Dim prospects for Russian crude productionViewDespite Moscow’s readiness to provide state support to sanctioned energy firms, there are views that Russian crude output could begin to fall as soon as 2015. A Russian oil industry member has projected that by 2017 crude production could fall between roughly 50,000 – 150,000 bpd, from crude oil and condensate production levels of 10.54 million bpd of last year, as a result of underinvestment and fewer drilled wells. Furthermore, the fall in crude prices is clouding the prospects of shale oil exploration and production in Russia’s vast Bazehenov formations in Western Siberia.
China's crude imports and refining throughput riseViewChina’s September refining crude throughput rose 9.1% compared to this time last year, but this increase did not match the surge in Chinese crude imports for the month. September crude imports jumped by approximately 780,000 bpd from August, while September refining throughput rose 470,000 bpd by comparison reaching 10.26 million bpd. This rise in Chinese refining runs this past month occurred in spite of an estimated 470,000 bpd of refining capacity that began turnarounds in September in addition to a large portion of the 465,000 bpd of refining capacity that began turnarounds in August and remained offline for part of September.
$24.5 billion infrastructure projects approved in ChinaViewAfter the property mortgage easing measures earlier this month, today China’s National Development and Reform Commission (NDRC) approved the construction of three railway and five airports projects. These eight projects in total are worth about $24.5 billion. This is another push made by the officials to support the expansion pace of China’s economy, when the local property market keeps softening. China’s GDP YoY growth in Q3 this year reached 7.3%. This is lower than the previous records, but it still beats many market participants’ expectation. On the other hand, other macro indicators (such as electricity consumption, railway shipments) showed a worse scenario in China, which explains the latest movement by NDRC. The stimulus measures carried out this month have already seen reactions from the housing market and therefore the steel industry. There are early signs of a recovery of the local house sales and steel product prices.
Update on an El Nino event formationViewAccording to the Australian’s Bureau of Meteorology latest update on an El Nino event, sea surface temperatures in the central equatorial Pacific have warmed closer to El Nino threshold levels and they stand at the warmest levels since the phenomenon started to build-up back in March. The Australian Bureau also added that they believe that the El Nino thresholds will be reached by January 2015 and this is because they will still maintain a watch status on the event, representing an at least 50 percent chance of a late-season event. Additionally, the US Climate prediction centre projected earlier in the month that a weak El Nino might form during the next couple of months across the equatorial Pacific.
Saudi Arabia shuts down offshore Khafji fieldViewCiting “environmental reasons”, Saudi Arabia has shut down production at their offshore site at the shared Neutral Zone according to several Kuwaiti officials. Saudi Arabia will bring production down to nil from recent levels of over 200,000 bpd at the offshore Khafji field; Kuwait and Saudi Arabia share the Neutral Zone which, with inclusion of potential output of almost 300,000 bpd from the Khafji field, can produce up to 500,000 bpd. The two countries have been in disagreement over how to proceed with the next phase of the offshore development. The shutdown of the Khafji field will leave only the onshore portion producing and will thus lower output from the Neutral Zone to approximately 200,000 bpd until the disagreement is resolved.
Continued power struggles heighten Libyan oil industry uncertaintyViewIn response to the rival self-proclaimed Tripoli-based government issuing their own oil policies last week, Libyan Prime Minister Abdullah al-Thinni insisted on Friday that his internationally recognised government retains control of the country’s oil revenues which stem from a current national oil output of more than 800,000 bpd. In August, the Dawn of Libya, an umbrella organisation of armed groups from the western city of Misrata, ousted al-Thinni’s government from Tripoli and have since established their own rival parliament and government which effectively controls areas of western and central Libya and has taken control of a number of ministries. This development, in conjunction with the rival government installing their own oil minister and controlling the website of the National Oil Corp., has brought renewed concern over the stability of the country’s oil industry and volatile production levels.
Dip in Iranian crude exports to South KoreaViewIranian crude oil exports to South Korea declined 7% in the first nine months of 2014, averaging at 128,876 bpd. The Joint Plan of Action permits Iran to export between 1 million and 1.1 million bpd of crude oil provided that they suspend their higher-grade uranium enrichment program. South Korea is a very significant importer of Iranian crude as Asia’s fourth largest economy, yet in September Iran exported approximately 136,000 bpd of oil to South Korea while last year that figure stood at almost 140,000 bpd.
India’s coal inventory lowest in 25 yearsViewWhile China’s coal demand outlook in the current quarter looks bleak due to the recent domestic regulations and import tax, India’s coal demand in the coming months has shown decent potentials. According to India’s Central Electricity Authority (CEA), the coal inventories at India’s 103 coal-based utilities have dropped to merely 7.2 million tonnes, which is the lowest level in 25 years. Among the 103 power plants, 61 see their coal stocks less than 7 days of consumption. Given that this year’s monsoon season is already over, some local players blame Coal India and the weather conditions. Coal India has again been unable to meet its production target during this year. On the other hand, Cyclone Hudhud made its landfall in East Coast India (Visakhapatnam) last weekend and it has caused massive destruction. It is a matter of time for this cyclone to come to an end, and then India’s coal demand will likely be fully released into the market.
Closure of Kurnell refinery boosts Australian demandViewThe 135,000 bpd Kurnell refinery in south-western Australia has been shut down this week and has been converted into the country’s largest fuel import terminal able to store 4.72 million bpd. This closure brings Australia’s total refining capacity down to 549,000 bpd, however this figure will drop again with the expected mid-2015 closure of BP’s 102,000 bpd Bulwer Island refinery, located next to the closed Kurnell refinery. The closure of the Kurnell refinery is estimated to lift Australian demand for jet imports by 15,000 bpd and demand for gasoil imports by 50,000 bpd.
Jump in Chinese crude importsViewCrude imports to China rose by 13.1% from 5.96 million bpd in August to 6.74 million bpd in September. There are doubts, however, as to whether Chinese refining throughput can absorb this significant increase in crude imports as in September there was an estimated 460,000 bpd of Chinese refinery capacity off line for turnaround, some of which had remained off line from August turnarounds. Nonetheless, this past month’s surge in Chinese crude imports reflects a 7.4% increase year-on-year, with Chinese crude imports up 8.3% for the first nine months of 2014 compared to last year.