Energy Argus Petroleum Coke - Argus Media

Copyright © 2017 Argus Media group

Energy Argus Petroleum Coke

Issue 17-49 | Wednesday 6 December 2017

Market overview key prices

petroleum coke spot market $/t

HGi price ± Four-week average

Atlantic basinfob US Gulf coast 4.5% sulphur 40 81.50 -0.50 81.88fob US Gulf coast 6.5% sulphur 40 61.50 -3.50 67.13fob Venezuela 4.5% sulphur 70 81.50 -0.50 81.88cfr Turkey 4.5% sulphur 70 102.50 0.00 102.38Sulphur adjustmentUS Gulf coast, per 0.1% 1.00 +0.15 0.74Pacific basinfob US west coast <2.0% sulphur 45 121.00 -4.00 126.25fob US west coast 3.0% sulphur 45 99.00 -7.00 105.25fob US west coast 4.5% sulphur 45 88.00 -9.00 95.75cfr China <2.0% sulphur 45 147.00 -4.00 152.50cfr China 3.0% sulphur 45 131.00 -4.00 135.75cfr China 6.5% sulphur 40 95.00 -4.00 99.75cfr India 6.5% sulphur 40 92.50 -4.50 98.00cfr WC India 8.5% sulphur 70 87.50 -3.50 93.50

petroleum coke calculated prices $/t

HGi price ± Four-week average

Atlantic basindel ARA 4.5% sulphur 40 101.50 -0.25 101.31del ARA 6.5% sulphur 40 81.50 -3.25 86.56del Brazil 4.5% sulphur 40 99.75 -0.25 99.63del Brazil 6.5% sulphur 40 79.75 -3.25 84.88del Turkey 6.5% sulphur 40 82.75 -3.25 87.63Pacific basindel Japan 3.0% sulphur 45 117.00 -6.75 122.94del Japan 4.5% sulphur 45 106.00 -8.75 113.44del China 4.5% sulphur 40 119.50 -0.25 118.88del India 4.5% sulphur 40 120.25 0.00 119.50Prices calculated by adding relevant fob petroleum coke price to freight rate.

coke freight rates $/t

6 Dec ± Four-week average

SupramaxUSGC to ARA 20.00 +0.25 19.44Venezuela to ARA 18.00 +0.75 17.06USGC to Turkey 21.25 +0.25 20.50USGC to Brazil 18.25 +0.25 17.75USGC to China 38.00 +0.25 37.00USGC to EC India 38.75 +0.50 37.63EC Saudi Arabia to WC India 10.25 -0.75 10.31PanamaxUSWC to Japan 18.00 +0.25 17.69

Fuel coke: prices drop again on india worriesHigh-sulphur fuel-grade petroleum coke prices dipped again this week as the Indian central government said it will look into limiting coke imports into the country.

Market participants had hoped more regulatory clarity would emerge at a 4 December Supreme Court hearing, but instead the court scheduled two more hearings for next week on the coke ban and emissions limits issues.

There was some potentially good news for sellers: the government pushed the case that cement makers should be al-lowed to use petroleum coke because sulphur is captured. The court is expected to consider this further on 11 December.

The country’s oil minister also made comments over the weekend suggesting that the central government will look to limit coke imports. But a sulphur cap or an import tax are more likely mechanisms than an outright ban on coke imports.

Concerns that other Indian states, in addition to Uttar Pradesh, Haryana and Rajasthan, could either seek to ban or impose tighter regulations on coke’s use is encouraging sellers to try and clear cargoes.

Offers for December and January-loading supramax cargoes of US 6.5pc sulphur coke were reported in the low $90s/t on a cfr India basis, down sharply from the high $90s/t a week ago.

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cfr China 6.5% cfr India 8.5% cfr India 6.5%

6.5% sulphur coke: cfr india vs china $/t

Copyright © 2017 Argus Media group Page 2 of 16

Issue 17-49 | Wednesday 6 December 2017Energy Argus Petroleum Coke

Monthly indexes: noveMber

Fuel-grade coke calendar month indexes $/t

hGi low high Avg

fob US Gulf coast

4.5% sulphur 40 82.00 83.00 82.20

6.5% sulphur 40 65.00 73.00 70.50

fob Venezuela

4.5% sulphur 70 82.00 83.00 82.20

cfr Turkey

4.5% sulphur 70 102.00 103.00 102.60

fob US west coast

<2.0% sulphur 45 122.00 129.50 126.10

3.0% sulphur 45 101.00 110.00 104.80

4.5% sulphur 45 94.00 99.00 96.60

cfr India

6.5% sulphur 40 97.00 106.00 101.80

8.5% sulphur, WC 70 91.00 103.00 97.90

cfr China

<2.0% sulphur 45 151.00 157.00 154.40

3.0% sulphur 45 135.00 139.00 137.00

6.5% sulphur 40 99.00 105.00 102.60

Calculated coke indexes $/t

hGi low high Avg

Delivered NWE-ARA

4.5% sulphur 40 100.75 101.75 101.25

6.5% sulphur 40 84.75 91.75 89.55

Delivered Brazil

4.5% sulphur 40 98.25 100.00 99.30

6.5% sulphur 40 83.00 89.75 87.60

Delivered Turkey

6.5% sulphur 40 86.00 92.25 90.45

Delivered India

4.5% sulphur 40 117.50 120.25 118.90

Delivered China

4.5% sulphur 40 117.00 119.75 118.40

Delivered Japan

3.0% sulphur 45 118.50 127.50 122.40

4.5% sulphur 45 111.50 116.50 114.20

Prices calculated by adding relevant fob petroleum coke price to freight rate.

Anode-grade coke monthly indexes: november $/t

low high Mid

cif green, 0.8% sulphur 370.00 420.00 395.00

cif green, 2% sulphur 225.00 305.00 265.00

cif green, 3% sulphur 160.00 190.00 175.00

fob calcined, 3% sulphur 400.00 450.00 425.00

Coke-to-coal calorific comparisons

Coal 4.5% coke 6.5% coke 8.5% coke

del ARA $/mnBtu 3.72 3.30 2.65 -

% of coal - 89.00 71.00 -

del India $/mnBtu 4.29 - 3.00 2.84

% of coal - - 70.00 66.00

del Turkey $/mnBtu 4.02 3.33 2.69 -

% of coal - 83.00 67.00 -

fob USGC $/mnBtu 2.48 2.65 2.00 -

% of coal - 107.00 81.00 -

But buying interest remains muted, with few transactions and bids heard in the market over the past week, although an 8.5pc sulphur cargo was heard to have been sold at $87/t on a cfr India basis.

The uncertainty and weak demand have prompted two of India’s largest private-sector coke producers, Reliance Indus-tries (RIL) and Essar Oil, to lower their prices for December.

RIL reduced its December price by around 455 rupees/t ($7.06/t) to Rs7,645/t/t before taxes and duties. Essar, which typically follows RIL's lead, reduced its price by the same amount to Rs7,635/t, market participants said.

By contrast, Indian state-owned refiner MRPL was said to have raised its December price, betting that possible curbs on imports would boost demand for domestically produced petro-leum coke in the south of the country.

Weak demand from Indian cement makers is also prompting domestic coke producers to look to alternative markets. RIL was heard to have sold three cargoes to overseas buyers this week at around $86-87/t fob, including to China.

Indian supply weighs on Chinese pricesThe increased supply from India was dragging high-sulphur coke prices lower in China this week.

An Indian refinery offered one 50,000t 6pc sulphur coke cargo for late December loading this week, with bids around

Coal-implied forward curves $/t

1Q18 2Q18 3Q18 4Q18 2018 2019 2020

fob USGC 4.5% petroleum coke81.50 80.67 80.08 80.50 80.92fob USGC 6.5% petroleum coke61.50 60.87 60.43 60.74 61.06del ARA 4.5% petroleum coke101.50 96.94 95.37 94.52 97.11 90.13 86.31del ARA 6.5% petroleum coke81.50 77.84 76.58 75.90 77.98 72.37 69.30cfr India 6.5% petroleum coke92.50 89.23 87.49 85.75 88.75 83.74 80.74



Anode coke: Prices climb further in NovemberUS Gulf anode-grade petroleum coke prices increased further in November, as strong calcined coke demand drove calciners to compete for green coke supply.

Buyers had hoped that low-sulphur green coke pricing might begin to level off on the expectation that a major US Gulf calciner’s appetite would finally be satiated after winning a few recent tenders.

But a tender for low-sulphur South American green coke supply early in November received a bid that shocked some competitors, concluding in the high $300s on a wet metric tonne delivered US Gulf basis. This was almost $100/t higher on an fob basis than the same refiner’s previous tender in September.

The deal helped boost the Argus November assessment for 0.8pc sulphur, less than 150ppm vanadium green coke to

Weekly petroleum coke price snapshot $/t

Northwest Europe

del 4.5% sulphur 101.50


Brazil



Turkey

cfr 4.5% sulphur 102.50


US west coast

fob <2.0% sulphur 121.00

fob 3.0% sulphur 99.00


Japan



China

cfr <2.0% sulphur 147.00




US Gulf coast



India




Venezuela


$90-95/t cfr. This was only shortly after a US-based trading firm sold a 6.5pc sulphur coke cargo in the mid-to-high $90s/t cfr.

The trader still has one more similar cargo to sell, how-ever, and buyers are mostly holding off as they expect prices to retreat further on concerns regarding the ban in India.

Traders are having increasing difficulty securing buyers, even for lower-sulphur coke. One firm withdrew an offer of 2.3pc sulphur coke from Chile after receiving low bids.

But an eastern Chinese cement plant launched a tender to buy 12,000t of 3pc sulphur coke for delivery later this month or early next month. The tender will close on 14 Decem-ber, with the buyer expecting to receive offers at around Yn1,200/t, equal to roughly $146/t on a cfr basis.

US Gulf sulphur spread widensWhile the weak demand from major Asia-Pacific buyers weighed on 6.5pc sulphur coke on a US Gulf fob basis, driv-ing prices another $3.50/t lower to $61.50/t, 4.5pc sulphur coke prices have remained fairly steady. This has widened the spread between the two grades now to $20/t, up from just $9/t in the week of 13 November.

India bought little 4.5pc, so its exit from the market is hav-ing almost no effect on the mid-sulphur pricing.

While the sharp drop in high-sulphur pricing may eventually draw some mid-sulphur buyers into the high-sulphur market, at least two Turkish buyers released tenders this week requesting cargoes of 4.5pc sulphur coke.

A lack of 4.5pc sulphur production in the US Gulf and con-tinued loading difficulties in Venezuela are keeping supply of this grade tight.



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low-vol fob Australia PCI cfr N China

Steel feedstocks: Low vol vs PCI $/t

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17 May 17 26 Jul 17 27 Sep 17 6 Dec 17

4.5% premium to 6.5%

USGC coke: 4.5% premium to 6.5% $/t

NewS

New India policy will ‘curb coke imports’The Indian government says it will develop a policy to limit petroleum coke imports into the country after the Supreme Court banned its consumption in a number of northern states surrounding Delhi.

The oil ministry, in consultation with the ministries of environment, commerce and industry, and finance, will shape a policy to curb petroleum coke imports, India’s oil minister Dharmendra Pradhan said.

The minister appeared to stop short of suggesting a com-plete import ban, which the prime minister’s office had urged

ministries to debate last week in reaction to an air pollution crisis in Delhi.

Pradhan’s comments over the weekend, as well as com-ments from the government’s lawyer at a Supreme Court hearing on 4 December, have further muddied views about the prospects for petroleum coke demand in India.

The court in late October ordered a complete ban on pe-troleum coke in Uttar Pradesh, Haryana and Rajasthan, adding to a prior ban within Delhi.

Enforcement of the ruling in its current blanket form would knock out as much as 8mn t/yr, or about 30pc of India’s

$395/t on a dry basis, up by $60 from October. Calciners have been motivated to compete aggressively for

low-sulphur green coke, which is in short supply and essential to their blends if they are to stay within emissions limits. After failing to win the last few low-sulphur spot tenders, one bidder was driven to offer at fresh highs in the November tender, market participants said.

Strong calcined coke prices are allowing calciners leeway to offer at high levels, although prices for this product have started to level off. Chinese 3pc sulphur calcined coke prices have settled at around $500/t after surpassing that level in Oc-tober. Calcined coke prices in India are said to still be around $500/t, roughly flat with the prior month.

US Gulf prices are still catching up, with the Argus No-vember assessment for November 3pc sulphur, 250-350ppm vanadium calcined coke at $425/t, a $17.50/t increase from

October. The increases in the calcined coke prices and the high

prices for recent low-sulphur green coke tenders are encourag-ing US refiners to ask for big increases for 2pc and 3pc sulphur anode-grade green coke in first-quarter negotiations.

The 2pc sulphur, 150-250ppm vanadium specification rose by $35 on a dry metric tonne basis to $265/t, while the 3pc sulphur, 300-400ppm vanadium assessment gained $25 to $175/t on a dry basis.

On the other hand, domestic anode-grade green coke prices in China have started to slip, as government-mandated cuts to anode plants, calciners and aluminium smelters began to take effect for the winter heating season. But it is unlikely that this will result in greater exports to US Gulf calciners, as Chinese calciners are likely to take advantage of lower priced green coke for stockpiling, market participants said.



del ARA coke percent of coal %

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9 Nov 16 29 Mar 17 2 Aug 17 6 Dec 17

ARA 4.5% coke % of coal ARA 6.5% coke % of coal

fob USGC coke percent of coal %

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9 Nov 16 29 Mar 17 2 Aug 17 6 Dec 17

fob USGC 4.5% coke % of coalfob USGC 6.5% coke % of coal

del Turkey coke percent of coal %

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9 Nov 16 29 Mar 17 2 Aug 17 6 Dec 17

cfr Turkey 4.5% coke % of coalcfr Turkey 6.5% coke % of coal

del India coke percent of coal %

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9 Nov 16 29 Mar 17 2 Aug 17 6 Dec 17

cfr India 6.5% coke % of coalcfr India 8.5% coke % of coal

petroleum coke demand, mostly from cement makers in the northern states around Delhi. But the Indian oil ministry and environment ministry told the court on 4 December that ce-ment makers using petroleum coke in kilns were not contribut-ing to air pollution. Pradhan had also said in his comments that the cement industry is not a polluter when it uses petroleum coke, leading some to believe that the industry may yet re-ceive an exemption.

The court has scheduled another hearing on the coke ban for 11 December, as well as another hearing on establishing nationwide emissions limits on 13 December.

Early suggestions have been that the government will allow petroleum coke use as a feedstock rather than as a fuel in other states. This would allow calciners and aluminium smelt-ers to continue to use anode-grade coke. And it would allow

major domestic producer Reliance Industries to use its 6mn t/yr of petroleum coke production to fire a petroleum coke gasifier project it is just beginning to launch.

But the gasifier’s startup, which may be complete by as early as next summer, would complicate plans for an import ban. At full capacity, the gasifier is expected to require as much as 12mn t/yr of a combination of coke and coal. Even if Reliance uses only coal to supplement its own coke produc-tion, the loss of more than 6mn t/yr of domestic coke will remove almost half of India's total domestic coke supply.

Pradhan had said that if the government curbs imports the cement industry could use domestic petroleum coke as a substitute. Domestic petroleum coke usually has lower sulphur content than typical imports of 6.5pc sulphur petroleum coke from the US and 8.5pc sulphur imports from Saudi Arabia.



Market participants expect import curbs could take different forms. These could include excluding higher-sulphur product, forcing out 8.5pc sulphur Saudi Arabian petroleum coke, which was banned by Gujarat in late October. Or a tax, or cess, could be imposed on petroleum coke imports, the way the govern-ment levied a cess on all coal sales in India a few years ago.

A number of traders are concerned that the curbs could entail allowing only cement producers, which account for 75pc of the 27mn t consumed in India in 2016, to import the product. Such a restriction would force out traders or wholesalers which sell smaller parcels of petroleum coke from stockpiles at ports.

India is the world’s largest coke importer, receiving al-most 14mn t of the product in 2016 and more than 10mn t in January-October this year. This is a more than threefold rise in imports since 2013-14, with roughly 60pc of India’s imports

from the US and about 25pc from Saudi Arabia, oil ministry data show.

Petroleum coke consumers already affected by a complete ban in the four northern states will need around 10mn t of additional high calorific-value coal from the eastern US, South Africa, Mozambique and elsewhere as a substitute. This is expected to help tighten coal supply and push up prices, at a time when coal supplies from countries such as Australia are already relatively tight.

India’s RIL, Essar cut petroleum coke pricesIndia’s largest private-sector petroleum coke producers Reli-ance Industries (RIL) and Essar Oil have reduced their Decem-ber sales prices following a decline in seaborne prices.

RIL reduced its basic price for December before taxes and

US Gulf and midcontinent coker yields $/t

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9 Sep 16 10 Feb 17 7 Jul 17 1 Dec 17

US Gulf coker yield US midcontinent coker yield

Aluminium premiums $/t

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LME aluminium prices $/t

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cash 3 month

LME aluminium warehouse stocks mn t

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18 Jul 17 04 Sep 17 19 Oct 17 05 Dec 17



duties by around 455 rupees/t ($7.06/t) from November to Rs7,645/t. The company produces around 6.5mn-6.6mn t/yr of petroleum coke, about half of India’s total output. Essar, which typically follows RIL’s lead, reduced its basic price by the same amount to Rs7,635/t, market participants said.

Cfr India petroleum coke prices have declined after India’s Supreme Court banned the use of petroleum coke in the three states adjoining Delhi — Uttar Pradesh, Haryana and Rajas-than — from 1 November. In addition, petroleum coke with 7pc sulphur content and above has also been banned in the western coastal state of Gujarat, eliminating about 1mn t/yr of consumption of higher-sulphur Saudi Arabian petroleum coke.

Cfr India prices of petroleum coke with 6.5pc sulphur content have declined by $14/t, or 13pc, since late October, before the ban was announced, to $92.50/t. Cfr prices of pe-troleum coke with 8.5pc sulphur content have fallen by almost 15pc, or $15/t, to $87.50/t over the same period.

Both Indian refiners had kept their November prices unchanged. RIL and Essar raised their October prices by an un-usually large Rs935-950/t following weather disruptions in the US Gulf in the wake of Hurricane Harvey in late August, which tightened supplies and sent seaborne prices higher.

By contrast, Indian state-owned refiner MRPL raised its December price by Rs180/t to Rs7,300/t after taking the view that a possible curb on imports, which is being discussed by the government, could boost demand for domestically pro-duced petroleum coke in the south of the country, market participants said.

There are concerns in the market that sanctions and tight-er restrictions on petroleum coke use could be implemented in other Indian states. The Indian government has also said it will develop a policy to limit imports into the country, although there are some expectations that cement makers may still be allowed to use imports subject to restrictions on sulphur or the addition of new taxes.

Uncertainty surrounding possible tighter restrictions in other states and a potential curb on imports has put a virtual freeze on the trading of petroleum coke in India. Few deals have taken place over the last month, as buyers fear being stuck with product they cannot use.

It typically takes around 90 days for cargoes of US petro-leum coke to arrive at Indian ports after being purchased.

IOC evaluates Paradip coke gasification Indian state-run refiner IOC, the country’s biggest processor of crude, is considering setting up a petroleum coke gasification

project even as market participants worry a recent tri-state ban on the use of the fuel could extend to the entire country.

The 200bn rupee ($3.1bn) coke gasification venture, similar to one begun several years ago by private sector Reliance Industries (RIL), will convert 2mn t/yr of coke produced at Paradip to synthetic gas that can be used to produce electric-ity or make chemicals, IOC said. IOC plans to set up a petro-chemical complex next to the 300,000 b/d Paradip refinery on the east coast of India.

The Central Pollution Control Board, under direction from the central government’s Ministry of Environment, Forests and Climate Change, on 15 November issued a direction prohibiting the use of coke and furnace oil by any industry within Delhi, Haryana, Rajasthan and Uttar Pradesh states. The Supreme Court ruled on 24 October for the ban to take effect on 1 November.

But current indications are that the government will al-low petroleum coke use as a feedstock rather than as a fuel in other states. This would allow IOC’s proposed plant to go forward, as well as allow RIL to use its 6mn t/yr of petroleum coke to fire its 10mn t/yr gasifier project, which is just starting up. RIL plans to use the 23mn m³/d of gas produced from the gasifiers, now in the testing phase, to substitute imported LNG in its Jamnagar refinery.

IOC may include coke produced in the Paradip, Chennai and Haldia refineries in the proposed gasifier. IOC has a 2mn t/yr coker at Paradip and 0.9mn t/yr capacity cokers at Panipat and Koyali.

India imported around 14mn t of petcoke in the 2016-17 fiscal year ending March and 8.3mn t in the April-September period, according to the oil ministry.

The Indian government said over the past week that it will develop a policy to limit petroleum coke imports into the country after the Supreme Court banned the use of it as a fuel in three northern states surrounding Delhi.

South Korea’s coke imports slip from highsSouth Korean petroleum coke imports fell in October to the lowest point since June but remained higher than prior-year levels.

The country has been increasing its coke imports for most of this year, but a lack of Canadian shipments and supply dis-ruptions from the US as a result of Hurricane Harvey reduced October totals.

South Korea’s petroleum coke imports fell to 94,300t in Oc-tober, with only cargoes from the US and Saudi Arabia arriving,



according to customs data. This was down by 65pc from the previous month and almost 70pc from August, when imports hit a record high.

But October’s imports were still more than three times year-earlier levels, continuing the trend of higher year-over-year coke totals for most of 2017. Year-to-date imports rose by more than half from 2016.

The slip in October from the recent highs was partly because South Korea did not take any Canadian coke in the month, after receiving 212,800t in the third quarter. Canada had surpassed the US as South Korea’s main coke supplier in September, shipping 130,400t to the US’s 99,000t.

October’s total of 51,500t from the US likely represents a single supramax cargo, down from two the previous month. The US had supplied 277,600t in August and 181,700t in July. The declines may be a result of Hurricane Harvey disrupt-ing September loadings in the US Gulf and limiting spot cargo availability, as refiners struggled to fulfil term contracts.

South Korea received 42,700t from Saudi Arabia in October, about the same as a month earlier, after taking no shipments from the Middle Eastern country in February-August.

South Korea could take more Saudi Arabian supply in the coming months, as that country’s suppliers look to diversify their export markets. Most of this coke had been shipping to the west coast of India. But a recent ban in the state of Guja-rat on greater than 7pc sulphur coke and a total ban on coke consumption in four other states in that region are requiring Saudi Aramco’s two joint venture refineries to find other out-lets for their 8.5pc sulphur coke production.

South Korea’s year-to-date coke imports totalled 1.72mn t,

up by 56pc from 1.1mn t in the same 10-month period in 2016, and up by 90pc from the 904,100t imported in the 2015 year-to-date period.

Sitra refinery expansion contract awardedSouth Korea’s Samsung Engineering has won part of a long-awaited $4.2bn contract to modernise and expand Bahrain’s 262,000 b/d Sitra refinery.

The project is expected to add a coker that will produce anode-grade petroleum coke for the region’s aluminium mar-ket.

Samsung Engineering said it had won a $1.35bn piece of the contract from state-owned refiner Bapco. Other awards were made to Spain’s Tecnicas Reunidas and French engineering firm Technip.

The long-delayed project will increase Sitra’s crude-pro-cessing capacity by 37pc to 360,000 b/d.

Samsung’s letter of award comes about six months after the latest target date for Bapco to choose contractors for the project. The expansion has been stalled for years amid indeci-sion over its size and scope. Bapco, which earlier considered expanding the refinery’s capacity to as much as 450,000 b/d, aims to complete the project by 2020.

One upside of the delays is that Bapco will benefit from a drop in construction costs. The company put the expansion’s price tag at $5bn-7bn three years ago, before crude prices slid.

Adnoc plans downstream expansionAbu Dhabi’s state-owned Adnoc has unveiled a 400bn dirham ($109bn) capital expenditure budget for the next five years.

The programme is intended to expand the company’s refin-ing and petrochemical capacity.

The firm will spend more than 40pc of its budget on increasing downstream capacity, seeking to extract the maximum value from its crude in a “lower for longer” price environment. Adnoc aims to raise its refining capacity by around 60pc by 2025, and petrochemical production fourfold to 14.4mn t/yr, downstream director Abdulaziz Abdulla al-Hajri says.

The company has just over 900,000 b/d of refining capac-ity across two facilities — the 817,000 b/d Ruwais and 85,000 b/d Umm al-Nar. Around 650,000 b/d of this is geared towards crude processing, while the balance is used for condensate operations.

Adnoc will achieve the capacity target by constructing a new 600,000 b/d refinery at Ruwais and expanding the existing

South Korea petroleum coke imports t

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US Saudi Arabia Canada China Japan Others

https://direct.argusmedia.com/newsandanalysis/article/1558663




complex at the site. It aims to join forces with foreign part-ners that can provide technology and access to key markets, al-Hajri says. And the firm plans to upgrade its plants to run heavier crude grades, enabling exports of lighter, higher-value supply.

Adnoc’s planned initial public offering of up to a 20pc stake in its distribution subsidiary remains on track. The process, which is due to take place by the end of this month on Abu Dhabi stock exchange ADX, could generate as much as $2bn in revenue.

Lukoil will build coker at Nizhny NovgorodRussian independent Lukoil has made a final investment deci-sion (FID) to build a delayed coking unit (DCU) at its 365,000 b/d Nizhny Novgorod refinery.

The 2.1mn t/yr unit will come online in 2021, Lukoil said. It will allow Nizhny Novgorod to increase production of light oil products by more than 10pc, and to reduce production of com-mercial fuel oil by 2.7mn t/yr, Lukoil said. Nizhny Novgorod produced 4mn t of heating oil in 2016, according to the minis-try of energy.

Lukoil previously said the DCU would cost at least $600mn.The company has a similar 2.1mn t/yr DCU at its 290,000

b/d Perm refinery, which has enabled a halt to fuel oil produc-tion and exports there.

Russian graphite electrode producer faces probeRussian anti-monopoly service FAS is investigating graphite electrode producer Enegroprom for alleged violation of com-petition rules.

The regulator launched the inquiry after Enegroprom declined to disclose planned production and prices to steel-makers for 2018. Such a move, in an environment of concerns about a global shortage, could be considered withholding a product to cause price increases, which would violate federal law, FAS said.

The company on 11 October started a tender for graphite electrode supplies in the first half of 2018, achieving a price of $25,000/t, 25pc higher than in China, the watchdog said. Prices for graphite electrodes have risen sharply this year, to around $25,000/t in the summer from about $2,500/t at the start of 2017, after up to 30pc of electrode capacity in China was shut on environmental grounds. The decrease in Chinese output coincided with growth in global electric arc furnace steel production and a reduction in the availability of needle petroleum coke, leading to global shortage, FAS said.

Energoprom has four graphite electrode production facili-ties in Russia and is the only domestic producer. It controls over 50pc share of the market for RP, HP and SHP grades and over 35pc of the UHP grade market. The company promised to introduce its merchandising and pricing policy for 2018 in August. But neither steelmakers nor FAS have received any guidance so far, the regulator said.

Energoprom earlier this year lobbied the Eurasian Economic Commission — the regulatory body of the Eurasian Economic Union that comprises Russia, Kazakhstan, Belarus, Armenia and Kyrgyzstan — to resume an anti-dumping probe into graph-ite electrode imports from India, which Russian steelmakers deemed ill-timed.

Anti-dumping reform to support aluminium pricesA new anti-dumping methodology that the Council of EU member states approved on 4 December is likely to support European aluminium prices from 2018.

The new methodology will identify and redress cases where state intervention has artificially lowered the price of imported products, including aluminium. It will, in particular, focus on unfair trade practices that include price distortion, particularly on EU imports from China.

“We are strengthening our anti-dumping toolkit to provide a fair trade environment for EU producers,” Estonian trade minister Urve Palo said in a council statement.

The new legal framework removes the distinction between market and non-market economies for calculating dumping duties, while maintaining the same level of protection for producers. The European Commission must now prove the ex-istence of a significant market distortion between a product’s sale price and its production cost and will use this, along with other relevant evidence, to set the price for a product. The commission will also draft specific reports on market distor-tions for certain countries and sectors.

The new methodology will be signed in Strasbourg on 13 December and enter force on 20 December. The signing of a new methodology comes after approvals from the European Parliament’s trade committee and the parliament. The com-mission proposed the methodology in November 2016.

Half of the EU’s current anti-dumping measures target Chinese supplies. China accounted for six of the 15 new inves-tigations initiated by the country of export origin in 2016, EU trade defence statistics show. China’s exports of unwrought aluminium and aluminium products increased by 4.1pc to 3.98mn t in January-October compared with the same period a


https://metals.argusmedia.com/newsandanalysis/article/1545807




year earlier. Higher LME aluminium prices have encouraged China to

export more supply this year. Three-month LME aluminium increased by 21pc year to date to $2,050/t on 4 December.

But growth in China’s aluminium production and exports is a long-term trend. The country’s aluminium exports to the rest of the world increased by over 56pc in 2010-16. Exports to the EU increased by 39pc over the same period and totalled around 818,000t in 2016, excluding final aluminium products.

The market share of Chinese extrusions and flat-rolled product imports to Europe has increased to around 5pc from 2pc and 1pc, respectively, in 2010. Chinese extrusion exports to the rest of the world increased by 50pc to 1.4mn t/yr over 2010-16.

Around 600,000t of the 2016 total of 1.4mn t included so-called “fake semis” — primary aluminium cast in the shape of semi-fabricated products, but intended for immediate remelt-ing. This material avoided a tax that China usually places on primary aluminium exports, instead collecting a rebate.

Chinese primary aluminium production totalled 31.6mn t in 2016. This is expected to increase to 52mn t/yr by 2020, data from lobby group European Aluminium show.

China’s EV plan to fuel battery metals demandA plan by the Chinese government to install more charging outlets for electric vehicles (EVs) is expected to increase de-mand for metals used in batteries.

The growth could also increase competition for needle petroleum coke. This coke can be used as a feedstock in these lithium-ion batteries, which is part of why prices for needle coke have increased substantially this year.

China is on track to meet a production target of 700,000 EVs in 2017, with producers stepping up output in the last two months of the year. But there are only around 180,000 installed charging points.

The government has introduced a five-year plan, aiming to install 480mn individual charging points and 12,000 public charging stations by 2020. The lack of charging points is the most frequently cited concern among consumers when consid-ering purchasing a new car.

The Chinese government expects carmakers to produce 2mn EVs in 2020, about four times the number produced last year. Its new credit-score programme is aimed at increasing the production of EVs, and it is considering a ban on the pro-duction and sale of petrol and diesel cars by 2030.

The fast growth of EV production boosted China’s ship-

ments of lithium-ion batteries to 30.5GWh last year, up by 79pc from 2015. Lithium-ion battery shipments are expected to increase to 125GWh by 2025, industry analysts have fore-cast. This has in turn encouraged manufacturers to raise their production of battery materials.

China output cuts to boost long steel marketChinese winter steel output reductions will continue to sup-port a balanced global long products steel market in the first quarter of 2018, the International Rebar Products and Export-ers Association (Irepas) said.

A number of Chinese provinces and cities ordered blast furnace output cuts of 50pc during the winter heating season between November 2017 and March 2018 in an attempt to reduce smog in the region. The cuts will continue to limit ex-ports from China, and in turn, limit Chinese supply pressure on the international markets, Irepas said in its short-term outlook.

Prices for steel products in the international market will be supported in the coming months by strong demand for steel products, driven by higher industrial output as a result of an improving global economy. Most steel producers have already filled their January order books, the association said, but indicated that there are still factors in the market creating uncertainty and affecting purchasing decisions.

The continuing Section 232 investigation in the US could potentially limit imports into the country, supporting US do-mestic steel producers whose prices are level or a little lower then import prices, making it difficult to sell imports, espe-cially forward. Higher seaborne freight rates and historically high margins at European mills are causing caution, pointing to the possibility of a correction in prices at any time.

The Middle Eastern market remains under pressure both on the supply and demand side, although the anticipated absence of Chinese exports in the first half of 2018 — with more capac-ity cuts, mainly of billet, under way — means lower re-rolling activity providing support.

PetroChina and Sinopec to invest in refiningPetroChina and Sinopec raised spending in the third quarter and are likely to continue to invest in new refinery projects next year, buoyed by strong margins and high downstream demand.

PetroChina and Sinopec were profitable in July-September, boosted by a stronger downstream segment. PetroChina’s profit rose almost fourfold on the year to Yn4.69bn ($710mn), while Sinopec’s increased by around 13pc to Yn11.49bn. The




former’s refining segment profit was up by 77pc over the peri-od at Yn7.64bn, its highest since April-June 2016, and Sinopec’s rose by 48pc to just under Yn14.5bn.

Sinopec has exercised more prudence with expenditure this year. Capital expenditure (capex) of Yn29.1bn in January-September was just 30pc of its Yn98.5bn budget for the full year, recently revised down from Yn110.2bn. Around Yn8.5bn of this went to its refining unit, such as for the construction of the 200,000 b/d integrated Zhanjiang project. And PetroChina accelerated its investment in the third quarter, taking total ca-pex for the first nine months of this year to around Yn124.6bn, equivalent to 65pc of its Yn191.3bn budget for 2017.

Both companies are expected to continue to invest in refin-ing developments next year. PetroChina aims to begin building the 400,000 b/d Jieyang complex with Venezuela’s state-owned PdV by the end of 2017, while Sinopec will earmark more funds to launch Zhanjiang by 2020.

Sinopec has tapped a strong domestic jet fuel market this year, raising output from its two largest refineries — the 460,000 b/d Zhenhai and 470,000 b/d Maoming plants.

PetroChina hiked diesel production to meet strong domes-tic demand. The company’s diesel output was 2pc higher than a year earlier in January-September, at 960,000 b/d. But Sino-pec cut its production by 1.3pc to 1.35mn b/d. A growing prod-uct surplus is increasing exports, with the government granting rare extra quotas to PetroChina for November-December.

Beijing throws Shandong a lifelineThe issuance of a new batch of crude import quotas, and strong refining margins, will prevent a slowdown in Shandong crude imports next month.

The commerce ministry has granted three independent refiners a combined 353,000 b/d of crude import quotas for December. The 60,000 b/d Shandong Qingyishan Petrochemi-cal Technology refinery may import 188,000 b/d, the smaller 44,000 b/d Zibo Xintai Petrochemical plant can import 118,000 b/d, while the 60,000 b/d Shandong Yuhuang Chemi-cal facility has been granted a 47,000 b/d quota.

“This is a relief for refiners, as those that are running hard would have had to shut down, without access to an import quota,” a Shandong-based crude trader says. Quotas, tech-nically, identify an amount of crude for a specific refinery. But these import rights are often traded in the local market, allowing operators without access to imports to buy on the secondary market.

Refiners buying crude on the quota market usually pay a

premium to the des Qingdao spot price, which is the price of crude delivered to bonded port storage tanks. The quota premium has increased to $5/bl from $3/bl at the start of this year, illustrating the scale of the shortage. The market in traded quotas had been all but used up until the latest issu-ance of import rights, something which would have prevented many refiners from purchasing crude on the secondary mar-ket in December.

China was the top destination for US crude exports in Oc-tober, which rose to about 1.7mn b/d, according to US Census Bureau trade data. China imported about 448,000 b/d of US crude in the month, taking the top spot from Canada which moved to second with 279,000 b/d. China was also the top destination for US crude in February and April.

China’s environmental protection ministry, top economic planning body the NDRC, and the industry and information technology ministry in August issued a joint directive to 28 cities in north China ordering them to reduce PM2.5 particu-late matter — which is too fine to be filtered before it hits the lungs and is considered harmful to human health — by 15pc be-tween October and March next year. The order has prompted refiners in Zibo and Binzhou cities to cut runs, although larger independent refiners in Dongying and Heze are unaffected.

Majors refocus on refining and retailThe majors are refocusing their downstream priorities and targeting refinery upgrades after years of consolidation.

The majors’ downstream divisions have buoyed their finances since oil prices started to decline in mid-2014, re-quiring far lower capital expenditure than upstream assets. But the performance of different downstream segments has diverged. Shell’s returns on average capital employed have been considerably higher for marketing and chemicals than for refining in the past year, mirroring a trend at other European firms.

“Refining has become less prominent in our growth story,” Shell chief executive Ben van Beurden says. “Many of the as-sets that we successfully divested have now closed, so I think that we made some correct choices.” The company is left with a “very strong backbone of refining assets”, van Beurden says. “Will we build new refineries? I do not think so. But we will continue to invest in our refining footprint to maintain our position.”

Demand for BP’s products is increasing, but refining and petrochemical conditions remain challenging, downstream chief executive Tufan Erginbilgic says. “We have to be highly



competitive.” Total recently launched a €1.1bn ($1.3bn) project at its 308,000 b/d Antwerp integrated plant in Belgium, where it has hiked output of higher-value products. And the firm is considering more petrochemical deals, particularly in the US, following the shale gas boom.

Chevron and ExxonMobil are among the companies that are benefiting from feedstock supply growth in the US. The latter plans to start up 17 refining and chemical projects globally in 2016-19, to boost its capacity and cash generation.

New access to potential growth markets in the retail sec-tor is going hand in hand with wider long-term uncertainty, because of the gradual uptake of electric and hybrid vehicles. The majors are seeking to tie their investment in low-carbon technology with the downstream as a result.

Shell has concentrated its recent acquisitions on the elec-tric vehicle industry. It signed a deal last month with Ger-many’s Ionity to establish charging points across 10 European countries. This followed an agreement in October to purchase the Netherlands’ NewMotion. Total has invested in new energy assets, too — the firm bought French battery manufacturer Saft for around $1bn in May 2016. The takeover could help it develop a large electric vehicle charging system.

ExxonMobil has decided to integrate its refining and mar-keting businesses further, to “improve decision-making and enhance performance”, it says. The merged division, called ExxonMobil Fuels and Lubricants, will manage crude purchases and logistics, refining, supply, trading, midstream and sales of refined products

As part of the move, Bryan Milton, currently president of fuels and lubricants division, has been appointed president of the combined division, effective 1 January 2018.

US Venezuelan oil imports hit 14-year lowUS imports of heavy Venezuelan crude slumped to a new 14-year low in September, according to the Energy Information Administration.

An average import volume of 462,500 b/d was the lowest import volume from the country since February 2003. Total heavy crude imports were 7.9pc lower than September 2016 and 2.5pc lower than the five-year average for the month.

The drop surpassed a previous 14-year-low set in August. Sanctions, quality concerns and logistical struggles have re-duced Venezuelan exports this year.

Deliveries to Chevron, Motiva, Phillips 66 and Total refiner-ies all fell sharply lower than September 2016. PBF Energy imported 38pc more crude over the same period, the same

month that Venezuelan oil firm PdV said it had agreed to stop direct deliveries to the company in favor of intermediar-ies. PBF Energy said last month it has ample substitutes and expected to average 9,000 b/d fewer barrels of Venezuelan crude than last year.

Ramirez exit, more arrests rock Venezuela Venezuela’s UN ambassador and former longtime energy min-ister Rafael Ramirez resigned from his post in New York on 4 December, ending a standoff with the government in Caracas where an anti-corruption campaign is in full swing.

Some six dozen oil industry executives have been arrested in Venezuela since August, including last week’s detentions of former energy minister Eulogio Del Pino and former state-owned oil company PdV chief executive Nelson Martinez.

Six other former PdV executives were charged with corrup-tion yesterday, based on a 2010 $1bn bid-free lease contract for the PetroSaudi Saturn drillship “that turned out to be scrap”, according to acting attorney general Tarek Saab.

PetroSaudi, based in London and Riyadh, could not be im-mediately reached for comment.

Ramirez was widely seen as a leading target of the esca-lating crackdown, which critics say is a politically motivated purge aimed at consolidating the power of Venezuelan presi-dent Nicolas Maduro.

Since last week, Ramirez had defied an order from Maduro to step down and return to Venezuela.

In a four-page public letter to foreign minister Jorge Ar-reaza dated 4 December, Ramirez said his “decision to resign” the UN post he has held since December 2014 responds to unspecified “agreements” reached with Arreaza “after the president issued instructions based on his manifest wishes to separate me from the post.”

Ramirez’s missive does not detail the agreements, but in-stead lays out what he sees are his achievements while serving as energy minister and PdV chief executive in 2003-14.

The foreign ministry declined to comment. Ramirez has been replaced by Samuel Moncada, who had

been representing Venezuela at the Washington-based Organi-zation of American States (OAS).

Ramirez “was allowed to resign” in a face-saving gesture, a presidential palace official told Argus. “But the reality is the president fired Ramirez on 29 November because of the many instances of oil industry corruption while Ramirez headed the energy ministry and PdV.”

Saab said last week that investigations have so far uncov-



ered corruption in five of PdV’s 42 upstream joint ventures with foreign companies, including Petrozamora with Russia’s Gazprombank, Petromiranda with Russia’s Rosneft, Petrocede-no with France’s Total and Norway’s Statoil, Petropiar with Chevron and Sinovensa with Chinese state-owned CNPC.

Saab pegged Petrozamora’s corruption-related losses at over $500mn, but did not disclose estimated losses at the other joint ventures.

The newly appointed energy minister and PdV chief execu-tive, general Manuel Quevedo, on 4 December announced a comprehensive review of all outstanding procurement con-tracts signed by PdV or any of its subsidiaries to determine their legality.

PdV owed goods and services contractors over $19bn as of mid-2017. Quevedo aims to shrink that debt by cancelling pay-ments related to corrupt contracts, the energy ministry said.

Maduro’s decision to sack Ramirez is rooted in an internal power struggle within the ruling socialist party (PSUV), rather than an effort to clean up widespread corruption within PdV, according to two senior PSUV officials.

Maduro and his close political associates, including execu-tive vice president Tareck El Aissami, are tightening their control of Venezuela’s oil industry by militarizing its manage-ment and removing executives viewed as longtime associates or allies of Ramirez, the officials said.

It is unclear if Ramirez will return to Caracas where he could be arrested, or if he will seek to remain in the US or settle elsewhere.

US coal export growth to continue in early 2018International coal markets are poised to expand next year and continue to provide an outlet for US coal through at least early 2018, industry executives said.

US coal exports have outperformed expectations so far this year thanks to improved economies throughout the world and supply disruptions that have raised prices high enough to put shipments from nearly every basin in the money, Jack Porco, chief commercial officer of Xcoal, said yesterday at the Ameri-can Coal Council Coal Trading Conference in New York. That should continue for the next few months at least.

“We do not think that the restocking cycle is over yet,” Porco said. It should last “at least through the first quarter on the thermal side. On the coking coal side, I am willing to stick my neck out for at least six months.”

Xcoal’s customers are optimistic about exports next year, particularly on the metallurgical side. Steel production is ex-

pected to continue growing and coking coal buyers are starting to put more of a premium on higher-quality metallurgical coals as they run out of coke-making capacity.

On the thermal coal side, Asian demand should remain strong and steady German power prices, nuclear issues in France and lower coal production in Poland should help keep European-delivered prices elevated through the early part of next year, Porco said.

Xcoal expects to export more than 17mn metric tonnes of coal from the US this year. Central Appalachian markets are participating in trading in “a big way” and that is likely to con-tinue through the first three months of 2018, Porco said. Most other US basins are also now in the export market.

Globally, coal trading will be higher this year than it was in 2016 and will grow again in 2018, executives at the conference said. Porco projected the market will expand by 14mn-15mn t next year. Others were not specific.

John Keeshan, senior director at shipbroker Simpson Spence Young, expects markets to be more volatile next year. And participants may be more selective in booking shipments as freight costs rise.

It also is harder to see how coal producers are responding to international demand growth because more companies are privately held now, Keeshan said. In general, producers seem to have less of an appetite for capital spending now than they did the last time exports soared, from 2010-2012.

Coal mining executives are “not throwing around a bunch of money to invest in coal mines because know market could drop,” Keeshan said. In addition, while companies have been able to raise more capital from investors this year, interest rates on the loans are quite high, said Lucas Pipes, a senior analyst at B Reilly FBR.

The direction of the US dollar against foreign currencies will play a role in the global appetite for US coal next year as well. As the economy continues to strengthen, the dollar could get stronger, removing a source of support for the US market, executives at the conference said.

Doyle Trading Consultants is expecting US thermal coal exports to be around 42mn short tons (38.1mn t) next year and fall off to 35mn st in 2019. The US shipped 32.8mn st of ther-mal coal through October of this year, according to US Census Bureau data.

There are other structural challenges ahead for US exports, executives said at the conference. This includes the downward trend in European coal consumption. Coal demand in Europe is expected to decline to 85mn t in 2020 from just over 100mn



t last year, XCoal’s Porco said. In addition, buyers have a wide swath of supplier countries to choose from, including Australia.

Porco expects the API 2 to remain relevant to the seaborne thermal coal market even though European consumption is waning. Coal-fired capacity on the continent likely will echo the expected outlook for US generation, with older power plants going off line but other ones running harder than they had previously to pick up the slack in electricity demand.

Strike ends at Glencore Hunter Valley coal minesIndustrial action has halted at Switzerland-based firm Glen-core’s mines in Australia’s Hunter Valley, after workers voted in favour of new enterprise agreements and returned to work.

The agreement brings to an end almost six months of industrial action across Glencore’s Hunter Valley mining opera-tions in New South Wales (NSW). The firm in October blamed the industrial action and weather disruptions at its Colombian operations for its decision to cut its thermal and coking coal production outlook for 2017 to 121mn-127mn t, from 129mn-135mn t previously.

The agreement does not apply to Glencore’s Oaky North coking coal mine in Queensland, where workers remain locked out. Oaky North is being operated by contractors and non-unionised staff.

The NSW industrial action started on 8 June, when a co-ordinated 48-hour strike hit five of the six operations. Another 48-hour co-ordinated strike followed a week later before a short pause when both sides returned to negotiations. Strike action resumed over 22-23 July and has been followed by a series of rolling stoppages across the mines, with various individual sites holding a number of 10-24 hour stoppages each week. The action amounted to 2-5 strike days a week at each of the six mines, according to Glencore.

Glencore’s Australian unit produced 11.2mn t of coal in July-September, down from 13.4mn t in April-June and 13.7mn t in July-September last year.

The Hunter Valley is the largest thermal coal producing region in Australia.

Glencore’s 6mn t/yr Ulan underground thermal coal mine, 10.5mn t/yr run-of-mine Mangoola, 4.5mn t/yr Liddell, 3.7mn t/yr Glendell, 6.3mn t/yr Ravensworth and Bulga open-cut mines have all been affected by the strike action. The firm had been maintaining production using staff and contractors, but struggled to do so the longer the dispute went on as mine stockpiles were run down and maintenance could no longer be deferred.

Glencore produces mostly thermal and semi-soft coking coal from its mines in NSW, with hard coking coal coming from its Queensland operations.

The Hunter Valley coal industry could still be threatened by the continuing dispute between rail operator Pacific National and the Rail, Tram and Bus Union (RTBU). The RTBU is meeting with the Australian Fair Work Commission this week to try to find a resolution. The RTBU called a moratorium on industrial action last month while negotiations proceeded, but has now confirmed that those negotiations have broken down. It has not notified Pacific National of any new industrial action.

Bunker group predicts sulphur cap complianceThe best indication of potential compliance with the 2020 bun-ker fuel sulphur cap should come from the 5pc transgression experienced in the European emission control area (ECA), ac-cording to the International Bunker Industry Association (IBIA).

The industry body said there are valid reasons to be concerned about compliance with the International Maritime Organisation’s (IMO) 2020 sulphur cap, but the evidence from existing low-sulphur zones indicates that most vessels will abide by the regulations, it said yesterday.

The IMO ruled last year that from 2020 all vessels must limit sulphur pollution to 0.5pc mass by mass, but some ship-owners are expected to flout the regulations, which could give them a significant commercial advantage.

In a note intended to clarify the organisation’s position on the subject, IBIA said that it believes the industry should be careful about being either too pessimistic or optimistic on the levels of compliance.

It pointed out that compliance levels with existing emis-sions control areas (ECAs), which limit sulphur pollution to 0.1pc in North American and northern European waters, has been high at around 95pc.

The organisation is set to discuss ways to ensure compli-ance with the sulphur cap at a meeting of the IMO’s Sub-Com-mittee on Pollution Prevention and Response (PPR) in February 2018.

Issues such as the banning of heavy fuel oil (HFO) on board vessels that do not have sulphur abatement technology installed will be discussed. HFO has a sulphur content of up to 3.5pc, and will therefore not be usable on most vessels if they are to be compliant with the cap.

A recent IBIA survey found that 38pc of members thought such a ban should be put in place as soon as possible, while 55pc thought a ban should be enacted when there is good



availability of low-sulphur fuels. Some 7pc of responses were opposed to an HFO ban.

Global oil demand seen as growing in 2018Global oil demand will grow by 1.5mn b/d in 2018, and more than half of that growth will be met by US shale production, Bank of America Merrill Lynch (BofAML) analysts said yester-day.

US oil supply is expected to rise by 870,000 b/d in 2018 but OPEC will maintain the cuts it implemented in 2017, result-ing in a balanced market, BofAML head of commodities and derivatives Francisco Blanch said at the bank’s outlook event yesterday in New York. On these assumptions the bank expects Brent crude to average $56/bl in 2018, and hit a $70/bl at the peak of the US driving season. US shale supplies will grow in a $45/bl and higher price environment.

BoAML is bullish on refining margins. A strong diesel crack spread will continue to give Atlantic basin refiners reason to run at high utilization rates. But the capacity to increase crude distillation is limited, so diesel could reach $90/bl in 2018.

OECD petroleum product inventories, which were higher than the 2012-2016 average through most of 2017, declined back to their five-year average in September 2017. This caused a backwardation in the products markets, which in turn influenced the Brent crude forward curve, which moved from a steep contango into backwardation since August. “Now we have spot prices going above forward [prices] and that is what OPEC has been trying to engineer, by bringing down invento-ries”, Blanch said.

OPEC’s potential eventual exit from its output cut deal will be difficult. If the cartel goes back at once to its previous production levels, that would “destroy the market,” Blanch said. OPEC’s members will coordinate and gradually phase out the oil cut deal.

BoAML expects electric vehicles to comprise 40pc of auto sales by 2030, which could cause oil peak demand as soon as 2022-2023. But penetration of electric vehicles in the US will not be strong under President Donald Trump’s policies, and the penetration rate will be also affected by whether Trump gets reelected for a second term through 2024. But in China electric vehicle demand is expected to increase.

The bank projects tightening of US natural gas balances as LNG export facilities continue to develop, outpacing natu-ral gas production growth. US natural gas prices could reach $3.30/mn Btu in 2018 with US household natural gas prices breaking through $4/mmBtu this winter.

Refinery operations update

US Gulf coast � Compressors associated with a delayed coker unit at Phil-

lips 66’s 247,000 b/d refinery in Sweeny, Texas, tripped off line on 5 December. The incident resulted in 24 minutes of increased flaring, according to a filing to state environmental monitors. Operations personnel restarted the compressors.

� A sulphur recovery unit (SRU) malfunctioned on 6 December at Total’s 240,000 b/d refinery in Port Arthur, Texas. The re-finer reported increased emissions related to a blocked valve on equipment associated with the SRU, according to a filing to state hazardous materials monitors. The incident has since been resolved. Sulphur recovery units help to remove sulphur and other impurities from refinery products and gas streams.

� A gasoline-producing unit malfunctioned on 4 December at ExxonMobil’s 557,000 b/d refinery in Baytown, Texas. A compressor shutdown on equipment associated with a fluid catalytic cracking (FCC) unit led to increased emissions, ac-cording to a filing to state hazardous materials monitors. The compressor was returned to service, and there was a minimal effect on production. Flaring was expected to last for 12 hours, according to the filing. FCCs convert gasoil primarily to gasoline blendstocks.

� Shell will shut down a unit for planned maintenance at its 225,000 b/d refinery in Norco, Louisiana. The refiner noti-fied a community alert system of planned maintenance on an unidentified unit on 1 December. Flaring will begin on 3 December and will continue through 5 December, according to the filing. The Norco complex includes a chemical plant. The notification did not specify the location of the maintenance.

� ExxonMobil extinguished a fire on 28 November at its 348,000 b/d refinery in Beaumont, Texas. Company firefight-ers put out the blaze, the company said. There were no injuries. ExxonMobil said the company would meet product supply commitments.

US midcontinent � HollyFrontier on 1 November said turnaround work in the

west plant of its 125,000 b/d refinery in Tulsa, Oklahoma, will begin in February.

US west coast � Scheduled maintenance on unidentified units began the

week ending on 9 December at BP’s 222,700 b/d Cherry Point refinery in Blaine, Washington. The refiner reported the work

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of weeks. The halt of the diesel-making unit lasted through-out November. It triggered a sharp rise in Turkish diesel volumes and a virtual halt to import requirements for hydro-cracker feedstocks like vacuum gas oil (VGO) and straight-run fuel oil (SRFO). Tupras has yet to disclose whether a general maintenance shutdown that was underway last month at the 227,000 b/d Izmir refinery is yet over.

Africa � South Africa’s 180,000 b/d Sapref refinery was forced to

shut down on 30 November and is expected to stay closed until the 12 December. Problems with a single point mooring (SPM) at the BP-Shell joint venture refinery in Durban led to the refinery being shut, as no crude can reach the refinery, according to sources at the plant. The Sapref refinery has fre-quently hit production problems, with steam issues curtailing bitumen loadings in recent weeks. The refinery undertook a planned two-month turnaround in May and June of this year.

on 30 November in a filing to regional air quality monitors. Further details were not provided.

� Andeavor plans to increase flaring during the week ending on 16 December at its 363,000 b/d refining complex in Los Angeles, California. Increased flaring in the Carson section of the refinery is scheduled to begin on 7 December and continue until 13 December, according to a filing to regional air quality monitors. The event is not associated with a breakdown. Andeavor had restarted an unidentified unit on 5 December at the Los Angeles refining complex. The restart followed a “unit disruption” on 4 December that would not prevent the refinery from meeting product supply commit-ments, the company said.

Middle East � The 80,000 b/d hydrocracker at Turkish private-sector

Tupras’ 227,000 b/d Izmit refinery has restarted and is running normally after an unplanned shutdown that lasted a number

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