News archive May 2006

Australia's iron ore exports in April reached 21.43 Mt (basis wet), the highest monthly total this year, according to the Australian Bureau of Statistics. Exports to China accounted for 11.88 Mt of the month's total, with shipments bound for Japan comprising 6.22 Mt. Meanwhile, trade data for Brazil indicates that 19.15 Mt of iron ore were exported in April. This brings the year-to-date export total to 74.48 Mt, some 5.67 Mt higher than the same period last year.

Russia's prospective seaborne crude exports for June experienced only a slight drop despite a hike in the country's export duties, reports Energy Intelligence. Seaborne crude shipments are pencilled in at 2.90m b/d for June, down from 2.92m b/d in May. The fall in volumes comes as Russia is set to raise its tax on crude exports to $199.80/ton from the start of June, up from the $186.40/ton put in place in April. Loadings from the Baltic Sea are expected to rise 55kb/d month-on-month in June, while levels from the Black Sea are slated to drop 68k b/d, mainly due to volumes out of Yuzhny falling to 40k b/d, less than half that seen loading in May.

Industrial action has effectively halted vessel loadings at Puerto Drummond, according to Platts. Strike action has been ongoing since May 22 at Mina Pribbenow, restricting steam coal supply from the Colombian port into the Atlantic. The duration of the industrial action is currently unclear.

Japan is aiming to increase its oil stockpile for the first time since 1989 due to rising supply fears, reports Petroleum Argus. Publicly owned reserves will be raised to more than 42.8m bbl of crude equivalent, covering 120 days of consumption, from April 2007. The stockpile will be boosted by 5 days to 95 days of consumption with immediate effect as a temporary measure. As of 31 March, Japan's crude and product stocks stood at 168 days of consumption, consisting of the 90-day national stocks and 78-day stocks held by private firms. Privately held stocks are expected to fall to 60-65 days of consumption to ease financial burdens on oil firms given high prices, reports Argus.

Sudan has been invited to join OPEC by the Nigerian president, the current chairman of OPEC, reports Argus. Sudan is planning to increase its oil production to 500k b/d by the end of this year, when a number of new investment phases will be completed. Sudan has qualified to join OPEC according to the conditions set by the organisation for membership, and will soon make a decision, reports Xinhua.

The International Grains Council forecasts world wheat trade in the 2006/07 trade year (July-June) to reach 111.6 Mt, up 1.6 Mt from 05/06 and up 2.2 Mt from 04/05. The single largest increase in imports is forecast in India, according to the IGC. India is expected to import 4.0 Mt in 2006/07 (+3.0 Mt year-on-year). Increased imports into India are set to be offset partly by reduced import demand in North Africa (-1.9 Mt YOY to 16.8 Mt).

Mexico's oil output rose 20k b/d month-on-month in Apr to 3.37m b/d, helping to take year to date levels 0.4% higher than the same period last year at an average of 3.35m b/d, reports Energy Intelligence. Despite the production increase, crude exports were the lowest since 3q05 when hurricanes disrupted production. Total exports were down 153k b/d on the month at 1.8m b/d, but year to date levels were up 8.8% on Jan-Apr 2005 at an average of just under 2m b/d.

The US economy expanded at an annual rate of 5.3% in the 1q06, which, while short of some analysts' expectations, marked the fastest rate of growth since the 3q03. The Associated Press reports that a major factor behind the rapid GDP growth was the upsurge in consumer spending and business investment. Consumer spending in the 1q06 rose 5.2%, the fastest since the 3q03, while business investment climbed 13.8%, the fastest since the 3q04.

Imports of coking coal and steam coal into Germany reached record levels in March, according to the latest trade data. Steam coal imports hit 3.27 Mt, up 56% year-on-year, while 0.86 Mt of coking coal were imported (almost double the March 2005 total). As a result, combined coal imports into Germany in the 1q06 hit 10.45 Mt compared with just 7.05 Mt in the same period last year.

US gasoline stocks rose another 2.1m bbl last week to 208.5m bbl, but remained 3.2% lower year-on-year, according to the latest data from the US Department of Energy. The growth was helped by a 134k b/d fall in demand and a 176k b/d rise in imports which took levels back over 1.6m b/d to the second highest weekly average ever. This followed the record high set 2 weeks earlier. Distillate stocks also rose by 2.5m bbl to 117.1m bbl due to a rise in production from the previous week to nearly 4.1m b/d and a 185k b/d fall in demand. A 24k b/d increase in imports to 354k b/d also helped, with levels now over 95% higher than the same week last year. Crude inventories dropped 3m bbl to 343.9m bbl due to an 826k b/d fall in imports to 9.6m bbl. Refinery utilisation inched lower to 89.7%.

The OECD has raised its forecast for GDP growth this year in the 30 OECD states from 2.9% to 3.1%. The twice yearly World Economic Outlook expects the GDP of OECD countries to grow 2.9% in 2007. US economic growth is projected to reach 3.5% this year, but is expected to grow at 3.1% next year. The OECD also expects an improved economic performance in the eurozone in 2006, projecting growth at 2.2% as opposed to just 1.4% last year. In 2007, the OECD anticipates GDP growth in the eurozone to be 2.1%.

China will raise retail prices on fuel for the second time in 2 months, with hikes of 9.6% on gasoline and 11.1% on diesel, reports Reuters. The increases, set to take effect Wednesday, are much higher than the 6-8% analysts had expected. The price of diesel and gasoline will each increase by CNY500 a metric ton ($62.37) or 5 cents per litre. Prices have gone up about 15% this year, taking into account the previous rise in March. Some analysts expect the increases to dampen fuel demand in the world's second-largest oil consumer, whereas others think they will have little effect on consumption as China's economic growth surges. New reports show that the Chinese economy grew 10.3% in 1q06, 0.1% higher than earlier reported by the National Bureau of Statistics, reports China View.

Australia's coal ports exported 77.4 Mt in the first four months of the year, down from 78.3 Mt in the same period last year, according to data from McCloskey. Reduced shipments from Hay Point were responsible for some of the slower export pace; an out-of-operation shiploader contributed to a lower export total of 9.2 Mt (down 2.4 Mt year-on-year). In contrast, the biggest YOY increases in throughput were recorded at Gladstone (up 1.2 Mt to 15.9 Mt) and Port Kembla (up 1.0 Mt to 4.0 Mt). Meanwhile, SSY's Australian Coal Port Congestion Index shows average delays of 6-7days.

South Korean demand for oil products fell to 1.94m b/d in Apr, down 6.9% year-on-year, posting the fourth-straight month of annual decline due to maintenance at a petrochemical plant and lower demand from power producers, reports Reuters. Levels dropped 8.9% in March, 1.9% in Feb and 1.6% in Jan. Crude imports into the world's fourth-largest oil buyer rose 11% year-on-year to 2.32m b/d in Apr due to refiners increasing purchases on firm petroleum exports and on expectations of even higher crude prices in coming months. Exports of refined petroleum products by South Korea jumped 36% to 718k b/d, while oil product imports dropped 18% to 457k b/d due to weaker domestic consumption. The country's crude oil processing rate for April averaged 84.6% of capacity, up from 81.3% a year earlier, reports Reuters.

Rio Tinto’s Australian Hamersley Iron subsidiary has also secured agreement with Japanese steel mills for a 19% increase in the contract price of iron ore fines for the 2006 fiscal year. The price increase for iron ore fines is the same as the deal struck by CVRD with ThyssenKrupp, Ilva, Posco and the major steel mills of Japan. No agreement has yet been reached with Chinese steel mills. The Financial Times reports that Baosteel has stated it would not accept a price increase in iron ore fines of 19%. Baosteel is negotiating with leading mining companies on behalf of China’s steel sector.

North Sea loadings for June reflect another round of oil field maintenance work, with an expected 175k b/d cut in production, reports Energy Intelligence Briefing. 2.38m b/d are scheduled for loading in June, down from the 2.56m b/d expected in May. The greater-than-normal second quarter maintenance suggests lower activity in the usually peak third quarter, which could be of benefit to Atlantic Basin markets in the event of another active hurricane season in the US Gulf, said EIB.

FSU crude exports stood at 5.5m b/d in April, down 2.4% month-on-month, reports Petroleum Argus. Shipments in the first 4 months of the year also averaged 5.5m b/d, down by 0.6% on the same period last year. Primorsk handled a record 1.3m b/d in Apr but failed to offset the drop in exports through Black Sea ports due to maintenance to a pipeline feeding Novorossiysk and a fall in shipments along the Druzhba pipeline network, partly due to problems at Slovakia's Bratislava refinery.

The latest data from the International Iron and Steel Institute show that world steel production grew by 6.1% year-on-year in April to 99.0 Mt. Once again, large YOY rises in output were recorded in China (+19% to 33.7 Mt) and India (+25% to 3.6 Mt). In the other main steel-producing centres, production rose YOY by 1.2% in the US (8.0 Mt) in April, climbed 0.8% in the EU-25 (16.6 Mt), but declined by 1.3% in Japan (9.4 Mt) and by 1.9% in the FSU (9.5 Mt).

Oil dropped to a 5-week low, just above $68 a barrel on Thur, due to signs that high energy costs were firing inflation and slowing demand in the U.S, reports Reuters. Commodities, stock and bond markets fell on Wednesday after the United States reported a steep rise in consumer prices in April, driven by a big jump in fuel costs. U.S oil prices have fallen $4 since Friday, although some investors say the decline is just a pause for breath in a rally that has lifted the cost of oil from $20 per barrel since the start of 2002.

The latest statistics from the US Ministry of Commerce show that US coal imports in the 1q06 reached 8.13 Mt, up 1.23 Mt from the same quarter last year. Most of the increase consisted of a large rise in shipments from Colombia, which climbed from 4.97 Mt in the 1q05 to 5.85 Mt in the 1q06. March coal imports into the US were the highest monthly total ever.

US gasoline stocks rose 1.3m bbl to 206.4m bbl last week, the latest data from the US Department of Energy showed. Domestic gasoline production climbed 259k b/d to 9.18m b/d - despite a fall in refinery utilization from 90.2% to 89.8% - as refiners maximized their output of gasoline over distillates. Gasoline imports were down 199k b/d at
1.45k b/d but this was from a very high base the previous week and they still remain close to historical highs. Crude stocks fell 100k bbl last week to 347m bbl, as crude runs increased 21k b/d, while crude imports were up 376k b/d at 10.38m b/d - their highest level in 5 months.

OPEC cut its world oil demand growth forecast for ’06 from 1.43m b/d to 1.38m b/d saying high prices are contributing to a slowdown in
incremental demand in developed countries, reports Platts. The group now sees oil demand averaging 84.6m b/d in ’06. OPEC also cut its
forecast for non-OPEC oil output in its monthly oil report, expecting it to grow 1.34m b/d in ’06 to around 51.48m b/d, compared with a
previous projection of 51.54m b/d. It has also raised the "call" on its own crude from 28.5m b/d to 28.62m b/d for ’06.

CVRD and ThyssenKrupp have agreed a 19% increase for iron ore fine contract prices for the 2006 fiscal year, Reuters reports. This exceeds many analysts’ expectations of 10-15%. The agreed rise reflects the strength of demand and presumably the steelmakers’ increased ability to pay following this year’s steep rise in the price of steel. In the past, other steelmakers have followed initial price settlements, but China’s current market position may mean it will still hold out for a lower price rise.

Meanwhile, it has emerged that China produced a monthly record 33.71 Mt of crude steel in April, according to Macquarie Bank. This compares with 32.9 Mt produced in March. The annualised total is 410.1 Mt.

US refinery runs increased 332k b/d month-on-month in Apr to just under 14.9m b/d, accounting for 85.7% of capacity, according to figures from Energy Intelligence. Throughputs at EU refineries also rose during Apr, up 402k b/d from Mar to 12.2m b/d, giving a 91% utilisation rate. Due to scheduled maintenance in Japan, refinery runs there dropped 400k b/d in Apr to just over 4m b/d, taking utilisation down from 92.4% in Mar to 84%.

India's rising product exports will continue to climb higher over the next few months as the country expands refining capacity, reports Petroleum Argus. Although Indian oil demand is growing, it is being outpaced by output from a growing refining industry that is already running at over 100% of nameplate capacity. Refiners are choosing to export the surplus rather than cut throughputs. Product exports rose by over 30% in the first 2 months of the year compared with a year earlier, while gasoil exports were up by 40% year-on-year to over 230k b/d in the same period. Exports will increase further when state-owned IOC doubles capacity at its Panipat refinery to 240k b/d and Essar Oil starts up 156k b/d at its Vadinar plant by the end of June.