Category Archives: Crude oil
Dear readers, here is our latest “Weekly Report Review” . If you have any questions or requirements please tell us, thanks!
Energy
With Iraq tensions increasing, crude oil prices climbed to a new level and stood at $107.26/t last week. Focussing on the domestic market, the coal price fell further due to high inventory. A situation that leads traders with a negative outlook to think the price will go down.
Alumina and aluminium
Import prices remained stable last week, however imported material is uncompetitive when compared with domestic alumina. For aluminum, there is no positive change in the downstream market. On-demand procurement volumes were limited to sustain price increase. Last week, aluminum price went down slightly.
Raw material of AL
Although downstream demand continued be weak, refineries controlled their output to a relatively low level which helped petcoke prices stabilize. With oversupply and tighter cash-flow within the industry, they can’t push the prices up easily. Additionally, as demand for aluminum in the main market has shown no sign of a rebound, the price might drop again.
ALF3 price continued to rise due to the low inventory levels, increasing by ¥50/t WoW. For good news, fluorspar prices started to rise slightly.
Dear readers, our latest “Weekly Report Review” has been published. if you have any questions, please tell us. Thanks!
Energy
Iraq tensions drove oil price up sharply last week. But domestic coal prices remain stable. Although coal consumption is increasing in summer, but potential negative factors continued to work, especially high level stock and decreasing ship transport fee.
AL
Compared with increasing spot alumina price, limited trade volumes of imported alumina continued to suppress prices, which still remain at a low level. However, aluminium prices continued to climb slightly.
Raw material of AL
After a adjustment in petcoke prices, last week both anode and fuel grade coke prices remained stable. But for anodes, because of long term weak demand and reducing exports, anode prices declined last week.
For other product, ALF3 rose further last week due to the low level inventory. The total aluminum fluoride stocks held by the 17 main plants decreased by compared with April.
For more information on subscribing to this report and getting the full picture, contact us at blackchina@az-china.com.
… in oil imports.
A Financial Times article has illustrated the shift in crude oil and energy dynamics caused by the shale oil phenomenon combined with China’s growing prosperity.
Quoting the energy Information Administration (EIA), the FT points out that China now imports more crude oil than the USA. China now runs at 57% crude oil dependency, with this number growing steadily every year. Meantime, America’s imports are shrinking, thanks to the growth of shale oil production combined with a waning inclination to drive.
From the China side, there is a double-edged sword at work. Their increasing volumes are allowing them to secure improved payment terms, especially from smaller producers, but it puts China at the mercy of the global geo-political diplomacy saga. Where the USA previously acted as the world’s policeman, partly because of its dependence on Middle Eastern crude oil, will China find itself forced to take that role? China has already started deploying peace-keeping forces in various hot-spots, though that has usually been to protect other interests.
For the USA, a retreat from the world crude oil market gives it new freedoms. America’s dealings with Venezuela and other troubled oil countries should get a little easier, given the threat of an oil embargo is reducing.
For the petcoke market, it opens new doors for some, but closes doors for others. The more heavy oil that is introduced into American oil refineries, the more fuel coke will be produced. But the more Eagle Ford and Bakken shale oil that starts to flow through oil refineries that produce anode grade coke, the less coke will be produced. That’s because there is less CCR in the VRO, if you really wanted to know. So anode grade petcoke production is set to fall in the USA. Meantime, China’s increasing thirst for imported oil will start to impact the amount of anode grade coke available for its smelters as well. China has several new cokers coming into the market, but precious little of that coke will be to anode grade quality.
Over the last several years, there has been a “Fall Petcoke Conference” held somewhere around Asia, with the last one being held in Hong Kong last October.
This year, AZ China is offering our own petcoke conference, but this conference is going to be unlike any other you have attended. It will be held online.
The Petcoke Online Forum will be held November 12 - 14, and will be held in the comfort of your own office or home.
We at AZ China believe it is a vital time to get up to date with what is happening in the petcoke world. The recent announcement by Valero in the USA only highlights what is likely to get worse. Anode grade petcoke is about to go short, perhaps critically short. To the situation with Shale Oil and Tight Oil developments in the USA, add the increased use of hydro treating in Chinese oil refineries, and you have a potentially “tectonic” shift in the market balance of anode grade petcoke.
Fuel grade coke prices are also set for a roller coaster ride. China is likely to set import duties on high sulphur petcoke in 2014, but coal prices are set to fall. For as long as the calorific value connection is maintained, that will drive fuel coke prices down.
In the calcined coke world, new calciners are starting to impact the market. Some projects have been delayed or cancelled, but meantime, new capacity in calcined coke, and especially in anode manufacturing capacity.
In short, if ever there was a time to keep ahead of the curve, this is it. AZ China recognises this, and has decided to step into the breach.
To help us arrange this event, we are delighted to announce that Rain CII has agreed to sponsor the Petcoke Online Forum.
So, how does it work? Simple. We will shortly make a registration page available. Register your details and receive your login password. On the day, go to the forum site (we will provide the special link), and join the conversation. Because participants will come from all sorts of time zones, the conversation will be there waiting for you no matter where you log in from. (There’s a small admin fee of $99 with registration.)
Best of all, no need to find extra budget for travel or accommodation costs. No need to find a week out of your busy diary. An online forum will not have the networking opportunities that a physical presence does, but the AZ China Aluminium and Carbon conference in May 2014 will give you that opportunity.
In a separate post, I will give you more information about the line up of speakers and the topics we will cover.
If you don’t want to wait with registering for this important and innovative event, you can write to me at paul.adkins@az-china.com to pre-register. The office is closed this week for China Golden Week, but we will process your registration when the office re-opens.
Word on the street is that the NDRC is set to increase the retail price of gasoline and gas oil from tomorrow. The retail price of gas will rise by RMB0.4 per litre, according to industry players.
China last raised gasoline prices about 1 month ago.
An increase to the retail price gives a bit more room for Sinopec and CNPC to raise production at their respective refineries. With their sell prices largely fixed, but their buy prices set by the international market for crude oil, these companies sometimes have little option but to reduce throughput to the bare minimum when margins are squeezed. But a small price increase will allow more crude oil through the pipelines, and that means more petroleum coke coming out the bottom.
An increase to supply of green coke in an otherwise depressed market may see prices fall in the coming weeks, probably after Golden Week (China’s national holidays October 1 - 7).
The Chinese Government yesterday announced a reduction in the ceiling price for gasoline and gas oil. Petrol at the pump will now have a maximum price of about RMB 0.24 per litre lower.
This move is a result of the rule that China uses, where the maximum pump price is calculated using a 22-day moving average of crude oil prices. The ceiling rose in February after fears of an Iran nuclear issue, but with crude oil prices now retreating, the formula triggered a change back down.
The thing is, many petrol stations had already adjusted their prices down, as competition and lower wholesale prices forced their hands. So this announcement is not likely to change anything.
But it does signal that pet coke prices are likely to fall in the near term. Subscribers to our monthly Black China Report will see in the May edition (due out in a couple of days) that we expect green coke prices to reduce.
Here is a report from AFP, which pretty much covers the story of the latest fire at PetroChina’s Dalian refinery. As more information comes in, we will post it here.
A major fire broke out Monday at a refinery in northeast China owned by state-owned oil giant PetroChina, the official Xinhua news agency reported, in the latest disaster to hit the country’s oil industry.
It took nearly 300 firefighters several hours to put out the blaze, which broke out when an oil storage facility caught light at at around 10:00 am (0200 GMT), Xinhua said, adding that no casualties had been reported.
The fire was the second to hit the refinery in the coastal city of Dalian in as many months and follows a series of other disasters involving China’s rapidly expanding oil industry, which has come under scrutiny over its safety standards.
In July 2010, two pipelines exploded at a PetroChina oil storage depot in Dalian, also triggering a devastating spill.
The government estimated about 1,500 tonnes of oil poured into the Yellow Sea after the fire, but environmental watchdog Greenpeace said up to 60 times that amount may have escaped.
And in January this year, more than 30 people were injured when an explosion ripped through a PetroChina oil refinery in neighbouring Fushun city.
A spokesman for the company who declined to be named confirmed that Monday’s blaze was at the same refinery that was hit by a fire in July, but refused to provide any more details.
The world’s second-largest economy is also grappling with a huge spill from oil platforms jointly owned by state-owned CNOOC and US oil giant ConocoPhillips that have polluted large parts of Bohai Bay off the east coast.
Dalian, a major Chinese port and transport hub, sits at the confluence of Bohai Bay and the Yellow Sea about 460 kilometres (290 miles) east of Beijing.
According to state press reports, the Dalian refinery, PetroChina?s largest, has three crude distillation units with total crude processing capacity of 410,000 barrels per day.
Telephone calls to the Dalian plant and to local authorities went unanswered.
The word is out that Bechtel have purchased the coker technology section of Conoco Phillips. Several of the senior engineers have been transferred to Bechtel with the purchase, though it isn’t clear yet what this means for COP’s needle coke and specialty coke group.
One can argue that an engineering company is a better place for design and licensing of technology than a user of that technology, though I wouldn’t. I know that with Pechiney technology, the former Pechiney made as much money from sales of technology licences as it did from some other major divisions of the company. Sure, it raises problems that others in the industry have to go to their competitor to gain access to the technology, but there are ways of firewalling the business unit.
To me, this signals that COP is looking to streamline its business, and perhaps gradually lose minor segments such as coke.
In other related news, Yanchang Petroleum, based in Shaanxi province, has announced it will form a JV with KBR to market KBR’s VCC technology. VCC is a process which allows for the use of coal oil, heavy oil and other “bottom of the barrel” stocks to be processed for increased fuel production.
Editor’s update: Conoco Phillips have now supplied us with a copy of the press release on the sale of the technology to Bechtel. In their email, they also make it clear that the sale in no way represents any sort of change of strategy or intention to streamline out of coke sales. Here are the relevant parts of the press release:
China’s retail price for gasoline is pegged to a formula, which requires an unbroken change in crude oil prices for at least 22 days. But that trigger point has now been reached, and prices at the pump are set to rise strongly.
Reports in the Chinese media are now suggesting that prices will rise to as much as RMB7.50 per litre (about US$1.14 per litre, or $4.30 per gallon). They are currently sitting at the psychologically important mark of RMB7.
While this move will bring some relief for Sinopec, who have recently turned in a relatively poor financial report for the last financial year, it adds another straw to the inflation camel’s back.
There is not much that the government can do about this either. The rise in crude oil prices is essentially a response to the conflict in the Middle East, so the best that Beijing can hope for is an early settlement. But wars rarely achieve a quick ending (which is why the six-day war 40-odd years ago was so remarkable.)
Pushing reserve rate requirements with banks is no solution in this case. The Government has made several adjustments in order to take liquidity out of the market, but those actions are for capital markets and sectors such as real estate.
Fuel price rises will also hurt food and other sectors of the economy, as freight costs will rise. All in all, it is looking increasingly like high inflation is going to be with us for a while.
There has already been quite a lot of press about how China is concerned about a possible Jasmine Revolution infiltrating into Chinese minds.
Of more immediate concern is the rising price of crude oil. Already some refineries are reducing production of gasoline, stung by the widening gap between the cost of crude and their break-even point. According to local newspapers here in China, the tipping point is $90 per barrel. Oil was sitting at $106 last time I looked.
Sinopec has already announced that they will pay rebates to their refineries in a bid to maintain output of gasoline. No doubt they will then turn to the Government looking for relief from the substantial losses they are now incurring.
Petrol prices at the pump are controlled by a formula which only allows a price increase after about 3 weeks of sustained high oil prices. But when that rise kicks in, authorities will have to worry about yet another stimulus to inflationary pressures. Inflation is already running higher than the Government wants.
Close on the heels of gasoline shortages could be a shortage of crude oil. China has only about 2 weeks supply in reserves, according to a Business Insider report. Any worsening of the situation in Libya, or a spreading to other oil supplying countries, could spell extremely bad news for China’s economy.
For those of you who are looking at Chinese petroleum coke, these developments only make the matter worse.
0