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IHS CERAWeek: By dismissing OPEC cut, did Saudi Minister Naimi outline the path to one?

Saudi Oil Minister Ali Al-Naimi this week told a massive Houston crowd that the oil-rich kingdom wasn’t interested in solving the global market’s problems, telling them he saw no point in a coordinated production cut.

While he said no cut, is that what he really meant?

Maybe not.

Many attendees at the IHS CERAWeek conference pointed out that while Naimi said he sees a coordinated cut as an entirely useless endeavor, he didn’t rule it out.

“Perhaps he meant no cut … for now,” said Mohammed bin Hamad Al Rumhi, the oil minister of Oman, a non-OPEC country which has pledged to cut production by as much as 10%, or roughly 100,000 b/d, as long as OPEC members commit to the same in order to rebalance the market.

Echoing the sentiments of several others at CERAWeek, Rumhi said Naimi’s comments leave open the possibility of a production cut at June’s OPEC meeting.

“If circumstances change, this will change,” Jamie Webster, a senior director with IHS Energy, told Platts. “It’s not like this is done and there’s no more discussion.”

In his comments, Naimi dismissed the use of a production cut since there was “less trust” that member countries would comply.

“There is no sense in wasting our time seeking production cuts,” he said.

Webster said this was a reference to compliance issues with a 2008 OPEC production cut. As he seemingly dismissed the purpose of a cut, Naimi backed an agreement to freeze production at January levels, which he called “the beginning of a process.”

Naimi’s comments echo those made Monday by OPEC Secretary General Abdalla Salem El-Badri who called a proposal to freeze production a first step to attempt to counter a global supply glut and low prices and said more steps were likely if the freeze was successful.

“This is a first step to see what we can achieve,” El-Badri said during a CERAWeek press conference. “Maybe if this is successful we can take other steps in the future, I don’t know.”

Analysts said the most likely next step after a coordinated freeze would be a coordinated cut.

Dave Pursell, managing director with Tudor, Pickering, Holt & Co., told Platts that Naimi may have been subtly, but publicly, offering OPEC members a deal: join the agreement to freeze production and Saudi Arabia can talk about a coordinated cut at the June meeting to counter $30/b oil.

“You’ve got to quit adding before you can start subtracting,” Pursell said. “So part of that is [Naimi saying]: ‘You show me you’re not adding, then we can talk about subtracting.’”

Matt Reed, vice president of Foreign Reports, a firm analyzing oil markets and Mideast politics, said Naimi’s comments show that Saudi Arabia is still willing to cut, they just do not want to pursue that path alone.

“Naimi said a cut won’t happen but he was speaking generally, not specifically about Saudi Arabia,” Reed said in an email. “He has good reason to be skeptical about any cuts when the Iranians are promising to make today’s glut worse.”

Iran, which is looking to ramp up production with the end of sanctions, has criticized the pact reached by Russia and Saudi Arabia, the world’s top two oil exporters, and OPEC members Venezuela and Qatar to freeze production at January levels if other key producers did the same.

Reed said the freeze agreement represents an important first step since it shows that the world’s top producers are, at a minimum, focused on solutions to the oil price collapse and global supply glut.

Source: http://blogs.platts.com/

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The next stage in America’s evolving ethanol landscape targets five countries

2015 was a difficult one for US ethanol producers, prices came down from an eight year high in 2014 to a near-eleven year low in January of 2016. As with any market, when times are hard, it’s essential that players can adapt and evolve to keep business alive. So, eyes turn to export opportunities and to five countries in particular.

Traditionally, once supplies reach around 20 million gallons, cargoes start getting booked. Supplies are currently at around 23 million gallons. With sustained record high production levels putting downwards pressure on domestic prices, at the most recent National Ethanol Conference in New Orleans, US ethanol industry participants were readily eyeing export opportunities to provide the market with a much-needed boost in the form of buyers, and ultimately, revenue.

For both ethanol and biodiesel, rhetoric around the industry has shifted from a nearly one-sided focus on the Environmental Protection Agency (EPA) and Renewable Fuel Standard (RFS) to now touting the benefits of other biofuels. For biodiesel, it was touting its ability to reduce carbon emissions; for ethanol, it’s the benefits for octane-boosting.

The change is due, partly, to the fact that the new blending mandates are in place now, giving some stability and allowing both industries to focus on other aspects. However, the change in sentiment is also due to the fact that both fuels are at a disadvantage economically compared to fossil fuels.

So, as a way to address this evolving landscape, the industry is lining up five countries as key to the US export market: Brazil, the Philippines, China, India and Mexico. As the largest buyer of US product, Canada is already a well-established market, requiring less business development.

The big five

Brazil: Conveniently located, Brazil offers the US an export market that can be accessed with relative ease. In 2015, Platts-Kingsman estimated that the US exported around 440.4 million liters of fuel ethanol to Brazil, second in imports of US product behind Canada and a 4% uptick compared with exports to the region in 2014. Participants have described the Brazilian ethanol market as being in a constant state of either “feast or famine.” This supply uncertainty offers the US an opportunity to be the reliable constant supply of fuel into the country and it is one that US producers are looking to capitalize on.

The Philippines: In 2015, the Philippines were the third-largest importer of US fuel ethanol, increasing their buying power by 6% from 2014 and importing around 270.3 million liters. The cost of shipping, easy logistics and good demand in the region make the Philippines an ideal destination for US product. The low cost of shipping to the area is key for sellers; one US producer said that it costs as much to take ethanol from Iowa to Seattle as is does to take product from the West Coast to the Philippines. With such a strongly established trade route, market participants were keen for this to continue over the coming years.

China: Weighing in at No. 4 on the biggest importers of US fuel ethanol in 2015, China was the biggest mover on the list, increasing its imports by an astounding 1994% from 2014. As a country with a rapidly growing population, clamor is building from the widening band of middle classes to lessen the reliance on fossil fuels and improve air quality. Ethanol is seen as an answer to these calls, a positive sign for US exports. But the relationship is not an easy one. Most recently, China launched an anti-dumping probe into US DDGS imports, a by-product of ethanol, which saw imports fall by 9.6% month-on-month in December. The risk-reward premium of sending product all the way to China to potentially have it sit in a dock for an indefinite period of time is high. But when the going’s good, China is a veritable cash-cow of a market for US ethanol.

India: Following his election in 2014, Prime Minister Narendra Modi increased the blending mandate for ethanol in India, moving from E10 in 2015 to E20 by 2017. But in 2015, India’s effective blend rate fell far below the E10 mandate, reaching just 4.34%, and the country lacks the capability to produce sufficient ethanol domestically to meet the requirement. Alongside the blending mandate, at the 2015 COP21 summit, India also announced plans to cut its CO2 emissions per unit of GDP by as much as 35% from 2005 levels by 2035. To do this, India will need external support, and imports, and the US will be a main contributor on both fronts.

Mexico: At only ninth place on the list of importers, Mexico may not come across as an obvious country to focus energies on. But from 2014 to 2015, Mexico increased its buying of US ethanol by 14%, up to 116.2 million liters. The country, much like India, is going through energy reform and will need help to hit its mandates. They too lack the infrastructure to meet ethanol targets and the US is perfectly positioned, both geographically and logistically, to step up to the plate.

Source: http://blogs.platts.com/

Romance of the high seas strong in shipping industry hearts

“There is nothing more enticing, disenchanting, and enslaving than the life at sea”. So said renowned Polish-British writer Joseph Conrad in his controversial 1900 novel, Lord Jim.
Sailors from decades past said that without shipping half the world would freeze to death, the other half would starve to death.
It is a grand, dramatic statement, I agree, but it is not too far from the truth: according to the International Chamber of Shipping, an astonishing 90% of world trade is carried by the global shipping industry.
Carrying goods by sea has provided employment opportunities – and, not to mention, danger, adventure and escape – to countless restless souls since Prehistory. The romantic in me loves the fact that I report on an industry with an unbroken tradition of millennia.
At sea you could earn a living, but also run away from your problems. You could change your name and start your life anew and become – as Nikos Kavvadias, a wonderful Greek poet and writer, who also happened to be a telegraphist on board commercial ships, put it – “the perfect, unworthy lover of the endless voyage and azure ocean.”
You could also lose your life at sea. Divers will often come across cargo that got lost in a shipwreck: from ancient Greek amphorae in the depths of the Mediterranean, to golden Spanish coins in the Caribbean and French champagne bottles at the bottom of the Baltic Sea.
They are relics of trade from times gone by, testament to the tastes and needs – and to say nothing of the greed – of people long departed.
And let’s not forget there were dark times, not too long ago, when even human beings were considered cargo and shipped from one shore to another to be sold like any other commodity.
Today much of the cargo modern commercial vessels carry does not sound very glamorous – urea and petroleum coke don’t really have the same ring as spices, tea and mastic – but shipping remains an exciting and vibrant business to be involved in.
I talk to people who work in the maritime industry on a daily basis, from charterers to shipbrokers to owners and operators.
Yes, arranging for your cargo to be taken from the US Gulf to the Far East, or mediating between an owner and charterer who are at loggerheads, or trying to find a stem for your vessel in a loading area that has five other ships competing for it, can be as stressful as any other job.
Much of this work is done staring at a screen in an office like any other, with an uninspiring commute to negotiate.
However, any person involved in all this, from Piraeus to Copenhagen, from New York to Singapore, will tell you that there is something wondrous about a business that deals with transporting grain, or oil, or – yes, urea – between two ports that sometimes lie at opposite sides of the world.
The people I talk to in the dry bulk industry are often ex-seafarers – yes, they do swear like seafarers – or are the sons and daughters of brokers and sea captains, or got involved in shipping because it sounded like an interesting industry, only to catch the shipping “bug” and, years later, can no longer imagine working in any other sector.
The vast majority of them are passionate about shipping, which explains why the dry bulk sector’s recent bearishness has left them heavy-hearted. I can tell this from the tone of their voice over the phone.
Granted, dry bulk owners and shipping companies got carried away in recent years, partly because of China’s vast appetite for a variety of commodities this past decade, and ordered too many ships.
Cargoes have been falling well short of supply, which lies at the core of what has been a lackluster performance by the dry bulk freight sector for over a year.
Yes, dry bulk has a long way to go before it returns to some semblance of health.
But while it may take years for a rebalance to be reached, something tells me that those hard-working men and women who work in this thrilling industry will remain faithful to that little bit of romance they harbor in their hearts and that first drew them in. After all, they still have to ensure that half the world gets fed and half the world is kept warm.

Source: http://blogs.platts.com/

US crude oil markets can seem as befuddling as an elephant

Para leer en español haga clic aquí: Los mercados del crudo de Estados Unidos suscitan variedad de opiniones
Few people are often in complete agreement. Each reaches a conclusion based on their own past experiences and expectations. Disagreements often manifest in descriptions of the same thing, which are presented with supportive information, which all may makes sense to those presenting the subject matter — but for those who may have supportive evidence backing the opposite, contrary views can sometimes be vexing.
Opinions on the future of the crude oil markets are no different.
This was the case at the Platts 5th Annual North American Crude Oil Summit held the first week of March in Houston, where many industry experts presented insights and their views on the direction of the crude oil market. Will crude production continue to fall? How high (or low) will prices go in 2016? What kind of volume of crude exports could we possibly expect?
These are all questions that came up during the conference, but depending on you asked, there were various expectations. It was like the tale of the six blind men who set out to determine what an elephant looked like by feeling different parts of the mammal’s body. And like in the tale, while one’s subjective experience may be true, it may not be the totality of the truth.
battistini-blind-men-elephantIn the tale of the blind men and the elephant, one man feels the elephant’s leg and says the elephant is like a pillar; one who feels the tail describes the elephant as something similar to a rope; one who feels the trunk says it is like a tree branch; one who feels the ear says the elephant is like a hand fan; one who feels the belly says the elephant is like a wall; and the one who feels the tusk says the elephant is like a spear.
Many versions of the story itself exist still today. In some, the disagreeing blind man become extremely violent towards each other. In another, the blind men listen to one another and learn from each other’s perspectives. But it isn’t until the end of the story that the blind men learn that they are, in fact, all blind, when a man who can see the elephant in its totality describes it to them.
During the Platts Crude Oil Summit, presenters from different companies and positions in the market held a wide range of market views. Some expected the crude oil market to recover to levels near $80/b by the end of 2016. Some held the number closer to the $50/b level. Still, most agreed that crude oil prices had reached bottom and didn’t expect it them to fall much further, if at all.
In addition, though disagreements persisted on how much production had fallen, there was a consensus on the fact that it had fallen. Even some forecasts that until recently held that crude oil production in the US would rise in 2016 have now succumbed to the realization that production is unequivocally in decline — down as much 800,000 b/d since the mid-year peak of 9.6 million b/d.
In a way, there’s only a certain amount of deviation that the blind men in the original tale should have derived from their experience. After all, none would describe the elephant as something that was smaller than a dog, otherwise they would not be labeled as just blind but also as incoherent or insane. In addition, the blind men were not deaf so they should have heard the elephant breathe and bellow loudly, so they should have had an idea that the elephant was something large.
Perhaps upon leaving the conference, attendees left with a wide variety of ideas and expectations on the direction of the US crude oil market and the market as a whole. But in the end, attendees trusting their own senses should have reached their own conclusions — perhaps that that shale oil production in the US has fallen and continues to fall, that crude oil prices have most likely already reached a bottom, or that the resilience of shale oil was overstated.

Source: http://blogs.platts.com/

Odds on, odds off: London gold market seemingly confused on best route forward

With Cheltenham races this week, everyone is in betting mood. It would appear that the cards could be stacked in IntercontinentalExchange’s favor, as the operator has come up as an outside favourite to possibly succeed the London Bullion Market Association ‘request for proposal’ to reform the London gold market.

Why? Because the other two rumored exchanges involved in the process — the London Metal Exchange and CME Group — have already been touted, maybe?

“The market is currently built on hearsay, and rumors,” said one source close to the situation.

And guessing. Oh, and lack of interest.

“I have a business to run,” said one senior source.

To recap: Late February CME was suggested to be the best suitor to move the over-the-counter market forward, owing to its dominance in listed gold futures and options products.

CME, which operates the world’s largest gold exchange by volume in the world, declined to comment on market chatter.

Although not officially disclosed, it is widely believed that the five parties in the running for the LBMA RFP are: CME, the LME, ICE, Autilla/Cinnobar and Markit/ABS.

The result of the RFP should create a platform that creates future growth for the London market.

No parties rumored to be involved in the RFP would comment on the matter, or any surrounding market talk, nor would the LBMA.

Ahead of the CME whispers, LME was deemed a front-runner in the proceedings, although that was played down by some camps, as it could be viewed as a submission of the London market to the Chinese. LME is owned by HKEx.

This has been a concern for certain bullion bankers for some time.

However, that was the very reason for the LME being the odds-on favorite, basis the fact China is the world’s number one physical gold consumer.

“The Chinese are buying the gold, why would London want the US to dominate the space?” said one banker.

It is worth noting that CME does have exposure to Asian markets, most recently in the form of news that China Construction Bank Corporation has joined the LBMA Silver Price — operated and administered by CME Group/Thomson Reuters — and is the first Chinese participant to become a member of the benchmark pricing mechanism.

CCB will be the sixth price participant, joining HSBC Bank USA NA, JPMorgan Chase Bank, The Bank of Nova Scotia, The Toronto Dominion Bank and UBS AG.

The LBMA is said to currently be engaging in a beauty pageant, in which the five suggested suitors give details of their proposals.

“I’m not so sure of the LME’s chances,” said one source close to the situation, “personally I think ICE could be the dark horse.”

This isn’t the first time Platts has heard that rumor, but as previously stated, there are plenty of whispers out there, Chinese or otherwise.

“Whatever the outcome, the next few weeks should start to get busy,” said one senior source, suggesting that perhaps the LBMA won’t be the author of the final chapter of the London bullion revolution.

Source: http://blogs.platts.com/

Times a-changing for China’s thermal coal market on increased hydro flow

China’s huge investment in hydro-electric power, including such schemes as the massive Three Gorges project on the Yangtze river in Hubei province, is starting to pay off. But at the same time, it is adding to the woes of an already depressed thermal coal seaborne market.
Already reeling from plummeting prices, stagnating demand and chronic oversupply, the thermal coal market for China now has to contend with a rival: a low-cost source of power generation that is growing each year.
Hydro power generation for China leapt 24% year-on-year in the January-February 2016 period to 129 billion kWh from 104 billion kWh in the same period last year, according to China’s National Bureau of Statistics, March 15.
China Power GenerationChina Power GenerationChina’s hydro-electric dams are generating approximately 20% of China’s annual electricity output, compared with a share of around 70% for coal-fired generation. At the same time, China is investing heavily in alternative energy sources such as nuclear, solar and wind turbine generation, albeit starting from a very low base.
This winter season in China actually witnessed a decline in coal-fired power generation, with the Asian country’s coal plants output falling 4.3% year-on-year in the January-February 2016 period to 678 billion kWh, said China’s statistics bureau.
In fact, China’s coal-fired electricity generation has recorded negative growth for most of 2015. As a result, prices for thermal coal imports failed to produce their traditional November to February rally.
China thermal coal pricesAt China’s southern ports, the main intake point for imported thermal coal from countries including Australia and Indonesia, delivered prices have traded in a sideways fashion between $43-$45/mt CFR basis for 5,500 kcal/kg NAR coal from the middle of November 2015 to mid-March 2016, according to Platts prices.
China thermal coal price spreadChina’s almost silent revolution in diversifying its energy economy to reduce its dependence on coal-fired electricity is likely to prompt a re-think for energy suppliers, including thermal coal shippers. Coal does continue to dominate China’s energy generation mix, but the times they are a-changing, as Bob Dylan once said.

Source: http://blogs.platts.com/

Congestion reverses power price trends in New York ISO

New York ISO Zone A West day-ahead wholesale power prices have bounced around this March as maintenance and generation outages have increased congestion in the region. This price volatility appears to have spilled onto the prompt-month forward power contract as the spread between West and other New York zones has widened.
NYISO Zone A day-ahead prices have ranged from $5.23/MWh to $54.62/MWh since the start of the year, with the highest prices seen in March, when the month-to-date average is about $27.50/MWh, compared to $21.25/MWh for January and February combined.
“Congested conditions in the west have been exacerbated by the retirement of the Dunkirk and Huntley units as well as scheduled maintenance outages,” NYISO Spokesman Ken Klapp said.
micek-nyiso-zone-a-day-aheadNRG had plans to convert the 530-MW Dunkirk plant to burn natural gas, but those plans were put on hold and the plant was mothballed January 1, although NRG has filed for new interconnections, NRG Spokesman David Gaier said.
NRG permanently retired the two-unit, 380-MW Huntley coal-fired plant March 1.
For the prompt-month package, Zone A on-peak prices have jumped to a range of $26.55/MWh to $38.10/MWh since Dec. 31, 2015, forcing the spread between Zones A and G to blow out.
micek-northeast-april-on-peak-2016
Typically, Zone G is at a premium to Zone A. However, things have flipped this year with Zone A priced as much as $7.60 above with the gap the widest in March and showing an upward trend.
Further, in early March Zone A started climbing above ISO-NE’s Mass Hub April on-peak package, which typically is at a premium in the Northeast. Mass Hub April on-peak has ranged from $28.50/MWh to $45.50/MWh since December 31 and has been as much as $3.60 below Zone A in recent days.
Looking at 2015 prices, Zone A and G April on-peak packages had a spread range of $2.10 to $5.25 with Zone G being the premium package in NYISO.
micek-northeast-april-on-peak-2015
NYISO expects up to 8,900 MW to be offline throughout the end of March due to scheduled maintenance and as much as 11,250 MW to be offline through mid-April.
Other Northeast generation outages could also be coming into play in the prompt-month price shifting.
micek-nyiso-fuel-mix
Based on historical outage trends and engineer/plant manager input on a nuke industry message board, Platts’ unit Bentek Energy is currently expecting 3,260 MW of upcoming nuclear outages for the Northeast in April. Those outages include Constellation Energy’s 1,155 MW Nine Mile Point-2 in Oswego, N.Y., which is expected to start maintenance around April 11 with an estimated finish date of May 6 for an overall duration of 25 days, according to Bentek.
And looking down the road, Morningstar energy analyst Jordan Grimes sees transmission upgrades as a key part to helping solve congestion issues.
“We are bearish Zone A constraints throughout the curve even in the face of the Huntley retirement in March,” Grimes wrote in a NYISO term outlook last month. “We believe National Grid transmission upgrades and flows from PJM will eventually solve constraints.”
National Grid’s Western Reinforcement transmission project will help relieve Zone A congestion; the market is overstating the impact of the Huntley retirement, given current dispatch rates, Grimes wrote.
“Zone A is certainly going to be volatile in April and May and as of now it certainly doesn’t looked solved as the congestion is worse than expected,” Grimes told Platts Wednesday. “But transmission upgrades will solve the constraint eventually, the impact of the June upgrades will be important. NYISO could also re-rate the 230kV lines to its emergency max in the short term to help alleviate congestion.”
National Grid has proposed adding series reactors to the most constraining 230 kV lines north of Huntley, with a planned in-service date of June 1 to improve the total Niagara Power Project and Ontario import energy deliverability, NYISO Executive Vice President Richard Dewey wrote in a letter to the State of New York Department of Public Service. The series reactors would improve the total Niagara Power Project and Ontario import energy deliverability, but there would still be a reduction compared to the levels of energy deliverability that existed when the Dunkirk and Huntley plants were available.
This reduction in energy deliverability will persist until permanent solutions are in place, Dewey wrote. In the interim, the NYISO and National Grid are considering a temporary operating procedure to allow the constraining National Grid 230 kV lines to be secured to the higher short-term emergency ratings to improve Niagara Power Project and Ontario import energy deliverability.

Source: http://blogs.platts.com/

Another riveting week ahead in steel markets?

Last week was a week of two halves for the global ferrous supply chain. From early-to-mid week prices were under pressure, but as the period progressed iron ore kicked up and steel in China and elsewhere followed suit.

One school of thought suggested Chinese production ramping up slower than anticipated — to cash in on the price uptick — was the cause for some of the bullishness. “Because of their losses, Chinese mills are generally not eager to boost their production, and therefore steel output, despite some recovery, has stayed low compared with early last year,” one steelmaker said.

Two other steelmakers in northern and western China said their mills had idled blast furnaces late last year and would not be relighting them despite the uptick.

Despite the rises toward the end of the week, the general feeling across most markets appeared to be anxiety and a lack of visibility. Across many markets Platts frontline reporters were told “I don’t know the price today” by a variety of buy- and sell-side sources. “Yo-yo” was a favored way of describing the volatile movements.

The Chinese billet market was particularly confused, with mills reportedly defaulting on contracts when prices rose and buyers following suit as they collapsed. Some sources said buyers were rebooking the same material at much higher prices, impacting as much as 1 million mt. Prices from CIS slab suppliers were also seesawing throughout the week following the developments in China.

Global slab supply seemed tighter. Several Black Sea-based mills left the slab merchant market suggesting they had been sold out for some time. Some buyers tried Brazilian mills, which said their production was fully booked until June. Iranian mills also had limited tonnage to export, sources said.

In markets such as Turkey — a large recipient of Chinese and CIS semis in recent months — all this filtered into much stronger scrap pricing as there was a lack of suitable alternatives, and mills looked to take advantage of brisk domestic rebar demand, although some said the market was cooling a touch.

European and UK coil producers were going gung-ho for rises amid a lack of import competition; the presence of seemingly cheap Chinese forward offers has weighed heavy on domestic mills in recent years, but cheaper forward prices were not seemingly available. UK mills were being aided by the weak sterling, as “Brexit” uncertainty continued to beat the currency down.

Source: http://blogs.platts.com/

Fuss over “missing” 800,000 oil barrels: ‘Get over it,’ says IEA official

Has the hoo-ha over the 800,000 “missing barrels”, the difference between average daily global oil production and consumption flagged by the International Energy Agency in its March report gone a bit too far?

And did you fall for the argument that these barrels may not even exist, which in theory halves the presumed oversupply in the global oil market and gives us reason to be more bullish on oil prices, which had teetered near 13-year lows just two months ago?

In yet another testament to how clueless and sentiment-driven the oil markets have become, the case of the missing barrels was actually proffered by some as one of the reasons behind Brent clambering to over $41 this month, from levels near $30 in February and a $27 nadir in January.

Google “missing barrels” and you can catch all the excitement in case you missed it. The latest one is actually a sobering report that has Morgan Stanley analysts dismissing it as an old “market myth” and a “poor explanation” for crude’s rise in recent weeks.

In its monthly oil market report issued March 11, the IEA said it had actually been able to reduce the uncertainty in the supply/demand balance, described as “missing barrels,” to 800,000 b/d, after re-analyzing its data for floating storage and oil in transit. The figure, it said, was “well within the normal range considering the vagaries of data.”

The implied surplus of supply over demand remains a high 1.9 million b/d for Q1 and 1.5 million b/d for Q2 this year, the agency maintained.

We know nervous markets don’t have time to pause and reflect.

But the IEA, it seems, had not gambled upon the play its “missing barrels” was to receive. The Wall Street Journal ran a report a few days later, citing some analysts suggesting that if the 800,000 b/d doesn’t exist, the oversupply that has pressured oil prices may not be as big as estimated.

The tally of unaccounted-for oil — which comes from the difference between the 1.9 million b/d presumed surplus and the roughly 1.1 million b/d of oil calculated by the IEA as being in transit and moved into onland storage — rose to its highest level in 17 years last year, and this was an important factor in an industry dominated by oversupply, the paper said.

Brent’s trek from $36 and change at the start of March to a year-to-date high of $41.79 on March 22 has left more than a few market watchers puzzled. The dollar’s weakness following the US Federal Reserve meeting March 16, a lingering 200,000 b/d production outage in Nigeria and a drop of about 120,000 b/d in pipeline crude supplies from Kurdistan got buttressed by the “missing barrels” argument in support of crude’s rebound. Otherwise, the few hundred thousand barrels in production outages should pale in comparison with the giant global surplus.

In an oil market of 96 million b/d, and entrenched imperfections in the gathering and reporting of oil production and consumption statistics, the discrepancy between the calculated surplus and the oil tallied as moving into storage is not something the IEA can do anything about, the agency’s head of oil industry and markets division Neil Atkinson stressed March 23.

Responding to a Platts question about his take on the buzz created by the IEA report’s “missing barrels” reference, Atkinson, who was in town to participate in the Singapore International Energy Week’s launch event, took issue with the perception that the IEA didn’t know where the “missing” oil was.

“A lot of it is in China [in the form of stockpiles], there’s some in India, some sitting in pipelines and some in ships,” he said. The IEA, an energy policy adviser to the OECD countries, does obtain data from non-OECD countries, contrary to some assertions, but it’s not perfect, the official stressed. “Get over it,” is how Atkinson summed up his view on the hullabaloo.

David Hewitt, Managing Director at Credit Suisse and fellow panelist at the SIEW event, agreed, saying that some traders seemed to have seized upon the “missing barrels” story in their hunt for reasons to be bullish about the market.

Incidentally, both Atkinson and Hewitt were also dismissive about the other bullish ghost still lingering over the market — the “production freeze” initiative by some OPEC and non-OPEC producers. Anyone got a number for oil’s Ghostbusters?

Source: http://blogs.platts.com/

AFPM 2016: From Latin American polymers to US methanol, toluene, MX and more

Platts’ US petrochemical markets team was at the American Fuel and Petrochemical Manufacturers’ annual meeting in Dallas earlier this week, where they met with industry leaders, speakers, market participants and more about what the petchem markets are experiencing — and expecting — in 2016.
The editors filed dozens of stories, including one about the possibility of more restructuring and consolidation in the industry and another looking at various challenges facing the industry.
To give a bit more insight into wide range of products and topics that were discussed at AFPM, we wanted to share a few more stories to come out of the conference.

Brazil’s demand for polymers can improve by midyear: sources
Market participants believe Brazil’s political turmoil can stabilize by July, leading to strong demand for polymers, sources said on the sidelines of the American Fuel and Petrochemical Manufacturers’ annual meeting in Dallas.
Brazil has been rocked by a major corruption scandal at state-owned Petrobras. The turmoil has included names such as the current and former president of Brazil, multiple congressmen and other officials, Petrobras, which is looking to shed assets, is Braskem’s main provider of feedstock naphtha, which the petrochemical company uses in the production of basic petrochemicals, polyethylene, polypropylene and other polymers.
As Brazil is a key part of the Mercosur region and South America, the political outcome will impact other countries in Latin America, sources said.
“The minute Brazil is back on track, Argentina, Uruguay and even Venezuela will be impacted as well. The demand in Brazil for consumption goods exists and we need to be ready when it happens,” a trader that sells resins to Latin America said Sunday.
With Brazil’s economy struggling, demand has been talked weak for months due to a combination of factors. A palpable increase in late/delinquent payments and instability of the US dollar against Brazilian currency were some factors hindering trade, sources said.
“Buyers are cautious since last year and we believe their inventories are very low. By July 2016, this is likely to change depending on the political situation,” the trader said.
A Brazil-based distributor also said it depends on Brazil’s political stability.
“People are afraid to make debts and consumption is a short-term way to growth. So, if the political scenario changes, the consumption might increase as well,” the distributor said. “But I think July is still too early to see any changes in the economic side.”
— Ingrid Furtado

US methanol market monitoring projects, China: sources
The status of planned methanol facilities in the US Gulf Coast and Pacific Northwest and the state of the market in China have attracted the focus of US market participants, sources said Sunday on the sidelines of the American Fuel and Petrochemical Manufacturers’ annual conference in Dallas.
US methanol capacity expanded to 5.75 million mt/year at the start of the year, up from 2.25 million mt/year at the start of 2015. The amount could exceed 15 million mt/year by 2020, based on projects announced by companies.
Sources said they did not expect all planned units to come to fruition, but the expansion in US methanol will continue to some extent, they said. Methanol pricing in China has also attracted attention, recently providing reason for optimism, sources said.
“There seems to be more comfort in the market with pricing in China higher and pricing in the US appearing to come off a recent floor,” a trading source said.
Chinese spot methanol pricing reached a 2016 high at $230/mt CFR China on Friday, the highest since reaching that same level December 7, according to Platts data.
The increase in pricing in China has been driven by increased demand from methanol-to-olefins units due to recently improved economics on stronger olefins and downstream pricing, sources in that region said.
US spot pricing reached 47.75-48.25 cents/gal FOB USG for March and April, recently off a two-month high after spending February in a range of 42-45 cents/gal FOB USG, Platts data showed.
The recent tightness in shipping space has been a factor within the market, with material that typically entered the US from Trinidad and Tobago and Venezuela seeking new homes as well as firm interest from China in importing US methanol.
The expansions in US methanol production have been targeted for the US Gulf Coast and the Pacific Northwest.
Projects in the US Gulf Coast include Natgasoline (1.75 million mt/year in 2017), South Louisiana Methanol (1.8 million mt/year in 2017), Yuhuang Chemical (1.8 million mt/year in 2018) and G2X Energy’s Big Lake Fuels (1.4 million mt/year).
The Pacific Northwest has seen plans for methanol projects. Northwest Innovation Works has announced plans for plant in Kalama, Washington (3.5 million mt/year in 2019); Clatskanie, Oregon (3.5 million mt/year in 2020); and Tacoma, Washington (7 million mt/year at a date to be determined).
The US Gulf Coast has other planned methanol projects slated for the next two years. G2X Energy’s 1.4 million mt/year Big Lake Fuels secured engineering contracts and should required three years of construction, the company said Tuesday. Other projects include Natgasoline (1.75 million mt/year in 2017), South Louisiana Methanol (1.8 million mt/year in 2017) and Yuhuang Chemical (1.8 million mt/year in 2018).
— Justin Schneewind

US toluene, MX sentiment remains bullish despite blending lag: sources
US participants were still bullish on toluene and mixed xylene spot markets despite a lag in gasoline blending demand, sources said on the sidelines of the American Fuel and Petrochemical Manufacturers’ annual meeting in Dallas.
Both markets were anticipated to see upward pressure as early as February, as those markets saw in 2015, but the incline in gasoline blending demand has been slower because of higher gasoline inventories, sources said.
US toluene and mixed xylene spot inventories have remained ample as market players stored product in preparation for demand ahead of the driving season. However, for those looking to buy product for the second half of April, product was tougher to come by, a couple of sources said.
“Although we’ve seen this lag, the demand will be there as we close in on the driving season,” a source said.
US spot toluene was assessed Monday at $2.03/gal ($617/mt) FOB US Gulf Coast, while US spot mixed xylene was assessed at $1.96/gal ($594/mt) FOB USG.
— John Calton

Source: http://blogs.platts.com/