NY oil spill

Oil spill off storm-battered New York: report

Channel News Asia

1 November, 2012

Clean-up efforts were under way early Thursday after some 300,000 gallons of diesel fuel spilled into the waters off New York City in the aftermath of superstorm Sandy, CNN reported.

The spill was caused by a rupture in a storage tank at a nearby New Jersey refinery run by Motiva, part-owned by oil giant Shell, it said.

The US Coast Guard was overseeing the cleanup effort, which involved around 100 workers helping to place containment booms around the spill, CNN said.

Neither the Coast Guard nor Shell was immediately available for comment.

The massive cyclone carved a path of devastation across the US northeast on Monday and Tuesday, flooding lower Manhattan and much of the New Jersey coastline and leaving millions without electricity across several states.

The Chinese slow-down

Dying diesel sales say China's engine slowing

China is unlikely to import diesel for domestic use for the rest of the year due to a slowing economy, industry sources say, putting pressure on Asian diesel margins as well as potentially reversing high prices for the fuel in the West.

Reuters,

27 September, 2012

The drop in imports of diesel, Asia's most widely consumed fuel, is the latest example of slowing industrial activity in China feeding through to demand for resources. Consumption of iron ore, steel and copper have all fallen in recent months.

The main output of Chinese refineries is typically diesel, but China normally starts buying at this time of the year on the spot market to meet peak demand from agriculture and for power generation. This year China is still exporting.

"Usually around this time, they will at least be making enquiries to buy diesel and start snapping up volumes, but I'm not seeing that happen now," said a source at a refiner that normally supplies China, who asked not to be identified.

"The fact that they're still exporting, even though in small volumes, shows that demand is not quite there."

China's top refiner Sinopec Corp (0386.HK) is exporting about 60,000 tonnes of diesel a month, two A sia-based traders said, after it made its first significant export in six months in June.

This is in sharp contrast to last year when Chinese refiners started making enquiries around this time and imported more than 300,000 tonnes of diesel for November and December, one of the biggest purchases of the year for domestic use.

In 2010, Sinopec also imported about 300,000 tonnes of diesel for November and December.

Purchases typically start from late September to October.

China imported 81,996 tonnes of diesel in August, a fall of 67 percent from a year ago, customs data shows. For the first eight months of the year, it imported 732,747 tonnes, down 47 percent from the same period last year

These figures do not fully reflect China's diesel imports since they also include transit barrels shipped to tax-bonded storage, which may not be destined for the Chinese market.

"Demand in China is not good at all, so it doesn't look like state-owned companies will be importing much this year," said a source at a company that imports diesel into China.

China earlier this month raised retail prices of diesel by 6.5 percent, further squeezing domestic demand, traders said.

FUEL OIL DEMAND DOWN

Lower Chinese demand is already being felt in the Asian fuel market with diesel margins at a one-week low this week, traders said.

Pressure on margins could, however, be partly offset in the fourth quarter as demand from other parts of Asia such as Vietnam picks up post-monsoon with more industrial activity and as heating oil demand rises from Europe.

Lower Chinese demand may also help ease pressure on diesel prices in the West, where the profit margin over crude has risen 30 percent in the past three months to $19.50 a barrel.

Demand for straight-run fuel oil, used as feedstock for China's independent or "teapot refineries", has also slowed, in a further sign that diesel demand has declined, traders said.

The main output for Chinese refineries is usually diesel. It is also the same for teapot refineries, and a lower appetite for fuel oil indicates a decline in demand for diesel, particularly for use in power generators.

A Singapore-based fuel oil trader said he had seen more shipments of fuel oil going into China. "These were fixed earlier when demand prospects were good but the pick up rate from teapot refiners is not great," he said.

October purchases of the feedstock, currently at around 1 million tonnes, will drop from September's 1.8-2 million tonnes, according to estimates by two traders who supply to China.

CHINA EXPORTS NOW NORMAL

September and October are typically when diesel used in the Chinese agricultural sector picks up, said Liao Na, information director of energy consultancy C1 Energy.

While she expects gasoil supply within the country to turn tighter this month, with a drop in stocks, she does not envisage the shortage to be as high as in previous years.

"Due to slowing demand, the market will move to a balanced range and there will not be a critical shortage as in previous years," she said.

Asian gasoil margins held above $19 a barrel over Dubai crude this week, well above the $16 a barrel range in the same period last year, Reuters data showed. That may indicate China's diesel exports are supporting a market squeezed by a lack of supply due to refinery closures in Australia, Japan and the United States,

"Nowadays, China exporting diesel is not a big deal, it's becoming normal and the market is used to it," said a source at a North Asian refiner.

Russian oil

Russia Invests in Diesel as Putin’s Oil Boom Peaks

Russia is cementing its status as Europe’s foremost diesel supplier as President Vladimir Putin seeks to shore up economic growth with record investment in the refining industry.

Bloomberg,

22 August, 2012

The nation will boost exports of premium, low-sulfur diesel by more than 50 percent next year, according to Facts Global Energy Inc., a Singapore-based researcher. Profits for European refiners may drop because of the increase in Russian shipments, JBC Energy GmbH said.

Russia is improving fuels quality to safeguard its Western export market and take advantage of crude output that’s risen to a post-Soviet record. As the government tries to allay a slowing pace of economic expansion, investment in refining will rise to 340 billion rubles ($11 billion) next year, up 93 percent on 2012, according to the nation’s energy ministry.

“There’s pent-up potential in the system and when the Russians switch it on, it will be a big threat to European refiners’ margins,” Gemma Parker, an analyst at Facts Global Energy in London, said by phone.

Putin, who began his first of three terms as president in 2000, has invested in infrastructure to guarantee access to European consumers without relying on neighboring countries for transit. Projects include a diesel pipeline to the Baltic Sea port of Primorsk that opened in 2008, handling shipments from the country’s biggest refineries including TNK-BP’s Ryazan facility and OAO Lukoil’s Nizhny Novgorod plant.

Baltic Pipeline

Rising production will increase flows through that link, known as Sever, to its 175,000 barrel-a-day capacity by the end of 2012, compared with about 100,000 last year, according to JBC Energy, a Vienna-based researcher. The Primorsk pipeline carries Euro-5 standard fuel, the strictest fuels category that contains no more than 10 parts per million of sulfur and fetches a higher price than other fuels.

OAO Transneft, Russia’s oil pipeline monopoly, may expand Sever to 245,000 barrels a day by 2015 and build a second 180,000 barrel-a-day line, dubbed Yug, to the Black Sea port of Novorossiysk by 2017, according to a June corporate magazine.

Russia’s crude output rose to a post-Soviet peak of 10.35 million barrels a day last year, Energy Ministry data show, as it vies with Saudi Arabia to be the world’s biggest producer. Russia’s economy is forecast to grow by 3.7 percent next year, the slowest rate since 2009, data compiled by Bloomberg show.

Russia produced 6.11 million tons of diesel in July, the most in 11 months, according to data e-mailed by the Energy Ministry’s CDU-TEK unit today.

Diesel for Europe

While Europe relies on imports to meet some of its diesel needs, the increased Russian supply coincides with stagnating demand in the region as economic growth sputters. European consumption of diesel and gasoil averaged 5.87 million barrels a day in the first five months of the year, the least since 2002, according to the International Energy Agency in Paris.

“By 2014 or 2015, Russian modernization will have a significant impact on European refining as the Russians seek to keep the premium for themselves,” Arsenije Dusanic, an analyst at JBC, said by phone on Aug. 16, referring to premium prices for higher-quality fuels.

Diesel in northwest Europe advanced 1 percent today to $1,018.50 a metric ton, according to data compiled by Bloomberg.

Low-sulfur diesel exports from Russia will rise to about 290,000 barrels a day next year, surpassing last month’s record of 190,000 barrels a day, according to an Aug. 3 report by Facts Global Energy.

Europe may experience a “glut” of diesel by 2016 as imports from Russia rise, Karen Kostanian, a Moscow-based analyst at Bank of America Corp., wrote in an Aug. 9 report.

European Plants Close

At least six European refineries have closed since the start of last year because of overcapacity, including ConocoPhillips’ Wilhelmshaven plant in Germany and a U.K. site run by Petroplus Holdings AG, data compiled by Bloomberg show.

Russia’s refineries suffered from years of underinvestment after the break-up of the Soviet Union, according to Dusanic, leaving them less flexible than competitors in the types of fuel they produce. The neglect resulted in low yields of premium diesel and gasoline compared with fuel oil, a more-polluting product for shipping and power generation that’s used mainly in Asia and the Middle East.

Fuel oil accounted for 38 percent of the Russia’s output last year, according to Energy Ministry data. That compares with less than 10 percent in Germany.

A government call for lower gasoline prices last year resulted in reduced supply, which led some retail stations to run out of fuel. Those shortages were followed by a July 8, 2011 warning from Putin, who was then prime minister, that companies might be fined if they put off upgrades, prompting refiners to accelerate work.

India's energy shortage

India sucks in diesel as poor monsoon triggers massive power shortage

Platts,

2 August, 2012

A day after two massive power blackouts crippled northern India, state-owned refiner and largest marketer Indian Oil Corp. sought its fourth parcel of gasoil for this summer -- it needs 60,000 mt (507,000 barrels) of gasoil for August 19-21 delivery (see story at 0411 GMT).

And market players expect there could be more such purchases, as India faces the threat of drought after a strikingly poor monsoon.

During the widespread power blackouts on Monday and Tuesday this week, which affected more than 600 million people, a substantial amount of back-up electricity was produced using diesel-powered generators, Barclays said in a market report Wednesday.

"This has ranged from residential and commercial users ramping up usage of small diesel generators to ad hoc support for infrastructure providers using medium diesel generators," the report said.

"Large diesel generator usage among industries has also ramped up in order to maintain activity."

Inadequate monsoon rainfall has dealt a double whammy to the country's power supply and demand balance: hydroelectric generation has dropped, while power demand for irrigation from farmers trying to save their drying crops by using underground water has spiked.

Barclays expects India's gasoil demand to rise by more than 250,000 b/d in July -- after already having registered a year-on-year increase of 151,000 b/d or 9.4% this season.

Before the latest tender, IOC had already bought 180,000 mt of 320 ppm sulfur gasoil for June and July delivery, as the seasonal spike in demand coincided with maintenance shutdowns at some of its refineries.

IOC is not considered a regular buyer of gasoil, only sporadically picking up cargoes from the spot market to balance its inventory levels, according to sources.

JUNE GASOIL SALES RISE 13.8% ON YEAR

Though official data showed a slight month-on-month dip in June gasoil sales in India, which came in at 6.08 million mt (1.51 million b/d) versus 6.38 million mt in May according to the Petroleum Planning and Analysis Cell under the oil ministry, the figure was still 13.8% higher than a year ago.

Average rainfall across the country between June 1 and July 31 was 19% below the long-term average, according to the latest report by the India Meteorological Department Wednesday.

"A drier monsoon shower has meant farmers have had to rely on diesel-powered pumps to draw water from wells," Barclays said in its report.

"As a measure to ease the farmers' burden, the agriculture minister has announced that the cost of diesel would be halved in areas where rains have been 50% below average up to 15 July, allowing diesel sales to likely rise even further over July," it added.

Meanwhile, Indian refiners ratcheted up gasoil production in June in a bid to close the gap with rising demand for the fuel, PPAC data showed.

Total gasoil production by the country's refiners in June, at 7.67 million mt (1.91 mil b/d), was the highest ever on record, and surpassed the previous peak of around 7.5 million mt in March this year, according to preliminary data from PPAC.

The gap between gasoil production and domestic sales is explained by exports, the majority of which are from the country's two private refiners, Reliance Industries Limited and Essar Oil.

Gasoil exports by RIL and Essar dropped to around 1.73 million mt in June from around 2.28 million mt in May, according to data compiled by Platts from shipping fixtures -- a drop of 24%. India's state-owned marketers probably sourced more gasoil from the private refiners, reducing availability for export, market sources noted.

AUTOMOTIVE SECTOR ALSO VIES FOR DIESEL

The Barclays report also highlighted rising diesel demand from the automotive sector owing to the heavy subsidies the fuel enjoys compared with gasoline, which is sold at international market prices.

"While the subsidies are targeted to the more vulnerable parts of the agricultural sector, the price differentials mean that diesel has been the favored fuel for both automobile and industrial sector use, with diesel gradually taking market share from fuel oil and gasoline," the report said.

Diesel currently retails at Rupees 41.29/liter ($0.74/liter) in the capital New Delhi, substantially lower than gasoline, which sells for Rupees 68.46/liter.

"While a cut in diesel subsidies has been discussed given the impact on the public purse, the government has put it on hold for now, given the current electricity situation," Barclays said.

"Also, it is likely that given the sensitivity of diesel prices to the most vulnerable sections of India's population [agriculture], even if an adjustment of the diesel price upwards is considered, it could potentially be passed through using a one-off charge on buying diesel cars rather than an outright increase in diesel prices," it added.

Goods transport by trucks accounts for the single biggest use of diesel in India, with a 37% share, followed by passenger cars (15%), buses (12%), agriculture (12%), industry (10%), power generators (8%) and railways (6%), according to the last available PPAC breakdown, which dates back to fiscal 2008-09. The exact current share of passenger cars in the diesel demand pool remains contentious and confusing, with a much smaller number -- 0.6% -- mentioned in a report by the Planning Commission earlier this year vigorously challenged and debated.

Chinese demand for diesel

Everyone wants diesel at the moment - Seemorerocks

-- It will be major shortages in diesel fuel that will make it no longer possible to pretend. -- MCR

Diesel demand growth highest among oil products in China

Commodity Online,

30 March, 2012

BEIJING (Commodity Online): The growth rate for diesel in China has been the highest among the main oil products, as high as 7.9% per year. China’s diesel consumption in 2011 was 3.5 mb/d, more than 70% of which came from the transportation industry.

On the structural side, diesel fuel’s tight leverage to economic activity has been the primary reason for the extraordinary path taken by Chinese diesel demand. Significant government investment in the road system and a mandate in 2000 that all trucks should run on diesel by 2010 have also facilitated the rapid expansion of domestic diesel demand.

Beyond road transport, diesel also remains the primary fuel employed in China’s rail system and marine transport. The other factor supporting Chinese diesel burn is less structural but a hugely important swing at the margin, as it manifests through severe domestic shortages for diesel.

Administratively driven power cutoffs, strong harvest season, seasonal refinery maintenance, low hydro-power reservoir water levels and the Chinese government’s control of product prices negatively impacting oil refinery margins have all played a part in varying degrees in higher demand for diesel in the country.

Despite the increasing challenge posed by the lack of infrastructure, the rising level of agricultural and railway electrification, as well as energy saving vehicles (including CNG trucks), diesel demand should be able to maintain a growth rate of around 7.5% per year.