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U.S. crude prices appear on track for the third consecutive weekly rise as investors looked past the Energy Information Administration’s (“EIA”) report showing a surprise build in stockpiles and turned their attention to the strained market fundamentals.

On the New York Mercantile Exchange, WTI crude futures increased 1.8% to settle at $110.24 a barrel yesterday after climbing $6.47 on Wednesday.

Before going into the other factors, let’s dig deep into the EIA’s Weekly Petroleum Status Report for the week ending May 6.

Analyzing the Latest EIA Report

Crude Oil: The federal government’s EIA report revealed that crude inventories rose 8.5 million barrels compared to analyst expectations of a 300,000-barrel decrease. A sharp drop in exports primarily accounted for the unexpected stockpile build with the world’s biggest oil consumer even as refinery crude runs rose and production declined. Total domestic stocks now stand at 424.2 million barrels — 12.5% less than the year-ago figure and 13% lower than the five-year average.

On a somewhat bullish note, the latest report showed that supplies at the Cushing terminal (the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange) decreased 587,000 barrels to 25.9 million barrels.

Meanwhile, the crude supply cover was up from 26.7 days in the previous week to 27.1 days. In the year-ago period, the supply cover was 32.3 days.

Let’s turn to the products now.

Gasoline: Gasoline supplies decreased for the sixth week in succession. The 3.6-million-barrel drop was attributable to strong demand and exports, as well as lower imports. Analysts had forecast that gasoline inventories would fall by 1.7 million barrels. At 225 million barrels, the current stock of the most widely used petroleum product is 4.7% less than the year-earlier level and 5% below the five-year average range.

Distillate: Distillate fuel supplies (including diesel and heating oil) logged its fifth weekly fall in a row. The 913,000-barrel decline primarily reflected higher exports. Current inventories — at 104 million barrels — are 22.6% below the year-ago level and 23% lower than the five-year average.

Refinery Rates: Refinery utilization, at 90%, rose 1.6% from the prior week.

Final Words

Oil prices ended above $110 yesterday, primarily reflecting concerns about supplies from Russia, which is one of the world’s largest producers of the commodity. Raising the prospect of a dramatic fall in crude flows, speculation has it that the European Union could shortly follow the United States in blocking imports of Russian energy to protest Moscow’s invasion of Ukraine.

While there are jitters over soaring inflation, a strong greenback, stuttering economic growth and the coronavirus lockdowns in China (the world’s second-biggest oil consumer), these have been more than offset by the pending European embargo that could lead to an acute supply squeeze.

As it is, the Oil/Energy market continues to enjoy support from geopolitical uncertainty amid Russia’s military operations in Ukraine. In March, crude prices surged to multi-year highs of $130-a-barrel.

Even the fundamentals point to a tightening of the market. Per the latest government report discussed above, U.S. commercial stockpiles have been down more than 12% in a year, prompted by the demand spike owing to the reopening of economies and a rebound in activity.

As a matter of fact, the Energy Select Sector SPDR — an assortment of the largest U.S. companies thronging the space — has risen 40.7% year to date against a 17.5% loss for the broader S&P 500 benchmark.

Consequently, the top three gainers of the S&P 500 this year are all energy-related names: Occidental Petroleum OXY, Valero Energy VLO and Coterra Energy CTRA.

Occidental Petroleum: OXY, carrying a Zacks Rank of #2 (Buy), is the top-performing S&P 500 stock in 2022 with a gain of 104.3%. Occidental Petroleum’s expected EPS growth rate for three to five years is currently 32.8%, which compares favorably with the industry’s growth rate of 22.1%.

OXY has a projected earnings growth rate of 264.3% for this year. The Zacks Consensus Estimate for Occidental Petroleum’s 2022 earnings has been revised 88.4% upward over the past 60 days.

Valero Energy: This Zacks Rank #2 (Buy) stock has jumped 60.3% year to date. VLO beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 84.3%.

Valero Energy is valued at around $49.1 billion. VLO has a projected earnings growth rate of 353.7% for this year.

Corterra Energy: This Zacks Rank #1 (Strong Buy) stock was the third-best performer in the S&P 500 Index, with shares appreciating 57.9% so far in 2022. CTRA has a projected earnings growth rate of 81.8% for this year.

Yahoo! Finance by Nilanjan Choudhury, May 23, 2022

The Australian upstream industry meet this week for its key annual gathering, with discussions dominated by attempts to remain relevant in a world aiming to undergo an energy transition to achieve net zero greenhouse gas (GHG) emissions by 2050.

Delegates spent more time than usual at the Australian Petroleum Production and Exploration Association (Appea) 2022 conference in Brisbane, Queensland discussing topics such as producing hydrogen from gas and adding carbon capture, utilisation and storage (CCUS) capacity to future oil, gas and hydrogen projects, while still largely focused on discussing new oil and gas projects.

The industry body that represents Australian oil and gas producers has appointed a new chief executive Samantha McCulloch who heads the IEA’s CCUS unit, signalling Australia’s upstream sector is going to have to be more serious about reducing its GHG emissions.

“Samantha is an internationally acclaimed expert in carbon capture, utilisation and storage, a technology that is critical to the world achieve its climate goals,” Appea board chairman Ian Davies said in his closing speech of the Appea conference on 19 May.

Future government policy will be dictated by the outcome of Australia’s federal election on 21 May. The main opposition Labor party has a deeper GHG emissions cut of 43pc by 2030 from 2005 levels compared with the current Liberal-National coalition government’s target of 26-28pc over the same period.

Deeper emissions cuts will affect the energy sector, which accounts for more than 75pc of Australia’s total emissions through burning coal and gas for producing electricity, consuming oil products in transportation, fugitive emissions associated with coal and gas extraction and the energy used in the manufacturing process, as well as the heating of homes and businesses.

“Meeting Australia’s and the world’s demand for energy, affordably and reliably must occur at the same time as we invest in the huge task of decarbonising our energy system to net zero emissions by 2050,” Davies said.

The role the oil and gas industry plays in 2022 will look different by 2050, he said. As the sector will play a much greater firming role in the electricity grid to back up renewable energy, provide feedstock to hydrogen producers and deliver low-emissions energy with CCUS.

Another obstacle to the sector is access to finance, as banks and other lenders come under pressure to reduce their financing of fossil fuel production to meet GHG emissions targets and environmental, social and corporate governance (ESG) mandates.

Upstream firms are facing tighter lending requirements from banks because of ESG, MST Marquee senior research analyst Mark Samter told Appea, citing the 80,000 b/d Pikka oil project in Alaska that is operated by Australian independent Santos. Banks no longer want to be associated with lending to an oil project located in an environmentally-sensitive area.

“Ten years ago Santos would have had no problem getting finance for a project like Pikka, but that is not the case today,” Samter said.

Argus by Kevin Morrison, 20 May, 2022

B.C.’s clean LNG touted as important decarbonization tool, and economic tool in reconciliation with First Nations.

The first Canada Gas and LNG conference to take place in person in three years kicked off today at the Vancouver Convention Centre with a low-key demonstration from environmentalists and a recap of LNG projects underway or proposed in Canada, including two in which First Nations would be owners or major partners.

The projects range from a small operator – Cryopeak – that supplies liquefied natural gas (LNG) to mines and remote communities, to a new project in Newfoundland, LNG NL, that proposes to source natural gas from the Jeanne d’Arc Basin near the Hibernia oil fields, and pipeline it to Grassy Point Newfoundland for liquefaction and export it to Europe.

The project could also see a second pipeline built to return CO2 captured at Grassy Point back to the Jeanne d’Arc Basin for deep sea sequestration.

The Canadian LNG industry has taken a back seat to the U.S., which has dramatically eclipsed Canada as a major LNG producer. But there was some sense Tuesday at the three-day conference that the Canadian natural gas and LNG sectors could be having a moment, thanks to an energy crisis in Europe, exacerbated by war, which has underscored the importance of natural gas in energy security and the energy transition.

Anyone looking at gasoline prices today may be suddenly thinking about energy and energy security, said Bryan Cox, president of the Canadian LNG Alliance.

“We’re starting to feel that, and we’re starting to think about energy in a whole different way,” Cox said.

In a press release, Stand, Dogwood and the Wilderness Committee accused Bruce Ralston, minister of Energy, Mines and Low Carbon Innovation, of “peddling myths about clean LNG.”

“In reality, pumping more super-polluting methane gas out of the ground will prevent B.C. from meeting its climate targets and condemn all of us to more deadly extreme weather,” Dogwood campaigner Alexandra Woodsworth said in a press release.

But independent studies, including from St. Xavier University, have confirmed that the natural gas produced in Northeast B.C. has some of the lowest GHG intensities anywhere, partly due to low methane leakage, and a number of LNG projects in B.C. propose to use electric drive, which would make it, again, some of the lowest intensity LNG produced anywhere.

“Right now, today, people are building new coal-fired power plants in Asia,” said Jason Klein, the new CEO of LNG Canada, which is building a $17-billion plant in Kitimat.

“This industry has the opportunity to displace that coal with natural gas…and we have some of the cleanest LNG in the world. LNG Canada, when it’s in operation, will be the lowest GHG intensity of any currently operating LNG plants. It’s 35% lower greenhouse gas intensity of any facility operating today, and 60% lower than the global weighted average.”

The Intergovernmental Panel on Climate Change says switching from coal power to natural gas could reduce GHGs emission by 50%, provided fugitive methane emissions are managed. This has proven true in the U.S., which has achieved some of the most dramatic decreases in GHGs from the power sector in the western world, thanks largely to fuel switching from coal to gas.

“With our CleanBC Roadmap to 2030, we continue to demonstrate we are one of, if not the most, responsible natural gas producing jurisdiction in the world,” said Ralston. “We are bringing forward stronger targets to reduce methane emissions from the oil and gas sector by 75% by 2030, and nearly eliminate all industrial methane emissions by 2035.”

B.C.’s natural gas and LNG not only would be some of the cleanest in the world, it also could be the springboard for the next generation of even cleaner fuel – hydrogen. Hydrogen can be produced from natural gas, and some of the pipeline infrastructure and export terminals could eventually be used to transport hydrogen.

“Hydrogen alone has the potential to reduce the province’s emissions by 30% of the 2050 Clean BC target,” Ralston said.

The biggest LNG project in B.C. that’s under construction is the $18-billion LNG Canada project. Next in line is the smaller $1.6-billion Woodfibre LNG project in Squamish, which just recently got the notice to proceed.

FortisBC is working on an expansion of its Tilbury LNG plant, and two First Nations are partnered with oil and gas industry players on two new projects – the Haisla’s Cedar LNG and the Nisga’a-backed Ksi Lisims LNG project.

“Were going to be the largest First Nations investment in Canadian history,” Haisla Chief Crystal Smith said of the $3-billion Cedar LNG project, which is currently in an environmental review process.

Paul Sullivan, senior vice president of Global LNG for Worley, said a 40-year-old natural gas and LNG business model in Europe has been “shredded” overnight by Russia’s invasion of Ukraine. He said European leaders are now deeply concerned about the cost of energy, and now asking themselves if they can afford to dispense with coal.

He said Canada is blessed with a “massive amount of natural resources, including natural gas.” The question for Canada is whether it is willing to share those resources with countries trying to secure supplies of low carbon energy.

The first LNG facility built in B.C. has been around for quite some time – the FortisBC Tilbury Island plant, which originally produced LNG as a backup for pipeline gas. It has expanded its production capacity to start supplying LNG as a transportation fuel for both trucking and the marine sector. Some LNG produced there has been shipped to Asia in ISO containers.

Because it is largely powered with clean BC Hydro power, the LNG it produces is 30% less carbon intensive than LNG produced elsewhere in the world, said FortisBC CEO Roger Dall’Antonia.

“That’s a massive advantage, when you think about a premium low-carbon LNG product, Canada’s leading the way on that front,” he said.

FortisBC plans to expand its Tilbury plant, with an additional storage tank, additional liquefaction and a new marine terminal for marine LNG bunkering.

FortisBC has also been investing in renewable natural gas (RNG), which when blended with natural gas lowers its emissions intensity even more. Dall’Antonia said Tilbury LNG could reduce GHGs from shipping in B.C. by 27%, compared to other marine fuels.

In addition to providing a possible new source of low carbon energy to Asia and Europe, the nascent LNG sector in B.C. is also proving an important economic tool in reconciliation with First Nations.

Despite what some news headlines might suggest, the fact is a number of LNG projects are wholeheartedly supported by First Nations. Sixteen along the Coastal GasLink pipeline corridor have signed option agreements to take up to a 10% equity stake in the pipeline, and the Haisla First Nation has leveraged its partnerships with the LNG Canada and Coastal GasLink to proposed their own LNG project – Cedar LNG.

The Nisga’a First Nation are also partnered up with Alberta oil and gas producers on the Ksi Lisims LNG project.

Vancouver Is Awesome by Nelson Bennett, May 13, 2022

A project is getting underway to explore the feasibility of converting product tankers to shore-based power in ports. As chemical tankers are required to comply with higher safety standards than many other types of vessels, the project is viewed as significant in ports’ efforts to expand the use of cold-ironing as the ports work to meet new environmental regulations. 

While other segments of the shipping industry have been exploring the use of shore power, so far its application has been applied mostly to cruise ships and ferries as well as some general cargo ships. Recently a few ports have begun to study the expansion, for example in Sweden and the Port of Gothenburg which supported the first tanker to use battery power for in-port navigation and shore power while on dock.

The latest program exploring shore power for chemical tankers is launching at the Port of Rotterdam. Stolt Tankers signed a memorandum of understanding with the Port of Rotterdam Authority and Vopak Botlek to conduct a six-month feasibility study for the use of shore-based power for chemical tankers calling at Vopak’s Botlek terminal.

As chemical tankers are required to comply with higher safety standards than many other types of vessels, Stolt believes the results of the study will be important for the whole chemical tanker industry.

“We have identified several ships with the potential to take part in the trial, which if successful will also present opportunities for our ships calling at ports to plug into power from renewable sources,” said Lucas Vos, President of Stolt Tankers. The goal is while in port to have ships be able to switch off their diesel generators and connect to onshore power, potentially from renewable sources.

The project poses several significant technical hurdles, which make it unique, according to the partners. The feasibility study aims to discover effective solutions to these challenges that can be used to form the basis of an agreed international standard.

The installation of shore-based power for chemical tankers will only be a viable solution if the industry can agree on a single standard says Stolt. Shipowners will need confirmation that their ships can safely and reliably connect to shore power in multiple ports before investing in the necessary ship adjustments, which is why it is essential to design a standardized industry solution in partnership with other leading organizations.

“The availability of shore-based power for our ships has the potential to greatly reduce the use of onboard diesel generators while ships are in port, resulting in a significant reduction of greenhouse gas emissions,” said Vos. “This supports Stolt Tankers’ ambition to reduce its GHG emissions intensity by at least 50 percent by 2030 compared to 2008 levels.

Late in 2021, Stolt Tankers highlighted that it had already reduced its fuel consumption and the resulting CO2 emissions by six percent compared to 2020. Stolt achieved the savings in bunker consumption by improving operational and technical efficiencies and fleet optimization. Speed and trim were optimized according to weather conditions and enhanced maintenance programs, including additional hull and propeller cleaning, which also reduced fuel use. In addition, on several ships, Stolt also installed advanced power-saving propeller fins.

Industry providers of shore power equipment reported in the past few years a resurgence in demand as more ports look to install the connections required to provide shore power. In some ports, for example PortMiami, the implementation of shore power has been slowed by the lack of infrastructure to link the port to the power grid and the power generation capabilities. By

By The Maritime Executive, May 9, 2022

The Port of Zhoushan on Saturday (7 May) said it has digitalised information regarding commercial oil storage capacity at the port.

The development was a result of a joint project between the  Port of Zhoushan, the Zhoushan Port Association, and the Zhejiang International Oil and Gas Trading Center.

It covers commercial storage capacity currently available for lease by the 10 major oil storage companies in the city, including six main storage types such as crude oil and low-sulphur fuel oil. 

The information has been released on the official website of Zhejiang International Oil and Gas Trading Center.

This innovation follows the launch of the comprehensive price information for the storage of oil products at Zhoushan facilities, making it convenient for cargo owners to grasp the current available storage capacity information which improves operational efficiency. 

This will also further enhance the competitiveness of Zhoushan’s bunker fuel storage industry, states the port.

By Manifold Times, May 9, 2022

Independently-held oil product inventories in the Amsterdam-Rotterdam-Antwerp (ARA) area rose on the week to reach six-week highs during the week to 4 May, according to the latest data from consultancy Insights Global.

Gasoil stocks were up and reach their highest since the week to 31 March, but remained well below the five-year average for this time of year. Tankers carrying gasoil arrived in ARA from Russia, the UAE and the US, and departed for Brazil, France, the UK and west Africa.

The trade in spot cargoes within the northwest European market was limited and barge flows to destinations along the river Rhine remained steady at a low level.

The trade in finished-grade gasoline and components was more brisk, amid keen demand for European gasoline from across the Atlantic. Tankers departed the ARA area for the US, Mexico, Canada, Puerto Rico, Bulgaria and west Africa. Inventories rose on the week to reach five week highs.

Naphtha stocks were down by 3.5pc on the week amid keen demand particularly from gasoline blenders producing export cargoes. There were no outgoing cargoes, as the eastward arbitrage to Asia-Pacific was firmly closed throughout the week. Tankers carrying naphtha arrived from Algeria, Finland, Norway, Russia, Spain and the US.

Jet fuel stocks fell on the week to eight-week lows, as air travel in Europe continues to pick up. Tankers carrying jet fuel arrived from Malaysia and departed for Norway and the UK.

Fuel oil stocks rose to their highest since the week to 10 February, supported by the arrival of cargoes from Algeria, Bulgaria, Georgia and Russia with departures for west Africa.

Reporter: Thomas Warner