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,

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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,

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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

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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,

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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,

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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,

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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,

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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,


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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,

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