Crude oil dropped down towards US$41/b, stoking fears that prices will once again fall below US$40/b as the markets deals with a persistent supply glut that does not seem to have an end in sight. China, in particular, is almost finished filling up its strategic petroleum reserves, and has been buying up less crude in July than earlier in the year.
Last week in Asian oil
In a sign that the global oil glut is growing ever bigger, Saudi Aramco has lowered the pricing of its crude sold to Asian customers, slashing Arab Light and Arab Extra Light in particular as it competes with Iran to sell crude to an Asian refining market that is under pressure from low margins. In contrast, prices to Europe were raised, an indication of the region’s lower priority in the race for demand stakes.
In a sign that Asian demand is running out of steam, Korean crude oil imports for July fell by 5.8% y-o-y to 88 million barrels. There is also concern about the wider Korean economy; overall exports fell by 10.2%, the 19th consecutive monthly contraction, and weak economies have weak oil demand.
Years of sluggish investment and the depressed crude markets have seen Indonesia’s proven oil reserves sink to their lowest level since 2000, with only 2,922 million stock tank barrels in oil reserves declared for the first half of 2016. This comes despite an increase in fields - 757 in 2015 vs 632 in 2000 – indicating that mature fields are depleting fast and new fields coming online are not substantial enough to offset the loss.
Pakistan is reviving its plans for two new oil refineries to eliminate surging domestic demand that have caused oil imports to spike. The ambitious plans call for the planned Balochistan and central Punjab refineries, with a whooping combined 480kb/d capacity, to come online by 2023, eliminating the need for imports. As grand as the plan is, it is also unlikely to happen.
Japanese refiner TonenGeneral has purchased its first crude oil from Iran, a move that was not possible when it was part of ExxonMobil, illustrating a shift towards embracing Iran as a new crude source for Japan.
Indonesia has reversed its decision to implement a new pricing formula based on dated Brent for its July shipments, to ‘maintain stability’ in the market, but will press ahead with the new formula by the end of 2016.
The first LNG shipment from the lower 48 US states is on its way to China, as Shell’s Maran Gas Apollonia loaded with Cheniere’s Sabine Pass gas moved past the Panama Canal towards China. Expect this to become a busy route in the near future, as the US Gulf heats up the race to supply LNG to Asia, joining Canada and Australia.
Two major deepwater natural gas fields in Indonesia will start production in the next 12 months, with Chevron’s Bangka project due in August, and Eni’s Jangkrik expected for July 2017. Both are located in the Kutai Basin in East Kalimantan.
China’s upstream giant CNOOC is warning investors that it will likely declare a loss of US$1.2 billion for 1H16, as it takes a hit on the oil sands assets it bought from Nexen. The severe decline in oil prices has been particularly brutal for CNOOC, as it has no downstream assets to hedge and offset revenue that evaporated when oil prices crashed.
International markets last week
The impasse between the Libya government and Libya’s National Oil Co is over. NOC has now said that it ‘unconditionally welcomes’ the deal brokered between the government and the Petroleum Facilities Guard, moving to restart crude exports from three blocked ports. It is good news for Libya’s oil exports, but another contribution to ever-growing supply.
Norway’s Statoil has agreed to pay US$2.5 billion to Petrobras for a 66% stake in the BM-S-8 offshore licence in Brazil, which includes a substantial part of the Carcará oil field in the Santos basin. Although Petrobras is loath to part with recoverable volumes of up to 1.3 billion barrels of oil equivalent, huge debts means it must offer up valuable assets for cash.
A fifth consecutive rise for the US rig count, with producers adding three new oil rigs but stopped two gas rigs to bring the total to 462. Though lower than the rise of 14 last week, the continued additions show producers gaining confidence, but contributing to the growing glut.
The Petrobras sell-off continues, with the Brazilian giant offering up its petrochemicals units in Pernambuco to Mexico’s Alpek for US$700 million. The deal is part of Petrobras’ attempt to pare down debt through asset sales, and the petchems units’ recent performance has been weak.
In other Petrobras news, the Brazilian state oil firm says its plans to re-evaluates its plans for the massive Comperj and Abreu refining and petrochemical projects, suspending ongoing work at both sites for the time being as it grapples with its debt and a refocusing of priorities.
A favourable FEIS (final environmental impact statement) has been released for the Golden Pass LNG export project in Texas by the Federal Energy Regulatory Commission, clearing the way for US$10 billion Golden Pass to switch from an import to an export facility, just as the widened Panama Canal dramatically shortens the journey of US Gulf LNG to Asia.
Tumbling oil prices have knocked the earnings of the world’s oil giants. ExxonMobil posting a 59% decline in profits for Q2, down to US$1.7 billion, while Chevron’s drop was even more dramatic – into the red with a loss of US$1.47 billion after a US$571 million profit in Q215. The picture was repeated across the earnings reports of oil companies, with players like Shell, BP and Statoil reporting weak results.
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Tyre market in Bangladesh is forecasted to grow at over 9% until 2020 on the back of growth in automobile sales, advancements in public infrastructure, and development-seeking government policies.
The government has emphasized on the road infrastructure of the country, which has been instrumental in driving vehicle sales in the country.
The tyre market reached Tk 4,750 crore last year, up from about Tk 4,000 crore in 2017, according to market insiders.
The commercial vehicle tyre segment dominates this industry with around 80% of the market share. At least 1.5 lakh pieces of tyres in the segment were sold in 2018.
In the commercial vehicle tyre segment, the MRF's market share is 30%. Apollo controls 5% of the segment, Birla 10%, CEAT 3%, and Hankook 1%. The rest 51% is controlled by non-branded Chinese tyres.
However, Bangladesh mostly lacks in tyre manufacturing setups, which leads to tyre imports from other countries as the only feasible option to meet the demand. The company largely imports tyre from China, India, Indonesia, Thailand and Japan.
Automobile and tyre sales in Bangladesh are expected to grow with the rising in purchasing power of people as well as growing investments and joint ventures of foreign market players. The country might become the exporting destination for global tyre manufacturers.
Several global tyre giants have also expressed interest in making significant investments by setting up their manufacturing units in the country.
This reflects an opportunity for local companies to set up an indigenous manufacturing base in Bangladesh and also enables foreign players to set up their localized production facilities to capture a significant market.
It can be said that, the rise in automobile sales, improvement in public infrastructure, and growth in purchasing power to drive the tyre market over the next five years.
Headline crude prices for the week beginning 14 January 2019 – Brent: US$61/b; WTI: US$51/b
Headlines of the week
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