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Opec+ heavyweights defend 'slow and steady' strategy

  • Market: Crude oil
  • 14/10/21

Opec+ heavyweights Saudi Arabia, Russia and the UAE today reaffirmed their support for the group's plan to gradually phase back crude production, and once again knocked back suggestions they should raise output faster and more aggressively to help temper rising oil prices.

Crude prices have been on an upward trajectory since the Opec+ group kicked off its latest output restraint deal in May last year, with front-month Ice Brent futures above $84/bl earlier today, the highest in more than three years. But there appears little appetite among Opec+ members to respond with a shift in strategy.

"The alliance has done a good job," UAE energy minister Suhail al-Mazrouei said today at Russian Energy Week in Moscow. "I'm not worried that we will have a heated market." Russian deputy prime minister Alexander Novak, also at the event, said he does not see "any particular problems" either, nor any "major volatility" in the market.

The 23-country producer group has agreed on a roadmap for restoring the production that it removed from the market last year after demand collapsed in the wake of the pandemic. The plan entails monthly hikes of 400,000 b/d through to April next year, followed by a rise of 432,000 b/d each month until all of the original 9.7mn b/d cut is unwound. At this month's meeting, the group stuck to the roadmap and sanctioned a 400,000 b/d increase in its collective output quota for November, despite signs that the market may require a larger hike.

Oil prices have risen by more than $2/bl since that meeting, and latest data from the IEA put OECD industry oil stocks 162mn bl below the pre-Covid five-year average — a key metric that Opec and its partners have been using to formulate policy. But the group is still championing its slow and steady approach. "With the collaboration we have seen, we still have some reserves that we as a group can put into the market," al-Mazrouei said. But "if we don't do things with balance… we may end up overdoing it."

Saudi energy minister Prince Abdulaziz, also speaking at Russia Energy Week, advised against taking a short-term view of the market and highlighted the hefty supply surplus projected for next year. "We keep telling people that we should look way beyond the tips of our noses, because if we take 2022 into account, you will end up, by the end of the year, with huge levels of stocks," Prince Abdulaziz said. "We want to do it in a gradual, phased-in approach. We believe that we will have a challenging year in 2022 if we don't attend to the situation amicably, and with the same resolution," he said.

Copy and paste

Opec+ delegates told Argus last week that the group's decision to stay the course at its latest meeting was largely driven by the belief that the current tightness in the oil market is temporary and will pass once the gas, NGL and coal markets stabilise. What is happening in the oil market today is "only an aberration of what has been happening with other sources of energy", Prince Abdulaziz said today.

"What we see in the oil market today is incremental increases in price — 29pc vis-a-vis a 500pc increase in gas prices vis-a-vis a 300pc increase in coal prices vis-a-vis a 200pc in NGL prices," he said.

Opec+ has done "a remarkable job of being the so-called regulator of energy markets", the Saudi minister said, adding that gas, coal and other energy markets "need a regulator". The current situation shows that other energy markets "need to copy and paste what Opec+ has done and has achieved", he said.


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03/01/25

Viewpoint: Med may take more Mideast crude in 2025

Viewpoint: Med may take more Mideast crude in 2025

London, 3 January (Argus) — The Mediterranean region's capacity to absorb returning sour crude output in 2025 will hinge on nimble pricing strategies by Saudi Arabia and Iraq. The Mediterranean imported around 4.67mn b/d of crude in 2024, down from 4.92mn b/d in 2023, Vortexa data show. The drop follows heavy spring refinery maintenance, unplanned refinery outages and weak product margins that prompted some refiners in the region to cut crude runs. But competitive pricing by Mideast Gulf crude producers could help entice Mediterranean buyers during the seasonal uptick in demand for transport fuels this summer, and the scheduled completion of repairs at Motor Oil Hellas' 180,000 b/d Corinth refinery in Greece in the third quarter could help absorb a planned production increase from Opec+. Eight Opec+ members ꟷ Saudi Arabia, Iraq, Russia, Kuwait, the UAE, Kazakhstan, Algeria and Oman ꟷ agreed last month to postpone the return of 2.2mn b/d of production cuts for a third time to April 2025. They now intend to return this over an 18-month period rather than the previously planned 12-month period. Saudi Arabia has accounted for 1mn b/d of this 'voluntary' production cut since July 2023, but Saudi crude deliveries to the Mediterranean still edged up to 241,000 b/d in 2024, from 238,000 b/d in 2023. State-controlled Aramco's consistent cuts to its formula prices in recent months left its December 2024 prices for Mediterranean customers on average $2.13/bl cheaper than its January 2024 prices. Comparatively, Aramco's Mediterranean formula prices rose on average by nearly $5/bl across 2023 when sour crude was in short supply but demand was higher. This adaptive pricing strategy has helped Aramco retain market share in the Mediterranean at a time of overall weaker demand. Deliveries of Iraq's Basrah crude to the Mediterranean region declined by 27pc on the year to average 409,000 b/d in 2024, largely due to longer journey times around South Africa to avoid Yemen-based Houthi attacks on shipping in the Red Sea. But Mediterranean interest in 2025 could increase should Basrah be forced out of Asia-Pacific, where Canada's Trans Mountain Expansion has enabled increased Chinese purchases of Canadian heavy sour Cold Lake and Access Western Blend, which require lighter crudes for blending. The EU embargo on seaborne imports of Russian crude has cut off Europe's access to medium sour Urals, with the exception of non-EU member Turkey. Northwest European buyers can turn to Norway's Johan Sverdrup grade but Mediterranean buyers have been left without a local medium sour crude since Kirkuk exports, from Turkey's Ceyhan port, were halted in March 2023 by a dispute between Iraq and the Kurdistan Regional Government. Even if Kirkuk exports resume in the coming months, it is unclear if these will return to previous levels of around 500,000 b/d, given upstream challenges in Iraqi Kurdistan and Iraq's Opec+ commitments. In the absence of local rivals, Saudi Arabia and Iraq are well poised to direct more supply into the Mediterranean, with competitive pricing. Aramco's ability to ship from Egypt's Mediterranean Sidi Kerir port has increased its appeal as it delivers supplies within days. Rebuilding confidence in Libya Libya's recent two-month blockade, sparked by a leadership crisis at the central bank, again shone a light on the country's fragile politics. Although output has recovered since force majeure ended on 3 October, confidence in Libya's ability to reliably supply crude has waned, diminishing its appeal in an oversupplied market. Spot assessments for Libya's largest grade, Es Sider, averaged a $1.46/bl discount to the North Sea Dated benchmark in November, and state-owned NOC set the grade's November formula price at a $2.25/bl discount for term customers. Both were the lowest since December 2022, as sellers aimed to entice buyers and allay reliability concerns. But Libyan production has proven resilient over the past decade, quickly rebounding after armed conflict and several politically-motivated disruptions. NOC reported crude and condensate output at a near 12-year high of 1.4mn b/d in early December. By the end of last month, the company said it had increased to 1.47mn b/d. And foreign producers are still keen on the country, with Italy's Eni, BP, Austria's OMV and Spain's Repsol resuming exploration campaigns , the first since 2014. By Melissa Gurusinghe Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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US crude output at record 13.46mn b/d in Oct: EIA


31/12/24
News
31/12/24

US crude output at record 13.46mn b/d in Oct: EIA

Calgary, 31 December (Argus) — US crude production in October rose to a record high 13.46mn b/d on sustained strength in Texas and New Mexico, the Energy Information Administration (EIA) said today in its Petroleum Supply Monthly report. Output rose from 13.2mn b/d in September and from 13.15mn b/d in October 2023. The prior record of 13.36mn b/d was set in August. Texas, home to 44pc of the country's crude production, pumped out a record 5.86mn b/d in October, up from 5.8mn b/d in September and up from 5.57mn b/d in October 2023. New Mexico, which shares the prolific Permian basin with Texas, produced 2.08mn b/d in October, ticking down by 5,000 b/d from record highs set in August and September but up from 1.8mn b/d in October 2023. US offshore crude output in the Gulf of Mexico rebounded to 1.85mn b/d in October after hurricane activity in September cut production to 1.57mn b/d. Still, US Gulf of Mexico output was down from 1.94mn b/d in October 2023. Monthly production changes inland were mixed, with North Dakota falling to 1.16mn b/d in October from 1.21mn b/d in the month prior. Bakken shale basin producers had to contend with wildfires during the month and effects are still lingering for some, state officials said earlier this month. Colorado output rose in October to the highest in more than four years at 499,000 b/d. This was up from 476,000 b/d in September and the highest level for the state since March 2020. By Brett Holmes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: 2025 Hardisty heavy diffs may remain strong


31/12/24
News
31/12/24

Viewpoint: 2025 Hardisty heavy diffs may remain strong

Calgary, 31 December (Argus) — Heavy crude spot differentials in Alberta are expected to remain strong into next year, even with growing oil sands production and possible US import tariffs. After years of cost-overruns and construction delays, the 590,000 b/d Trans Mountain Expansion (TMX) commenced on 1 May, nearly tripling the capacity of crude able to reach Canada's Pacific coast and providing Alberta oil sands producers with increased access to buyers on the US west coast and Asia-Pacific. Extra egress capacity for Alberta crude westward has pulled previously apportioned volumes away from Enbridge's 3mn b/d Mainline system — Canada's main method of export to ship crude south to US refiners in the midcontinent and Gulf coast. In the fourth quarter, apportionment averaged just over 1pc for both light and heavy crude on the Mainline, significantly lower than the average apportionment of 21pc for lights and heavies in the fourth quarter last year. While president-elect Donald Trump's looming blanket tariff on all Canadian imports would re-direct more Albertan crude westward via TMX to Asia- Pacific buyers, many believe the tariff would be too harmful to US midcontinent refiners for Trump to actually carry out his threat. Prior to TMX's commencement, high apportionment combined with rising crude production heading into the winter months forced more crude onto railcars, which typically requires a $15/bl to $20/bl spread between Western Canadian Select (WCS) at Hardisty Alberta, and Houston, Texas, for uncommitted shippers to profit. With the redirection of apportioned volumes to buyers in the west, Canadian heavy spot differentials in Alberta have strengthened in a quarter when discounts have generally widened in recent years. Argus's WCS Hardisty assessment averaged a $12.08/bl discount to the CMA Nymex WTI during fourth quarter Canadian trade cycle dates, $11.52/bl stronger than the $23.61/bl discount averaged in the fourth quarter a year prior. Yet, crude output in Alberta's key oil sands is expected to rise heading into 2025, with production levels reaching record-high levels this year. Alberta crude output was 4.2mn b/d in October, according to the latest Alberta Energy Regulator (AER) data, up by 9.4pc year from a year earlier and the second highest monthly production on record. Alberta oil sands producers, meanwhile, have increased their crude production guidance for next year. Suncor expects to pump out 810,000-840,000 b/d across its upstream sector in 2025, up by 5pc from 2024. Cenovus expects to increase production next year by 4pc to between 805,000-845,000 b/d of oil equivalent (boe/d), and Imperial Oil plans to boost upstream production by 2pc to 433,000-456,000 boe/d. Egress capacity remains ample despite rising production heading into 2025. Total crude pipeline egress capacity out of Alberta is expected to be over 4.6mn b/d in 2025, with shippers still yet to utilize uncommitted space on the 890,000 b/d Trans Mountain pipeline. About 712,000 b/d or 80pc of the system is reserved for contracted shippers, with the remaining 20pc available for uncontracted shipments. With unconstrained egress capacity expected to persist, Suncor and Cenovus have both assumed WCS at Hardisty will average a strong $14/bl discount to WTI in 2025. In the near term, Trump's plans to impose a blanket 25pc tariff on all Canadian imports would threaten some US demand for Canadian crude. Yet, while some traders are pricing in the reality of US tariffs, most market participants are skeptical of whether Trump's tariff plans would extend to Canadian crude due to the co-dependency between Albertan producers and some US refiners. US midcontinent refiners, many of whom were financial backers of Trump's 2024 presidential campaign, are dependent on Canadian crude given a lack of access to alternative heavy sour crudes suited for their refineries. Canadian grades represent approximately 70pc of the US midcontinent refinery feedstock, with the remainder largely sourced in the US. US importers may take more crude from countries including Saudi Arabia, given the country has plenty of spare capacity to increase the production of heavy sour crude favored by US midcontinent refiners. However, replacing Canadian crude with waterborne supplies would result in a substantial increase in tanker demand. In August, only around 370,000 b/d of the 3.8mn b/d of Canadian crude imported by US refiners moved on tankers, Vortexa data show. Even if US refiners can replace Canadian and Mexican heavy crude, they are expected to face higher landed costs and, potentially, less reliable supplies. By Kyle Tsang Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: US Supreme Court tees up more energy cases


31/12/24
News
31/12/24

Viewpoint: US Supreme Court tees up more energy cases

Washington, 31 December (Argus) — The US Supreme Court is on track for another term that could significantly affect the energy sector, with rulings anticipated in the new year that could narrow environmental reviews and challenge California's authority to set its own tailpipe standards. The Supreme Court earlier this month held arguments in Seven County Infrastructure Coalition v Eagle County, Colorado , a case in which the justices are being asked to decide whether federal rail regulators adequately studied the environmental effects of a proposed 88-mile railway that would transport 80,000 b/d of crude. A lower court last year found the review, prepared under the National Environmental Policy Act (NEPA), should have analyzed how building the project would affect drilling and refining. Business groups want the Supreme Court to issue an expansive ruling that would limit NEPA reviews only to "proximate" effects, such as how rail traffic could affect nearby wildlife, rather than reviewing distance effects. The court recently agreed to hear a separate case that could restrict California's unique authority under the Clean Air Act to issue its own greenhouse gas regulations for newly sold cars and pickup trucks that are more stringent than federal standards. Oil refiners and biofuel producers in that case, Diamond Alternative Energy v EPA , say they should have "standing" to advance a lawsuit challenging those standards — even though they could now show prevailing in the case would change fuel demand — based on the alleged "coercive and predictable effects of regulation on third parties". These two cases, likely to be decided by the end of June, follow on the heels of the court's blockbuster decision in June overturning the decades-old "Chevron deference", a foundation for administration law that had given federal agencies greater flexibility when writing regulations. Last term, the court also limited agency enforcement powers and halted a rule targeting cross-state air pollution sources. This term's cases are unlikely to have as far-reaching consequences for the energy sector as overturning Chevron. But industry officials hope the two pending cases will provide clarity on issues that have been problematic for developers, including the scope of federal environmental reviews and the ability of industry to win legal "standing" to bring lawsuits. Two other cases could have significant effects for the oil sector, if the court agrees to consider them at a conference set for 10 January. Utah has a pending complaint before the court designed to force the US to dispose of 18.5mn acres of "unappropriated" federal land in the state, including oil-producing acreage. Utah argues that indefinitely retaining the land — which covers about a third of Utah — is unconstitutional. In another pending case, Sunoco and other oil companies have asked for a ruling that could halt a series of lawsuits filed against them in state courts for alleged damages from greenhouse gas emissions. President-elect Donald Trump's re-election could create complications for cases pending before the Supreme Court, if the incoming administration adopts new legal positions. Trump plans to nominate John Sauer, who successfully represented Trump in his presidential immunity case, as his solicitor general before the Supreme Court. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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Viewpoint: Trump tariffs may shift crude flows to USWC


30/12/24
News
30/12/24

Viewpoint: Trump tariffs may shift crude flows to USWC

Houston, 30 December (Argus) — President-elect Donald Trump's proposed 25pc tariff on Canadian and Mexican imports could redirect key imported oil grades from the US west coast, opening avenues for displaced Latin American crudes to reappear. The tariffs, which Trump announced on 25 November, could displace about 9pc of the crude US west coast refiners import. Canadian crude flows from the newly expanded 890,000 b/d Trans Mountain pipeline system, which recently have drawn purchases in the US west coast, would force barrels to Asia-Pacific . Mexican crude sellers would divert crude to other outlets as well, like Europe or Asia-Pacific. Refiners on the US west coast increased purchases of Canadian grades after the May startup of the Trans Mountain Expansion (TMX). Cheaper prices and closer proximity to Vancouver, British Columbia, where TMX crude loads, allowed the heavy sour crudes to find favor along the US west coast. But the proposed tariffs could raise landed TMX prices, no longer making it the cheapest heavy sour option. US west coast buyers would pay a 25pc import tariff to US Customs and Border Protection on TMX crude once it has entered port. US west coast refiners received around 169,000 b/d of crude from the Vancouver area since the pipeline came on line in May, up from less than 40,000 b/d a year earlier, data analytics firm Vortexa shows. Around 60pc of Mexico's crude exports in 2024 went to the US, mostly to the US Gulf coast, according to Vortexa data. Tariffs could lead to a drop in prices to adjust to a tariffed American market or for Mexican crude going more often to other destinations such as Europe or Asia-Pacific. Spain, South Korea and India, were the second, third and fourth most common destinations for Mexican crude exports in 2024, respectively. Mexico's crude production and export infrastructure is concentrated on the country's east coast, making exports to Asia-Pacific difficult. Mexico would need to invest in building exporting infrastructure from the west coast to improve trade routes to Asia, market participants say. But Mexico's state-owned oil company Pemex plans to continue cost-cutting measures, led by recently elected President Claudia Sheinbaum, so infrastructure expansion is unlikely. Other Latin crudes could also experience a rise after being displaced by the commencement of TMX in May. Since then, heavier crudes from countries such as Colombia, Ecuador and Argentina have found more frequent routes to the US Gulf coast and Asia-Pacific. Market participants believe lighter Brazilian grades could find routes to the US west coast as TMX supply increases in China. China imported 683,000 b/d of Brazilian crudes in 2024, c ompared with 180,000 b/d of imports to the US west coast from Brazil, according to Vortexa. Sources say the tariffs are a bargaining chip by the incoming administration, and participants are skeptical they will be implemented by the Trump administration. Instead, the tariffs could exclude crude and other commodities. More than $3.3bn of goods and services cross the US-Canada border each day, according to Canada's Fall Economic Statement (FES), which notes Canada is the largest market for 36 US states. Market participants are vocally against the proposed tariffs. Tariffs on crude and refined products "will not help our industry compete, nor will they support US energy dominance and affordability for consumers," the American Fuel and Petrochemical Manufactures said on 27 November . Cenovus is also trying to explain to policy makers in the incoming Trump administration how tariffs on Canada could impact the energy system in North America. But the incoming administration shows no sign of backing off the tariffs for 2025. By Rachel McGuire and João Scheller Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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