Oil prices mixed as Trump calls on OPEC to lower prices

US President Donald Trump has urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend. (Reuters)
Updated 21 September 2018
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Oil prices mixed as Trump calls on OPEC to lower prices

  • OPEC and its allies are scheduled to meet on Sunday in Algeria
  • They are not likely to agree to an official increase in crude output at this weekend’s meeting

SEOUL: Oil prices were mixed on Friday after falling in the previous session as US President Donald Trump urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend.
International benchmark Brent crude for November delivery was up 5 cents at $78.75 a barrel by 0424 GMT.
US West Texas Intermediate crude for October delivery fell 8 cents to $70.24 a barrel.
Trump called on the Organization of the Petroleum Exporting Countries (OPEC) to lower prices, saying on Twitter “they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices.”
OPEC and its allies are scheduled to meet on Sunday in Algeria to discuss how to allocate supply increases to offset a shortage of Iran supplies due to US sanctions.
Stephen Innes, head of trading for Asia-Pacific at OANDA in Singapore, said Trump’s remarks just days before the OPEC meeting put “a focus on the likely supply impacts of US-led Iran sanctions.”
“The market had until that point been trading fluidly with the assumption that Saudi Arabia is now comfortable with Brent at $80 or even higher, which is challenging the market’s long-held supposition that prompt Brent between $70 and $80 was OPEC’s sweet spot,” Innes added.
Brent has been trading just below $80 a barrel, backed by concerns of supply shortages from looming US sanctions against Iran, which are set to take effect in November.
“Iranian crude exports are coming earlier and bigger-than-expected, at a time seasonal demand is strong. With spare capacity also falling sharply, the market remains exposed to supply-induced price shocks,” according to a report by ANZ Bank.
Although supply worries have pushed up oil prices, OPEC and its allies were not likely to agree to an official increase in crude output at this weekend’s meeting, OPEC sources said.


Asia’s refining profits slump as Mideast exports surge

Updated 23 February 2019
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Asia’s refining profits slump as Mideast exports surge

  • Since 2006, the Asia-Pacific has been the world’s biggest oil-consuming region, led by industrial users South Korea and Japan along with rising powerhouses China and India
  • However, overbuilding of refineries and sluggish demand growth have caused a jump in fuel exports from these demand hubs

SINGAPORE: Asia’s biggest oil consumers are flooding the region with fuel as refining output is exceeding consumption amid a slowdown in demand growth, pressuring industry profits.
Since 2006, the Asia-Pacific has been the world’s biggest oil-consuming region, led by industrial users South Korea and Japan along with rising powerhouses China and India.
Yet overbuilding of refineries and sluggish demand growth have caused a jump in fuel exports from these demand hubs.
Compounding the supply overhang, fuel exports from the Middle East, which BP data shows added more than 1 million barrels per day (bpd) of refining capacity from 2013 to 2017, have doubled since 2014 to around 55 million tons, according to Refinitiv.
Car sales in China, the world’s second-biggest oil user, fell for the first time on record last year, and early 2019 sales also remain weak, suggesting a slowdown in gasoline demand.
For diesel, China National Petroleum Corp. in January said that it expected demand to fall by 1.1 percent in 2019. That would be China’s first annual demand decline for a major fuel since its industrial ascent started in 1990.
The surge in fuel exports combined with a 25 percent jump in crude oil prices so far this year has collapsed Singapore refinery margins, the Asian benchmark, from more than $11 per barrel in mid-2017 to just over $2.
Combine the slumping margins with labor costs and taxes and many Asian refineries now struggle to make money.
The squeezed margins have pummelled the stocks of most major Asian petroleum companies, such as Japan’s refiners JXTG Holdings Inc. or Idemitsu Kosan, South Korea’s top oil processor SK Innovation, Asia’s top oil refiner China Petroleum & Chemical Corp. and Indian Oil Corp., with some companies dropping by about 40 percent over the past year. Jeff Brown, president of energy consultancy FGE, said the surge in exports and resulting oversupply were a “big problem” for the industry.
“The pressure on refinery margins is a case of death by a thousand cuts ... Refinery upgrades throughout the region are bumping up against softening demand growth,” he said.
The profit slump follows a surge in fuel exports from China, India, Japan, South Korea and Taiwan. Refinitiv shipping data shows fuel exports from those countries have risen threefold since 2014, to a record of around 15 million tons in January.
The biggest jump in exports has come from China, where refiners are selling off record amounts of excess fuel into Asia.
“There is a risk for Asian market turmoil if (China’s fuel) export capacity remains at the current level or grows further,” said Noriaki Sakai, chief executive officer at Idemitsu Kosan during a news conference last week.
But Japanese and South Korean fuel exports have also risen as demand at home falls amid mature industry and a shrinking population. Japan’s 2019 oil demand will drop by 0.1 percent from 2018, while South Korea’s will remain flat, according to forecasts from Energy Aspects.
In Japan, oil imports have been falling steadily for years, yet its refiners produce more fuel than its industry can absorb. The situation is similar in South Korea, the world’s fifth-biggest refiner by capacity, according to data from BP.
Cho Sang-bum, an official at the Korea Petroleum Association, which represents South Korean refiners, said the surging exports had “triggered a gasoline glut.”
That glut caused negative gasoline margins in January.