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Last Updated: May 4, 2020
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Headline crude prices for the week beginning 27 April 2020 – Brent: US$16/b; WTI: US$14/b

  • Crude oil prices remain in the doldrums after a week of see-saw prices, with traders attempted to ascertain the extent of demand destruction while also shifting their focus to the new OPEC+ supply deal
  • Signs that major economies were slowly emerging from the Covid-19 pandemic – ahead of crucial summer demand season – were adding drops of optimism to the sentiment pool; China is now almost back to full operation, while fatality and case rates in the US, Europe and Asia were also on the decline
  • The major concern is storage: there is already too much oil – crude and refined – sloshing around the world, and storage capacity worldwide is already hitting its limit, as players seek new, novel ways to hoard oil
  • Saudi Arabia has begun throttling its production down to 8.5 mmb/d, while Kuwait, Algeria and the UAE had already begun reducing production earlier; but all eyes will be on Russia, as well as overall adherence to the quotas
  • WTI prices also took a tumble as the United State Oil Fund LP – the largest oil exchange-traded funds (ETF) – announced it would sell out its June WTI contracts, adding to the glut in the market and highlighting the risk of another bloodbath when the WTI June contract expires on May 20
  • The Covid-19 pandemic is also affecting major upstream projects; cases are on the risk in Novatek’s Arctic LNG 2 project in Russia and Total’s Afungi LNG site in Mozambique, while clusters have been reported in the UK North Sea, which could jeopardise the industry there amid the Brexit uncertainty
  • The US active rig count continues to chart new recent lows, losing 64 rigs (60 oil, 4 gas) to bring the total number of operating rigs to 465, with the main losses predictably being in the onshore sector as offshore rigs remained flat
  • Oil prices are slowly recovering on the market’s twin hopes of the Covid-19 pandemic easing and the OPEC+ supply deal biting off a major portion of disappeared demand; expect Brent to trade in the US$22-26/b range, with WTI further back at US$15-18/b range

  

Headlines of the week

Upstream

  • After almost a year of regular renewals, the US government has decided not to renew Chevron’s waiver to operate in Venezuela despite sanctions, in an effort to place more pressure on Nicolas Maduro; the decision also affects four service providers: Halliburton, Schlumberger, Baker Hughes and Weatherford
  • Despite postponing drilling campaigns elsewhere, Thailand’s PTTEP is moving ahead with its plans to on two wildcat explorations in Peninsular Malaysia’s Block 415 and PM407, which it picked up in March 2019
  • Total is to purchase Tullow Oil’s whole interest in the Uganda Lake Albert development – including the East African Crude Pipeline – for US$575 million
  • Indonesia has announced that the PB-1 oil discovery in Central Sumatra’s onshore Mahato permit contains some 61.8 billion barrels of oil in place
  • Despite a hedging strategy that proved to be canny in the face of an oil price collapse, Mexico’s Pemex is now looking to halt production at new oilfields – some 20 fields with output estimated at 50,000 b/d at peak – and refine more
  • Pertamina has officially cut its 2020 target for new drilling and upstream output, aiming to cut output by 3% to 894,000 b/d from the previous 923,000 b/d
  • Consolidation continues in the US shale patch, as Oklahoma-based Empire Petroleum Corp acquired upstream and midstream assets in the Eagle Ford basin’s Ft. Trinidad field from Pardus Oil & Gas
  • Chevron has sold its non-operating interest in the Azeri-Chirag-Deepwater Gunashli (ACG) oil fields to Hungary’s MOL for some US$1.57 billion

Midstream/Downstream

  • Fujairah, the Middle East’s oil storage hub, may be getting new storage capacity, as Brooge Petroleum and Gas Investment announced plans to advance its Phase III facilities to add 2.1-3.5 cbm of space for crude and refined products; the Phase III plans also include a possible associated refinery
  • After the dramatic downfall of Singapore’s Hin Leong Trading, Sinopec is now reportedly in talks with the trader to purchase the 2.33 million cbm Universal Terminal in Singapore, which could fetch some US$1.5 billion
  • Portugal’s Galp Energia will be suspending operation at its 220 kb/d Sines refinery on a lack of storage space for a fuels glut; Galp had already shut its smaller Matosinhos refinery in early April, bringing all refining to a halt
  • South African petchems giant Sasol is looking to sell a large stake in its US$13 billion Lake Charles chemicals complex, aiming for a possible joint venture
  • Indonesia will be shutting down the 260 kb/d Balikpapan refinery in East Kalimantan in early May as domestic demand for fuels shrivels up; the shutdown will also affect the 120 kb/d upgrade project planned for the site

Natural Gas/LNG

  • Sempra Energy’s Cameron LNG has entered the final commissioning stage for Cameron LNG Phase 1 project in Louisiana, introducing pipeline gas to the final of three liquefaction trains with a total capacity of 12 million tpa
  • Woodside and its partners have begun offshore surveys in Myanmar’s offshore ultra-deep Block A-6, which is expected to strike natural gas
  • Qatar Petroleum has struck a deal with China’s Hudong-Zhonghua Shipbuilding Group to reserve the latter’s upcoming shipbuilding capacity to expand its LNG carrier fleet, in preparation for the ongoing North Field expansion projects
  • Indonesia’s Medco Energi has announced a new offshore gas discovery, at the offshore South Natuna Sea Block B

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Where to buy your Gun Parts from?

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May, 20 2022
High Oil Prices and Indonesia’s Ban on Oil Palm Exports

Supply chains are currently in crisis. They have been for a long time now, ever since the start of the Covid-19 pandemic reshaped the way the world works. Stressed shipping networks and operational blockages – coupled with China’s insistence on a Covid-zero policy – means that cargo tanker rates are at an all-time high and that there just aren’t enough of them. McDonalds and KFCs in Asia are running out of French fries to sell, not because there aren’t enough potatoes in Idaho, but because there aren’t enough ships to deliver them to Japan or to Singapore from Los Angeles. The war in Ukraine has placed a particular emphasis on food supply chains by disrupting global wheat and sunflower oil supply chains and kicking off distressingly high levels of food price inflation across North Africa, the Middle East and Asia. It was against this backdrop that Indonesia announced a complete ban on palm oil exports. That nuclear option shocked the markets, set off a potential new supply chain crisis and has particular implications on future of crude oil pricing and biofuels in Asia.  

A brief recap. Like most of Asia, Indonesia has been grappling with food price inflation as consequence of Covid-19. Like most of Asia, Indonesia has been attempting to control this through a combination of shielding its most vulnerable citizens through continued subsidies while attempting to optimise supply chains. Like most of Asia, Indonesia hasn’t been to control the market at all, because uncoordinated attempts across a wide spectrum of countries to achieve a similar level of individual protectionism is self-defeating.

Cooking oil is a major product of sensitive importance in Indonesia, and one that it is self-sufficient in as a result of its status as the world’s largest palm oil producer. So large is Indonesia in that regard that its excess palm oil production has been directed to increasingly higher biodiesel mandates, with a B40 mandate – diesel containing 40% of palm material – originally schedule for full implementation this year. But as palm oil prices started rising to all-time highs at the beginning of January, cooking oil started becoming scarcer in Indonesia. The government blamed hoarding and – wary of the Ramadan period and domestic unrest – implemented a Domestic Market Obligation on palm oil refineries, directing them to devote 20% of projected exports for domestic use. Increasingly stricter terms for the DMO continued over February and March, only for an abrupt U-turn in mid-March that removed the DMO completely. But as the war in Ukraine drove prices even further, Indonesia shocked the market by announcing an total ban on palm oil exports in late April. Chaotically, the ban was first clarified to be palm olein only (straight refining cooking oil), but then flip-flopped into a total ban of crude palm oil as well. Markets went haywire, prices jumped to historical highs and Indonesia’s trading partners reacted with alarm.

Joko Widodo has said that the ban will be indefinite until domestic cooking oil prices ‘moderate’. With the global situation as it is, ‘moderate’ is unlikely to be achieved until the end of 2022 at least, if ‘moderate’ is taken to be the previous level of palm oil prices – roughly half of current pricing. Logistically, Indonesia cannot hold out on the ban for more than two months. Only a third of Indonesia’s monthly palm oil production is consumed domestically; the rest is exported. An indefinite ban means that not only fill storage tanks up beyond capacity and estates forced to let fruit rot, but Indonesia will be missing out on crucial revenue from its crude palm oil export tax. Which is used to fund its biodiesel subsidies.

And that’s where the implications on oil come in. Indonesia’s ham-fisted attempt at protectionism has dire implications on biofuels policies in Asia. Palm oil prices within Indonesia might sink as long as surplus volumes can’t make it beyond the borders, but international palm oil prices will remain high as consuming countries pivot to producers like Malaysia, Thailand, Papua New Guinea, West Africa and Latin America. That in turn, threatens the biodiesel mandates in Thailand and Malaysia. The Thai government has already expressed concern over palm-led food price inflation and associated pressure on its (subsidised) biodiesel programme, launching efforts to mitigate the worst effects. Malaysia – which has a more direct approach to subsidised fuels – is also feeling the pinch. Thailand’s move to B10 and Malaysia’s move to B20 is now in jeopardy; in fact, Thailand has regressed its national mandate from B7 to B5. And the reason is that the differential between the bio- and the diesel portion of the biodiesel is now so disparate that subsidy regimes break down. It would be far cheaper – for the government, the tax-payers and consumers – to use straight diesel instead of biodiesel, as evidenced by Thailand’s reversal in mandates.

That, in turn, has implications on crude pricing. While OPEC+ is stubbornly sticking to its gentle approach to managing global crude supply, the stunning rebound in Asian demand has already kept the consumption side tight to match that supply. Crude prices above US$100/b are a recipe for demand destruction, and Asian economies have been preparing for this by looking at alternatives; biofuels for example. In the past four years, Indonesia has converted some of its oil refineries into biodiesel plants; in China, stricter crude import quotas are paving the way for China to clamp down on its status of a fuels exporter in favour of self-sustainability. But what happens when crude prices are high, but the prices of alternatives are higher? That is the case for palm oil now, where the gasoil-palm spread is now triple the previous average.

Part of this situation is due to market dynamics. Part of it is due to geopolitical effects. But part of it is also due to Indonesia’s knee-jerk reaction. Supply disruption at the level of a blanket ban is always seismic and kicks off a chain of unintended consequences; see the OPEC oil shocks of the 70s. Indonesia’s palm oil export ban is almost at that level. ‘Indefinite’ is a vague term and offers no consolation to markets looking for direction. Damage will be done, even if the ban lasts a month. But the longer it lasts – Indonesian general elections are due in February 2024 – the more serious the consequences could be. And the more the oil and refining industry in Asia will have to think about their preconceived notions of the future of oil in the region.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$110-1113/b, WTI – US$105-110/b
  • As the war in Ukraine becomes increasingly entrenched, the pressure on global crude prices as Russian energy exports remain curtailed; OPEC+ is offering little hope to consumers of displaced Russian crude, with no indication that it is ready to drastically increase supply beyond its current gentle approach
  • In the US, the so-called NOPEC bill is moving ahead, paving the way for the US to sue the OPEC+ group under antitrust rules for market manipulation, setting up a tense next few months as international geopolitics and trade relations are re-evaluated

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May, 09 2022
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An online shop is a type of e-commerce website where the products are typically marketed over the internet. The online sale of goods and services is a type of electronic commerce, or "e-commerce". The construction supply online shop makes it all the more convenient for customers to get what they need when they want it. The construction supply industry is on the rise, but finding the right supplier can be difficult. This is where an online store comes in handy.

Nowadays, everyone is shopping online - from groceries to clothes. And it's no different for construction supplies. With an online store, you can find all your supplies in one place and have them delivered to your doorstep. Construction supply online shops are a great way to find all the construction supplies you need. They also offer a wide variety of products from different suppliers, making it easier for customers to find what they're looking for. A construction supply online shop is essential for any construction company. They are the primary point of contact for the customers and they provide them with all the goods they need.

Most construction supply companies have an online shop where customers can purchase everything they need for their project, but some still prefer to use brick-and-mortar stores instead, so it’s important to sell both in your store.

Construction supply is an essential part of any construction site too. Construction supply shops are usually limited to the geographic area where they are located. This is because, in order for construction supplies to be delivered on time, they must be close to the construction site that ordered them. But with modern technology and internet connectivity, it has become possible for people to purchase their construction supplies online and have them shipped right to their doorstep. Online stores such as Supply House offer a wide variety of products that can help you find what you need without having to drive around town looking for it.

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