China's rapid electricification is hurting oil producers, says Russell
O Ver-estimating China's desire for crude oil has played a role in the oil markets, particularly by OPEC. This theme is likely to continue into future years. China is the leader in the transition to electric cars, having already reached 50% of new sales. The rest of the globe is expected to reach this level by 2030. According to this forecast (which is what the IEA calls the Stated Policies Scenario, or STEPS), the growth of EVs will displace around 6,000,000 barrels of crude oil per day. China becoming the model for renewable…
OPEC+ Has Oil Price and Demand Problems. It Should Solve Demand
OPEC+ has two problems and two solutions.The first problem is that crude oil prices are too low for the comfort of most of the members of the group, which pulls together the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia.The second issue is that crude demand has so far disappointed the somewhat optimistic forecasts made by OPEC for 2024 growth.The first solution is for OPEC+ to surprise the market and change its mind on increasing output from the fourth quarter onwards.The second solution is to increase output as planned…
IMO 2020, China Output Pummels Asian Refinery Margins
Profits at Asian refineries are being buffeted by a combination of factors, chief among them uncertainty over how exactly new shipping fuel standards will play out and the rise of China as a product exporter.Refinery margins in Asia have been knocked to the lowest since the financial crisis in 2008 by some measures, as the industry grapples with the disparate factors.The return from processing a barrel of Dubai crude at a typical Singapore refinery was a loss of $1.19 a barrel in early Asian trade on Monday. This compares with…
For China, U.S. Soybeans are Small Fry
China's purchase of some U.S. soybeans is being viewed as a tentative sign of a little détente in the dispute between the world's two largest economies, but real progress would be a resumption of what had been a burgeoning energy trade.U.S. and Chinese negotiators are meeting for two days of talks in Shanghai starting on Tuesday amid modest expectations for progress to resolve the trade imbroglio that has resulted in tit-for-tat tariffs being imposed on billions of dollars worth of imports and exports.One of the areas where some positive movement has been seen is China's commitment to buy more U.S. agricultural produce, soybeans in particular.U.S.
Coal's Uncertain Future and Glencore's Output Cap
It's been weird in the coal world in recent days, with the world's largest shipper saying it's capping output, biggest seaborne buyer China putting restrictions on some imports, and an Australian court saying mines must factor in climate change.Throw in an executive at a major Indian coal-fired power generator saying his company won't build any new plants as coal can't compete with renewables, and it's little surprise that environmental activists may be tempted to pop champagne corks.The common theme at work is that coal is finding it harder to secure a long-term future in the world's energy mix.
China Will Buy More LNG, but Wants it Smoother, Less Lumpy: Russell
China appears set to once again boost its purchases of liquefied natural gas (LNG) for the northern winter, but unlike last year's rush, this time the process is likely to be more organised and stable.In recent weeks there have been several indicators that China is planning on increasing the use of natural gas in winter heating, replacing boilers that use more polluting coal.Curbing winter air pollution has been a major aim of the authorities in Beijing, but they were stung by criticism last year that the switch to natural gas was made too quickly and the resulting shortages left some people without adequate heating.A sign that Beijing is putting more
China's Falling U.S. Crude Imports More to do with Money than Politics
One of the side effects of President Donald Trump's escalating trade dispute with China is that U.S. exports of crude oil to the world's biggest importer are now viewed through the prism of politics.However, this ignores that buyers and sellers of crude are generally more motivated by profit margins and getting the right grades of oil to maximise the productivity of their plants.While it's true they can't disregard politics, and this is especially the case for the state-controlled Chinese majors, it's worth looking at the economics of the U.S.-China crude trade as well.U.S.
What Saudi Arabia Does Now is Key for Global Crude Markets: Russell
If it were possible to boil the crude oil market down to just one determining factor for the coming months, it would be this: What will Saudi Arabia actually do? The Saudis appear to have emerged as the winners from last week's meeting of the Organization of the Petroleum Exporting Countries (OPEC), and the subsequent talks between OPEC and its allies in the deal to restrict output. The outcome of the meetings would seem to indicate that crude oil supply should rise by as much as 1 million barrels per day (bpd). That's based…
China Opening May Spark Iron Ore Markets
In the relatively short space of the past decade the paper iron ore market has grown from virtually nothing to exceed the physical market, but now the industry is grappling with what comes next. While the growth in iron ore futures and exchanged-cleared swaps has been impressive, iron ore is still a long way behind other commodity markets, such as crude oil and some agricultural products, where paper trade exceeds physical by large multiples. There are two main paper markets for iron ore, the well-established Singapore Exchange (SGX) futures and swaps…
Expected LNG Surplus Evaporates, New Projects Looming
Liquefied natural gas (LNG) producers around the globe are once again considering new investments as expectations of a glut in supply wither away in the face of strong, China-led demand growth in Asia. Given it takes several years to go from a Final Investment Decision (FID) to producing cargoes of the super-chilled fuel, however, the industry may be acting too late to prevent a supply shortfall by the middle of next decade. Much of the focus this week at an annual oil and gas conference in Australia - which is about to become the world's top exporter of LNG - was on what projects are viable and how quickly can they be developed.
Shanghai Crude Futures off to Cautiously Good Start
The new Shanghai crude oil futures have been trading for just over a month and have so far managed to build up reasonably strong volumes, but this success may only mask some wider concerns. The yuan-denominated contracts were launched on March 26 by the Shanghai International Energy Exchange (INE) and are enjoying trading volumes averaging around 80,000 a day, with the open interest around 16,000. The INE contract offers seven grades of Middle Eastern and domestic crude for delivery to various locations in China, the world's largest oil importer.
China's Gasoline Exports Impact Profit Margins
China's surging imports of crude oil this year are the major driver of higher prices on the demand side, but the flip side to this is soaring Chinese fuel exports that are hurting profit margins at regional refiners. The world's largest crude importer took in 9.1 million barrels per day (bpd) in the first quarter, up 7 percent from the same period in 2017, according to customs data. Exports of refined products, however, have jumped by even larger margins, with shipments of gasoline and diesel reaching record highs in March, according to the data released on Monday.
To Frack or Not to Frack? Australia's NatGas Dilemma
The decision by the government of Australia's Northern Territory government to allow the resumption of fracking for natural gas will do little to immediately solve the country's energy woes, but will likely sharpen political battle lines. The territory's government said on April 17 that it has lifted a near two-year moratorium on hydraulic fracturing, known as fracking, accepting the recommendations of its own commission of inquiry into the practice. Northern Territory is a vast, sparsely-populated 1.4 million square kilometre (540,000 square mile) part of central and northern Australia, and home to two potentially rich basins of natural gas.
China's Coal Import Restrictions may Pressure Pricing
The price of seaborne thermal coal in Asia may come under pressure as China moves to impose some import restrictions on imports of the polluting fuel. Several ports in southern and eastern China have introduced controls on coal imports, ranging from bans on unloadings to tightening customs clearances. Among ports banning imports is the Chuanshon anchorage at Ningbo port, according to a manager at a coal trading house quoted by Reuters on Monday, while Zhoushan near Shanghai is restricting the number of vessels allowed to dock. What is not clear yet is just how severe these restrictions are, how widespread they will become and how long they will last.
"Fat and lazy" LNG buyers Need Producers Help to Boost Demand
Buyers of liquefied natural gas (LNG) have grown "fat and lazy" on expectations of a surplus of the super-chilled fuel and they now risk a shortage in the early years of the next decade. There's no surprise that this was the view of a LNG project developer, expressed at this week's LNG Asia Pacific Congress, hosted in Singapore by IBC. The perspective of buyers was somewhat different, with some recognising that prior forecasts of a large surplus were unlikely to materialise, given rising demand in several Asian countries that are new to the LNG market.
Saudi Crude Price Hike Rebuffed by Asian Buyers
Saudi Aramco may have shot itself in the foot by unexpectedly increasing the price of its crude oil to Asia, with a major Chinese refiner responding by sharply cutting back on the volume of cargoes from the world's top exporter. Sinopec, Asia's largest refiner, aims to slash its crude oil imports from Saudi Arabia's state producer by 40 percent in May, according to an official from the company's trading arm Unipec. Such a large cut sends two very clear messages to Aramco, the first being that Sinopec didn't agree with the price hike, and the second that the Chinese refiner feels it can make up any shortfall from other suppliers.
China Crude Futures Enjoy Champagne Start
China's new crude oil futures contract enjoyed a successful first day of trading in Shanghai, most likely exceeding the wildest hopes of its backers, but much of the hard work of building a viable benchmark still has to be done. The new contract, launched on Monday by the Shanghai International Energy Exchange (INE), attracted interest from Western oil traders as well as domestic investors. Some 20 million barrels of oil changed hands on the first day, with the first deal going to global trader Glencore , and other participants included major merchants Trafigura, Freepoint Commodities and Mercuria.
Two Risks Threaten Commodities: Russell
It's not quite time to run up the red flags, but some recent developments in commodity markets suggest it may be time to start looking for them in the locker. The are two main factors that appear to be emerging that may threaten an end to the current quite rosy picture surrounding demand for commodities such as iron ore, steel and the metals most exposed to the battery boom, cobalt, lithium and nickel. On the supply side, there is a renewed rush of optimism that may set off another round of mining companies over-paying for assets or sinking way too much capital into projects approved on the back of too bullish forecasts.
Energy Battle is More Than OPEC vs U.S. Shale
The market narrative consuming crude oil markets currently is the interplay between supply cuts by OPEC and its allies and rising U.S. shale output, with a side helping of Chinese imports driving demand. While there are solid reasons for industry participants to focus on these dynamics, there is also the risk of missing out on other factors that help shape the market. Such a factor is India, which has long flown below the radar of the crude oil market, despite becoming the second-biggest importer in the fast-growing Asian market behind China, and the third-biggest in the world after the United States.
Commodities' Dilemma: Strong Demand or Trade War Fears?
The tug-of-war between fundamentals and sentiment appears to be getting stronger for many commodities as the market tries to reconcile factors such as robust demand numbers from China and increasingly worrying rhetoric and actions from the United States. Iron ore, steel and copper all performed well on Wednesday after Chinese data showed real estate investment and industrial output rising at a faster than expected pace. Spot iron ore prices in China <.IO62-CNO=MB> rose 2.7 percent to close at $71.64 a tonne, while London-traded copper futures gained 0.6 percent to $6,988.50 a tonne.
