News archive October 2008

S. Korea's crude imports rose 1.3% in September y-o-y to 2.3m b/d, although imports from top supplier Saudi Arabia fell 2% to 685k b/d, reports Energy Intelligence. Volumes from the UAE surged 22% to 423k b/d, Iranian shipments jumped 85% to 278k b/d and Qatari imports rose 48% to 184k b/d. Imports from Australia and Iraq were down 36% and 49% respectively at 81k b/d and 90k b/d. Algeria was the only source of African crude, having sent 20,800 b/d during the month. The Middle East accounted for 87.2% of total imports while Asian's countries provided 9.5%, compared with 83% and 10.5% respectively last year.

In September, China increased its intake of Saudi crude by 64% y-o-y to 994k b/d, as additional volumes went to the new Qingdao and Fujian refineries where Saudi Aramco is a partner, reports Energy Intelligence. Angola was the second largest supplier, with volumes up 4.4% at 525k b/d, while Iranian shipments rose 43% to 465k b/d. Russian and Sudanese imports fell 16.3% to 221k b/d and 14.4% to 188k b/d respectively. The Middle East accounted for 58% of the total 3.67m b/d imported while Africa supplied 25%.

Russia's seaborne crude exports are scheduled to be 2.8m b/d in November, just 2k b/d lower than Oct, despite the country's burdensome tax regime, reports Energy Intelligence. However, actual volumes may be lower as there are 5 unclaimed stems on the schedule totalling 620kt, or about 150k b/d. Volumes from the Black Sea port of Novorossiysk are set to fall 74k b/d on the month to 841k b/d while shipments from the Baltic Primorsk are due to rise 73k b/d to 1.5m b/d. The start of Nov usually sees the start of the winter storms on the Black Sea, which combined with the shorter daylight hours, cause delays in passing through the Bosporus Strait.

Nigeria will reduce its crude exports in Nov and Dec by 5% to comply with OPEC production cuts, reports Bloomberg. In addition, 5 cargoes have been removed from the Nov schedule and 7.6 cargoes from the Dec program, totalling about 11.97m bbl, equivalent to 6 VLCCs. The reduction is larger than expected when so much output is already shut-in with force majeure still in place on Bonny Light and Brass River. Exports in November and December were originally scheduled to average 1.9m b/d and 2m b/d respectively but are now forecast to be around 1.64m b/d and 1.66m b/d.

Russia's government announced the signing of the first railway bridge deal with China on Tuesday, which is a potential supply route for iron ore exports to the Chinese border from Russian miner Aricom. The annual capacity is expected to reach 20 Mt in both directions, Reuters reports. According to data from China Customs, China imported a total of 5.4 Mt of iron ore from Russia in 2007, with year to date imports at 3.87 Mt.

US distillate stocks grew 2.3m bbl last week to 126.6m bbl but remained 6.4% lower y-o-y as imports increased 92k b/d to 273k b/d and demand rose 61k b/d to just over 4m b/d, according to the latest data from the US Department of Energy. Gasoline inventories were down 1.5m bbl at 195m bbl, relatively unchanged from a year earlier, as imports fell 231k b/d to 831k b/d. Crude stocks were up 0.5m bbl at 311.9m bbl despite imports falling 63k b/d to 10.34m b/d. Refinery utilisation was up 0.59% at 85.3%.

US steel imports in September increased to 2.65 Mt, up by 15% from the previous month. However, year-to-date imports are still running around 7% below last year's pace, according to data from the American Iron and Steel Institute. Steel imports into the US in the first nine months of 2008 total 22.05 Mt, a fall of 1.67 Mt on the same period last year.

More Asian jet fuel is expected to go to Europe in future as demand in the region becomes more important due to the continuing post-Olympics fall in demand from China, reports Platts. The USWC coast has also cut its volumes from Asia in recent months due to oversupply and a closing arbitrage window. China's jet fuel imports are set to decline even further next year as new domestic supply comes on stream. PetroChina will bring online a 200k b/d refinery at Qinzhou by the end of the year and plans to increase capacity to 440k b/d by 2011, while CNOOC will start up its refinery in Guangdong in Jan/Feb. China Aviation Oil, China's dominant importer of jet oil, is planning to import around 305kt in Dec, down from 325kt in Nov. In Q208, ahead of the Olympics, CAO acquired 1.57Mt of jet fuel, 73% higher y-o-y and 38% up on Q108, while the volume in 3Q08 was 1.26Mt. China's imports for Q408 are forecast to be less than 1Mt. High gasoil stocks in the country, along with poor demand due to the weak economy, could mean domestic refiners will maximise jet fuel output over gasoil, reports Platts.

China's stockpiles of iron ore rose to a record volume of 72.28 Mt at the end of last week. Meanwhile, the spot fob price of iron ore from India (63.5% Fe content) has crashed to the lowest level for 19 Months, standing at $63.00/t at the end of last week, down by 58.6% from its peak of $152.00/t on December 2007.

Mexican crude output fell 303k b/d in the 3Q8 y-o-y to 2.75m b/d after Pemex shut in wells to offset the loss of demand in September after Hurricanes Gustav and Ike forced US Gulf refiners to shut down, reports Petroleum Argus. This, combined with already declining output, led to a 405k b/d drop in exports to 1.28m b/d in the 3Q08. September production fell 35k b/d from August levels to just over 2.72m b/d with output from the Cantarell field declining to 940k b/d having fallen to 990k b/d in August, the first time it had gone below 1m b/d since 1995. Exports fell to just over 1m b/d in Sept, down from over 1.4m b/d in Aug, as Mexico's main customers on the US Gulf coast shut their refineries due to the hurricanes. Shipments to the US fell over 400k b/d to about 900k b/d, while 60k b/d went to Asia-Pacific for the first time since April. Net product imports in the 3Q08 were up nearly 90k b/d y-o-y as domestic demand remained firm.

The Bureau of Geology and Mineral in Shandong Province announced that a proven deposit with a concentration ratio around 25.97%-31.72 % of more than 1,000 Mt of iron ore has been found in Yanzhou at southern Shandong Province, Xinhua reported. The newly discovered deposit will provide an important resource guarantee for the steelmaking industry in Shangdong Province.

OPEC has cut its oil output by 1.5m b/d to 27.3m b/d from 1 Nov at an emergency meeting on Friday, but prices have continued to fall due to the fear of a global recession, reports AFP. US light crude for Dec delivery fell to $62.85/bbl, its lowest since May 2007, while Brent North Sea crude dropped to $61/bbl, the lowest since March 2007. Saudi Arabia has pledged to cut output by 466k b/d, while Iran and the UAE will lower volumes by 199k b/d and 134k b/d respectively. Nigeria is to reduce output by 113k b/d while Angola will produce 99k b/d less. The decision will be reviewed at the meeting scheduled in Algeria on 17 Dec.

Against the background of falling steel prices both within China and across international markets, the China Iron and Steel Association has revised its forecast for China's steel production down to 500Mt in 2008, according to the Secretary General of CISA quoted by Reuters. This is well short of earlier forecasts of 520-540Mt.

Vietnam's first refinery to come on stream in 2009, with a capacity of 145 kb/d, is set to affect crude and product Asia-Pacific markets, Argus reports. Dung Quat is estimated to reach 80% of total capacity by late Q3 or Q4 next year. Hanoi will supply the refinery with 55kb/d of sweet Bach Ho crude from January to October 2009. Most of the refinery's crude intake is likely to come from domestic sources, reducing substantially Vietnam's 300 kb/d crude exports. Moreover, it is estimated that Vietnam's oil product imports will be reduced by 30%, when the refinery nears full production.

North Sea crude production reached a 9-year low in Q308 at 3.66 mb/d inQ308, 200 kb/d lower y-o-y. UK crude production fell by 80 kb/d to 1.21 mb/d in Q308, compared to the same period last year. Norwegian crude output declined by 90 kb/d to 2.1 mb/d in Q308 y-o-y, while it was 1% higher than Q208. Denmark's production was 35 kb/d lower y-o-y down to 280 kb/d. Crude production in Netherlands slid by 9% to to 37 kb/d.

By late afternoon in London, ICE Brent was trading at $ 66.48/bbl.

US crude stocks rose another 3.2m bbl last week to 311.4m bbl, just 1.6% lower y-o-y, as imports jumped 239k b/d to 10.4m b/d, according to the latest data from the US Department of Energy. Gasoline inventories were up 2.7m bbl at 196.5m bbl, 1.4% higher on the year, while imports fell 390k b/d to just over 1m b/d. Demand was up 171k b/d at just over 9m b/d. Distillate stocks were up 2.2m bbl at 124.3m bbl but remained 7.6% lower y-o-y, as imports increased 90k b/d to 181k b/d.

The SSY Combined Australian Port Congestion Index rose to 6.8 days this week after four successive weeks of decline. Congestion at Australia's iron ore ports returned to more than 6 days, up from 3.8 days a week ago. Average delays at the east coast coal ports of 7 days have been virtually cut in half from a year ago.

Meanwhile, the Hunter Valley Coal Chain Logistics Team (HVCC) has reduced its forecast for the end-October queue at Newcastle to 22 vessels from 29 last week. The end-November queue has been revised to 30 vessels compared with 34 forecast last week.

According to the National Bureau of Statistics, China's economic growth rate fell to 9% in the 3q08 from 10.1% last quarter, against the background of the credit crunch globally and weakening demand in domestic market, reported Reuters. This shows year to data figures of 9.9% down from 10.4% in the 1h08, approaching single digits for the first time in at least four years.

Australia exported a monthly record 31.3 Mt of iron ore in September, representing a 38% increase year-on-year. This has raised year-to-date exports to 251 Mt or 22.7% higher than in Jan-Sep 2007, according to preliminary port export data, Macquare reports.

Meanwhile, FMG exported 8.5 Mt of iron ore in September. Rio Tinto shipped 46.3 Mt in the 3q08, some 2.4 Mt more than the previous quarter. BHP Billiton exported 32.4 Mt of iron ore in the 3q08.

The Federal Reserve reported that US industrial output was down by 2.8% in September, the biggest drop in 34 years after slipping 1% in August, with a slowdown in production affected by hurricanes Gustav and Ike. The latest fall has encouraged fears of recession in the US.

Meanwhile, September US consumer price inflation remained unchanged from August at an annual rate of 4.9%, with lower energy and clothes prices helping to offset higher food costs.

US crude stocks rose another 5.6m bbl last week to 308.2m bbl, but remained 4.2% lower y-o-y, despite imports falling 185k b/d to 10.16m b/d, according to the latest data from the US Department of Energy. Gasoline stocks jumped another 7m bbl to 193.8m bbl but remained 1% lower on the year as imports inched 18k b/d higher to 1.45m b/d. Demand was up 203k b/d at 8.89m b/d while production rose 228k b/d to almost 9.2m b/d as refinery utilisation increased 1.3% to 82.2%. Distillate inventories dipped 0.5m b/d to 122.1m b/d, taking levels 10.4% lower y-o-y, as imports fell 74k b/d to 91k b/d and demand rose 76k b/d to 4m b/d. Distillate output increased 155k b/d to 4.18 b/d.

Crude oil shipments through the BTC pipeline will average about 44% more than previously expected over the next month after one of two platforms resumed output, reports Bloomberg. Exports from 18 Oct to 21 Nov will average 548,571 b/d, according to a revised loading program, up from the previously scheduled 380,857 b/d. BP started production from the West Azeri platform in the
Caspian Sea on 9 Oct after a gas leak reduced output. The Central Azeri platform resumed processing oil and gas from West Azeri, while its own production remained shut.

OPEC has lowered its 2009 global oil demand forecast for a second month by 450k b/d, or 0.5%, to 87.21m b/d, due to the financial crisis, reports Bloomberg. It also cut its forecast for this year by 330k b/d. OPEC will hold an extraordinary meeting on 18 Nov in Vienna, after its decision to lower excess supplies at last month's meeting failed to halt a fall in prices, which are down 49% from their July record.

US auto sales fell by 3.8% in September, having gained 1.7% in August. September's year-on-year fall of 18.5% represents a record rate of decline. Year-to-date sales were down by 8.4% compared to the first nine months of 2007. Lack of available credit and the delaying of purchases by consumers helped to push sales down. Overall US retail sales fell by 1.2% in September, the biggest drop since August 2005.