Easwaran Kanason

Co - founder of PetroEdge
Last Updated: November 29, 2016
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Business Trends
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Last week in world oil:

Prices

-Traders appear to have cold feet over the prospect of an OPEC supply freeze, causing a choppy pattern in prices. Oil started the week at some US$47/b. An announcement by OPEC on 30 November will swing prices up or down depending on the context, with Saudi Arabia declined to appear at meeting between OPEC and non-OPEC producers this week.

Upstream & Midstream

-BP has snapped up two new oil interests in the North Sea, acquiring a 25% interest in two Statoil licences in Shetland (including the Jock Scott prospect) and 40% in Nexen’s prospect, which include Craster. Exploration wells are expected to be drilled mid 2017, seen as a sign of BP reaffirming its support for the North Sea. 

-And the US rig count is up again. Three new oil rigs and two new gas rigs were added last week, bringing the total up to 474 and 118, respectively, as US oil players continued to see improvement in the market. 

Downstream 

-The US Environmental Protection Agency has mandated a record amount of biofuel to be mixed into American gasoline and diesel in 2017. Benefitting farmers and placing presence on oil companies, the program will require refiners to mix some 19.28 billion gallons of renewable fuel into American fuel next year, with 15 billion coming from corn. It will be one of the last orders of the Obama administration, with question marks over Donald Trump’s future policies, which could either favour the oil lobby or Midwest farmers that helped deliver his presidency.  

-Uganda plans to select the partner for its first oil refinery in February 2017, with Sinopec among the leading contenders. Uganda had first partnered with Russia’s RT Global Resources, but then moved on the South Korea’s SK Engineering with talks falling through both times. The refinery, if it goes ahead, has also attracted the attention of neighbouring Tanzania and Kenya, while upstream operators Total, CNOOC and the UK’s Tullow Oil have all also expressed interest in the refinery.  

Natural Gas & LNG

-Israel’s Leviathan gas field has secured another customer. Paz Gas, the largest distributor of refined products in Israel has secured a deal to purchase 3.12 bcm of natural gas for 15 years, which will be channelled to the Paz Oil refinery in Ashdod. 

-France’s Total has established a consortium to build a LNG import terminal in the Ivory Coast. Meant to feed the country’s growing electricity consumption, the other partners are Azerbaijan’s SOCAR (26%), Royal Dutch Shell (13%), Ivorian state oil company Petroci (11%) with Golar and Endeavour Energy holding minority stakes. The Cote d'Ivoire-GNL terminal is expected to be completed in mid-2018, with Total supplying LNG from its global portfolio.

Corporate

-Denmark’s state-owned Dong Energy and shipping giant Maersk are mulling a merger as they battle the persistent low oil price environment. Both companies have a larger presence in North Sea oil, with Maersk also highly affected by the parallel slump in shipping.  

Last week in Asian oil:

Upstream & Midstream

-With the downturn in Singapore’s upstream offshore and marine industry worsening, the city state’s government has stepped in to prop it up. Among the measures introduced will be boosting the government International Enterprise Singapore finance scheme and bringing back government-backed bridging loans. 

Downstream & Shipping

-India Oil is planning a US$5.5 billion plan to upgrade its Nagapattinam plant, owned by subsidiary Chennai Petroleum Crop and Iran’s Nafitran Intertrade. The refinery is currently the smallest in India Oil’s portfolio, with capacity rising to 300 kb/d if and when the upgrade plan goes ahead. 

-A second Vietnam refining project has been cancelled this year. After Thailand’s PTT scrapped its project in July, the Can Tho refinery led by Vien Dong Investment has been cancelled. The small US$538 million project had a capacity of 40 kb/d. PetroVietnam’s second refinery in Nghi Son is also facing delays, casting doubt on its completion by July 2017. 

-With Singapore having banned floating storage and ship-to-ship (STS) transfers, competition to the Asian hub for oil products is heating up. The Malaysian state of Malacca is planning to spend nearly US$3 billion to build a port that it hopes will siphon off tanker, refuelling, repair and storage traffic away from Singapore. The project is led by T.A.G Marine and Linggi Base, backed by Chinese investors, which is part of the larger US$12.5 billion Kuala Linggi International Port project. 

Natural Gas & LNG

-Energy policy makers in Thailand are aiming to increase its imports of LNG to meet rising power demand, after the construction of new coal-fired plants have hit repeated delays. The Energy Ministry upped its target for LNG imports to 17.4 million tons in 2022 and 34 million tons by 2036. The previous target for 2036 was 23 million tons. Declining natural gas production in the Gulf of Thailand means that Thailand will have to look overseas to procure the LNG it requires for electricity generation. 

-The Japan Fair Trade Commission is probing the sales destination clauses of the country’s numerous LNG contracts. The clauses, long-time features of LNG sales contracts, restrict buyers from re-selling cargoes to third parties, which Japanese buyers have long disliked. With LNG moving into a buyer’s market, Japan is taking advantage of the supply overhang to re-dictate terms for its LNG contracts. 

-Once rivals, Singapore and Japan now appear to be joining forces to create a benchmark for the LNG market in Asia. The Singapore Exchange (SGX) and Japan’s Tokyo Commodity Exchange (TOCOM) have signed a memorandum of understanding to ‘jointly develop Asia’s LNG market’, a sign that instead of being rivals, the two countries could be friends in creating the first Asian LNG hub. Singapore, which already has the Singapore Sling and North Asia Sling LNG assessments, is the established hub for oil in Asia but lacks significant volumes. Japan, on the other hand, has huge volumes but is seen as too domestic-focused. Meanwhile, China has launched its first gas derivatives exchange in Shanghai last week. 

Have a productive week ahead!

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Crude Oil Prices: Changing Gear

In the last week, global crude oil price benchmarks have leapt up by some US$5/b. Brent is now in the US$66/b range, while WTI maintains its preferred US$10/b discount at US$56/b. On the surface, it would seem that the new OPEC+ supply deal – scheduled to last until April – is working. But the drivers pushing on the current rally are a bit more complicated.

Pledges by OPEC members are the main force behind the rise. After displaying some reticence over the timeline of cuts, Russia has now promised to ‘speed up cuts’ to its oil production in line with other key members of OPEC. Saudi Arabia, along with main allies the UAE and Kuwait, have been at the forefront of this – having made deeper-than-promised cuts in January with plans to go a bit further in February. After looking a bit shaky – a joint Saudi Arabia-Russia meeting was called off at the recent World Economic Forum in Davos in January – the bromance of world’s two oil superpowers looks to have resumed. And with it, confidence in the OPEC+ club’s abilities.

Russia and Saudi Arabia both making new pledges on supply cuts comes despite supply issues elsewhere in OPEC, which could have provided some cushion for smaller cuts. Iranian production remains constrained by new American sanctions; targeted waivers have provided some relief – and indeed Iranian crude exports have grown slightly over January and February – but the waivers expire in May and there is uncertainty over their extension. Meanwhile, the implosion in Venezuela continues, with the USA slapping new sanctions on the Venezuelan crude complex in hopes of spurring regime change. The situation in Libya – with the Sharara field swinging between closure and operation due to ongoing militant action – is dicey. And in Saudi Arabia, a damaged power repair cable has curbed output at the giant 1.2 mmb/d Safaniuyah field.

So the supply situation is supportive of a rally, from both planned and unplanned actions. But crude prices are also reacting to developments in the wider geopolitical world. The USA and China are still locked in an impasse over trade, with a March 1 deadline looming, after which doubled US tariffs on US$200 billion worth of Chinese imports would kick in. Continued escalation in the trade war could lead to a global recession, or at least a severe slowdown. But the market is taking relief that an agreement could be made. First, US President Donald Trump alluded to the possibility of pushing the deadline by 2 months to allow for more talks. And now, chatter suggests that despite reservations, American and Chinese negotiators are now ‘approaching a consensus’. The threat of the R-word – recession – could be avoided and this is pumping some confidence back in the market. But there are more risks on the horizon. The UK is set to exit the European Union at the end of March, and there is still no deal in sight. A measured Brexit would be messy, but a no-deal Brexit would be chaotic – and that chaos would have a knock-on effect on global economies and markets.

But for now, the market assumes that there must be progress in US-China trade talks and the UK must fall in line with an orderly Brexit. If that holds – and if OPEC’s supply commitments stand – the rally in crude prices will continue. And it must. Because the alternative is frightening for all.

Factors driving the current crude rally:

  • Renewed supply cut pledges from Russia and Saudi Arabia
  • Unplanned supply outages in Saudi Arabia
  • Supply issues in Venezuela, Iran and Libya
  • Optimism over a new US-China trade deal
February, 22 2019
“Lubricants Shelf” to Assess Engine Oil Market

Already, lubricant players have established their footholds here in Bangladesh, with international brands.

However, the situation is being tough as too many brands entered in this market. So, it is clear, the lubricants brands are struggling to sustain their market shares.

For this reason, we recommend an impression of “Lubricants shelf” to evaluate your brand visibility, which can a key indicator of the market shares of the existing brands. 

Every retailer shop has different display shelves and the sellers place different product cans for the end-users. By nature, the sellers have the sole control of those shelves for the preferred product cans.

The idea of “Lubricants shelf” may give the marketer an impression, how to penetrate in this competitive market. 

The well-known lubricants brands automatically seized the product shelves because of the user demand. But for the struggling brands, this idea can be a key identifier of the business strategy to take over other brands.

The key objective of this impression of “Lubricants shelf” is to create an overview of your brand positioning in this competitive market.

A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.

Why “Lubricants shelf” is key to monitor engine oil market?

The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.

And the situation is being worsened while so many by name products are taking the different shelves of different clusters. This market has become more overstated in terms of brand names and local products.

You may argue with us; lubricants shelves have no more space to place your new brands. You might get surprised by hearing such a statement. For your information, it’s not a surprising one.

Regularly, lubricants retailers have to welcome the representatives of newly entered brands.

And, business Insiders has depicted this lubricants market as a silent trade with a lot of floating traders.

On an assumption, the annual domestic demand for lubricants oils is around 100 million litres, whereas base oil demand around 140 million litres.

However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.

February, 20 2019
Your Weekly Update: 11 - 15 February 2019

Market Watch

Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b

  • Oil prices remains entrenched in their trading ranges, with OPEC’s attempt to control global crude supplies mitigated by increasing concerns over the health of the global economy
  • Warnings, including from The Bank of England, point to a global economic slowdown that could be ‘worse and longer-lasting than first thought’; one of the main variables in this forecast are the trade tensions between the US and China, which show no sign of being solved with President Trump saying he is open to delaying the current deadline of March 1 for trade talks
  • This poorer forecast for global oil demand has offset supply issues flaring up within OPEC, with Libya reporting ongoing fighting at the country’s largest oilfield while the current political crisis in Venezuela could see its crude output drop to 700,000 b/d by 2020
  • The looming new American sanctions on Venezuelan crude has already had concrete results, with US refiner Marathon Petroleum moving to replace Venezuelan crude with similar grades from the Middle East and Latin America
  • While Nicolas Maduro holds on to power, Venezuela’s opposition leader Juan Guaido has promised to scrap requirements that PDVSA keep a controlling stake in domestic oil joint ventures and boost oil production through an open economy when his government-in-power takes over
  • Despite OPEC’s attempts to stabilise crude prices, the US House has advanced the so-called NOPEC bill – which could subject the cartel to antitrust action – to a vote, with a similar bill currently being debated in the US Senate
  • The see-saw pattern in the US active rig count continues; after a net loss of 14 rigs last week, the Baker Hughes rig survey reported a gain of 7 new oil rigs and a loss of 3 gas rigs for a net gain of 4 rigs
  • While demand is a concern, global crude supply remains delicate enough to edge prices up, especially with Saudi Arabia going for deeper-than-expected cuts; this should push Brent up towards US$64/b and WTI towards US$55/b in trading this week


Headlines of the week

Upstream

  • Egypt is looking to introduce a new type of oil and gas contract to attract greater upstream investment into the country, aiming to be ‘less bureaucratic and more efficient’ with faster cost-recovery, ahead of a planned Red Sea bid round encompassing over a dozen concession sites
  • Lukoil has commenced on a new phase at the West Qurna-2 field in Iraq, with 57 production wells planned at the Mishrif and Yamama formation that could boost output by 80,000 boe/d to 480,000 boe/d in 2020
  • Aker BP has hit oil and natural gas flows at well 24/9-14 in the Froskelår Main prospect in the Alvheim area of the Norwergian Continental Shelf
  • Things continue to be rocky for crude producers in Canada’s Alberta province; production limits were increased last week after being previously slashed to curb a growing glut on news that crude storage levels dropped, but now face trouble being transported south as pipelines remain at capacity and crude-by-rail shipments face challenging economics

Midstream & Downstream

  • The Caribbean island of Curacao is now speaking with two new candidates to operate the 335 kb/d Isla refinery after its preferred bidder – said to be Saudi Aramco’s American arm Motiva Enterprises – withdrew from consideration to replace the current operatorship under PDVSA
  • America’s Delta Air Lines is now reportedly looking to sell its oil refinery in Pennsylvania outright, after attempts to sell a partial stake in the 185 kb/d plant failed to attract interest, largely due to its limited geographical position

Natural Gas/LNG

  • Total reports that it has made a new ‘significant’ gas condensate discovery offshore South Africa at the Brulpadda prospect in Block 11B/12B in the Outeniqua Basin, with the Brulpadda-deep well also reporting ‘successful’ flows of natural gas condensate
  • Italy’s Eni and Saudi Arabia’s SABIC have signed a new Joint Development Agreement to collaborate on developing technologies for gas-to-liquids and gas-to-chemicals applications
  • The Rovuma LNG project in Mozambique is charging ahead with development, with Eni looking to contract out subsea operations for the Mamba gas project by mid-March and ExxonMobil choosing its contractor for building the complex’s LNG trains by April
February, 15 2019