WEEKLY ENERGY RECAP: Vaccine hopes spur demand

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Updated 22 November 2020

WEEKLY ENERGY RECAP: Vaccine hopes spur demand

  • Refiners in Asia are ramping up in anticipation of the winter peak in demand for heating oil

Oil prices rose to their highest level in three months after recording a third weekly gain.

It came amid huge optimism for improving oil demand, driven by hopes for an effective coronavirus disease vaccine. 

This spurred speculators to return to the previously subdued futures markets.

The vaccine may prove to be the proverbial light at the end of the tunnel for refiners who have been idling capacity in response to the pandemic-triggered demand decline. Still, more closures are looming in Europe as refiners continue to battle against weak margins as demand for refined petroleum products is hit by renewed lockdowns. 

The picture is somewhat different in Asia where capacity is growing and at a stronger pace than expected.

Refiners in Asia are ramping up in anticipation of the winter peak in demand for heating oil. 

While new lockdowns in the US and Europe weighed on demand, Chinese refineries have processed vast quantities of crude in October. 

The world’s second-largest economy continues to show signs of improving oil demand as crude imports rose to 11.83 million barrels per day (bpd), showing big improvements on a month-to-month basis. 

Reuters reported an additional 100 million barrels in 2021 for private Chinese private refiners’ stockpile, which means that floating storage in China should have been depleted.

OPEC+ producers showed strong compliance in October that reached 101 percent,  cutting oil production by 7.7 million bpd.This bodes well for January when the group must decides on its strategy for the new year.

The producers  have all demonstrated great flexibility in responding to the situation at hand, and that dexterity is likely to continue.

US sanctions Chinese and Russian firms over Iran trade

Updated 29 November 2020

US sanctions Chinese and Russian firms over Iran trade

  • Four companies accused of ‘transferring sensitive technology and items’ to missile program

LONDON: The US has slapped economic sanctions on four Chinese and Russian companies that Washington claims helped to support Iran’s missile program.

The four were accused of “transferring sensitive technology and items to Iran’s missile program” and will be subject to restrictions on US government aid and their exports for two years, Secretary of State Mike Pompeo said in a statement.

The sanctions, imposed on Wednesday, were against two Chinese-based companies, Chengdu Best New Materials and Zibo Elim Trade, as well as Russia’s Nilco Group and joint stock company Elecon.

“These measures are part of our response to Iran’s malign activities,” said Pompeo. “These determinations underscore the continuing need for all countries to remain vigilant to efforts by Iran to advance its missile program. We will continue to work to impede Iran’s missile development efforts and use our sanctions authorities to spotlight the foreign suppliers, such as these entities in the PRC and Russia, that provide missile-related materials and technology to Iran.”

The Trump administration has ramped up sanctions on Tehran after withdrawing from the Iran nuclear deal in 2018.

Earlier this week, Pompeo met Kuwaiti Foreign Minister Sheikh Ahmad Nasser Al-Mohammad Al-Sabah, when the campaign of pressure on the Iranian regime was also discussed.

“I want to thank Kuwait for its support of the maximum pressure campaign. Together, we are denying Tehran money, resources, wealth, weapons with which they would be able to commit terror acts all across the region,” he said.

It is not yet clear how the incoming administration of Joe Biden will deal with Tehran and whether it wants to revive the nuclear deal which would be key reviving the country’s battered economy. The Iranian rial has lost about half of its value this year against the dollar, fueling inflation and deepening the damage to the economy.

Iran’s economy would grow as much as 4.4 percent next year if sanctions were lifted, the Institute of International Finance (IIF) said last week. 

The economy is expected to contract by about 6.1 percent in 2020 according to IIF estimates.