American oil companies increase pressure on crude export banViewThe new Cactus pipeline connecting West Texas oil to Corpus Christi will be expanded and, as a result, will increase the export capacity of an American oil company’s super-light crude. The 498km long pipeline will increase to 330,000 bpd from 250,000 bpd by the fourth quarter of next year, after the initial portion gets started up in April. In a similar vein, a different American oil company is reported to be seeking to sell 600,000 bpd of condensate from the Eagle Ford formation in West Texas to Asia for delivery in 2015. This comes after the company has already exported condensate cargoes to Asia this year after being one of two companies given rulings from the U.S. Commerce Department permitting them to export certain quantities of condensate. These developments come as the American oil industry is putting increasing pressure on the 1975 ban of U.S. crude oil exports.
Chinese product exports swell in OctoberViewChinese October oil product exports have jumped 205,000 bpd from September to reach 845,000 bpd, a 28% increase from last year and the highest level in almost five years. Gasoline and gasoil made up a large chunk of the jump in product exports, both products that are linked to Chinese economic growth. The jump in this past months product exports is not explained by the increased Chinese crude refining throughput this year, but by slowing Chinese economic demand. Chinese crude refining throughput has grown by 608,000 bpd year-on-year, but refining throughput only crept up by 22,000 bpd from September to October. So, this surge in Chinese oil product exports is widely viewed as another sign that the country’s economic growth is slowing and, as a result, China is putting pressure on the Asia-Pacific products markets.
Weekly Oil Price ReviewViewOil prices were much less volatile this week with Brent and WTI losing $0.17/bbl and $0.24/bbl respectively from Monday to Thursday. Despite signs on Monday that Venezuela and Russia may be working on a plan to support prices, worries about a recession in Japan, after the economy shrank by an annualized 1.6% in the third quarter of 2014, weighed on WTI as it lost 0.18/bbl and the new front-month January Brent contract as it fell $0.10/bbl. Data emerged on Tuesday that Saudi Arabia, the world’s number one crude exporter, raised crude shipments in September despite indications of an oversupplied market, leading oil prices to lose for a second day straight. Despite early gains on Wednesday due to heightened tensions in northern Iraq, North Sea Brent retained its downtrend losing $0.37/bbl. WTI fell slightly on Wednesday as the EIA also reported a large increase in crude inventories of 2.6 million barrels during the previous week, U.S. refineries are also coming online as seasonal refinery maintenance ends spurring greater U.S. crude oil imports. Both crude contracts gained Thursday for the first time in three days on the back of growing speculation that OPEC may do something to support oil prices and positive U.S. economic data; factory activity in the U.S. mid-Atlantic is at its highest level in 20 years, while October U.S. home re-sales were at their greatest level in more than a year. Overall, from Monday to Thursday Brent fell from $79.42 to $79.33/bbl and WTI fell from $75.82 to $75.58/bbl.
Iraqi-Kurdistan crude export agreement reachedViewThe Baghdad government and semi-autonomous Kurdistan region have reached a deal on Kurdish crude exports that will see tensions cool between the two parties, the agreement will also establish a more allied front to face the shared threat of IS militants in the north and west of the Iraq. Under the deal, the Kurdish Regional Government will deliver 150,000 bpd, approximately half of their overall shipments, to the Iraqi government export tanks in the port of Ceyhan, Turkey. In return, Iraq will pay $500 million as salary payment to Kurdish civil servants. The Iraqi Finance Minister confirmed the full amount was transferred on the 19th of November in conjunction with the first transfer of Kurdish oil. Additionally, this agreement comes as members of the American government discuss the possibility U.S. military action against Islamic State pending congressional authorization.
Qatar plans to reduce condensate exportsViewTasweeq, Qatar’s state-run oil marketing firm, has announced that the country’s condensate exports will be cut by 150,000 bpd over the next two years. In place of these reduced exports, Qatar is planning to increase exports of naphtha and other light end products. Qatar has made this decision as the outlook for the condensate market looks increasingly saturated as a result of greater competition from the U.S. and from within the Middle East. Qatar is also facing competition from Iran for its main export destination of Asia, condensate exports are exempt under the Iranian crude export sanctions. The heavily discounted Iranian condensate exports have more than doubled in the period of March to June 2014 than during the same period last year, reaching 525,000 bpd.
Russia-Venezuela 2015 supply dealViewRussia’s state-controlled Rosneft and Venezuela’s state-owned PDV have agreed to a new crude oil and petroleum products supply contract. Within the next five years PDV is to supply Rosneft with 11.73 million barrels (1.6 million tonnes) of Venezuelan crude oil and 9 million tonnes of oil products, this comes after a deal signed in May which stipulated PDV to send Rosneft 1.6 million tonnes of crude and 7.5 million tonnes of oil products within the next five years. A Rosneft official reported that most of the crude supply will come from the 150,000 bpd Petromonagas joint venture located in the Venezuelan Orinoco Oil Belt, he also said that Rosneft will start taking in the petroleum product supplies first as it could take up to a year to market the crude volumes.
Kozmino exports to China to increase in 2015ViewAccording to industry sources, Russian ESPO crude exports through the Pacific Kozmino export terminal are projected to reach over 580,000 bpd in 2015, an increase of approximately 20%. This comes as the top Russian producer, Rosneft, delivers on a deal with China to increase crude shipments via Kozmino to China by 100,000 bpd in 2015.
Weekly Oil Price ReviewViewBoth crude contracts plummeted this week with Brent closing on Thursday below the crucial $80/bbl benchmark and WTI closing below $75/bbl. Despite heightened conflict in Libya and Ukraine reported on Monday, US dollar strength pulled both Brent and WTI down $1.05/bbl and $1.25/bbl respectively. On Tuesday, realisation that there remains no meaningful way to cut crude production, after the Kuwaiti Oil Minister commented on Monday that OPEC will most likely not cut production, led the December Brent contract to test the $80/bbl level; Brent fell a further $1.29/bbl as the same dispiriting message was carried into Wednesday as Saudi Arabia’s Oil Minister stated that the kingdom will not engage in the price war. Anticipation of increasing US refinery utilization rates in the coming colder weeks, despite abundant US production, pushed WTI $0.52/bbl higher, but a strengthening US dollar against the British pound and the same news that depressed Brent led WTI to lose that gain as it fell $0.77/bbl on Wednesday. The recent neutral comments from OPEC leaders and a strong downward 2015 price revision from the EIA contributed to North Sea Brent closing below $80/bbl for the first time in four years on Thursday, the more heavily traded January contract, which replaces the December Brent Contract next week, lost $3.63/bbl to close at $77.49/bbl. Weekly EIA data showed US production breaking through the 9 million bpd mark last week, and combined with an inventory build in Cushing the December WTI contract lost $2.97/bbl. Overall, from Monday to Thursday, Brent lost $3.47/bbl to close at $79.92/bbl while WTI lost $4.44/bbl to close at $74.21/bbl.
China may cut its coal export tax from 10% to 3%ViewThere are market rumours saying that the Chinese government plans to reduce the country’s coal export tax from the current 10% to 3% at the beginning of 2015. In the recent months the officials have taken out a series of measures to help the domestic coal miners, such as limiting coal production and taxing coal imports. The possible export tax cut may be another push to back the local producers. If it happens, it can encourage more seaborne sales which may ease the price pressure on coal in China’s domestic market. However, the degree of its impact still remains in question, given that Chinese coal in average are still more expansive that Indonesian or Australian coal in the international market. It will likely be difficult for Chinese miners to grab the market shares in a short time frame.
Iraq proposes split of Basra Light crude into two grades to Asian buyersViewIraq’s State Oil Marketing Organisation (SOMO) has requested feedback from its Far East clients after submitting a proposal to split its Basra Light crude into light and heavy grades. Both grades will export from Iraq’s southern terminals to Asian customers. The lighter grade would have an API gravity of 29 degrees, while the heavy grade would have an API gravity of 24-25 degrees and will be loaded from Iraq’s Single Point Mooring (SPM) terminals. Once feedback is completed, SOMO will set monthly official selling prices for each grade, with the split of Iraqi Basra Light starting as early as 2015. Market sources report that Chinese and Indian buyers will be more inclined to purchase the heavy grade given their refining abilities to handle heavier crude.