US crude exports come under pressure
December exports of US crude WTI look likely to fall because of record high freight rates and weather-related disruptions to export operations.
The cost of shipping light sweet WTI on an Aframax tanker to Europe climbed to the highest ever at $10.18/bl on 18 November, on record-high US crude flows to European refiners as they prepare for the 5 December implementation of the EU's ban on seaborne imports from Russia (see graph). Aframax loadings have also been relatively unhindered by disruptions affecting very large crude carrier (VLCC) exports, helping to boost the freight rate.
Many US traders have been seeking to load crude for export on VLCCs instead of Aframaxes, which are traditionally used to ship oil to Europe, to save on freight costs. But loading operations for the larger tankers have been disrupted this month by bad weather. Crude usually has to be loaded on VLCCs along the Texas coast through reverse lightering, where the oil is first put on an Aframax or Suezmax and than moved to larger tankers by ship-to ship (STS) transfer.Butreverse lightering operations were halted on 15-22 November by high waves caused by a cold front along the Gulf coast. The disruption, combined with strong demand to ship crude on VLCCs, may lead to a backlog of tankers waiting to load at the US Gulf coast as far out as mid-December.
Around 26 VLCCs are already on subjects to load at the Gulf coast in the next 30 days and more than 20 are expected to arrive in the region by the end of December for orders. Around 95pc of the VLCCs loading at the Gulf coast will need at least one STS transfer to be fully loaded, and at least nine tanker loadings have already been delayed past their scheduled dates.
Lightering operations were expected to return to normal by 23 November, but another cold front brewing in the US Gulf of Mexico could halt activity again by 26-27 November. The US Gulf coast is also nearing the fog season, usually from December to early April, when significant weather changes can cause further constraints to export operations as ship channels are forced to close to vessel traffic during periods of poor visibility.
Lighter side
WTI sank to a discount of around $7/bl to Ice February Brent on a fob basis on 22 November, its lowest since April 2020, as the halt to lightering operations hindered VLCC exports(see graph). Prices have rebounded slightly with the resumption of lightering offshore the Corpus Christi port hub. Prices are now equivalent to a $4.60/bl premium to North Sea Dated after estimated delivery costs, or about $2/bl higher than the level at which traders have pegged the grade at the Netherlands port of Rotterdam, leaving it unprofitable to export to Europe. Waterborne spot crude prices are widely expected to remain under pressure given that many trading firms will draw down inventories to avoid end-of-year taxes, which could lead to an increase in supplies at a time of export constraints.
The recent halt to lightering operations and the record Aframax freight rates could undermine US crude exports. The US exported 3.47mn b/d of crude in the first nine months of 2022, up by over 19pc on a year earlier, and is on track to reach a new record high, according to the latest available monthly statistics from the US Census Bureau.
US crude exports to Europe rose to a record 1.47mn b/d in January-September, up by nearly 44pc from the same period in 2021 (see graph). Exports to top destinations the UK and the Netherlands climbed by 28pc and 46pc, respectively, to record highs of 330,000 b/d and 341,000 b/d, while a handful of other countries have more than doubled their intake of US crude year on year.
Related news posts
UK eyes new environmental guidance for oil, gas: Update
UK eyes new environmental guidance for oil, gas: Update
Adds comment from Shell London, 29 August (Argus) — The UK government will develop new environmental guidance for oil and gas firms, in the light of a recent Supreme Court decision that ruled consent for an oil development was unlawful, as the scope 3 emissions — those from burning the oil produced — were not considered. The ruling means that "end use emissions from the burning of extracted hydrocarbons need to be assessed", the government said today. The government will consult on the new guidance and aims to conclude the process "by spring 2025", it said today. It will in the meantime halt and defer the assessment of any environmental statements related to oil and gas extraction and storage activities until the new guidance is in place, including statements that are already being assessed. The Supreme Court in June ruled that Surrey County Council's decision to permit an oil development was "unlawful because the end use atmospheric emissions from burning the extracted oil were not assessed as part of the environmental impact assessment". The government also confirmed that it will not challenge judicial reviews brought against the development consent granted to the Jackdaw and Rosebank oil and gas fields in the North Sea. A judicial review in the UK is a challenge to the way in which a decision has been made by a public body, focusing on the procedures followed rather than the conclusion reached. Environmental campaign groups Greenpeace and Uplift launched legal challenges in December seeking a judicial review of the government's decision to permit Rosebank. Norway's state-owned Equinor and London-listed Ithaca hold 80pc and 20pc of Rosebank, respectively. Greenpeace in July 2022 separately filed a legal challenge against the permitting of Shell's Jackdaw field. "This litigation does not mean the licences for Jackdaw and Rosebank have been withdrawn", the government said. The Labour government, voted into office in July , pledged not to issue any new oil, gas or coal licences, but also promised not to revoke existing ones. Equinor is "currently assessing the implications of today's announcement and will maintain close collaboration with all relevant stakeholders to advance the project. Rosebank is a vital project for the UK and is bringing benefits in terms of investment, job creation and energy security", the company told Argus today. Shell is "carefully considering the implications of today's announcement... we believe the Jackdaw field remains an important development for the UK, providing fuel to heat 1.4mn homes and supporting energy security, as other older gas fields reach the end of production", the company told Argus . North Sea oil and gas production "will be a key component of the UK energy landscape for decades to come", the government said today. The UK government introduced a climate compatibility checkpoint in September 2022, designed to ensure that oil and gas licensing fits UK climate goals. The UK has a legally-binding target of net zero emissions by 2050. The checkpoint, though, does not take into account scope 3 emissions. These typically make up between 80pc and 95pc of total oil and gas company emissions. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Baghdad issues ultimatum to KRG to drive output down
Baghdad issues ultimatum to KRG to drive output down
Dubai, 29 August (Argus) — The federal Iraqi government has issued an ultimatum to northern Iraq's Kurdistan Regional Government (KRG) to reduce its crude output to "the minimum required", or face the possibility of not receiving its share of the budget. The move, communicated today by a senior official at Iraq's state marketer Somo, represents the latest attempt by Baghdad to pressure the KRG into cooperating to help bring Iraqi output below its Opec+ production target. KRG was asked "on several occasions" to cut its production according to the budget law "to the minimum required for their local refineries" — around 50,000 b/d, the official said. "Otherwise, the KRG will have to pay [the federal government] all the revenues they receive, for the extra barrels beyond what their refineries need". Iraq has emerged as the Opec+ group's biggest overproducer, failing to meet its target in any of the first seven months this year. The country, along with Kazakhstan and Russia, which are overproducing too, submitted updated plans to the Opec secretariat last week outlining how it intends to compensate for the extra volume. Iraqi officials said that a lack of visibility on KRG production are complicating efforts. Output has been gradually recovering in Kurdistan this year, even though the 400,000 b/d export pipeline that links fields in the north to the Turkish Mediterranean port of Ceyhan has been shut-in since March 2023 because of a dispute between Baghdad and Turkey. Crude production from the region collapsed below 100,000 b/d in the months following the pipeline closure, but has risen steadily, particularly from fields operated by foreign companies, as they find new outlets for their crude. Foreign operators operating in Kurdistan said they rely on trucking crude to local refineries to stay in business, but Kurdish crude is also being smuggled — by truck — across the border to neighboring Turkey, Iran and Syria, Argus understands. Different accounts Crude output from Iraqi Kurdistan is currently averaging around 350,000 b/d , a spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur) told Argus. Apikur is an industry body representing the foreign operators in the northern region . Argus assessed KRG production at 200,000-250,000 b/d on average in the first half of the year. But the federal government disputes those numbers, insisting that production from Kurdistan is around 150,000 b/d. "Any more than that will put huge pressure on the KRG," the official said. Assuming refining capacity of 50,000 b/d, the official labelled the higher estimates as "illogical." He pointed to the fact that about 500 trucks are already needed on a daily basis to export the region's 100,000 b/d, and that the state of the roads and service stations does not allow for the double amount of vehicles. Earlier attempts by the federal government to scale back Iraqi Kurdish production have failed, but the official thinks that Baghdad's latest ultimatum will have the desired impact. "These are serious steps," the official said. If KRG production remains above the 50,000 b/d needed for domestic refining, and it does not deliver the proceeds to Baghdad, it will not receive its share of the budget, which it is heavily dependent on to support its economy. Getting back on track Iraq's latest compensation plan put its overproduction in January-July at 206,000 b/d, compared with 197,000 b/d in January-June. Opec+ secondary sources estimated that output rose by 57,000 b/d on the month to 4.251mn b/d in July, some 251,000 b/d above the Opec+ target. The official said Iraqi production should fall to required levels from September. Somo canceled a spot cargo of 1mn bl this month, and Iraq is "working on deferring two similar shipments, before the end of the month," the official said. "That means we will be down around 3mn bl, or 90,000 b/d". He added that a 50,000 b/d decrease in domestic crude consumption resulting from increased gas imports from Iran and stronger domestic gas output will also help with the country's compliance. He said Iraq's August output levels will be down on the month, but dependent "on the position of the KRG". By Nader Itayim and Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
UK plans new environmental guidance for oil and gas
UK plans new environmental guidance for oil and gas
London, 29 August (Argus) — The UK government will develop new environmental guidance for oil and gas firms, in the light of a recent Supreme Court decision that ruled consent for an oil development was unlawful, as the scope 3 emissions — those from burning the oil produced — were not considered. The ruling means that "end use emissions from the burning of extracted hydrocarbons need to be assessed", the government said today. The government will consult on the new guidance and aims to conclude the process "by spring 2025", it said today. It will in the meantime halt and defer the assessment of any environmental statements related to oil and gas extraction and storage activities until the new guidance is in place, including statements that are already being assessed. The Supreme Court in June ruled that Surrey County Council's decision to permit an oil development was "unlawful because the end use atmospheric emissions from burning the extracted oil were not assessed as part of the environmental impact assessment". The government also confirmed that it will not challenge judicial reviews brought against the development consent granted to the Jackdaw and Rosebank oil and gas fields in the North Sea. A judicial review in the UK is a challenge to the way in which a decision has been made by a public body, focusing on the procedures followed rather than the conclusion reached. Environmental campaign groups Greenpeace and Uplift launched legal challenges in December seeking a judicial review of the government's decision to permit Rosebank. Norway's state-owned Equinor and London-listed Ithaca hold 80pc and 20pc of Rosebank, respectively. Greenpeace in July 2022 separately filed a legal challenge against the permitting of Shell's Jackdaw field. "This litigation does not mean the licences for Jackdaw and Rosebank have been withdrawn", the government said. The Labour government, voted into office in July , pledged not to issue any new oil, gas or coal licences, but also promised not to revoke existing ones. Equinor is "currently assessing the implications of today's announcement and will maintain close collaboration with all relevant stakeholders to advance the project. Rosebank is a vital project for the UK and is bringing benefits in terms of investment, job creation and energy security", the company told Argus today. North Sea oil and gas production "will be a key component of the UK energy landscape for decades to come", the government said today. Argus has also contacted Shell for comment. The UK government introduced a climate compatibility checkpoint in September 2022, designed to ensure that oil and gas licensing fits UK climate goals. The UK has a legally-binding target of net zero emissions by 2050. The checkpoint, though, does not take into account scope 3 emissions. These typically make up between 80pc and 95pc of total oil and gas company emissions. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Iraqi Kurdistan’s oil output at 350,000 b/d: Apikur
Iraqi Kurdistan’s oil output at 350,000 b/d: Apikur
Dubai, 29 August (Argus) — Crude production in northern Iraq's semi-autonomous Kurdistan region is around 350,000 b/d, according to a local industry body, just 50,000 b/d below what it was before the closure of a key pipeline to Turkey shut Kurdish producers out of international export markets in March last year. The production estimate relates to fields under the control of the Kurdistan Regional Government (KRG) and excludes those in the region that are controlled by the federal government in Baghdad. It was provided to Argus by the spokesperson for the Association of the Petroleum Industry of Kurdistan (Apikur), Myles Caggins. "The volume of production has generally increased since the shuttering of the pipeline in March 2023. All Apikur members remain focused on ultimately having the pipeline reopened for exports," Caggins said. Apikur represents eight foreign oil firms operating in the Kurdistan region — DNO, Genel Energy, Gulf Keystone, HKN Energy, Shamaran Petroleum, Western Zagros, Mol and Hunt Oil. Producers in the region have been selling their crude to local buyers since the pipeline was closed but they have had to settle for steep discounts. Caggins estimates local sales of Iraqi Kurdish crude are averaging $30-35/bl, which is around $45-50/bl lower than prevailing international oil prices. Apikur's estimate tallies with an operational update from Gulf Keystone today , which put crude output from the Shaikan field in the Kurdistan region close to capacity at 48,200 b/d in August and the current value of local crude sales at around $27/bl. Besides local refiners taking Iraqi Kurdish crude, Argus understands that some of the production is being smuggled into Turkey, Iran and Syria. Such robust production levels in the Kurdistan region are unlikely to be welcomed by Iraq's federal government in Baghdad, given the challenge it faces in keeping Iraqi output below the country's Opec+ cap. Iraq has failed to stick to its target in any month this year. Along with fellow overproducers Kazakhstan and Russia, Baghdad submitted updated plans on 23 August detailing how it intends to compensate. Iraqi officials say efforts to compensate for exceeding the Opec+ target are complicated by a lack of visibility on production in Iraqi Kurdistan, which they currently put at around 100,000 b/d, less than a third of the Apikur estimate. The KRG does not provide monthly production figures as part a wider clampdown on issuing data following the pipeline's closure. Sources at Iraq's oil ministry have told Argus that it will be easier to deliver compensation cuts after the summer season ends and temperatures begin to drop. By Bachar Halabi Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more