Written by rjs, MarketWatch 666
Here are some more selected news articles for the week ending 27 March 2021. Go here for Part 1.
This is a feature at Global Economic Intersection every Monday evening or Tueday morning.
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Fight over natural gas ban roils Nevada – A fight over the future of natural gas is simmering in Nevada, highlighting questions about equity and energy costs that could cloud efforts to decarbonize the buildings sector. Nevada is one of at least seven states this year where lawmakers are considering proposals to phase out or reduce the use of natural gas in homes and businesses, according to a tally by the American Gas Association. A state lawmaker, Assemblywoman Lesley Cohen (D), is set to introduce legislation that would set emissions reduction targets for buildings over the next 30 years, to ultimately achieve a 95% decrease in emissions from buildings by 2050. Under the plan, energy efficiency measures and electrification would be the primary means for decarbonization. While it’s unclear if the bill will pass, Gov. Steve Sisolak (D) backed a climate strategy last year that called for switching from gas-powered to all-electric buildings. The Nevada debate is also showcasing how gas ban proposals nationally can face resistance not just from gas utilities, but from business and union groups in states with Democratic-controlled legislatures. Supporters say the measure provides a framework for the state to plan a gradual, cost-effective transition away from natural gas that protects ratepayers from potential so-called stranded assets – such as new gas infrastructure that could be of little value in the future. They say the proposal is a natural step for Nevada to move toward its commitment to “zero or near-zero” greenhouse gas emissions economywide by 2050, as the state pledged to do under a bill passed in 2019. “Responsible energy planning isn’t just a necessity, it’s an unparalleled opportunity to create good jobs, diversify our economy, and lead the nation in renewable energy innovation,” Cohen said in a statement. “In a legislative session full of economic challenges and tough choices, this one is easy: let’s make sure we’re getting the best returns on our energy investments in the years to come.” But Southwest Gas, the utility that services the majority of homes and businesses in the state, plans to oppose the bill, and real estate and minority business groups are also raising concerns. Echoing arguments made in statehouses and cities around the country that have considered similar gas transition measures, opponents say that limiting the ability of new businesses and homes to connect to the gas system will drive up energy costs and hurt small businesses. Under the plan, gas providers would need to decrease emissions 2.5% by the end of 2022 relative to 2016 levels and continue reducing emissions every two years thereafter.
Settlement with Merit Energy resolves violations of oil pollution prevention regulations in Wyoming – Today, the U.S. Environmental Protection Agency (EPA) announced a proposed settlement with Merit Energy Company (Merit) of Dallas, Texas, resolving alleged violations of the Clean Water Act, and its implementing regulations meant to prevent oil pollution. These violations include failure to comply with Spill Prevention, Control, and Countermeasure (SPCC) requirements at a tank battery facility operated by the company in Hot Springs County, Wyoming. As a result of the proposed agreement, Merit will pay a civil penalty of $115,000 to resolve the alleged violations. Today’s proposed settlement resulted from EPA’s investigation of an oil spill that occurred on June 19, 2018, when Merit released approximately 455 barrels of crude oil from the Stateland Tank Battery Facility into Grass Creek, a tributary of the Big Horn River. In reviewing the spill, EPA discovered deficiencies in Merit’s SPCC plan for the facility. The company has since corrected these deficiencies and submitted an updated plan to EPA, helping ensure the environment and nearby communities are better protected from damaging oil spills. ‘Due to the harm oil spills can cause to public health and the environment, every effort must be made to prevent oil spills and to clean them up promptly once they occur,’ said the EPA Region 8 Enforcement and Compliance Assurance Division Director Suzanne Bohan. ‘We are encouraged by Merit’s actions to come into compliance with the laws and regulations that protect the environment from the damages that can occur when oil is discharged into navigable waters or adjoining shorelines.’ The Oil Pollution Prevention requirements of the Clean Water Act are intended to prevent and facilitate the response to the discharge of oil from non-transportation-related onshore facilities. All facilities with 1,320 gallons of oil that have the potential for a spill to reach waters of the United States are required to have an SPCC Plan. The $115,000 penalty will be deposited into the Oil Spill Liability Trust Fund, a fund used by federal agencies to respond to discharges of oil and hazardous substances. This proposed Consent Agreement is subject to a 30-day public comment period and final approval by the EPA’s Regional Judicial Officer. To access and comment on the Consent Agreement, visit: https://www.epa.gov/publicnotices/notices-search/location/Wyoming
FERC OKs Gas Pipeline Job After First-Ever Climate Change Review – With the help of a Republican commssioner who was its Trump administration chairman, the Federal Energy Regulatory Commission approved 87 miles of natural gas pipeline replacement in South Dakota and Nebraska after reviewing its effect on climate change – the agency’s first such action. Neil Chatterjee joined current FERC Chairman Richard Glick and Allison Clements, both Democrats, in the 3-2 decision. Commissionsers James Daily and Mark Christie, both Republicans, dissented in the March 22 decision. “We find that the project’s contribution to climate change would not be significant,” the commission said in its review of Northern Natural Gas Co.’s request to replace a pipeline that was built in the 1940s and 1950s, the A-line that carries gas from South Sioux, Neb. to Sioux Falls, S.D. In a significant change in policy, FERC will continue to consider all appropriate evidence regarding the significance of a project’s reasonably foreseeable greenhouse gas emissions and their contribution to climate change, the agency said in the decision. Glick, who took over as chairman after President Joe Biden’s inauguration, said FERC is committed to treating GHG emissions’ contribution to climate change the same as all other environmental impacts. “A proposed pipeline’s contribution to climate change is one of the most consequential environmental impacts and we must consider all evidence in the record to assess the significance of that impact,” he said. The order noted, however, that the evidence the commission relies on to assess significance may evolve. On Feb. 18 FERC issued a Notice of Inquiry seeking new information and additional stakeholder perspectives to help it decide whetherto revise its approach for assessing the significance of GHG emissions. Future changes would not affect its Northern Natural Gas decision, the order said. FERC compared the $173.8 million project’s foreseeable GHG emissions to total GHG emissions of the US. “This project could potentially increase CO2 emissions based on 2018 levels by 0.0003%, in subsequent years, the operations only would be 0.000006%,” the order said. The company wants to replace the existing pipeline because it has mechanical joints and acetylene welds that are more susceptible to leaks and hydrostatic pressure test failures. The existing pipeline will be sold to a salvage company and removed. Danly agreed that the project should be approved, but dissented in part, saying the commission violated the law “by reversing its longstanding determination that it is unable to assess the significance of a project’s GHG emissions or those emissions’ contribution to climate change without sufficient reasoning.” Danly said the order is “regulatory malfeasance at its most arbitrary and capricious,” and the change in policy direction announced is in “an obscure docket that is likely not to be appealed.”
Valve failure prompts oil spill in Divide County – A valve failure has led to an oil spill in Divide County, the North Dakota Department of Environmental Quality reported Thursday. Summit Midstream Partners estimates that 532 barrels or 22,300 gallons of oil spilled at the site 16 miles southwest of Crosby. The spill occurred along piping going into a tank at Summit’s Divide Station. The oil was contained to the site by a berm, according to a spill report the company filed with the state. Summit reported the spill to the state last Saturday. About three-quarters of the oil has been recovered, according to Environmental Quality. State inspectors will continue to monitor cleanup, the agency said.
North Dakota bumps budget due to faith in oil outlook (AP) – North Dakota’s Legislature on Monday bumped tax collection expectations for the next two-year spending cycle, with budget writers banking on stable oil prices and production. House and Senate appropriation committees predicted general fund tax collections at $4.04 billion, or $95 million more than the Republican-led Legislature’s budgetary starting point in January. Senate Appropriations Chairman Ray Holmberg called the Legislature’s numbers “very reasonable.” Lawmakers will rely on them to finish their work on the state’s 2021-2023 spending plan. “This is the one we hang our hat on,” Holmberg told the appropriations committee. “It’s the best guess we have at this point.” Lawmakers based their numbers on a pair of competing revenue forecasts presented last week. Lawmakers essentially split the difference between estimates done by state budget analysts and Moody’s Analytics, and their own economic consultancy, IHS Markit. While oil prices are a key contributor to the state’s wealth, oil revenues actually are a relatively small part of the state’s general fund, which finances state government and a variety of programs. The general fund can take in no more than $400 million in oil tax revenues per two-year budget cycle, a setup designed to protect the budget from price swings. Beyond that level the money goes to other state funds. The state’s general fund is financed mostly by taxes on sales, income, corporations, tobacco and gambling. Lawmakers assumed oil prices at $40 a barrel when crafting their budgetary starting point in January, though prices have hovered at around $60 a barrel since then, including on Monday. The Legislature’s appropriations committees on Monday adopted an estimated price of $60 a barrel, and predicted production would decline from about 1.1 million barrels daily to 1 million barrels in the second year of the budget cycle.
Are California Oil Companies Complying With the Law? Even Regulators Often Don’t Know. – ProPublica — At the ragged edge of rapidly gentrifying downtown Los Angeles, the aging, yellow brick residential Portsmouth Hotel sits among knockoff watch dealers here, while a block away, a giant construction crane hoists materials skyward for new luxury apartments. Below ground is another story. Tucked out of sight, oil wells run thousands of feet deep, tapping thick crude from one of California’s many urban oil fields. And in the fall of 2019, investigators with the state’s oil agency flagged trouble. Nasco Petroleum was injecting huge amounts of water into well bores above the legal pressure limits, aiming to push more crude out of the aging downtown field. Similarly intense pressure led to a major oil spill in 2006, after a nearby well bore operated by Nasco’s predecessor ruptured. Hot crude and oily waste bubbled up from underground, filled an apartment building basement, oozed out of manhole covers and buckled sidewalks. More than 130 low-income tenants were evacuated. The pressure wasn’t the investigators’ only concern. They also noted that a number of “bad” wells had been left unfixed for years, with missing cement seals. The wells, investigators wrote in a report to a manager, posed “immediate” risks to drinking water aquifers. They urged supervisors at the California Geologic Energy Management Division, or CalGEM, to take the strongest possible enforcement actions: order Nasco to cease well operations, suspend approvals of the company’s project or both. No one ever did. While the agency said in a statement that it has taken less stringent measures, like mandating that Nasco lower injection pressure, it declined to provide evidence that the company had complied. Officials acknowledged they remain concerned about potential threats to drinking water, though they said they had no proof of contamination. In January, they said they would address the problems but declined to provide specifics. Today, three of the problematic wells are listed as active on CalGEM’s website. Less than 100 feet from Nasco’s oil operations, low-income residents of the Portsmouth Hotel said they’ve endured decades of problems from the site, including the ground trembling at all hours, fumes that cause headaches and nausea, and equipment catching fire.”People live in here with fear. … They worry something’s gonna happen, an explosion or something, and we’re not gonna have a chance,” said Gregorio Villegas, the longtime building manager. A Nasco employee said its wells are operating with no problems. The owner did not respond to requests for comment. Emergency phone numbers on the site’s front entrance are disconnected, and no one responded to knocking on gates.
Haaland defends leasing pause during Interior forum —Top officials at the Interior Department heard a variety of conflicting perspectives about drilling on federal lands and waters on Thursday amid tensions surrounding the Biden administration’s pause on new federal oil and gas leasing. Interior Secretary Deb Haaland on Friday defended the pause as it “gives us space to look at the federal fossil fuel programs that haven’t been meaningfully examined or modernized in decades.” During a public forum on Friday, industry groups, environmentalists, Native leaders and labor organizations were among those that spoke with administration officials. The forum comes as the department is expected to produce an interim report on the program this summer. In an executive order, President Biden also put a temporary pause on new leases for federal lands, “pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practice.” When he was on the campaign trail, Biden said he wanted to ban new oil and gas permitting on federal lands, but since taking office, his administration has not said it plans to do so. At the top of the forum Thursday, Haaland reiterated that “fossil fuels will continue to play a major role in America for years to come.” Republicans and some energy industry groups have criticized the pause, with 14 states recently suing over the move. During the forum, industry groups talked about jobs that come from public lands and waters drilling and argued that “responsible” development of federal land can be part of a climate solution. They also argued that the significant number of leases that are not being used does not constitute a stockpile, saying instead that not every lease can be used. “It takes several years … for a company to analyze the underlying geology, perform the necessary technology and engineering assessments and arrange the logistics of exploration and development projects before a company can determine if a lease contains commercial quantities of oil and natural gas,” said Frank Macchiarola, the senior vice president of Policy, Economics and Regulatory Affairs at the American Petroleum Institute. Meanwhile, environmental groups warned of pollution and discussed oil spills resulting from these activities. Nathalie Eddy, interim field team manager at Earthworks, argued that the administration “should permanently halt all new oil and gas extraction on public lands.” Speakers from indigenous groups stressed that tribes are concerned by climate and environmental issues, but some also noted the importance of oil and gas for tribal economies. “Too often, well-intentioned but overly broad responses to the climate crisis are not good for all of Indian Country,” said Fawn Sharp, president of the National Congress of American Indians.
White House yanks Interior nominee after Murkowski opposition – The White House has withdrawn its nomination of Elizabeth Klein to become the Interior Department’s deputy secretary, as the Biden administration faced push back from Alaska Sen. Lisa Murkowski, sources familiar with the situation said Monday. Details: Klein is a former Obama administration official and deputy director of the State Energy and Environmental Impact Center at the New York University School of Law who focused on renewable energy and climate change issues. The Biden administration pulled her nomination after hearing of opposition coming from Murkowski, a moderate Republican whose vote is crucial to Biden’s legislative agenda and who has sought to expand the oil and gas industry in her state, one of the sources familiar with the matter said. The White House and a spokesperson for the Department of Interior did not immediately respond to questions. A spokesperson for Murkowski did not reply to a request for comment. A spokesperson for Sen. Joe Manchin, the West Virginia Democrat who chairs the Senate Energy and Natural Resources Committee that would have considered Klein’s nomination, did not immediately answer questions. Tommy Beaudreau, a former Interior official under the Obama administration and Alaskan native, is being vetted for a possible nomination as deputy secretary, said two people familiar with the matter. Murkowski floated Beaudreau’s name as a possible replacement for Klein, the people said. Beaudreau is currently a lawyer at law firm Latham & Watkins’ environment, land & resources department, and global co-chair of the firm’s project siting & approvals practice.
Canadian oil producers see new route to Gulf Coast refineries coming from CP Rail deal | Financial Post – Canadian Pacific Railway Ltd.’s blockbuster US$25-billion deal for Kansas City Southern offers new hope for expanded access to the Gulf Coast for Canadian oil producers that have struggled to reach heavy oil markets in Texas and Louisiana. Canadian oil and gas companies have for years tried to expand their options to ship heavy oil from Alberta to the southern coast of the United States, but their efforts to reach the world’s largest concentration of heavy oil refineries have been challenged time and time again. Most recently, U.S. President Joe Biden cancelled permits for the Keystone XL pipeline. Currently, only Canadian National Railway Co. offers a direct route for oil producers to ship crude from Alberta to the U.S. Gulf Coast, but the combined CP/KCS railway network could introduce some competition among the railways to move those barrels.The CP and KCS rail networks currently connect in Kansas City, from which point the KCS rail line offers direct connection to heavy oil markets in Louisiana (Shreveport, Baton Rouge and New Orleans) and Texas (Beaumont, Port Arthur, Houston and Corpus Christi).”In combination, the combined railroad can offer one-railroad connectivity between Alberta and U.S. Gulf Coast markets via these existing KCS connections,” The deal could also reduce overall shipping costs by boosting competition between CP and CN, Currently, crude by rail accounts for about five per cent of revenue at CP and about two per cent at KCS. The two companies believe the deal will boost these revenues. CP spokesperson Jeremy Berry in an emailed statement said the company plans to use a crude-by-rail facility in Alberta that pulls the blending agents out of heavy crude oil to create a “pipeline-competitive way of delivering Alberta energy products to market by rail.”He added: “We can do this as the combination will provide for a more direct and efficient route to refineries on the Gulf Coast.”A combination of energy products, including crude oil and fracking sand, chemicals and plastics, make up roughly 20 per cent of CP Rail’s total freight revenue,
Donald Trump’s Parting Gift to the People of St. Croix: The Reopening of One of America’s Largest Oil Refineries – For years, Sonia Rivera and her husband have lived off the land, growing tomatoes, cucumbers, kale and other vegetables at their idyllic home in St. Croix, part of the U.S. Virgin Islands located just east of Puerto Rico and roughly a thousand miles from the shores of Florida. In early February, their paradise became a nightmare. A flaring incident at the massive Limetree Bay oil refinery sent a plume of steam into the air and covered more than 130 houses in the Clifton Hill neighborhood, including the Rivera’s home and garden, with specks of oil. Rivera said she had to dig up and throw out her whole plot, including more than 50 pounds of food. “Literally black spots were all over everybody’s roofs,” Rivera said. “We’ve already spent over $600 trying to replace the dirt that was contaminated.” It’s certainly not the first accident to occur at the 56-year-old facility, once one of the largest oil refineries in the world. The refinery site is home to one of the biggest, and least known, oil spills in U.S. history. Its previous owners faced a multi-million dollar settlement for violating the Clean Air Act. And over the past year, as new ownership rushed to reopen the plant after nearly a decade, Limetree Bay has experienced a series of mishaps and delays, including multiple fires, foul odors strong enough to close schools and several unscheduled flares like the one that doused Rivera’s home and garden. Now the plant stands as a prime example of what environmentalists see as the Trump administration’s unfettered and irresponsible deregulatory agenda and a penchant, late in President Trump’s term, for granting sweetheart deals to well-connected corporate interests. In Limetree’s case, the administration ignored decades of precedent in issuing new permits and expressed a willingness in emails to the refinery’s new owners to do almost anything they needed to restart it. Virgin Islands government officials touted the plant’s restart in February as a lifeline for the territory, still recovering from two Category 5 hurricanes in 2017 – Irma and Maria – and crippled by a pandemic that devastated global tourism. Locals, like Rivera, worry what it will mean for them, and their tropical island, to once again live in the shadow of an oil refinery that has fouled St. Croix’s ecosystem throughout its existence.
The Biden EPA Withdraws a Key Permit for an Oil Refinery on St. Croix, Citing ‘Environmental Justice’ Concerns – The Biden administration handed environmental justice advocates a major victory on Thursday when it announced it was withdrawing a key pollution permit for an oil refinery in the U.S. Virgin Islands that locals say has long fouled their air and water and endangered their health. Citing “environmental justice concerns” and the new administration’s priority to consider “the needs of overburdened communities,” the Environmental Protection Agency announced in a press release that it was withdrawing the federal air pollution permit for the Limetree Bay oil refinery, located on the territory’s southern island of St. Croix. The move, however, won’t require Limetree to cease refining operations. The company had operated the refinery as an oil storage facility for years, but last month reopened the refining portion utilizing that permit, which was issued by the Trump EPA in December 2020. “Withdrawing this permit will allow EPA to reassess what measures are required at the Limetree facility to safeguard the health of local communities in the Virgin Islands, while providing regulatory certainty to the company,” Walter Mugdan, EPA’s acting regional administrator, said in the release. The decision could lead to stricter pollution controls at the facility and marks the Biden administration’s most significant step so far to follow through on its pledges to elevate environmental justice to the top of its regulatory agenda. Nearly 75 percent of the people living in the communities just north of the refinery are Black, about a third identify as Hispanic or Latino and over a quarter fall below the national poverty line, according to a recent EPA analysis. “We are grateful to the Biden/Harris administration and the EPA for this significant first step in commitments to environmental justice and meaningful action on climate change,” Jennifer Valiulis, executive director of the St. Croix Environmental Association, said in a statement Thursday afternoon. “Our island community and environment have suffered for decades due to lax monitoring of emissions, poor enforcement, and inadequate protections.” The permit withdrawal comes just days after Inside Climate News reported that the St. Croix refinery had been the site of one of the largest oil spills in American history and that its previous owners had dodged a multi-million dollar settlement for violating the Clean Air Act.
Facing COVID-19 outbreaks and privatization, oil workers shut down refineries in Brazil – The deadly combination of worsening working conditions and the uncontrolled acceleration of the COVID-19 pandemic in Brazil is provoking strikes and work stoppages at Petrobras refineries since the beginning of March. On Monday, the strike by nearly 900 oil workers at the Landulpho Alves Refinery (RLAM), in Bahia, entered its 18th day. It has been strengthened by the walkout of fellow Petrobras workers at the Gabriel Passos Refinery (Regap), in Minas Gerais. Both refineries have suffered severe COVID-19 outbreaks. At RLAM, two oil workers died this month after being infected with the coronavirus: operations technician Carlos Alberto, 55, and shift coordinator Wagner Plech, 52. In addition to these fatalities, more than 80 other workers have tested positive for COVID-19 at the facility, with eight of them being hospitalized and three admitted to an Intensive Care Unit. Striking workers at the Landulpho Alves refinery (RLAM) in Bahia, Brazil (Twitter) The coronavirus outbreak at RLAM began after management took action to prevent a strike in February, when workers were protesting against the sale of the refinery. “Workers report that cases of contamination by the virus began to multiply about six days after the eve of their [scheduled] strike [on February 17], when RLAM’s General Manager authorized the entry into the facility, without any kind of safety controls, of contract and outsourced workers, placing up to three teams of operators in CCLs [Local Control Houses], who slept on mattresses on the floor and in a closed environment,” the union reported. At Regap, the decision to stop the work was taken after more than 200 workers, including contract and outsourced employees, tested positive for COVID-19 in March alone. Eleven of them had to be hospitalized due to severe cases of COVID-19. The cases at Regap skyrocketed during a “maintenance stop,” a periodic procedure for check-up and renovation of the structure that requires the presence of up to 2,000 extra workers. The procedure was started on February 28 and was supposed to last about 30 days. The coronavirus is also spreading uncontrollably through Petrobras’ terminals and offshore platforms. According to a Reuters report, oil workers at the Campos Basin in Rio de Janeiro have pressed charges at the Labor Prosecutor’s Office demanding that Petrobras provides clarification on the spread of the coronavirus on oil and gas platforms, following a spike in cases in March. Considered by the government as “essential,” oil workers are being pushed into highly infected workplaces to ensure a high production of fuels and oil derivatives and meet Petrobras’ demand for profits. While subjecting its employees to deadly conditions, the company has closed 2020 with a net profit of 7 billion reais (US$ 1.27 billion).
Cheniere and Shell oil tankers change course to avoid Suez Canal as ships divert routes -Companies are scrambling to reroute shipping vessels to avoid the logjam at the Suez Canal, including at least two U.S. ships carrying natural gas for Cheniere and Shell/BG Group, according to data provided by MarineTraffic and ClipperData. At least ten tankers and containerships are changing course as the Ever Given, one of the world’s largest containerships, remains stranded across the canal along Egypt, MarineTraffic spokesman Georgios Hatzimanolis told CNBC in an interview. “We expect that number to go up as this closure progresses,” Hatzimanolis said. The1,300-foot ship ran aground Tuesday enroute from Malaysia to the Port of Rotterdam in the Netherlands. The stranded ship has caused other vessels to back up in the canal, holding up roughly $400 million an hour in goods, according to Lloyd’s List shipping journal. That’s slowly increased over the last several days after repeated efforts by Egypt to refloat the 247,000-ton containership have failed. Officials there are using eight large tugboats and excavation equipment on the banks of the canal to dig out sand around the grounded vessel. According to MarineTraffic, there are 97 vessels stuck in the upper portion of the canal, 23 vessels waiting in the middle and 108 vessels in the lower portion. The logjam stretches through the Red Sea, past the Gulf of Aden, all the way to the Border of Yemen and Oman. “From Asia to Europe we are seeing ships divert in the Indian Ocean, just below the southern tip of Sri Lanka,” added Hatzimanolis. For Europe-bound ships coming from Asia, going around Africa instead of through the canal can add up to seven days to a ship’s journey, he said. The Maran Gas Andros LNG tanker departed from Ingleside, Texas on March 19 loaded with Cheniere fuel and a carrying capacity of 170,000 cubic meters of liquified natural gas. The Pan Americas LNG tanker, which is carrying Shell/BG fuel, left Sabine Pass on March 17 and can carry up to 174,000 cubic meters of liquefied natural gas. Matt Smith, director of commodity research for ClipperData, confirmed which companies were using the ships. Both tankers changed course in the middle of the North Atlantic Ocean before diverting to go around the Cape. ClipperData also shows the Suezmax Marlin Santorini loaded with 700,000 barrels of Midland West Texas Intermediate crude oil diverting away from the canal. Smith said the original route to the Suez was an “unusual diversion.” “The vast majority of U.S. crude exports avoid the Suez Canal, heading either to Europe or around the Cape of Good Hope to Asia instead,” Smith explained. The Suezmax Marlin was at Magellan’s Seabrook terminal in Houston, Texas, on March 10, where it was topped off with 330,000 barrels of West Texas light crude oil before heading to Galveston lightering zone a day later. The vessel then left the U.S. declaring for Port Said in Northeast Egypt but took a turn south Thursday after passing the Azores Islands near Portugal. “The vessel is yet to update its declared destination,” said Smith. ClipperData shows the number of fully loaded fuel tankers waiting off Port Said as well as the US Gulf Coast. As of Friday afternoon, another two tankers and a Suezmax, the largest tanker that can navigate the Suez Canal, carrying vacuum gasoil from the U.S. were passing Crete and set to anchor offshore Egypt.
About 4,000 liters of diesel oil pumped out of sunken ship in Mui Ne – A representative of Truong Tam Maritime Company today said that the company and related competent agencies made concerted efforts to pump nearly 4,000 liters of diesel oil mixed with water out of the wrecked ship safely. The operation was a race against time in 15 minutes. As media released, the Bach Dang ship, with a capacity of 2,500 metric tons, with seven sailors aboard capsized and sank on its way to carry the fly ash from Vinh Tan 2 thermal power plant in the province to the Southern Province of Dong Nai. Luckily, all of the sailors were rescued and 4,000 liters of diesel oil remained in the ship’s fuel tank when it capsized. The ship has since been lying upside down on the sea, with neither oil spill nor fly ash spreading. After all 4,000 liters of diesel oil was pumped out of the ship’s fuel tank, the salvage and treatment of fly ash will continue.
PTTEP loses high profile Montara oil spill lawsuit – On August 21, 2009, the Montara-H1 well blew out on the wellhead platform. An explosion and uncontrollable oil spill continued spewing between 400-2,000 barrels of oil per day into the Timor Sea until November 3, 2009 after a relief well was drilled and the leak stopped. It was the biggest oil spill in Australian history. A class action of 15,000 seaweed farmers took PTTEP to court several years ago, seeking roughly $200 million in damages to their seaweed crops, with the case taking more than five years to conclude. On Friday afternoon, the Federal Court of Australia in New South Wales ruled that oil from the Montara H1 production well had reached seaweed crops of Indonesia. PTTEP has officially lost the case a decade after the oil spill. PTTEP had argued that oil from the spill did not reach Indonesian waters. Federal Court justice Yates, however, ruled otherwise. “I am satisfied that oil spilled from the H1 Well blowout reached certain areas of Indonesia,” justice Yates said when handing down his verdict this afternoon. PTTEP then argued that even if oil had travelled from the Montara oil spill to Indonesia, that by the time the crude floated there, it would have disintegrated and not caused damage. “I am satisfied that this oil caused or materially contributed to the death and loss of [the plaintiff’s] crop,” justice Yates ruled. This claim too, was dismissed by the Court. Justice Yates also found that PTTEP had been negligent in its operations of the Montara oil field, a fact PTTEP did not dispute, and awarded damages of about Rp252 million (A$22,500) to the lead plaintiff of the class action. Given there are 15,000 class action members, the cost of damages could reach well over $300 million. A spokesperson for Maurice Blackburn told Energy News they were “happy with the result.” Justice Yates said he calculated the damaged as “the difference between the net income earned and the net income but for the respondents negligence.” It has been a long wait for both the class action plaintiffs, represented by Maurice Blackburn, and the defendant PTTEP, represented by Allens. The Federal Court sat on the ruling for more than 12 months since the trial ended to reach its determination. PTTEP does have the right to appeal the judgment.
Grounding of cargo ship in Suez Canal could hurt the LNG market if prolonged, analyst says -The disruption caused by the grounding of a large container ship in Egypt’s Suez Canal – halting marine traffic through one of the busiest and most important waterways in the world – could have a major impact on the liquefied natural gas (LNG) market if prolonged, according to an analyst at Wood Mackenzie. The ship, called Ever Given, ran aground on Tuesday morning after losing the ability to steer amid high winds and a dust storm, the Suez Canal Authority (SCA) said in a statement. Rescue efforts are currently underway with multiple tugboats sent to the scene to assist in the re-float operation, which can take days. “The impact of this disruption on the LNG market will be limited if the disruption is solved within a day or two. Only a handful of LNG cargoes were in the close vicinity of the Suez Canal when the incident started. At this stage, we don’t expect major bottlenecks, unless the situation drags on,” said Lucas Schmitt, principal analyst at Wood Mackenzie. The Suez Canal is a key channel for LNG ships – with around 8% of global LNG trade passing through. “So far in March 2021 a handful of cargoes have been transiting each day in both directions (until the disruption),” added Schmitt. The 120-mile long man-made waterway is a key point of global trade, connecting a steady flow of goods from East to West. Everything from consumer products to machinery parts to oil flows through its waters. Nearly 19,000 ships passed through the canal during 2020, for an average of 51.5 per day, according to the Suez Canal Authority. The Ever Given ship, was sailing from China to Rotterdam when it ran aground. The impact on the LNG market would be greater if the disruption is prolonged as the recent delays at the Panama Canal illustrated, according to Schmitt. Those delays lead to a spike in LNG prices and shipping rates, according to Reuters. “However, the timing of this incident means it will have less impact on prices than that of the Panama since we’re entering the shoulder season for the LNG market,” he noted. “Charter rates are currently low – around 30 k$/d – but could tighten up (reflecting the additional tonne-mile needed to bypass the canal) if the disruption lasts.” Schmitt added further delays could “impact both loading and discharge schedules and disrupt some flows, mostly to the European market.”
Australia Dangerously Dependent On China’s Fuel Exports As 2 Of Its Last 4 Refineries Close –There’s growing alarm in Canberra over what’s expected to be Australia’s inevitable increased dependence on foreign petroleum amid a major influx of cheaper refined oil products from China. It comes as China’s crude oil refinery capacity is rapidly expanding and simultaneously Australia is about to see its last four refineries cut down by two, given the recent announced closures of an Exxon Mobil and separately a BP refinery. It’s yet another way that Beijing has the upper hand and leverage amid the ongoing trade war which has seen the two sides slap tariffs and even a few import bans on each other. A recent report out this week in the South China Morning Post runs through the numbers which suggests China is poised to dominate crude exports in the Asia-Pacific region, particularly to “vulnerable” Australia – leaving Aussie government leaders concerned over self-sufficiency and if the country can weather the storm of Beijing’s “coercive trade warfare”. “Chinese exports of refined oil products to Australia rose from a few thousand tonnes before 2011 to nearly 300,000 tonnes at the end of last year, according to figures from China customs,” the report begins by noting. Following the announced impending closures of BP’s Kwinana and ExxonMobil’s Altona plants, a third – Ampol’s Lytton plant – is now also said to be mulling a shutdown given its inability to compete with Asian refineries. And the fourth, Viva Energy’s Geelong refinery, has since last year been kept afloat by a federal government rescue package amid spiraling lossesestimated at over $100 million.
Oil rises slightly despite demand fears amid European lockdowns – Oil steadied on Monday as hopes for a pick-up in demand later this year helped arrest last week’s broad sell-off, but prices stayed under pressure as new European coronavirus lockdowns made a quick recovery look less likely. Brent crude was up 6 cents or 0.1% to $64.59 a barrel, while U.S. oil for delivery in April gained 13 cents to settle at $61.55 per barrel. The more active U.S. crude futures for delivery in May rose 14 cents or 0.2% to $61.58 a barrel. Both contracts fell more than 6% last week after making steady gains for months on the back of output cuts and an expected demand recovery. “Oil (had) its worst week this year as concerns grow over a flaring up in COVID-19 cases across Europe,” “This comes at a time when there are clear signs of weakness in the physical oil market.” Physical markets have come under pressure as refiners around the world, including China and the United States, begin maintenance activities. Chinese refinery maintenance season is due to peak in May and begin tapering in June, traders have said, depriving some crude grades such as those in West Africa of their main outlet. Nearly a third of French people entered a month-long lockdown on Saturday, while Germany plans to extend its lockdown into a fifth month, according to a draft proposal. “Vaccination campaigns haven’t been as fast as the market had hoped for and consequently this will have an effect on the oil demand recovery, which in turn hurts prices,” While a broad economic recovery remains elusive, Saudi Aramco Chief Executive Amin Nasser was optimistic on longer-term prospects for the world’s top oil exporter. On Sunday Nasser said global oil demand was on track to reach 99 million barrels per day (bpd) by the end of 2021. “While I think demand is going to improve further as more economies ease travel restrictions in the coming months, the impact of this will be offset to some degree by rising oil supply,” “OPEC+ will be easing supply restrictions slowly, while U.S. shale production is likely to ramp up due to the attractive oil prices again. All told, I can’t see oil prices rising significantly further.” The Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, have put in place unprecedented production cuts to balance global markets after demand plunged during the COVID-19 pandemic. U.S. drillers meanwhile are starting to take advantage of the recent spike in prices, adding the most rigs since January in the week ending last Friday.
Oil falls as European coronavirus curbs point to demand hit – Oil tumbles 4% on concerns over Europe curbs, rollouts il prices fell more than 4% on Tuesday, hit by concerns over new pandemic curbs and slow vaccine rollouts in Europe as well as a stronger dollar. Brent crude futures were down by $2.69, or 4.2%, to $61.93 a barrel, having hit a low of $61.41. West Texas Intermediate (WTI) U.S. crude futures fell by $2.46, or 4%, to $59.10, after falling to as low as $58.47. Both contracts traded near lows not seen since February 12. The front-month Brent spread flipped into a small contango for the first time since January. Contango is where the front-month contracts are cheaper than future months, and could encourage traders to put oil into storage. “Continental Europe is tightening the coronavirus measures and thereby further restricting mobility,” Commerzbank analysts said. “This is likely to have a correspondingly negative impact on oil demand.” Extended lockdowns are being driven by the threat of a third wave of infections, with a new variant of the coronavirus on the continent. Germany, Europe’s biggest oil consumer, is extending its lockdown until April 18 and asked citizens to stay home to try to stop a third wave of the COVID-19 pandemic. Nearly a third of France entered a month-long lockdown on Saturday following a jump in COVID-19 cases in Paris and parts of northern France. A stronger U.S. dollar also weighed on prices. As oil in priced in U.S. dollars, a stronger greenback makes oil more expensive for holders of other currencies. Physical crude markets are indicating that demand is lower, much more so than the futures market. “Physical prices have been weaker than futures have been suggesting for several weeks now,” said Lachlan Shaw, head of commodity research and National Australia Bank.
Oil prices drop 6% to enter correction territory – U.S. and global oil prices fell by roughly 6% on Tuesday to enter correction territory, as renewed lockdowns in Europe to combat the coronavirus pandemic looked likely to crimp energy demand. “Optimism around a swift global economic recovery has recently been dampened by setbacks in vaccine rollouts in parts of Europe and Southern Asia,” said Christin Redmond, commodity analyst at Schneider Electric, in a market update. Meanwhile, “U.S. refineries continue to struggle to come back online following the mid-February winter storm, which has resulted in several consecutive weeks of crude inventory builds.” West Texas Intermediate crude for May delivery lost $3.80, or 6.2%, to settle at $57.76 a barrel on the New York Mercantile Exchange. Front-month prices have fallen 12.6% from the recent high of $66.09 on March 5 to enter correction territory, according to Dow Jones Market Data. May Brent crude dropped $3.83, or 5.9%, to $60.79 a barrel on ICE Futures Europe. The global benchmark also marked a correction, down 12.7% from the recent high of $69.63 from March 11. Both WTI and Brent crude logged their lowest front-month contract settlements since February. Germany, Europe’s largest economy, extended its lockdown measures by another month to April 18 (link), and imposed several new restrictions in an effort to drive down the rate of coronavirus infections. “A surge in virus cases in mainland Europe, where the rollout of vaccines has been painfully slow, has cast doubt on resumption of travel in the region…Among other things, this is hurting demand projections for crude oil and holidays,” While Europe is struggling with extended shutdowns, the opposite is happening in the U.S., where a continued easing of social distancing restrictions, vaccine rollouts, and the release of government financial aid checks are expected to boost demand for crude in the world’s largest oil-consuming country. The divergent trends were evident in the crack spreads — the differential between products produced from a barrel of crude and the crude itself — on either side of the Atlantic. He noted that the gas oil/Brent crack spread in Europe remains very low, below $5 a barrel. By comparison, the comparable U.S. spread is seen around $15 a barrel. Among other factors influencing trading, tensions between Saudi Arabia and Yemen rebels have provided some support for oil prices this month.
WTI Holds Big Losses After Surprise Crude Build –Crude prices crashed today, extending recent losses with WTI back below $58 at six-week lows amid dimming prospects of a steady recovery in demand from Europe to India. “The weakness in crude prices isn’t likely to go away in the coming weeks, even as U.S. refinery utilization recovers to pre-storm levels,” “There is still the resurgence of Covid-19 in Europe and Asia, and refinery maintenance in China and these are likely to keep international demand weak for U.S. crude.” Tonight’s API-reported inventory data will give us the next trend direction API:
- Crude +2.927mm (-900k exp)
- Cushing -2.282mm
- Gasoline -3.728mm
- Distillates +246k
After four straight weeks of builds, analysts expected crude stocks to draw this week, but once again (if API is right) we saw a crude build. Gasoline stocks drew down once again. WTI broke below a key technical level today and was hovering around $57.50 ahead of the API print and was unexcited by the data. “The swing lower was triggered by the deteriorating near-term demand outlook in the face of still hampered refineries, surging interest and renewed European lockdowns,” “With prices breaking below the 50-day moving average during the session, technical traders may well take WTI lower still.”Finally, we note that overseas buying isn’t expected to recover any time soon. China, the largest customer for U.S. oil, slowed its intake after purchasing heavily in recent months. Local producers are also competing with traders that have amassed large quantities in storage across the world and are looking to offload their supplies since it doesn’t pay now to store oil and sell in the future.
Oil rises on bargain-hunting but oversupply fears cap gains – Oil prices edged higher on Wednesday as investors looked for bargains following the previous day’s plunge, but gains were capped as pandemic lockdowns in Europe and a build in U.S. crude stocks curbed risk appetite and raised oversupply fears. Brent crude futures rose 27 cents, or 0.4%, to $61.06 a barrel by 0108 GMT, after tumbling 5.9% and hitting a low of $60.50 the previous day. West Texas Intermediate (WTI) crude futures climbed 19 cents, or 0.3%, to $57.95 a barrel, having lost 6.2% and touched a low of $57.32 on Tuesday. Both benchmarks touched their lowest levels since early February on Tuesday and have now fallen more than 14% from their recent highs earlier this month. The front-month spread for both Brent and WTI slipped into contango, where front-month contracts are lower than the later months, a sign that demand for prompt crude is declining. “Investors adjusted positions from Tuesday’s sharp selloff,” “But the market sentiment remained bearish due to growing concerns about demand recovery in the wake of new pandemic curbs in Europe,” he said. Germany, Europe’s biggest oil consumer, extended its lockdown to April 18, and Chancellor Angela Merkel urged citizens to stay at home for five days over the Easter holiday. Worries over the pace of the recovery from the pandemic were also heightened after a U.S. health agency said the AstraZeneca Plc vaccine developed with Oxford University may have included outdated information in its data. Adding to pressure, U.S. crude oil stocks jumped by 2.9 million barrels in the week to March 19, against analysts’ expectations in a Reuters’ poll for a decline of about 300,000 barrels, according to trading sources citing data from industry group the American Petroleum Institute. But gasoline stocks fell by 3.7 million barrels, compared with expectations for a build of 1.2 million barrels. Human rights sanctions on China imposed by the United States, Europe and Britain, which prompted retaliatory sanctions from Beijing, also added to market concerns.
WTI Dips After Surprise Crude, Product Inventory Builds – After a brief dip, extending yesterday’s losses, on the surprise crude build reported by API overnight, but anxiety over the Suez canal blockage potentially taking days to fix sent prices notably higher overnightTen tankers carrying 13 million barrels of crude could be affected after a container ship that ran aground in the Suez Canal blocked vessels passing through the waterway, oil analytics firm Vortexa said on Wednesday.The approximate rate of backlog is about 50 vessels a day and any delays leading to re-routings will add 15 days to a Middle East to Europe voyage, Vortexa added. DOE
- Crude +1.912mm (-900k exp)
- Cushing -1.935mm
- Gasoline +204k
- Distillates +3.806mm
Official data confirmed API’s crude build surprise but it is the build in products that is most notable.
Oil gains more than $3/bbl after Suez Canal ship grounding (Reuters) – Oil prices jumped about 6% on Wednesday after a ship ran aground in the Suez Canal, and worries that the incident could tie up crude shipments gave prices a boost after a slide over the last week. The crude benchmarks, U.S. crude and London-based Brent, added to gains after U.S. inventory figures showed a further rebound in refining activity, suggesting U.S. refiners are mostly recovered from the cold snap that slammed Texas in February. Brent crude settled at $64.41 a barrel, gaining $3.62, or 6%, after tumbling 5.9% the previous day. West Texas Intermediate (WTI) settled at $61.18 a barrel, rising $3.42, or 5.9%, having lost 6.2% on Tuesday. The gains appeared to stabilize the market that had slumped from early this month, when prices hit their highest levels this year on expectations for demand recovery. Those hopes have since been dashed as European nations re-entered lockdowns to halt another wave of the pandemic. Oil has recovered from historic lows reached last year as OPEC and its allies made record output cuts. On Tuesday, both benchmarks touched their lowest since February. Ten tug boats struggled on Wednesday afternoon to free one of the world’s largest container ships after it ran aground and blocked the Suez Canal for more than a day, port agent GAC said. The GAC said the information it had received earlier claiming the vessel was partially refloated, allowing traffic to resume along the fastest shipping route from Europe to Asia, was inaccurate. “It’s one of those wild cards that is unique to the crude oil industry,” said Bob Yawger of Mizuho in New York. “Once you think you have everything nailed down, I can guarantee one thing: You don’t.” Oil prices were also supported by U.S. Energy Information Administration data that showed refinery runs recovering after a winter storm shut Texas refineries last month.
Oil Prices Fail to Get Boost from Blocked Suez — Oil dropped as a strengthening dollar and mounting lockdowns in Europe blunted the potential impact of crude cargoes backing up outside the blocked Suez Canal. Futures fell 4.3% in New York on Thursday in the wake of a stronger U.S. dollar, which reduces the appeal of commodities priced in the currency. Work to re-float the massive ship that’s stuck in the canal continued without success. While the Suez blockage is complicating trade, a long-term realignment of global crude flows has seen westbound shipments from Persian Gulf producers fall, limiting the impact on oil prices. The Suez Canal has “diluted importance as a transit hub for energy,” said Bob Yawger, head of the futures division at Mizuho Securities. Prices are facing pressure from the rising dollar, “the incredible inability of the euro zone in particular to take care of the Covid situation” and case numbers in the U.S. “going in the wrong direction.” At the same time, the U.S. reported the most new cases on Wednesday since Feb. 12 and European countries have tightened restrictions recently. Volatility has risen to the highest since November, and traders see the market shedding length with little to stoke immediate optimism ahead of a full-fledged economic reopening from the pandemic. Despite the recent sell-off, oil is still up around 20% this year and there is confidence in the longer-term outlook for demand as coronavirus vaccinations accelerate worldwide and OPEC+ continues to hold back supply. The alliance is scheduled to meet next week to decide production policy for May. “It all got a bit too excited earlier with talk about supercycles and massive stock draws in the first quarter,” said Paul Horsnell, head of commodities research at Standard Chartered. That was “never on the cards, the big stock draws come later.” Still, the prompt timespread for Brent has resumed trading in a bullish backwardation after briefly flipping to a bearish contango on Tuesday for the first time since January. The spread was 14 cents in backwardation on Thursday, compared with 67 cents at the start of the month. West Texas Intermediate for May delivery fell $2.62 to settle at $58.56 a barrel in New York. Brent for May settlement slipped $2.46 to end the session at $61.95 a barrel. Hedge funds had built up net long positions in WTI and Brent last month to the highest in over a year, according to a Bloomberg analysis of Commodities Futures Trade Commission and ICE data for four contracts. Since then, prices jumped to multi-year highs and above technical gauges indicating a correction was due, before last week’s price plunge sent futures in New York back near $60 a barrel.
Oil drops more than 4%, on pace for third straight week of losses – Oil prices fell on Thursday as a new round of coronavirus restrictions in Europe revived worries about demand, even as tug boats struggled to move a stranded container ship blocking crude oil carriers in the Suez Canal. Brent crude slid 3.8% to $61.95 per barrel. U.S. West Texas Intermediate (WTI) crude dropped 4.28% to settle at $58.26 per barrel. Both contracts jumped about 6% on Wednesday after a ship ran aground in the Suez Canal, one of the world’s most important oil shipping routes. The Suez Canal Authority said on Thursday it had suspended traffic temporarily while eight tugs work to free the vessel. “We believe that the incident mostly creates noise in the market and should remain without any lasting fundamental impact,” said Norbert Rucker, analyst at Julius Baer bank. Wood Mackenzie’s vice president, Ann-Louise Hittle, said a few days of delays in crude or product travelling through the Suez Canal to Europe and the United States should not have a prolonged impact on prices in those markets. The impact of the Suez Canal blockade on oil prices is also limited as the destination of most oil tankers is Europe, but European demand is currently weak due to a new round of lockdowns. “If Europe was in a better state in its COVID-19 battle, then the disruption would possibly create a more prolonged issue but this is not the case. That is why traders today quickly corrected some of the previous day’s gains,” said Rystad Energy’s analyst Bjornar Tonhaugen. The technical manager of the ship said another effort to re-float the vessel will be undertaken later in the day after an earlier attempt failed. The salvage company said it might take weeks. Given the persistent demand worries and falling prices, expectations are growing that the Organization of Petroleum Exporting Countries and allies, together called OPEC+, will roll over their current supply curbs into May at a meeting scheduled for April 1, four OPEC+ sources told Reuters. “Oil markets are unlikely to renew their upward momentum aggressively until OPEC+’s next meeting in early April, which should leave production cuts unchanged,” said Jeffrey Halley, senior market analyst at OANDA. The global oil market was also under pressure as producers faced difficulties selling to Asia, especially China. Asian buyers instead took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said. A strong dollar also weighed on oil prices. The dollar hit a new four-month high against the euro as the U.S. pandemic response continued to outpace Europe’s.
Oil prices rebound on fears Suez Canal blockage may last weeks – Oil prices bounced back on Friday from a plunge a day earlier on concerns that a large container ship that ran aground in the Suez Canal may block the vital shipping lane for weeks, squeezing supply. Prices, however, were still headed for a third consecutive weekly loss. Brent crude advanced $1.16, or 1.9%, to trade at $63.12 per barrel, after dropping 3.8% on Thursday. U.S. West Texas Intermediate (WTI) crude advanced $1.25, or 2.1%, to trade at $59.81 per barrel, having tumbled 4.3% a day earlier. Both benchmarks were on track for a weekly loss of more than 3%, following a more than 6% decline last week. The trapped container ship is blocking traffic in the Suez Canal, one of the world’s busiest shipping channels for oil and refined fuels, grain and other trade between Asia and Europe. Officials stopped all ships entering the canal on Thursday, and a salvage company said the vessel may take weeks to free. “Expectations that the blockage of the Suez Canal may last for weeks raised fears of supply tightness in oil markets,” said Nissan Securities researcher Yasushi Osada. “But lingering worries that a fresh wave of lockdowns in Europe and elsewhere may slow a recovery of global fuel demand are expected to limit price gains,” he said. Countries in Europe are renewing restrictions to curb the spread of COVID-19, which will likely reduce fuel demand from the region. Germany, Europe’s largest economy, has seen its biggest increase in coronavirus cases since January. In parts of western India, authorities ordered people indoors as new infections hit the highest level in five months. The oil market was also under pressure as producers had difficulty selling to Asia, especially China. Asian buyers instead took cheaper oil from storage while refinery maintenance has reduced demand, industry sources said.
Oil jumps 4% on fears Suez Canal blockage may last weeks (Reuters) – Oil prices rose more than 4% on Friday on worries global supplies of crude and refined products could be disrupted for weeks as workers try to dislodge a giant container ship blocking the Suez Canal. Slideshow ( 2 images ) It was a rebound from a sharp decline the previous session on concerns that fresh coronavirus lockdowns in Europe would hurt demand. Brent crude rose $2.62, or 4.2%, to settle at $64.57 a barrel, after dropping 3.8% on Thursday. U.S. West Texas Intermediate (WTI) crude gained $2.41, or 4.1%, to settle at $60.97 a barrel, having tumbled 4.3% a day earlier. Brent rose 0.1% over the last week, while WTI dropped 0.7%, its third weekly loss. Oil trade was volatile this week, as traders weighed the potential impact of the Suez Canal blockage which happened on Tuesday against the effect of new coronavirus lockdowns. “Today the market is up again as traders in a change of heart decided that the Suez Canal blockade is actually becoming more significant for oil flows and supply deliveries than they previously concluded,” said Paola Rodriguez Masiu, Rystad Energy’s vice president of oil markets. The Suez Canal stepped up efforts on Friday to free the stuck mega vessel, after an earlier attempt failed. Efforts to free it may take weeks, with possible complications from unstable weather. Of the 39.2 million barrels per day (bpd) of total seaborne crude in 2020, 1.74 million bpd went through the Suez Canal, according to data intelligence firm Kpler. Additionally, 1.54 million bpd of refined oil products flow through the canal, about 9% of global seaborne oil product trade, Kpler said. On Friday, there were 10 vessels waiting at the entry points of the Canal carrying around 10 million barrels of oil, Kpler said. Reeling from the blockage in the Suez Canal, shipping rates for oil product tankers have nearly doubled this week, and several vessels were diverted. The oil markets were also lifted by worries over escalating geopolitical risk in the Middle East. Yemen’s Houthi forces on Friday said they launched attacks on facilities owned by Saudi Aramco. Prices also drew support from expectations that the Organization of the Petroleum Exporting Countries and its allies will maintain lower production. Goldman Sachs said it expects OPEC+ to keep production unchanged for May when the group meets next week, “with a still large ramp-up of 3.4 million barrels per day expected by September.” Acting a week ahead of the OPEC+ meeting, Abu Dhabi National Oil Company (ADNOC) has deepened crude oil supply cuts to Asian customers in June to 10%-15% from 5%-15% in May, several sources said. In the United States, the number of rigs drilling for oil rose by six this week to 324, data from oil services firm Baker Hughes showed. Still, the potential negative effect on demand from the coronavirus pandemic loomed. Germany’s third wave of the coronavirus could turn into the worst one so far and 100,000 new daily infections is not out of the question, the head of the German Robert Koch Institute (RKI) said.
Oil’s Most Volatile Week In Months Closes With a Whimper – — Oil in New York barely nudged this week despite whipsawing over several days, as renewed lockdowns in some regions blunted near-term demand outlooks and muted the impact of a standstill at the Suez. West Texas Intermediate futures fell less than 1% to close the week at $60.97, while Brent crude just barely eked out a gain, snapping a streak of back-to-back weekly declines. Futures rose almost 6% and fell nearly 5% in sessions this week as traders recalibrated their positions from day-to-day. Market volatility reached the highest since November. While optimism remains over the long-term outlook for a global demand rebound, the downbeat developments surrounding European lockdowns and rising case counts exacerbated an abrupt unwinding of long positions in a market that was signaling it may have rallied too far, too fast. Still, Goldman Sachs Group Inc. said crude’s decline in recent weeks had overshot market fundamentals, and demand should still increase sharply through the northern hemisphere’s summer season. The stage is set for crude’s rally “but the whole recovery trade got a little bit ahead of itself and oil got a little bit ahead of itself,” said Jay Hatfield, CEO at InfraCap in New York. “Once we get the real demand coming back, we can start to see prices heading to $70, $80 or even a superspike.” Meanwhile, the Suez Canal remained blocked, with efforts to dislodge a massive container vessel expected to take until at least Wednesday. The impact on headline prices was muted. The grounding of the Ever Given ship on Tuesday set off a chain of events that’s wreaking havoc on global seaborne trade — shipping rates have increased, hundreds of vessels remain backed up in the channel and ships are rerouting to avoid the logjam. Yet the impact on the oil market is likely smaller than it would have been in the past, with flows from the Middle East to Europe declining due to a long-term realignment of trade. And while plenty of oil is shipped from the North Sea to Asia, it’s usually carried on tankers that are too large to pass through the canal. Nevertheless, “the last days feel like oil investors are on a rollercoaster,” said Giovanni Staunovo, a commodity analyst at UBS Group AG. “Drops are followed by a rise the day after, with fundamental news not being able to explain those shifts.” Prices WTI for May rose $2.41 to settle at $60.97 a barrel. Brent for the same month gained $2.62 to end the session at $64.57 a barrel. Oil prices have come under renewed pressure recently amid softening physical demand, a strengthening dollar and the unwinding of long positions. The increased volatility over the past two weeks has been felt across oil markets. Combined open interest in WTI and Brent has fallen nearly 7% to the lowest since January, refined product prices have slipped from the highs they hit after last month’s deep freeze and crude’s underlying market structure weakened. Still, prices are up roughly 25% this year and there’s confidence in the longer-term outlook as vaccination rates climb and OPEC+ keeps supply in check. The group meets next week to decide on its production policy for May.
Saudi Aramco profit slumps 44% after Covid-battered year, but maintains dividend – – Oil giant Saudi Aramco reported a 44% slump in full-year 2020 results, but maintained its $75 billion dollar dividend payout, with CEO Amin Nasser describing the last twelve months as one of the most “challenging years” in recent history. Saudi Aramco, Saudi Arabia’s behemoth state oil firm, reported net income of $49 billion in 2020, down from $88.19 billion in 2019. The result was slightly below analysts expectations of $48.1 billion but still represents one of the highest of any public company globally. “In one of the most challenging years in recent history, Aramco demonstrated its unique value proposition through its considerable financial and operational agility,” Saudi Aramco Chief Executive Amin Nasser said in company statement Sunday. Aramco said revenues were impacted by lower crude oil prices and volumes sold, and weakened refining and chemicals margins. The firm also said it expects to cut capital expenditure in the year ahead, and lowered its guidance for spending to around $35 billion from a range of $40 billion to $45 billion previously. Free cash flow slumped almost 40% to $49 billion, well below the level of its hotly anticipated dividend. Aramco also declared a payout of $75 billion for 2020, despite concern that it would take on additional debt to maintain it. “Looking ahead, our long-term strategy to optimize our oil and gas portfolio is on track and, as the macro environment improves, we are seeing a pick-up in demand in Asia and also positive signs elsewhere,” he added. Shares in the top western oil and gas companies including Royal Dutch Shell and BP dropped to multi-year lows in 2020, as the coronavirus pandemic wrecked havoc across the global economy and sparked a historic collapse in the price of oil. Exxon Mobil, the largest U.S. energy company, posted its first annual loss. Escalating attacks on oil facilities Aramco’s facilities have been the target of several attacks by Yemen’s Houthi rebels – attacks that have escalated this year, with Saudi Arabia and Iran, the latter of whom backs the rebels, on opposing sides of Yemen’s bloody civil war. Houthi missile volleys in parts of Saudi Arabia that struck Aramco facilities earlier in March briefly sent the price of oil above $70 a barrel to its highest level in more than a year. Most recently, the rebels claimed responsibility for drone strikes on an Aramco facility in the capital Riyadh on Friday, causing a fire that the Saudi energy ministry said was quickly brought under control with no casualties. Asked how the company aimed to reassure investors and the global community that its infrastructure was well-protected and prepared to prevent serious disruption to its operations, CEO Amin Nasser stressed that there was “no impact on business” from the attacks. “I think the most important thing is the readiness of our people,” Nasser told CNBC during a press conference following the earnings release. “There is always something you learn with each attack, and you go and you enhance your emergency response … and you make sure you have all what is needed to restore these facilities if they are attacked.”
Saudi Forces Strike Yemen In Response To Attack On Aramco – Saudi-led coalition forces conducted airstrikes against Houthi military bases in Yemen’s capital Sanaa, Bloomberg reported, citing local residents and a Houthi-controlled TV channel. The attacks, according to the report, targeted military camps and Houthi facilities near the Sanaa airport and the suburbs of the city. They came in response to a Houthi drone attack on Saudi oil facilities that took place on Friday. According to Saudi media, the attack did not cause any damage.This is just the latest in a series of airstrikes by the Saudi-led coalition against the Houthis, after the Yemeni rebel group, which is affiliated with Iran, struck a Saudi oil target earlier this month. “The missile forces managed today to strike [a facility] of the Saudi Aramco company in Jeddah with a Quds 2 cruise missile. The strike was precise,” a spokesman for the Houthis said in early March. The Saudi side later confirmed the attack but said it had inflicted no significant damage.At the time, the Houthis warned there will be more attacks against Saudi targets and advised foreign companies and Saudi Arabia residents to be cautious.The Saudi response came soon enough in a series of airstrikes, with 32 carried out on March 9 alone, Zerohedge reported at the time.Saudi Arabia and the Houthis have been locked in a conflict since 2015. Many see it as a proxy war between the Saudis and the Iranian backers of the Yemeni rebel group, which overthrew the Saudi-affiliated Yemeni government and tried to assume power over the country.Oil facilities in Saudi Arabia are a favorite target for the Houthis because of the Kingdom’s reliance on oil revenues. The most notable attack that the Yemeni rebel group claimed responsibility for was the September 2019 attacks on Saudi Aramco’s oil facilities that cut off 5 percent of daily global supply for weeks, sending oil prices soaring. Saudi Arabia and the United States have said that it was Iran – and not the Houthis – who was responsible for the attack.
Saudi official made death threat against UN’s Khashoggi investigator: report – A Saudi official reportedly issued what was perceived as a death threat against a United Nations investigator following her investigation into the murder of journalist Jamal Khashoggi. Speaking to The Guardian, Agnes Callamard, the organization’s special rapporteur for extrajudicial killings, said she was alerted to the threat by a UN colleague in January 2020. Two threats were allegedly made toward Callamard by a Saudi official during a meeting of senior UN officials in Geneva, in which the official reportedly threatened to have her “taken care of” if she was not reined in by the UN. “A death threat. That was how it was understood,” Callamard said when asked how her colleagues saw the statement. After UN officials voiced alarm at the threat, other Saudi officials tried to reassure them that the threat should not be taken seriously, the Guardian reports. But after the officials left, the Saudi official remained and repeated their alleged threat to the UN officials. “It was reported to me at the time and it was one occasion where the United Nations was actually very strong on that issue. People that were present, and also subsequently, made it clear to the Saudi delegation that this was absolutely inappropriate and that there was an expectation that this should not go further,” Callamard told the Guardian. During the “high-level” meeting between Saudi diplomats in Geneva, visiting Saudi officials and senior UN officials, Callamard’s investigation into the Khashoggi killing was angrily criticized by the Saudis, Callamard said. The Saudi officials also reportedly baselessly claimed that Callamard had been paid by the Qatari government. As the Guardian reports, Callamard’s 100-page report published in 2019 concluded there was “credible evidence” that Saudi crown prince Mohammed bin Salman was behind Khashoggi’s death, along with other Saudi officials. The Saudi government has repeatedly denied that the crown prince ordered Khashoggi’s death.
Oil nations tipped for political instability if the world moves away from fossil fuels – Algeria, Chad, Iraq and Nigeria will be among the first countries to experience political instability as oil producers feel the effects of a transition to low carbon energy production, according to a new report from risk consultancy Verisk Maplecroft. In its 2021 Political Risk Outlook, published Thursday, the firm cautioned that countries that had failed to diversify their economies away from fossil fuel exports faced a “slow-motion wave of political instability.” With the move away from fossil fuels set to accelerate over the next three to 20 years, and the Covid-19 pandemic eating into short-term gains gains in oil export revenues made in recent years, Maplecroft warned that oil-dependent countries failing to adapt risk sharp changes in credit risk, policy and regulation. Though some countries are increasing fossil fuel investment in the short term, consensus estimates indicate that “peak oil” will be reached in 2030, after which the transition toward a low carbon economy will gather steam and force oil-producing countries to adapt their revenue streams. Analysts suggested the worst-hit countries could enter “doom loops of shrinking hydrocarbon revenues, political turmoil, and failed attempts to revive flatlining non-oil sectors.” Since the oil price crash of 2014, most exporters have either stagnated or reversed efforts to diversify their economies, Maplecroft data highlighted, with many doubling down on production in the ensuing years in a bid to plug revenue holes. “Despite this, the majority took a hit on their foreign exchange reserves anyway, including Saudi Arabia, which has burnt through almost half of its 2014 dollar stockpile,” the report added. Break-even costs, the capacity to diversify and political resilience were identified as the three key factors determining the severity of the impact on stability when the expected energy transition begins to bite. “Currently, if countries’ external break-evens – the oil prices they need to pay for their imports – remain above what markets can offer, they have limited choices: draw down foreign exchange reserves like Saudi Arabia since 2014, or devalue their currency like Nigeria or Iraq in 2020, effectively rebalancing their imports and exports at the expense of living standards,” the report explained. Nigeria, Africa’s largest economy, relies on crude sales for around 90% of its foreign exchange earnings and has devalued its naira currency twice since March last year. The IMF last month urged the country’s central bank to devalue once again, but met with resistance. “Many, if not a majority, of net oil producers are going to struggle with diversification largely because they lack the economic and legal institutions, infrastructure and human capital needed,” The most vulnerable countries are higher-cost producers that are heavily dependent on oil for revenues, have lower capacity to diversify and are less politically stable, the report said, identifying Nigeria, Algeria, Chad and Iraq as the first to be hit “if the storm breaks” due to their fixed or crawling exchange rates.
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