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India offers potential for long-term oil demand growth as the economy is set to grow at a robust pace, shifting the focus from China where oil demand could peak much earlier, delegates said at the Asia Pacific Petroleum Conference 2023 organized by S&P Global Commodity Insights."China has been supporting the global crude demand for the past 20 years, but in the coming three to five years, China's demand is going to peak and then it will start to decline. The global market has to look at India or other countries for demand resilience," FGE Chairman Fereidun Fesharaki told a panel on China, India and Russia.S&P Global Commodity Insights shared similar views on the trend."Peak oil demand in China will come earlier than in India where demand may continue to keep growing for much longer given the relative lower base, economic expansions and a young population," said Kang Wu, global head of demand research at S&P Global.Indian refiners attending APPEC also said the country's peak oil demand was nowhere near as it is still pursuing refinery expansion plans."China's demand will taper off a little but countries like India are coming up and the demand is growing. India will continue to require oil and gas maybe for a couple of decades, although it would transition and move over to renewables by that time," said Vivek Tongaonkar, finance director and CFO at Mangalore Refinery & Petrochemicals.Postpandemic recoveryOn the short-term outlook for oil demand, speakers said 2023 would turn out to be the last year of demand recovery from COVID-19. From 2024 onward, the rate of growth would start to slow down."This year, world oil demand will grow by 2.4 million b/d but next year it could be 1.2 million b/d," Fesharaki said.Kang from S&P Global highlighted slightly different numbers, saying world oil demand is expected to increase by 2.2 million b/d in 2023, with China contributing about 942,000 b/d. Jet fuel demand, which is estimated to rise 1 million b/d in 2023, will be the main driver of the global oil demand recovery from COVID-19."Looking into 2024, global jet fuel demand is expected to increase by about 440,000 b/d, primarily driven by international airlines. While the global oil demand growth will slow to around 1.67 million b/d next year before a likely demand peak in 2027," Kang added.Asia's total oil demand is forecast to increase 3.8%, or 1.39 million b/d, year over year to 38.1 million b/d in 2023, according to S&P Global.Russian crude flowsRussia has sprung to become India's top crude oil supplier in 2023. India received 1.82 million b/d of crude oil from Russia, accounting for approximately 37.2% of total crude imports from January to August. This is a jump from the same period last year when India imported only around 470,000 b/d crude oil from Russia, constituting roughly 10.2% of total imports, S&P Global data showed.India was actively buying Russian crude because of the discounts offered as well as the ability of the country's refiners to process those crudes, APPEC delegates said."Indian refineries have very high Nelson Complexity Index. They are well positioned to process both heavy and sour crudes, as well as Russian crudes. Although heavy and sour crudes are preferred, the discounts on Russian crude have been good enough to attract those volumes to the country," Sanjay Choudhuri, finance director at Numaligarh Refinery Ltd., said.India's crude oil imports from Russia are projected to constitute 35%-40% of overall imports in 2023, which could translate to around 1.9 million to 2.2 million b/d, as long as Russian prices remain competitive compared to alternative sources, such as the Middle East and Africa, according to S&P Global.Russian volumes to China have also grown following the Russia-Ukraine war but at a much lower rate than prewar levels."Before the war, China was anyway importing about 1.6 million-1.6 million b/d of Russian oil. Now, it has risen to about 2 million b/d/ So the growth is not that huge, compared to what we have seen in India. The bulk of the incremental growth in China has come due to buying by the independent refiners," Kang said.But he added that the overall volumes of Russian oil flowing to China and India may have reached the peak and there may not be bandwidth for the two countries to take in more.Russian seaborne oil exports fell to an 11-month low in August, according to tanker tracking data, as heavy refining maintenance hit oil products exports while output cut pledges and Black Sea tensions continued to limit crude flows. Total Russian shipped crude and oil products exports averaged 5.27 million b/d, the lowest since September 2022 and 650,000 b/d below prewar levels, according to S&P Global Commodities at Sea data.Russia-origin seaborne crude shipments averaged 3 million b/d in August, little changed on the month, but about 800,000 b/d lower compared with the April-May average and below the average prewar levels of 3.1 million b/d, CAS data showed. Crude shipments to India, currently Russia's biggest oil buyer, fell to a six-month low in August, the data showed.
Asian and Persian Gulf refineries will continue to depend heavily on Middle Eastern crude grades as their staple diet, regardless of price swings and changes in key benchmark spreads, because there's a limit to how much light sweet US crude would be able to take up the refiners' crude slate, industry executives and trading sources said at the Asia Pacific Petroleum Conference 2023 organized by S&P Global Commodity Insights.OPEC and its allies are expected to maintain the tight supply strategy for a lengthy period and aggressive output cuts led by top producing members, including Saudi Arabia, have supported benchmark crude prices and the Dubai price structure, industry executives and refinery sources said during early panel discussions and networking sessions Sept. 4."The [OPEC+ production cuts] have been relatively successful ... Benchmark Platts Dated Brent has been pretty stable between $72/b and $88/b for nearly a year now," said Vitol CEO Russell Hardy during a panel discussion."The prices are going to the point of equilibrium where sour crude economics, which should always be better than sweet economics, have sort of evened up.""Prices have been elevated due to the OPEC+ [production cut] activities ... Saudi Arabia is clearly meeting its goal," said Ben Luckock, cohead of oil trading at commodities trading house Trafigura during a panel discussion.Despite the production cuts, top OPEC and Middle Eastern producers have ensured their term supplies to Asian buyers remain stable. Asian refiners would look to secure base feedstock requirements from Persian Gulf suppliers, even if the rising Dubai market structure and higher Middle Eastern official selling prices could impact refining margins, executives and delegates said.Major Middle Eastern OPEC members may have led the production cuts but they have respected Asia's demand and monthly term lifting allocations have not been reduced, delegates of an Indian and a Japanese refiner told S&P Global on the sidelines of APPEC."Saudi Arabia wants their consumers to be satisfied," Luckock said.Saudi Arabia said it will continue its 1 million b/d voluntary cut that is holding crude production at a two-year low of 9 million b/d through at least September. Still, Saudi Aramco has fully met Asian buyers' nominations for September-loading term crude oil supply, S&P Global reported previously.Narrowing Brent-Dubai spread A sharp downtrend seen in the Brent-Dubai benchmark price spread due to strength in the Persian Gulf market structure could lure Asian traders to take more sweet crudes from the US and elsewhere, but many Asian refiners would continue to seek and depend heavily on Middle Eastern sour crudes, the executives and trading sources said.The Brent-Dubai Exchange of Futures for Swaps, or EFS, spread -- a key indicator of Brent's premium to the Middle Eastern benchmark -- flipped to negative at minus 19 cents/b on Aug. 24, marking the lowest spread since minus 22 cents/b on Oct. 20, 2020, S&P Global data showed. A negative EFS spread makes various sweet crude grades produced in the Americas, North Sea and Africa linked to the European Dated Brent benchmark more economical compared with Dubai-linked grades for Asian refiners.Still, many new complex and highly sophisticated refineries in India, Kuwait, China and others broadly prefer to buy sour crude, though there's not enough of Middle Eastern sour crude supplies to go around, Hardy said.Echoing this were South Korean and Japanese refinery delegates at APPEC, who said their mainstay would continue to be Middle Eastern sour crude grades. Price swings, such as the Brent-Dubai spread flipping to negative, only present short-term opportunities to procure more light sweet US crude."South Korean refineries are configured and designed to crack heavy high sulfur crude at maximum efficiency, so Middle Eastern sour grades will always be the primary feedstock," said a trading and logistics manager at a South Korean refiner on the sidelines of APPEC."We are flexible enough to take a lot of sweet [US and African grades] as well and the current EFS really works well for more US imports, but the staple Middle Eastern sour crude feed structure will never change.""I think Japan would take the chance to buy a few light sweet US crude cargoes depending on the arbitrage window, but Saudi Arabian and UAE crude is the primary fit feedstock for Japanese [refining] system," said a delegate representing a Japanese refiner.The US became the fifth largest crude supplier to Japan in July, when the Asian consumer imported 2.18 million barrels, or 70,211 b/d, compared with nil imports in the year ago and more than four times from 478,260 barrels, or 15,942 b/d, in June, latest data from the Ministry of Economy, Trade and Industry showed.Still, around 2.43 million b/d, or around 95% of Japan's total crude imports of 2.554 b/d during the first seven months, were sourced from the Middle East, the data showed.
With increasing demand for alternatives to fossil-fuel based products, Daniel Evans, Head of Fuels and Refining for S&P Global Commodity Insights, discusses how refinery customers are looking to reduce emissions and remain profitable.Find out more at APPEC 2023
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In an interview with Rob Westervelt of Chemical Week, Lummus CEO Leon de Bruyn said that the company's new technology for converting crude oil directly into chemicals is gaining traction in the market. De Bruyn said that the technology is more efficient and produces lower emissions than traditional methods of chemical production. He also said that the company is already seeing interest from potential customers.Find out more at the World Petrochemical Conference 2024
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Click here to access the interactive Platts Periodic Table of OilThe 6th edition as of September 2023 includes:New carbon intensity data, focusing on upstream emissions of 51 crude gradesUpdates Platts Dated Brent data to include WTI MidlandNew technology – click through option and reset button addedUpdated crude assay and price data for 150 of the world's most traded crude gradesThe uneven pace of the global energy transition along with Russia’s war in Ukraine continues to impact every corner of the oil market.With redirected oil flows, supply disruption and a market increasingly under pressure from energy security concerns and demand destruction, the quality of oil has never been more important.The medium sour barrel -- the most frequently processed oil in refineries -- has experienced the biggest change in oil flows.This is why the editorial team at S&P Global Commodity Insights has created the 6th edition of the interactive Periodic Table of Oil with new crude grades, carbon intensity values, a design refresh and enhanced technology to help customers plan and make more informed decisions in rapidly changing volatile markets.The market value of a crude grade has traditionally been defined by its density and sulfur content, but as the oil sector looks to better understand the emissions associated with producing different grades, carbon intensity is emerging as an important metric in price discovery.S&P Global now evaluates the carbon intensity of crude production for almost 100 oil fields. The results show a wide spectrum, from as low as 1.67 kg of carbon dioxide equivalent per barrel of production for Norway's Johan Sverdrup field, up to 527 kgCO2e/b for the Orinoco Belt in Venezuela.There are hundreds of different grades and varieties produced around the world, from light sour Murban in the UAE to Guyana's medium sweet Liza and Mexican heavy-sour Maya crude.This interactive chart allows readers to find key information in one place on region of origin, price, trade volumes, sulfur content, viscosity, carbon intensity, trade flows and benchmarks.Click here to access the interactive Platts Periodic Table of Oil
China's crude oil imports from Saudi Arabia and Russia are showing signs of a rebound in August after declines in July, but those gains are not likely to last as refineries wait for the next announcement on import quotas. Saudi Arabia's crude shipment to China are averaging 1.9 million b/d in August, up from 1.3 million b/d a month earlier, while Russia inflows are at 1.38 million b/d, up on month from 1.36 million b/d, according to Kpler shipping data. Imports from Saudi Arabia were at a 12-month low of 1.33 million b/d in July, while Russian shipments dropped to 1.91 million b/d in the month, the lowest since April, China General Administration of Customs data showed. Although Saudi Arabia's official selling prices for August loading were high, Middle East crudes remained competitive with the addition of shipping freight, according to a source within Unipec. Both state-run and private Chinese refineries are taking in more barrels, the source said. Refinery maintenance July customs data could have been understated by as much as 1 million b/d on paperwork and accounting delays, and could be corrected upward for August data, said Iman Nasseri, Middle East managing editor at Facts Global Energy in Dubai. "Some Chinese refiners have been limited by refinery maintenance and quota constraints, and some of the capacities which were on maintenance are coming back this month, hence higher runs in August are expected," Nasseri said. "Still, refiners are waiting for the next announcement on quotas." Some of China's small refineries have been buying fuel oil as an alternative to crude as China cracked down on imports of rebranded crude under the name of "diluted bitumen," but the trade has largely resumed since June, he said. "After nominating less term volumes from Saudi Arabia due to higher OSPs in the past two months, Chinese refiners, including NOCs such as CNPC and Sinopec and mega independents such as Hengli and Rongsheng, have resumed their usual term volumes for September loading," he said. "But again, as the new quota announcement is delayed, we expect Chinese importers to be less active in the spot market yet." OPEC+ cuts Indications of higher Saudi Arabian volumes come amid a record cut in the country's crude production in line with the ongoing OPEC+ production controls. In April, Saudi Arabia said it would slash 500,000 b/d of its crude production in concert with several OPEC+ allies, which are contributing an additional 1.2 million b/d of their own cuts, in a bid to tighten the market and reverse a slump in oil prices. The kingdom then said it planned to make a unilateral 1 million b/d cut for July and August, bringing production down to a two-year low of 9 million b/d. Saudi Arabia dropped its production to 9.05 million b/d in July, the lowest level since June 2021, according to the latest Platts survey from S&P Global Commodity Insights. The decline was not as steep as its pledged cut, with production falling 940,000 b/d on June volumes. "Saudi energy diplomacy has always been versatile and adaptive during market shifts," said Abdulaziz al-Moqbel, an independent energy consultant based in Al-Khobar. "One could easily notice that Chinese oil demand is still strong and increasing regardless of many macroeconomic indicators," he said. "The Saudi exports have relied on three foundations, commitment, priority and competitiveness. These three foundations had made the Saudi oil exports able to endure various scenarios of market conditions."
OPEC continues to forecast demand for its oil growing significantly up to the end of 2023, albeit at a slightly lesser rate than it previously expected, in a sign it expects a significant tightening of the market in coming months. In its monthly oil market report, OPEC said demand for its crude will grow 300,000 b/d in the second quarter, 1.3 million b/d in the third quarter and 2 million b/d for the fourth quarter compared to the same periods of 2022. But for the full year 2023, the call on OPEC crude was estimated at 29.3 million b/d, down by 100,000 b/d compared to its previous report, with non-OPEC supply expected higher. It also revised down its estimates of demand for OPEC crude in 2024 by 100,000 b/d from the previous month's assessment to stand at 30.1 million b/d. That was significantly above July production volumes, which were 27.31 million b/d, according to an average of secondary source estimates. Production was down 836,000 b/d month on month, as Saudi Arabia implemented a voluntary 1 million b/d cut. Saudi Arabia self-reported a 943,000 b/d decline in production on the month. Nigeria also reported a significant drop of 168,000 b/d in output following issues with key export grade Forcados. OPEC and its allies plan to maintain aggressive supply restraint into the autumn in a bid to support prices. Saudi Arabia has said its extra unilateral cut of 1 million b/d will run through the end of September, while non-OPEC ally Russia has committed to a 500,000 b/d drop in crude exports for August and 300,000 b/d for September. Uncertainty remains over compliance with the latest pledges, as well as its policy beyond September, however. OPEC expects non-OPEC liquids supply to expand by 1.5 million b/d in 2023, a slight upward revision from its previous report, with the US, Brazil, Norway, Kazakhstan, Guyana and China expected to drive supply growth. In 2024 it expects non-OPEC liquids output to grow by 1.4 million b/d. The production cuts should shrink global oil stocks significantly and reverse the last few months of builds. Commercial inventories held by OECD countries were up 4.2 million barrels in June to stand at 2.828 billion barrels, according to the OPEC report. OPEC retained its estimates for world oil demand in 2023 and 2024, as upward revisions to first quarter data for OECD America and Europe were completely offset by downward revisions to 2Q23, mainly in Europe and Other Asia. World oil demand in 2023 is expected to grow by 2.4 million b/d, unchanged from the last month's assessment. OPEC said China was expected to see lower-than-expected oil demand growth in the second half of 2023, with recent economic indicators for the economy showing a slowing trend in industrial production. It expected Chinese oil demand to grow 710,000 b/d in the third quarter, and 590,000 b/d in the fourth quarter, both compared to 2022 levels. OPEC revised up world economic growth for both 2023 and 2024 to stand at 2.7% and 2.6%, respectively.
Saudi Arabia is keen to collaborate with China in developing crude-to-chemicals, natural gas and mining projects both within and outside Saudi Arabia because the world’s second biggest economy is taking the lead in various sectors, according to Saudi energy minister Prince Abdulaziz bin Salman."When it comes to oil demand in China, it is still growing so of course we have to capture some of that demand," he told the Arab China Business Conference streamed live from Riyadh on June 11. "They will be engaged with us when it comes to gas. It will be more in the midstream part along with others."China is central to Aramco’s strategy to diversify into more specialized high-value chemical products and less carbon-intensive hydrocarbon usage, under which Aramco has said it plans to convert up to 4 million barrels per day (b/d) of crude oil into chemicals. Aramco signed a number of agreements, which include potential crude supply and chemical offtake agreements, with Chinese entities in December during a state visit by China’s President Xi Jinping to Riyadh.Aramco is already boosting investments in China to guarantee long-term oil supply to the world’s second biggest oil consumer. The company will begin construction this year of a 300,000 b/d refinery in northeast China, in which it has a 30% stake. On top of the crude distillation capacity, the complex will be integrated with a 1.65 million metric tons per year (MMt/y) steam cracker and a 2 MMt/y para-xylene (p-xylene) unit, which are expected to be fully operational by 2026. Aramco will supply 210,000 b/d of crude to the complex.In March, Aramco signed an agreement to buy a 10% stake in Rongsheng Petrochemical, giving it access to an 800,000-b/d refinery owned by Zhejiang Petroleum and Chemical Co.Saudi Arabia also wants to partner with China as the country seeks to produce converted chemicals, most of which will go to Asia, mainly to China and India, Prince Abdulaziz said. Saudi Arabia is interested in working with China on crude-to-chemicals projects both within and outside the kingdom, he said.Aramco and its subsidiary Sabic are already cooperating on the previously announced development of a 400,000-b/d crude to chemicals project at Ras al-Khair in Saudi Arabia.Saudi Arabia also wants to collaborate with China in developing the Gulf country’s renewables projects, including importing Chinese expertise to localize production for the sector, the minister said.In April, Saudi Arabia was the top oil supplier to China, delivering 2.07 million b/d of crude, although this was 5.3% lower year on year and down 1.8% from March on a barrels-per-day basis, according to data from China’s General Administration of Customs.Saudi Arabia has traditionally been China’s top crude supplier, with most of the country’s refineries designed to crack Middle East crudes."We will plug them also into mining too and we will work with them in mining abroad, and we have got the right incubators," the minister said. In January, Saudi Arabia’s Public Investment Fund and Saudi mining firm Ma’aden announced a joint venture agreement to establish a new company that will invest in mining assets globally to secure minerals for Saudi Arabia’s industrial sector."We came to recognize the reality of today that China has taken a lead and will continue to take that lead," said Abdulaziz. "We do not have to compete with China, we have to collaborate with China."For more insight and news on chemical feedstocks visit check www.chemweek.com