Zhoushan takes bunker market share as China prices fall

Spanish Market: Oil products
27/04/20

Low-sulphur bunker prices at China's main ports have moved to a discount to prices in Singapore, drawing some business away from the southeast Asian bunkering hub.

Rising exports, intensifying price competition and tax reforms are making Chinese prices increasingly competitive. Prices of 0.5pc sulphur bunker fuel oil in Zhoushan, China's emerging bunker hub in Zhejiang province, fell to a discount of $5.30/t to Singapore prices on 14 April, the first such discount since 6 January. The discount increased to $14.42/t on 22 April, the widest since $32/t on 27 December.

Low-sulphur 380cst bunker fuel oil prices were at $205.96/t in Zhoushan and $216.51/t in Singapore on 24 April, a $10.55/t discount, according to Argus data.

China's governing State Council earlier this year approved plans to refund taxes on fuel oil exports from 1 February, a move aimed at enhancing the competitiveness of Chinese bunker fuel supplies on the global market. Sales were previously subject to a 13pc value-added tax, which made it more costly to refuel at Zhoushan than Singapore. Exporters are only able to sell to the bonded bunker market, limiting exports to the barge market.

The fall in bunker prices has helped Zhoushan expand its market share, as traders and shipowners switch some business away from Singapore. Bunker sales at Zhoushan rose by 25pc from a month earlier to 348,500t in March, although this was still less than 10pc of Singapore's sales of 4.32mn t in the same month.

Spot low-sulphur bunker volumes in Zhoushan reported to Argus reached a record high of nearly 49,000t in March. Argus started to assess the Zhoushan Bunker Index (ZBI) from June 2019, using a volume-weighted average (VWA) of spot bunker deals captured each day.

Zhoushan is not the only Chinese port aggressively competing with Singapore. Prices in Hong Kong and Shanghai, where Argus also applies a VWA methodology, moved to a discount to Singapore on 14 April from a premium previously amid rising Chinese exports. Hong Kong and Shanghai prices were assessed $14.50/t and $8.50/t lower than Singapore respectively on 24 April. Spot volumes reported to Argus reached a record high of 27,500t in Shanghai and Hong Kong at 32,300t in March.

Chinese ports' price discount is expected to continue as refiners in the country look to export more fuel oil to relieve pressure on rising crude and light distillate inventories. One major state-controlled refiner is planning to raise fuel oil exports by at least 25pc to more than 500,000t in April from 400,000t in March.

Market participants are still waiting for details of potential export quotas for fuel oil, which had been expected as part of the tax reforms.

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31/10/24

US biofuel feedstock use dips in August

New York, 31 October (Argus) — Renewable feedstock usage in the US was down slightly in August but still near all-time highs, even as biomass-based diesel production capacity slipped. There were nearly 3.5bn lbs of renewable feedstocks sent to biodiesel, renewable diesel, and sustainable aviation fuel production in August this year, up from fewer than 3bn lbs a year prior, according to the US Energy Information Administration's (EIA) latest Monthly Biofuels Capacity and Feedstocks Update report. August consumption was 0.4pc below levels in July and 0.5pc below record-high levels in June. US soybean oil consumption for biofuels rose to 39.3mn lbs/d in August, up by 2.1pc from a year earlier on a per-pound basis and up 6.9pc from a month prior. The increase was entirely attributable to increased usage for renewable diesel production, with the feedstock's use for biodiesel slipping slightly from July. Canola oil consumption for biofuels hit 14.2mn lbs/d, up by 58.1pc from a year prior on a per-bound basis but still 19.4pc below record-high levels in July. Distillers corn oil usage, typically less volatile month-to-month than other feedstocks, bucked that trend to hit a high for the year of 13.6mn lbs/d in August. That monthly consumption is up 13.6pc from a year earlier and 20.9pc from a month earlier. Among waste feedstocks, usage of yellow grease, which includes used cooking oil, rose to 22.4mn lbs/d in August, up 13.8pc from levels a year prior and 5.8pc from levels in July. Tallow consumption for biofuels was at 18.6 mn lbs/d over the month, an increase of 27.8pc from August last year but a decrease of 13.4pc from July this year. Production capacity of renewable diesel and similar biofuels — including renewable heating oil, renewable jet fuel, renewable naphtha, and renewable gasoline — was at 4.6bn USG/yr in August, according to EIA. That total is 24.1pc higher than a year earlier and flat from July levels. US biodiesel production capacity meanwhile declined to fewer than 2bn USG/yr over the month, down by 4.3pc from a year earlier and 1.3pc from a month earlier. US biomass-based diesel production capacity has expanded considerably in recent years, but refiners have recently confronted challenging economics as ample supply of fuels used to comply with government programs has helped depress the prices of environmental credits and hurt margins. The industry is also bracing for changes to federal policy given this year's election and a new clean fuel tax credit set to kick off in January. That credit, known as "45Z", will offer a greater subsidy to fuels that produce fewer greenhouse gas emissions, likely encouraging refiners to source more waste feedstocks over vegetable oils. That dynamic is already shaping feedstock usage this year, with Phillips 66 executives saying this week that the company's renewable fuels refinery in California is currently running more higher carbon-intensity feedstocks ahead of a shift to using more waste early next year. By Cole Martin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

China trade tensions could cloud climate summit

31/10/24

China trade tensions could cloud climate summit

China argues that its industrial emissions are needed to provide technology and goods for the global energy transition London, 31 October (Argus) — As the world's leading greenhouse gas emitter, China will struggle to align its reduction efforts closer to those required under the Paris Agreement's 1.5°C global warming target while at the same time fending off trade barriers. "It is imperative to properly handle the relationship between new energy and traditional energy," President Xi Jinping said earlier this year. Chinese CO2 emissions posted zero year-on-year growth in the third quarter, despite a rebound in coal-fired output, as clean power generation also grew rapidly, Helsinki-based Centre for Research on Energy and Clean Air (CREA) says. But Beijing remains guarded on whether its CO2 emissions have peaked, with coal still an integral part of its energy mix. It has set a 2030 target for peak emissions but will likely reach this some years early, the country's new climate envoy, Liu Zhenmin, says. "If we want to achieve global carbon [neutrality], first we have to provide the world with more affordable, secure technology. Second, we need to address financing," Liu says, referring to the finance requested by developing countries from developed countries to enable the former to reach their climate targets. China is set against being dragged into contributing to the new climate finance goal, despite calls from developed countries for it to do so. China deals with climate action on its own terms. It opted out of a pledge to treble renewable power capacity and double energy efficiency at last year's UN Cop 28 climate summit in Dubai, although it did agree to the final conference text, which made mention of the pledge. China's nationally determined contribution (NDC) includes a target date for reaching peak CO2 emissions, but lacks clear goals for peaking emissions of other greenhouse gases such as methane. Beijing is due to update its NDC by February. To remain in line with the Paris accord's 1.5°C target, the new NDC will need to aim for an at least 30pc reduction in CO2 emissions from 2023 levels by 2035 and set absolute reduction targets, CREA says. And sales of new energy vehicles (NEVs) — battery electric, plug-in hybrid and fuel-cell vehicles — need to account for 60pc of total new car sales by 2035, from 50pc currently, to drive transport sector emissions down to 2020 levels, CREA says. China had nearly 25mn NEVs on its roads in June and is on course to quadruple this figure by 2030. Its renewable power capacity has already surpassed a 1.2TW target for 2030, enabling Beijing to cut its approvals for new coal-fired power plants by almost 80pc on the year in January-June, according to environmental group Greenpeace. But China's coal production capacity continues to increase. Chinese power demand is set to rise by more than 500 TWh/yr in the next 5-10 years. Beijing could meet this demand with more renewable and nuclear power generation, but nuclear currently holds a mere 5pc share of China's electricity mix. Brace brace China had seemingly narrowed its climate policy differences with the US in terms of approach and objectives, and played a role alongside the US in bringing a consensus around fossil fuels language at Cop 28. But China is bracing for a showdown on climate finance at Cop 29 in Baku next month. China and advanced economies accounted for more than 95pc of electric vehicle (EV) sales in 2023, energy watchdog the IEA says. But China could be subject to huge new tariffs on exports to the US if Republican candidate Donald Trump wins the US presidential election in November. Tariffs would have to be at 40-50pc to deter Chinese EV imports, consultancy Rhodium says — the EU on 29 October announced a slew of tariffs on Chinese EVs of up to 45pc. Western countries would add $6 trillion to global energy transition costs if they decouple from Chinese products, Liu says. China's carbon emissions by source China's industrial carbon emissions Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

US court set to weigh biofuel blend mandates

31/10/24

US court set to weigh biofuel blend mandates

New York, 31 October (Argus) — A US court on Friday will weigh some novel issues that could affect enforcement of the Renewable Fuel Standard (RFS), the federal program that sets minimum biofuel blending levels for domestic motor fuel supplies. The Environmental Protection Agency (EPA) in last year's RFS regulation required refiners and importers to blend increasing volumes of renewable fuel from 2023-2025. But the rule differed from past obligations in a crucial way. While the RFS law set annual volume targets of cellulosic, advanced and conventional biofuels through 2022, it tasked EPA with setting volumes in subsequent years by balancing factors such as the environmental impacts of biofuels, energy security, expected production and consumer costs. In a consolidated case to be heard Friday by the US Court of Appeals for the District of Columbia Circuit, environmental groups and oil refiners are separately challenging aspects of how the EPA applied those factors in setting 2023-25 volumes. The court has previously affirmed the legality of many RFS rules. "Past cases always give you some perspective on how the DC court might see it," said Susan Lafferty, a partner at law firm Holland & Knight. "But the DC court could also say, ‘not relevant anymore because this is a different part of the statute that we are working with.'" Refiners say EPA misapplied the criteria, upping compliance costs more than necessary by setting targets for cellulosic and conventional biofuels too high and targets for advanced biofuels too low. They also challenge EPA's balancing of potential impacts, noting that the agency assumed that all parties can easily pass the costs of compliance on to consumers. In a separate case this year, the DC Circuit discarded EPA rejections of program waiver petitions, in part because judges disagreed that refiners can easily pass on the cost of Renewable Identification Number (RIN) credits used to show compliance with the RFS program. EPA used this pass-through theory in the 2023-2025 rule "like a magic wand, waving it around to dismiss any argument that the rule will cause harm", the American Fuel and Petrochemical Manufacturers and small refineries said in a case filing. Lafferty expects the judges at Friday's hearing to probe the extent to which EPA's volumes relied on this pass-through theory, "a policy that now this very court has gutted." Environmentalists have similarly targeted EPA's cost analysis, arguing that the agency downplayed the environmental drawbacks of growing crops for energy. The Center for Biological Diversity and the National Wildlife Federation argue that EPA has legal discretion to set post-2022 volumes for corn- and soybean-derived biofuels as low as zero. EPA counters that the court owes the agency deference in evaluating scientific data and making predictive judgments. And biofuel groups that have intervened argue that the program is designed to require more biofuel production even if there are no formal volume requirements in law anymore. While EPA's post-2022 authority to set blend mandates is a new issue, the DC Circuit has handled various cases about EPA's implementation and has generally been deferential to the agency's volume decisions. The court this year upheld 2020-2022 targets. In a 2019 decision, the court kept volumes in place , despite telling EPA to more deeply weigh endangered species impacts. While the court might take issue with some aspects of EPA's latest rule, including the agency's lateness in finalizing volumes, judges could again be reluctant to upend fuel markets if they find only small oversights. Depending on how skeptical judges appear about EPA's arguments on Friday, the case could cause concern for biorefineries. A decision is expected next year, meaning any order for EPA to better justify its decisions or go back to the drawing board would likely fall to the next president's administration. On the panel for Friday's hearing are two judges familiar with the program: Democratic appointee Cornelia Pillard, who wrote the opinion this year upholding 2020-2022 blend mandates, and Republican appointee Gregory Katsas, who dissented and said those volumes were excessive. The third judge on the panel is Democratic appointee J. Michelle Childs. RINcrease or decrease RIN market activity has thinned as participants await the results of the court case and November's presidential election. In its latest rule, EPA aimed to provide a clearer picture over a longer timeline by finalizing volumes over multiple years. But the agency underestimated the growth in renewable diesel production, partly because of unexpectedly high feedstock imports. The result has been persistent oversupply, which took D4 biomass-based diesel credit prices from around 150¢/RIN in spring last year to as low as 42¢/RIN a year later according to Argus assessments. Multiple refiners have consequently dialed back biofuel production. In the past, RIN prices have proven sensitive to legal developments as traders anticipate supply and demand shifts. Prices softened this summer after the DC Circuit vacated small refinery waivers, leaving it unclear whether many facilities would have to buy RIN credits at all. By Cole Martin and Matthew Cope Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

UK budget falls short of lifting bitumen demand

30/10/24

UK budget falls short of lifting bitumen demand

London, 30 October (Argus) — UK finance minister Rachel Reeves today in the country's budget allocated an extra £500mn ($650mn) to road maintenance, but this will do little to tackle road conditions in the country, according to industry organisation the Asphalt Industry Alliance (AIA). Reeves also confirmed the HS2 rail link between Old Oak Common in west London and Birmingham, with tunnelling work to extend the line to London's Euston station. AIA chair David Giles said that although it was encouraging to hear acknowledgement that the condition of our local roads is a reminder of the failure to invest as a nation, it was disappointing that the opportunity to deliver a step change was missed. Giles welcomed the additional £500mn for highway maintenance next year, but said that it "falls short of the long-term funding horizon the sector has been calling for". England alone needs £14.4bn, as a one time catch up cost, according to the AIA. "This additional allocation is a fraction of what's needed to prevent further decline,"he said. One time catch up cost is the amount needed to as a one-off to bring the network up to a condition that would allow it to be managed cost effectively going forward as part of a proactive asset, according to the organisation. The AIA was hoping for a multi-year ringfenced commitment allowing local authorities to plan and proactively carry out the effective maintenance needed to drive improvement on local roads, Giles said. Government data show UK bitumen consumption slipped to 1.54mn t in 2023, the lowest since 2016. Consumption was 1.89mn t in 2021 and 1.56mn t in 2022. In the first seven months of this year consumption was 835,000t, 9pc down from 917,000t in the same period of 2023. By Fenella Rhodes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cepsa rebrands to Moeve to reflect sustainability shift

30/10/24

Cepsa rebrands to Moeve to reflect sustainability shift

Madrid, 30 October (Argus) — Spain-based integrated energy company Cepsa has changed its name for the first time in its 95 years of existence, to Moeve (pronounced Moo-eh-vey). The change reflects Cepsa's transition "in which the majority of profits will come from sustainable activities by the end of this decade," said chief executive Maarten Wetselaar. Cepsa has sold nearly 70pc of its oil and gas production over the past two years, including its stakes in upstream assets in Abu Dhabi , in Peru and in Colombia . It has retained stakes in light crude and gas production in Algeria, which has a significantly lower carbon footprint. The company reported provisional working interest crude production of 36,000 b/d in July-September, down from 80,000 b/d in the same period of 2021. Since then it has announced an €8bn ($8.65bn) investment strategy to decarbonise much of its business through ventures such at the planned 2GW Andalusian Hydrogen Valley , announced at the end of 2022, together with second-generation biofuels, biomethane and renewables development. Cepsa, or Compañia Espanola de Petroleos SA, was founded in 1929. It has been been majority controlled by Abu Dhabi sovereign wealth investors IPIC and Mubadala Investment Company since 2011. US investment fund Carlyle acquired 37pc of the firm in 2019. By Jonathan Gleave Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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