WEEKLY ENERGY RECAP: China distracts from Strait of Hormuz

In this May 5, 2019 photo issued by Karatzas Images, showing the British oil tanker Stena Impero at unknown location, which is believed to have been captured by Iran. (AP)
Updated 21 July 2019

WEEKLY ENERGY RECAP: China distracts from Strait of Hormuz

  • China’s economy slowed to the weakest pace since quarterly data began in 1992 amid the ongoing trade standoff with the US, while monthly indicators provided signs of some stabilization emerging

RIYADH: Crude oil prices deteriorated despite rising tensions in the Arabian Gulf toward the end of the week. Brent crude prices dropped to $62.47 and WTI dropped to $55.63 per barrel.
WTI recorded its biggest weekly decline in seven weeks, having fallen sharply earlier in the week on hopes that the situation in the Gulf would improve along with parallel worries about global demand. At the same time, a major storm hurt output in the Gulf of Mexico, where production was down by almost a fifth in its wake.
We saw a continuation of the theme of previous weeks where the oil price largely ignored events in and around the Strait of Hormuz, even after Iran seized two British-flagged oil tankers.
Instead, the market reacted to Iran’s potential nuclear deal with the US that would include permanent enhanced nuclear inspections in return for the lifting of sanctions.
China’s crude oil throughput rose to a record in June, up 7.7 percent from a year earlier, following the start-up of two large new refineries. Crude oil processing reached 13.07 million bpd, beating the previous record in April of 12.68 million bpd.
Despite strong oil demand from China, oil prices slipped after Beijing posted its slowest quarterly economic growth in at least 27 years, reinforcing concerns about demand in the world’s largest crude oil importer.
China’s economy slowed to the weakest pace since quarterly data began in 1992 amid the ongoing trade standoff with the US, while monthly indicators provided signs of some stabilization emerging.
The International Energy Agency pounced on that news and published a shaky oil demand outlook and reduced its 2019 oil demand forecast to 1.1 million bpd, down from its initial forecast of 1.5 million bpd, due to the slowing global economy and the US.-China trade war.
Yet the economic impact of the US-China trade argument is not an oil market-reflective. Surprisingly, some economists suggest that the trade dispute could spark a global recession, sending incremental oil demand lower. This has caused growing concern about supply and poor economic growth that has pushed oil prices lower, based purely on sentiment.
Arabian Gulf crude grades have further strengthened backed by demand uptick from North Asian refineries.
Norway’s crude oil production slipped to the lowest in three decades to 1.38 million bpd in April from 1.387 million bpd in March and 1.531 million bpd a year ago.

Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq


Emirates trims Boeing shopping list amid 777X delays

Updated 20 November 2019

Emirates trims Boeing shopping list amid 777X delays

  • The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion
  • But Emirates’s purchases overhaul reduces the order to 30 planes

DUBAI: Emirates Airline on Wednesday slimmed down its purchasing plans with Boeing amid delays in delivering an order of 156 of the new long-range 777X aircraft, substituting instead 30 of its 787-9 Dreamliners.
The Middle East’s largest airline in 2017 signed an initial agreement to buy 40 Boeing 787-10s in a deal worth $15.1 billion, but the overhaul reduces that to 30.
At the same time, Emirates is cutting its 156-strong order of the larger 777X to 126 planes.
The restructuring means that the carrier now has just 156 aircraft ordered from Boeing, compared to 196 previously in both firm orders and initial agreements, an airline spokeswoman confirmed to AFP.
“Emirates reduced its 777X order of 156 to 126 and substituted them with the Dreamliners,” Emirates president Tim Clark told a news conference at the Dubai Airshow.
Boeing said the airline will update its order book “by exercising substitution rights and converting 30 777 airplanes into 30 787-9s.”
Emirates said in a statement that for the 777X, it “will enter into discussions with Boeing over the next few weeks on the status of deliveries.”
Emirates in 2013 signed a $76-billion contract for 150 Boeing 777X twin-engine aircraft, powered by GE’s new GE9X engine, in what was the single largest order by value in the history of US commercial aviation.
The order was subsequently increased to 156 planes.
The 777X was originally scheduled to take off on its first test flight this summer, however its development has been slowed by issues with the engine and Boeing has pushed back the timeframe to early 2021.
The delays also hit as Boeing is in the process of completing changes required by regulators on the 737 MAX, which has been grounded worldwide after two crashes that resulted in 346 deaths.