Last week in world oil:
-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.
-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.
-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.
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Anthony Rizzo Players Can't Sit On Bench According to a report from the Chicago Sun-Times, the world-famous Anthony Rizzo Phrase "Zombie Rizzo" has been told to never be used again. Of course, this is not the first time that the Zombified Chicago Cubs' first baseman has made headlines this year. A year ago, "Rosebud" was the catchphrase that he coined for himself. Also, there is Anthony Rizzo Shirts that come in his name. Now that the Cubs are World Series Champions, Anthony Rizzo is on his way to superstardom. He is leading the World Series in several categories, including hits, runs, home runs, RBI's, OBP, and SLG. Also, he's on track for a staggering year in hits, RBI's, and total bases, all while being second in home runs.
The Cubs Phenom
This season the Chicago Cubs are over 3.5 million in earnings from the local broadcasts alone. The Cubs could lose a good deal of local revenue if they fail to get back to the World Series. But the local revenue is not the biggest factor in the Cub's success. A large part of their success comes from two of their most popular players, third baseman Kris Bryant and first baseman Anthony Rizzo. These two players are now the favorites to win the MVP awards this year, especially if the Cubs are able to stay on top of the wild card standings. A Look at Rizzo Anthony Rizzo is often compared to his college teammate Andrew McCutchen. Both players have performed well at the plate.
The wood pellet mill, that goes by the name of a wood pellet machine, or wood pellet press, is popular in lots of countries around the world. With all the expansion of "biomass energy", there are now various production technologies utilized to convert biomass into useable electricity and heat. The wood pellet machines are one of the typical machines that complete this task.
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What Is A Wood Pellet Mill?
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The Benefits Of A Wood Pellet Mill
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How To Maintain A Wood Pellet Mill
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It was shaping up to yet another dull OPEC+ meeting. Cut and dry. Copy and paste. Rubber-stamping yet another monthly increase in production quotas by 432,000 b/d. Month after month of resisting pressure from the largest economies in the world to accelerate supply easing had inured markets to expectations of swift action by OPEC and its wider brethren in OPEC+.
And then, just two days before the meeting, chatter began that suggested something big was brewing. Whispers that Russia could be suspended made the rounds, an about-face for a group that has steadfastly avoided reference to the war in Ukraine, calling it a matter of politics not markets. If Russia was indeed removed from the production quotas, that would allow other OPEC+ producers to fill in the gap in volumes constrained internationally due to sanctions.
That didn’t happen. In fact, OPEC+ Joint Technical Committee commented that suspension of Russia’s quota was not discussed at all and not on the table. Instead, the JTC reduced its global oil demand forecast for 2022 by 200,000 b/d, expecting global oil demand to grow by 3.4 mmb/d this year instead with the downside being volatility linked to ‘geopolitical situations and Covid developments.’ Ordinarily, that would be a sign for OPEC+ to hold to its usual supply easing schedule. After all, the group has been claiming that oil markets have ‘been in balance’ for much of the first five months of 2022. Instead, the group surprised traders by announcing an increase in its monthly oil supply hike for July and August, adding 648,000 b/d each month for a 50% rise from the previous baseline.
The increase will be divided proportionally across OPEC+, as has been since the landmark supply deal in spring 2020. Crucially this includes Russia, where the new quota will be a paper one, since Western sanctions means that any additional Russian crude is unlikely to make it to the market. And that too goes for other members that haven’t even met their previous lower quotas, including Iraq, Angola and Nigeria. The oil ministers know this and the market knows this. Which is why the surprise announcement didn’t budge crude prices by very much at all.
In fact, there are only two countries within OPEC+ that have enough spare capacity to be ramped up quickly. The United Arab Emirates, which was responsible for recent turmoil within the group by arguing for higher quotas should be happy. But it will be a measure of backtracking for the only other country in that position, Saudi Arabia. After publicly stating that it had ‘done all it can for the oil market’ and blaming a lack of refining capacity for high fuel prices, the Kingdom’s change of heart seems to be linked to some external pressure. But it could seemingly resist no more. But that spotlight on the UAE and Saudi Arabia will allow both to wrench some market share, as both countries have been long preparing to increase their production. Abu Dhabi recently made three sizable onshore oil discoveries at Bu Hasa, Onshore Block 3 and the Al Dhafra Petroleum Concession, that adds some 650 million barrels to its reserves, which would help lift the ceiling for oil production from 4 to 5 mmb/d by 2030. Meanwhile, Saudi Aramco is expected to contract over 30 offshore rigs in 2022 alone, targeting the Marjan and Zuluf fields to increase production from 12 to 13 mmb/d by 2027.
The UAE wants to ramp up, certainly. But does Saudi Arabia too? As the dominant power of OPEC, what Saudi Arabia wants it usually gets. The signals all along were that the Kingdom wanted to remain prudent. It is not that it cannot, there is about a million barrels per day of extra production capacity that Saudi Arabia can open up immediately but that it does not want to. Bringing those extra volume on means that spare capacity drops down to critical levels, eliminating options if extra crises emerge. One is already starting up again in Libya, where internal political discord for years has led to an on-off, stop-start rhythm in Libyan crude. If Saudi Arabia uses up all its spare capacity, oil prices could jump even higher if new emergencies emerge with no avenue to tackle them. That the Saudis have given in (slightly) must mean that political pressure is heating up. That the announcement was made at the OPEC+ meeting and not a summit between US and Saudi leaders must mean that a façade of independence must be maintained around the crucial decisions to raise supply quotas.
But that increase is not going to be enough, especially with Russia’s absence. Markets largely shrugged off the announcement, keeping Brent crude at US$120/b levels. Consumption is booming, as the world rushes to enjoy its first summer with a high degree of freedom since Covid-19 hit. Which is why global leaders are looking at other ways to tackle high energy prices and mitigate soaring inflation. In Germany, low-priced monthly public transport are intended to wean drivers off cars. In the UK, a windfall tax on energy companies should yield US$6 billion to be used for insulating consumers. And in the US, Joe Biden has been busy.
With the Permian Basin focusing on fiscal prudence instead of wanton drilling, US shale output has not responded to lucrative oil prices that way it used to. American rig counts are only inching up, with some shale basins even losing rigs. So the White House is trying more creative ways. Though the suggestion of an ‘oil consumer cartel’ as an analogue to OPEC by Italian Prime Minister Mario Draghi is likely dead on arrival, the US is looking to unlock supply and tame fuel prices through other ways. Regular releases from the US Strategic Petroleum Reserve has so far done little to bring prices down, but easing sanctions on Venezuelan crude that could be exported to the US and Europe, as well as working with the refining industry to restart recently idled refineries could. Inflation levels above 8% and gasoline prices at all-time highs could lead to a bloody outcome in this year’s midterm elections, and Joe Biden knows that.
But oil (and natural gas) supply/demand dynamics cannot truly start returning to normal as long as the war in Ukraine rages on. And the far-ranging sanctions impacting Russian energy exports will take even longer to be lifted depending on how the war goes. Yes, some Russian crude is making it to the market. China, for example, has been quietly refilling its petroleum reserves with Russian crude (at a discount, of course). India continues to buy from Moscow, as are smaller nations like Sri Lanka where an economic crisis limits options. Selling the crude is one thing, transporting it is another. With most international insurers blacklisting Russian shippers, Russian oil producers can still turn to local insurance and tankers from the once-derided state tanker firm Sovcomflot PJSC to deliver crude to the few customers they still have.
A 50% hike in OPEC’s monthly supply easing targets might seem like a lot. But it isn’t enough. Especially since actual production will fall short of that quota. The entire OPEC system, and the illusion of control it provides has broken down. Russian oil is still trickling out to global buyers but even if it returned in full, there is still not enough refining capacity to absorb those volumes. Doctors speak of long Covid symptoms in patients, and the world energy complex is experiencing long Covid, now with a touch with geopolitical germs as well. It’ll take a long time to recover, so brace yourselves.
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