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Viewpoint: Naphtha exposed to the elements

  • Spanish Market: LPG, Oil products
  • 29/12/21

European naphtha prices are finishing the year high relative to crude and gasoline, but are at the mercy of powerful forces as the market heads into 2022.

European naphtha margins to crude hit six-year highs of around $5/bl in mid-December, as low imports from elsewhere combined with robust demand from gasoline producers to support prices. European gasoline consumption has proven resilient against the new Omicron variant wave of Covid-19, as key European markets have not so far had the kind of restrictions on freedom of movement that characterised previous waves of the pandemic.

The extent of Covid restrictions in the first half of 2020 is unknowable but crucial to forecasting the immediate future of the European naphtha market. Other variables are equally significant, and just as difficult to assess. The dramatic rise in natural gas costs during the second half of 2020 has had a direct effect on naphtha, as LPG has been drawn out of the petrochemical cracking pool and into power generation at European refineries. Natural gas costs could easily rise further during the first quarter, drawing more naphtha into the petrochemical sector to replace the LPG lost to refinery fuel generation. But if the northern hemisphere winter proves to be milder than the market anticipates, then LPG prices will fall heavily, displacing naphtha.

Also critical in determining the fate of the naphtha market in the next six months is the balance of supply and demand in Asia-Pacific. Naphtha prices in Europe have been supported during the second half of 2021 by the relative ease of clearing excess cargoes to Asia-Pacific. But with naphtha demand in Asia closely connected with the state of the Chinese manufacturing sector, European naphtha exports are highly exposed to economic fluctuations east of Suez. The impact of the Omicron variant on Asian economies is as uncertain as it is in Europe.

There are so many important variables heading into 2022 that some participants in the swaps markets have been heard drawing down their long-term positions until the outlook is clearer. With that in mind, there appears little utility in making firm predictions about what is in store for the European naphtha market out to the end of the second quarter. Overall it has been clear since the beginning of the pandemic that naphtha prices have tended to be well-supported relative to other refined products when the pandemic's effects have been most severe. This is because the fall in demand for transport fuels causes run cuts at European refineries, reducing the amount of naphtha produced, while demand for naphtha as a petrochemical feedstock remains buoyant as people continue to consume plastics.

Naphtha refining margins are more likely to stay at the elevated levels recorded in mid-December if the Omicron wave causes lockdowns to be imposed in key European markets. They will probably be elevated further if the winter proves to be notably cold, as LPG prices will rise and make naphtha the obvious choice of feedstock for petrochemical producers. Naphtha refining margins, measured by the premium to North Sea Dated crude, are typically steady during the first quarter, varying little from month to month before summer-grade gasoline blending starts in the second quarter and supports naphtha demand. If refining margins stay steady during the first quarter at around the December average of $4/bl, it would be the strongest start to the year by that measure since at least 2011. The average refining margin for the first quarter of 2016 was the highest since 2011 at around $2/bl, after the monthly average for the previous December was close to the $4/bl recorded this year, suggesting a potential direction as the market moves into 2022.


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19/07/24

Weather sparks uncertainty for Vietnam’s bitumen demand

Weather sparks uncertainty for Vietnam’s bitumen demand

Mumbai, 19 July (Argus) — Expectations of Vietnam's bitumen consumption in July-August are mixed, given an easing in the monsoon season in some regions but an upcoming typhoon season in other parts. The mixed expectations will likely keep importers uncertain about future seaborne purchases. Consumption in Vietnam has been lower than normal in the last quarter because of unfavourable weather, political uncertainties, a lack of new paving projects and delays in disbursement of project funds, according to market participants. The lower consumption kept inventories higher and weighed on demand for spot seaborne volumes, with many importers only focused on taking delivery of their term contract shipments. Some importers in Vietnam are cautious and did not report consumption rising noticeably as weather in the key consuming south and central regions continues to be wet and not suitable for road paving, while the country is also set to experience typhoons next month. Consumption will stay low until September because the typhoon season starts next month, and the first region to get hit is the north before moving towards the south, a key importer told Argus . It is raining in the south and central regions, according to the importer. "The north is alright now but there is no good pick up [in consumption]," the importer said, adding that imported cargo inventories in the region are still notably higher. This is in contrast to expectations from other Vietnamese importers and some Asian traders, which said that consumption and demand for seaborne bitumen are expected to be higher in July and August as compared to previous months this year, given favourable weather in north Vietnam and more enquiries for Singapore cargoes, to restock in August. Consumption in the south and central regions are stable-to-weak, but overall demand in July and August are set to pick up as some new road projects are in the pipeline, a market participant said. Inventories are falling in some parts of the region and there is a need to replenish stocks now, while the domestic selling price is also expected to increase, participants said. "Demand in Haiphong and north Vietnam is good, and we are able to sell more than last month," another importer told Argus . "If the weather continues to be good, then demand will improve further in the coming weeks and that can increase import appetite." Vietnam is a net importer and typically secures most of its seaborne volumes from Singapore, Thailand, Taiwan, and China. Vietnam imported 1.04mn t of bitumen in 2023, up by 20pc from 866,000t imported in 2022, according to GTT data. Singapore cargoes accounted for about 32pc of Vietnam's total imports last year, while Thailand, Taiwan, and China together accounted for about 35pc of the total imports, the data showed. This compared to a 33pc and 40pc share, respectively, in 2022. Middle East penetration Some importers are worried that domestic prices are unlikely to rise in the near term, because of increased availability of relatively cheaper Middle East-origin cargoes in the region. They noted that this would cut domestic appetite for Asian cargoes and would in turn weigh on imports. Vietnam imported about 252,000t of bitumen from the Middle East in 2023, accounting for about 24pc of the total imports, show GTT data. This compared to 135,000t imported in 2022, which accounted for about 16pc of the total imports. Imports from the Middle East totalled 156,000t over January-May, nearly tripling from 55,000t imported during the same period last year. The region's imports from Singapore during the five-month period this year totalled 135,000t, down from 150,000t a year earlier. Imports from the Middle East increased as the inter-regional price arbitrage with Singapore was wide open. The Argus assessed ABX 1 fob Singapore prices averaged $421.50/t for the week of 12 July, while fob Iran bulk prices averaged $294.50/t for that week. Vietnam importers noted that Middle East-origin bulk cargoes were priced at low-$400s/t on a cfr basis, which was still lower than prevailing fob Singapore levels during the period. By Sathya Narayanan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil's flood-hit airport to resume flights in Oct


18/07/24
18/07/24

Brazil's flood-hit airport to resume flights in Oct

Sao Paulo, 18 July (Argus) — The Salgado Filho international airport in Porto Alegre, in flood-hit Rio Grande do Sul state, will begin receiving some flights in October, Brazil's port and airport ministry said. The airport, which is managed by Germany's Fraport, will initially receive roughly 50 flights/d, with the goal of resuming full capacity by year-end. Prior to the floods, the airport had forecast that it would have 5,404 domestic and international flights (180 flights/d) and transport over 608,000 passengers in April. But it was forced to shut in late April after the record floods that hit the state. The economy of Rio Grande do Sul state contracted by 9pc in May from the previous month, according to preliminary estimates by Brazil's central bank. The floods have left at least 182 dead and nearly 600,000 people displaced, according to the state's civil defense. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Aumentan importaciones de combustible en México


16/07/24
16/07/24

Aumentan importaciones de combustible en México

Mexico City, 16 July (Argus) — Las importaciones de combustible en México aumentaron en julio de cara a la temporada de viajes de verano e impulsadas por una disminución de la producción nacional en las refinerías de la estatal Pemex. Las importaciones marítimas a México de gasolina, diésel y turbosina, incluidas las importaciones de Pemex y privados, aumentaron un 18pc a aproximadamente 780,000 b/d del 1 al 10 de julio, frente a 663,000 b/d en el mismo periodo de 2023, según datos de Vortexa. Esto se debió principalmente a un aumento del 66pc en los cargamentos de diésel hasta alcanzar 268,000 b/d, ya que la disponibilidad de este combustible en el mercado ilegal probablemente disminuyó, según fuentes del mercado. Los cargamentos de turbosina se cuadriplicaron hasta los 43,000 b/d en el mismo periodo, ya que Pemex reabastece sus inventarios antes de la temporada de viajes aéreos de verano. Las importaciones de combustible a México habían disminuido a principios de este año, después de que la campaña del gobierno para aumentar la producción de refinerías y reducir su dependencia de las importaciones de EE. UU. comenzara a dar sus frutos, aumentando la producción de gasolina y diésel de Pemex en un 32pc y reduciendo sus importaciones hasta un 25pc en marzo. Pero en abril y mayo, el sistema de refinación de Pemex enfrentó varios problemas, desde un incendio en la refinería de Minatitlán hasta un corte de energía importante en la refinería de Tula, lo que llevó los niveles de procesamiento de crudo de Pemex a un mínimo de cinco meses en mayo. Las tasas de operación de las refinerías en junio se publicarán el 26 de julio. Es probable que el procesamiento de crudo haya caído durante el mes pasado debido a operaciones de mantenimiento en dos refinerías, dijo una fuente familiarizada con las operaciones de refinación de Pemex. El mercado tiene sus dudas sobre la posibilidad una fuerte caída en las importaciones de combustible a México, y algunos refinadores de la costa del Golfo de EE. UU. esperan una fuerte y creciente demanda. Además, incluso si la refinería Olmeca de 340,000 b/d iniciara operaciones comerciales este año, es probable que las otras seis refinerías reduzcan sus tasas de utilización, según fuentes del mercado. Recientemente, Pemex comenzó a vender diésel desde la terminal de distribución de la refinería de Olmeca, pero la cantidad es limitada y el combustible se produjo utilizando materia prima destilada en otra planta. La tendencia a la baja en las operaciones de refinado de México podría continuar en julio a pesar de los esfuerzos del gobierno saliente para aumentar la producción nacional. México ha exportado alrededor de 1 millón de b/d de crudo hasta la fecha en julio, un aumento del 20pc frente a los 847,500 b/d en todo junio, según los datos de Vortexa. Esto indica que es probable que las refinerías de Pemex estén operando a tasas más bajas. Las importaciones de combustible de México podrían continuar su tendencia al alza en los próximos meses, pues los gasolineros esperan una mayor demanda de gasolina durante las vacaciones de verano. Los inventarios de gasolina y diésel de Pemex descendieron un 24pc en junio a 6.2 millones de bl, frente a 8.1 millones de bl en junio de 2023, según una respuesta de transparencia de Pemex a una solicitud de Argus . La empresa deberá aumentar sus importaciones si las refinerías no siguen el ritmo de la demanda. Además, las importaciones suelen aumentar en la segunda mitad del año, impulsadas por la demanda de diciembre y la mezcla de gasolina de invierno de menor precio. México importó más gasolina en el segundo semestre del año en 11 de los últimos 12 años y más diésel en ocho de esos mismos años. Juego de unos pocos El mercado de importación de combustible de México se ha limitado a Pemex y a algunas empresas del sector privado durante los últimos tres años del mandato del presidente Andrés Manuel López Obrador, y no hay señales de cambio después de las elecciones presidenciales de junio. Se espera que la presidenta electa Claudia Sheinbaum, que tomará el cargo el 1 de octubre, continúe con las políticas nacionalistas de energía de López Obrador, y tendrá aún menos contrapeso que su predecesor tras la contundente victoria de su partido Morena en las elecciones legislativas. Las importaciones de combustible a México se abrieron a empresas del sector privado después de la reforma energética de 2014, pero la secretaría de energía canceló decenas de permisos de importación de combustible en los últimos años. Por Antonio Gozain Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Q&A: Petredec pushes LPG to drive Africa clean cooking


16/07/24
16/07/24

Q&A: Petredec pushes LPG to drive Africa clean cooking

London, 16 July (Argus) — LPG trading company and shipowner Petredec was recently unveiled as one of the founding members of the World Liquid Gas Association's (WLGA) Cooking For Life Africa Task Force (CFLA), following the in May. The company was one of the early international entrants to the sub-Saharan African LPG market and continues to pursue opportunities in the region. Argus' Oliver Binks spoke with Petredec's head of downstream, James Bullen, about the company's plans to help expand LPG's use across Africa: Why did Petredec join the CFLA? The task force is a direct response to the IEA's call to action following its summit in Paris in May. The IEA's ambition is to end cooking fuel poverty by making cleaner fuels accessible to all, thereby saving lives. The WLGA created the task force to focus on LPG's role in addressing this challenge. Although the problem itself is acknowledged to be surmountable, and not even particularly costly — in relative terms — the WLGA believes that LPG can largely solve the issue of clean cooking in Africa now. This is a belief that we not only share, but also through our work on the ground in Africa, fully understand first-hand. LPG is well-suited to developing markets, such as those being highlighted as particularly problematic within Africa by the IEA. We believe that LPG's inherent benefits of being accessible, easy to deploy, well-understood and affordable make it the unparalleled choice for meeting the IEA's objectives. What projects are the company involved in within the region? Our strategy onshore has been to invest in markets where LPG is established and understood but market growth is in some way hindered. This is typically owing to a lack of investment in infrastructure, especially import infrastructure. We base our investment decisions on long-term opportunities for LPG and how we can alleviate these bottlenecks to facilitate growth. Affordability is a significant barrier to fuel switching, so being able to import the cheapest possible product is a fundamental pillar of any investment plan we develop. And central to this is the necessity to select locations where the largest LPG carriers, VLGCs, can be accommodated to discharge cargoes. Big ships mean better freight economics, which means cheaper import prices and more affordable LPG for the consumer. We have not announced the specific details of our new investments and are not in a position to do so yet, but the type of projects will come as no surprise to anyone familiar with our record. We have invested more than $200m in the past decade on medium to large-scale LPG infrastructure and it's fair to assume we will do more of the same. What are the challenges to developing infrastructure in sub-Saharan Africa? While working in each developing market has its own specific challenges, there are often common issues to navigate when large-scale infrastructure projects are under development. These include planning and permitting , environmental adherence and acceptance and navigating local bureaucracy, which can be multi-layered and onerous. Delays are common and projects such as designing and constructing import terminals, distribution systems and break-bulk hubs are complicated and time-consuming. The key to overcoming these is consistency, perseverance, patience and commitment. Projects run late, budgets require amendments and remits change, but good opportunities are often difficult by nature. Keeping the end goal in sight and taking a long-term view are key. What specific infrastructure in the supply chain needs the most investment? Different regions and markets have different needs. Some countries have focused on one specific type of infrastructure investment while ignoring other key elements. Other countries are in need of modernisation across their entire supply chains. A problem we frequently come across is outdated and insufficient infrastructure stifling market growth. While market participants' intentions to support the growth of LPG might be there, their efforts can be in vain if they are working with 50-year-old-plus import terminals with inadequate capacity to meet market demands, or an antiquated cylinder filling and distribution system. How much LPG does Petredec supply to sub-Saharan Africa, and where does it source it from? Petredec has supplied LPG to Africa since the 1980s, first in north Africa and then elsewhere around the coast of the continent. Annual quantities vary with supply contracts, but for many years now we have supplied significant volumes to South Africa, which we then distribute via road tankers across the southern part of the continent. From our import hub in Richards Bay, South Africa, our local subsidiary, Petregaz, transports LPG to nine countries across the region, often more than 2,000km in each direction. We have always used our global trading, supply and shipping system to ensure that the most appropriate product is supplied to each market. This means as arbitrage opportunities open and close, product can originate from a number of locations, but for South Africa, we typically utilise our large offtake positions in the US Gulf to supply the market. What other clean cooking options do Africans have apart from LPG, and why not pursue these over LPG? We aren't aware of any alternatives as compelling as LPG when considered holistically as a "through the transition" energy option for developing markets. The IEA itself, in the report A Vision for Clean Cooking Access for All, identifies LPG as the primary solution to deliver clean cooking access, representing nearly half of the households gaining access by 2030. That is not to say that LPG is the answer to every problem in every market. During the summit, we encountered new cooking stoves powered by solar energy and recycled pellets, both intriguing but reliant on electric power as a back-up fuel or for flame acceleration. Where we are talking about markets with limited access to electricity, neither of these are practical. The summit also highlighted a number of biofuels, some of which appear interesting, but developments are very early and at this point unproven. We do not believe that LPG's ready availability, low-cost set-up and easy scale-up can be bettered by any current alternative. Which countries are the company focusing on for LPG market expansion across the region? We are focused on expanding operations in our existing markets and new territories. We already deliver LPG to nine sub-Saharan African countries by road so fully understand the importance of multi-modal logistics. But we are keen to improve supply chain operations and are examining opportunities to utilise alternative forms of transport and enhance existing logistics in order to improve productivity and, most importantly, lower costs. Reduced logistic costs means cheaper deliveries resulting in improved affordability, which is crucial as we and our partners strive for market growth. What are the company's objectives in terms of inland African LPG distribution this year? The current project focus, particularly in South Africa, is on further optimisation of the supply chain to better serve our customers. Having acquired one of South Africa's largest dedicated LPG road logistics operators in 2023, we have now fully integrated that business into our operations and have set about further expanding the freight aspect of our offering. We expect to announce further developments in due course that will improve that level in terms of speed, cost and reliability. Targeting new usage opportunities for LPG is also a key current focus, as we look to leverage the strong foundations we have laid since commissioning the Richards Bay terminal in 2020. Acute shortages of alternative energy options and an ongoing electricity crisis in South Africa have thrust LPG into the limelight as a viable substitute for power generation. We are engaged with several industrial and commercial businesses looking for energy security that are, for the first time, considering using LPG. The company divested its Reunion business in 2023. Why and what lessons were learnt? The business ran profitably throughout our 14 years of ownership, and together with our local partner, we had gradually managed to grow our market share and overall volumes. However, with our investment focus in the region shifting from the southern Indian Ocean to continental Africa, Petregaz Reunion had become somewhat isolated in our longer-term strategic growth plan. With their own growth strategy focusing on market consolidation and integrating operations, the business was a natural fit for Vivo Energy and a transaction suited all parties. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Tanker owner denies Houthi attack in Med


16/07/24
16/07/24

Tanker owner denies Houthi attack in Med

London, 16 July (Argus) — The owner of a tanker reported attacked today in the Mediterranean Sea has said there was no such incident. Petronav Ship Management said its tanker, Olvia , was not targeted as claimed by Yemen's Houthi militants. An attack in the Mediterranean would be a big step outside the Houthi's region of operations, which is limited to the area in and around the Bab el-Mandeb strait at the southern end of the Red Sea. The Houthis claimed two other attacks today in the Red Sea, on crude tanker Chios Lion and oil product tanker Bentley I . By Ben Winkley and Bob Wigin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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