David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Chevron-Booked Ship Laden With Venezuelan Crude Sails to US

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The Aframax Sealeo is on its way to the US after receiving Venezuelan crude in a ship transfer off Aruba, according to ship-tracking data compiled by Bloomberg. 

    Sealeo received Hamaca crude oil from tanker Caribbean Voyager in a ship-to-ship transfer ~Monday

    Caribbean Voyager loaded ~500k bbl Hamaca ~Jan. 6 at the Venezuelan government-controlled port of Jose

    Sealeo signals Pascagoula, Mississippi, as destination; Pascagoula is the site of the Chevron Pascagoula refinery, a facility designed to process heavy sulfurous oil like the types produced by Venezuela

    Cargo is first to sail to US after the country eased sanctions against Venezuela in November

    Last time US received Venezuelan crude was in May 2019 when Motiva Port Arthur refinery in Texas took ~350k bbl of Diluted Crude Oil: AHOY data compiled by Bloomberg

    Other Chevron tankers sailing to/from Venezuela:

    Kerala, which loaded 250k-300k bbl Boscan crude for Chevron, is currently anchored off Lake Maracaibo awaiting orders

    UACC Eagle, which is bringing ~620.4k bbl of US heavy naphtha to Venezuela, is currently moored at the port of Jose to discharge.

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    Russia to Try to Limit Oil Discounts With Market Principles

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    The Urals grade, by far the country’s top export stream, was $37.80 a barrel at the Baltic Sea port of Primorsk on Friday, according to data provided by Argus Media. That was less than half where Brent futures settled on the same day.

    The ballooning discount follows the European ban on almost all seaborne crude imports from Russia that imposed from Dec. 5. Simultaneously, the European Union joined with the G-7 industrialized nations in imposing a cap on the price of Russian supply. Anyone wishing access to Western services — in particular industry standard insurance, but also an array of other things — could only do so if they paid $60 of less.

    The western price cap is “illegal” and will affect stability of the global energy supply, requiring “significant cooperative effort by responsible countries to remedy,” the ministry said, reiterating earlier statements by President Vladimir Putin and top Russian energy officials.

    Russia is prepared to cut its crude production by 500,000-700,000 barrels a day in response to the threshold, Deputy Prime Minister Alexander Novak said last month. 

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    Oil's New Year Slump Deepens Below $75 as China Concerns Grow

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    Crude’s dwindling levels of open interest have left it open to sharp swings in recent months, and a failed attempt to break above its 50-day moving average this week has done little to improve the technical picture. While sanctions against Moscow over Russia’s war in Ukraine dragged its oil flows to 2022 lows late last month, that’s been of little relief to bulls so far this year. 

    The impact of a pre-Christmas freeze that hobbled refinery capacity in some parts of the US should also become clearer in inventory data this week, with the industry-funded American Petroleum Institute’s figures due later. In the short-term, that has lowered crude processing capacity in North America and is also weighing on prices. 

    “We’ve seen these big freeze-offs in the US and that has meant that the crude balance has actually weakened,” Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd., said in a Bloomberg TV interview, referring to US refinery closures due to cold weather. “There’s a few more weeks of softness I would think.”

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    War and Currency Statecraft

    Thanks to a subscriber for this report by Zoltan Pozsar for Credit Suisse. Here is a section: 

    Dirty Energy Is the Lone Junk Winner in Credit's Brutal Year

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    Junk-bond investors had almost no way to avoid losses this year, and shunning dirty energy only made the pain deeper. The best return -- one of very few gains -- was in coal, highlighting challenges for investors who need to perform but also want to be sustainable.

    Junk’s 11% loss this year -- the worst since the global financial crisis -- was led by communications and consumer non-cyclical bonds, down 15% and 13%, respectively. Energy performed best in the US high-yield index, down about 5% overall.

    Coal -- albeit a very small chunk of the corporate bond market -- is up 3.2%, while oil and gas services debt gained 1.7%. That compares with a global credit market that’s down double digits in most market segments this year, with particularly steep losses for longer-dated debt.

    Credit markets are forecast to see a broad-based rebound next year and with many sectors trading cheap to history, junk energy probably won’t be the best again in 2023. But so long as oil prices stay supported by conflict and reopening, it should at least be a buttress for bond portfolios likely to take another beating from inflation next year.

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    China's Covid Pivot Set to Worsen the Global Energy Crunch

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    China’s pivot away from Covid Zero is poised to boost natural gas demand in the world’s biggest importer, potentially curbing supply to Europe and other Asian nations.

    China National Offshore Oil Corp. is now looking to secure more shipments of the super-chilled fuel for next year. The return to the market of one of the nation’s largest liquefied natural gas buyers follows a period of subdued demand, due to virus curbs suppressing economic activity, and may herald a rebound in imports. 

    Beijing’s move to reopen its economy and live with Covid-19 has seen most internal restrictions being dismantled over the last few weeks. Provided that’s not rolled back as cases surge, that will increase the challenge for Europe next year as it prepares for the winter of 2023/24 with little or no natural gas from Russia. 

    Chinese gas imports are likely to be 7% higher in 2023 than this year, according to Wang Zhen, president of Cnooc’s Energy Economics Institute.

    The forecast belies still-weak industrial demand. Many factories will send workers home earlier-than-usual for the Lunar New Year holidays, while local production and Russian pipeline flows are rising.

    There are already signs China will need to increase LNG purchases to prepare for next year, however. Inventories at northern ports are depleting faster than normal amid cold weather and have dropped to the mid-to-low level, according to ENN Energy’s research group, while domestic LNG prices are trending higher.

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    Tesla Stock Is the Cheapest Ever After This Year's 52% Slump

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    “My biggest concern is the slowdown they’re seeing in China,” Matt Maley, chief market strategist at Miller Tabak + Co. said, adding that “as long as Elon Musk is spending a lot of time with Twitter, it’s going to keep a lid on the stock.”

    Bloomberg News reported Friday that Tesla plans to suspend output in stages at its Shanghai electric car factory from the end of the month until as long as early January, amid production line upgrades and slowing consumer demand. 

    Meanwhile, Twitter is more than a distraction. Musk’s bankers are considering replacing some of the high-interest debt he layered on Twitter with new margin loans backed by Tesla, people with knowledge of the matter told Bloomberg.   

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    CATL to Deepen Ties With Honda on Battery Development

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    China’s Contemporary Amperex Technology, the world’s biggest maker of electric-car batteries, signs a global partnership agreement with Honda Motor, according to an exchange filing to Shenzhen Stock Exchange.

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    US Seeks Halt to Oil-Reserve Sales to Refill Depleted Stockpiles

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    The Biden administration is seeking to stop sales from the Strategic Petroleum Reserve mandated by Congress so it can refill the emergency reserve, a move that could impact the release of 147 million barrels of crude oil.

    The Energy Department is seeking to cancel or delay sales mandated by Congress in fiscal years 2024 through 2027 so that it can move forward with a White House plan to refill the oil reserve when crude prices reach around $70 a barrel, an agency official told a Senate committee Thursday. Congress has mandated the sale of 147 million barrels of oil to pay for unrelated legislative initiatives during that time frame, including 35 million barrels in fiscal 2024, according to data compiled by research firm ClearView Energy Partners. 

    “It doesn’t make sense for us to be releasing oil while we’re trying to refill the SPR,” Doug MacIntyre, the department’s Deputy Director for the Office of Petroleum Reserves, said in testimony before the Energy and Natural Resources Committee. “We can’t fill and release from the same site at the same time.”

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