News archive September 2008

According to preliminary data, 4 converted tankers of 976,719 dwt were delivered into the Capesize fleet in September. In the year to date SSY's records show that 3.6Mdwt of converted tankers have entered the Capesize fleet with an additional 2.5 Mdwt expected to enter service before the end of the year. VLCC to VLOC conversions are primary targeted at fronthaul iron ore trade from Brazil as charterers seek to benefit from economies of scale and reduce their $/tonne transportation costs.

Continuing with India's oil fundamentals, diesel oil demand in the country has risen by about 10% to 1 mb/d compared with 2007. Crude runs reached a record level of 3.4 mb/d in July and should reach 4 mb/d in the 4th Quarter as the 580.000 b/d Reliance's Jamnagar plant commences operation, Argus reports. India bought a record high 550.000 b/d of crude oil ex-West Africa for October, partly due to an easing in freight rates in August and an open arbitrage for light sweet west African crude to move Asia- Pacific. For November, 245.000 b/d of west African crude is already scheduled to be imported to India.

Chinese iron ore port stockpiles are now at 69.7 Mt, down slightly from last week's all-time high of 71.5 Mt, but still some 28.1 Mt higher than the same period last year. High stockpile levels have impacted on spot ore prices to China. The spot fob price of iron ore from India (63.5% Fe content) has dropped over the last two months to $95/t, the lowest level since August 2007. The delivered cost of Indian ore to China in the last two weeks has dropped below Brazilian contract ore for the first time in 2008.

The latest International Grains Council wheat trade forecast for 2008/09 (July-June) has been revised upwards by 1.3 Mt to 116.0 Mt and compares with an estimate of 109.2 Mt for the 2007/08 crop year. Year-on-year increases in export volumes are anticipated in Canada, the EU-27 and Russia, with the largest gains expected from Australia (+6.5 Mt to 14.0 Mt) and Ukraine (+6.8 Mt to 8.0 Mt). However, US exports are expected to fall 8.2 Mt year-on-year to 26.0 Mt.

Mexico's oil output continued to fall in August, but exports to the US increased to help offset the hurricane-related loss of some Gulf of Mexico production, reports Energy Intelligence. Crude output was down 23k b/d month-on-month to a 10-year low of 2.76m b/d, taking output 9.2% lower y-o-y as rates at the offshore Cantarell area continue to decline. Total exports were up 2.8% on the month at 1.42m b/d, however, year to date volumes were down 15.9% at an average 1.44m b/d. Exports to N. America, mainly the USG, rose 89k b/d, mostly at the expense of shipments to Europe which fell 50k b/d, while there were no exports to Asia for the fourth consecutive month.

Venezuela has signed a deal to increase oil exports to China from the current 330k b/d to 1m b/d by 2012, reports AP. The two countries also plan to build 4 oil tankers and 3 oil refineries in China capable of processing Venezuela's heavy, sulphur-laden crude. Reassurance was given that this deal would not affect supplies to any other country, such as the US. Other plans for co-operation with China call for building a refinery in Venezuela and launching a joint oil-development project in the crude-rich Orinono River belt. Venezuela has been seeking new markets to reduce its dependency on the US market, which still buys about half of the country's oil despite years of political tensions. China is the world's second-biggest oil consumer and importer after the US and its imports are rising by over 10% per year.

Japan recorded a rare trade deficit in August, encouraging fears the country may be about to enter into recession, the BBC reports. The value of the country's imports was some $324bn yen ($3.09bn) higher than its exports in August. Exports to the US dropped by a record 21% as the financial crisis impacted on demand from overseas. Japan's automobile shipments have fallen while import costs have been driven higher by rising prices for oil, coal and natural gas.

US gasoline stocks fell another 5.9m bbl last week to 178.7m bbl, another record low and 6.6% lower y-o-y, while refinery utilisation hit a record low of 66.7%, down 10.71% from the previous week, following the hurricanes, according to the latest data from the US Department of Energy. Gasoline imports were up 234k b/d at 1.2m b/d, while demand was 166k b/d down at 8.7m b/d and production was down 372k b/d at just under 8m b/d. Crude inventories fell 1.5m bbl to 290.2m bbl, 9.5% lower on the year, as imports fell 1.37m b/d to 7.14m b/d, the lowest since Jan 2000. Distillate stocks declined 4.2m bbl to 125.4m bbl as imports rose 68k b/d to 199k b/d and production fell 542k b/d to 3.26m b/d.

SSY's Combined Australian Port Congestion Index shows current average waiting times off the east and west coasts of around 6.5 days, down from 7 days just over one week ago. Average delays at the east coast coal ports of 7.7 days have shown little change in September, having fallen from close to 9 days in late August. Waiting times off the west coast iron ore ports of 5.5 days are down from 6.5 days at the start of last week.

The BTC pipeline has been closed for maintenance but exports out of Ceyhan continue as normal and no force majeure has been declared, reports Platts. While already scheduled, the closure has been able to take advantage of the lower operating rates currently in place. The flow through the line had been reduced to about 330k b/d, or 40% of capacity, due to a gas leak which began on 16 September. Flow through the pipeline had been supplemented from oil in storage at BP's Sangachal terminal until Monday when it was reduced in line with output.

Some 2.54 Mt of steel was shipped to India in the first five months of India's fiscal year (April-August), according to the India steel ministry's joint plant committee quota by Metal Bulletin. That represented year-on-year growth to 35%. The major steel exporters to India are China, South Korea and Russia.

Australia's August coal exports were up by 7.8% from July to 23.38 Mt, largely due to the strong recovery from weather-affected disruption earlier this year in Queensland, according to McClosky. Coal exports from Australia in the first eight months of this year totalled 172.34 Mt, representing a 3.3% increase over the same period last year.

US crude imports in July from Saudi Arabia rose 277k b/d y-o-y to 1.66m b/d while those from Iraq were up 236k b/d at 696k b/d, reports Energy Intelligence. Canadian imports increased 142k b/d on the year to 1.96m b/d. Mexican volumes continued to fall, with levels 269k b/d lower y-o-y at 1.2m b/d, only just above Venezuela's 1.19m b/d. Total US crude imports were 105k b/d higher than June at nearly 10.1m b/d despite refinery runs being 135k b/d lower. Latin America supplied 31% of total imports, with 25% coming from Canada and 19% from the Middle East.

October loading schedules for the 8 principal Norwegian and UK crude systems show a 120k b/d, or 5.4%, rise in production to almost 2.36m b/d, reports Energy Intelligence. The increase comes as scheduled maintenance programs in Norway are almost finished. Statfjord output rose 103k b/d to a 2-year high of 303k b/d while Gullfak's rose 74k b/d to 342k b/d, the highest since July 2007.

Global oil demand in August fell 260k b/d month-on-month to 85.99m b/d, 178k b/d lower on the year, reports Energy Intelligence. Non-OECD demand grew by a below-average 891k b/d, or 2.4%, y-o-y as OECD demand fell by over 1m b/d. Chinese demand was up 5% to average 7.9m b/d while US demand declined 1m b/d on the year in August to 19.95m b/d. Global supply also fell 890k b/d from July to 86.44m b/d, due to scheduled maintenance and unexpected supply disruptions. However, supply was up 1.66m b/d y-o-y.

US gasoline stocks fell 3.3m bbl last week to 184.6m bbl, the lowest on record and 3.2% lower y-o-y, following Hurricanes Gustav and Ike, according to the latest data from the US Department of Energy. Gasoline imports fell 144k b/d to 977k b/d while demand was down 183k b/d at 8.9m b/d. Crude inventories dropped 6.3m bbl to 291.7m bbl, 8.5% lower on the year, as imports declined 71k b/d to 8.5m b/d, the lowest since 30 Sept 2005. Distillate stocks were down 0.9m bbl at 129.6m bbl as imports inched 14k b/d higher to 131k b/d and demand fell 167k b/d. Refinery utilisation fell 0.86% to 77.41%, the lowest since 30 Sept 2005 and Hurricane Katrina.

BP has suspended oil production at a second Azeri field after halting output at another deposit due to a gas leak, effectively halving oil extraction from the Caspian Sea deposits, report Reuters. The fields are part of the ACG group of fields which produces around 900k b/d, the Central and Western Azeri fields are usually producing about 470k b/d.

Angola's crude exports are expected to fall 12.6% month-on-month in November to average 1.74m b/d, 9.5m bbl lower than October, according to the latest loading programs, reports Platts. The program shows 55 standard 950k bbl cargoes. The reduced schedule could be a result of OPEC's requirement that members comply with existing quotas which Angola has been exceeding in recent months. Angola's quota, established in Sept 2007, is 1.9m b/d, reports Platts.

China's August crude steel production was down by 5% from July to 42.57 Mt, with coke and iron ore production also slipping, largely due to the forced closure of some mines and factories before and during the Olympics.

China 's coal output was up by 1.85 Mt from the previous month to 222.14 Mt, representing a 14.5%-increase on the same month last year, according to the latest data from the National Bureau of Statistics

Iron ore exports at Indian's major ports have continued to fall, caused by China's iron ore demand weakening further against a background of persistently high port stockpiles. Major iron ore export ports including Mormugao, Paradip, Visakhapatnam and Haldia have reported dramatic falls in exports in the past month. According to Metal Bulletin, FOB prices for 63.5% fines currently stand below $100/t.

Russia and Ukraine are predicted to supply more wheat into the international market this year, according to the US Department of Agriculture (USDA). Combined exports are forecast to climb to 23 Mt in the 2008/09 marketing year, up by 71% (+9.56 Mt) compared to 2007/08, largely due to positive crop prospects and strong regional demand in North Africa and the Middle East. The USDA has also upgraded its prediction for 08/09 EU wheat exports by 2.5 Mt over the previous month's forecast to 18.0 Mt.

The UDSA now projects Argentina's corn exports at 12 Mt in 2008/09, down by 3 Mt from the previous forecast made last month. Combined exports of both soyabean and soya meal from Argentina are forecast to increase to 42.69 Mt (+2.29 Mt on 2007/08 marketing year).

Fuel oil exports from the Middle East Gulf are forecast to fall to around 33Mt this year, or less than 585k b/d, down from 36Mt p.a last year, as subsidised power prices boost domestic consumption, reports Petroleum Argus. The decline comes due to increased power generation demand in the region and strong bunker sales in Fujairah. Exports could be cut further by recent refinery problems at Kuwait's 200k b/d Shuaiba and 440k b/d Mina al-Ahmadi refineries. The lower exports have coincided with Iran's decision to stop fuel oil sales of 250k b/d from August as it builds stocks ahead of winter to cope with a shortfall in natural gas supply. Fuel oil demand in the Mideast Gulf is set to rise to 1.23m b/d by 2010, from just over 1.1m b/d in 2007.

Chinese coal imports in August grew by 0.35 Mt from July to 3.74 Mt, according to trade data quota by Reuters. The increase was helped by the Chinese government's efforts to encourage imports in order to alleviate power shortages and record high prices, but was still down by 7% compared to the same month last year. This brings coal imports in the first eight months to 28.73 Mt, down by 18% y-o-y. The August increase made China a net importer for the first time since May.

China's crude imports rose 11.5% y-o-y in August to 15.65mt, or 3.7m b/d, up from the 3.27m b/d imported in July, according to the latest data from Chinas Customs. Year-to-date volumes on a daily basis were up about 8.2% at an average 3.6m b/d. Product imports rose 32% y-o-y to 791k b/d but were 23.6% lower than July. Volumes over the Jan-Aug period were up 17.8% on the year at an average 862k b/d.

OPEC has announced that since the oil market is oversupplied it will comply with September 2007 production allocations (adjusted to include new members Angola and Ecuador and excluding Indonesia and Iraq), totalling 28.8m b/d, reports Reuters. This means a supply cut of about 520k b/d versus July over the next 40 days.