News archive August 2008

According to the latest report published by the International Grains Council, the global grain supplies outlook has improved further in August. Total grains production in the 2008/09 trade year is now forecast at 1,749 Mt, up 62 Mt from a year earlier. Global consumption is forecast at 1,731 Mt, which would be the highest total in the past five years, with soaring consumption set to benefit from greater use of lower-grade wheat for feed, and maize for ethanol production.

Meanwhile, the wheat stocks forecast for the five major exporters has rebounded significantly, with stocks expected to rise by 46% 2007/08 to 41 Mt. However, global maize stocks are forecast to remain tight at only 112 Mt, which would represent a 5-year low.

The US economy probably grew at a faster pace in the 2q08 than predicted last month, according to the latest survey of economists by Bloomberg. Led by growth in exports, the economy is estimated to have accelerated to an annual growth rate of 2.7% from April to June, up from a previous estimate of 1.9% issued last month. GDP grew at an annual rate of 0.9 % in the 1q08.

Meanwhile, initial jobless claims remain near a six-year high, implying the job market has weakened, according to a Labour Department report.

Indian refiners processed a record high volume of crude in July of 14.31mt, or 3.37m b/d, 12% higher y-o-y, having reached 113.1% of their pro-rated installed capacity in an attempt to keep up with domestic products demand, reports Platts. Planned throughput had been just 12.78mt, or 3m b/d. Essar's throughput reached a new high of nearly 1.14mt at its new 210k b/d Vadinar refinery, which translates to an annualized rate of 13.62mt p.a, almost 130% of the installed capacity. Domestic demand grew 3.8% y-o-y in the 2Q08 to 33.56mt or 2.7m b/d while net product exports fell 45% to 2.88mt as exports fell and imports rose. Exports in the 3Q08 are forecast to fall further as the government plans to ask Reliance Industries to sell gasoil in the domestic market from its export-oriented 660k b/d Jamnagar refinery to meet rapidly rising demand (it rose 11.3% y-o-y in 2Q08). Essar Oil will not have any spot gasoline exports for September, and will instead sell the product from its Vadinar refinery domestically to meet expected supply shortages due to partial turnarounds at some refineries.

The US imported 2.58 Mt of steel in July, according to preliminary Census Bureau date in the American Iron and Steel Institute's latest report. This marks a gain of 0.1Mt from the previous month, up by 4% m-o-m followed a monthly jump of nearly 7% in June, but still down 13.4% compared to 2.98 Mt in July 2007.

US gasoline stocks fell a further 1.2m bbl last week to 195.4m bbl, as imports rose 574k b/d to 1.37m b/d, according to the latest data from the US Department of Energy. Crude inventories were down 0.1m bbl at 305.8m bbl, 8.4% lower on the year, as imports dropped 1m b/d to just under 10m b/d. Distillate stocks were unchanged at 132.1m bbl, with imports up 50k b/d at 123k b/d and demand up 101k b/d at almost 4.2m b/d. Refinery utilisation increased 1.6% to 87.3%.

India's steel exports declined in the first four months of the fiscal year beginning in April, with 2.75 Mt of steel being shipped from April to July. That represented a 25% year-on-year decline. The previous financial year saw a total of 5 Mt of steel exported, with the recent slowdown helped by the government's imposition of a 15% export tax on steel products in May. April-July steel imports totalled 3.5 Mt, up by 20%. Some 6.9 Mt of steel was imported by India in the previous fiscal year, Reuters reports.

Saudi Arabia became the second-largest crude supplier to the US in the 1H08, behind Canada, whereas in the 1H07 Mexico was in second place, reports Petroleum Argus. Saudi Arabia shipped 1.52m b/d of crude to the US, up from 1.41m b/d a year earlier, as output during the period rose 645k b/d y-o-y to 9.24m b/d. Volumes from Mexico in Jan-Jun 2008 fell by 260k b/d to 1.19m b/d as output rapidly declines. Shipments to the US from Iraq were up nearly 200k b/d as production increased 375k b/d to 2.35m b/d. Imports from Algeria fell over 180k b/d y-o-y in the 1H08, having fallen more than 200k b/d in June from May, as US demand for gasoline-rich Saharan Blend dropped due to poor gasoline refining margins.

China is facing the worst power crisis since 2004, mainly due to power shortages and soaring prices. The government has ordered coal exporters to cut exports, combined with the introduction of a 10% export tariff on thermal coal, to try to keep more supply back for domestic power generators, Reuters reported.

Fuel oil exports from Tallin in July rose by 25% month-on-month to reach 1.29mt, or 279k b/d, due to strong demand from bunker buyers and utilities in Mexico, reports Petroleum Argus. Around 900kt, or 195k b/d, was shipped across the Atlantic from Tallin in July, double the 477kt sent in June. Despite low fuel oil stocks in Singapore, high freight rates meant limited volumes went to Asia-Pacific. Since then, margins have improved and exporters are now looking to move more east. VGO exports from the port rose from 40kt to 52.5kt in July as BP took additional volumes while its Rotterdam refinery underwent maintenance. Fuel oil exports from Ventspils rose 62.5% on the month to 152kt. However, gasoline loadings from Ventspils were down 36.6%, with total product exports from the port rising 1.3% to almost 1.24mt.

Macarthur Coal has announced the lifting of force majeure declaration on its Queensland Bowen Basin operations at Coppabella and Moorvale mines effective 20 Aug. Flooding caused by rains in Queensland led to the force majeure being put in place seven months ago. However, the company was able to offset some of the production shortages by processing and shipping thermal coal from inventories.

September loading schedules for the 8 principal Norwegian and UK crude systems show a 290k b/d, or 14.9%, month-on-month rise in output to 2.23m b/d, making up for the 12.3% month-on-month drop seen in August, reports Energy Intelligence. The rise is mainly due to scheduled maintenance programs coming to an end. The biggest gain comes from Forties loadings with a rise of 175k b/d, having seen a 115k b/d fall in August.

The Bank of Japan cuts its assessment of exports, production, capital investment and consumer spending in today's report. Japan's economic growth has been described by the Bank as 'sluggish' for the first time in 10 years. The Unemployment rate has climbed to the highest in almost two years. Japan's weaker economic outlook has mainly been driven by high oil and raw material costs also a global slowdown.

US gasoline stocks fell another 6.2m bbl last week to 196.6m bbl, with imports rising 9k b/d to 794k b/d and demand dropping 23k b/d to 9.4m b/d, according to the latest data from the US Department of Energy. Production increased 213k b/d to nearly 9.1m b/d, despite refinery utilisation dipping 0.2% to 85.7%. Crude inventories grew 9.4m bbl to 305.9m bbl, 9% lower y-o-y, as imports increased 1.34m b/d to almost 11m b/d, the highest since Jan 2007. Distillate stocks were up 0.5m bbl at 132.1m bbl despite imports falling 63k b/d to 73k b/d, the lowest level since July 1999, as demand fell 319k b/d to just over 4m b/d.

Angola will increase daily crude exports in October to just under 2m b/d, the highest in at least 8 months and 0.5% higher month-on-month, as new fields raise output, reports Bloomberg. 65 cargoes are due to load in October, up from 62 in September, including 3 from the Saxi Batuque fields which Exxon started last week. When combined with the Mondo project, which started output in January, the fields are expected to reach a total production rate of 200k b/d later this year. Angola produced 1.9m b/d in June while Nigeria pumped 1.84m b/d, reports Bloomberg.

Crude steel production in July increased by 6.2% year-on-year to 117 Mt, but this was 2 Mt lower than the previous month's total and 3 Mt lower than the monthly record total of 120 Mt in May, according to International Iron and Steel Institute data released today.

World crude steel output for the first seven months of 815 Mt was up 6.1% (+47 Mt) y-o-y, with China up 9.3% (308 Mt), Japan up3.8% (72 Mt), EU27up 0.9% (127Mt), Russia up 4.8%(44 Mt), Ukraine up 4.5% (25 Mt), and the US up 4.8% (59 Mt).

Azeri crude exports by rail to Georgia have been stopped after the line was damaged in Georgia, which accused Russian troops of blowing up a railway bridge, reports Reuters. The halt further limits BP's options in taking oil from the Caspian after the BTC pipeline link to Turkey was damaged by fire and a pipeline to Supsa in Georgia was shut due to security concerns. The railway line can carry 50-70k b/d of Azeri oil to Batumi and is expected to reopen within 10 days. In the meantime a disused rail bridge is being prepared for use. Due to the disruption, the BP-led Azeri-Chirag-Gunashli oilfields in the Caspian have cut production to about 250k b/d from about 800k b/d before the BTC link was damaged, reports Reuters.

According to a statement from China's Ministry of Finance, China will raise export duties on exports of coking coal and coke, and impose an export tax of 10% on thermal coal effective from 20th August in order to curb soaring exports and help ease power shortages. Export duties on coking coal will be raised from 5% to 10% while taxes on coke will rise to 40% from 25%.

China exported 0.84 Mt of coke in July, down by 44% month-on-month. In the first seven months exports totalled 8.3 Mt, representing a 8.3% decline year-on-year, latest customs data reveal.

Global oil demand fell 1.04m b/d month-on-month in July to 85.76m b/d but remained 229k b/d higher on the year, taking year-to-date demand up 1%, reports Energy Intelligence. In the US, demand fell 3.4% in July, putting it down 3.6% in the year-to-date. Global supply rose 590k b/d on the month in July to 87.56m b/d, up 2m b/d y-o-y. As a result, after months of supply surpluses failing to result in stockbuilds, OECD crude and product inventories grew by 1.66m b/d in July, while oil at sea added another 1m b/d as long-haul sailings peaked last month.

The pace of industrial output growth in July dropped to the lowest level in 19 months, representing a 14.7%-increase year-on-year, mainly due to strict controls on production before and during the Olympic games. Raw coal, iron ore and crude steel production reached 220.29 Mt (-8% m-o-m), 63.74 Mt (-22% m-o-m) and 44.89 Mt (-4% m-o-m) in July, according to the latest statement from China's National Bureau of Statistics.

Indonesia's state oil company, PT Pertamina, will buy up to 1.5m bbl of crude a month, around 50k b/d, from Libya as the output from the SE Asia's only OPEC member declines, reports Bloomberg. Reports state this volume could increase to 6m bbl a month depending on Pertamina's crude needs. The shipments will start in October under a 20-year contract, with the oil being processed at the 260k b/d Balikpapan and 340k b/d Cilacap refineries. Crude output in Indonesia has dropped about 40% in the past 12 years amid ageing fields, turning the country into a net oil importer and prompting it to consider leaving OPEC. Daily crude output has been less than 1m b/d since Feb 2004, reports Bloomberg.

The US Department of Agriculture (USDA) has cut its forecast of 2008/09 world coarse grain exports in August, down 4.5 Mt on last month's forecast at 115 Mt, representing a fall of 9.9Mt compared to the 07/08 estimate. The US, Argentina and Brazil are predicted to supply less coarse grain into the international market, with export forecasts down from July's estimates by 0.7 Mt, 1.5 Mt and 3.0 Mt respectively. Corn export estimates for October/September marketing year have been slashed by 4.3 Mt from last month to 88 Mt.

US gasoline stocks dropped 6.4m bbl last week to 202.8m bbl as imports dipped 79k b/d to 785k b/d despite demand falling 38k b/d to 9.45m b/d, according to the latest data from the US Department of Energy. The decline came as refinery utilisation fell 1.1% to 85.9%, mainly due to Tropical Storm Edouard idling some refineries in the US Gulf region last week, causing gasoline production to drop 209k b/d to 8.85m b/d. Distillate inventories were down 1.7m bbl at 131.6m bbl but were 3% higher y-o-y as imports fell 156k b/d to 136k b/d and demand jumped 254k b/d to 4.4m b/d. Crude stocks were down 0.4m bbl at 296.5m bbl, 11.5% lower on the year, as imports fell 538k b/d to 9.65m b/d. probably as a result of delays caused by the storm.

BP has declared force majeure on crude flows along the Baku-Supsa pipeline used to export Azeri crude via the Georgian Black Sea port Supsa, reports Bloomberg. It has halted flows on the 100k b/d pipeline due to security fears in Georgia. The announcement follows the closure of the 1m b/d BTC pipeline last week following a fire on the line.

The Indonesian government has asked six miners to temporarily halt exports and use the Indonesia Coal Price Index as a benchmark to review their selling price. Meanwhile, the road closure during the weekend in East Kalimantan will affect the largest coal producer Bumi’s coal supplies and power production, according to an announcement from the Indonesia energy ministry quota by Reuters.

World oil demand growth will rise by approximately 60,000 barrels per day (bpd) to 930,000 bpd in 2009 as consumption in non-OECD countries
increases, the International Energy Agency said on Tuesday. Compared with its previous monthly report, it also nudged up its expectations
for demand in 2009 by 70,000 bpd to 87.8 million bpd and said its outlook for 2008 was virtually unchanged. Stock levels in developed countries fell by 15.3 million barrels in June, the IEA’s monthly
report found, but for July, supplies increased
from both OPEC and non-OPEC sources. OPEC July crude supplies rose by 145,000 bpd to 32.8 million bpd, as Saudi Arabia, Nigeria and Iran all produced more oil, while supplies from Norway, Canada, Argentina and Brazil underpinned non-OPEC growth of 520,000 bpd. Growth in non-OPEC output now averages 455,000 bpd for 2008 and 655,000 bpd for
2009.Effective OPEC spare capacity is a slim at 1.5 million bpd, but should rise at the end of this year and into next year, the IEA said.