WEEKLY ENERGY RECAP: Despite sell-off, spot market is tight

Workers are seen at the damaged site of Saudi Aramco oil facility in Abqaiq, Saudi Arabia. (Reuters)
Updated 06 October 2019

WEEKLY ENERGY RECAP: Despite sell-off, spot market is tight

  • Demand is strong for Arabian Gulf crude grades after a return to pre-attack production

Oil prices continued to deteriorate for the second week in a row. Brent crude dropped below the $60 barrier for the first time in a month. 

Brent fell to $58.37 per barrel which is close to the level it was before the attacks on Saudi Aramco oil facilities on Sep. 14. 

WTI also fell to $52.81 per barrel. 

Worrying economic news continued to put downward pressure on the market. However, the focus should not be on the slowing economic outlook that is detached from oil market fundamentals. 

The market continues to shrug off the possibility of serious supply threats. Conventional oil discoveries have plunged to a seven-decade low with no signs of any speed recovery amid lower capital expenditure investments. 

This coincides with OPEC oil output falling to an eight-year low in September.

At the same time, output from the US and Russia, also fell to 11.81 million bpd and to 11.24 million bpd respectively.

Right after the Saudi Aramco attacks, many speculators took advantage of the short-lived price spike as a major opportunity to sell older positions and lock in profits. 

However, after oil prices plunged for the second week in a row, money managers reduced their net long positions in Brent futures.

That was largely because speculators have been discouraged by the weakening macroeconomic outlook which of course implies weakened demand for oil.

However, demand remains strong for Arabian Gulf sour crude grades despite a return to normal Saudi pre-attack production levels.

The physical spot market remains extremely tight, reflected in steep Dubai backwardation and higher official sales prices (OSP) for November Arabian Gulf sour crude grades. 

The Russian crude grade, ESPO, also fetched high premiums despite the restoration of supply in the Kingdom. 

Brent-linked crudes are still not economically cheap enough to flow into Asia to compete with the Arabian Gulf sour crudes.

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

Spain’s tourism moving inland

Updated 7 min 19 sec ago

Spain’s tourism moving inland

  • Foreigners account for 20% of all visitors to northern Asturias region in 2019, up from 10% a decade ago

MADRID: Rural and green travel is the new frontier for Spain’s tourism industry as it tries to break free from its dependence on mass seaside travel and fight off stiff competition from cheaper Mediterranean rivals.

Foreign visitors accounted for just 5 percent of all tourists who stayed at a rural home in the country in 2014.

Today they make up 20 percent, according to the tourism ministry, a share the government wants to rise to 35 percent.

“We must have done something right,” the ministry’s director for sustainable tourism, Ricardo Blanco, said at the five-day Fitur tourism trade fair in Madrid which wraps up Sunday.

Spain, the world’s second-most visited country after France, hit a record for tourist arrivals for the seventh year in a row last year, with nearly 84 million foreign visitors.

But the big resorts which started out in the 1960s along the country’s southern coastline saw profits fall by 0.7 percent as sunseekers from northern Europe returned to less expensive destinations in Turkey, Tunisia and Egypt which they had shunned for years due to security concerns.

By contrast foreign tourism grew by “almost double digits” in Spain’s green northern coast, and did well in the arid and underpopulated center which is home to medieval architecture, according to a recent report from tourism company lobby group Exceltur which wants to end a reliance on “sun and beach” tourism.

In the northern Asturias region, where a moist climate gives rise to a wealth of forests and rich vegetation, the government’s efforts have “started to bear fruit,” said the regional government’s deputy Tourism Minister Graciela Blanco.

The region, which has long been popular with Spaniards, welcomed a record 400,000 foreign visitors last year.

Foreigners accounted for 20 percent of all visitors to Asturias in 2019, up from 10 percent a decade ago.

Asturias has benefited from renewed interest in the historical Camino de Santiago pilgrimage route which passes through the region. And the local government has boosted promotion of the region’s natural parks for hiking, cycling and eco-tourism in other European countries as well as Japan and South Korea, where there is strong interest in the pilgrimage route known in English as the “Saint James Way.”

The scenario is similar in the neighboring northwestern region of Galicia where the number of foreign tourists has nearly doubled over the past 10 years.

The pilgrimage route ends in Santiago de Compostela, the capital of Galicia, and services catering to tourists have sprouted up in the region such as wine tours and horseback riding in a bid to attract the visitors.

Many pilgrims return to Galicia to go sightseeing and take part in these activities, said Carmen Fernandez, a spokeswoman for the region’s tourism board.

But interior regions “remain very hard to sell online” to tourists, said Cristina Brunet, who owns several bed and breakfasts in the northern city of Palencia in the Castilla-Leon region, one of Spain’s most depopulated areas. Tourists looking for places to spend their holidays type the names of regions they already know into search engines, and the government does not take part in enough tourism fairs outside of Spain to promote the interior, she added.

“Everyone has heard of Marbella, Torremolinos and Benidorm but no one knows the rest of the country,” said Eduardo Gutierrez of public tourism innovation body Segittur, in a reference to three popular seaside resorts on Spain’s southern coast.

Rural residents who want to open a bed and breakfast or other tourism-related project often lack internet connections and struggle to get loans, added Maria Teresa Lopez, president of the federation of rural women’s associations (Fademur).