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US Refiners Finally Reducing Crude Inventories
August 03, 2012 |
| According to monthly data and weekly estimates from the Energy Information Administration (EIA), US domestic crude production continues to surge higher on increasing drilling activity. Meanwhile, US refiners are finally beginning to draw their crude stocks lower, from multi-year peaks, on higher crude runs and moderately-lower crude imports. This continuing dynamic would imply sharply lower crude imports for the remainder of 2012, to levels not seen since 1997. |
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IEA Trims OPEC Production Capacity Outlook
July 27, 2012 |
| In addition to cutting demand estimates in its recent Oil Market Report, the International Energy Agency (IEA) sliced its forecasts for OPEC production capacity during 2013 by 1.07 mbpd since its December 2011 report. Baseline revisions and cuts in Iranian capacity, due to tighter sanctions, featured in the estimate reduction, which leaves AG capacity on a much slower trajectory. Combined with new refineries coming on line in the region, the new estimates imply a much lower level of crude export capacity available for VLCCs. |
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Caribbean Refinery Closures Offset by Sagging Demand
July 20, 2012 |
| During the first quarter of 2012, the dual closure of Valero’s 235 kbpd Aruba refinery and the remaining 350 kbpd of capacity at Hovensa’s St. Croix facility offered the potential that the loss of this Caribbean refining capacity would provide a boost to product tanker demand. Long a source of clean product imports to the USAC, the loss of this short-haul supply would require imports from longer-haul locations for a region shedding its own refining capacity, so the hypothesis went. Although tonne-miles have risen sequentially, the continuing US product demand malaise has muted the effect. |
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Moderating IEA View Limiting Tanker Outlook
July 13, 2012 |
| In its recent Oil Market Report (OMR), the International Energy Agency (IEA) kept its forecast for 2012 global oil demand roughly unchanged, while lowering its estimates for 2013 global oil demand growth from those levels previously reported in its medium term outlooks. Given its expectations for growth in non-OPEC supply and OPEC natural gas Liquids (NGLs), the IEA forecast call on OPEC crude in 2013 remains unchanged from 2012. With OPEC maintaining aggressive output levels to promote massive global stock builds in 1h12, any return to normalised inventory management during 2012-13 would suggest a sharp drop in OPEC production in the Arabian Gulf (AG). |
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Japanese Utility Demand Supports Aframaxes
July 06, 2012 |
| Although the Japanese government has approved the start-up of two nuclear reactors in July in order to avoid power shortages during peak summer demand, the removal of virtually all of Japan’s nuclear generating capacity following the Fukushima disaster in 2011 should continue to support LNG, fuel oil and crude imports in the medium term. Shifting import sourcing patterns for fuel oil and crude for direct burning at Japanese utilities have been supportive for Aframax demand, and this should continue, despite modest declines from the nuclear start-ups. |
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A Delayed Launch
June 29, 2012 |
| Although estimates of how long repair work will last are better left until Motiva completes its inspection assessments, guesses swirling in the media suggest an outage of at least six months, or a longer. |
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US Crude Stock Build Continues
June 22, 2012 |
| Six weeks ago, we observed that a surprise US crude inventory build was consistent with seasonal patterns, risk aversion ahead of Iran sanctions, trapped Cushing storage and Motiva stock building. We suggested that these rising inventories, driven by surging US shale oil production, poised a threat to crude tanker demand on any normalisation of inventory levels in a weakening demand environment. Since then, US crude stocks have continued to rise against historical seasonal patterns -- despite strong crude runs -- thus raising the stakes in the prospects for the tanker market. |
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Chinese Crude Sourcing Offers Continued Support to VLCCs
June 15, 2012 |
| The rapid growth of Chinese oil product demand, refining capacity and crude imports has been a supportive feature of crude tanker demand for years, and is poised to continue this trend. Recent shifts in Chinese crude import volumes and sourcing patterns have provided a recent boost to tanker demand in 1h12 and have allowed VLCC earnings to recover. Many of these crude import shifts are part of a secular trend that will continue to be supportive for the sector, but some of the recent activity is more ephemeral, suggesting that demand growth may slow during the balance of 2012. |
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PADD 1 Crude Imports Poised to Rebound
June 08, 2012 |
| At first glance, crude oil import data for PADD 1 (representing the US East Coast) might suggest that volumes are in the midst of a steady decline that might continue for many more months. As the chart below shows, PADD 1 crude imports were near their 5-year lows in March, the most recent monthly data available. In fact, imports into this crucial bellwether of the US economy are down nearly 250 thousand barrels per day since summer 2010. These developments might appear to suggest the type of gloom and doom that many have been anticipating, but a closer look at the data reveals that this is not necessarily the case. |
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Shifting Panamax Supply Boosts Earnings
June 01, 2012 |
| Panamax spot earnings in the Atlantic basin have been climbing consistently over the past month, especially for Panamaxes trading in the Caribbean spot market. In fact, Panamax Caribbean earnings are currently exceeding $20,000 per day, a peak level usually only seen in winter months. This development is surprising given depressed earning levels at the beginning of the year. This development is even more surprising relative to the Aframax Caribbean market, where earnings are currently approximately one half of Panamax earnings. |
