WEEKLY ENERGY RECAP: Russian crude disruption fails to lift oil market

WEEKLY ENERGY RECAP: Russian crude disruption fails to lift oil market
It was surprising that the supply outage of Russian Urals crude oil flows to Germany and Poland didn’t cause an upward momentum in oil prices, says Faisal Mrza. (AFP)
Updated 27 April 2019

WEEKLY ENERGY RECAP: Russian crude disruption fails to lift oil market

WEEKLY ENERGY RECAP: Russian crude disruption fails to lift oil market

RIYADH: Last week started with a major bullish sentiment in the oil market, after the US said it was halting sanctions waivers on Iranian crude exports. This drove Brent prices to a five-month high, touching $75 per barrel, although they dropped by the end of the week to $72.15.
Though oil prices didn’t change much on a weekly closing basis, a steep price fluctuation took place during the week.
Prices fell sharply at the end of the week on speculation that some Iran crude oil exports may be able to find customers regardless of the end to sanctions waivers. Also, global refining margins fell across the board last week, mostly driven by weak middle distillates margins (diesel and jet fuel), though gasoline margins have remained relatively firm ahead of the high demand season in summer.
Most of the supply distributions have been attributed lately to geopolitical factors; however, some other technical factors have emerged after Europe refineries stopped processing Urals crude from Russia after they found contamination in oil delivered via the Druzhba pipeline.
It was surprising that the supply outage of Russian Urals crude oil flows to Germany and Poland didn’t cause an upward momentum in oil prices, especially given that the global market is already short of supplies of similar crude grades.
Urals crude oil is close in quality to the sour crude produced in the Arabian Gulf. It accounts for most of the Russian crude exports in eastern and central Europe, and almost half of Russia’s total crude oil exports globally.
The contamination came at a time when European refiners are already questioning Urals quality, especially the sulfur levels.
Its unclear whether the concerns will affect Russia’s future market share, and hence the global supply and demand balance. Likewise, it is not yet clear how long the issue will last, given that Reuters reported it could have legal effects, as buyers in Europe could open lawsuits against Russian suppliers.

  •  Faisal Mrza is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter: @faisalmrza

Smartphone giant Xiaomi reels as US ramps up China blacklist

Smartphone giant Xiaomi reels as US ramps up China blacklist
Updated 6 min 26 sec ago

Smartphone giant Xiaomi reels as US ramps up China blacklist

Smartphone giant Xiaomi reels as US ramps up China blacklist
  • US Department of Defense ‘determined to counter China’s military-civil fusion development strategy’

HONG KONG: Shares in Xiaomi collapsed on Friday after the US blacklisted the smartphone giant and a host of other Chinese firms as the Trump administration aims to cement its trade war legacy against Beijing.
Beijing hit back at the latest sanctions, accusing the US of “abusing state power” to crack down on Chinese companies “for no reason.”
The flurry of last-minute blacklistings is the coda to four years of aggressive diplomatic and trade policies toward rival China under Donald Trump.
With just six days to go before the president leaves office, US officials made a series of announcements targeting Chinese firms including state oil giant CNOOC, Xiaomi and embattled social media favorite TikTok.
Xiaomi — which overtook Apple last year to become the world’s third-largest smartphone manufacturer — was one of nine firms classified by the Pentagon as “Communist Chinese military companies.”
The Pentagon’s action means US investors will be unable to purchase Xiaomi securities and will ultimately have to divest down the line unless the order is overturned by the incoming administration of Joe Biden.
Xiaomi is one of the biggest companies to be blacklisted so far and its shares plunged more than 10 percent in Hong Kong by the close of trading Friday after the announcement. US chip giant Qualcomm is a major investor.
The smartphone maker denied having links to China’s military and said in a statement it was “reviewing the potential consequences” of the new order.
But the US Department of Defense said it was “determined to highlight and counter the People’s Republic of China’s military-civil fusion development strategy” that allowed it to access key technology and security data.
Similar actions have been made by the US against other tech firms including Huawei and chip giant SMIC, hobbling their ability to import key technology and compete internationally.
“The Trump administration has broadened the concept of national security, abused state power and repeatedly cracked down on Chinese companies for no reason,” said Chinese Foreign Ministry spokesman Zhao Lijian Friday.
“China is firmly opposed to that.”

FASTFACT

Xiaomi denied having links to China’s military and said in a statement it was ‘reviewing the potential consequences’ of the new order.

Trump issued an executive order in November banning Americans from investing in Chinese companies deemed to be supplying or supporting the country’s military and security apparatus, earning a sharp rebuke from Beijing.
Earlier this month the New York Stock Exchange said it was delisting three state-owned Chinese telecoms giants to comply with the order.
The Commerce Department also released a separate banned entity list on Thursday targeting companies such as CNOOC and deep-water explorer Skyrison, which develops military equipment.
That makes it extremely difficult for US firms to export products or technology to those companies without a hard-to-obtain license.
Commerce Secretary Wilbur Ross said CNOOC had been listed because of “reckless and belligerent actions in the South China Sea and its aggressive push to acquire sensitive intellectual property and technology for its militarization efforts.”
“CNOOC acts a bully for the People’s Liberation Army to intimidate China’s neighbors, and the Chinese military continues to benefit from government civil-military fusion policies for malign purposes,” Ross said.
Territorial disputes in the South China Sea have festered for years, with Beijing building a series of artificial islands to expand its military and commercial reach in the contested region.
“CNOOC has repeatedly harassed and threatened offshore oil and gas exploration and extraction in the South China Sea, with the goal of driving up the political risk for interested foreign partners, including Vietnam,” the Commerce Department said.
CNOOC’s share price was less affected, falling a little more than 1 percent in Hong Kong on Friday.
Meanwhile, the Commerce Department also announced new rules for trading in technology and communications equipment with “foreign adversaries” including China, Russia, Iran, North Korea, Cuba and Venezuela.
The rule will take effect in 60 days. The aim is to protect against data and national security vulnerabilities in software and hardware, and it would outline a six-month review process before any ban is implemented.
A senior administration official confirmed the new rule would apply to TikTok, the video app that Trump banned from operating in the US.