Oil prices rise on Iran sanctions worries, decline in Venezuelan output

Traders said markets climbed on expectations that the US will in May re-impose sanctions against Iran, a major oil producer and OPEC member. (Reuters)
Updated 26 April 2018
0

Oil prices rise on Iran sanctions worries, decline in Venezuelan output

SINGAPORE: Oil prices rose on Thursday, supported by expectations the United States will re-impose sanctions against Iran, a decline in output in Venezuela and ongoing strong demand.
Brent crude oil futures were at 74.27 per barrel at 0643 GMT, up 27 cents, or 0.4 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were up 14 cents, or 0.2 percent, at $68.19 per barrel.
Traders said markets climbed on expectations that the United States will in May re-impose sanctions against Iran, a major oil producer and member of the Organization of the Petroleum Exporting Countries (OPEC).
French President Emmanuel Macron said on Wednesday that he expected US President Donald Trump to pull out of a deal with Iran reached in 2015, in which Iran suspended its nuclear program in return for western powers lifting crippling sanctions.
Trump will decide by May 12 whether to restore US sanctions on Tehran, which would likely result in a reduction of its oil exports.
Further pushing oil prices has been declining output in Venezuela, OPEC’s biggest producer in Latin America.
Venezuela’s crude production has fallen from almost 2.5 million barrels per day (bpd) in early 2016 to around 1.5 million bpd due to political and economic turmoil.
US oil major Chevron Corp. has evacuated executives from Venezuela after two of its workers were imprisoned over a contract dispute with state-owned oil company PDVSA.
Venezuela’s plunging output and looming US sanctions against Iran come against a backdrop of strong demand, especially in Asia, the world’s biggest oil consuming region.
However, not all market indicators point toward tighter supplies.
US crude oil inventories rose by 2.2 million barrels in the week to April 20, to 429.74 million barrels. That’s almost 10 million barrels above the five-year average.
US crude production climbed by 46,000 barrels per day (bpd) on the previous week, to 10.59 bpd. That’s an increase of more than a quarter since mid-2016.
American crude oil output has overtaken that of top exporter Saudi Arabia. Only Russia currently produces more, at around 11 million bpd.
The soaring US output has made WTI crude around $6 per barrel cheaper than Brent, the international benchmark for oil prices.
Dutch bank ING said “the wide discount for WTI to Brent saw exports rising 582,000 bpd week-on-week to a record high of 2.33 million bpd.”
With US output and exports surging, some analysts warn that the 20-percent climb in Brent prices since February is starting to look overdone.
“The market does look a little toppish,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.


England’s northern ports look to prosper from Brexit

Updated 13 min 2 sec ago
0

England’s northern ports look to prosper from Brexit

  • Tens of millions of pounds are being invested to prepare for a potential increase in shipping in northeast England
  • A pro-Brexit MP said the area would “without doubt reap a Brexit dividend”

IMMINGHAM, United Kingdom: Brexit has brought hope to the windswept docks of the Humber River, a key goods gateway in northeast England where tens of millions of pounds are being invested to prepare for a potential increase in shipping.
In Immingham, a gritty town of around 11,000 inhabitants in the shadow of the sprawling port and oil refineries, former dock worker Willie Weir said business was already “picking up.”
“I think we’ll end up a very rich country,” the 54-year-old, who now owns a hotel and lorry park, told AFP. “Within a couple of years I think we’ll be trading with a lot of other countries.”
Associated British Ports (ABP) — which owns four Humberside facilities — is spending big to attract new business, raising hopes for a return of the area’s former industrial glory.
The company is betting the country’s departure from the EU next March will snarl southeastern hubs like Dover, where limited space and hourly sailings could bump up against post-Brexit bureaucracy, leaving traders looking for alternatives.
“There are certainly some opportunities available for the Humber ports,” ABP’s head of Humber communications Dafydd Williams said during a recent tour of its vast Immingham complex.
The company reckons Humberside can better handle the burdens and delays that Brexit may bring, with space available for new customs facilities and waiting areas for trucks.
It believes the longer shipping routes across the North Sea from Europe will allow new bureaucracy to be done aboard vessels, which is difficult during a 90-minute crossing from Calais to Dover.
ABP has dedicated £50 million ($66 million, 57 million euros) to expanding its container terminals, spending £14 million last year at Hull, which led to several new European routes.
It now hopes for similar results in Immingham, Britain’s biggest port by tonnage, with investment in loading cranes, tugs and a re-engineered dockside.
Unifeeder — a shortsea carrier that imports most of its Britain-bound cargo through Immingham — said it is seeing more container customers switching from southern ports.
“The cargo naturally finds the easiest course,” said the company’s UK manager, Andrew Ellis. “It’s just economics.”
Amar Ramudhin, a logistics expert at Hull University Business School, believes leaving the EU creates “big potential” for a shift to the north.
“Brexit just gave a bigger chance for these ports,” he said.
Peter Baker, an industry analyst, said Humber ports offered better value, as they are closer to a raft of distribution centers for firms like Amazon and Ikea.
With more of the journey done at sea, costs, congestion and CO2 emissions all fall, he said.
But Baker said he doubted the Humber ports will be less adversely impacted by Brexit.
“If there are customs checks and port health (checks) and everything else, it’s going to be just as difficult in Immingham as it would be in Dover,” he said.
Andrew Byrne, managing director of DFDS Seaways — Immingham’s biggest shipping line with its own terminal and 35 sailings a week on eight vessels — also called talk of a Dover exodus “misguided.”
He said his company had also seen “no evidence” of a big shift to containers among its customers.
“We’re hoping for the best but preparing for the worst,” Byrne said of its Brexit preparations.
Brexit sympathies run high in North East Lincolnshire, the region where Immingham is located.
In the 2016 referendum, 70 percent voted to leave the EU — one of the highest results in the country and much higher than the overall national result of 52 percent.
Martin Vickers, a pro-Brexit MP from the ruling Conservatives representing Immingham, wants the government to spur regeneration by giving the region freeport status.
He predicted the area would “without doubt” reap a Brexit dividend.
But across the Humber, staunchly pro-EU Hull MP Karl Turner, who represents the most pro-Brexit constituency the opposition Labour party holds, is skeptical about Brexit benefits.
He predicts Britain leaving the EU next March without any kind of deal would be “an unmitigated disaster for the ports.”
“There’s a bigger risk to the wider economy which I think ABP have not really taken on board,” he said.
Back at Immingham’s waterfront control tower, where the Humber’s 40,000 annual shipping movements are directed from, Williams defends his company’s positive outlook.
“We can adapt our space to accommodate whatever the arrangements are and that’s why we’re confident about the future.”