Another naval incident in the South China Sea has the U.S. claiming freedom of navigation and China claiming provocation. Military conflict remains unlikely, but relations between China and the U.S. are fraying beyond just the trade war. The continued economic clash with Washington coupled with a Chinese economic slowdown, policy uncertainty in Washington, and the possibility of provocative actions by Taiwan or Japan could precipitate more serious conflict.
The summit between President Trump and the Supreme Leader of North Korea, Kim Jong-un, has come and gone in a flurry of photographs and a very short and very vague agreed statement. The meeting was largely symbolic and strict U.N. sanctions remain in place, but reduced tensions could eventually create an environment for stronger trade links between North Korea and China, Russia, and South Korea
High imports in the last three months have led to high level of stocks at Shandong ports and refineries that were previously in maintenance. ESAI Energy estimates that China’s industry stocks will reduce from 350 million barrels at the end of May to around 330 million barrels by August. Imports would be further tempered to perhaps around 9 million b/d.
Iranian President Rouhani recently met with President Xi at the SCO Summit. This meeting comes shortly after the withdrawal of the U.S. from the JCPOA, and the threat of U.S. sanctions on companies doing business with Iran. It is tempting to assume that China will strengthen ties with Iran, expanding oil trade with the Islamic Republic. However, China’s interaction with Iran is likely to be more symbolic than substantive.
ESAI Energy’s Amrit Naresh is featured in the May 2018 Fuel Oil and Feedstock Trader publication discussing Russia’s Refineries Invest to Cut Fuel Oil, which was based on a presentation given at the Platts Middle Distillate Conference in Antwerp in February 2018.
In July 2011, Russian President Vladimir Putin called the heads of Russia’s leading oil companies to a meeting near St. Petersburg and gave them a choice: increase the secondary processing capacity at your refineries or go bust. Putin had long wanted to improve the value-adding capabilities of Russian industry and see Russia export fewer raw materials and more finished goods, less dirty and more clean fuel.
When it’s too high, consumers start freaking out and using less. When it’s too low, oil companies cut back operations and lay off thousands of workers. Opinions on where the sweet spot currently lies differ widely, but analysts and strategists say it’s probably somewhere between $60 and $70 per barrel.
China’s stockpiling in government depots will contribute 55,000 b/d to imports in 2018, and 140,000 b/d in 2019, when the delayed Zhanjiang SPR depot starts. Hengli and Zhejiang Petrochemical will process Middle East crudes, driving up imports towards the end of 2018. Meanwhile, ESAI Energy expects at least a third round of export quotas in the second half of the year due to capacity additions.
Following President Trump’s decision to withdraw the United States from the JCPOA, the response of Iran, Europe, Russia and China over the next several weeks will be closely watched. The U.S. and Europe are likely to continue discussions regarding joint action on Iran and the imposition of secondary sanctions on European companies. Whether China, Russia and, one day, Iran can be brought back to the negotiating table will depend on statements, actions and likely exogenous events over the wind down period.
China’s reforming capacity will grow by 400 000 bpd in 2018, displacing more than 100 000 bpd of the country’s mixed aromatics imports, according to ESAI Energy’s newly published ‘China Gasoline Production and Blending to 2020 Watch.’ After 2019, additional investment will fully wean China’s gasoline producers from these imports.
Hellenic Shipping News Worldwide:
“LPG will be a fast-moving market for the next couple of years,” comments Andrew Reed, ESAI Energy’s Head of NGLs. “The LPG market is prone to imbalances, so one might expect the expansion of supply to lead to a glut that would hamper prices and U.S. exports. But China will soak up more and more LPG in 2019, keeping exporters happy.”
BOSTON, MA, May 7, 2018 Reforming Investment in China will Displace Mixed Aromatics Imports China’s reforming capacity will grow by 400,000 b/d in 2018, displacing more than 100,000 b/d of the country’s mixed aromatics imports, according to ESAI Energy’s newly published China Gasoline Production and Blending to 2020 Watch, a detailed gasoline blending analysis. After…
As a response to increasingly strict gasoline standards, China’s reforming capacity grew 180,000 b/d in 2017. This year, the growth will be 400,000 b/d to reach a total capacity of 2 million b/d. ESAI Energy expects that the surge in reforming capacity will displace more than 100,000 b/d of mixed aromatics imports.
The autonomous Kurdish region of Iraq voted for independence last week in a resounding – but non-binding – referendum. Baghdad has dismissed the vote. Turkey and Iran, with large Kurdish populations themselves, have threatened a blockade. Turkey’s threat to shut the Kirkuk-Ceyhan crude oil pipeline puts Kurdistan’s nearly 600,000 b/d of crude exports at risk. Ongoing tensions have already encouraged a temporary run-up in Brent prices, and will keep a small geopolitical premium on the price of crude.
Even as President Trump continues to oppose the Nuclear deal with Iran, we expect him to certify the Nuclear Accord on October 15th (i.e., keep it as is) while increasing pressure on Iran in other ways. But certification comes up every 90 days, so this will be an ongoing issue.
Current tensions between North Korea and the international community, but especially the U.S., South Korea and China are bound to continue and threaten military conflict that could escalate to a previously unthinkable outcome. While oil and gas trade with North Korea is quite small, any threat of military action in the region will impact shipping and lift the price of waterborne goods.