More Atlantic Basin crude makes its way eastViewA narrow Brent-Dubai spread has revitalized the amount of Atlantic basin cargoes bound for Asia-Pacific refiners, where demand is rising due to strong refining margins. March-loading Nigerian crude to India is scheduled at 344,000 bpd - up by 40% compared to February, while there has been a resurgence in the number of Forties crude cargoes to Asia Pacific; 6 million barrels of Forties crude loaded in January and February for South Korea with another 4 million barrels expected to be loaded in March. Additionally, new crude storage tanks in China and India should help to support crude volumes going east in light of the impending refinery turnaround season.
Weekly Oil Price ReviewViewThe Brent-WTI spread to its widest in a year at $11.88/bbl on Thursday, global supply disruptions have brought some relief for Brent while WTI faltered as US crude inventories continue to surpass all-time highs. The bearish oversupply fundamental backdrop weighed on prices Monday; April Brent fell $1.32/bbl and the new April WTI contract fell $1.36/bbl, however prices rose briefly as the Nigerian Oil Minister was quoted as saying an extraordinary meeting of OPEC may be called if prices fall further, but this was soon dismissed by OPECs dominant Middle East Gulf members. Prices were flat Tuesday as production disruptions at Libya’s Sarir field and the Eurozone approval of Greece’s reform plans tempered anxiety over the weekly EIA release of US oil inventory levels. Despite US crude stock levels setting another record high last week, stocks now sit at 434.1 million barrels, bullish fervour took hold of the market on Wednesday with supportive comments from Saudi Arabia’s oil minister that demand for oil is growing, Brent rose by $2.97/bbl while WTI gained $1.71/bbl. However, the burgeoning US crude inventories registered with market players Thursday as WTI lost Wednesday’s gain, falling $2.82/bbl, but continued supply disruptions in Libya offset some of the downturn for Brent which fell $1.58/bbl. Overall, from Monday to Thursday North Sea Brent remained relatively flat losing only $0.17/bbl to settle at $60.05/bbl while WTI fell $2.17 to close down to $48.17/bbl.
Iraqi crude exports drop off in FebruaryViewAfter setting record volumes, southern Iraqi exports have fallen to their lowest level in a year amid poor weather and crude quality-induced shut-ins. Between February 1st and 23rd, total Iraqi crude oil exports have fallen to 2.34m bpd, after reaching 2.94m bpd in December. Southern exports of Basrah crude have fallen to 2.06m bpd, from 2.39m bpd a month previous, after Somo blocked any crude above 27 degrees API gravity from being exported in an effort to appease traders frustrated with the worsening quality of the crude. However, according to the provisional February 1st – 23rd loading schedule exports of Kirkuk crude, including volumes given to Iraqi marketer Somo at the Turkish port of Ceyhan, have risen by 0.13m bpd from January to 0.28m bpd, but the provisional schedule was released before relations between the KRG and the Baghdad government began to deteriorate last week over Baghdad’s failure to pay Kurds for the volumes agreed in December’s oil export agreement.
India to begin filling SPRs this yearViewIndia is planning to begin filling its three new strategic petroleum reserve sits as early as next month. The 9.7 million barrel site at Visakhapatnam is expected to open in March, while the remaining 11.4 million barrel Mangalore and 18.3 million barrel Padur sites should be ready to be filled in October. Together, these three reserve facilities will give India an additional India 6 ½ days of net oil import cover (based on 2014 imports) in the country’s pursuit to raise reserves to 90 days net imports as per IEA member country guidelines.
Drop in South Korean January product exports despite jump in refining runsViewIllustrating a trend across the Asia-Pacific region, South Korean refining runs climbed to 91.4% in January on the back of strong margins. Crude imports to the country rose by 125,000 bpd from December and runs rose by 96,000 bpd, while compared to January of last year crude imports rose by 202,000 bpd and runs jumped by 281,000 bpd. South Korean refiners took particular advantage of January’s spike in naphtha cracks by shifting towards naphtha production, which rose by 60,000 bpd, in place of gasoline and gasoil output, which fell by 14,000 bpd and 28,000 bpd respectively. As a major importer of naphtha and major exporter of gasoline and gasoil, total South Korean product exports fell by 82,000 bpd last month compared to December.
Cold snap reverses TA gasoil flowsViewA cold snap in north eastern US has led to a ‘reverse arbitrage’ of transatlantic European diesel shipments. The spread between Nymex diesel futures and European ICE gasoil is at its highest level since last year’s “polar vortex”, with the extremely cold weather disrupting nearly two-thirds of the refining capacity in the US northeast. Additionally, Argus has reported that cargoes are being drawn to the east coast from even further afield than Europe; a distillates cargo from the newly opened 400,00 bpd Yasref refinery is on its way to New York.
Weekly Oil Price ReviewViewMarket players grappled with opposing oil price indicators this week; last Friday oil prices posted a third weekly gain following Middle Eastern supply disruptions and a sharp decline in the count of US oil rigs. Despite its recent popularity, some view the rig count as a red herring that is inciting a bullish push, which is often swiftly dampened when the market recalls that global crude oil production is outpacing demand by roughly 2 million bpd. Oil prices were little changed Monday, a bank holiday in the US, as gains in the US dollar spurred by Eurozone troubles offset concerns over Kurdistan exports and unsettling violence in Libya. April Brent rose $1.13/bbl while March WTI settled up $0.75/bbl on Tuesday as Libya’s oil production and export capacity deteriorate to negligible levels. On Wednesday, the market scrutinized the 35% gain in oil prices over the past month on the back of the falling number of US oil rigs and reassessed rising US crude inventories, which reached 425.6 million barrels, the highest level since the EIA started recording levels in 1982. An explosion at a refinery in California and spring refinery maintenance also pushed oil prices to fall; WTI lost $1.39/bbl while Brent fell $2/bbl, the most it has in the last two weeks. On Thursday, both benchmarks fell less than $1/bbl as the EIA reported an eleventh consecutive week of inventory building in Cushing, and also reported an increase of 54,000 bpd in US crude oil production for the week ended February 13th despite the sharp decline in the number of rigs drilling in the US. Overall from Monday to Thursday, April Brent futures lost $1.31/bbl to settle at $60.21/bbl and the March WTI contract fell $1.62/bbl to close at $51.16/bbl.
Indonesia to import less crude in 2015ViewIndonesia’s state-run Pertamina will import approximately 33 million barrels less crude in 2015 as domestic production is expected to rise. Domestic crude output is projected to reach 555.4 million barrels this year, from 520.4 million barrels last year, while Pertamina is targeting crude imports of 306.46 million barrels in 2015. However, imports of gasoline and gasoil will rise; Indonesia is Asia’s largest importer of the two products. Imports of gasoline, RON 88 and RON92, are expected to rise by 17.5 million barrels and 8 million barrels respectively, while gasoil imports are projected to almost double to 63.1 million barrels in 2015
KRG and Baghdad deal unravels ViewThe Kurdistan Regional Government (KRG) may soon halt oil shipments to Baghdad unless they receive the budget payment agreed in December’s oil export agreement. The KRG sent 27,000 bpd in November, 180,000 bpd in December, 145,000 bpd in January and volumes have reached over 260,000 bpd in the first week of February to Iraq’s oil marketer Somo. However, a financially struggling Baghdad is simply “not able to pay the Kurdistan Region’s budget” and as a result Kurdistan’s oil production outlook is suffering as a swathe of international oil companies are leaving the region due to ISIL security-related issues and as KRG payments to the oil companies become obsolete. Reaching the 850,000 bpd production goal by year-end, from 400,000 bpd currently, is unlikely, although for the longer term Kurdistan could see production capacity outpace 1 million bpd.
Chinese "teapot" refineries to import crude oilViewThe Chinese National Development and Reform Commission (NDRC) has issued new guidelines that will allow the country’s “teapot” refineries to import crude. Refineries with at least one crude distillation unit, a capacity of over 40,000 bpd and whose oil products meet the latest standards will be eligible to secure import quotas, however only well-connected teapot refineries have been able to thus far. This new regulation fulfils an objective of the NDRC to provide private firms a larger role in the Chinese energy sector, leading state oil firms account for nearly 90% of crude oil imports.