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Last Updated: July 5, 2018
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Market Watch

Headline crude prices for the week beginning 2 July 2018 – Brent: US$77/b; WTI: US$73/b

  • With the US taking a hardline position and pressing its allies to end all imports of Iranian crude by November, oil markets have tightened in anticipation of a severe shrinkage in supply.
  • While the US is saying that it will not offer any extensions or waivers on the November deadline, Iran has responded that it is ‘impossible’ to cut off Iranian supply in such a short time.
  • Japan and South Korea are reportedly considering cutting off Iranian imports – two years after happily re-embracing them – in response to America’s stance, but India and China will still take in volumes.
  • With the impending loss of Iranian volumes, President Donald Trump has demanded (on Twitter) that Saudi Arabia raise its output beyond what was agreed at the June 22 OPEC meeting to compensate. In response, Aramco stated that it has 2 million barrels of spare capacity but will be careful in how it plans to deploy it.
  • In North America, the shutdown of the Syncrude plant in Alberta, a key Canadian oil sand facility, by a transformer blast has pushed WTI beyond US$70/b, dramatically narrowing its spread with Brent as less oil flows to and from Cushing.
  • News that US crude production fell marginally by 2,000 b/d in April have tempered WTI prices, which got a boost last week as the EIA reported a ‘very bullish’ draw on US crude stockpiles.
  • Meanwhile, the leaders of ExxonMobil and Chevron have publicly fretted about the growing trade tensions instigated between the US and its allies, stating that it could ‘destabilise the global economy’.
  • US drillers cut the American active rig count for a second consecutive week, shutting down 4 oil rigs and 1 gas rig to bring the total count down to 1,047.
  • Crude price outlook: With the Iranian issue weighing heavily on the market and the Syncrude facility expected to out through July, we expect crude prices to remain in their current (high) ranges – US$77-78/b for Brent and US$73-74/b for WTI. 

Headlines of the week


  • Qatar Petroleum is reportedly looking to invest some US$20 billion into American oil and gas fields over five years, as it aims to keep up with the international investments made by its Middle Eastern rivals.
  • Angola is aiming to raise its crude output by 250,000 b/d to nearly 2 mmb/d by 2020, through a combination of new energy legislation, more favourable investment terms and direct plans with ExxonMobil and Equinor.
  • Ethiopia is preparing for its first crude oil tests in the Ogaden basin with Chinese help, as it aims to exploit a resource that is estimated to hold some 8 tcf of natural gas and promising crude wells in Ogaden’s Hilala and Calub.
  • Eni has reported a small, but significant, new oil discovery at Angola’s Bloc 15/06 in the Kalimba offshore area, with some 230-300 barrels in place.
  • Pan-African firm Oranto Petroleum will begin exploring for oil in Zambia after winning two blocks, which could be Zambia’s first ever oil output.
  • Shell has officially exited the Majnoon field in Iraq, handing it over to the state’s Basra Oil Co, which is still in search for a new partner to replace Shell.


  • The US has proposed a biofuels blending mandate of 19.88 billion gallons for 2019, some 3% higher than last year’s mandate, in line with expectations.

Natural Gas/LNG

  • As India rethinks its decision to split up state gas utility firm GAIL, the company remains on the hunt to feed India’s growing LNG demand, but is now demanding deals lasting only 10, not 20, years for flexibility.
  • CNOOC is planning to build a new LNG receiving terminal in Jiangsu, expected to be completed in December 2020 for US$2.17 billion.
  • The first Russian Arctic LNG shipment through the Northern Sea Route (NSR) to Asia has begun, paving the way for a busy summer NSR season as ice thaws.
  • Poland’s state gas firm PGNiG has signed long-term agreements to import some 2 mtpa of LNG from Port Arthur LNG and Venture Global LNG each, with shipments beginning delivery in 2023.
  • As US exports of LNG grows, the Panama Canal Authority is planning to ramp up movement of LNG tankers through the crucial transport point, allowing ships to traverse the canal at night and two at a time at Lake Gatun.
  • Hoping to continue its streak of Egyptian gas discoveries, Eni is preparing to begin drilling exploration wells at the Noor field in North Sinai.
  • Shell has sanctioned development of the Fram gas field in the North Sea, its third project approval in the ageing basin this year, following Alligin in the west Shetlands with BP and Penguins in January.
  • South Korea’s Kogas has joined Total and Novatek as a partner for the Arctic LNG 2 project in Siberia’s Gydan Peninsula, aiming to capitalise on the shorter Northern Sea Route to offtake LNG volumes.


  • The founding family of Japanese refiner Idemitsu has reportedly dropped its opposition to a planned merger with Showa Shell Sekiyu, paving the way for an end to a drawn-out battle between the board and the family.

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The United States now exports crude oil to more destinations than it imports from

As U.S. crude oil export volumes have increased to an average of 2.8 million barrels per day (b/d) in the first seven months of 2019, the number of destinations (which includes countries, territories, autonomous regions, and other administrative regions) that receive U.S. exports has also increased. Earlier this year, the number of U.S. crude oil export destinations surpassed the number of sources of U.S. crude oil imports that EIA tracks.

In 2009, the United States imported crude oil from as many as of 37 sources per month. In the first seven months of 2019, the largest number of sources in any month fell to 27. As the number of sources fell, the number of destinations for U.S. crude oil exports rose. In the first seven months of 2019, the United States exported crude oil to as many as 31 destinations per month.

This rise in U.S. export destinations coincides with the late 2015 lifting of restrictions on exporting domestic crude oil. Before the restrictions were lifted, U.S. crude oil exports almost exclusively went to Canada. Between January 2016 (the first full month of unrestricted U.S. crude oil exports) and July 2019, U.S. crude oil production increased by 2.6 million b/d, and export volumes increased by 2.2 million b/d.

monthly U.S. crude oil production and exports

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

The United States has also been importing crude oil from fewer of these sources largely because of the increase in domestic crude oil production. Most of this increase has been relatively light-sweet crude oil, but most U.S. refineries are configured to process medium- to heavy-sour crude oil. U.S. refineries have accommodated this increase in production by displacing imports of light and medium crude oils from countries other than Canada and by increasing refinery utilization rates.

Conversely, the United States has exported crude oil to more destinations because of growing demand for light-sweet crude oil abroad. Several infrastructure changes have allowed the United States to export this crude oil. New, expanded, or reversed pipelines have been delivering crude oil from production centers to export terminals. Export terminals have been expanded to accommodate greater crude oil tanker traffic, larger crude oil tankers, and larger cargo sizes.

More stringent national and international regulations limiting the sulfur content of transportation fuels are also affecting demand for light-sweet crude oil. Many of the less complex refineries outside of the United States cannot process and remove sulfur from heavy-sour crude oils and are better suited to process light-sweet crude oil into transportation fuels with lower sulfur content.

The U.S. Energy Information Administration’s monthly export data for crude oil and petroleum products come from the U.S. Census Bureau. For export values, Census trade data records the destinations of trade volumes, which may not be the ultimate destinations of the shipments.

October, 23 2019
Recalibrating Singapore’s Offshore Marine Industry

The state investment firm Temasek Holdings has made an offer to purchase control of Singaporean conglomerate Keppel Corp for S$4.1 billion. News of this has reverberated around the island, sparking speculation about what the new ownership structure could bring – particularly in the Singaporean rig-building sector.

Temasek already owns 20.5% of Keppel Corp. Its offer to increase its stake to 51% for S$4.1 billion would see it gain majority shareholding, allowing a huge amount of strategic flexibility. The deal would be through Temasek’s wholly-owned subsidiary Kyanite Investment Holdings, offering S$7.35 per share of Keppel Corp, a 26% premium of the traded price at that point. The financial analyst community have remarked that the bid is ‘fair’ and ‘reasonable’, and there appears to be no political headwinds against the deal being carried out with the exception of foreign and domestic regulatory approval.

The implications of the deal are far-ranging. Keppel Corp’s business ranges from property to infrastructure to telecommunications, including Keppel Land and a partial stake in major Singapore telco M1. Temasek has already said that it does not intend to delist and privatise Keppel Corp, and has a long-standing history of not interfering or getting involved in the operations or decisions of its portfolio companies.

This might be different. Speculation is that this move, if successful could lead to a restructuring of the Singapore offshore and marine industry. Since 2015, Singapore’s rig-building industry has been in the doldrums as global oil prices tumbled. Although prices have recovered, cost-cutting and investment reticence have provided a slower recovery for the industry. In Singapore, this has affected the two major rigbuilders – Keppel O&M and its rival Sembcorp Marine. In 2018, Keppel O&M reported a loss of over SS$100 million (although much improved from its previous loss of over SS$800 million); Sembcorp Marine, too, faces a challenging market, with a net loss of nearly 50 million. Temasek itself is already a majority shareholder in Sembcorp Marine.

Once Keppel Corp is under Temasek’s control, this could lead to consolidation in the industry. There are many pros to this, mainly the merging of rig-building operations and shipyards will put Singapore is a stronger position against giant shipyards of China and South Korea, which have been on an asset buying spree. With the overhang of the Sete Brasil scandal over as both Keppel O&M and Sembcorp Marine have settled corruption allegations over drillship and rig contracts, a merger is now increasingly likely. It would sort of backtrack from Temasek’s recent direction in steering away from fossil fuel investments (it had decided to not participate in the upcoming Saudi Aramco IPO for environmental concerns) but strengthening the Singaporeans O&M industry has national interest implications. As a representative of Temasek said of its portfolio – ‘(we are trying to) re-purpose some businesses to try and grasp the demands of tomorrow.’ So, if there is to be a tomorrow, then Singapore’s two largest offshore players need to start preparing for that now in the face of tremendous competition. And once again it will fall on the Singaporean government, through Temasek, to facilitate an arranged marriage for the greater good.

Keppel and Sembcorp O&M at a glance:

Keppel Offshore & Marine, 2018

  • Revenue: S$1.88 billion (up from S$1.80 billion)
  • Net Profit: -S$109 million (up from -S$826 million)
  • Contracts secured: S$1.7 billion

Sembcorp Marine, 2018

  • Turnover: S$4.88 billion (up from S$3.03 billion)
  • Net Profit: -S$48 million (down from S$157 million)
  • Contracts secured: S$1.2 billion
October, 22 2019
Global energy consumption driven by more electricity in residential, commercial buildings

Energy used in the buildings sector—which includes residential and commercial structures—accounted for 20% of global delivered energy consumption in 2018. In its International Energy Outlook 2019 (IEO2019) Reference case, the U.S. Energy Information Administration (EIA) projects that global energy consumption in buildings will grow by 1.3% per year on average from 2018 to 2050. In countries that are not part of the Organization for Economic Cooperation and Development (non-OECD countries), EIA projects that energy consumed in buildings will grow by more than 2% per year, or about five times the rate of OECD countries.

building sector energy consumption

Source: U.S. Energy Information Administration, International Energy Outlook 2019 Reference case

Electricity—the main energy source for lighting, space cooling, appliances, and equipment—is the fastest-growing energy source in residential and commercial buildings. EIA expects that rising population and standards of living in non-OECD countries will lead to an increase in the demand for electricity-consuming appliances and personal equipment.

EIA expects that in the early 2020s, total electricity use in buildings in non-OECD countries will surpass electricity use in OECD countries. By 2050, buildings in non-OECD countries will collectively use about twice as much electricity as buildings in OECD countries.

average annual change in buildings sector electricity consumption

Source: U.S. Energy Information Administration, International Energy Outlook 2019 Reference case
Note: OECD is the Organization for Economic Cooperation and Development.

In the IEO2019 Reference case, electricity use by buildings in China is projected to increase more than any other country in absolute terms, but India will experience the fastest growth rate in buildings electricity use from 2018 to 2050. EIA expects that use of electricity by buildings in China will surpass that of the United States by 2030. By 2050, EIA expects China’s buildings will account for more than one-fifth of the electricity consumption in buildings worldwide.

As the quality of life in emerging economies improves with urbanization, rising income, and access to electricity, EIA projects that electricity’s share of the total use of energy in buildings will nearly double in non-OECD countries, from 21% in 2018 to 38% in 2050. By contrast, electricity’s share of delivered energy consumption in OECD countries’ buildings will decrease from 24% to 21%.

building sector electricity consumption per capita by region

Source: U.S. Energy Information Administration, International Energy Outlook 2019 Reference case
Note: OECD is the Organization for Economic Cooperation and Development.

The per capita use of electricity in buildings in OECD countries will increase 0.6% per year between 2018 and 2050. The relatively slow growth is affected by improvements in building codes and improvements in the efficiency of appliances and equipment. Despite a slower rate of growth than non-OECD countries, OECD per capita electricity use in buildings will remain higher than in non-OECD countries because of more demand for energy-intensive services such as space cooling.

In non-OECD countries, the IEO2019 Reference case projects that per capita electricity use in buildings will grow by 2.5% per year, as access to energy expands and living standards rise, leading to increased use of electric-intensive appliances and equipment. This trend is particularly evident in India and China, where EIA projects that per capita electricity use in buildings will increase by 5.3% per year in India and 3.6% per year in China from 2018 to 2050.

October, 22 2019