MABUX: Bunker market this morning, Aug.04. - Hellenic Shipping News Worldwide

MABUX: Bunker market this morning, Aug.04. - Hellenic Shipping News Worldwide


MABUX: Bunker market this morning, Aug.04. - Hellenic Shipping News Worldwide

Posted: 03 Aug 2020 11:00 PM PDT

MABUX World Bunker Index (consists of a range of prices for 380 HSFO, VLSFO and MGO (Gasoil) in the main world hubs) decreased slightly on Aug.03:

380 HSFO – USD/MT – 300.19 (-1.11)
VLSFO – USD/MT – 356.00 (-2.00)
MGO – USD/MT – 437.39 (-0.44)

Meantime, world oil indexes rose slightly on Aug.03, on positive economic data from the United States, Europe and Asia, but investors remained concerned about rising COVID-19 cases globally.

Brent for October settlement increased by $0.85 to $44.15 a barrel on the London-based ICE Futures Europe exchange. West Texas Intermediate for September delivery rose by $0.74 to $41.01 a barrel on the New York Mercantile Exchange. The Brent benchmark traded at the premium of $3.14 to WTI. Gasoil for August delivery gained $5.00 – $370.00.

Today morning global oil indexes have turned into slight downward movement again.

Market is worried about oversupply as OPEC+ is due to start reducing production cuts this month. Besides, a recovery in oil prices from record lows is likely to encourage U.S. shale producers to ramp up output.

Russia said that the country's oil output in July was unchanged from levels seen in June, in line with an OPEC+ agreement. It was pointed out that RF level of compliance with the deal in July was close that recorded in June, when it stood at 99%. Under the OPEC+ agreement, Moscow pledged to reduce its output to around 8.5 million bpd in May-July to support oil prices. The deal does not include output of gas condensate, a light oil. The cuts under the global deal should be eased starting from August because of a recovery in oil prices. Russia has said it would increase its oil production by 400,000 bpd.

It is expected that Saudi Arabia to cut the price of its flagship Arab Light crude grade to Asia for September by an average of US$ 0.48-0.61 per barrel. While the Saudi price hikes in the past three months signaled oil demand recovering and Middle East Dubai/Oman benchmarks strengthening as supply grew tighter after the OPEC+ cuts, the expectations of lower Saudi prices going forward is a sign that demand recovery is stumbling and dragging the Middle East benchmarks and refining margins down.

India was under lockdown for most of April and May because of the coronavirus pandemic, and now people seem to be avoiding commuting on public transportation where possible. The use of passenger cars and two-wheelers in India is only set to grow, which may translate into higher demand for refined oil products and consequently, higher crude oil imports. Meantime, India's crude oil imports slumped in June to their lowest levels since 2011, with oil refiners buying less crude because of maintenance and weaker demand.

The autonomous government of northeast Syria has signed a deal for the marketing of crude oil with a U.S. company. Most of Syria's oil is in the northeast of the country, which is under the control of a Kurdish-led Syrian Democratic Council, the political wing of opposition formation Syrian Democratic Forces, which has enjoyed U.S. support through the prolonged conflict. It was also reported, that the United States was going to supply two modular refineries to northeastern Syria, which will satisfy a fifth of the oil-rich region's needs. At the moment, most of the oil still produced in Syria—around 60,000 bpd—is refined in makeshift facilities. Before the war, the country produced 380,000 bpd.

The LNG market went into a tailspin this year due to the pandemic, but in fact, the global market for natural gas was heading into a downturn at the start of 2020, before the coronavirus led to widespread shutdowns. A substantial increase in export capacity in 2019 outpaced demand growth, pushing down prices. Against a weak backdrop, the pandemic-related demand destruction disturbed the market, leading to LNG prices in Asia (JKM) to collapse below $3/MMBtu and even below $2/MMBtu for a period of time. The negative effect of the LNG supply glut has been felt most acutely by U.S. exporters. The gas glut in Asia led to storage filling up in Europe, and ultimately the flexibility of American LNG translated into cancelled cargoes from the United States. Dozens of cargoes were cancelled in each of June, July and August.

We expect bunker prices may slightly rise by 3-5 USD today.
Source: MABUX

Qatar- Economics of crude oil refining and importance of value-added products - MENAFN.COM

Posted: 04 Aug 2020 11:16 AM PDT

(MENAFN - Gulf Times) * How oil markets — crude oil and refined petroleum products — work
* Economics of crude oil refining and its conversion into value-added products
* Encouraging increased refining capacity to meet the needs of local market and making surplus for export

Crude oil and petroleum products are commodities traded in global commodity markets, such as London, New York and Singapore. It can be said that crude oil is the most traded and controlled commodity in the world along with refined petroleum derivatives, such as gasoline, diesel, Jet fuel and fuel oil.

It is actively and transparently traded on the global energy exchanges — on a daily basis.

Market prices for crude oil and refined products at any time are a function of current and future supply and demand conditions, and are evaluated according to a variety of scenarios.

For crude oil, this includes general economic conditions, natural disasters and geopolitical or military events, especially in major oil-producing areas.

The price of crude oil affects the price of the refined product, but the primary balance of supply and demand for specific refined products (such as LPG, gasoline, jet fuel, and diesel) is often more important in influencing trade decisions and setting the selling price, depending on the specifications and pricing mechanism.

The advantages of more complex refineries compared to typical refineries are as follows:

1. Increasing the value of high-value products such as gasoline, middle distillates such 'Jet A1', diesel and household heating oil, to reduce dependence on low-value products, such as heavy fuel oil, asphalt and waste.

For example, a refinery typically produces 20% of gasoline, 30% of medium distillate products (jet fuel and light diesel) and 50% of heavy waste from light crude oil. In the most complex refineries, it reaches 60% of gasoline, 35% of medium distillates (aircraft and diesel fuel), and 5% of heavy waste (fuel oil, asphalt, bitumen).

2. The ability to process a larger group of crude oil types means that refineries can use cheaper heavy crude oils to produce products that are lighter in demand, and increase profit margins by increasing sales volumes instead of exporting it as a virgin crude.

3. The flexibility to adapt to changing markets and local fuel specifications:

This flexibility allows refiners to adapt production to changes in market demand and fuel specifications (for example, increased demand for lighter products, diesel gasoline, and blended component gasoline) is appropriate for blending ethanol.

Therefore, since 2003, more sophisticated refineries have generated higher profit margins, especially if the oils produced in their countries are refined instead of exporting and then exporting refined products that are higher than the price of crude oil, thus achieving an excellent profit margin (after deduction of the operational cost of refining and optimisation).

The refinery's ability to adjust its product list to meet changes in demand has a major impact on its profitability — products such as gasoline, diesel, jet fuel and lubricants are the most profitable. However, the refinery's flexibility to adapt to market demand is constrained by the availability, composition and complexity of available types of crude oil, and different regional markets differ according to demand.

Types of crude oil and its refining:

There are more than 150 different types of crude oil in the world, but the primary option in which crude oil is refined is between lighter and heavier grades. Heavy grades have a higher percentage of heavy hydrocarbons consisting of longer carbon chains.

Heavy crude oils are cheaper and more abundant, but they are more expensive because they require significant investment and have higher processing costs (higher energy inputs and additional processing to meet environmental requirements).

Lighter grades require a lower upgrade at the refinery, but lower supply. Lighter oils tend to contain less sulfur content, making their sales more in demand.

Processing cheaper heavy crude to lighter products of higher value usually improves profit margins — if the refiner has the configuration to do so.

Cost is not the only reason for choosing a certain degree of crude oil:

Each grade of crude produces a different set of refined products, each with a different price that also varies by region.

The value of "net recovery" reflects the value of each type of product in terms of the value of the products it produces.

The demand from refineries also affects the price difference for different grades of crude. Refineries encourage refining of oil produced within their countries based on an economic feasibility study.

Ironically, even with the increased supply of heavy crude oil, the demand for refined petroleum products has shifted to a greater proportion of lighter and higher quality products (from heavy fuel oil and marine fuel to diesel and gasoline and lighter products).

This has resulted in the so-called "quality gap", resulting from the increased availability of heavy crude oil in the global market, which makes its prices not large compared to light oils.

For example, in Qatar, the 'Qatar Land Crude' is produced in the oil fields in Dukhan and transported through pipelines to the Refinery and Crude Terminal located at Mesaieed, where approximately 80,000 barrels of oil and approximately 50,000 barrels of condensate oil are produced, where refined petroleum products are produced.

It is distributed to the local market and the surplus is exported, for example gasoline, jet fuel and diesel, and the rest of crude oil is also exported as light crude oil to the entire world.

As for other oils, such as Marine and Al-Shaheen of high density (API), the production is fully exported. The production of Al-Shaheen oil is about 300,000 barrels per day (bpd) with an increase in production expected in the near future.

Knowing that Al-Shaheen Crude Oil is priced through Platts Oil Pricing Agency, it is considered one of the Middle East's crudes that is important for enhancing liquidity in the daily evaluation of Dubai Index in Asia since 2016.

Refining these oils locally, and establishing refineries internally and externally to maximise the financial returns from a barrel of crude oil is strategically and economically important in future. In the region, there is competition for exports of petroleum products.

This is despite the variation in refining capacity from one country to another and an increase in the proportion of importing those products in the Arab Gulf and the Middle East.

Competitive advantages include modern refineries, the low cost of a barrel of crude oil and the possession of large logistical capabilities such as huge storage capabilities in the tanks inside the refineries, in addition to a modern and flexible fleet of refined products tankers and liquefied petroleum gas (LPG).

Building refineries must be studied economically and strategically in Qatar or to study the investment abroad in crude oil refining by doing a strategic partnership with end-users in the developing Asian countries and emerging market in the near future to maximise revenue.

* Saad Abdulla al-Kuwari graduated in Chemical Engineering from Qatar University and obtained an MBA in Oil & Gas from Liverpool University. He was appointed CEO of Tasweeq in 2010. During his career, he has occupied several key positions in refining projects and processing, oil, gas and refined products, storage tanks and export terminals operation. He also has considerable experience in the field of Gas Processing Operations. He was also manager of Gas, Oil Petrochemical Marketing in QP Marketing Directorate for several years.

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