News

China coronavirus roils oil markets, but China may ultimately rescue crude

2020-02-28

The spread across the world of the Chinese coronavirus has probably wiped out global crude oil demand growth for 2020, but in something of an irony it’s likely to be China that will be responsible if any increase is eked out.

There is little doubt that the coronavirus, which started in the city of Wuhan and has killed more than 2,700 people so far, will hit Chinese crude consumption this month, and likely into March and April.

But it also seems to be the case that Beijing may finally be getting a handle on containing the virus, just as it ramps up in other countries, most notably South Korea, Japan, Iran and Italy.

This makes it likely that Chinese refiners will be keen to resume operations that have been curtailed because of the virus, but this could be delayed until April.

There are two reasons for the delay in resuming full crude processing in China. Firstly, fuel inventories have to be drawn down and secondly March is traditionally a month when several refiners undertake scheduled maintenance, as it falls in the shoulder season between peak winter and summer demand.

There is also a difference between Chinese domestic fuel consumption, and the country’s overall crude demand, given Beijing is still filling its strategic petroleum reserve, and refiners are also boosting exports of refined products.

This means that while some estimates suggested Chinese fuel demand fell by up to 4 million barrels per day (bpd) this month as the coronavirus led to the quarantining of entire cities, the hit to crude imports may not be so dramatic.

China’s crude imports are expected at 10.53 million bpd for February, down from 10.69 million bpd in January, according to a report on Wednesday by Refinitiv Oil Research.

A mere drop of 160,000 bpd isn’t much of a dent to demand, and if the final tally is in line with the Refinitiv forecast, it will put some of the more doom-laden predictions about China’s crude demand into perspective.

MARCH, APRIL WEAKNESS?
However, it’s likely that the bigger hit to China’s oil imports will come in March, and possibly extend into April.

Refinitiv vessel-tracking data is showing 136 vessels carrying 177.6 million barrels are already heading to China and expect to unload in March, already over half the expected deliveries in an average recent month.

This will also be far from the final total, given that more cargoes are likely to leave Middle Eastern and Russian ports in the next two weeks and still have time to reach China before the end of March.

What the vessel-tracking and port data is suggesting is that while China’s imports of crude may be softer than they would have been in the absence of the coronavirus, they are still holding up pretty well and the drop is nowhere near as severe as the hit to domestic fuel consumption.

If Chinese crude imports do start to recover from April onwards, it means the market focus is likely shift to how big the impact of the coronavirus will be on the rest of the world.

With more new cases being reported outside of China for the first time on Wednesday, the risks are rising that the coronavirus may reach vulnerable countries in Africa and the Middle East, and could strain health systems even in developed countries.

It’s still a wait-and-see approach, but if travel bans and quarantine measures become commonplace across Europe, even forecasts for zero global oil demand this year may prove optimistic.

However, the epidemic, along with fears that it may become a pandemic, is driving a slump in crude prices, with Brent futures dropping as low as $52.57 a barrel in early Asian trade on Thursday, the weakest intraday price in a year, and putting the decline since the peak this year on Jan. 8 to nearly 27%.

Assuming China does contain the virus and its economy starts to recover as stimulus hopes are delivered, the current weak crude price may also drive increased buying for its strategic stockpiles.

NEWS COURTSEY: HELLENIC SHIPPING NEWS

Oil Price Forecasts Take A Turn For The Worst

2020-02-28

As China’s coronavirus epidemic continues to expand and more countries are affected, the slowdown in global oil and gas consumption this year will hit suppliers who will see average prices fall below previous expectations, according to Rystad Energy’s revised forecasts.

de oil prices, which Rystad Energy earlier expected to average nearly $60 per barrel in 2020, are now forecast to slump to about $56 per barrel for the year following revisions to our January forecasts. Another negative revision might be around the corner due to the increasing downside risk.

Brent has come under renewed downwards pressure this week, trading below $55 per barrel as news of rising numbers of coronavirus cases across the world have spooked market participants. Rystad Energy’s latest crude oil market balances suggest that the epidemic’s net impact on oil demand could create almost the same amount of surplus crude barrels during the second quarter of 2020 as it will in first quarter of the year.

The surplus may amount to nearly 1.8 million barrels per day without any additional production cuts in the market, assuming Libya’s production returns to normal during the second quarter. Rystad Energy therefore sees additional downside risk to crude prices from today’s $55 levels during the second quarter, unless at least 1 million barrels per day are removed from the quarter’s market balances.

Gas prices in Europe for 2020 are now forecast to fall more than previously expected, to below $4 per million British thermal units (MMBtu) on average, according to revisions to our January forecasts. Forecasts for TTF prices in particular are cut to $3.95 per MMBtu, a drop of $1.61 or 29% from our January forecast.

Similarly, our price forecast for Asian Spot prices has been revised down to $4.63 per MMBtu for 2020, which represents a drop of $1.69 per MMBtu from our previous forecast.

NEWS COURTSEY: OIL PRICE.COM

Germany remains world’s fifth largest shipping nation

2020-02-28

Germany remained the world’s fifth largest shipping nation with a 4.9 percent share of the global maritime shipping fleet at the end of 2019, a decrease of 0.6 percentage point year-on-year, the German Shipowners’ Association (VDR) said.

At the end of last year, a total of 2,140 ships were registered in Germany with a gross tonnage of 52.8 billion, 184 fewer ships and 4.7 million less in gross tonnage than the year before, according to the VDR.

In terms of total 20-foot equivalent units (TEU), Germany was “no longer the biggest nation in the container shipping sector,” the VDR noted.

China has taken over Germany’s position and now has the largest fleet of container ships. This development was “quite foreseeable,” said VDR President Alfred Hartmann.

“Many of the Chinese ships have been built in the last ten years and are much bigger, so that more containers can be transported,” a VDR spokesperson told Xinhua on Wednesday.

According to the VDR, the German shipping companies are facing the “immense challenge” of offering their services today although revenues have remained roughly at the same level as over 20 years ago.

“To be able to survive in the prevailing intense global competition, the shipping industry must be able to operate competitively from the location of Germany on an international scale,” said VDR Chief Executive Officer (CEO) Ralf Nagel.

The VDR noted that besides competitiveness, climate protection was the “biggest” challenge for the German shipping sector.

To achieve the climate targets laid down by the International Maritime Organization (IMO), the German shipping sector would “need a technological revolution,” Hartmann said. “The point is that all efficiency measures implemented in ship construction alone will not be sufficient. We will need other fuels.”

Since the beginning of the year, stricter environmental regulations by the IMO only allow fuels with a maximum sulfur content of 0.5 percent instead of 3.5 percent.

NEWS COURTSEY: HELLENIC SHIPPING NEWS

SEA7 MARKET RUN DOWN

2019-11-21

      INDICATIVE RATES ARE FOR NATURAL DATES AND NOT FOR PROMPT LOADING  
FUEL PRICE INDICATION   SEA7 SPOT RATE INDICATION VLCC/SUEZMAX/AFRAMAX / MR              -           21 NOVEMBER 2019
BASIS FUJAIRAH   QUANTITY (MT) GRADE BITR ROUTE TREND   INDICATION
IFO 380 3.5% Sul $ 250.50   MR FUEL   CROSS AG FIRM USD 550K
VLSFO 0.5% Sul $ 574.50   MR FUEL   FUJ-MOMBASA FIRM USD 850K
IFO 180 3.5% Sul $ 294   MR FUEL   MUMBAI-SPORE FIRM USD 800K
LSMGO 0.1% Sul $ 682   40,000 FUEL   AG-SINGAPORE FIRM USD 950K
      80,000 CRUDE TD8 AG-SINGAPORE FIRM WS 180
CRUDE OIL PRICE (USD/BBL)   80,000 FUEL   AG - REDSEA FIRM USD 950K
WTI 57.11   80,000 HEAT   YANBU - EAST   WS  
BRENT 62.18   80,000 CRUDE   RAS GHARIB - WCI   WS  
DUBAI     80,000 CRUDE   RAS TAN - WCI   WS  
      80,000 HCRUDE   INDO-FAR EAST FIRM WS 150
      79,000 CRUDE   LABUAN - PARADIP   WS  
      79,000 CRUDE   SERIA - MUMBAI   WS  
      1,00,000 NH   KOZMINO-QINGDAO FIRM USD 850k
      80,000 NH  TD14 INDO-OZ FIRM WS 145
      80,000 NH   OZ-EAST FIRM WS 135
      SUEZMAX NHFO   MED-SINGAPORE FIRM USD 4.00 M
      SUEZMAX NHFO   ROTTERDAM-SINGAPORE TO TEST USD 4.40 M
      SUEZMAX NHFO   USG-SINGAPORE FIRM USD 5.50 M
      SUEZMAX NHFO   BALTIC-SINGAPORE TO TEST USD 4.50 M
      1,30,000 CRUDE   WAFR-SINGAPORE FIRM WS 125
      1,40,000 CRUDE   AG-UKCM STEADY WS 65
      SUEZMAX CRUDE   CPC-S.KOREA STEADY USD 5.50 M
      SUEZMAX CRUDE   AG-EAST FIRM WS 127.5
      SUEZMAX CRUDE   AG-WCI FIRM WS 130
      SUEZMAX CRUDE   AG-ECI FIRM WS 140
      SUEZMAX CRUDE   WAF-WCI FIRM USD 3.90 M
      VLCC CRUDE   STS USG/NINGBO FIRM USD 10.50 M
      2,70,000 CRUDE TD3C AG-CHINA FIRM WS 85
      2,80,000 CRUDE TD1 AG-USG FIRM WS 50
      2,60,000 CRUDE TD15 WAFR-CHINA FIRM WS 87
      VLCC NHFO   ROTTERDAM-SINGAPORE FIRM USD 8.75 M
      VLCC CRUDE   H.POINT-S.KOREA FIRM USD 9.75 M
      2,60,000 CRUDE   USG-WCI   USD  
      2,60,000 CRUDE   WAFR-WCI    USD  
      2,60,000 CRUDE   WAFR-ECI(2:1)   USD  
      2,65,000 CRUDE   AG (NO BASRAH) -WCI   WS 105
      2,65,000 CRUDE   AG (NO BASRAH) -ECI   WS 90