US crude exports come under pressure
December exports of US crude WTI look likely to fall because of record high freight rates and weather-related disruptions to export operations.
The cost of shipping light sweet WTI on an Aframax tanker to Europe climbed to the highest ever at $10.18/bl on 18 November, on record-high US crude flows to European refiners as they prepare for the 5 December implementation of the EU's ban on seaborne imports from Russia (see graph). Aframax loadings have also been relatively unhindered by disruptions affecting very large crude carrier (VLCC) exports, helping to boost the freight rate.
Many US traders have been seeking to load crude for export on VLCCs instead of Aframaxes, which are traditionally used to ship oil to Europe, to save on freight costs. But loading operations for the larger tankers have been disrupted this month by bad weather. Crude usually has to be loaded on VLCCs along the Texas coast through reverse lightering, where the oil is first put on an Aframax or Suezmax and than moved to larger tankers by ship-to ship (STS) transfer.Butreverse lightering operations were halted on 15-22 November by high waves caused by a cold front along the Gulf coast. The disruption, combined with strong demand to ship crude on VLCCs, may lead to a backlog of tankers waiting to load at the US Gulf coast as far out as mid-December.
Around 26 VLCCs are already on subjects to load at the Gulf coast in the next 30 days and more than 20 are expected to arrive in the region by the end of December for orders. Around 95pc of the VLCCs loading at the Gulf coast will need at least one STS transfer to be fully loaded, and at least nine tanker loadings have already been delayed past their scheduled dates.
Lightering operations were expected to return to normal by 23 November, but another cold front brewing in the US Gulf of Mexico could halt activity again by 26-27 November. The US Gulf coast is also nearing the fog season, usually from December to early April, when significant weather changes can cause further constraints to export operations as ship channels are forced to close to vessel traffic during periods of poor visibility.
Lighter side
WTI sank to a discount of around $7/bl to Ice February Brent on a fob basis on 22 November, its lowest since April 2020, as the halt to lightering operations hindered VLCC exports(see graph). Prices have rebounded slightly with the resumption of lightering offshore the Corpus Christi port hub. Prices are now equivalent to a $4.60/bl premium to North Sea Dated after estimated delivery costs, or about $2/bl higher than the level at which traders have pegged the grade at the Netherlands port of Rotterdam, leaving it unprofitable to export to Europe. Waterborne spot crude prices are widely expected to remain under pressure given that many trading firms will draw down inventories to avoid end-of-year taxes, which could lead to an increase in supplies at a time of export constraints.
The recent halt to lightering operations and the record Aframax freight rates could undermine US crude exports. The US exported 3.47mn b/d of crude in the first nine months of 2022, up by over 19pc on a year earlier, and is on track to reach a new record high, according to the latest available monthly statistics from the US Census Bureau.
US crude exports to Europe rose to a record 1.47mn b/d in January-September, up by nearly 44pc from the same period in 2021 (see graph). Exports to top destinations the UK and the Netherlands climbed by 28pc and 46pc, respectively, to record highs of 330,000 b/d and 341,000 b/d, while a handful of other countries have more than doubled their intake of US crude year on year.
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Kazakhstan outlines Opec+ compensation plan
Kazakhstan outlines Opec+ compensation plan
London, 3 May (Argus) — Opec+ member Kazakhstan has submitted a plan to Opec detailing how it intends to compensate for producing above its crude production target in the first four months of the year. Kazakhstan and Iraq — which has also submitted a compensation plan — are the Opec+ alliance's largest overproducers and a key reason why the group exceeded its overall production in the first three months of the year . Kazakhstan's energy ministry said it produced above its target by 129,000 b/d in January, 128,000 b/d in February, and 131,000 b/d in March, according to secondary source estimates. Opec secondary sources, of which Argus is one, have yet to formally submit their production estimates for April, but Kazakhstan said it is factoring preliminarily overproduction of 100,000 b/d for April. The ministry said it kept oil production high because of high winter demand for natural gas — much of its gas production is associated and is produced alongside its oil. Kazakhstan said it would start its compensation plan in May with an initial cut of 18,000 b/d below its official target of 1.468mn b/d. It would then stick to its target in June and July before implementing a cut of 131,000 b/d in August, none in September, 299,000 b/d in October, 40,000 b/d in November and zero in December. The cuts have been designed to coincide with scheduled maintenance at the country's key oil fields of Kashagan and Tengiz, the ministry said. Kazakhstan would have to reduce its output by 149,000 b/d in May compared with its March production of 1.599mn b/d to meet its pledge, according to Argus calculations. The compensation plan is set to be adjusted once a final figure for April is available. The plan would be further adjusted to accommodate any change in the Opec+ alliance's output policy — for which a meeting is scheduled to take place on 1 June in Vienna. Opec has been increasing pressure on members exceeding their targets. It called last month on countries that have overproduced to submit detailed compensation plans by the end of April. The Opec+ alliance has implemented a series of cuts — voluntary or collective — worth a combined 5.4mn b/d since October 2022 in a self-described bid to "support the stability and balance of the oil market". The latest round of "voluntary" output reductions by several members came into force in January and is due to run until the end of June. By Aydin Calik and Nader Itayim Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraq sets plan to compensate for excess Opec oil output
Iraq sets plan to compensate for excess Opec oil output
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US regulator slams executive over Opec 'collusion'
US regulator slams executive over Opec 'collusion'
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Canadian rail workers vote to launch strike: Correction
Canadian rail workers vote to launch strike: Correction
Corrects movement of grain loadings from a year earlier in final paragraph. Washington, 2 May (Argus) — Workers at the two major Canadian railroads could go on strike as soon as 22 May now that members of the Teamsters Canada Rail Conference (TCRC) have authorized a strike, potentially causing widespread disruption to shipments of commodities such as crude, coal and grain. A strike could disrupt rail traffic not only in Canada but also in the US and Mexico because trains would not be able to leave, nor could shipments enter into Canada. This labor action could be far more impactful than recent strikes because it would affect Canadian National (CN) and Canadian Pacific Kansas City (CPKC) at the same time. Union members at Canadian railroads have gone on strike individually in the past, which has left one of the two carriers to continue operating and handle some of their competitor's freight. But TCRC members completed a vote yesterday about whether to initiate a strike action at each carrier. The union represents about 9,300 workers employed at the two railroads. Roughly 98pc of union members that participated voted in favor of a strike beginning as early as 22 May, the union said. The union said talks are at an impasse. "After six months of negotiations with both companies, we are no closer to reaching a settlement than when we first began, TCRC president Paul Boucher said. Boucher warned that "a simultaneous work stoppage at both CN and CPKC would disrupt supply chains on a scale Canada has likely never experienced." He added that the union does not want to provoke a rail crisis and wants to avoid a work stoppage. The union has argued that the railroads' proposals would harm safety practices. It has also sought an improved work-life balance. But CN and CPKC said the union continues to reject their proposals. CPKC "is committed to negotiating in good faith and responding to our employees' desire for higher pay and improved work-life balance, while respecting the best interests of all our railroaders, their families, our customers, and the North American economy." CN said it wants a contract that addresses the work life balance and productivity, benefiting the company and employees. But even when CN "proposed a solution that would not touch duty-rest rules, the union has rejected it," the railroad said. Canadian commodity volume has fallen this year with only rail shipments of chemicals, petroleum and petroleum products, and non-metallic minerals rising, Association of American Railroads (AAR) data show. Volume data includes cars loaded in the US by Canadian carriers. Coal traffic dropped by 11pc during the 17 weeks ended on 27 April compared with a year earlier, AAR data show. Loadings of motor vehicles and parts have fallen by 5.2pc. CN and CPKC grain loadings fell by 4.3pc from a year earlier, while shipment of farm products and food fell by 9.3pc. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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