and ship broker data.

The BW Thames, chartered by Trafigura, is currently voyaging around the Cape laden with 60,000 metric tons of jet fuel loaded from the West Coast of India.

The Hafnia Africa is also sailing around the Cape, laden with 60,000 tons of jet from Jubail, in the Middle East Gulf. Both vessels are chartered to discharge at European ports.

East of Suez jet fixtures typically take a shorter route to Europe via the Suez Canal, but the contango on the jet futures curve, where prompt prices are below those for further out, has encouraged charterers to take the longer route, keeping product onboard for a longer period of time. The North West European CIF jet swap for May was assessed at a $24.98/ton premium to April swaps on Thursday, according to OPIS data. In comparison, the contango between the two front months was pegged at $1.79/ton four months ago in January.

"We have seen quite a lot of jet booked from East of Suez for Europe and we expect to see more Cape of Good Hope diversions, as the market tries to make the most of the contango," a ship broker told OPIS. "People will also be looking at options to take jet to the U.S. with extended delivery."

Some Europe-bound vessels have instead sailed to North America via the Mediterranean Sea and bypassed Northwest European disports.

BP chartered the STI Expedite to transport a 90,000-ton jet cargo from the West Coast of India to Europe, but the vessel made landfall at the Port of Limetree, U.S Virgin Islands instead, MINT data show.

Saudi Aramco trading company ATC chartered the Red Eagle, which sailed to Port Everglades from the port of Jubail hauling 60,000 tons of jet fuel. The vessel was originally chartered to discharge in Western Europe, according to shipbroker reports.

The Marika, chartered by Trafigura, arrived in Quebec, Canada yesterday, sailing via the Mediterranean Sea laden with a 60,000-ton jet cargo from the west coast of India.


--Reporting by Selene Law,;

--Editing by Rob Sheridan,

Copyright, Oil Price Information Service

Oil Traders in Line for Bumper Billion-Dollar Profits on Super Contango

March 27, 2020

The biggest oil traders are set to rake in billion-dollar profits this year possibly even matching those seen during the 2008-09 financial crisis as steep contango, huge price fluctuations and low flat prices combine to create a perfect trading storm, industry sources said.

As was the case in past oil crises, the most recent of which was in 2014-15 when a similar output hike was made by Saudi Arabia, opening up a huge contango, i.e. when the price of a commodity today is worth a lot less than in the future, that played straight into the hands of traders who have become experts in the store-now, sell-later play.

"This is the best market for the trader. They look for the most distressed seller in the market and buy the cargo, you get the cheapest price and the contango to lock-in," said one source, who had carried out such so-called contango trades in previous cycles.

At that time, Ivan Glasenberg, chief executive of Glencore, said 2015 could be a "blowout" year for their oil trading business before his company and several other oil firms went on to chalk up some of their best performances in years.

The forward curves are showing a six-month contango of $10.50 for Brent, $6.90 for Dubai and $9.90 for WTI, sources said. At the same time, physical differentials against these benchmark prices are at historical or multi-year lows in just about every producing region including the Middle East, North Sea, Russia and West Africa, traders said.

Trades for May-loading Murban, for example was done at a discount of more than $2.00/bbl to its official selling price (OSP), while Urals were pegged in the Rotterdam market at over minus $4.00/bbl to Dated Brent, they said.

In other words, there's a lot of room for traders to maneuver in their efforts to build up a contango play. Throw into this mix the widest negative Brent and Dubai EFS spread ever and volatile freight rates, a savvy trader will have all the ingredients necessary to come up with strategies that give huge profits.

The spread between May ICE Brent futures to Dubai swaps was at a record low of minus $4.72/bbl, which is a record discount that Brent-related crudes have over Dubai-linked grades, broker data show.

During the 2014-15 oil glut, Vitol, the world's biggest independent oil trader, reported net profit of $1.6 billion in 2014, while Trafigura saw its gross profit soar 50% to $1.7 billion in that same year through September, according to media reports at that time. Oil majors such as BP, which have nimble trading outfits, also recorded massive profits.

Shipping fixtures released on Friday showed that companies are still on the lookout for tankers for the storage play as the coronavirus disease 2019 (COVID-19) spreads further with India being the latest of the major economies to announce lockdowns that are set to decimate oil demand.

Shell booked the very large crude carrier (VLCC) Maran Corona for a voyage from the U.S. Gulf Coast to East Asia with storage option, while Hess has the Desimi on charter for the same journey for $15.25 million that includes 60 days storage at $95,000/day, a fixture list showed.

This price is higher than those paid by companies, which were ahead of the curve and made such tanker bookings prior to the surge in rates.

Bahri, the shipping arm of Saudi Aramco, for example had taken at least 16 VLCCs on time charter, which turned out to be the trigger for freight to jump.

Prior this, Glencore, for example, chartered an ultra large crude carrier (ULCC) for $37,000/day for at least six months, which worked out to a carrying cost of about $0.40-$0.50/bbl per month.

The freight market is also showing tremendous volatility, VLCCs were chartered a week ago for the North Sea to Korea route at up to $13.5 million, these were subsequently failed and then re-booked this week at $11-$11.5 million, or about $1.00/bbl less, fixtures show.

In India, talks are emerging of importers seeking to defer term loadings and possibly re-sell cargoes that are about to be loaded or already on the waters, possibly at a cheaper price even, market sources said.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Brent-Dubai Arbitrage Marker Breaks Under Strain of High Freight, Low OSPs

March 23, 2020

Adding to the chaos and confusion in the oil market, a key indicator to measure the viability of shipping arbitrage Brent-related crudes to Asia has broken on the back of sky high freight rates and heavily-discounted Middle East barrels, according to industry sources.

The front-month Brent-Dubai spread, or exchange for swaps (EFS), fell to minus $3.55/bbl on Thursday, broker data show, which industry sources said was the weakest in at least two decades. Typically, a spread of under plus $3/bbl was enough for traders to look to work the incremental arbitrage.

These additional barrels include flows of marginal cargoes from the North Sea, West Africa and even North Africa, they said.

"Things are getting out of intuition these days," said Feng Xiaonan, IHS Markit downstream analyst in Beijing, summing up the breakdown in price relationships following the twin impact of eroding demand caused by the coronavirus disease (COVID-19), and Saudi Arabia's decision to open its oil tap and slash prices a week ago.

Freight became a critical factor as well as an obstacle in this exercise after a deluge of players moved in to snap up tankers for use as floating storage as the weak market flipped into contango.

Bahri, the shipping arm of Saudi Aramco, made the rare move of snapping up very large crude carrier (VLCCs) on time charter, which triggered a jump in freight rates.

In the past few days Bahri has given up at least five of the around 25 VLCCs it had put on subject, leading to a slight easing of freight rates, shipping sources said.

Currently, it costs about $6.00/bbl to ship West Texas Intermediate (WTI) crude from the U.S. Gulf Coast to Singapore, one market source said. This means freight costs is more than 22% of the value of WTI crude at about $27.00/bbl.

The numbers are not too dissimilar from the North Sea to East Asia with fixtures from last week showing bookings at $13.5 million for a (VLCC), which works out to $6.75/bl.

However, a fixture list released on Monday showed two of the charters, both by Vitol, were failed. The first, the Bunga Kasturi Enam, was due to load from the North Sea on April 10 and the other, the Amyntas, was due to pick up Forties from Hound Point on April 20-25; both tankers were bound for South Korea, the report showed.

"Freight is very expensive, and the arbitrage is closed," said one source, adding that the cut to official selling prices (OSPs) by Middle East producers also tampered the Brent-Dubai relationship.

A week ago, Saudi Arabia triggered a supply avalanche from the Middle East after output cut talks at the OPEC+ meeting broke down and Russia walked away from the negotiating table.

On the back of the supply increase, Saudi Aramco also slashed its OSPs by about $6/bbl, which was also followed by other producers in the Middle East including the United Arab Emirates, Iraq and Kuwait.

This led to Asian refiners buying the crack spreads to lock-in their margins, which meant buying Dubai crude and selling products, leading to the initial flip in the Brent-Dubai spread into negative territory. This was pushed further down by funds coming in to sell outright Brent in the futures market, market sources said.

The falls were triggered by forecasts for massive demand destruction in the West as COVID-19 spread unabated, leading to bigger deaths in Italy than in China, where the virus first started and has a bigger infection rate overall.

"Our estimate is that world oil supply will exceed demand in the first half of the year by approximately 1.8 billion bbl, which is 200 million bbl more than the upper end of estimated available crude oil storage capacity," IHS Markit said in a March 20 report.

This means that the market for floaters is unlikely to go away anytime soon.

The same goes for the contango, which should ensure that freight stays reasonably high in the immediate future, the sources said.

Cheap floating storage space, such as Glencore's charter of the ultra large crude carrier (ULCC) for $37,000/day for at least six months, which worked out to a carrying cost of about $0.40-$0.50/bbl per month, is non-existent at the moment, they said.

Time charter earnings fell on Friday, on news of the Bahri VLCC release, to $120,319/day compared with a high of $264,072/day on March 16, according to data from the Baltic Exchange based on its TD1 (ME-USG) and TD3C (ME-China) routes. That was the highest since the Exchange started recording data from Feb. 2, 2008.

In the meantime, traders looking to work arbitrage barrels will have to compare on an outright basis the ultimate landed price to China, South Korea or Singapore and not look to the Brent-Dubai spread for signs as it is no longer meaningful, market sources said.

OPIS Mobile News Alerts provides instant access to real-time petroleum industry news from veteran OPIS reporters. For over 35 years, OPIS has guided jobbers, retailers, suppliers, refiners, traders, brokers, end users, and other industry professionals through a sea of volatility. Tell Me More

--Reporting by Raj Rajendran,

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Saudi Arabia to Boost LPG Supply as Oil Taps Open, CP Under Pressure

March 19, 2020

Saudi Arabia will export increasingly more liquefied petroleum gas (LPG) as the kingdom opened its oil taps after the OPEC+ output cut talks fell apart with Russia walking away from the negotiating table, industry sources said.

The increase in Saudi supplies comes at the same time as China waived import tariffs on U.S. cargoes in part due to damage caused by the coronavirus disease (COVID-19) and also to fulfill its end of a trade deal to buy more from Washington.

The cheaper U.S. cargoes has led to a leveling up of the two LPG markers in Asia, i.e. the Saudi Aramco monthly Contract Price (CP) and the Far East quotes as well as put pressure on the AG benchmark due to swelling supplies from the Middle East, the sources said.

"As a rule of thumb, 1.8 million mt of LPG production a year is associated with 1 million b/d in crude oil production," said Yanyu He, IHS Markit executive director for NGLs. Consequently, if Saudi Arabia were to ramp up to 12 million b/d from its recent level of around 9.7 million b/d, this could imply an annualized increase of some 4 million mt in global LPG supply, he added.

Saudi LPG output shrank in March due to maintenance at the Yanbu refinery leading to all cargoes scheduled for loading out of Ras Tanura instead of being split between the two ports and compliance to the output cuts, which become moot after the breakdown in talks in early in the month, said sources.

State-run Saudi Aramco was initially expected to ship the lowest volume in two years in March, with an estimated 8-10 VLGCs due to load but this grew quickly after as many as 4-5 rare spot cargoes were offered from over the weekend, they said and according to data from IHS Markit's Waterborne LPG report.

In total an estimated 620,000 mt, or 13-14 VLGCs, are due to be exported in March compared with a much higher 760,000 mt in April as Aramco offered more cargoes to term and spot buyers.

Aramco typically ships monthly about 16 VLGCs and approximately 60% of the cargoes are lifted from Ras Tanura against 40% from Yanbu, based on monthly average liftings in 2019 in the Waterborne LPG report.

At its peak, Saudi Arabia exported 820,500 mt in March last year against the lowest level of 509,000 mt in May, based on the Waterborne LPG report.

Asian buyers usually prefer lifting from Ras Tanura due to its proximity, said market contacts.

This increase in volume has weighed on AG FOB differentials. Spot cargo transactions were trending lower to a discount of single-digit to the April CP, and in turn also put pressure on CFR Japan prices that led to offers at a smaller premium to the Far East quotes from double-digit premiums in early March, market sources said.

Prior to the removal of tariff on U.S. imports from China, the prompt month CP swap traded at a hefty premium of $66/mt to the Far East quotes, supported by strong demand from the Chinese petrochemical sectors.

The spread swiftly crumbled on the day tariff waiver applications opened and slumped to minus $23/mt on March 3 where at least eight importers received approvals for April, according to OPIS record.

However, the impact of increased production from the Middle East could throw yet another spanner into an Asian market already buffeted in recent months by the US-China trade war and dwindling domestic demand due to COVID-19.

"U.S.-origin cargoes are still cheaper," said one source, but added that the prospect of increased production in the Middle East meant that LPG parcels from the AG might remain competitively priced relative to U.S. cargoes.

Chinese importers have bought around five full cargoes of U.S. origin materials to date, all of which traded at a premium of $30-45/mt compared with above $60s/mt prior to tariff removal, according to market sources.

Meanwhile, freight on the Middle East to Japan route immediately rebounded from a five-month low of $54/mt after the first spot sales were done by Aramco and reached $59/mt as of Wednesday, as more vessels were booked to take cargoes from the Arab Gulf to East Asia.

It remains to be seen who, between the U.S. and Saudi Arabia, can grab a larger market share in China as downstream demand and inventory could eventually reach its ceiling as a potential global recession looms on the horizon, they said.

Real-time LPG pricing helps you see how global markets fit together with the OPIS Global LPG Ticker.

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--Reporting by Lujia Wang,;

--Editing by Raj Rajendran,

Copyright, Oil Price Information Service

Asian Refiners Grapple With Supply Glut Again After Brief Saudi OSP Respite

March 18, 2020

Asian refiners are bracing once more for tough times as the oil demand destruction spreads to more countries, after they enjoyed the briefest of a brief purple patch in the immediate aftermath of the twin Saudi Arabia action of opening its taps and slashing official selling prices (OSPs).

The refiners, who saw first-hand the scale of oil consumption vanishing in China in the wake of the coronavirus disease (COVID-19), are adjusting to the new reality of lost export outlets after bumper overseas sales in the past month, industry sources said.

A week on from the Saudi actions, a few winners and losers have already emerged but what will happen in the longer term is still up for debate as unlike the most recent output cut executed in 2014, the global economy is not geared up to absorb the surplus barrels with a virus-triggered recession high on the agenda, they said.

"World oil demand is collapsing every day; we are looking at a potential recession on the horizon. The oil price will be low if Saudi Arabia and the other Middle East producers continue to pump more and there will be a surge in inventory," said Premasish Das, IHS Markit downstream research & analysis director in Singapore.

The reduction in global oil demand in the second quarter could reach or exceed 10 million barrels a day (b/d), Das said. Such expectations are not fanciful when compared with the demand destruction seen in China alone in February, which is estimated at close to 6 million b/d.

In this instance, the question that pops into mind is where all those millions of extra barrels that are coming out of the Middle East will go.

Industry sources say that Asia is not going to be a major beneficiary as much of the Saudi cargoes are heading West to Europe and the U.S., which they said explained the charter of as many as 30 very large crude carriers (VLCCs) by Bahri, the shipping arm of state-run Saudi Aramco.

"The Saudis are taking the fight to the U.S. and Europe, they are targeting shale oil and Russia. If you look at the OSPs the price to Asia is still about $1/bbl more than that to the U.S and Europe," said one crude market source, explaining that there was no change to the price structure.

Requests by Asian term buyers for more crude oil in their April loadings, to take advantage of the lower prices, were not accepted by Aramco, market sources with knowledge of the matter said.

On the other hand, similar nomination hikes by refiners in the West were accepted, they added.

"This is a price war, it's not about market share," said one crude oil trader, adding that the Saudis were, once more, fed up of having to take the lion's share of the output cuts but yet only enjoying a little of the benefit.

Although Saudi Arabia remains Asia's largest crude supplier, its market share has dampened over the years with Asian refiners diversifying crude sources on the back of large Saudi production cuts since 2017, IHS Markit said in a report released on March 17.

"Despite the 2.5 million b/d rise in Asian crude purchases from 2016 to 2019, imports from Saudi Arabia increased by only 300,000 b/d during the period -- lower than the rise in imports from Saudi's biggest competitors Russia (530,000 b/d growth) and the U.S. (980,000 b/d growth)," it said in the report that was co-authored by Das.

As much as Aramco was not enticing Asian refiners with disproportionately cheaper crude, its shock-and-awe tactic will weed out more-expensive, further away producers and in the longer term raise its market share in Asia, one market source said.

In the meantime, players who are only now looking to cash in on the current low prices will feel left out as all the contango play has already taken place as seen by the sharp jump to VLCC freight rates that have made such store-now-sell-later strategy moot, the sources said.

A few companies had traders coming in over the previous weekend to snap up left over supertankers, after the Bahri splurge, for just such actions leaving the rest to cough up sky high prices, a source said.

On Monday, Reliance Industries booked a VLCC for the AG-WCI voyage at a record Worldscale (WS) 400, as much as four times what they would pay in normal circumstances.

Another trading move seen straight after the OSP cut was refiners locking in their cracks, or refining margins. Those who managed this are sitting pretty as the jet fuel crack, for example, sank to $3.11/bbl on Tuesday compared with $6.75/bbl on March 6, according to IHS Markit OPIS assessment, which sources say is the lowest in at least a decade.

These refiners do not even need to run their facilities and sell their products to enjoy this boon, they could simply unwind their paper positions and collect their profits, traders said, which they add is somewhat reassuring a market that is already swimming in a pool of unsold diesel, gasoline and jet fuel.

Refiners are also advancing maintenance schedules, cutting runs and tweaking them to maximize certain products, including minimizing jet fuel, the worst of the oil products affected by COVID-19 due to the multiple travel bans, they said.


--Reporting by Raj Rajendran,;

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

Traders turn to giant tankers for storage

March 12, 2020

Traders are increasingly turning to giant tankers to store oil amid improving storage economics, market sources said.

Among the tankers used for such purposes is the AET 2005-built very large crude carrier (VLCC) 300,000 dwt Bunga Kasturi Dua, which Brazilian state-owned refiner Petrobras chartered last month for 30 days at a rate of $21,000/day with an option for another 30 days extension. The tanker is likely to float around Indonesian or Malaysian waters, market sources said.

Chinese charterer Northern Petroleum International, the shipping arm of independent Chinese refiner Zhenghua Oil, had meanwhile booked the 2011-built VLCC Athenian Glory for 40-70 days to use as floating storage around Singapore at $28,500/day.

Another Chinese trading firm, Unipec, chartered the Elandra Elbrus for a 6 months storage at $37,500/day, a shipbroker said. The vessel made its maiden voyage from Al Basra Oil Terminal, Iraq to Yosu, South Korea from Feb 1 to Mar 4, IHS Market Intelligence Network showed. The tanker is expected to remain parked in north Asia, market sources said.

Ultra large crude (ULCC), the largest class of oil tankers which could store over 3 million barrels of crude per vessel, are also being used as floating storage, according to shipping sources. There are at least two ULCCS floating
around Malaysian waters-- the 441,561 dwt Europe and the 441,561dwt Oceania. The latter is owned by EuroNav, who is using the tanker to store very low sulfur fuel oil (VLSFO) and heavy sweet crude, market participants said.
Shipping sources pegged the chartering rates for ULCCs at around $35,000/day.

The same trend could be detected outside of Asia. UK-based Tullow Oil took the VLCC Kokkari for a short- term storage, likely to store west African crude, shipbrokers said. Vitol was also seen to have chartered the VLCC Ridgebury Purpose for six months at $37,500/day with an option to extend for another six months, they added. This tanker is likely to be stationed around the Mediterranean area.

It is common for traders to use tankers as floating storage but the recent uptick in such cases came at a time of improving storage economics in both the crude and fuel oil markets. The prompt timespread in the Brent crude market was at around $0.70/bbl in backwardation at the start of the year and narrowed to just $0.17/bbl on 2 Mar. The Singapore 0.5% sulfur marine fuel market was likewise at a $13/mt backwardation at the start of the year and had flipped to around $2/mt in contango on 2 Mar.

Storage economics improve as markets move from backwardation to contango. With the coronavirus disease 2019 (COVID-19) outbreak severely curtailing oil demand, it made sense for traders to turn to floating storages as oil inventories pile up, market sources said. Onshore tanks in the trading hub of Singapore cost around $0.7715/bbl a month with a minimum six-month lease. Current chartering rates worked out to less than $0.50/bbl a month for a VLCC and just around $0.35/bbl a month for a ULCC, according to a shipbroker's estimates.

Fresh enquiries for VLCCs have only increased this week, market sources said. The recent breakdown in talks between OPEC and key ally Russia on output cuts had not only led to a collapse in oil prices but also a widening contango in the crude and fuel oil markets. The prompt timespread in the Brent crude market and Singapore 0.5% sulfur marine fuel market stood at a $0.57/bbl contango and $4.50/mt contango respectively on 9 Mar Singapore close, making storage economics more attractive than before.

"Floating storage cost could potentially be lower than the contango structure in next couple of months and thus more economically attractive to store in VLCC rather than selling at cut-throat price now," said Matthew Chew, principal oil analyst at IHS Markit.

"A $5/mt contango for 0.5% sulfur marine fuel can technically cover storage costs after accounting for bunker and port charges," a European trader added.

Market sources however also point out that there are risks in holding on to physical cargoes in a bearish market where further demand destruction remained a possibility. The market contango might be steep enough to cover storage costs on paper, but "we don't think it is deep enough because our risk premium is so high," a trader said.

OPIS Global Marine Fuels Report delivers daily assessments of marine bulk and bunker fuel prices in key global ports, including calculated prices for the new 0.5% VLSFO, a new fuel created in anticipation for IMO 2020. Easily track cargo and bulk fuel prices for Asia, Mideast, Europe and the Americas with this concise report filled with at-a-glance tables and charts. Start your free 30-day trial.

--Reporting by Thomas Cho,
--Editing by Hanwei Wu,

Copyright, Oil Price Information Service

Crude Oil Crash: Floating Storage Plays Emerge as Demand Contracts

March 9, 2020

Traders are looking to store crude oil on board tankers as inventories levels are set to jump and demand contracts for the first time in 11 years.

Global oil demand is now forecast at 99.9 million b/d in 2020, down around 90,000 b/d from 2019, and the first contraction since 2009, according to the latest estimates from the International Energy Agency. That's in stark contrast to the IEA's forecast last month that suggested global oil demand would grow by 825,000 b/d in 2020. This contraction comes amid a global oil supply surplus of 4.3 million b/d forecast for the first quarter of this year, according to IHS Markit data.

At the same time, traded volumes of forward freight agreements (FFAs), which help mitigate exposure to freight market risks, have steadily been increasing in recent weeks, according to the Baltic Exchange. Total weekly volumes for crude tanker FFAs are currently pegged at the highest level since Feb. 3, Baltic Exchange data show.

A collapse in crude prices could play into the hands of tanker owners as oil prices move into contango, leading to an increase in demand for floating storage, according to a shipping report by Norwegian investment bank Arctic Securities.

"FFAs are trading up and the market is looking at storage plays on VLCCs," a shipbroker told OPIS today. "Floating storage is still a way off, but it's looking more plausible."

There could be a potential downside swing in demand of between 1 million and 2 million b/d, arising from the coronavirus disease 2019 (COVID-19), and a 1 million-2 million b/d potential upside move on supply, depending on whether the Organization of the Petroleum Exporting Countries and other key producers, notably Russia, are able to reach an agreement on production cuts, according to an IHS Markit Oil Market Insight report today.

The plunge in demand for crude cargoes has impacted ship owners. Earnings for Very Large Crude Carriers slumped to $21,300/day by March 6 from around $75,000/day on Jan. 9, as demand from Chinese crude buyers slumped amid the outbreak of COVID-19, which saw operations come to a standstill across much of the country.

"Floating storage will be profitable if the 12-month spread is higher than the cost of the vessel and the interest charges for storing the crude," said shipbroker Poten & Partners. "We are not there yet, but the economics are moving in the right direction."


--Reporting by Rob Sheridan,;

--Editing by Barbara Chuck,

Copyright, Oil Price Information Service

COVID-19: China February Oil Demand Destruction at Record Levels, March Down

March 5, 2020

The fuel demand destruction afflicting China shrank oil consumption to record lows in February with March also set to show negative growth as it takes the nation longer to overcome the debilitating coronavirus disease (COVID-19), which is now spreading fast in other parts of the world.

China lost an unheard five million barrels a day (b/d) or more of oil demand in February, the most on record, according to preliminary estimates from IHS Markit. Consumption in March will also shrink, in contrast to earlier forecasts of a small growth, by over 1 million b/d.

“Based on high-frequency data, such as transportation, we estimate February demand was down at least five million b/d, that is huge. March will look better but it will still be about one-fifth of the loss in February,” said Feng Xiaonan, IHS Markit downstream analyst in Beijing.

“This is a lot worse than our initial forecast. We were looking at positive growth in March. Looking back, the recovery was not as fast as we anticipated because of the measures taken by the government to combat the spread of COVID-19, including numerous lock downs and quarantines.”

Overall, the sharp drop in February consumption will reverberate over the course of the year leading to forecast of a demand loss of about 370,000 b/d this year from 2019, according to early IHS Markit estimates.

“This is the first time that China is experiencing negative annual fuel demand growth and it will have a global impact as China contributes about 40% to the growth rate,” Feng said.  

IHS Markit had forecast oil demand growth of 500,000 b/d for this year prior to the COVID-19 outbreak.

The drop in oil consumption won’t have a massive impact on Chinese crude purchases over the course of this year, with buyers likely to take advantage of tolerance levels in term contracts, which in some cases allow as much 10% cuts, and trim opportunistic spot purchases, industry sources said.

China Seaborne Crude Oil Imports

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Data from IHS Markit’s Commodities At Sea (CAS) is showing a slowdown in crude loadings bound for China starting to take place with 248 million barrels (8.55 million b/d) lifted in February, of which 52 million barrels have been delivered. This compares with 271 million barrels (8.74 million b/d) in January, of which 193 million barrels have already been discharged.

Crude sources said there’s still the chance of destination changes to the February loadings, especially from further away sources such as the North Sea, West Africa and South America, as traders look to place them elsewhere or take into storage in the face of limited appetite from independent, or tea pot, refiners.

These tea pots are the main buyers of crude oil on a delivered basis to China and traders that have already lined up cargoes for this market would have to look for new outlets, they said.

“There are a lot of U.S. crude that’s heading to Southeast Asia in March and April because of this sudden drop in Chinese demand. The tariff waiver and trade deal came a bit too early for traders to move January and February U.S. Gulf Coast (USGC) barrels,” said one source.

CAS data showed January exports from the USGC to Southeast Asia jumping to a record 14.5 million barrels, with loadings in February coming in second at 11.70 million barrels.

On the other hand, China is slated to receive only 2.77 million barrels of January and 3.21 million barrels of February loadings. Shipments rose to a peak of 13.59 million barrels in February 2018.

South Korea, which in recent months emerged as the biggest importer of U.S. crude, trimmed its purchases. Loadings in February fell to 8.75 million barrels compared with 15.15 million barrels in January and 16.15 million barrels in December.

The drop is in line with run cuts and maintenances undertaken by South Korean refiners as COVID-19 takes a firm hold in the peninsular, with infections soaring to almost 6,000, which is the most after China, market sources said.

The virus is spreading fast and other nations such as Italy and Iran where the death toll has risen to 107 and 92, respectively. These are also the most outside China. 

This wide and swift spread of COVID-19 is also likely to lead to oil demand crumbling in other parts of the world, which will mean that refiners in East Asia that have been relying on the export market to help clear the supply overhang will soon run out of places to place their surplus cargoes, market sources said.

“China kept its oil product exports at a high level in February but going forward this will be challenging, a lot will depend on global demand,” IHS Markit’s Feng said.

What was previously only restricted to China has now expanded to numerous countries as airlines curtailed their operations due to both government travel bans and a general drop in passenger traffic.

British Airways, for example, cancelled 24 flights between New York and London in March after having already curbed travel to China, Singapore, South Korea and Italy.

“January was just the tip of the iceberg in terms of the traffic impacts we are seeing owing to the COVID-19 outbreak, given that major travel restrictions in China did not begin until 23 January. Nevertheless, it was still enough to cause our slowest traffic growth in nearly a decade,” said Alexandre de Juniac, the director general and CEO of the International Air Transport Association (IATA).

Tracking commodity cargoes has never been easier.

The Commodities at Sea suite of products deliver critical information on commodity movements with easy-to-use visualization and data extract tools so you can track market shifts and new opportunities right away with a few clicks. Learn More


--Reporting by Raj Rajendran,

--Editing by Sok Peng Chua,

Copyright, Oil Price Information Service


Covid-19: Diesel Glut Triggers Arbitrage on Newly-Built VLCCs to Europe, WAF

February 27, 2020

The large-scale shipment of ultra-low sulfur diesel (ULSD) on board newly-built very large crude carriers (VLCCs) is back in vogue in Asia as traders sought to alleviate the supply glut due to demand erosion caused by the Covid-19 coronavirus.

One of the first such endeavor to emerge was via the VLCC Elandra Kilimanjaro, which left a shipyard in South Korea in February, and is currently in Pengerang, southern Johor, according to data from IHS Markit ship tracker.

The Elandra Kilimanjaro on Wednesday completed a ship-to-ship (STS) transfer with the product tanker Torm Herdis, which had picked up a 90,000 mt ULSD cargo in Singapore, the tracker data showed.

The Torm Herdis was provisionally booked to load 90,000 mt of ULSD in Singapore on Feb. 19 by Unipec bound for Europe with options for other locations, according to a fixture list released on Feb. 6.

The VLCC subsequently made its way to Pengerang terminal, site of large onshore tanks as well the 300,000 barrels a day (b/d) Petronas-Saudi Aramco refinery.

It would take another 180,000 mt to fill up the VLCC.

The use of newly-built VLCCs to transport ULSD and other clean products were rampant in the second and third quarter of last year amid a of flurry of VLCCs leaving shipyards in South Korea and China ahead of the IMO-2020 mandate. Their freight rates were cheap and traders locked in short-term time charters for the arbitrage trade, acting at times as floating storage.

Traders said there are signs that something similar is on the cards in the wake of cheap freight rates, especially for newly-built VLCCs, which give shipowners another option as they secure the vessel's certification.

In the previous such arbitrage play, traders gathered diesel and jet fuel from East Asia and the Middle East for shipment to West Africa (WAF) and Europe with over 10 VLCCs involved in the trade, market sources said at that time.

Diesel prices in Singapore have slumped to $61.89/bbl on Wednesday, which is the lowest since mid-August 2017, according to OPIS IHS Markit data.

Differentials have also taken in a hit, dropping to $0.22/bbl from $0.87/bbl in early-February, the data showed.

Shipping fixtures showed a slew of tankers fixed to move diesel from China and South Korea to Singapore, or with option to Europe. A total of 1.2 million mt was booked to load in February compared with 535,000 mt in January and 280,000 mt in December.

"China's gasoil demand over the first quarter 2020 is expected to contract by some 8% from the previous year," said Matthew Chew, principal research analyst at IHS Markit.

Demand for the first quarter of this year was estimated at 2.981 million b/d, while that for the same period last year was 3.354 million b/d, IHS Markit data showed.


Market Intelligence Network (MINT) Refined Products offers forecast columns and track the movement of on-water exports of jet-fuel, diesel and gasoline cargoes with real-time satellite AIS tracking intelligence. Learn More

--Reporting by John Koh, (, Raj Rajendran,

--Editing by Carrie Ho,


Copyright, Oil Price Information Service

Covid-19: Unipec in Rare Shipment of Vietnam Crude to Hawaii

February 20, 2020

Unipec, China’s biggest oil trader, has chartered a tanker to ship a cargo of Vietnamese crude to Hawaii, in the first such shipment in more than three years, according to a tanker fixture and IHS Markit ship tracking data.

The cargo, which is destined for the Par refinery in Hawaii, may have offered Unipec an unexpected outlet in the face of declining demand in China due to the spreading Covid-19 coronavirus that has destroyed significant fuel demand in the region and beyond, industry sources said.

“Par Energy is buying to replace Libyan barrels and Unipec has term Vietnam cargoes,” said one crude trader.

Crude oil exports from Libya has virtually ground to a halt for over a month now due to a civil strife that led to the closing of about 1 million barrels a day (b/d), or around 90% of the nation’s output capacity, according to local reports.

Unipec booked the Aframax Victory Venture to load 80,000 mt of Su Tu Den and Bach Ho crude on March 1-3 for discharge at Barbers Point in Hawaii, a fixture list released on Thursday showed.

According to IHS Markit’s Commodities At Sea (CAS), this would be the first such shipment in data going to October 2016. Sarir crude from Libya is the largest grade processed by the Hawaiian refinery, the CAS data showed. It also runs Indonesian Minas and Duri as well as Murban from the UAE and Sokol from Russia.

Pars Hawaii Crude Oil Purchases


Pars Hawaii operates the state’s only refinery, located in Kapolei with a rated capacity of 94,000 b/d.

Unipec has been actively seeking alternative outlets, when economical, for its term crude cargoes due to shrinking demand in China as refiners slash runs, traders have said. It had mostly placed surplus term March Angolan barrels to buyers in the Mediterranean who also face supply issues due to the Libyan outage.

“Under the updated base-case scenario, we expect that Chinese refineries will need to deepen cuts to crude runs by as much as 3.5 million barrels per day (b/d) in February, 1.8 million b/d in March and 800,000-900,000 b/d in April from their original production targets before returning to normal operation rates in May and beyond,” the IHS Markit downstream team in Beijing said in a Feb. 14 report.

--Reporting by Raj Rajendran,

--Editing by Sok Peng Chua,

Copyright, Oil Price Information Service


Flaring at Rotterdam Refinery Ahead of Maintenance

February 19, 2020

Shell has issued a statement confirming that flaring at its 404,000-b/d Pernis refinery near Rotterdam was caused by a unit failure.

The market is eyeing developments at the refinery closely in case a large turnaround scheduled for May starts sooner than expected, a trader told OPIS.

OPIS revealed two weeks ago that a major turnaround was planned at Pernis.

Shell confirmed the story two days later and said that the maintenance would begin on May 6.

OPIS understands that maintenance workers will be on site in April.

"Due to the failure of a part of a factory, we currently have high flaring," the statement on the Shell Pernis website said today. No other details were given.

A source told OPIS this morning: "I drove by the Shell refinery and saw some heavy flaring."

A second source said that decreased unit heating was reported at a part of a hydrocracker at the refinery.


--Reporting by Anthony Lane,;

--Editing by Paddy Gourlay,

Copyright, Oil Price Information Service

Oil Traders on Edge After U.S. Imposes Sanctions on Rosneft Trading

February 19, 2020

The U.S. sanction against mega Russian trader Rosneft Trading SA sent shock waves through the oil market as it evoked memories of a similar action against Cosco last September, which led to a kneejerk tripling of freight rates. 

“If end users rather err on the side of caution, like in the Cosco case, and blanket reject dealing with Rosneft cargoes, prices have more upside,” said one crude oil market source in Singapore.

Rosneft Trading, a unit of Russia’s largest oil company, is the intermediary involved in getting most of the crude and oil products produced by its parent company to the rest of the world. It markets crude grades such as Urals, ESPO, Sokol and CPC Blend as well as diesel, fuel oil and other residues made by Rosneft refineries.

In a briefing to the media, a transcript of which was posted on its website, the U.S. State Department said that companies that have contracts with Rosneft Trading can apply for a waiver if their deals are not related to Venezuela. These companies have 90 days, until May 20, to wind down their businesses.

“You would need – if you were in that situation, you would need to go to OFAC (Office of Foreign Assets Control) and seek a license to continue those other activities that you may claim are unrelated to Venezuela, and you’d have to make your argument, but the application is to the entire range of activities of Rosneft Trading S.A.,” its special representative for Venezuela Elliott Abrams said in the briefing held on Tuesday in Washington.

The State Department is confident that the moves would not have a significant impact on oil prices, adding that current levels were below that when the U.S. first imposed sanctions on Jan. 28, 2019. However, crude futures rose on Wednesday.

ICE Brent crude was up 52 cents, or 0.9%, at $58.27/bbl as of 4:08 pm Singapore time.

“Oil prices are lower today than they were when this campaign started. We’re not trying to raise oil prices. We’re trying to diminish the amount of money available to the Maduro regime,” Abrams said, referring to the current ruler of Venezuela.

The State Department stressed that its target was the flow of Venezuelan oil, which despite the over year-long sanctions is still continuing unabated.

“What is the company that is now handling about 70 percent of Venezuelan oil? It’s Rosneft Trading S.A. What is the company that is engaging in all sorts of tricks and evasions to try to get around U.S. sanctions on Venezuelan oil, the oil sector we sanctioned? It’s Rosneft Trading. So we went after the operational company,” he said.

Data by IHS Markit Commodities at Sea on charterers shows that Rosneft has been dominating shipment of crude oil from Venezuela.

raj 0219

Rosneft said that the sanctions against its trading unit “are arbitrary and selective, as other international companies, including American ones, carry out similar activities in Venezuela, and the U.S. regulator does not claim them.”

“The U.S. Treasury Department has not provided any evidence of illegal activities of the Company, as well as of any violation of the unilateral restrictions imposed by the U.S. The Company is to consider options for its legal protection upon reviewing the documents published,” Rosneft said in a statement on its website.

Abrams said that the U.S. would reach out to the two biggest importer of Venezuela crude, China and India, to explain its policy.

“I think this is a very significant step and I think you will see companies all over the world in the oil sector now move away from dealing with Rosneft Trading,” he said, adding that the sanction was different to that imposed in 2014, which was restricted to technical activities such as drilling in the Arctic and access to western debt financing.

Oil traders said that if companies shun dealing with Rosneft Trading completely then there would be a big impact on the market, but if this was only restricted to Venezuelan barrels then the consequences won’t be huge.

It could only affect the heavy-sour grades, the mainstay of Venezuelan crude exports, which for now is mitigated by the Covid-19 coronavirus that has significantly eroded oil demand, especially in China.

“The macro picture is still lurking in the background, i.e., China demand erosion,” said one trader, adding that the full picture of the sanctions have yet to emerge.

--Reporting by Raj Rajendran,

--Editing by Sok Peng Chua,

Copyright, Oil Price Information Service

Analysis: US-China LPG Flow Likely to Resume, Yet Chinese Demand Uncertain

February 18, 2020

Through the State Council Tariff Commission, Beijing has revealed its plans to slash the 26%-28.5% tariffs currently imposed on U.S. LPG, via an application-based system that Chinese firms will use for the tariffs waivers, subject to approval. The applications will be accepted from March 2, 2020.

While the latest measure of the application-based system still subject to approval from Chinese government does not officially end the trade war between the country and the U.S., it is expected by sources to resume the U.S.-China LPG flow. The question is when this will start and how much U.S. LPG that China will draw.

A source noted that the official timeline could be applicable even to those vessels that currently in the Pacific. Out of around 28 laden very large gas carriers (VLGCs) in the North Pacific area currently seen, none of the vessels show China ports as their respective destination, according to IHS Markit shipping tracking data, but changes in destinations may be seen on later dates.

A potential signal for resuming the LPG flow in March was a Chinese importer that was heard to have withdrawn its offer for a 2H March cargo from the USGC resale market, which was heard still available in the market last week.

However, it remains to be seen if the latest announcement will steeply hike China's imports of U.S. LPG, as the ongoing COVID-19 coronavirus in China is expected to cap the overall LPG demand in the nation. Some diversions involving at least four LPG vessels were already heard for cargoes that initially scheduled for China delivery.

"China is diverting cargoes so demand doesn't look so hot, in theory it should support LPG prices but until this virus thing is resolved the impact will be weakened," said a source.

Edgar Ang, associate director, midstream oil and NGL at OPIS parent IHS Markit, had estimated China's February LPG demand reduction at 20% of 4 million-5 million tons, about 800,000 tons to 1 million tons.

Commenting on China's March demand, he added, "in theory, the Chinese going back to work after Lunar New Year holidays, so it should ramp up economic activity" while more updates on China's coronavirus situation will be required to estimate direction in the nation's LPG demand next month.

It is also worth mentioning that the latest announcement came as China is expected to boost its overall shipments of U.S. energy products as it has agreed to increase imports from the U.S to at least $30.1 billion in 2020 and $45.5 billion in 2021 under the trade deal signed Jan. 16. As such, further action from Beijing to comply with the trade deal was anticipated.

--Reporting by Charles Kim,

--Editing by Barbara Chuck,

Copyright, Oil Price Information Service

Several Diesel Cargoes Spotted Heading To U.K. Port

February 18, 2020

Diesel imports into the port of Milford Haven in the U.K. are rising in advance of a reported turnaround at the nearby Pembroke refinery, data from the IHS Markit OPIS Tanker Tracker show.

The site at the former refinery at Milford Haven, bought by Puma Energy in 2015, is also used for oil storage.

A total of 362,000 metric tons of ultra low sulfur diesel (ULSD) is expected to arrive at the U.K. port over January and February.

That compares to 260,000 tons seen arriving in the same two months last year.

The Valero-operated 210,000-b/d Pembroke refinery has been reported going into maintenance between March and May.

Valero was not available for comment about first quarter maintenance at Pembroke.

Meanwhile, one diesel trader told OPIS that diesel cargo flows into the U.K. were higher than normal currently.

OPIS sources have suggested that the 220,000 b/d Humber refinery, owned by Phillips 66, will undertake maintenance later in the year, but other U.K. refineries have only light maintenance programs in 2020.

There will be no large-scale turnaround at the Essar-operated 200,000-b/d Stanlow refinery until February 2022, OPIS revealed earlier this year. Instead of a big turnaround, the refinery envisages a program of rolling unit shutdowns. Stanlow's hydrofluoric acid unit was due to come offline this month, while the sulfur recovery unit 3 is penciled in for maintenance in May.

Just two small February maintenance projects at ExxonMobil's 270,000 b/d Fawley plant have been scheduled, sources told OPIS at the start of the year.

The power needed to supply feed from the refinery to the chemical plant were due to undergo maintenance beginning on February 8, while maintenance at the resid hydrotreater, which converts heavy sulfur products into lighter ones, will begin on February 24, OPIS understands.

No big works at the Petroineos-operated 210,000 b/d Grangemouth refinery has been heard, although OPIS revealed last week that the petchem plant in Grangemouth will undertake a turnaround in April.

--Reporting by Anthony Lane,
--Editing by Paddy Gourlay,

Copyright, Oil Price Information Service

Crude Flows Unabated Into China for Now, Run Cut Impact Likely in 2H March-April

February 17, 2020

Crude oil shipments into China are continuing at a brisk pace even as refiners cut back throughput and traders divert, where possible, unwanted cargoes.

There are, however, very early signs that fuel demand destruction may have bottomed as workers slowly get back to work having overcome travel restrictions and quarantines due to the Covid-19 coronavirus.

IHS Markit ship tracker, fixture and ship agent reports show a steady flow of crude oil into the main Chinese ports with many of these cargoes destined to independent (or tea pot) refineries, suggesting the availability of onshore storage space.

The voyage of many of the tankers, on the other hand, were not straight forward with many making changes to destination, undertaking ship-to-ship activities and even the odd absence of location transmissions as traders look to optimize in current difficult conditions, according to ship trackers and industry sources.

“Under the updated base-case scenario, we expect that Chinese refineries will need to deepen cuts to crude runs by as much as 3.5 million barrels per day (b/d) in February, 1.8 million b/d in March and 800,000-900,000 b/d in April from their original production targets before returning to normal operation rates in May and beyond,” the IHS Markit downstream team in Beijing said in a Feb. 14 report.

Consequently, this will reduce China’s annual crude demand growth to 125,000 b/d in 2020, just one-fifth of what was otherwise expected if there was no virus outbreak, according to the report. “Further cuts in our demand outlook cannot be ruled out at this point,” it said.

Despite the sharp drop in run cuts, crude oil imports into China in February have not dropped significantly, as shown in a ship agent report on Monday.

“There’s not much change to crude imports in February, the buyers have not much option but to let their vessels discharge. These cargoes were already booked and really close to arriving,” said Feng Xiaonan, IHS Markit downstream analyst in Beijing and one of the authors of the report.

“But everything is very sluggish in China in February. The largest bottleneck is the traffic ban. People can’t get out of their villages to get back to work,” Feng said, adding this was a huge impediment to industries getting back on their feet.

In the petrochemical sector, for example more than half of the manufacturers are still down with up to a third likely to remain shut or undertake maintenance works until further notice, she said.

Crude Oil Shipments to China

raj 0217

Data from IHS Markit’s Commodities At Sea (CAS) shows a trend of declining crude oil shipments from the second week of March onward, which matches the views of trading sources.

Traders such as Unipec that have flexible barrels, i.e. term cargoes with no destination restrictions, have where possible re-sold these. Market sources said that a lot of these include Angolan and other sweet grades that were much needed in the Mediterranean following the prolonged halt to Libyan production that removed about 1 million b/d of output.

Even in the face of these cargo diversion, opportunistic spot buying has surfaced as differentials drop to multi-year lows.

Independent Chinese refiners were seen booking tankers to load Russian ESPO Blend cargoes for loading in late-February, fixture lists show.

“Yes, some are definitely bottom hunting, but generally buying is slow. ESPO premiums are very low,” said one crude source.

These actions also point to much uncertainties in the market where refiners in China are adjusting their planned run rates on an almost daily basis, leading to very nimble trades, market sources said.

For example, two tankers, the Universal Winner and the Aegean Dream, took almost identical moves of initially signaling a Chinese port as their destination before changing it midway through their journey and then reverting back to their original destination.

During their journey from Brazil, both tankers signaled Singapore areas as their final journey and reduced their draught signal temporarily while in the Straits of Malacca before taking bunker in Singapore and then heading to China fully laden.

The mystery of their maneuvers is compounded with a ship agent’s report that shows the Aegean Dream now discharging North Sea Forties crude, which suggests murky trades will feature greatly in these difficult conditions, the sources said.

In another case, IHS Markit ship tracker showed a VLCC, chartered by Unipec, diverting from its original voyage plan to China as listed on a fixture report.

The Xin Hui Yang picked up its cargo from Basra terminal on Jan. 29 and traversed the Arabian peninsula instead and was outside the Egyptian port of Ain Sukhna in the Red Sea on Feb. 9, data from the tracker show.

It stopped transmitting from Feb. 9-Feb. 13, and thereafter began a journey out of the Red Sea. One Feb. 15, about half-way in the Red Sea, it signaled a change in its draft to 11 meters from 20.5 meters and showed Singapore as its next destination.

This meant that the tanker had discharged its cargo, possible while near Ain Sukhna during the four days when it was not transmitting.


--Reporting by Raj Rajendran,

--Editing by Carrie Ho,

Copyright, Oil Price Information Service 

Brazilian Ethanol Discharged at Selby Terminal; 1st Time in 4 Months

February 13, 2020

Deliveries of Brazilian fuel ethanol into NuStar Energy LP's Selby, Calif., fuel terminal have resumed -- nearly four months after a fire took the terminal out of operation in October 2019.

Explosions and a fire hit the terminal in the San Francisco Bay Area on Oct. Trading sources report that the terminal resumed operations on Feb. 4.

The terminal is a critical part of Brazil-to-U.S. ethanol flows since most imported Brazilian fuel ethanol goes either to the NuStar terminal or to Shell's Carson terminal in Southern California.

As reported by OPIS, the hobbled NuStar terminal impeded deliveries of Brazilian fuel ethanol into California as tankers carrying the fuel scrambled for other outlets.

"Vessels have actually been coming in for partial discharges and then going back out to anchorage awaiting open tank space to come back in," one market source told OPIS in early January, noting that parties were racking up considerable demurrage costs in the process.

The long wait is over, so to speak, with at least one vessel having discharged Brazilian ethanol at the terminal despite the facility reportedly offering just 800,000 bbl of storage, or just two-thirds of its former capacity (1.2 million bbl).

The Jag Punit tanker moored at the NuStar terminal on Feb. 4, according to IHS Markit's Market Intelligence Network (MINT) data.

The tanker had left Brazil last October loaded with a cargo of ethanol, according to ship brokers. The charterer was reported as Eco-Energy. The vessel reached the Port of Long Beach in Southern California last November and performed a partial discharge, according to MINT. Since late December, the tanker has been anchored in the San Francisco Bay.

The Jag Punit was not the only tanker impacted by the Selby accident. The Bow Cecil tanker has been anchored in the San Francisco Bay since December with a reported cargo of Brazilian ethanol which was loaded last November. Ship broker information lists Raízen as the tanker charterer.

Another cargo of ethanol is reported to be headed toward the Selby terminal aboard the Navig8 Aquamarine. The tanker left Brazil on Feb. 4 and is expected to be at the Panama Canal in seven days, MINT data shows. Trading sources expect the tanker to arrive at Selby in early March.

With Brazil's South Central sugarcane-growing region currently in its inter-harvest period, the Brazil-to-California ethanol arbitrage is technically closed. However, sources report that the ethanol volume aboard the Navig8 Aquamarine was purchased long before current market dynamics surfaced.


--Reporting by Brad Addington,

--Reporting by Eric Wieser,

--Editing by Patrick Newkumet,

Copyright, Oil Price Information Service

Cosco COAs Offer Unipec Timely Storage Options Amid China Demand Fallout

February 12, 2020

The timely return of once-sanctioned Very Large Crude Carriers (VLCCs) belonging to units of the Cosco shipping group has given China state-owned traders like Unipec greater flexibility in managing their supply risks, according to industry sources, tanker fixtures and ship tracking data.

Unipec, China's largest crude oil importer, started using Cosco tankers again after U.S. sanctions against the companies were lifted last month. Shipping fixtures released on Tuesday and Wednesday show at least eight VLCCs due to pick up cargoes from the Middle East in late February.

These tankers, which are on term contract with Unipec, could easily be used as floating storage should it become necessary, market sources said. They have mostly been drifting in Chinese waters since late October after the U.S. imposed sanctions on them for transporting Iranian oil, data from IHS Markit ship tracker show.

"The market is in contango now, but a pure storage play doesn't make sense. Unipec is doing storage, but purely as a defensive measure because they can't use the crude now," said one source.

Crude oil demand in China has tumbled because of the spreading Covid-19 coronavirus that has killed more than 1,000 people and infected over 42,000. It led to the lock down of cities and Hubei province leading to extensive demand destruction.

However, there are some signs that the epidemic may be nearing its peak as infection cases in China begin to stabilize.

"The market disturbance brought about by the coronavirus outbreak is still expected to reach and pass its peak in February, but a slower-than-expected recovery means the peak demand shock to all markets, oil included, will be much more acute than previously anticipated, said Feng Xiaonan, IHS Markit downstream analyst in Beijing.

"China will need to lower its crude imports by as much as 1.1 million barrels a day (b/d) on average over the course of the next four months in order to bring the country's crude supply and demand back to balance, representing an annual reduction of 300,000 b/d from our previous projection," the IHS Markit Beijing downstream team said in a Feb. 7 report.

Feng on Monday raised the reduction in crude imports to more than 1.5 million b/d on news of more refinery run cuts, which rose to an estimated more than 3 million b/d. This would translate into a runs decline of 2.3 million b/d from February 2019.

Unipec has also looked to re-sell cargoes on hand where possible, the market sources said. Unipec officials could not be reached for comment.

The trader has managed to place a couple of March loading Angolan cargoes into the European market, they said, adding that refiners there were starved of sweet grades following the Libyan shut-ins that closed about one million b/d of crude output.

Unipec was still heard offering at least three other Angolan cargoes including Saturno and Santos, the sources said.

At the same time, one VLCC chartered by Unipec that was supposed to be heading to China, according to a fixture report, diverted from its original voyage plan.

The Xin Hui Yang picked up its cargo from Basra terminal on Jan. 29 and traversed the Arabian peninsula instead and was outside the Egyptian port of Ain Sukhna in the Red Sea on Feb. 9, data from the IHS Markit ship tracker showed. The tanker has since then stopped transmitting its whereabouts.

--Reporting by Raj Rajendran,

--Editing by Carrie Ho,

Copyright, Oil Price Information Service

China Refinery Run Cuts Deepen Further as Crude Cargoes Are Resold

February 10, 2020

Chinese refiners are scaling back crude runs significantly in the face of brimming oil product storage tanks, but for now, there have been no turning away or declaration of force majeure on crude deliveries following the coronavirus outbreak, industry sources said.

Refiners have in the first instance stopped incremental spot crude purchases, looked for alternative outlets for term barrels and finally begun negotiations with long-term suppliers in the Middle East to reduce prompt shipments, the sources said.

“We won’t see a drastic drop in February/March deliveries as a lot of these were pre-booked and already on the waters. There will be a significant drop in April,” said Feng Xiaonan, IHS Markit downstream analyst in Beijing.

Citing a highly fluid situation in China, Feng said refiners are making throughput decisions on an almost daily basis as demand crumbled in the wake of draconian actions by the authorities to stem the spreading of the virus, including placing an entire province in lockdown.

“Cross-province travel is low because of all the restrictions. This has led to staff not getting to their workplaces on time in some cases, and also to severely curb transportation fuel demand,” Feng said.

Typically, refiners keep storage tanks for crude that could last for months but for the refined products, it usually only amounts to days as these are quickly shipped out once they are produced, she said. Even the crude tanks are brimming because of large purchases throughout last year, Feng added.

Consequently, in the aftermath of a huge drop in domestic demand, which IHS Markit estimates at 40% in February for transportation fuels, refiners have no choice but to reduce their throughput. 

Feng now estimates the cuts to have risen to more than 3 million barrels a day (b/d) from their original February targets, compared with a forecast of 2.3 million b/d made in an IHS Markit report on Feb. 7. This would translate to a runs decline of a similar 2.3 million b/d from February 2019.

“China will need to lower its crude imports by as much as 1.1 million b/d on average over the course of next four months in order to bring the country’s crude supply and demand back into balance, representing an annual reduction of 300,000 b/d from our previous projection,” the IHS Markit Beijing downstream team said in the report.

The reduction in crude imports is now raised to more than 1.5 million b/d over the next four months, Feng said, based on latest information on refinery run cuts.

Industry sources said the nation’s biggest trader, Unipec, was already in the market re-selling crude cargoes where possible, amid talks that the outage of about 1 million b/d in Libya had made it relatively easier for the company to find outlets for surplus West African sweet grades.

Term producers such as Saudi Aramco have cut back term crude volumes in the face of the sudden sharp drop in refinery runs and near tank-top conditions, they said.

Saudi Arabia In-Transit Crude Oil Shipments to China

raj 0210

According to data from IHS Markit’s Commodities At Sea (CAS), flows for arrival to China in early March from Saudi Arabia have slowed in the past few days.

Deliveries for arrival from March 2-9 average about 2 million bbls per day with no daily shipments reaching 4 million bbls or 6 million bbls seen for many days in February and March, the data show.

The consistently low level of deliveries for the later days ties in with sources reporting of Aramco reducing their term volumes but this could not be confirmed.


--Reporting by Raj Rajendran,

--Editing by Carrie Ho,

Copyright, Oil Price Information Service 

Shell Confirms Pernis Turnaround

February 6, 2020

The Shell-operated 404,000 b/d Pernis refinery in Rotterdam will undertake a turnaround in early May, the company confirmed to OPIS today.

OPIS reported earlier this week that maintenance workers were being recruited for work beginning in April, with sources referring to a turnaround.

However, the extent of the maintenance work was not revealed.

Asked whether a turnaround was coming in April, a spokesman for Shell said:

"Yes, maintenance activities at Shell Pernis take place at Pernis constantly. The next turnaround will start early May. We won't provide further details."


--Reporting by Anthony Lane,

--Editing by Paddy Gourlay,

Copyright, Oil Price Information Service

Oil Demand Destruction Sends Tanker Rates Tumbling, Virus Clause Emerges

February 6, 2020

The shipping industry is bracing for tougher times as oil flows grind down in the face of shrinking demand in China due to the coronavirus even as tanker owners look to add a virus clause similar to that seen after the Ebola outbreak in 2014-15, sources said.

Shipping sources said that the coronavirus clause will call for charterers to pay for the extra costs brought about by the epidemic in terms of demurrage due to quarantine or additional operational costs incurred from compliance with new virus-related guidelines.

"I heard charterers have accepted this, they don't have a choice as owners are already putting this clause in new contracts," said one ship broker.

The quarantine that's increasingly being placed on tankers that have called in China or have crew from that nation as a precaution to curb the spread of the virus could lead to a temporary shortage of vessels, especially on short-haul regional routes, they said. The new coronavirus has so far killed 563 and infected over 28,000 people.

"In the short-term vessel availability will be affected but the shipping industry has a way of overcoming this. The big issue, however, is the huge drop in demand from China," said Rahul Kapoor, vice president for maritime and trade at IHS Markit in Singapore.

"The overall demand is so negative that it will outweigh any positives," he said, adding that the re-entry of vessels after U.S. sanctions against two units of Chinese shipper Cosco was lifted will increase availability in the tanker pool.

Chinese fuel demand is expected to drop by 1.4 million barrels a day (b/d) from a year ago, according to IHS Markit estimates made in its Oil Market Briefing on Tuesday.

"A temporary decline of 3 million b/d in world oil demand for a month or more cannot be ruled out at this stage given uncertainty about containing the outbreak," IHS Markit said in the report, with run cuts in February estimated at 2.1 million b/d.

Independent refiners in China have stopped making fresh crude oil orders as they are struggling to sell oil products that are already in their tanks, traders said. This high inventory situation has triggered drastic run cuts atthe worst hit refiners, they added.

 Crude Oil Bound for China

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According to IHS Markit's Commodities at Sea ship tracking service there are 313 million bbls of crude oil on board tankers heading for China.

Of this volume, 203 million bbls, or 7 million b/d, are due to arrive in February with another 84 million bbls due in March.

So far none of these crude oil that are on the waters have been canceled under a force majeure clause but some Chinese traders are looking for alternative homes if the economics work, the market sources said.

Traders are also exploring the possibility of keeping these supplies in storage as part of a contango play, they said.

Tankers rates are continuing their downtrend even after news of the 14-day quarantine by some nations against vessels leaving from China, which has yet to make an impact, ship brokers said.

"It's a bit like a double-edged sword but at the moment freight rates are still coming down," the ship broker said, pointing to an overnight fixture for a Suezmax from Kozmino to north China that was booked at $600,000, down $130,000 from the previous charter a day ago.

Rates on other routes are also extending their falls, some close to multi-year lows.

Very large crude carrier (VLCC) rates on the busy Middle East Gulf to China route (TD3C) fell by 1.21 Worldscale (WS) points on Tuesday to WS 43.04, which worked out to time charter equivalent (TCE) of $16,865 per day, according to data from the Baltic exchange.

Freight on this route jumped to WS 313.33 points on Oct. 11 at the height of the Cosco crisis.

Reporting by Raj Rajendran,

Editing by Sok Peng Chua,

Copyright, Oil Price Information Service


Ningbo Port Delays Berthing, Discharge as Suspect Crew Are Tested for Coronavirus

February 5, 2020

A mandate for ports in China to quarantine vessels with crew suspected of carrying the new coronavirus was put into practice at Ningbo after a liquefied petroleum gas (LPG) carrier was held up for four days before it was allowed to berth.

The Ningbo Maritime Board requested the vessel to remain at sea until the two-week incubation period was over before allowing it to discharge its cargo, market sources said, adding that the owner was expected to bear the extra costs incurred.

The LPG carrier Pacific Yantai was asked to drift outside the northeastern Chinese port for an additional four days to take its overall journey time beyond the 14-day coronavirus incubation period before entering Ningbo port, market sources said.

The delay to discharge and the two-week wait could tighten freight availability and eventually raise shipping rates if more cases of the virus among ship crew members emerge, said market contacts.

The crew member boarded the vessel on Jan. 21 on route to China from the Middle East while it was bunkering, they said.

Data from IHS Markit's MINT ship tracker showed the Pacific Yantai undertaking bunkering on Jan. 21 in waters off Singapore and staying outside Ningbo from Jan. 28-Feb. 2 before entering the port to discharge its cargo. The tanker left on Feb. 4, signaling Zhangjiagang as its next destination.

The crew member was cleared of virus infections, according to sources.

The Singapore Maritime Port Authority (MPA) did not reply to an e-mail seeking clarification on the crew member.

MPA requires all arriving vessels that have called at ports in mainland China or with crews who have traveled to mainland China in the past 14 days to submit a Maritime Declaration of Health Form from Feb. 1, according to a circular issued on Feb. 1.

More stringent controls should be taken by regional port operators and shipping companies; however, ports are prohibited from rejecting port calls and isolate anchorages as a means to prevent the epidemic from spreading without valid rationale, China's Ministry of Transport said in a notice issued on Jan. 30.

Crew members are not allowed to leave the ship without special circumstances, the ministry said.

Maritime authorities in other countries have also imposed similar 14-day quarantine rules. However, traders pointed out that most voyages including from the oil-rich Middle East to China takes about 20 days.

Australia for example will quarantine vessels that have left mainland China on or after Feb. 1 until the 14-day period passes, according to one shipping notice.

Aside from the suspected LPG carrier, two more similar cases were reported wherein crew members showed symptoms of fever before arrival since Jan. 22, according to Ningbo Zhoushan Port Co.

The petrochemical carrier Sea Smart was told to postpone its discharge by one day to Jan. 24, allowing test to be carried out on one suspected crew which was negative, Ningbo Port said.

The dry bulk carrier Endeavour halted its discharged on Jan. 24 due to bad weather while two crewmembers were put in isolation and tested, which was also negative, they added.


--Reporting by Lujia Wang,

--Editing by Raj Rajendran,

Copyright, Oil Price Information Service

Crude Oil Contango Storage Play May Return on Low Freight, China Demand Drop

February 5, 2020

Crude oil players are gearing up for a potential storage play on the back of the current coronavirus-triggered weakness that has seen demand in China plunge and push the key Brent market into contango, industry sources said.

The decline in China's oil demand, estimated at 1.4 million barrels a day (b/d) from a year ago by IHS Markit, has led to a slowdown in spot crude purchases from incremental supply sources such as the North Sea, Brazil, Baltic and West Africa with buyers taking minimum term contractual volumes, they said.

The downward pressure on prices has flipped crude benchmarks such as Brent and West Texas Intermediate into contango. At the same time, the steep decline in freight rates, itself a consequence of the sharp drop in oil shipments, has opened up the prospect of oil being stored on-board tankers.

"Traders are watching the price curves closely, right now the front months have flipped into contango and the spread is still small, it's not enough to pay for storage and other costs," said one crude trading source.

But the current low freight rates may entice players to put tankers on subject, with a view to fixing the booking in the coming days if the contango widens, the trader said.

In the forward paper market, the Brent March/April time spread was at minus $0.12/bbl in contango while March/April Dubai was still in backwardation, albeit at a small plus $0.14/bbl, data from brokers show.

"The Atlantic Basin Brent-related crudes will be under pressure because of this drop in China demand," said Premasish Das, IHS Markit's research & analysis director in Singapore.

Describing the demand destruction in China as the "biggest negative oil demand shock since the Great Recession of 2009" in a report released on Tuesday, IHS Markit said the demand shock will have repercussions elsewhere in Asia and the world.

China, which has since the SARS epidemic of 2003 grown to become the world's largest oil importer, has put in place unprecedented levels of quarantines and restrictions on travel and commerce, it said.

"A temporary decline of 3 million b/d in world oil demand for a month or more cannot be ruled out at this stage given uncertainty about containing the outbreak," IHS Markit said in the Oil Market Briefing that was co-authored by Das.

IHS Markit expects refiners in China to cut runs drastically in February, amounting to 2.1 million b/d or about 28% of current crude throughput of around 13-14 million b/d. Refiners elsewhere in northeast Asia, including Taiwan, have also reduced throughput.

Crude oil sources said that cargoes that China refiners buy on spot basis including Russian Baltic Urals, North Sea Forties and Johan Sverdrup, Brazilian Lula and various West African, mostly Angolan, grades are likely to be among the first to be affected.

Holders of term Angolan crude cargoes were already heard offering these March loading barrels to other markets instead of taking them back to China as is usually the case, the sources said.

Freight rates have been declining over the past month as the coronavirus put a brake on oil flows on both the buy and sell side.

Very large crude carrier (VLCC) rates on the busy Middle East Gulf to China route (TD3C) fell by 8.17 Worldscale (WS) points on Tuesday to WS 44.25, which worked out to time charter equivalent (TCE) of $18,166 per day, according to data from the Baltic exchange.

The rates are the lowest since July 2019. Freight jumped to WS 313.33 points on Oct. 11 at the height of the Cosco crisis.

Based on the TCE rate as per the TD3C route above, the cost of having a VLCC on the waters for one month will work out about $0.27/bbl, which is not very faraway from the latest contango seen in the forward markets, traders said.

However, for a contango play to be profitable the price gap will also need to cover other financial and miscellaneous costs, which would add a few cents per barrel to the equation, they said.

Alternatively, players could request VLCCs plying long-haul voyages such as the North Sea or U.S. Gulf Coast (USGC) to East Asia, which take about 50 days, to travel at a lower speed and pay the extra shipping costs, the sources said.

The cost of shipping crude on a VLCC from USGC to South Korea has shrunk to $7.8 million while the voyage to Singapore was priced at $6 million, according to a shipping fixture released on Wednesday.

VLCC freight rates on the USGC-China/South Korea route soared to as much as $23.6 million in October at the height of the U.S. sanctions against six Chinese shippers including two Cosco units, fixture lists showed.

"Freight is extremely cheap now, we should start to see floaters carrying crude oil very soon," the trader


--Reporting by Raj Rajendran, 

--Editing by Trisha Huang, and Sok Peng Chua,


Copyright, Oil Price Information Service

Corpus Christi EPIC Terminal Seen Shipping Crude to US, Europe

February 4, 2020

The EPIC Midstream Oil Export Terminal has moved several cargoes of crude oil since becoming operational at the beginning of December, but it is too early to speculate about a steady destination for the Texas product, according to IHS Markit's Market Intelligence Network (MINT) data.

Combined, the vessel cargoes potentially represent about 4.9 million bbl of crude being moved out of the Corpus Christi port if the tankers are fully loaded.

The first cargo to load at the newly operational terminal was on the Eser K tanker, EPIC Midstream confirmed last year. MINT data shows the tanker carried the cargo to the Milford Haven Valero terminal in Wales.

A second cargo was picked up by the Aries Sun in mid-December and headed to the Europort in Rotterdam. The next couple of cargoes traveled to a nearby U.S. Gulf port and Come-by-Chance in Canada.

The EPIC Midstream terminal is located on the former site of the International Grain Terminal in Corpus Christi, Texas. The facility has a max load rate of 20,000 barrels per hour.

EPIC Midstream operates the Y-Grade pipeline, which came online in August 2019 with interim crude delivery from Crane, Texas. The company's crude oil pipeline from Orla, Texas, to Corpus Christi is scheduled to be completed in first quarter this year and have an initial capacity of 600,000 b/d.

The Port of Corpus Christi finished the year 2019 with record tonnage during the month of December as well as record tonnage for the entire year. The port operator attributed the record results to the new crude pipelines feeding the port.

Looking at cargoes this month, the latest one was picked up by the Eagle Turin tanker, which loaded at the EPIC Midstream terminal Feb. 1 and then headed to the U.S. Gulf lightering region. The vessel performed a ship-to-ship activity Feb. 2-3 for 23 hours with the Olympic Trust tanker, according to MINT.

The Olympic Trust tanker has been chartered by Vitol to take the lightering cargo on the long journey to Singapore, according to shipbroker reports.


--Reporting by Eric Wieser,

--Editing by Rob Sheridan,

Copyright, Oil Price Information Service