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Vaccines to boost 2021 oil demand and prices: Trafigura

  • Market: Crude oil, Oil products
  • 17/12/20

Trading firm Trafigura expects "very strong" oil demand growth will help push crude prices up to $55-60/bl by the end of 2021, assuming "the proper rollout" of Covid-19 vaccines happens by the middle of the summer, the company's chief economist Saad Rahim told Argus.

"You have already seen a strong recovery in many places — certainly in China, but also in Europe and Japan, for example. The US is lagging in some parts, but I think we can see some stronger momentum. India had taken a major hit, but the momentum there is also looking strong," Rahim said. "This is before you really have the effect of another round of stimulus policies out of Europe and potentially the US. And this is before you have the proper rollout of the Covid-19 vaccines."

On the supply side, Rahim said he thinks the US is "some way away" from rigs being deployed at levels that will allow production "to really grow ... rather than just slow the decline". And at the same time, while Opec+ countries are bringing some crude supply back in January, they are not flooding the market, he said.

Libya, which is exempt from Opec+ quotas and whose output has recovered rapidly since the end of port and field blockades a few months ago, is unlikely to have a significant impact on market rebalancing, according to Rahim.

"The Libyan volumes have come on very quickly, so they are not really going to add many more barrels there. And the market has absorbed those volumes, meaning that demand is already looking much healthier," he said.

A third way

Trafigura traded 5.6mn b/d of crude and oil products in its financial year to 30 September, the strongest in its 27-year history thanks to increased volatility caused by the Covid-19 pandemic. The firm does not set targets for oil volumes and does not want to "ever chase empty barrels", instead focusing on "the most profitable barrels that are there and make sure we hit the margin", Rahim said.

While oil and metals remain the firm's key revenue generators, Trafigura has launched "a third pillar of our business, around renewables and power, recognising the shift that is taking place", Rahim said.

A world in which Trafigura's power and renewables business becomes its key revenue generator would be "a very interesting development, because it does mean that our metals business is also probably growing very rapidly" thanks to high demand for metals in the energy transition, he said. "For us as a diversified and integrated company, it would be a very interesting development. But we still expect oil to remain the key revenue generator in the next 4-5 years."

A transcript of our interview with Saad Rahim will be published in this week's issues of Petroleum Argusand Argus Global Markets. He will also be one of the speakers at the Argus Crude Live virtual conference taking place on 26-28 January, 2021. For full details of the conference programme and how to register to attend, please visit https://www.argusmedia.com/en/conferences-events-listing/crude-live


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06/11/24

US elections undecided as some polls close: Update

US elections undecided as some polls close: Update

Updates with changes throughout Washington, 5 November (Argus) — Early voting results from key US swing states point to a tight race between former president Donald Trump and vice president Kamala Harris, with the outcome carrying high stakes for energy policy, trade and climate change. Pennsylvania, Michigan, Wisconsin, North Carolina, Georgia, Arizona and Nevada are the swing states that will decide which candidate reaches the threshold of 270 electoral votes needed to win the election. Early results from Georgia point to a slight advantage for Trump relative to his 2020 results in that state, which President Joe Biden then carried by nearly 12,000 votes. But early voting results also point to slight gains for Harris in some demographic segments relative to Biden's 2020 performance. That would make election results in Wisconsin, Michigan and Pennsylvania — which typically take days to complete the count — crucial for determining the outcome. Winning all three states would secure a victory for either candidate. In the US Senate, Republicans have a pathway to win control with a 51-49 majority by flipping one more seat, after West Virginia governor Jim Justice (R) was declared the winner in that state's Senate race by the Associated Press. Democrats are defending seats in close races in Montana, Ohio, Michigan, Pennsylvania and Wisconsin. If the Senate is tied, control will go to the party that wins the presidential election. Even before polls closed today, Trump said there was a "lot of talk about massive CHEATING in Philadelphia" in a post on his social media site, in a rerun of his strategy in the 2020 election of making unsubstantiated claims about voting. Harris, in a campaign speech on Monday in Pennsylvania, said the election offered a chance to "turn the page on a decade of politics that have been driven by fear and division". Trump has focused heavily on energy policy and voter frustration about inflation in his bid for a second term. US motorists were paying an average of $3.07/USG for regular grade gasoline in the week ended on 4 November, the lowest price in 10 months, but still higher than at any point in Trump's first term. On the campaign trail, Trump has promised to bring down energy prices through a policy to "drill, baby, drill" and dismantling President Joe Biden's signature climate initiative, the Inflation Reduction Act. Harris has pledged to support the 2022 law and other Biden energy policies , such as continued support for electric vehicles. Harris has disavowed her 2019 pledge to ban hydraulic fracturing. But oil and gas companies remain concerned about restrictions on federal leasing and efforts to electrify the vehicle fleet if she is elected. The next president will decide key questions on energy policy, such as the licensing of new US LNG export facilities and regulating carbon emissions from power plants, oil and gas facilities and vehicles. The election will carry equally high stakes for companies involved in metals , agriculture and other commodities. Trump is planning a combative approach to trade, with a 20pc tariff on all foreign imports and even higher tariffs against China. In 2025, the US Congress is also poised for a major fight on tax policy because of the year-end expiration of an estimated $4 trillion in tax cuts. On foreign policy, the next president will face decisions on the future of US restrictions on Russian energy exports and US sanctions against Iran and Venezuela and how to contain the growing threat of an Israel-Iran war and its potential impacts on oil flows from the Middle East. Polls also show a tight race in the fight for control of the US House of Representatives, where Republicans hold a 220-212 majority and where up to 22 seats are deemed competitive, election ratings firm Cook Political Report says. By Chris Knight and Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Record loadings in Vancouver lift USWC Aframax rate


05/11/24
News
05/11/24

Record loadings in Vancouver lift USWC Aframax rate

Houston, 5 November (Argus) — Record high crude exports in Vancouver have lifted short-haul Aframax rates in the region, pressuring the Vancouver-US west coast rate to its highest level since before the Trans Mountain Expansion (TMX) came online in May. The rate to ship 80,000t of crude, or about 550,000 bl of Cold Lake, from Vancouver to the US west coast climbed to Worldscale (WS) 182.5, equivalent to $2.39/bl, on 29 October, the highest since 21 March. It sustained that level through 4 November before inching lower to WS180 on 5 November, according to Argus data. The seven-month high came after a record 24 Aframaxes loaded at Vancouver's Westridge Marine Terminal in October , according to shipowner Teekay Tankers and ship-tracking data from Kpler. The previous record was 21 in July. October's loadings coincided with a record 413,000 b/d of crude exported from the expanded Trans Mountain pipeline system the same month. Of the 24 Aframaxes, nine went directly to Asia-Pacific ports while five went to the Pacific Area Lightering zone (PAL) to discharge onto very large crude carriers (VLCCs). The remainder traveled to ports on the US west coast. A recent shift in charterers' preferences to ship crude directly from Vancouver to destinations in Asia-Pacific , rather than via PAL, has contributed to the upward pressure in rates to the US west coast since September. Direct transpacific shipments remove vessels from the west coast North America market for about 45 days. October's high number of Aframax loadings has had less of an impact on the rate for Vancouver-China shipments, which tend to load later in the loading window and open the number of potential vessels to ships in the east Asia market. Aframaxes hired for Vancouver-US west coast runs often are provisionally booked about five to 10 days in advance of loading, compared with 15-20 days in advance for Vancouver-China shipments. The Vancouver-China Aframax rate was $2.8mn lumpsum, or $5.13/bl for Cold Lake, on 5 November, according to Argus data. That rate had been rangebound between $2.8mn and $2.9mn between 26 September and 5 November. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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South Africa plans to upgrade Sapref to 600,000 b/d


05/11/24
News
05/11/24

South Africa plans to upgrade Sapref to 600,000 b/d

Cape Town, 5 November (Argus) — The South African government plans to repair and expand the closed 180,000 b/d Sapref refinery in Durban, in the KwaZulu-Natal province, creating a facility with at least 600,000 b/d of capacity, according to the Central Energy Fund (CEF). State-owned CEF struck a deal in May to acquire Sapref from BP and Shell. The government wants to upgrade the refinery to ensure that South Africa has security of supply, CEF group chair Ayanda Noah told delegates at the Africa Energy Week underway in Cape Town. "Nowadays, a refining capacity of 600,000 b/d upwards is more economical, and that is what South Africa is aiming for," Noah said. "We are very ambitious." Sapref was South Africa's largest oil refinery with around 35pc of the country's refining capacity before it was shut in 2022 . That followed the closure of Engen's 105,000 b/d Durban refinery in 2020. Only three of South Africa's refineries remain operational — Astron Energy's 100,000 b/d Cape Town refinery, Sasol and TotalEnergies' 107,000 b/d Natref refinery and Sasol's 150,000 b/d coal-to-liquids plant at Secunda. South Africa now only has 35pc of its original refining capacity left, which means it has to import the balance, according to Noah. "You cannot outsource security of supply," she said. "There are many other variables that are outside our control. Look at the geopolitical tensions up north that affects supply chains negatively." Importing around 65pc of oil products is not efficient, especially given South Africa's high unemployment rate, Noah said. "Essentially, what we've done, is export downstream jobs." There is also a negative impact on the balance of payments and the economy, because South Africa cannot control prices, Noah added. It is the role of the CEF as a state-owned company to assist when there are market failures, she said. BP and Shell each owned a 50pc stake in the refinery and were looking to sell the facility after halting operations in 2022. But these plans were set back after extensive flood damage at the plant in April of that year, only two months after it was shut indefinitely. Four years ago, UK-based consultancy Citac estimated it would cost around $15.7bn to upgrade all of Africa's refineries to Afri-6 clean fuel standards, its chief executive Gary Still said in an interview. But those calculations were made before Sudan's 100,000 b/d Khartoum refinery was shut and Ghana's 120,000 b/d Sentuo refinery came online, Still said. It is also likely that the cost of refinery upgrades has increased substantially as goods and services became more expensive after the Covid-19 pandemic, while engineering firms and personnel with the necessary expertise are less available, Still said. By 2030, the African Refiners and Distributors Association (ARDA) wants African countries to meet Afri-6, which imposes a 10ppm sulphur limit on gasoline and diesel, in line with Euro 5 fuel specifications. ARDA's executive secretary Anibor Kragha, described the Sapref acquisition as "phenomenal," because South Africa is "claiming its energy independence through it," he said. By Elaine Mills Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US attorneys cast light on Venezuela oil trade


05/11/24
News
05/11/24

US attorneys cast light on Venezuela oil trade

Washington, 5 November (Argus) — The next US president will have to decide how to continue to apply economic penalties against oil-producing countries such as Russia, Iran and Venezuela — but the sanctions regime is hardly a barrier for some determined sellers and buyers. A US federal indictment, unveiled on Monday, accused Turkish national Taskin Torlak of trading Venezuelan oil in 2020-23 despite US sanctions against Caracas. Torlak allegedly relied on individuals and companies operating in Ukraine, China, Turkey, Russia and other countries to access US banks, insurers and freight companies to transport Venezuelan oil to China. US sanctions cut off Venezuela from the US financial system under the threat of economic and criminal penalties. Torlak's methods included re-naming and re-flagging oil tankers, covering tanker names with paint or blankets, and turning off the AIS transponders and obtaining fake bills of lading, according to the US criminal indictment. Venezuela state-owned PdV allegedly paid tens of millions of dollars to Torlak to facilitate shipment of oil. But the US indictment also cites frequent complaints from Torlak about PdV's arrears for such services. "We would like to emphasize our satisfaction in operating our fleet under the commercial interest serving the Bolivarian Republic of Venezuela and [PdV] for nearly 2.5 years, with strong technical management and continuous validation from charterers", an associate of Torlak wrote to PdV in July 2023 to complain that the Venezuelan company was late in making a $32.5mn payment. President Joe Biden's administration lifted sanctions against PdV in October 2023, only to reimpose them six months later as Caracas reneged on its promise to hold a free and fair presidential election. The US backs the Venezuelan opposition's claim that its candidate Edmundo Gonzalez defeated incumbent president Nicolas Maduro in July. But Washington has backed away from adding more sanctions against Venezuela. Most Venezuelan crude heads to China, where many independent refiners rely on networks such as Torlak's alleged organization to access discounted crude from countries under US sanctions. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Phillips 66 Calif shutdown to shift tanker flows


05/11/24
News
05/11/24

Phillips 66 Calif shutdown to shift tanker flows

Houston, 5 November (Argus) — Phillips 66's plans for a late 2025 shutdown of its 139,000 b/d refinery in Los Angeles, California, will likely lead to more trans-Pacific refined products tanker shipments into the US west coast while having a more muted effect on crude tankers. Phillips 66 said it would likely shut the refinery in the fourth quarter of 2025, citing the high regulatory costs of operating in California. While it is unclear what will become of the facility, Phillips 66 said it still plans to supply the region with road fuels in the future. The closure will reduce California's refining capacity by 8.6pc to about 1.48mn b/d and removes about 14pc of refining capacity in the Los Angeles area. Tankers hauled about 160,000 b/d of refined products to California in January-October, with about 95,000 b/d going to Los Angeles, according to data from analytics firm Vortexa. About 27pc of the deliveries to Los Angeles came from refiners on the US Gulf coast and elsewhere on the US west coast on Jones Act-compliant vessels, which must be US-built, US-flagged and US-crewed. But the relatively small Jones Act fleet is already fully utilized, with no additional ships on order, shipbroker Poten said. This means replacement supplies of refined products will need to come from farther afield, likely Asia-Pacific. South Korea is Los Angeles' biggest source of waterborne refined products so far this year, shipping about 33,000 b/d in January-October, Vortexa data show, followed by other US sources (25,000 b/d), China (9,000 b/d), India (9,000 b/d) and Canada (8,500 b/d). Taiwan, Singapore and Japan also have supplied marginal cargoes to Los Angeles this year. An increase of California-bound shipments from these countries would create additional demand for voyages lasting a range of 19-35 days, boosting ton-mile demand and tanker employment in the Pacific basin. Medium range (MR) and long range 1 (LR1) refined product tankers would benefit the most from these increased trade flows, with MRs accounting for 67pc of the current market share and LR1s 33pc, according to Vortexa data. Tanker demand for exports from the US west coast is unlikely to be affected. Phillips 66 Los Angeles exported just 2,000-4,000 b/d of products in January-October, data from Kpler and Vortexa show. Limited impact on crude tankers Because Phillips 66's Los Angeles refinery was designed to process domestic California crude, the impact on the regional crude tanker market likely will be much more limited — and offset by increased tanker demand on Canada's Pacific coast. With available domestic — albeit declining — California crude production, the 139,000 b/d refinery imported 64,000 b/d of crude in January-August 2024, mostly from short-haul sources in the Americas, the latest data from the US Energy Information Administration (EIA) show. The trade was dominated by 1mn bl Suezmaxes and 500,000-700,000 bl Aframaxes. The refinery imported 15.52mn bl of crude in January-August 2024, according to the EIA. Canada was the largest international supplier (4.84mn bl) in that span, boosted by the Trans Mountain Expansion (TMX) pipeline start-up in May, followed by Guyana (3.48mn bl) via the Trans-Panama Pipeline, Mexico (2.98mn bl), Brazil (2.92mn bl) and Ecuador (1.3mn bl). Because of the refinery's use of domestic crude supplies, the complex's imports are equivalent to just two Suezmax shipments or three Aframax shipments per month. For the regional tanker market, that is more than offset by the burgeoning TMX flows on Canada's Pacific coast, which in October loaded a record 24 Aframaxes , destined to refineries in China and the US west coast. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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