El Niño cools downViewThe Australian Bureau of Meteorology has downgraded further its expectations on the likelihood of the El Niño phenomenon this year. It said that the possibility for an El Niño event to happen later this year has decreased from 70% to 50%; also it believes “if an El Niño were to occur, it is increasingly unlikely to be a strong event”. Back into the first half of this year, several weather agencies were warning that the El Niño would happen as early as in July this year; however since the Pacific Ocean is cooling down, they are altering their initial positions. We have seen some mild signs of El Niño occurring, but they are not strong enough to harm the seaborne dry bulk trade patterns. The above can well enough help the fragile confidence on the recovery of the dry freight market later this year.
Kurdish crude exportsViewThe Suezmax carrying Kurdish oil that arrived in Galveston, Texas, over the week end was given the go-ahead on Monday by the US Coast Guard to begin lightering. However, a US judge has issued an arrest warrant to move the cargo ashore for safekeeping. Tensions between Baghdad and the KRG have increased since Kurds took control of Kirkuk earlier this month and recently started pumping oil from the region after the KRG claimed it had found evidence that Baghdad had sent orders to sabotage a mutually agreed pipeline.
Adani received approval for its Carmichael coal mineViewToday the Australian Environment Minister approved Adani Group's Carmichael mine and railway project. Adani plans to start building the mine this year and it is aiming at producing 60 million tonnes of thermal coal per year from 6 open-cut pits and 5 underground mines. These mines are located in the Galilee Basin (Eastern Australia), which means the essential railways need to pass the Bowen Basin before reaching the coal ports. Such a long logistical network will likely cause long developing time and higher production costs. Fortunately the long term thermal coal demand from both China and India seems pretty solid, and it has been said that South Korean steel maker Posco will help build the railway system. Adani plans to reach its production target in 2023.
North Sea crude production recoveringViewNorth Sea crude production has stood slightly above 2.6m bpd for the first half of the year. Although this represents an increase of only 3,000 bpd compared with the first half of last year, it is the first year-on-year output increase since 2004. Norway’s production went from 1.52m bpd to 1.54m bpd and UK’s production increased by 15,000 bpd from 861,000 bpd to 876,000 bpd whereas Denmark’s slid 29,000 bpd to 156,000 bpd.
Weekly Oil Price ReviewViewThis week kicked off with gains across the board as more geopolitical risk was priced into both crude benchmarks, mostly on the back of escalating violence in Ukraine and expectations of large draws from U.S. oil stockpiles. Despite tensions rising and news of falling Libyan output, Brent and WTI declined by $0.35 and $0.17/bbl respectively on Tuesday, as markets seemed to wait for a new headline or a tangible manifestation of a supply disruption. The large inventory draw of 4 million barrels last week announced this Wednesday fuelled small gains for both crudes and WTI’s discount to Brent fell to $4.51/bbl during the day, a near three-month low. Brent had fallen almost 7% since mid-June as low profit margins have crimped European refiners’ demand for the crude. Finally, Brent and WTI both fell on Thursday as unseasonably low demand and high supply offset strong economic data from China. From Monday to Thursday, Brent fell from $107.24 to $107.07/bbl and WTI rose from $101.95 to $102.07/bbl. The spread between both closed at $5/bbl.
Iron ore miners saw record high iron ore productionViewBoth Vale and BHP Billiton announced their record iron ore output in the previous quarter. Vale produced 79.4 million tonnes of iron ore between April and June this year, which is 13% higher than 2013. The Brazilian miner said the dry weather helped it maximize its production. On the other hand, BHP mined 56.6 million tonnes of iron ore in Q2 this year, 16% year-on-year growth. It is reported that BHP in total produced 225 million tonnes of iron ore in fiscal year 2014. This is 4% higher than its output target. Earlier this month, we have already seen the robust output figures from Rio Tinto and FMG. The surging iron ore supply this year has sharply dragged down the iron ore prices – the benchmark TSI has been drifting around $90-100 per tonne during the past two months.
China's net gasoil exports jumpViewIn June, Chinese net gasoil exports jumped by 79,000 bpd year-on-year to 109,000 bpd, which also represents a 35,000 bpd increase from May. This surge to the highest level in four years has contributed to the weakening of the Asian gasoil market and kept prices under pressure as a result of oversupply. This sudden increase is remarkable, as it came in a month during which China saw an unusually high domestic demand which was offset by an even rarer occurrence of gasoil production growth, which jumped 6.6% from last year to reach 3.7 million bpd.
Tokyo Steel keeps its steel product prices unchanged for AugustViewJapan’s Tokyo Steel Manufacturing announced that it will keep its steel product prices unchanged in August. This will be the 7th consecutive month for this steel maker to hold its product prices flat. Earlier this month, both Baosteel and Wuhan Steel in China said that they will also roll over their July prices into next month. Recently the Chinese steel market has found some positive signs due to a better economic outlook. The property stock index in China has already registered a sharp increase since the end of last month. Although China Iron and Steel Association (CISA) warned that the "mini-stimulus" measures in China are unlikely to lift the steel prices, steel makers’ confidence are indeed recovering.
Kurds begin pumping Kirkuk crudeViewAccording to Reuters, Kurds are now pumping between 20,000 and 25,000 bpd from the Avana Dome Kirkuk field and sending it to the Kurdistan Regional Government on a reversed pipeline that runs from Avana to the Khurmala Dome and has a capacity of roughly 60,000 bpd. Because of a lack of options to evacuate the oil - the main northern export pipeline is offline and the 270,000 Baiji refinery is still surrounded by the rebels - most of the production is re-injected into the Kirkuk reservoir to maintain pressure and produce associated gas, which is needed to produce electricity.
Weekly Oil Price ReviewViewOil prices kicked off the week with slight gains as both Brent and WTI rose on Monday on renewed violence in Libya and Iraq, which offset positive signs of a well-supplied crude market. Tuesday reversed the trend, following an announcement by Libya’s oil minister claiming oil output has bounced back to almost 590,000 bpd. With no disruptions and ample supply, crude prices tumbled to their lowest level since April, Brent closed at $106.02/bbl and WTI closed at $99.96/bbl. Both benchmarks bounced back on Wednesday on the back of larger than expected draws on inventories and positive economic data from China. Finally, prices rose yet again on Thursday as a Malaysian plane crashed in Ukraine, spurring fears of increased turmoil and an escalation in violence in Eastern Europe. Overall between Monday and Thursday, Brent rose from $106.66 to $107.79/bbl, and WTI rose from $100.83 to $103.90/bbl.