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International News

LNG producers get glimmer of hope amid wreckage of oversupply, coronavirus

There are some tentative signs that demand and spot prices for liquefied natural gas (LNG) are starting to recover in the top-consuming Asian region, but the vagaries of the way the market for the super-chilled fuel works means producers may not see much immediate benefit.

The spot price for cargoes for delivery to northeast Asia LNG-AS climbed to $2.40 per million British thermal units (mmBtu) in the week to July 17, putting it 30% above the record low of $1.85 in the week to May 29.
While that percentage rise may seem impressive, it’s worth noting that the spot price remains at historically depressed levels, and is about half the price that prevailed at this time last year.
While traders report plentiful cargoes are available, it appears that July may see an uptick in imports in the northeast Asian region, which includes the world’s three biggest LNG buyers, Japan, China and South Korea.
The region is on track to import 15.25 million tonnes of the super-chilled fuel in July, according to Refinitiv vessel-tracking and port data, which was filtered to include only ships that have already discharged, are discharging or awaiting discharge, or expected to arrive and unload their cargoes before the end of the month.
This would be up from 14.43 million tonnes in June and would be the strongest month since March.
Source: Hellenic Shipping
NOVATEK Shipped First LNG Cargo to Japan via Northern Sea Route

PAO NOVATEK announced yesterday that NOVATEK Gas & Power Asia Pte. Ltd., a wholly owned subsidiary, shipped the first cargo of liquefied natural gas (“LNG”) from the Yamal LNG project to Japan transported eastbound via the Northern Sea Route.

The LNG cargo was delivered by the LNG tanker “Vladimir Rusanov” under a spot contract and unloaded at the Ohgishima LNG Terminal in Japan in accordance with the contract’s delivery schedule. This LNG cargo is the Company’s first successful experience of entering and unloading an Arc 7 ice-class LNG tanker in a Japanese port, which allows the Company to increase the volume of LNG supplies to this country.
“We focus a significant amount of attention to develop and enhance the logistical scheme for our LNG projects,” noted Lev Feodosyev, NOVATEK’s First Deputy Chairman of the Management Board. “The future launch of a transshipment terminal in Kamchatka will significantly expand our opportunities to cost competitively deliver and supply LNG to the entire Asia-Pacific region.”
Source: Hellenic Shipping
China Sinopec seeks long-term LNG as prices remain low

China's Sinopec is seeking liquefied natural gas (LNG) for delivery over a 10-year period to take advantage of the current low prices as gas demand has fallen because of the coronavirus pandemic.

Sinopec, officially named China Petroleum & Chemical Corp, is seeking 1 million tonnes of LNG a year for delivery over 10 years starting from 2023, said six industry sources.
Offers are due by Friday and will remain valid until mid-August, one of the sources said.
The firm is likely seeking long-term LNG at a time when prices for both long-term contracts and spot cargoes are low, a second source said.
Asian spot LNG prices LNG-AS , which buyers are increasingly using as a gauge to negotiate their long-term contracts, are hovering near record lows.
Prices of long-term contracts that are typically priced on Brent oil are also being negotiated at lower levels.
Source: Zawya
Oil demand may climb new peaks in post-coronavirus world

While the coronavirus pandemic may have done permanent damage to oil consumption in the transport sector, strong growth in petrochemicals suggests peak oil demand could still be a couple of decades away.

Changing demand patterns also raise big questions as to how refineries and producers adapt in the post-pandemic world before demand falls from its eventual summit.
An accelerated shift to cleaner energy and electric vehicles, along with vehicle efficiency improvements, had already started to gnaw away at oil demand well before the coronavirus hit.
But what is striking is that those transportation sectors seen as more resistant to energy transition due to the challenges of them running on alternative fuels – airlines and shipping – have been hardest hit and will be the slowest to recover.
Some analysts see global oil demand now peaking later this decade, while others believe it may never return to the giddy heights of 100 million b/d.
Further out, the most likely case according to S&P Global Platts Analytics’ Scenario Planning Service is 3 million b/d removed from oil demand to 2040, with aviation the most impacted sector. But that also needs to be put into context.
Jet and marine fuels make up a relatively small piece of the crude cake, at about 8% and 6%, respectively. The petrochemicals sector, which includes materials used more regularly in a coronavirus world, from mobile phones to packaging and hand sanitizers, has been quietly carving out a bigger share at around 19% of overall oil demand.
Source: Hellenic Shipping
Chinese independent refiners shy away from crude purchases amid rising stockpiles, low margins

Plagued by high crude stockpiles and weak margins, Chinese independent refiners have curtailed buying cargoes in the September-loading cycle, impacting differentials for several China-focused grades in the region.

Chinese refiners' top crude picks, including Oman and Russia's ESPO Blend grades, have taken a hit in recent days amid tepid buying appetite from teapots, another name for China's independent refineries.
"The Chinese market is still flooded with supply, inventories are still high and refining margins are still weak," a source from a Chinese trading house said.
China's crude oil imports soared 34.4% year on year to an all-time high of 12.99 million b/d, or 53.18 million mt, in June as Chinese buyers who had rushed to secure cheap crudes in late March received their deliveries in the month, preliminary General Administration of Customs data showed July 14.
The record-high inflow was within expectations, but has caused serious congestion in China waters, Platts previously reported.
"There are a lot of stocks around right now ... either in floating storage units or in tanks ... teapots are not keen to buy," said the China based crude trader.
"Unsold cargoes from the July/August loading program of ESPO are still floating because of congestion," the source added.
In the week beginning July 20, the volume of crude on tankers idled in Chinese waters for seven or more days were at 80.27 million barrels, a third all-time high, according to data intelligence firm Kpler.
Poor margins
Weakening refining margins in China have also been a contributing factor to limited purchases of crude by Chinese independent refiners, trade sources said.
China's domestic refining sector involves regulated refinery gate product prices, calculated as a formula based on an input crude price with a floor at around $40/b.
"Independent refineries which are cracking crudes that bought at over $40/b will even make a slight refining loss," a Singapore-based trader said.
Front-month ICE Brent futures prices, which averaged $26.63/b in April and $32.41/b in May, have averaged above $40/b since then at $40.77/b in June and $43.10/b so far in July, Platts data showed.
"Domestic margins are also not great so teapots not keen on buying," said another crude trading source.
The domestic refining margin in June for Shandong independent refiners slid Yuan 169/mt ($24/mt) to around Yuan 285/mt, theoretically, for cracking imported crudes, according to Platts calculations in July based on raw data from JLC.
Source: SP Global
China record crude oil storage flies under the radar

Australia- China's refineries imported and processed record amounts of crude oil in June, and while these are undoubtedly bullish economic signals, it's worth noting that flows into storage tanks were also likely at an all-time high.

The massive amount of crude being stored in China may end up weighing on oil imports from August onwards, even with the nation's recovery in domestic consumption.
China's refinery throughput was 57.87 million tonnes in June, equivalent to 14.08 million barrels per day (bpd), which eclipsed the previous record from December 2019 and was up 9% from June of last year.
While China doesn't provide data on flows into both commercial and strategic storages, an estimation can be made by deducting the amount of crude processed from the amount available from both imports and domestic output.
Imports in June were 53.18 million tonnes, or about 12.9 million bpd, a second consecutive monthly record. Domestic production was 16.24 million tonnes, or about 3.95 million bpd.
Put the two together and the total crude supply available in June was about 16.85 million bpd, or 2.77 million bpd more than what was processed by refineries.
Given the absence of official data on storage flows, it cannot be confirmed that this is a record, but based on calculations it's likely that more crude oil went into storage in June than in any other month.
June's storage flows were outsized in comparison to the already significant volumes going into inventories in the first five months of the year, with calculations showing 1.88 million bpd being stored over January to May.
What China has been doing is taking advantage of low crude prices that prevailed earlier this year amid the global economic slowdown caused by the coronavirus pandemic and a price war between the two leading exporters, Saudi Arabia and Russia.
When coronavirus lockdowns began across China, there were fears that crude imports would slump as consumption dropped.
This didn't happen, however, as Chinese refiners simply diverted crude they had ordered into storage.
When the brief price war broke out between the Organization of the Petroleum Countries and its allies in the group known as OPEC+, China decided to buy large volumes of crude at prices that were close to the lowest in two decades.
The surge of imports in May and June, and that is likely to extend into July, is the result of this buying splurge.
IMPORTS TO MODERATE
So, what happens next
It's clear that even with record refinery processing, China has been storing large volumes of crude oil.
It's possible the bulk of this went into strategic storage, but some may be in commercial tanks to be used instead of fresh imports in coming months.
It's also possible China's Strategic Petroleum Reserve (SPR) is close to maximum capacity and that purchases for storage will slow over the rest of 2020.
With crude prices having staged a recovery from their April lows, China may also judge crude to no longer be the bargain it was, especially given the uncertainty over global demand amid the ongoing pandemic.
Brent crude was trading around $42.91 a barrel in early Asian trade on Monday, up some 168% from the intraday low of $15.98 on April 22, but still some 40% below the intraday peak this year of $71.75 on Jan. 8.
While crude is still cheap compared to prices that prevailed for much of 2019, the risk is that Chinese imports pull back somewhat from August onwards.
Even though domestic consumption appears to have bounced back to pre-coronavirus levels, Chinese refiners may have stored enough crude, and furthermore may struggle to sell excess refined fuels to regional markets.
Despite the record processing in June, exports of refined products were stagnant at 3.88 million tonnes, a tiny drop from May's 3.89 million but down 28.6% from 5.43 million tonnes in June last year.
It's not certain that strong domestic fuel consumption will be enough to keep China's appetite for crude imports as strong as it has been.
Source: Zawya
Oil falls as worsening pandemic threatens recovery

Oil prices dipped on Monday, weighed down by the prospect that a rise in the pace of coronavirus infections could derail a recovery in fuel demand.

Brent crude was down 10 cents, or 0.2%, at $43.04 a barrel by 0047 GMT, after dropping slightly last week. U.S. oil was off by 6 cents, or 0.2%, at $40.53 a barrel, after gaining 4 cents last week.
"With global daily COVID-19 case counts still rising and the U.S. Sunbelt most populous states showing little success in bending and containing the (epidemic's) curve, concerns about the post-COVID recovery pace are limiting the upside for oil," said Stephen Innes, chief global markets strategist at Axicorp.
More than 14 million people have been infected by the novel coronavirus globally and nearly 602,000 have died, according to a Reuters tally.
While fuel demand has recovered from a 30% drop in April after countries around the world imposed strict lockdowns, usage is still below pre-pandemic levels. U.S. retail gasoline demand is falling again as infections rise.
Japan's oil imports fell 14.7 percent in June from the same month a year earlier, official figures showed on Monday. The drop was not as pronounced as in May when they fell 25%, year on year.
Still, exports from the world's third-largest economy slumped by a double-digit decline for the fourth month in a row as the coronavirus pandemic took a heavy toll on global demand.
In the U.S., energy drillers cut the number of oil and natural gas rigs operating to a record for an 11th week in a row, data showed on Friday.
Source: Zawya
Expanding capacity at Antwerp chemical storage terminal

With seven new tanks of a total 12.700 cbm capacity, Noord Natie Odfjell Antwerp Terminal (NNOAT) significantly increases storage volume for the European chemical market. In a time of increased demand, customers now get a welcomed addition of quality accommodation for a wide range of chemical and base oil products.

The new tankpit is part of NNOAT’s ambitious expansion program at the fourth harbor dock in the Antwerp port. This is the third fully automated tankpit at the terminal, setting the standard in terms of operational safety and efficiency. Comprising seven stainless-steel tanks that are tailored to specialty chemicals, the tankpit further increases the terminal’s unique capacity for storage and related services.

“Noord Natie Odfjell Antwerp Terminal is a strategic component to our terminal platform and the expansion of the tankpit marks another step in realizing the inherent potential of our Antwerp terminal. The terminal team and contractors have done a fantastic job in safely and successfully bringing the new capacity onstream during these unprecedented times.” Adrian Lenning, Global Head of Odfjell Terminals

The port of Antwerp is the most important port for chemicals in the EU. With more than 80 calls a year, the port is on the top ten list of Odfjell ships’ most visited. The combination of chemical transportation at sea and flexible storage ashore offers effective and flexible synergies for Odfjell’s customers.

NNOAT is a leader in the European chemical storage market with its capacity of 390,000 cbm and 236 tanks divided over 16 interconnected tank pits. The extensive mooring capacity of 2,500 meters at the terminal allows for simultaneous handling of several vessels and barges.

The terminal’s ongoing expansion program will increase current capacity by 130.000 cbm. The new pit includes stainless steel tanks of 3 x 2.500 cbm and 4 x 1.300 cbm. Next step is another 45.000 cbm tank pit planned for mid-2022. With more than 45.000 m2 of land available, the terminal has available capacity to excel services and meet increased demand in coming years.

Source: Hellenic Shipping

China Is About to Run Out of Places to Store Crude Oil

China is almost out of space to hold the oil that domestic traders bought at bargain-basement prices earlier this year when the Covid-19 pandemic crushed global crude demand.

As of Wednesday, China had used up 69% of its crude oil storage capacity with the 33.4 million tons it had stockpiled, up by 24% from the previous year, according to data from energy information provider Oilchem China. That’s only 1 percentage point away from the 70% threshold that experts view as the country’s capacity limit.

The dwindling storage space is a result of the enormous amount of oil purchased by bargain-loving domestic buyers in March and April, said an oil analyst. The shipments, most of which arrived at Chinese ports over the past two months, has gradually topped up storage tanks.

The situation, which has also been exacerbated by low turnover, is most prominent in East China’s Shandong province, one of the country’s oil refining hubs. Oil tankers have to wait 15 to 20 days there before they are able to offload their cargos, the analyst added.

In May, China’s oil imports jumped 19.5% to 47.97 million tons, bringing the country’s cumulative imports for the year to 216 million tons, according to China’s customs agency.

Authorities have moved to deal with the issue by allowing some storage sites to expand their capacity and by granting some companies the rights to sell petroleum products abroad.

Industry analysts have forecast that China’s crude oil imports will continue to grow, perhaps even surpassing May’s levels. Given the gradual recovery of domestic demand for fuel and other petroleum products, the amount of oil held in storage may peak this month.

Source: Hellenic Shipping

China grants extra oil import quotas for private refiners

China has issued more non-state crude oil import quotas to refiners, for a total of 26.84 million tonnes (195.93 million barrels) in its third batch for 2020, three sources familiar with the matter told Reuters on Thursday.

A total of 17 companies are receiving the quotas, they said.

These include China National Chemical Corporation, with a quota of 8.6 million tonnes; Zhejiang Petroleum & Chemical Co, allotted 2.4 million tonnes; Shandong Tianhong Chemical Co, which received a quota of 2.2 million tonnes, while Hengli Petrochemical (Dalian) Refinery Co got 2 million tonnes.

That takes China's total released quota of non-state crude imports to 184.55 million tonnes this year, a Reuters calculation showed.

The entire year's quotas were set at 202 million tonnes, the Ministry of Commerce said last November.

The ministry did not immediately respond to a faxed request for comment. (1 tonne=7.3 barrels for crude oil)

Source: Zawya

China gives private refiner Zhejiang Petroleum first-ever fuel export licence

China has granted Zhejiang Petroleum & Chemical Co (ZPC) a licence to export refined oil products, making it the first private oil refiner to win such permission, two sources with knowledge of the matter said on Thursday.

The license would allow ZPC to directly sell oil products to the international market, competing against state-owned refiners and helping to ease oversupply pressure in China's domestic market.

The refiner, however, will still need to be granted a government quota that will determine the size of its exports before it can begin shipments, said one of the sources.

Presently, only a handful of large state-owned Chinese refiners, including Sinopec, CNPC, CNOOC, Sinochem Group and China National Aviation Fuel Company, are allowed to export refined products.

Independent refiners have long lobbied the government to allow them to directly export refined fuel to the international market.

Earlier this year, ZPC, whose 400,000-bpd refinery is located in China's top bunker port Zhoushan, was allotted a quota of one million tonnes to export very low sulphur fuel oil (VLSFO) via state-run companies as proxies.

In 2016, the government temporarily gave oil product export quotas of 1.675 million tonnes to 12 Shandong-based private refineries.

Reuters could not immediately reach ZPC for comment.

Source: Zawya

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