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International Oil production changes

General discussions of the systemic, societal and civilisational effects of depletion.

International Oil production changes

Unread postby mefistofeles » Tue 05 Aug 2008, 17:11:56

Iran and Saudi Arabia Halt Fuel Oil Exports
Iran, a regular exporter of fuel oil to Asia, will halt shipments of the heavy fuel from August

Iran's decision came on the heels of Saudi Arabia's move to not resume spot fuel oil exports after its peak summer demand season, due to persistently strong requirements from domestic power plants and new secondary refining units.

The very fact this news didn't roil the oil markets makes me wonder whether or not oil traders are actually looking at the wrong metrics.

Perhaps its the availibility of finished product they should be looking at rather than crude oil per see.

Also the export numbers from Russia are quite startling: Russian OIl Production Down 1% year over year
In the first seven months of the year, output was 9.76 million bpd, also down by 1 percent versus the same period of last year.

OPEC is also considering oil rationing .
TEHRAN, Aug. 2 (Xinhua) -- Iranian Oil Minister Gholam Hussein Nozari has revealed that the Organization of Petroleum Exporting Countries (OPEC) will seriously consider rationing its oil production, the semi-official FARS news agency reported.

Reading all this news I think the markets have become too complacent and we are actually setting the groundwork for a huge spike in oil prices.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby Twilight » Tue 05 Aug 2008, 17:21:03

Reuters wrote:"This is true, we will be concentrating on building up stocks for use at our power stations," a source familiar with the fuel oil export programme said.
Iran's decision came on the heels of Saudi Arabia's move to not resume spot fuel oil exports after its peak summer demand season, due to persistently strong requirements from domestic power plants and new secondary refining units.

What did I say 12 months ago? Expect Kuwait to cut this autumn too.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby DantesPeak » Tue 05 Aug 2008, 17:21:15

Iran's decision came on the heels of Saudi Arabia's move to not resume spot fuel oil exports after its peak summer demand season, due to persistently strong requirements from domestic power plants and new secondary refining units.

That appears to be correct. I recently posted this article on another thread, the non-confirmation - and export halt - being a confirmation of problems:
Saudi Aramco denies shortage of fuel to rural areas July 27, 2008
DHAHRAN – Saudi Aramco said, Sunday, it has not received any complaints from clients about shortages of its products in any local market. The statement comes after farmers have complained that diesel has been undersupplied to the rural regions of the Kingdom.
Farmers complained of their crops being in danger of drying up because they could not acquire diesel for their water pumps to irrigate the fields. Truck drivers also complained of shortages at filling stations in June.
It said it increased diesel sales to its customers in Al-Qasim and Hail by 15 percent this year. It also said its sales to customers in the Al-Jouf region have increased by 31 percent because of increased demand from last year, Al-Hayat reported.
Engineer Ahmed Al-Saadi, Executive Director for Distribution at Saudi Aramco said the company is providing all the petroleum products, including diesel fuel to the local market.
He said the company has not received any complaint from its clients indicating a shortage of supply, because Aramco has fulfilled its part of the contracts with its customers.
He said contracts have specific times in which specific quantities are required. – SG

Saudi Gazette In general, diesel and the similar heating oil are in short supply in many countries.

US exports of diesel have more than doubled in 2008, a trend that doesn't look likely to slow down soon.

A US export halt to diesel/heating oil is not out of the question even as early as this winter (2008-2009) as the high price of energy begins to bite - hard.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby kpeavey » Tue 05 Aug 2008, 21:30:29

The Olduvai Theory puts the OPEC/non-OPEC crossover event in/around 2008. Is this just a part of the script?
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby FloridaGirl » Tue 05 Aug 2008, 22:47:17

The very fact this news didn't roil the oil markets makes me wonder whether or not oil traders are actually looking at the wrong metrics.


I don't get it. Are you saying that you expect the price of oil to rise on this news? I read it and think that it means that these countries have hit the limit of their refining capacity, thus limiting the amount that they, and whoever they were selling to, could consume. So I see it as potentially lowering the price of oil for everyone else relative to what the price would be if they did not hit a refinery limit.

I do see it as potentially increasing the price of fuel oil.

Am I missing something here?
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby mefistofeles » Wed 06 Aug 2008, 01:57:17

Well I think you have to look at my question in the context of refinery capacity. The United States is running at under 90% utilization for its refinery capacity.

EIA Refinery Utilization

So therefore if its simply a question of global refinery capacity then fuel oil prices should be unaffected,assuming enough crude oil is availble ,since regions with less fuel oil could simply buy more fuel oil from regions that have spare refining capacity such as the US.

However if there isn't enough crude oil then fuel oil prices should go higher, since there isn't enough crude oil to manufacture more fuel oil.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby MrBill » Wed 06 Aug 2008, 04:08:39

FloridaGirl wrote:
The very fact this news didn't roil the oil markets makes me wonder whether or not oil traders are actually looking at the wrong metrics.


I don't get it. Are you saying that you expect the price of oil to rise on this news? I read it and think that it means that these countries have hit the limit of their refining capacity, thus limiting the amount that they, and whoever they were selling to, could consume. So I see it as potentially lowering the price of oil for everyone else relative to what the price would be if they did not hit a refinery limit.

I do see it as potentially increasing the price of fuel oil.

Am I missing something here?



That is how I interpret it. Iran has to import finished products like diesel from India who are just now opening up the largest, most advanced refinery in the world to supply parts of Asia. Therefore, it makes little sense for Iran to export finished fuel oil, and then to turn around an re-import it if there are regional shortages in the country as they subsidize the cost of petrol below world price levels.

Ditto for Saudi Arabia. They export more crude than they refine. They also subsidize quite heavily domestic demand to buy social peace and order. However, new plants like that built in India should increase global refining capacity that has up to now been a bottlenceck and supportive of the price of oil. Especially as they will be able to refine heavier, sour grades of oil that have been up to now shut-in or under-utilized.

It is worrying that Iran and SA still subsidize domestic consumption therefore limiting price's ability to curb excessive demand (and smuggling) rather than the decision to supply their own markets domestically before exporting.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby ROCKMAN » Wed 06 Aug 2008, 13:34:35

Mr. Bill et al,

Here's a little more confusion for the mix: totally unvarified: word on the street in Houston this morning: Gulf Coast refiners are preparing to cut back capacity due to lack of feed stock. Maybe so. Maybe not. Or maybe, if it is true, a reflection of the new capacities coming online overseas.

Personally I only believe rumors that come from Mr. Bill...and then only half the time. And then I usually pick the wrong half.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby DantesPeak » Wed 06 Aug 2008, 16:44:15

World News Connection

August 2, 2008

India's Essar In Oil Deal With Iran

India's Essar in Oil Deal with Iran TEHRAN (FNA)- India's Essar is in talks to sell gasoline to Iran and has signed its first-ever term contract with Tehran to import 1.6 million barrels of crude oil every month, top company officials have said. Iran lacks sufficient refining capacity to meet its needs, forcing it to import fuels. It has recently resumed gasoline purchases from India's Reliance Industries, which had stopped supplies last year over credit issues. "Iran has asked us for gasoline supplies, we are talking to them," Managing Director Naresh Nayyar told Reuters.

Traders say Iran's gasoline imports are set to rise to 170,000 bpd from a monthly average of 95,000-115,000 bpd as the world's fourth-largest oil producer is planning maintenance at two large refineries in the fourth quarter. Essar, which runs a 210,000-bpd refinery at Vadinar in western India, was also close to a term deal with the Abu Dhabi Nation Oil Co (ADNOC) to buy 1.2 million barrels of crude oil every month, the officials said. Under the term deal with Iran, Essar would import 1 million barrels of Iran Heavy and 600,000 barrels of Norouz grades, he said. Another company official later clarified that Nayyar was referring to monthly purchases by the company. The officials said Essar had the option to increase term crude volumes by 1 million barrels a month from Iran. Essar, which already buys some crude oil from ADNOC and Venezuela, was also close to firming up a term contract to buy 2 million barrels a month deal from Venezuela's state oil company PDVSA. Nayyar said the firm was seeking medium grades from ADNOC. Essar processes 20 percent heavy crude and 40 percent each of light/sweet and sour/heavy grades.

No link - Tehran Fars News Agency
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby DantesPeak » Wed 06 Aug 2008, 16:59:32

ROCKMAN wrote:Mr. Bill et al,

Here's a little more confusion for the mix: totally unvarified: word on the street in Houston this morning: Gulf Coast refiners are preparing to cut back capacity due to lack of feed stock. Maybe so. Maybe not. Or maybe, if it is true, a reflection of the new capacities coming online overseas.

Personally I only believe rumors that come from Mr. Bill...and then only half the time. And then I usually pick the wrong half.


I am probably OT here, but refinery utilization was at low levels last week and probably even lower this week due to the storm.

Just today, wholesale gasoline prices in the upper Midwest moved up 4 cents/gallon vs. the rest of the country, and more than 10 cents/gal over the last week. Obviously supply and demand are getting much closer than they were only a month ago, otherwise total US gasoline inventories wouldn't have dropped 4 million barrels in just the last week.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby MrBill » Thu 07 Aug 2008, 02:08:12

Image
Source: Bloomberg

I do not think there is much of a mystery here. The crack spreads are terrible, and there is a mismatch between HO (diesel & heating oil) and RBOB (gasoline). This is apparent in the Noram market, but also apparently in Asia. European spreads are slightly higher, but not much.

On the NYMEX you still have healthy crack margins for HO of $20 per barrel, but in the front 6-months (OCT-MAR) RBOB cracks margins are just $1.50-4.50 per barrel due to lack of demand. That pulls the 321 crack spread down to just $7-10 per barrel in the front months (OCT-MAR) before they recover somewhat to $13-14 a barrrel afterwards. But still well below the $20+ per barrel crack spreads we saw early last year when refiners were outperforming the S&P Energy Index.

Asia Naphtha-Crack falls below $130/T on weak demand
Asian naphtha's premium against Brent crude fell on Thursday on weak buying sentiment, while outright prices edged down on overnight crude losses.

Benchmark open-spec naphtha contracts for second-half September fell to $1,010.00 a tonne, from $1,016.00 a tonne in the previous session.

The crack against Brent for second-half September fell to $129.65 a tonne, down from $131.08 a tonne in Wednesday's session.

The half-month notional differentials were at $4.00 a tonne in contango, compared with $1.50-$2.00 a tonne earlier in the week, reflecting bearish demand for prompt-delivery cargoes.

Taiwan's Formosa Petrochemicals Corp, which was reviewing offers made for its tender to buy up to 510,000 tonnes of open-spec naphtha for delivery between October 2008 and March 2009, had extended the validity of the bids to later in the day.

"Formosa will buy at least 450,000 tonnes from its term tender, but prices are still being reviewed," said a trader involved in the deal.

The private Taiwanese company had contracted in July last year more than 350,000 tonnes of the same grade naphtha for October 2007-December 2008 at a discount of $1.50 a tonne to Japan spot quotes on a cost-and-freight (C&F) basis.

ICE September Brent crude gained 38 cents to $117.38 a barrel.

source:SEOUL, Aug 7 (Reuters)

However, compounding the problem from the refiners' point of view must be the mismatch between HO and RBOB. I am sure they would like to refine more heating oil and less gasoline, but it does not work that way. The oil barrel is divided up into LPG, light distillates, middle distillates and residual fuel oil. Light and middle grades make up 70% of the barrel. Gasoline comes from the light end. Diesel and heating oil come from the middle distillates. They both have to be refined at the same time in roughly the same proportion. And it is lack of demand for gasoline that is pulling down profitability. That is probably why we saw such a large drop in gasoline inventory in the EIA report yesterday. Refiners are letting gasoline inventories run down because their margins are so low.

Image
source: Bloomberg

Apparently the market is not overly alarmed by a lack of refining capacity at the moment. At least that is not reflected in the share prices of refiners or in strong 321 crack margins. And with India bringing a brand new 450.000 bpd refinery online that can process heavier, more sour grades that capacity seems to be expanding now in response to high prices over the past several years.

So either crude prices have a lot farther to fall or increased demand has to materialize against the backdrop of a weak global economy. Personally I think we will see $100 oil before we will see $150 baring any shooting wars or killer hurricanes.
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Re: Iran and Saudi Arabia Halt Fuel Oil Exports/Oil Spike

Unread postby MD » Thu 07 Aug 2008, 04:57:52

To the people that have posted to this thread so far, both new and old:

You are on the very short list of reasons why I continue to volunteer my time here.

Thanks.
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The end of the Oil Age may be closer but more uncertain

Unread postby AdamB » Tue 06 Mar 2018, 09:49:57

Exactly when the world’s thirst for oil starts to ebb as a shift to cleaner, renewable energy gathers pace is increasingly occupying forecasters on both sides of the debate. The booming growth of renewable energy and high hopes for electric cars are seen equally as a challenge or a panacea by the producers of fossil fuels and environmental groups alike. Last month saw the dial appear to shift in favor of the latter, however, after BP became the first Western supermajor to pinpoint an inflection point in the world’s need for oil. Tamed by a steady surge of wind and solar power, electric cars, more frugal vehicles and curbs on some plastics, Europe’s number two producer now sees oil demand peaking in the “late 2030”. A year ago it expected oil demand to rise beyond 2040. The actual timing of the peak is less important than the direction of travel. Updating its influential long-term Energy


The end of the Oil Age may be closer but more uncertain
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
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