WEEKLY ENERGY RECAP: China highlights demand strength

Oil has been under pressure from concerns over global economic growth amid ongoing US-China trade tensions. (Reuters)
Updated 03 August 2019

WEEKLY ENERGY RECAP: China highlights demand strength

  • Upcoming September crude oil trading was completed without a single unsold Gulf crude cargo

An eventful week ended with downward momentum for oil prices. Brent crude fell to $61.89 and WTI dropped to $55.66 per barrel.

Oil has been under pressure from concerns over global economic growth amid ongoing US-China trade tensions.

However, crude remains healthy, reflected by growing demand from refineries in Asia, where new refining capacity is coming online. 

Exports from the Arabian Gulf to Asian refiners are growing — a key barometer for the overall health of the global crude market.

Though crude oil trading activity in the Gulf region have been threatened amid political turmoil in the Strait of Hormuz, there has been no change in Asian refiner plans from the area.

Upcoming September crude oil trading was completed without a single unsold single cargo for sour crude from the Arabian Gulf.

Gulf sour crude grades have further strengthened on bullish fuel demand amid tighter supply for high sulfur fuel oil and bunker fuels. That has resulted in medium sour crude spreads pushing upwards.

The strength of underlying demand in the market was highlighted by China’s record crude oil imports from Saudi Arabia in July.

OPEC crude oil production fell to an 8-year low, just 29.42 million barrels-per-day (bpd) in July, down 280,000 bpd from June. Voluntary output cuts from Saudi Arabia and steep losses from Iran contributed to this historically low figure.

Libyan crude oil production fell below 1 million bpd to just 950,000  after the Sharara oil field, the largest in the country, went offline for the second time in as many weeks.

There was a huge decline in US crude oil stockpiles for the seventh week in a row. The EIA reported that US crude inventories declined by nearly 49 million barrels in the last seven weeks. It is the longest retreat since the winter of 2017/18 when they fell for a record 10 consecutive weeks. 

Stockpiles of gasoline and distillate fuels also shrank, which should ease concerns about slowing consumption, as strong summer demand in the US continued to drain stockpiles. The EIA report showed total US inventories were at their lowest level since late May.


Gulf Marine CEO quits after review sparks profit warning

Updated 22 August 2019

Gulf Marine CEO quits after review sparks profit warning

  • Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence

DUBAI: Gulf Marine Services said on Wednesday Chief Executive Officer Duncan Anderson has resigned as the oilfield industry contractor warned a reassessment of its ships and contracts showed profit would fall this year, kicking its shares 12 percent down.

The Abu Dhabi-based offshore services specialist said a review by new finance chief Stephen Kersley of its large E-class vessels operating in Northwest Europe and the Middle East pointed to 2019 core earnings of between $45 million and $48 million, below $58 million that it reported last year.

A source familiar with the matter told Reuters that Anderson, who has served as CEO for 12 years, was asked to step down. Anderson could not be reached for comment.

The company, which in the past predominantly operated in the UAE, expanded operations and deployed large vessels in the North Sea and Saudi Arabia nine years ago and listed its shares in London in 2014.

Tensions in the Arabian Gulf, a worrisome global growth outlook and uncertainty over oil prices have recently dampened investor confidence.

The North Sea has seen a revival in production in recent years due to new fields coming on line and improved performance by operators following the 2014 oil price collapse.

Still, the basin’s production is expected to decline over the next decade, according to Britain’s Oil and Gas Authority.

“(The CFO’s) review has coincided with a pause in renewables-related self-propelled self-elevating support vessels activity in the North Sea, which will impact several of the higher day-rate E-Class vessels,” Investec wrote in a note.

Gulf Marine appointed industry veteran Kersley as chief financial officer in late May as it sought to halt a slide which has seen the company’s shares fall nearly 80 percent last year and another 23 percent so far this year.

The company said market conditions remained challenging and that it was still in talks with its financial advisors regarding a new capital structure.

“Management, the new board and the group’s advisors, have been in negotiation with the group’s banks on resetting its capital structure and progress has been made,” it said in a statement.

Last year, Gulf Marine said contracts were delayed into 2019 as the company was seen to be in breach of certain banking covenants at the end of 2018.

The company said it was still in talks with its banks and individual lenders with hopes of getting a waiver or an agreement to amend the concerned covenants.