Oil prices on the rise as cuts kick in

An oil pump is seen at sunset outside Scheibenhard, near Strasbourg, France, October 6, 2017. (Reuters)
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Updated 16 May 2020

Oil prices on the rise as cuts kick in

  • The sustained recovery in oil prices comes after a week in which producers committed to even bigger cuts than the record 9.7 million bpd reduction agreed in the revived OPEC+ agreement
  • Oman, a relatively small player in the Gulf oil market, weighed in with its own cuts yesterday, pledging to reduce output by up to 15,000 bpd from June

DUBAI: Global oil prices ended the week on a high after further big commitments to rebalancing crude markets in the face of the pandemic-driven fall in demand.
Brent crude, the global benchmark, stayed firm above the $30 mark, ending the day just short of $32 in European trading — its third consecutive daily rise.
West Texas International (WTI), the US standard, jumped 4.4 percent to just short of $30, easing fears of another plunge into negative territory when the contract for June delivery expires next week.
The sustained recovery in oil prices comes after a week in which producers committed to even bigger cuts than the record 9.7 million barrels per day (bpd) reduction agreed in the revived OPEC+ agreement between producers led by Saudi Arabia and Russia.
The Kingdom pledged an extra 1 million bpd of voluntary cuts last week, followed by smaller reductions from Kuwait and the UAE.
Oman, a relatively small player in the Gulf oil market, weighed in with its own cuts yesterday, pledging to reduce output by up to 15,000 bpd from June.
The International Energy Agency (IEA) calculated that oil supply would fall to a nine-year low this month, down 12 million bpd to around 88 million barrels.
“It is on the supply side where market forces have demonstrated their power and shown that the pain of lower prices affects all producers,” the IEA said.
Saudi Arabia’s cut of more than 4 million bpd is the largest component of that reduction, followed by Russia. The US is going through its own more gradual reduction as high-cost shale operations are scaled back and some producers file for bankruptcy.
Oil demand is a more uncertain element in the equation. Some analysts said that demand of as much as 30 million bpd, about a third of the world’s consumption, was lost at the height of lockdowns last month.
The IEA said that the fall in demand over the year — though the most severe the energy industry has ever suffered — might be less than initially expected. It calculated that total demand would be 91.2 million barrels this year, down from 100 million last year.
Some experts believe the recovery could be faster than predicted. Roger Diwan, vice president of financial services at US energy consultancy IHS Markit, said that by the second half of next year demand could be almost completely made up.
“It may be hard to comprehend now. But barring a second wave of the pandemic, nearly all pre-COVID demand could return by the second half of 2021. If that transpires, it could even lead to a market squeeze in the medium term as supply destruction hinders the ability of supply to keep up with recovering demand.
“But make no mistake, the road to oil price recovery will likely be choppy and plagued with stop-and-go rallies and selling cycles until some level of certainty is restored,” he added.
Saudi Arabia, as a global “swing producer,” will gain from any upturn. The Kingdom’s energy ministry last week announced the discovery of two new oil fields, with more details to be released once geological surveys are complete.


Coronavirus strands merchant ship crews at sea for months

Updated 3 min 14 sec ago

Coronavirus strands merchant ship crews at sea for months

  • Virus takes toll on merchant navies, who carry over 80 percent of global trade

ATHENS: For nearly four months, Capt. Andrei Kogankov and his oil tanker crew haven’t set foot on dry land. With global travel at a virtual standstill due to the coronavirus pandemic, the Russian captain was forced to extend his normal contract. He still doesn’t know when he’ll be able to go home.

Countries across the world have imposed lockdowns, shut borders and suspended international flights to curb the spread of the new coronavirus. The move was deemed essential to prevent rampaging contagion, but merchant ship crews have become unintended collateral damage.

About 150,000 seafarers are stranded at sea in need of crew changes, according to the International Chamber of Shipping. Roughly another 150,000 are stuck on shore, waiting to get back to work.

“In some ways, they’ve been the forgotten army of people,” said Guy Platten, secretary general of the ICS. “It’s not a tenable position to keep on indefinitely. You can’t just keep extending people,”
said Platten.

With more than 80 percent of global trade by volume transported by sea, the world’s more than 2 million merchant seafarers play a vital role.

“They’re out of sight and out of mind, and yet they’re absolutely essential for moving the fuel, the food, the medical supplies and all the other vital goods to feed world trade,” Platten said.

International shipping organizations, trade unions and shipping companies are urging countries to recognize merchant crews as essential workers and allow them to travel and carry out
crew changes.

“Our challenge now is to get a very strong message to governments. You can’t expect people to move (personal protective equipment), drugs and all the issues that we need to respond to COVID, and keep cities and countries that are in lockdown fed, if you don’t move cargo on ships,” said Steve Cotton, General Secretary of the International Transport Workers’ Federation, or ITF. “They’ve got to recognize the sacrifice seafarers are making for our global society.”

Kogankov is seven months into a four-month contract and was supposed to be replaced in mid-March in Qatar. But a few days before he arrived, Qatar imposed a lockdown and banned international flights.

From there to South Korea, Japan, South Korea again and on to Singapore and Thailand, each time the same story: Lockdown. No flights. No going home.

The uncertainty and open-ended extension of his contract — and with it the responsibility for his 21-man crew and a ship carrying flammable cargo — is taking its toll.

“When you are seven months on board, you are becoming physically and mentally exhausted,” Kogankov said by satellite phone from Thailand. “We are working 24/7. We don’t have, let’s say, Friday night or Saturday night or weekends. No, the vessel is running all the time.”

Officers sign on for three to four months, the rest of the crew for around seven months. But they always have an end date. Take
that away, and suddenly the prospect of endless workdays becomes a strain.

“We’re gravely worried that there could be a higher increase of incidents and accidents. But we also are seeing a high level of what I would describe as anxiety and frustration,” Cotton said. “If you don’t know when you’re going to get off a ship, that adds to a high level of anxiety that really is
quite demoralizing.”

Unless governments facilitate crew changes, Cotton warned, “it’s difficult for us to convince the seafarers not to take more dramatic action, and ... stop working.”

It’s not just crew changes that are problematic during the pandemic. Getting medical help for seafarers has also become difficult, as Capt. Stephan Berger discovered when one of his crew fell ill — not with coronavirus.

Lockdowns in successive ports made visiting a doctor impossible. It took multiple phone calls and the combined efforts of a Dubai paramedic, Berger and the German ship-owning company to eventually get the necessary care for the crewmember, who was hospitalized for three weeks.

Of the 23 people aboard Berger’s Berlin Express, 18 were due for a crew change when it moored in Valencia, Spain, in late May. The officers had extended what were normally three-month contracts to four and five months, while the mostly Filipino crew had been on board for eight or nine months, instead of three or four.

Despite this, morale has been good, Berger said.

Nobody is particularly happy with the contract extensions, “but we have to take it as it is,” he said. “It feels sometimes like a prison.”

Ship-owning company Hapag-Lloyd was doing everything it could to arrange crew changes and managed to arrange for the seven European crew members to sign off in Barcelona on May 30, Berger said. But there are still no flights home for the Filipino crew.

“We are very much hidden. We are on board our vessels, and the people might see the big ships coming in and out of the ports, but very seldom they see the people who are operating the ships,” Berger said. “We hope that people would recognize it a little bit
more now.”

On another Hapag-Lloyd container ship, apprentice Hannah Gerlach was to sign off in mid-March in Singapore. But even as her vessel headed to Asia, it was clear that wouldn’t happen. Gerlach packed her bags for an earlier departure from Sri Lanka, but by the time she arrived, so had the lockdown.

“I definitely miss my family very much ... And I miss just these moments of a normal life, to have the possibility to go out for a walk, to the forest, to ride the bicycle,” Gerlach said. “You don’t know any more when your contract will end, when you have the chance to see your family again.”

David Hammond, founder of the Human Rights at Sea organization, said many seafarers “have really been at the end of their tether” due to contract extensions. “The reality is that until there is global cooperation among states and shipping entities ... then crew change is going to be very problematic.”