News archive February 2008

Mexican crude exports dropped 9.3% y-o-y in Jan to 1.43m b/d, 4.1% lower than Dec, despite production remaining steady on the month, averaging 2.96m b/d, reports Energy Intelligence. Bad weather has been causing disruptions to exports from EC Mexican ports in the first 2 months of this year. Crude exports to the Americas were down 120k b/d from Dec to 1.22m b/d, while Asia imported no Mexican crude. Europe took 100k b/d more than Dec, when Mexican exports hit a low for the decade of 1.45m b/d.

The US imported 2.4 Mt of steel in January, according to data from the American Iron and Steel Institute. This marks a gain of 0.6 Mt from the previous month and is the second-highest total in the last six months. US steel imports in 2007 reached 29.9 Mt, after annual imports peaked at 40.9 Mt in 2006.

Further tightening in global steam coal supply can be expected after the Bergwerk Saar coal mine in Germany was closed at the weekend, according to media reports. Coal production at the 3.7 Mtpa mine was halted after mining activity induced an earth tremor, causing damage to buildings. Saarland's state prime minister has said the closure may be permanent.

US gasoline stocks rose another 2.3m bbl last week to 232.6m bbl, the highest since the week ending 4 Feb 1994, and 5.7% higher y-o-y, according to the latest data from the US Department of Energy. Imports rose 527k b/d to 1.35m b/d, 52% higher than the same week last year, while demand dropped 80k b/d to just over 9m b/d. Crude inventories grew 3.2m bbl to 308.5m bbl, but remained 6.2% lower on the year, despite imports falling 144k b/d to under 10m b/d. Distillate stocks dropped 2.5m bbl to 120m bbl as imports fell 187k b/d to 192k b/d. Demand was down 576k b/d at 4.2m b/d. Refinery utilisation recovered by 1.2% to 84.7%.

Wheat futures prices at the Chicago Board of Trade reached another record high, as US wheat inventories are poised to decline to the lowest level in 60 years, according to the Financial Times. Key wheat supplier, Kazakhstan, is to follow the example of Argentina and Russia by levying tariffs on wheat exports in a bid to conserve supplies for its domestic market.

South Korean coal imports in January were up 9% on the same month last year to 7.6Mt, the latest customs statistics show. Imports from both China and Indonesia have declined (by a combined 0.5 Mt year-on-year) to 1.7 Mt and 2.1 Mt respectively. Australia was South Korea's leading coal supplier with 2.7 Mt (+0.7 Mt YoY), so boosting tonne-mile demand.

Asia-Pacific demand for W. African crude is to remain firm due to fuel shortages in China and refiners building up depleted stocks, reports Petroleum Argus. Volumes in March are set to be 1.29m b/d, down on Feb, but up 6.6% y-o-y. Chinese demand for March W. African crude is 860k b/d, down on February's record 1.05m b/d, but still 26% higher on the year. China's purchases have risen from the usual 630-700k b/d to 0.9-1m b/d since around Nov 2007. Dec-Jan refinery runs in China, Japan, India, S. Korea and Singapore were 18m b/d, up by over 1m b/d on Oct, outstripping imports. Refiners are now looking to replenish stocks depleted by cold weather before summer utility demand begins. S. Korean refiners bought W. African crude for the first time this year for March loading, while Indian purchases rose 30% to 215k b/d. However, Asia-Pacific buyers are facing competition from US refiners looking to secure sweet crude for April when maintenance ends.

Colombian coal exports in January were 5.0 Mt, according to trade data quoted by the McCloskey Group. This marks a decline of 0.5 Mt from December. Given the current tightness of steam coal supply (Richards Bay FOB price assessed by Platts at $116/t), producers in Colombia are under increased pressure to boost supplies to the export market.

Iran's crude oil exports to N. Asia rose 31% in the 4Q07, driven by China, after OPEC increased output from November, reports Reuters. Quarterly exports from Iran rose 325k b/d taking its annual total to the region to around 1.26m b/d, 10% higher y-o-y, despite OPEC supply restrictions for most of 2007. Exports from Saudi Arabia, Iran, Kuwait and the UAE to N. Asia were up 346k b/d in the 4Q07 to 6.38m b/d, according to data from Japan, Taiwan, S. Korea and China, indicating that OPEC targeted Asia when it raised output by 500k b/d. Exports from Saudi Arabia rose 130k b/d, or 5%, from the 3Q07, although Saudi exports to N. Asia were down 4.4% in 2007 y-o-y. Exports from the UAE fell 9%, or 130k b/d, over the 4Q07 following field maintenance in Nov that cut output for that month by up to 600k b/d. China's imports of Iranian crude rose 22.4% to 410k b/d, making Iran its third-largest supplier after Saudi Arabia and Angola. Volumes are expected to rise to about 500k b/d this year. S. Korea's 2007 imports of Iranian crude were up 15% while Japan's rose 3.5%, reports Reuters.

US gasoline stocks rose another 1.1m bbl last week to 230.3m bbl, the highest since the week ending 11 Feb 1994, and 3.7% higher y-o-y, according to the latest data from the US Department of Energy. Imports dipped 14k b/d to 827k b/d while demand grew 105k b/d to 9.1m b/d. Crude inventories jumped 4.2m bbl to 305.3m bbl, but remained 6.8% lower on the year, as imports increased 365k b/d to 10.1m b/d. Distillate stocks fell 4.5m bbl to 122.5m bbl as demand soared 629k b/d to 4.8m b/d. Imports were up 99k b/d at 381k b/d. Refinery utilisation dropped 1.6% to 83.5%, the lowest rate since the week ending 3 March 2006.

The US Federal Reserve expects US economic growth of 1.3-2.0% in 2008. This is down on its previous range of 1.8-2.5% forecast in October. The US Federal Reserve remains more positive about the US economy than the IMF: last month the Fund projected US GDP growth at 1.5% on a year-on-year basis for 2008.

South Korea's crude imports rose 14% y-o-y in Jan to 82.5m bbl, or 2.66m b/d, according to state-run Korea National Oil Corp, reports Bloomberg. Exports of refined products were up 14% to 21.8m bbl while imports climbed 18% to 19.1m bbl. S. Korean refinery crude throughput rose 1.5% on the year to 77.9m bbl in Jan but production of refined oil products dropped 1.9% to 82.5m bbl. Domestic oil demand fell 2.5% to 71m bbl, or 2.3m b/d, reports Bloomberg.

Indian spot prices for iron ore rose to $147/t at the beginning of the week, just $8 short of the all-time high, according to data supplied by U-Metal. This marks the third successive weekly rise and implies a delivered price at Chinese ports of $193/t. Earlier this week Vale agreed contract price rises of at least 65% for iron ore fines with Posco, ThyssenKrupp and a number of Japanese steel mills.

The July futures price of soyabeans on the Chicago Board of Trade has reached a new all-time high with analysts attributing the gains to anticipated high demand from China, Reuters reports. Soyabean import demand from China is expected to increase as a consequence of recent severe weather, which destroyed 40% of the country's planted rapeseed crop, according to government estimates, and, in doing so, boosted demand for alternative edible oils. Preliminary customs data for January show that China imported 3.44 Mt of soyabeans, the highest monthly total since June 2006.

This year more constraints to global coal supply have emerged.

China's government has requested that the country's port authorities will halt coal loading in early February (Chinese New Year) and early March (parliamentary meeting), Reuters reports. The move is probably in response to power cuts in at least 50% of the country's provinces. Heavy snowfall, high coal prices and transportation difficulties have been blamed for the difficulties.

Secondly, six mining companies in Queensland have declared force majeure due to flooding. The extent of the disruption has not yet been established, but both Dalrymple Bay and Hay Point have been closed as a result of the severe weather conditions.

Richards Bay exported just 3.6 Mt of coal in January, Barlow Jonker reports. This estimate is lower than the preliminary estimate of 4 Mt reported in late January and significantly under the December throughput of 6.8 Mt. Rolling power cuts at major mines from January 25 coupled with floods have hampered output and exports.

Brazilian mining company Vale (formerly CVRD) has agreed a contract price increase of 65% for iron ore fines in the 2008 financial year with Korean steelmaker Posco and five Japanese mills (JFE Steel, Kobe Steel, Nippon Steel, Nisshin Steel and Sumitomo Metal Industries). The price increase will be effective from April 2008. Last year the iron ore contract price rose 9.5%.

Indian naphtha exports are rising again in Feb after 3 months of decline, as demand for natural gas from domestic power plants slows towards the end of winter, reports Petroleum Argus. Indian fertiliser companies have been replacing expensive naphtha as a feedstock with cheaper natural gas but in the last few months have had to resort back to using more naphtha due to lower gas supplies resulting from a new power unit coming onstream and maintenance at a gas field. Feb shipments have risen to over 150k b/d, up from 115k b/d in Jan. March exports are expected to rise further, with around 95k b/d already offered or sold. Indian naphtha exports were just over 240k b/d in 2007, compared with less than 170k b/d in 2006, reports Argus.

The town of Mackay in Queensland, located close to the coal loading facilities Dalrymple Bay and Hay Point, has been declared a flood disaster area by government authorities, according to Australian media reports. As a result Inchcape agency advised overnight that Hay Point Coal Terminal is closed with no vessel alongside, while no loading is reported at Dalrymple Bay Coal Terminal, although one vessel remains berthed. Rio Tinto is now the sixth mining company to declare force majeure at its 4.5 Mtpa Hail Creek coking coal mine as a result of the severe flooding in Queensland, Reuters reports.

Meanwhile, preliminary customs data show that China imported a monthly record of 36.8 Mt of iron ore in January.

China's crude imports rose 1.8% y-o-y in January to 3.3m b/d, and were over 8% higher than December, according to preliminary data from China Customs. Product imports grew 16.6%, or 109k b/d, on the year to 765k b/d and were 138k b/d higher than December.

Japan's Tokyo Electric Power Co (TEPCO) more than tripled its buying of crude and more than doubled its purchases of fuel oil in Jan y-o-y due to the indefinite shutdown of its biggest nuclear power plant and cold winter weather, reports Reuters. TEPCO bought 3.1m bbl of crude in Jan, up from just over 1m bbl in Jan 2007 while its consumption rose to 2.47m bbl from 710k bbl a year earlier. The rise follows the closure of the Kashiwazaki-Kariwa unit which has been shut since an earthquake in July 2007. TEPCO also bought 4.9m bbl of fuel during Jan, up from just under 2m bbl the previous year. In Jan the company raised its crude and fuel purchase outlook to 65.4m bbl up from the 34m bbl projected before the earthquake, reports Reuters.

South African utility Eskom plans to buy additional coal in the coming years to ensure adequate stockpiles at the country's power stations, according to Reuters. A spokesperson from the utility announced the company would require an extra 45 Mt of South African coal over the next two years to achieve its goal. Securing such a large quantity of coal for domestic power stations would certainly impact exports, the spokesperson advised.

A fifth mining company in Australia has declared force majeure following bad weather in Queensland earlier this week, Reuters reports. Xstrata announced that railings from the mines at Collinsville and Newlands have been affected. Heavy rain has caused further disruption to the coal supply chain (which was hit by flooding in January), prompting four mining companies to declare force majeure on coal shipments. Meanwhile, iron ore load ports in western Australia may be hit by a tropical cyclone this weekend, according to Australia’s Bureau of Meteorology.

The IEA has cut its forecast for 2008 global oil demand in its latest report by 200k b/d to 87.6m b/d, or 1.9%, mainly due to weakening demand in the US and despite continuing to see strong GDP growth in both the Middle East and China. OECD demand has been lowered by almost 300k b/d to 49.5m b/d, with a 170k b/d reduction in US demand to 20.7m b/d, a 0.5% contraction y-o-y. Around half of the OECD rise is expected to come from heating use, while transportation fuel growth is set to fall compared to previous years due to weaker economic activity and higher oil prices. World oil supply in January rose 745k b/d to 87.2m b/d on new output from Brazil and recovering non-OPEC output elsewhere. According to the IEA, economic refinery cuts in Jan and Feb were the most extensive in 5 years. Feb global refinery crude throughput should average 74m b/d, down 0.6m b/d from Jan.

US gasoline stocks grew another 1.7m bbl last week to 229.2m bbl and 1.8% higher y-o-y, despite imports falling 303k b/d to 841k b/d, according to the latest data from the US Department of Energy. Gasoline demand was up 104k b/d at just over 9m b/d while production rose 170k b/d to 8.9m b/d as refinery utilisation rose 0.8% to 85.1%. Crude inventories increase 1.1m bbl to 301.1m bbl, but remained 7% lower on the year, despite imports falling 777k b/d to 9.7m b/d. Distillate stocks dipped 100k bbl to 127m bbl as imports fell 89k b/d to 282k b/d and demand rose 27k b/d to 4.2m b/d.

More flooding has been reported in Queensland, causing further disruption to the supply chain, which was severely impacted by bad weather in January. Australian media sources report a derailment and track damage on the line to Abbott Point. Meanwhile, a moored Handymax vessel (the "Devprayag") at Dalrymple Bay has reportedly been damaged following a collision as a result of high winds.