Feb 01, 2021
Mar 01, 2021
In this week’s highlights: OPEC+ is set to decide production policy for April and beyond; power auctions begin in the United Kingdom; European gas stocks hit significant lows; and the UK sugar beet industry looks set to avoid pesticides.
Gas stocks slump on strong withdrawals
UK capacity market auctions open
Mar 02, 2021
At 11:05 am Singapore time (0305 GMT), the ICE Brent May contract was down 96 cents (1.5%) from the March 1 settle to $62.73/b, while the April NYMEX light sweet crude contract fell $1.07/b (1.76%) to $59.57/b.
The fall in crude prices was precipitated by a stronger US dollar, which makes purchasing oil more expensive for buyers using other currencies. At 10:54 am, the March US Dollar Index futures on ICE was trading at 91.235, up 0.388% from the March 1 settle of 91.036.
Contributing to the downturn was jitters ahead of the March 4 OPEC+ meeting, which is expected to offer guidance into the coalition’s production plan going forward.
“Crude oil fell as traders look ahead nervously to the OPEC meeting later this week,” ANZ analysts said in a March. 2 note.
The coalition has currently taken out 7.2 million b/d of crude production — roughly 7% of pre-pandemic supply — and can increase supply by up to 500,000 b/d each month, as per the agreement struck on Dec. 3, 2020.
The March 4 meeting, however, could potentially see oil production rising by up to 1.5 million b/d, as Saudi Arabia is also expected to announce whether it will extend its voluntary additional 1 million b/d cut, scheduled to end after March.
Analysts believe that given rising global oil demand, the market can likely absorb a 1.5 million b/d increase in oil production. However, these analysts have also cautioned that such a large increase in supply could spook the market, and lead to a downward price correction.
The meeting may see some contention among coalition members, some of whom such as Saudi Arabia, remain conservative, with others, such as Russia, are keen to increase supply given oil’s impressive rally.
“Brent crude has rallied nearly 30% this year as stimulus measures and the vaccine rollout raised hopes of stronger demand…this could see alliance members once again turn to the kingdom to provide the bulk of support to the market, even if others call for higher quotas,” ANZ analysts said.
In inventory data, commercial crude stocks in the US are expected to have increased 1.3 million barrels to around 464.3 million barrels in the week ended Feb. 26, analysts surveyed by S&P Global Platts said. The build would put inventories 0.4% behind the five-year average of US Energy Information Administration data, opening the first deficit to the average since late March 2020.
The weekly inventory reports from the American Petroleum Institute and the EIA, are due to be released later March 2 and March 3, respectively.
S&P Global Platts is to include US WTI Midland crude in its Dated Brent benchmark — the world’s biggest crude benchmark — in a major…
Feb 22, 2021
Platts on Feb. 22 announced a number of changes to come into effect in July 2022, reflecting the decline of traditional North Sea crude grades such as Brent, as well as increasing flows of US shale oil into Europe.
It also said the entire price assessment process, including the five grades already included, will switch to a CIF Rotterdam basis, meaning crudes will be assessed on the basis of deliveries into Europe’s largest trading hub, rather than including loadings at terminals around the region.
“These changes provide significant additional volume and will ensure the continued robustness of the Brent complex for the next decade and beyond,” according to Vera Blei, Platts’ head of oil markets price reporting.
“We also see it as a natural reflection of how the European refining sector has evolved. WTI Midland has really become a mainstay in the European refining slate,” she told journalists.
Platts, which publishes the daily Dated Brent assessment that underpins the majority of the world’s oil trade, first asked for feedback on the addition in 2018.
With the industry globally needing a reliable benchmark for physical crude, changes have been impelled by declines in North Sea output. UK production from fields such as Brent is now almost two-thirds lower than 2000 levels, at little more than 1 million b/d, with Norway now Western Europe’s most prolific producer and refiners relying on crudes from around the world.
WTI Midland, produced in the Permian basin, has similar properties to conventional North Sea grades, being slightly lighter in gravity and having similar sulfur content to Norwegian grades.
The inclusion of a crude loaded as far away as the Gulf of Mexico has contributed to the switch to assessing crude prices on a delivered basis. This should simplify the overall price assessment process, and potentially any addition of other crudes in future, Platts said.
Deliveries of WTI Midland from ports in the Gulf of Mexico are expected to be in the region of 500,000 b/d, likely exceeding loadings of the current biggest contributor to the benchmark, Forties.
Together with the existing grades — Brent/Ninian, Forties, Oseberg, Ekofisk, and Troll — “the combined flow of light sweet crude including WTI Midland into the Northwest European market routinely exceeds 1.3 million b/d, a healthy volume of fungible crude oil grades for a robust benchmark,” Platts said.
A number of technical issues will be finalized in the run-up to the change, including potential changes to trading terms in the related Cash BFOE market, which will be subject to further industry workshops, Platts said.
Platts will publish a WTI Midland assessment on a CIF Rotterdam basis starting July of this year.
Having consulted market participants, “Platts has found widespread support for the inclusion of WTI Midland in Dated Brent, Cash BFOE and all related assessments,” it said.
“Platts has also received feedback supporting simplified assessments that will more effectively and efficiently reflect these flows into Northwest Europe,” it said. “Both the inclusion of WTI Midland and a move to a fully-delivered benchmark will better reflect the modern fundamentals of the European crude oil market.”
The last new grade to be included in the benchmark was Norway’s Troll crude, in 2018.
However, the US shale boom of the last decade and the end of curbs on US crude exports in 2015 have made US crude a growing presence in Europe, sought after by refiners.
Any quality adjustment relating to WTI Midland will take place after its inclusion in the benchmark, Platts said.
For inclusion in the process, cargoes would have to meet certain criteria relating to quality and the port of loading and be declared at the time of loading, it added.
Feb 01, 2021
Dec 07, 2020
Connecting the upstream and trading communities As the oil community comes to terms with the past year, the industry faces a long and bumpy road…
Jun 15, 2021
As the oil community comes to terms with the past year, the industry faces a long and bumpy road ahead. What lies in store for the markets as the world emerges from a severe economic downturn as a result of the global pandemic, how do we expect the markets to rebound, and where does the energy transition fit into all of this?
Join us to better understand how upstream markets are adapting in this time of great uncertainty.
– Understand what the key market drivers are for 2021 – explore the geopolitical and macroeconomic landscape; Biden’s first 5 months in presidency, latest OPEC negotiations, and how economic recovery is looking globally
– Explore the current supply landscape; including how market dynamics have shifted amongst all of the chaos
– Gain insights onto the latest demand recovery outlook – including how the downstream industry has coped and adapted in light of recent events.
– Hear perspectives on what might be in store for the industry in the long term, including financing the industry in light of ESG and capex reductions.
The Uinta Basin in Utah is the producing area of the US Rocky Mountains. Its production has declined in recent years for two reasons: the…
Feb 15, 2021
The Uinta Basin in Utah is the producing area of the US Rocky Mountains. Its production has declined in recent years for two reasons: the region’s isolation and the gooey, waxy crude produced from it.
We spoke with Mark Hemphill, senior vice president for the Rio Grande Pacific Corp. He is project manager for the Uinta Basin Railway, an 85-mile, $1.5 billion project to bring Uinta Basin crude to a connecting point with two Class I railroads near Kyune Pass, Utah.
Commodity prices, as assessed by S&P Global Platts, are hitting fresh highs, sparking a debate around a potential supercycle. Goldman Sachs’ global head of commodity…
Feb 22, 2021
Commodity prices, as assessed by S&P Global Platts, are hitting fresh highs, sparking a debate around a potential supercycle.
Goldman Sachs’ global head of commodity research Jeff Currie, who identified the last supercycle in the early 2000s spoke with Platts associate director Paul Hickin about why and how it’s different this time around, what it means for oil, copper and the energy transition, as well as the outlook for demand, US shale and OPEC+.
Jan 18, 2021
London — Sheikh Ahmed Zaki Yamani, the former long-serving Saudi oil minister who died Feb. 23, helped bring the kingdom onto the world stage as…
Feb 23, 2021
The plainspoken Yamani held his powerful post for 25 years starting in 1962, when Saudi Arabia’s oil industry was still in its infancy.
Less than two decades later, Saudi production had soared to around 10 million b/d, making the kingdom the world’s largest crude exporter and generating enormous wealth.
Along the way, Yamani helped OPEC member states wrest control of their crude production from the international oil companies that had previously held sway, and he imposed Saudi Arabia’s — and OPEC’s — market power as oil demand steadily rose in the developed world.
“Ahmed Zaki Yamani was an outstanding icon of the world of oil and the leading light in OPEC,” the organization’s secretary general, Mohammed Barkindo, said in a statement. “I recall vividly and with fondness his patience and graciousness at our meetings. He was an active listener who when he spoke, everyone paid attention with what I call pin-drop silence.”
In 1973, Yamani led OPEC’s Arab states in embargoing oil exports to the US over its support for Israel in the Yom Kippur war, an economically devastating move that resulted in severe gasoline shortages and long queues at service stations. The episode still reverberates strongly in American politics today.
That was also when Saudi Arabia began to nationalize the Arabian American Oil Co. — ultimately transforming it into Saudi Aramco in 1988, two years after Yamani’s tenure as minister ended.
At an OPEC meeting in 1975, he was briefly taken hostage along with several other oil ministers and officials by the Venezuelan terrorist known as Carlos the Jackal, who threatened to execute him before releasing all hostages two days later.
Having survived his brush with death, in 1979 Yamani sought to help oil consuming countries by increasing Saudi crude production to offset much of Iran’s losses in the wake of its revolution, though it was not enough to prevent another price spike.
By the mid-1980s, as ascendant North Sea producers brought new supplies online, prices began a multi-year slump, prompting OPEC to impose quotas in a bid to prop up the market. But tired of cheating by other members, Saudi Arabia boosted supply in 1985-86 through a price war that forced crude down below $10/b. This strategy ultimately cost Yamani his job, as the fiscal pain proved too much for Saudi Arabia to bear. He was dismissed in 1986 and replaced by Hisham Nazer.
“He will remain an integral part of the history of the oil industry because he played a significant role in shaping it,” independent oil analyst Anas Alhajji said.
As the oil head of its biggest member, Yamani was the de facto leader of OPEC — as whoever holds the post of Saudi energy minister remains today — and his comments, closely monitored by traders, would regularly move the oil market. He remains OPEC’s longest serving minister to date.
OPEC is a much more cautious organization now, maintaining that it tries to keep its decisions on production policy apolitical and aims to promote market stability instead.
After his tenure as minister, Yamani founded an energy thinktank and a private equity firm.
Yamani’s best known quote appears to have presaged the global energy transition decades in advance, when he was reported to have said in 1973: “The Stone Age did not end because the world ran out of stones, and the oil age will end long before we run out of oil.”
Born in the holy Islamic city of Mecca in 1930, the 90-year-old Yamani died in London, Saudi state media reported, after a long battle with illness.
Faiza al-Husseini, vice president of consultancy Husseini Energy, said Yamani’s legacy also includes building Aramco’s multi-billion cubic feet Master Gas System, one of the kingdom’s biggest energy projects that boosted the Saudi petrochemical industry in the industrial developments of Jubail and Yanbu, while reducing the amount of crude oil burned to produce electricity.
“Zaki Yamani was a visionary leader at a time when the world was struggling to cope with the steep increase in demand for crude oil,” she said.