Energy in the new era

China is expected to export between 1.7 million mt (466,000 b/d) and 2 million mt (548,000 b/d) of gasoline in November and over 2 million mt in December, substantially higher compared with the 1 million mt it exported in October, analysts and market sources said Dec. 1. And should this happen, would likely exert downward pressure on regional gasoline crack spreads. Asia's largest gasoline exporter is expected to further lift its gasoline outflows by the end of 2022 in a bid to support its economy by encouraging exporters to exhaust their remaining export quotas. According to General Administration of Customs data, the country's gasoline exports stood at 662,000 mt in September, jumping 51.8% to 1 million mt in October. "Chinese oil companies will try their best to maximize the usage of their oil product export quotas, in a bid to push up the country's total goods export volumes and economy performance," said Sun Sijia, an analyst with S&P Global Commodity Insights. Beijing released 37.25 million mt of clean oil product export quotas in 2022. In January-October, China exported 23.2 million mt of gasoline, gasoil and jet fuel, the GAC data showed, leaving 14.05 million mt of quota yet to be used in November and December. "To boost exports as an economic indicator and earn more US dollars, related government authorities may work together with the refineries to facilitate and smoothen the logistics, helping the volume to hit a record high," a Beijing-based analyst said. China's domestic demand in November was weak amid tight movement restrictions, with capital city Beijing and manufacturing hubs Guangzhou, Chongqing under strict COVID control, while refining throughput was likely to hit a nine-month high. This would leave sufficient gasoline for export, market sources said. Sun said the Chinese government may alter COVID-19 restrictions frequently, resulting in an erratic impact on domestic gasoline demand. She added that people in China would continue to prefer to stay home to avoid infection and private cars remain the choice mode of transportation given rigid travel guidelines. Meanwhile, the country's estimated gasoline export volumes in 2023 remain subjected to next year's export quotas, which Chinese exporters are eagerly awaiting updates on, sources said. Expectations of China continuing to export large volumes of gasoline moving forward could possibly bolster overall gasoline supplies and exert a downward pressure on cracks, industry sources said. Several market participants also said that gasoline prices could also be weighed down by reduced demand from Malaysia following the end of the Nov. 19 general elections. However, other market participants said Malaysia's gasoline demand could be bolstered amid the school holiday period. Reflecting the softening sentiment, Platts-assessed front month FOB Singapore 92 RON gasoline swap crack spread against Brent swaps stood at 78 cents/b Dec. 1, down from $1.47/b on Nov. 30, S&P Global data showed. The physical FOB Singapore 92 RON gasoline crack against front month ICE Brent crude oil futures was assessed at $2.07/b Dec. 1, down from $3.33/b at the Asian close Nov. 30.

The last remaining European buyers of sour baseload crude Urals are now searching for alternatives to the Russian grade in order to fulfill contracts and ensure refinery throughput, after its Dec. 5 ban by the EU, marking a seismic shift in the European refinery slates. Kazakh crude CPC Blend has seen increasing demand as a light grade that can be easily blended with alternative sour crudes to produce a medium sour Urals alternative. One sour trader said they had purchased CPC Blend and Iraq's Basrah Medium in order to run them together to produce Urals for a term contract buyer. Kurdish Blend Test crude and CPC Blend were also being run together as Urals replacements, the trader said. Basrah Medium was heard to be flowing to Europe more in the last month, a second sour trader said, adding: "It's a substitute for Urals." Kpler shipping data supports this view with 77,000 b/d more Basrah Medium flowing to Europe in October compared with September. Some 377,000 b/d was bound for Europe in October compared with 129,000 b/d in December 2021, the last full month of voyage data before the war in Ukraine. Shipping data for KBT reveals a steadily increasingly flow of the medium sour grade toward Mediterranean refineries. In October, KBT exports to Europe soared to 359,000 b/d, up 129,000 b/d on the month, according to Kpler. "The KBT [price] is trending lower," a third sour trader said, adding that it was trying to attract Urals buyers with strong discounts. This comes as Iraqi oil marketer SOMO lowered the official selling price for all its grades in November in a surprise move to claim greater market share in Europe. "[SOMO and Saudi Aramco] have to make the prices palatable to compete with other regions like Latin American and other sour producers," another sour trader said. Turning to the North Sea, traders said there was growing expectation that Forties would be run with Johan Sverdrup as an alternative to the Urals baseload. "There's more interest in Forties as it [Urals] will be illegal in Europe in 30 days," said a North Sea trader, with a second saying it was "expected" there would be more interest in Forties in the December trading cycle. Another alternative for sour traders has come from the sweeter Libyan grade Es Sider that has caught the attention of buyers as production spikes and OSPs remain competitive. Es Sider is a sweeter grade than medium sour Urals but is often deemed too sulfurous for sweet buyers in the Mediterranean basin. "Libyan is competitive as usual and the OSP is cheap," said a Mediterranean trader, highlighting that it is attractive to buyers n the region as they looked for a cheap baseload grade. Platts, part of S&P Global Commodity Insights, last assessed Es Sider Nov.3 at a 1 cent/b discount to Dated Brent. KEBCO As European Urals purchases fade ahead of the Dec. 5 embargo, Kazakh-origin Urals (KEBCO) has risen in prominence as a Mediterranean sour marker. Platts last assessed KEBCO at a $16/b discount to Dated Brent on a CIF Augusta basis, $7.94/b higher than Russian Urals Nov. 3. "90% of Mediterranean refineries can now take KEBCO," the second sour trader said, highlighting the rise in importance of the medium sour grade. They added that it was now pricing independently of Urals as a standalone marketed grade. However, the third sour trader said some end-users were still wary of the grade as it transports through the Russian pipeline system leading to the molecules comingling. "With the Dec. 5 Embargo coming in, more and more people definitely realize they have to be cautious on these purchases," they added. Kpler shipping data reveals more buyers in the KEBCO market. In the first month of data in August, 75% of cargoes of Kazakh-origin crude went to a KMG-owned refinery in Romania, but in the most recent month of data in October that number has declined to 33% with buyers from Spain, Italy, Rotterdam and Poland joining the list of new KEBCO buyers.

Beijing has been stepping up efforts to tighten supervision and standardize operations of its refining sector. It launched a series of investigations on refineries beginning April 2021. The latest round of inspections this month will focus mainly on tax issues, as small-scale private refiners often fail to fulfill their tax obligations in an attempt to stay competitive. In this podcast, S&P Global Commodity Insights' experts Philip Vahn , Asia oil market managing editor and Oceana Zhou and Daisy Xu , senior analysts covering China market discuss Beijing's latest tax investigation and its impact on independent refineries’ future operations. Subscribe to Platts Dimensions Pro for access to assessments and premium content covering Platts Gasoline Unl 92 FOB Spore Cargo ( PGAEY00 ), Platts Gasoil FOB Spore Cargo ( POABC00 ) and much more. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

The days of vaccine certificates and COVID-19 tests for travel are long gone for most, and yet jet fuel demand doesn’t seem to have fully recovered from the pandemic. S&P Global Commodity Insights reporters Virginie Malicier and Maxim Kotenev tell Francesco Di Salvo how record-high physical premiums have led to a flurry of eastern cargoes sailing to Europe, and how short-staffed airlines and airports have had to cap passenger capacity growth despite ample pent-up travel appetite. Check our Jet CIF NWE Cargo assessment (PJAAU00) on Platts Dimensions Pro. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Commodity markets are on red alert. Economic warning signs are coming in thick and fast with skyrocketing inflation in Europe and the US, rising interest rates and slowing economic growth. Industrial metals are leading the decline lower, with energy and agriculture prices also off their March peaks amid a weakening demand outlook. Russia’s supply side risks and China’s recovery uncertainty will also shape the direction of commodity markets as 2023 looks set for a bumpy year. Click here to see the full-size infographic

Japan will start formal policy discussions July 28 to introduce a fourth round of refining regulations aimed at boosting the processing volume of vacuum residue, with preferential treatment expected for efforts to decarbonize the refining process, sources told S&P Global Commodity Insights July 26. The talks will be launched by the Ministry of Economy, Trade and Industry's natural resources and fuel committee, which will present ideas for new regulations and review regulatory responses from the last round that expired at the end of March, the METI sources said. The new regulations would likely follow the framework of the third round of regulations, with new elements relating to decarbonization efforts by refiners to be considered as part of the regulatory response, the sources said. The refiners' potential use of blue and green hydrogen instead of gray hydrogen in the refining process could be considered among the decarbonization efforts, the sources added. The third round of regulations required refiners to achieve a national target vacuum residue ratio, the daily residual processing volume as a percentage of the daily crude processing volume, of 7.5% by the end of March 2022. Given a significant drop in Japanese refiners' refining volumes in the past two years because of the pandemic-led demand slump, Petroleum Association of Japan President Tsutomu Sugimori said March 22 that "It will be difficult to achieve." "However, we are in the midst of emergency situations such as the coronavirus pandemic and the Ukraine issues, so that we expect to see some sort of mitigation," Sugimori added at the time. Previous regulations The third round of regulations introduced in 2017 focused on increasing processed volumes at residue cracking units across Japan's refining fleet with improvements in productivity. The previous two rounds of regulations had led to a reduction in Japan's overall crude distillation capacity. The third round of regulations required refiners to increase processing volumes of vacuum residue by the end of fiscal year 2021-22 (April-March) from baseline average volumes processed over FY 2014-15 to FY 2016-17. Under its definition, vacuum residue has a true boiling point of more than 565 degrees Celsius. This includes atmospheric residue, vacuum residue, vacuum gasoil and other residues processed at fluid catalytic cracking and residue fluid catalytic cracking and cokers. In order to comply with the third round of regulations, refiners had been expected to revamp their facilities, including carrying out work to upgrade pumps and change catalysts to be able to process more residues at units such as FCCs, RFCCs and cokers by the end of March 2022. Japan's nameplate refining capacity was 3.5188 million b/d across 22 refineries as of March 31, 2017 down 7.1% from 3.7897 million b/d earlier, following local refiners' response to the earlier rounds of refining regulations. The country's operable refining capacity stood at 3.4578 million b/d across 21 refineries at the end of March 2022.

US President Joe Biden just wrapped up a trip to the Middle East with a closely watched visit to Saudi Arabia. His national security director signaled that the success of his oil diplomacy will be judged in the coming weeks, not immediately. So will OPEC+ agree to increase production at its Aug. 3 meeting to help ease global prices? Ellen Wald, president of Transversal Consulting and senior nonresident fellow at the Atlantic Council's Global Energy Center, spoke with senior editor Meghan Gordon about the debate around Saudi Arabia's spare oil capacity, US-Saudi relations, and how Russia likely loomed over the talks. Stick around after the interview for Jordan Blum with the Market Minute, a look at near-term oil market drivers. Related content: Biden presses Saudi leaders to act through OPEC+ to increase oil supply in coming weeks High stakes for oil markets, Mideast security as Biden heads to Saudi Arabia Oil production test looms for OPEC heavyweights Saudi Arabia, UAE More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Russia has long supplied European and US markets with fuel oil. In light of the war in Ukraine, where is this fuel going and how can the usual buyers make up the shortfall? S&P Global Commodity Insights reporters David Petutschnig and Chloe Davies discuss with Joel Hanley how the dynamics of high sulfur fuel oil and vacuum gasoil are changing fast. Explore our special report Inside Fujairah: A gateway for energy and commodities in the Middle East More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Demand for transportation fuels has been picking up in Asia, as higher vaccination rates and improved mobility push regional economies to open up to near pre-pandemic levels. Global oil supplies, however, are not keeping pace with this recovering demand. China's move to inject more fuel supplies into the Asian market by way of a supplementary second round of oil products export quotas in early June is unlikely to help prop up regional demand-supply balances. Moreover, China's oil product exports in 2022 are likely to fall from 2021 levels as Beijing aims to minimize outflows to meet its net-zero target. Refining margins for clean transportation fuels like gasoil, jet/kero and gasoline skyrocketed to historical highs earlier this month. Even as cracks have inched lower since, expectations are these valuations will stay elevated in the foreseeable future. In this podcast, S&P Global Commodity Insights' Rajesh Nair , Su Yeen Cheong , Oceana Zhou and Zhuwei Wang shed light on the current situation and discuss the scenarios that are likely to play out in the Asian clean fuels markets in the near to medium term. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Platts, part of S&P Global Commodity Insights, is seeking feedback on whether Russian material is part of the open spot market reflected in Platts European benchmark gasoline, LPG, and jet fuel assessments Platts has observed that an increasing number of market participants are restricting material from Russia, in part or entirely, in their spot gasoline, LPG, and jet fuel trading activity. Platts is seeking immediate feedback on whether the basis definition of open origin for its gasoline, LPG, and jet fuel assessments should continue to include Russian-origin material, or whether it should reflect the market move toward trading non-Russian material. Unless otherwise stated, Platts benchmark assessments in these markets currently reflect an open-origin basis, which could potentially include Russian-origin supply. All Platts assessments reflect merchantable commodities. Platts gasoline, LPG, and jet fuel assessments include FOB and CIF cargo markets in Northwest Europe and the Mediterranean, as well as FOB barges and coasters and FCA rail assessments. Platts is seeking clarity on whether participants in all these markets are adopting a similar stance with regard to Russian-origin material. Platts has already excluded Russian product from its European naphtha, diesel, and gasoil cargo assessments. The relevant subscriber notes are available here and here. Please send all immediate feedback, questions, or comments to Europe_Products@spglobal.com and PriceGroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by S&P Global for public viewing. S&P Global will consider all comments received and will make comments not marked as confidential available to the public upon reque

In this episode of the Oil Markets podcast, light ends pricing editors Sarah Hernandez and Jordan Daniel and US clean products manager Matthew Kohlman discuss the record-high gasoline prices that are impacting drivers across the US. They discuss historically low inventories, how a shortage of octanes is driving up prices for premium grades, what the outlook is for gasoline demand, and prices through the rest of the summer. This Oil Markets podcast was produced by Jennifer Pedrick in Houston. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

Existing open origin diesel, gasoil cargo assessments exclude Russian origin from June 1 New CIF NWE ULSD cargo assessment launched June 1, reflecting all origins Seeking more feedback on Russian-origin material in ARA barge markets Effective June 1, Platts, part of S&P Global Commodity Insights, no longer reflects Russian-origin product in its open origin European diesel and gasoil cargo assessments. At the same time, Platts has launched a new assessment for ULSD cargoes CIF NWE reflecting all origins. The decision by Platts follows a review into the continued inclusion of Russian-origin material in its European diesel and gasoil assessments, announced in a subscriber note published April 14: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/041422-s-p-global-seeks-feedback-on-russian-product-in-platts-european-diesel-gasoil-assessments Feedback gathered from the market, as well as observed market activity in recent weeks, had shown a significant move away from Russian-origin material in the spot market. Platts had observed that many market participants were now restricting material from Russia, in part or entirely, in their spot diesel and gasoil trading activity. Platts assessments reflect the value at which a standard, repeatable transaction for merchantable material takes place, or could take place, in the open spot market at arms length. Although Russian product continues to flow to the European market, Platts understands that it is not trading on the same basis as product from other origins in the spot market, and that there is a difference in value between Russian and non-Russian product. As a result, with effect from June 1, the Platts assessments listed below exclude Russian-origin product. ASSESSMENT DETAILS: From June 1, the Platts European diesel and gasoil cargo assessments consist of: Diesel Outright assessments: CIF Open origin* Restricted origin (excluding Russia) All origins (including Russia) ULSD 10 ppm CIF NWE: AAVBG00 ULSD 10 ppm CIF NWE (restricted origin): AAURO00 ULSD 10 ppm CIF NWE (all origin): ALORA00 Diesel 10 ppm CIF NWE**: AAWZC00 Diesel 10 ppm CIF NWE (restricted origin)**: AATRO00 Diesel 10 ppm UK cargo CIF NWE: AAVBH00 Diesel 10 ppm UK cargo CIF NWE (restricted origin): AAVRO00 Diesel 10 ppm UK cargo CIF NEW Basis UK MOPS diff: AUKMA00 ULSD 10 ppm CIF Med Cargo: AAWYZ00 FOB Open origin* ULSD 10 ppm FOB NWE: AAVBF00 ULSD 10ppm FOB NWE**: AAWZD00 ULSD 10 ppm FOB Med Cargo: AAWYY00 Diesel Spread assessments: Restricted origin spreads (restricted origin vs open origin*) All origin spread (all origin vs open origin*) ULSD 10 ppm Cargoes CIF NWE restricted origin spread: AAURP00 ULSD 10 ppm Cargoes CIF NWE All Origin Spread: ALORB00 Diesel 10ppm Cargoes CIF NWE restricted origin spread**: AATRP00 Diesel 10ppm UK Cargoes CIF NWE restricted origin spread: AAVRP00 Gasoil 0.1% Outright assessments: CIF Open origin* Gasoil 0.1%S CIF NWE Cargo: AAYWS00 Gasoil 0.1%S CIF Med: AAVJJ00 FOB Open origin* Gasoil 0.1%S FOB NWE Cargo: AAYWR00 Gasoil 0.1%S FOB Med: AAVJI00 *From June 1, all open origin European diesel and gasoil cargo assessments exclude Russia-origin product **basis CIF Le Havre The calculations for the associated freight netback and freight netforward European gasoil and diesel assessments remain unchanged as of June 1. However, Platts continues to monitor prevailing trade flows and review the plausible load ports in these calculations, including the continued inclusion of Russian load ports. NEW CIF NWE ULSD CARGO ASSESSMENT: Platts understands that there continues to be a flow of Russian product into Europe, and market feedback has suggested a continued need for transparency in this market. As such, Platts has launched a new assessment for ULSD cargoes CIF NWE (all origins), which reflects material from all origins, including Russia. Other parameters and specifications of the new assessment are the same as the existing ULSD 10 ppm CIF NWE cargo assessment (AAVBG00). Platts is publishing the outright value of this new assessment in $/mt, as well as the spread reflecting the value of cargoes from all origins versus restricted origin cargoes. SEEKING MORE FEEDBACK ON ARA BARGES: Platts understands there are logistical differences between the Amsterdam-Rotterdam-Antwerp barge market and European cargo markets, particularly around the demonstration of origin of product. As such, Platts has invited further feedback on whether Russian-origin material should also be excluded from its European diesel and gasoil barge assessments, and how origin of product would be demonstrated in these markets. Please send any feedback, questions or comments to europe_products@spglobal.com and pricegroup@spglobal.com. For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.

Asian gasoil and gasoline cracks have surged in May, amid the war between Russia and Ukraine that started in late February. Asian refineries are looking to raise run rates or delay their planned maintenance this spring to meet the demand. In this podcast, S&P Global Commodity Insights' experts— Jonathan Nonis, Reetika Porwal and Joshua Ong from the Platts pricing team and J.Y. Lim, advisor for Asia-Pacific oil markets -- discuss the contributing factors and the future trajectory of the markets. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

The recent round of Q1 earnings calls for US refiners and upstream producers were almost unanimously upbeat. Crude prices of $100+/b oil and unusually high natural gas prices, coupled with changing oil flows from the war in Ukraine, have sparked buoyant US diesel demand while the need for energy security has led to a climbing rig count in both the domestic shale patch and more offshore projects. Americas oil news director Jeff Mower sits down with senior downstream editor Janet McGurty and senior upstream editor Starr Spencer to discuss recent trends and future outlooks for US producers and refiners. This Oil Markets podcast was produced by Jennifer Pedrick in Houston. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).

From the maximization of middle distillates yields by refiners to the impact of Chinese lockdowns on the Asia petrochemical sector, our editors explore the implication for European gasoline's blending margins. In this episode of the Oil Markets podcast, EMEA refined products associate editorial director Francesco Di Salvo speaks with gasoline editor Lucy Brown and naphtha editor Vinicius Maffei about the reasons for the record spread between gasoline and naphtha in Northwest Europe, a key measure of blending economics. This Oil Markets podcast was produced by Jennifer Pedrick in Houston. More listening options: No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P).