Canada’s TMX crude grows in popularity in China
Canada has become China's cheapest source of crude that is not under sanctions since the Trans Mountain Expansion (TMX) pipeline opened in May, potentially cementing the country's role as a supply source at a time when Chinese refiners' margins are feeling the pressure.
China has boosted imports of Canadian heavy crude since May — 170,000 b/d of TMX-shipped crude left the west coast port of Vancouver in June for China, data from oil analytics platform Vortexa show. TMX has allowed more output from Alberta's oil sands region to reach Vancouver — 300,000 b/d was exported from the port in June, TMX's first full month of operation. This was well up on the 34,000 b/d exported in April and 36,000 b/d in June 2023, and, strikingly, over double the 145,000 b/d of Canadian crude exported from the US Gulf coast last month.
Chinese importers — state-controlled Sinopec, PetroChina and Sinochem, and private-sector Rongsheng — are becoming more comfortable with TMX exports. Heavy sour grade Cold Lake made up 90pc of the firms' purchases in June, while Access Western Blend (AWB) — also heavy sour but with a higher total acid number (TAN) — represents the fastest-growing source of supply from Vancouver. This, and Californian buyers' preference for lower-TAN crude, is keeping spot differentials for TMX-shipped AWB under pressure and boosting its appeal in China.
Acidic grades corrode crude units at high temperatures, forcing sellers to offer them at discounts. Chinese firms secured $6/bl discounts to Ice December Brent for AWB delivered to China in October, while Cold Lake was offered $0.50-1.00/bl higher and no cargoes have been bought by China for October. AWB is far cheaper than Colombian Castilla and costs less than Cold Lake delivered to China from the US Gulf coast (see graph). Castilla is heavier than AWB, at 22.5°API, but far less sour.
Slow demand is hitting Chinese refiners' profits and spurring them to look for cheaper feedstock. AWB is around $6/bl pricier than Venezuelan heavy Merey but only Shandong independent refiners typically buy Merey. State-run firms expect TMX-shipped crude to partially displace their imports of Iraqi heavy sour Basrah Heavy and Latin American grades Napo, Oriente, Castilla and Vasconia.
Sinopec has become a consistent buyer of AWB for its 470,000 b/d Maoming and 540,000 b/d Zhenhai refineries. PetroChina is buying AWB for its 400,000 b/d Jieyang plant. Rongsheng bought 2mn bl of September-delivery AWB and the same again for October delivery to its 800,000 b/d ZPC refinery. But Sinochem has shut at least two of its Shandong facilities and paused all crude purchasing for its refineries in the province. "We take cheap AWB crude from the TMX pipeline to enhance our profits, despite its lower gasoline and diesel yields," a Chinese buyer says. Blending AWB with lighter crudes produces higher amounts of naphtha and fuel oil but lower amounts of middle distillates.
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Chinese buyers are still experimenting on how best to import Canadian crude. Vancouver port restrictions mean that shippers can load vessels no larger than an Aframax, and then with only 500,000-550,000 bl. Sinopec bought four Aframaxes in June before transferring their cargoes to a 2mn bl very large crude carrier (VLCC) in the Pacific Area Lightering (PAL) zone off California. The difficulty of aligning the arrival of the Aframaxes and a VLCC off California raises significant demurrage risks. And ship-to-ship transfers are only allowed during daylight hours, which shrink in the winter. The alternative is to ship crude to China on an Aframax, a 17-day voyage. But this has been $0.70/bl cheaper on average than the cost of putting together a VLCC for China delivery since early June.
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Venezuelan vote ends in opposition leader's exile
Venezuelan vote ends in opposition leader's exile
Caracas, 9 September (Argus) — Venezuelan opposition leader Edmundo Gonzalez landed in Spain on Sunday after an arrest warrant accused him of terrorism as President Nicolas Maduro continues to crack down on dissent despite international condemnation. Gonzalez fled to Spain after several days of shuttling between foreign embassies in Caracas "to save his liberty, integrity and life," Maria Corina Machado, Gonzalez's ally and the key opposition figure blocked by Maduro from running in the election, said on social media. "My departure from Caracas was surrounded by episodes of pressure, coercion and threats in order to not allow me to leave," Gonzalez said in an audio post to his followers. "I am confident that in the near future we will continue the struggle to achieve freedom and recover democracy in Venezuela." The US and other countries have not recognized official election results from 28 July and backed the opposition coalition's claim that Gonzalez likely was the winner. But Washington has refrained from taking any action, including enforcing an even stricter regime of oil and other sanctions, to force Maduro to cede power. "The United States strongly condemns Maduro's decision to use repression and intimidation to cling to power by brute force rather than acknowledge his defeat at the polls," secretary of state Antony Blinken said. Gonzalez's departure highlighted pessimism over the possibility of a negotiated departure for Maduro, who claims that he won a third term. "Today is a sad day for democracy," EU foreign affairs representative Josep Borrell said, saying that removing Gonzalez from Venezuela was the only solution for now. Oil minister and vice-president Delcy Rodriguez confirmed Gonzalez's departure late on 7 September, labeling Gonzalez an "opposition citizen" who was granted safe passage after requesting political asylum. In the days after the election, 23 demonstrators and one national guard member were killed, according to figures from the Organization of American States. Maduro boasted of arresting 2,500 "terrorists", but human rights non-governmental organizations say the detainees are demonstrators, election workers, politicians and journalists. According to the human-rights group Foro Penal, more than 1,700 are still in jail. By Carlos Camacho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Brazil to build on G20 for climate leadership role
Brazil to build on G20 for climate leadership role
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Opec+ members delay output increases to December
Opec+ members delay output increases to December
Dubai, 6 September (Argus) — Opec+ members have opted to delay their plan to start increasing output by two months, against the backdrop of a sharp fall in prices and growing concerns about the oil demand outlook. Eight members of the group — Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman — are now scheduled to start unwinding 2.2mn b/d of "voluntary" crude production cuts from December, instead of October, over a 12-month period, the Opec secretariat said on 5 September. The plan had carried a proviso that the unwinding was subject to "market conditions". And the return of this supply is still not a foregone conclusion. The eight members retain the "flexibility to pause or reverse the adjustments as necessary", the secretariat says. If they go ahead with the updated plan, their collective output targets will rise by around 180,000 b/d in December. The delay to the output increase came as Atlantic basin benchmark North Sea Dated fell close to $75/bl on 5 September, its lowest since December, on concerns over oil demand in China and the US. Beijing imported 1.3mn b/d less crude in July than June, taking its monthly tally of receipts down to 10mn b/d, the lowest in nearly two years. The oil price drop has not taken place in isolation, JP Morgan says. "Alongside commodities, US 10-year treasury yields have tumbled (-70bp) and the US dollar index came down by almost 2pc, signalling a shift in the assessment of macroeconomic risk in the US and globally." The Opec+ delay means that any unwinding of its cuts will not come until after the 5 November US elections. But with gasoline prices there not seen at concerning levels and edging down, oil prices are not viewed as much of an election issue. The decision could help establish a floor under prices, which have fallen despite an oil blockade in Libya that has driven the country's production down to around 300,000 b/d, from almost 1mn b/d. Opec+ may also have sought to add further support to prices by emphasising assurance by overproducers Iraq, Kazakhstan and Russia on "planned compensation schedules". Promised belt tightening from the three would effectively wipe out most barrels coming back to the market until October 2025 — as long as they deliver. For now, the eight members have chosen to buy time and gain more clarity on how the markets develop in the fourth quarter, while also seeking to tighten the noose on compliance. Come early November, those members will have to determine if the market can handle the incremental increase — if not, Opec+ might be up for some hard decisions in December. Compliance and compensation Compliance by some serial overproducers improved in August, Argus estimates. Russia, which has tended to exceed its targets in recent months, saw its output fall by 70,000 b/d to 8.98mn b/d, bang on its formal output target. And Kazakhstan finally started to deliver on its pledge to start compensating for exceeding its targets, with its output in August coming in 40,000 b/d below its effective target under its compensation plan. The biggest overproducer was usual suspect Iraq, which was 200,000 b/d above its formal target and 290,000 b/d over its effective target under its latest plan to compensate for overproducing. Overall production by Opec+ members subject to cuts was barely changed, easing by 10,000 b/d in August, as falls from Russia and Kazakhstan were offset by increases from Nigeria and the UAE. This drove the alliance's output down to 33.82mn b/d, around 30,000 b/d below its collective target. But the forced outages in Libya drove the group's overall output down by a hefty 300,000 b/d. Libya, like Iran and Venezuela, is exempt from production targets. Opec+ crude production mn b/d Aug Jul* Target† ± target Opec 9 21.54 21.45 21.23 +0.31 Non-Opec 9 12.28 12.38 12.62 -0.34 Total 33.82 33.83 33.85 -0.03 *revised †includes additional cuts where applicable Opec wellhead production mn b/d Aug Jul Target† ± target Saudi Arabia 8.96 9.00 8.98 -0.02 Iraq 4.20 4.25 4.00 +0.20 Kuwait 2.40 2.38 2.41 -0.01 UAE 2.98 2.94 2.91 +0.07 Algeria 0.91 0.91 0.91 0.00 Nigeria 1.54 1.46 1.50 +0.04 Congo (Brazzaville) 0.26 0.24 0.28 -0.02 Gabon 0.23 0.21 0.17 +0.06 Equatorial Guinea 0.06 0.06 0.07 -0.01 Opec 9 21.54 21.45 21.23 +0.31 Iran 3.33 3.35 na na Libya 0.92 1.20 na na Venezuela 0.88 0.88 na na Total Opec 12^ 26.67 26.88 na na †includes additional cuts where applicable ^Iran, Libya and Venezuela are exempt from production targets Non-Opec crude production mn b/d Aug Jul* Target† ± target Russia 8.98 9.05 8.98 +0.00 Oman 0.76 0.76 0.76 +0.00 Azerbaijan 0.49 0.48 0.55 -0.06 Kazakhstan 1.37 1.41 1.47 -0.10 Malaysia 0.33 0.34 0.40 -0.07 Bahrain 0.18 0.18 0.20 -0.02 Brunei 0.09 0.09 0.08 0.01 Sudan 0.02 0.02 0.06 -0.04 South Sudan 0.06 0.05 0.12 -0.06 Total non-Opec 12.28 12.38 12.62 -0.34 *revised †includes additional cuts where applicable Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Canada’s west coast crude exports up ten-fold on TMX
Canada’s west coast crude exports up ten-fold on TMX
Calgary, 6 September (Argus) — Crude exports from Canada's west coast rose sharply in June as shippers were eager to take advantage of enhanced access to Pacific Rim markets, according to Trans Mountain Corporation (TMC). The 590,000 b/d Trans Mountain Expansion (TMX) pipeline nearly tripled the capacity of the original 300,000 b/d system connecting oil-rich Alberta to Burnaby, British Columbia, with new volumes reaching the Westridge Marine Terminal (WMT) midway through May. Throughputs made a step change in June, the first full month of service, highlighting the pent-up demand among shippers who had waited years for the expansion to be built. Volumes on the Trans Mountain Mainline averaged 704,000 b/d in June, up from 412,000 b/d in May and 300,000 b/d in April, TMC said in its quarterly update. Of those flows, more than half went to the WMT for export in June at 361,000 b/d, ten times the 36,000 b/d sent to the terminal in April. The WMT handled 76,000 b/d of volume in May. Levels at the WMT have held steady in July and August above 350,000 b/d, according to more recent data from Kpler. Most of the volume has gone to China and the US west coast, but cargoes have also been aimed at new markets like Brunei this week . On a quarterly basis, the Mainline handled 471,000 b/d from April-June, up from 349,000 b/d from a year earlier. The WMT handled 157,000 b/d in the second quarter, up from 39,000 b/d across the same period. The Trans Mountain system also has a terminal at the Canada-US border near Sumas, Washington, that diverts crude to refineries in Washington state via the company's 111 kilometre (69 mile) Puget Sound Pipeline. Movements on Puget Sound rose to 246,000 b/d in June, up from 241,000 b/d in May and 199,000 b/d in April. Across the quarter, Puget Sound moved 229,000 b/d, up from 233,000 b/d in the same quarter 2023. Carrying costs for the highly-leveraged C$34bn ($25bn) TMX project weighed on the company's earnings despite an increase in toll-related revenues. Trans Mountain ended the second quarter with C$26.2bn of total debt, up from C$20.1bn a year earlier. Trans Mountain posted a loss of C$48mn in the second quarter, down from a C$172mn profit during the same quarter of 2023. 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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