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US set to resume crude purchases for SPR

  • Market: Crude oil
  • 07/05/24

The US is set to resume crude purchases for the US Strategic Petroleum Reserve (SPR), after calling off a planned 3mn bl refill last month following a rise in crude prices.

The US Department of Energy (DOE) today said it plans to purchase up to 3.3mn bl of sour crude for delivery in October to the SPR's Big Hill storage site in Texas. The solicitation sets a maximum price of $79.99/bl for the offers, a slight increase from the $79/bl ceiling it used in the recent monthly purchases.

The agency last month called off two pending solicitations that sought to buy 1.5mn bl/month for delivery to the SPR's Bayou Choctaw site in August and September, citing higher crude prices. The most recent SPR refill, nearly 2.8mn bl of sour crude for delivery in September, cost an average of $81.34/bl.

DOE says it has has already purchased a total of 32.3mn bl at an average price of $76.98/bl, well below the average $95/bl it received from the sale of 180mn bl of crude from the SPR to respond to market turbulence after Russia invaded Ukraine in 2022.

Energy secretary Jennifer Granholm told lawmakers last week that two out of four SPR sites were undergoing maintenance and would not be able to accept SPR deliveries until the end of the year. "We want to continue to fill it, and we will," Grahnolm said.

The SPR held 367.2mn bl as of 3 May.


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02/12/24

Mexico central bank flags 2025 growth uncertainty

Mexico central bank flags 2025 growth uncertainty

Mexico City, 2 December (Argus) — Mexico's central bank (Banxico) maintained its base-case 2025 GDP growth estimate at 1.2pc, with a range of 0.4pc to 2pc, citing heightened global uncertainty fueled by geopolitical conflicts and potential shifts in international economic policies. Central bank governor Victoria Rodriguez last week addressed US president-elect Donald Trump's proposed 25pc tariffs on Mexican goods, urging caution until the trade situation clarifies. Mexican president Claudia Shienbaum initially responded with a firm stance, saying Mexico could apply counter-tariffs. Later, Sheinbaum and Trump had a "friendly" phone call to discuss issues surrounding the proposed 25pc tariff on Mexican and Canadian imports, Sheinbaum said. Banxico raised its 2024 GDP growth forecast to 1.8pc from 1.5pc in its previous quarterly report in August, driven by stronger-than-expected third-quarter performance. Still, Banxico noted that the additional growth is driven by increased spending on imported goods rather than domestic production, particularly in investment and private consumption. Inflation dynamics remain mixed. While headline inflation rose to an annualized 4.76pc in October, core inflation eased to 3.58pc, its lowest level since mid-2020. Rodriguez emphasized progress on inflation despite external uncertainties, signaling room for further monetary easing. Banxico cut its target interest rate by 25 basis points to 10.25pc on 14 November and is widely expected to lower it again to 10pc at its 19 December meeting. Projections from Mexican finance executives institution (IMEF) suggest the rate could drop to 8.25pc by the end of 2025. Banxico also revised its 2024 inflation forecast to 4.7pc from 4.4pc in the August report but expects inflation to return to its 2–4pc target range by early 2025, with a 3pc rate projected by the fourth quarter. Other adjustments include a downgraded forecast for formal job creation in 2024 and 2025, with the range estimate for full-year job creation in 2024 dropping to 250,000–350,000 from 410,000-550,000 in August. The 2025 estimate came down to 340,000–540,000 from 430,000–630,000.The 2025 trade deficit outlook was also tightened to $14.9bn–$22.1bn, compared to a previous range of $13.7bn–$23.7bn. By James Young Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Opec+ meeting delayed to 5 December


28/11/24
News
28/11/24

Opec+ meeting delayed to 5 December

Dubai, 28 November (Argus) — A meeting of Opec+ ministers scheduled for 1 December has been postponed to 5 December. Opec said the delay is because of a conflicting travel schedule for energy ministers of Mideast Gulf countries, as the Gulf Co-operation Council (GCC) leaders summit in Kuwait overlaps with the Opec+ meeting. The Opec+ meeting, which was to be held online, will coincide with a decision to be taken by eight member countries on whether to press ahead with a plan to begin the phased return of 2.2mn b/d of "voluntary" production cuts to the market from January. This was to begin in October, but concerns about the strength of oil demand and price weakness prompted the group to postpone to December and then to January. The UAE will start increasing its output from January regardless, as a 300,000 b/d increase to its official production quota kicks in over the course of 2025. Any increase to Opec+ supply would be tempered by additional cuts that some of the eight will be making in the coming months to compensate for past overproduction. Iraq, Kazakhstan and Russia are the group's leading overproducers. Saudi energy minister Prince Abdulaziz bin Salman on 27 November talked with Kazakhstan's energy minister Almasadam Satkaliyev and Russia's deputy prime minister Alexander Novak, Moscow's point man on Opec+ matters. A day earlier, Prince Abdulaziz met in Baghdad with Iraq's prime minister Mohammed Shia al-Sudani and Novak. The statements from both meetings emphasised "full adherence to the [current policy] agreement, including the voluntary production cuts agreed upon by the eight participating countries, as well as compensating for any excess production." The 5 December meeting will be a third consecutive Opec+ ordinary ministerial meeting to be held virtually rather than in Vienna. The last time Opec+ held its ministerial meeting in-person was in June 2023. By Bachar Halabi and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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US refiners cannot readily replace Canadian oil: AFPM


27/11/24
News
27/11/24

US refiners cannot readily replace Canadian oil: AFPM

Calgary, 27 November (Argus) — US refiners that process Canadian crude would not easily find alternative supplies if president-elect Donald Trump follows through on his tariff plans, potentially threatening the viability of some fuel producers, a US refining industry group warned today. Trump on Monday said he would impose a 25pc tariff on imports of all goods from Canada and Mexico, claiming those two countries need to tighten borders they share with the US. Such tariffs would be problematic for US refiners that have come to rely on a steady diet of Canadian crude, much of which comes from the western, oil-rich province of Alberta. "There is no easy, fit-for-purpose replacement for this crude oil," the American Fuel and Petrochemical Manufacturers (AFPM), which advocates for many US refiners, said on Wednesday. Canadian oil is the number one refinery feedstock in the US midcontinent, accounting for 65pc of all crude runs in the region, according to AFPM. Refiners in the region have limited connectivity to US crude and refined products pipelines, so tariffs could sharply increase operating costs and even threaten their viability, the association said. Many refineries were built prior to the US shale boom and are suited for heavier, high-sulfur crudes that typically come from foreign sources. Canada exported about $428bn in goods and services to the US in 2022, while the US exported $481bn to Canada, according to US data. Petroleum makes up a substantial part of Canada's exports, with roughly 4mn b/d of Canada's 5mn b/d of production shipped to the US. Of this, about 3mn b/d is destined for the US midcontinent region. "The crude oil pipeline logistics have changed over the decades such that the loss of Canadian oil into these regions can only be replaced with domestic production," Lipow Oil Associates president and industry analyst Andrew Lipow told Argus Wednesday. "Unfortunately, there is very little pipeline capacity to deliver crude oil produced in Texas and New Mexico to refineries in Montana, Minnesota, and Chicagoland." Lipow suggested three scenarios, or some combination thereof, may unfold: Canadian crude would need to be further discounted to overcome the tariff; US refiners would pay more for crude, including for domestic WTI that would rise to import parity; or Canadian crude would be exempted from tariffs and there would be no change. "The extent of the price impact depends on one's locations, but certainly seems to me that the consumer will be paying more for energy," Lipow said. Tariffs on crude and refined products "will not help our industry compete, nor will they support US energy dominance and affordability for consumers", AFPM said. The American Petroleum Institute (API), another industry group, agreed. "Maintaining the free flow of energy products across our borders is critical for North American energy security and US consumers," an API spokesperson said. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Traders expect Opec+ to delay output increase


26/11/24
News
26/11/24

Traders expect Opec+ to delay output increase

London, 26 November (Argus) — Vitol, Trafigura and Gunvor representatives today suggested that Opec+ members would probably continue to delay their plan to start increasing crude production. The comments from three of the world's biggest trading firms come just days before the Opec+ alliance is set to hold a ministerial meeting on 1 December to decide its output policy for next year. At the top of the agenda is whether eight members will begin returning 2.2mn b/d of "voluntary" production cuts over a 12-month period starting in January — three months later than originally planned. "I think there's no room for them to increase," Gunvor chief executive Torbjorn Tornqvist said at the Energy Intelligence Forum in London today. "So far they've been very disciplined and they've made the right call not to add any oil," he said. Most forecasters predict weak oil demand next year, with the market flipping into a surplus. "I suspect that the barrels coming back will again be deferred," Trafigura's global head of oil Ben Luckock said. "Exactly how long? Probably not that far, but they have the choice to be able to continue to [delay] and they probably don't enjoy the price right now." The front-month Ice Brent crude futures is currently trading around $73/bl, around $20/bl below where prices were before Opec+ announced its initial output cut in October 2022. The alliance has reduced output by about 4mn b/d since then, Argus estimates. "The likelihood is that Opec will try to manage the market through the next two to three months to wait to see how some of these geopolitical aspects solve themselves," Vitol chief executive Russell Hardy said. All three executives pointed to geopolitical uncertainties such as the incoming US administration's Iran sanctions policy, the trajectory of the Ukraine-Russia war and the conflict in the Middle East as potential market movers in 2025. Luckock also stressed the importance of compliance for the Opec+ alliance. "I think compliance is a huge deal, because a cheating Opec doesn't yield higher prices." Members including Iraq, Kazakhstan and Russia have tended to exceed their production targets this year, tarnishing the credibility of the alliance. But a long-running Saudi-led effort to get these countries to comply and compensate appears to be bearing fruit. The three executives also gave their traditional forecasts for what the oil price would be in 12 months. Tornqvist said he expected prices to be similar to today's levels at $70/bl, which he described as "fair" given the world's large spare production capacity and declining production costs. Luckock said it was a "mug's game" forecasting 12-months out, particularly given the range of geopolitical uncertainties on the horizon. When pressed for a number he settled on $75/bl, but said this was not particularly useful to anyone. Hardy stuck with his previous forecast of $70-80/bl. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Trump tariffs will divert TMX crude from USWC


26/11/24
News
26/11/24

Trump tariffs will divert TMX crude from USWC

Houston, 26 November (Argus) — President-elect Donald Trump's plans to impose tariffs on imports from Canada could divert most of the crude exported via the 590,000 b/d Trans Mountain Expansion (TMX) pipeline away from US west coast refiners to Asia-Pacific. Flows from Canada's newest pipeline might shift after Trump, via social media late on Monday, announced plans to slap a 25pc tariff on all imports from Mexico and Canada. TMX, which expanded capacity on the Trans Mountain system to 890,000 b/d and gave Asia-Pacific buyers access to heavy sour crude produced in Alberta's oil sands, would have to direct all its flows to Asia if US west coast demand weakens. Tariffs on crude imports from Canada would force US west coast refiners to turn elsewhere. Refiners in the region have increased purchases of Canadian grades since the May commencement of the pipeline. Cheaper prices and closer proximity to Vancouver, where TMX crude loads, allowed the heavy sour crudes to find favor along the US west coast. But the proposed tariffs would strengthen TMX prices, no longer making it the cheapest heavy sour option. About 313,000 b/d of mostly heavy sour Canadian crude has loaded at Vancouver's Westridge terminal in the six months since the pipeline made its debut, according to analytics firm Vortexa. US west coast refiners received around 145,000 b/d since the pipeline came on line in May, up from less than 40,000 b/d a year earlier. Most TMX crude destined for the US west coast has gone to California refiners, with Marathon, Chevron and Phillips 66 emerging as consistent buyers. Around 34mn bl of TMX crude has loaded for Asia-Pacific, or about 161,000 b/d. China, the largest buyer in Asia-Pacific, has purchased about 83pc of those barrels, Vortexa data shows. Also, Latin American barrels could see a resurgence after being displaced by TMX in the region. Latin American medium and heavy sours, like Napo and Oriente, could see a resurgence in demand as well, after TMX displaced those grades. In the first six months after TMX, imports of Napo and Oriente fell by 14pc. Brazilian and Guyanese crudes could also see higher demand in the region, according to market participants. But Mexican crude flows could also be limited by Trump's tariffs. Imports from Mexico have been declining since TMX's May commencement, dropping 65pc in the pipeline's first six months of service. But refiners still import the grades, taking roughly 3.5mn bl, or 16,7000 b/d since the pipeline began operating. By Rachel McGuire Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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