Reuters: Nigeria struggles to sell oil cargoes

http://thenewsnigeria.com.ng/2014/12/30/reuters-nigeria-struggles-to-sell-oil-cargoes/

Almost half of Nigeria’s cargoes due to be exported in January are still available, Reuters has reported, even as oil prices reach the $50s trough, ten dollars below Nigeria’s benchmark price.

The backlog has pushed Nigerian oil differentials versus Brent to their lowest since at least 2009 BFO-QUA at 65 cents a barrel, down 80 percent since May, said Reuters. And it is also creating a discount frenzy between African and Gulf oil producers to Asian buyers

Asia has become a hotspot for a price war between African and Gulf oil producers who, hobbled by bulging global supplies and waning demand, are offering steep discounts to defend their market share in the world’s top net crude buying region.

The competition is welcome news for Asian buyers. If oil stays near $60 per barrel, import costs for the world’s No.2 oil consumer, China, would drop to under $125 billion a year, versus $222 billion in 2013 when crude averaged $110.

But for producers it means more competition, and African sellers like Nigeria and Angola, faced with precarious finances due to plummeting oil prices, are struggling to make inroads into Asia, a Middle Eastern stronghold.

“There is competition between West African and Middle East suppliers for the Asian markets, but the Middle East suppliers have the cost advantage,” said Philip Andrews-Speed, head of Energy Security Division at the National University of Singapore. The city-state is a major oil trading hub in Asia.

Low operating costs in Saudi Arabia, Kuwait and the Emirates already allow these countries to offer hefty discounts.

Now, a more than 50 percent jump in freight rates between West Africa and China since September is adding to the relative advantage of Middle Eastern grades, which require shorter shipping distances to Asia.

This has been a big setback for West African producers.

West African exports got a brief boost in August when Brent’s premium to Middle East crude DUB-EFS-1M narrowed to less than $2 per barrel from almost $5 in June. But with Middle Eastern producers now offering even more competitive prices, the advantage has faded.

“A year ago, a $2 premium would have been attractive, but in today’s environment it’s different,” a trader dealing with West African crude said.

GULF SUPPLIERS DOMINATE

West African producers traditionally sold most of their oil to North America and Europe, but exports dwindled given a gusher of shale oil from the United States and higher output from nations outside the Organization of the Petroleum Exporting Countries (OPEC).

West African crude exports to Asia rose more than 4 percent between January and December, Reuters data shows. China accounted for most of the rise as it took advantage of low prices to build up oil reserves.

But the higher West African arrivals into Asia were mainly due to sales before October, and have dropped since then due to Middle East discounts.

Middle East producers continue to dominate the Asian oil market, with Saudi Arabia, the United Arab Emirates and Kuwait all increasing shipments to the region since 2012.

The Middle East accounts for around half of China’s imports and Africa has a 25 percent share.

With pricing an advantage for Gulf producers, one hope for West Africa is China’s drive for diversification in order to avoid over-reliance on Middle Eastern oil, JBC Energy said.

But analysts are sceptical about the sustainability of steep discounts as producers need higher prices to finance their budgets.

“Governments that underpin their budgets with oil or metals have seen currency values plummet, reserves erode or current account deficits rise … Regimes built on oil wealth will come under pressure,” risk consultancy and insurance brokerage JLT Group said in its 2015 outlook.

The Magnetic Wand That Cleans Oil Spills: Upgrade

Why Crude Oil And Iron Ore Will Continue To Fall In Price In 2015

http://www.forbes.com/sites/timworstall/2014/12/29/why-crude-oil-and-iron-ore-will-continue-to-fall-in-price-in-2015/

There’s an interesting similarity between crude oil and iron ore on the world markets at the moment. In fact, if we take out the point that Opec is a cartel (which isn’t important to this point) we’ve actually got very much the same underlying economics in both markets. And the economics of this is clearer in iron ore than it is in crude oil but it does lead to very much the same price prediction for both commodities: prices are going to keep going down in 2015.

The basic insight (not that it’s a difficult insight to gain) is that both commodities are currently in over-production. Well, over-production doesn’t really exist, as prices move to balance supply and demand. But more is being produced than there is demand for at the prices of 6 months ago: thus the price today is lower than the price of 6 months ago. Our interesting question is whether this is going to continue next year?

The answer there seems to be that yes, it probably will. Because even at current prices there’s still more production than there is demand for it. Meaning that some producers will need to leave the market, curtailing supply, before prices rise again. It is, of course, possible that lower prices will stoke demand but the demand led price cycle for iron ore is long and it’s probably, with crude oil, longer than the influence of low prices on supply.

Here’s a nice piece about iron ore that illustrates the point:

At the $8 billion Roy Hill mine Rinehart is building in the Pilbara region, where her father made the first discoveries in the 1950s, ore must sell for about $56 a metric ton at Chinese ports to avoid losses, and costs are even lower for Australian output from Rio Tinto Rio Tinto Group and BHP Billiton BHP Billiton Ltd., UBS UBS Group AG data show. Even with prices down 65 percent from a record in 2011, top buyer China pays $67 for the steel-making ore today.

And:

Ore with 62 percent content delivered to Qingdao, China, plunged 50 percent this year to $66.84 on Dec. 23, the lowest in more than five years, according to Metal Bulletin Ltd., and the raw material was at $66.94 on Dec. 24. Even as prices drop, high-cost output may be slow to shutter. Some mines in China will attempt to “hang on” above $60 to $70, Bank of America Bank of America Merrill Lynch said, to preserve jobs. A drop below $60 next year is needed to accelerate cuts, Citigroup Citigroup Inc. says.

Mines just aren’t something you close down because they are unprofitable on an overall basis. There’s billions upon billions tied up in capital investments there, making true profitability not the measure against which you make production decisions. Instead, you keep producing as long as you’re covering your operating costs. Because that means that you’re still at least with a positive cash flow to make some contribution to those past sunk costs.

So, a mine might well keep operating at much lower prices than would tempt someone to open a new mine. This means that price swings can be quite violent in the industry (I’ve seen, handled even, metals that have had 1000% price increases in one year and 90% price collapses in others). The corollary of this is that prices need to go down well below full production cost, below even operating only cost, in order to shake the high cost producers out of the market.

This is also true of the crude oil market. Developing an oil field is a hugely expensive and capital intensive process. Actually pumping up the oil once you’ve done that not so much. And just as with the iron ore mines the different suppliers of oil have different all in costs and also different operating costs. Saudi Arabia could, in some fields, see the oil price at $10 a barrel and still have a positive cash flow. That’s simply not going to be true of the tar sands up in Canada. And that sort of price would certainly stop people drilling new shale wells: but it might well not stop them collecting the oil from the ones they’ve already drilled.

So, in this sense the two markets are very similar, in their underlying economics. Current supply is above current demand, thus price falls. But to curb supply (for demand will react more slowly than supply) some of the higher cost producers need to exit the market. And they’re not going to do that one the basis of all in costs, but on the basis of operating only costs, ignoring their sunk costs. Thus the price will need to go well below market clearing price in order to shake out those high cost producers.

Thus my opinion (and please don’t go investing on this basis! It is only an opinion!) that both prices, crude oil and iron ore, are likely to fall further in 2015.

My latest book is “23 Things We Are Telling You About Capitalism” At Amazon or Amazon UK. A critical (highly critical) re-appraisal of Ha Joon Chang’s “23 Things They Don’t Tell You About Capitalism”.

US crude settles at $54.73 a barrel; down 4% on the week

Daniel Acker | Bloomberg | Getty Images

http://www.cnbc.com/id/102295698

A Lufkin Industries Inc. Mark II Unitorque electric pumping unit removes crude oil from a Fidelity Exploration & Production Co. well outside South Heart, North Dakota.

U.S oil futures ended lower on Friday, tumbling as the dollar strengthened and a supply glut in top consumer the United States trumped worries about falling production from Libya.

U.S. crude settled down 2 percent, or $1.11, at $54.73 a barrel in thin trade as many countries were still on Christmas holiday. The contract has declined some 4 percent this week.

 

Brent crude was last trading about 70 cents lower at $59 a barrel.

 

The market had come under pressure from Wednesday's DOE report, which showed a 7.3 million-barrel rise in crude inventories to their highest December level on record. Analysts had expected a seasonal decline.

Read MorePrice plunge puts oil patch jobs at risk

The slide was exacerbated as oil prices reacted to a strengthening dollar index.

"There's still significant weakness in confidence, and that means that we're going to have occasional retests to the downside," said Richard Hastings of Global Hunter Securities. The strenghtening dollar index triggered the slide Friday, he said.

   

Additionally, the market continued to reel from bearish storage data just before the Christmas holiday.

"The numbers on Wednesday were really bearish, and it's possible the market is still trying to digest them," said Andrew Lebow of Jefferies in New York. "Maybe the path of least resistance is down here, given that we've been in a long down trend."

Read MoreFill'er Up: Booming biz for gas station stocks

Crude imports by Japan, the world's fourth-biggest oil buyer, dropped 17.3 percent in November from a year earlier to 14.68 million kilolitres (3.08 million bpd), government data showed on Thursday.

On Friday, officials said the blaze had spread to two more tanks.

Merry Christmas from www.crudeoildaily.com

Global oil price fall could hurt Ghana infrastructure plans -president

http://www.cnbcafrica.com/news/western-africa/2014/12/24/ghana-oil/

Oil producer Ghana could struggle to pursue its plans to build schools, roads and hospitals if global oil prices fall further.

Global oil price fall could hurt Ghana infrastructure plans. PHOTO: Omgghana.com

This is according to President John Mahama in comments emailed to Reuters on Tuesday.

Petroleum exports from Ghana's offshore Jubilee field are a big source of government revenue. As in other economies heavily dependent on oil income, the near halving of benchmark crude prices since June has undermined even conservative budget assumptions.

Ghana, which exports roughly 105,000 barrels of oil per day, had already begun talks with the International Monetary Fund in August on how to steady its economy after rapid development and surging government spending drove up inflation.

(WATCH VIDEO: Ghana's oil and gas space)

Mahama, whose post comes up for election in 2016, told his advisory council the oil price fall could further imperil government development plans.

"If it continues low, it will affect us on the revenue side in respect of how much money comes into the annual budget funding amount which we use for capital expenditure under the budget," Mahama said on Monday.

Ghana has a stabilisation fund to back up budget financing if oil revenue falls short of forecasts, but the government needs parliamentary approval to draw on the fund.

The government projected in its 2015 budget it would earn 4.2 billion cedis (1.3 billion US dollars) in oil revenues, or 3.1 per cent of gross domestic product.

Ghana also imports oil but the National Petroleum Authority is reluctant to lower pump prices, saying it would use any savings to offset debt owed to bulk suppliers.

Crude oil seen stored on tankers in 2015 as contango widens

Global oil traders are likely to store crude in tankers next year, as a widening contango makes large-scale storage at sea profitable for the first time since the financial crisis more than five years ago, industry sources said. PHOTO: BLOOMBERG 

http://www.businesstimes.com.sg/energy-commodities/oil-rout/crude-oil-seen-stored-on-tankers-in-2015-as-contango-widens

 

[SINGAPORE] Global oil traders are likely to store crude in tankers next year, as a widening contango makes large-scale storage at sea profitable for the first time since the financial crisis more than five years ago, industry sources said.

Oil prices have plunged nearly 50 per cent since June due to a global supply glut, but the economics for storing crude at sea have mostly remained unfavourable.

However, with Brent for prompt delivery dropping sharply versus later contracts in the past week, traders are increasingly requesting to lease vessels for storage.

This market structure, known as contango, allows traders to lock-in profits by buying oil now and selling it forward for later delivery, as long as the costs of storage are low enough.

"The current contango on the ICE Brent market would already be sufficient to make floating storage viable based on average 2014 freight rates," JBC Energy said in a note.

Analysts at JBC Energy expect 30-60 million barrels of oil to be stored offshore worldwide in the first six months of 2015.

A contango in 2009 led to over 100 million barrels being stored on tankers and sold later.

The International Energy Agency expects 300 million barrels of crude to be put into storage globally, including onshore and offshore, in the first half of 2015, which could "bump against storage capacity limits" in OECD countries.

In July this year, the oil market flipped into a prolonged contango for the first time since 2010. The spread between Brent for first and second month widened to around 80 cents a barrel, from around 20 cents last week.

Looking further ahead, Brent for February delivery is currently close to $3.95 cheaper than for delivery five months later, the widest gap since 2010.

But so far this year, only a few tankers have stored oil at sea as the discount for the front month crude futures has been insufficient to finance chartering. Ship owners have also been resisting calls to lease out vessels for oil storage given a seasonal hike in freight rates.

However, as day rates drop, ship owners will be compelled to lock in deals to allow charterers to store crude for months, industry sources said.

"Moving into the first quarter of 2015, freight rates are likely to correct downwards, opening up floating storage opportunities," JBC Energy said.

REUTERS

Cheap Oil Is Dragging Down the Price of Gold

By Debarati Roy

Photographer: Scott Eells/Bloomberg

A gauge of inflation expectations that closely tracks gold is headed for the biggest annual drop since the recession in 2008.

http://www.bloomberg.com/news/2014-12-23/cheaper-oil-putting-gold-out-of-job-as-an-inflation-hedge.html

Gold, the ultimate inflation hedge, isn’t much use to investors these days.

Oil is in a bear-market freefall that began in June, spearheading the longest commodity slump in at least a generation. The collapse means that instead of the surge in consumer prices that gold buyers have been expecting for much of the past decade, the U.S. is “dis-inflating,” according to Bill Gross, who used to run the world’s biggest bond fund.

A gauge of inflation expectations that closely tracks gold is headed for the biggest annual drop since the recession in 2008. While bullion rebounded from a four-year low last month, Goldman Sachs Group Inc. and Societe Generale SA reiterated their bearish outlooks for prices. The metal’s appeal as an alternative asset is fading as the dollar and U.S. equities rally, and as the Federal Reserve moves closer to raising interest rates to keep the economy from overheating.

Oil Prices

“Forget inflation -- all of the talk now is about deflation,” Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments LLC., said Dec. 16. “Obviously, oil prices dropping are adding to deflationary pressures. We may see a rate rise next year, and we could see gold come under pressure as the dollar continues to move higher.”

Even though there’s been little to no inflation over the past six years, investors have been expecting an acceleration after the Fed cut interest rates to zero percent in 2008 to revive growth. Those expectations, tracked by the five-year Treasury break-even rate, helped fuel gold demand and prices, which surged to a record $1,923.70 an ounce in 2011.

Eroding Appeal

Now, inflation prospects are crumbling, undermining a key reason for owning the precious metal.

Crude-oil futures in New York have tumbled 44 percent this year, dropping below $54 a barrel last week, as global output surged. The five-year break-even rate is down 33 percent this year, the most since 2008. In November, the cost of living fell 0.3 percent, the most since December 2008, government data show, and economists surveyed by Bloomberg predict the annual gain in consumer prices will slow in 2015 to 1.5 percent from an estimated 1.7 percent this year.

Cheaper energy means there are no signs that inflation is approaching the Fed’s 2 percent target, Gross, who used to run the world’s largest bond fund at Pacific Investment Management Co. before joining Janus Capital Group Inc. in September, said Dec. 12 in a Bloomberg Surveillance interview with Tom Keene.

Shunning Gold

Investor holdings in exchange-traded funds backed by gold last week were the lowest since 2009, and about $7.48 billion has been wiped from the value of the funds in 2014, according to data compiled by Bloomberg. Open interest in New York futures and options dropped 5.3 percent this year, set for a second annual loss and the longest slump since 2005, U.S. government data show.

After rebounding about 4 percent from a four-year low in early November, prices will average $1,175 next quarter, below the Dec. 22 close of $1,179.80, according to the median of 31 analysts tracked by Bloomberg. Goldman forecasts a drop to $1,050 by next December, while SocGen expects $950 in 2015’s fourth quarter.

Since touching a six-week high on Dec. 9, futures fell 5.1 percent to $1,175.20 on the Comex in New York today, heading for a second straight annual decline, down 2.3 percent. The Bloomberg Commodity Index dropped 15 percent this year, while the Bloomberg Dollar Spot Index climbed 11 percent. The Standard & Poor’s 500 equity index is up 12 percent, after touching a record high Dec. 5.

Rebound Bets

Speculators haven’t given up on gold. Money managers remain bullish, increasing their net-long position to 103,738 futures and option contracts as of Dec. 16, more than doubling bets since early November, according to U.S. Commodity Futures Trading Commission data.

Signs that central banks in China, Europe and Japan will add to stimulus efforts have increased speculation that global inflation could rise, even as U.S. consumer costs stay stable. While dollar-denominated gold is down this year, bullion is up 12 percent priced in yen and 10 percent in euros.

“It’s confounding that inflation is not rampant on a worldwide basis, based on the amount of liquidity that has been pumped into the system,” Michael Mullaney, chief investment officer of Fiduciary Trust Co. in Boston, which oversees $11.5 billion, said Dec. 16. “We are not there yet, but once this starts to percolate, we will see headlines on inflationary pressures” that can support gold prices, he said.

Rally Ends

Gold climbed 70 percent from December 2008 to June 2011 as the U.S. central bank bought debt and held borrowing costs at a record low. Prices slumped 28 percent last year, the most in three decades, after some investors lost faith in the metal as a store of value.

The Fed’s benchmark interest rate will be 1.125 percent at the end of next year, quarterly estimates from U.S. central bankers showed Dec. 17. Chair Janet Yellen said in a press conference that day that inflation will eventually reach the Fed’s target, allowing the central bank to raise borrowing costs.

Bullion’s link with inflation dates back more than 2,000 years, with the first use of coin currency in 550 B.C., according to the World Gold Council. While countries from the U.S. to the U.K. adopted a gold standard by the 19th century to limit inflation, no nation links currencies to the metal anymore. The Fed cut the dollar’s ties to gold four decades ago.

“Gold as an inflation hedge is unnecessary,” Atul Lele, who helps oversee $5.1 billion as the chief investment officer at Bahamas-based Deltec International Group, said Dec. 16. “We think inflation in the U.S. could rise, but nothing that should be a cause of worry.”

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net

Gas Prices Drop Below $2 in 5 Cities

http://247wallst.com/energy-economy/2014/12/22/gas-prices-drop-below-2-in-5-cities/

Gasoline has breached below $2 in a number of gas stations around the country. It has fallen below that level in five large cities, based on the price of an average gallon of gas.

According to GasBuddy, these cities are Tulsa, Okla., ($1.96); Lubbock, Texas, ($1.98): Kansas City, Mo. ($1.99); Fort Worth, Texas, ($1.99); and Dallas ($1.99).

The gas prices in several other cities have fallen below $2.05, and given falling prices, could be below $2 in a matter of days.

The data show that prices can be wildly different from city to city. The national average for a gallon of regular is $2.38. That is down from $2.84 a month ago. The price is over $2.90 in six cities, and more than $3 in two of them.

Three things largely drive the price of gasoline. First and foremost of these is oil prices, which have dropped from over $100 a barrel in June to well below $60 — and for a period below $55.

Another driver of prices is proximity to large refineries. All of the cities with sub-$2 gas are near the huge refineries on the Gulf of Mexico coast, especially near Houston.

Finally, state gasoline tax prices play an outsized role. The gas tax in Texas ranks 38th among American states at $0.20 per gallon. The gas tax in Oklahoma ranks 46th by the same measure at $0.17. By contrast, New York has the highest gas tax at $0.50.

The Biggest Ship in the World (Though It Isn’t Exactly a Ship)

http://www.nytimes.com/2014/11/02/magazine/the-biggest-ship-in-the-world-though-it-isnt-exactly-a-ship-.html?kwp_0=6815&smid=fb-nytimes&bicmst=1409232722000&bicmet=1419773522000&bicmp=AD&smtyp=aut&bicmlukp=WT.mc_id&kwp_1=116935&kwp_4=50285&_r=0#

It’s called Prelude, and it’s bigger than big. More than 530 yards long and 80 yards wide, it was constructed with 260,000 metric tons of steel, more than was used in the entire original World Trade Center complex, and it’s expected to displace 600,000 metric tons of water, or as much as six aircraft carriers. Even the paint job is huge: Most big vessels dry-dock every five years for a new coat, but Prelude’s paint is supposed to last 25 years. It will produce more natural gas than Hong Kong needs in a year. And it’s so big that you can’t really photograph it, at least not all at once. The photographer Stephen Mallon spent two days on cranes, one fore and one aft, taking more than a thousand pictures. Later, editing software was used to stitch hundreds of them together to create the composite image you see here.

What makes this giant liquefied-natural-gas enterprise feasible, paradoxically enough, is the miniaturization its construction represents. It’s much smaller than landlocked equivalents — imagine shrinking your local refinery until it fits on a barge. Shell Oil, which has the biggest stake in the project, describes Prelude as more environmentally friendly than an onshore site. There are no estuaries under threat, no shorelines to run pipe across and reduced risks to population centers, given the explosiveness of natural gas. And it is designed to ride out extreme weather, thanks to three giant 6,700-horsepower thrusters that can turn it into the wind and waves. “These are the things that the naval architects had to worry through,” says Robert Bea, co-founder of the Center for Catastrophic Risk Management, at the University of California, Berkeley. “It works like a big-ass weather vane.”   

      

Prelude is not a ship or a boat: The Shell executives refer to their longer-than-the-Empire-State-Building-is-tall contraption as a facility. “Prelude F.L.N.G.,” they might say, is “the largest offshore floating facility ever built.” (F.L.N.G. stands for floating liquefied natural gas.) Then again, even the executives slip up once in a while and call it a ship, because the Prelude does in fact move, just a little, when it has to. In the finished sketches, it looks like a gigantic unfinished cruise ship, a 30-story Carnival Cruise Lines boat, built with an Erector set.

Right now it is under construction in a South Korean shipyard on Geoje, the island where Samsung Heavy Industries makes large ships and drilling platforms. Prelude is designed to take advantage of inaccessible or “stranded” natural-gas deposits, stranded because until recently they cost too much to make their capture worthwhile. In North Dakota, for example, most natural gas released from oil drilling is burned off because of infrastructural limitations and the expense of recovering it. “A project like this wasn’t an economical prospect for decades, but now things are changing,” says Francis O’Sullivan, the director of research at M.I.T.'s Energy Initiative. Owing to shifts in oil prices and a change in the climate of energy arbitrage, a vast amount of usable natural gas — an estimated three trillion cubic feet of it — is now profitable and waiting to be tapped within an area called Browse Basin, under the Indian Ocean, roughly 125 miles northwest of Australia. That’s where Prelude will soon be towed, then fixed to what “The Biogeography of the Australian North West Shelf” describes as “the relatively featureless sedimentary sea floor plains.”

For anchors, Prelude uses four groups of mooring chains, each link of which is more than three feet long and was cast in the Basque region of Spain. On the days Prelude was photographed, the turret, which will be as big as the Statue of Liberty, had not been installed yet. It will go underneath the circular aperture, visible at the far right of the last image, and be the point through which the natural gas will be piped up into the facility and around which Prelude will rotate on the water. In the shipyard, this spot is known as the moon pool.

Stephen Mallon is a photographer based in New York. His exhibition “Land in Sea” was recently at the Waterfront Museum in Brooklyn.

A version of this article appears in print on November 2, 2014, on page MM40 of the Sunday Magazine with the headline: The Biggest Ship in the World. Today's Paper|Subscribe

ECA bunker surcharge clause introduced

http://www.tankeroperator.com/ViewNews.aspx?NewsID=6246

To minimise the risk of bunker volatility for its members, due to the forthcoming ECA sulphur cap and to take account of increasingly onerous regulations on emissions, INTERTANKO has produced a bunker surcharge clause. 

        

This clause – ‘INTERTANKO MARPOL Annex VI Clause for Voyage Chartering in Emission Control Areas’ - addresses any additional bunker costs when trading in an ECA.

The wording has also been adapted for use in the parcel trades – ‘INTERTANKO MARPOL Annex VI Clause for Voyage Chartering in Emission Control Areas (Parcel trades)’.

It has been put together to assist in recouping actual amounts paid for bunkers, thereby avoiding disputes with charterers over bunker prices and minimising risk associated with price volatility.

Where an owner fixes using Worldscale, there is no need for a bunker adjustment clause to cover the additional costs of low sulphur fuel used in an ECA. These extra bunker costs are not yet included in the flat rate but are today compensated by fixed differentials set out in the Worldscale book (using 2014 rates).

However, the Worldscale Association recently announced its fixed rate differentials for 2015. The figure set for bunkers with maximum 0.1% sulphur content – Baltic and North Sea ECA and European in-port bunker allowances will be $920.75 per tonne low sulphur fuels for the North American ECA & Caribbean ECA and in-port bunker allowances will be $1,028.02.

Baltic and North Sea ECA miles will attract a fixed differential of $48.35, while North American ECA miles will be compensated by a fixed differential of $65.31.

The bunker prices Worldscale will use for calculating other 2015 Worldscale flat rates will be $614.81 per tonne.

Not all members fix using Worldscale. Given the tighter ECA requirements from 2015, INTERTANKO has developed two clauses to accommodate the ECA differentials when fixing outside of Worldscale, on lumpsum, or USD per tonne basis.

To achieve maximum certainty at fixing and reimbursement of additional ECA costs, the mechanism of the CPP/dirty trades clause is based on actual consumption. Time within the ECA can be taken from the Master’s statements (as it would be with a deviation or call at an interim port) and the additional bunker costs can then be invoiced and paid without deduction.

Charterers should be in a position to make this calculation and pay the bunker surcharge together with freight. Timings within the ECA will be clear from the Master’s statements as they will coincide with a fuel switch when entering the ECA and will end in the ECA port at ‘hoses off’.

The reference prices for fuel used in the first clause are those available prior to loading on ‘first in first out’ basis, again a formula that is familiar when calculating bunkers consumed for deviation, or interim port calls. This can easily be adapted if members are more used to using ‘bunkers last stemmed’, or if a reference point from Platts is preferable.

The parcel trade version shows how a reference to Platts might work. Either way, the fuel oil reference prices used can be tracked in supporting invoices so that any additional charge can be verified by charterers.

Owners and charterers must therefore agree the following values prior to fixing, INTERTANKO said:

Cs = Daily consumption at Sea
Cp = Daily consumption at Port

This is unavoidable given the major bunker cost differential in trading in an ECA area, the organisation stressed. These figures may vary owner to owner but figures for the same ship type should be comparable and therefore capable of agreement.

There would be no additional compensation for owners who have opted to use scrubbers, or other alternatives to low sulphur fuel to satisfy the ECA requirements.

By using the Worldscale formula, or the INTERTANKO MARPOL Annex VI clauses for Voyage Chartering in Emission Control Areas, an owner who trades in and out of an ECA area can be properly compensated for the additional costs of using low sulphur fuels.

This is imperative now as for example, a vessel berthed in an EU port for over two hours is already required by the EU Sulphur Directive to use 0.1% sulphur content fuel. It will become more important in January 2015 and beyond as sulphur emission regulations continue to tighten. 

Owners are therefore encouraged to begin negotiations with charterers to ensure a proper distribution of risk and cost that the new requirements will bring, INTERTANKO warned. 

Gov. Andrew Cuomo To Ban Fracking In New York State

(AP Photo/Mark Lennihan)

New York Gov. Andrew Cuomo (D) will ban hydraulic fracturing, also known as fracking, in his state, officials announced Wednesday.

http://www.huffingtonpost.com/2014/12/17/cuomo-fracking-new-york-state_n_6341292.html

"I will be bound by what the experts say," Cuomo said at a press conference.

In his remarks at the conference, Cuomo lamented the emotionally charged nature of the debate over fracking, a process that uses a high-pressure blast of water, sand and chemicals to tap into natural gas reserves contained in shale formations. "Let's bring the emotion down and let's ask the qualified experts," said Cuomo, who quickly turned the press conference over to state health and environmental officials.

The officials said the potential health and environmental impacts are too great to allow fracking to proceed in the state at this time, and pointed to a dearth of studies regarding the long-term safety of hydraulic fracturing. The New York State Department of Environmental Conservation will issue a legally binding, supplemental environmental impact statement next year outlining its findings on the issue.

The potential adverse impacts of fracking are “widespread," DEC Commissioner Joseph Martens said at the press conference. He added that the prospects for fracking in New York are "uncertain at best," and the economic benefits are "far lower than originally forecasted."

Acting Health Commissioner Dr. Howard Zucker said that there are no longitudinal studies that provide an authoritative picture of the health impacts of fracking. The “bona fide scientific literature is only now emerging," he said.

Zucker said that in other states where fracking is already happening, he found that state health commissioners "weren't even at the table" when decisions about the process were made.

“I cannot support high-volume hydraulic fracturing in the great state of New York,” he added, noting that he would not live in a community that allows fracking and would not want his children to play in the soil in such a place.

Cuomo agreed with that conclusion.

"I think it’s our responsibility to develop an alternative … for safe, clean economic development,” the governor said.

The state of New York has had a moratorium on fracking since officials decided in 2008 that more research was needed. Several towns in New York have used zoning ordinances to ban fracking, a practice which was upheld by the state Court of Appeals earlier this year.

Wednesday's announcement is the culmination of a six-year review process by the DEC, including a study from the New York State Department of Health. The results of this review were expected to be released earlier this year, but were delayed until after the November election, in which Cuomo successfully sought a second term.

Cuomo dodged a question on fracking at the New York gubernatorial debate in October. "I am not a scientist," he said. "Let the scientists decide." Cuomo said he would wait for the results of the state's study: "What the experts say is right, that is what I will do."

Earlier in October, reports revealed that New York state officials had edited the text of a federal study about fracking's impact on water, in addition to delaying the study's release. Some descriptions of environmental and health risks were "played down or removed," Capital New York reported.

The activist group New Yorkers Against Fracking issued a statement on Wednesday praising Cuomo's decision. “On behalf of millions of New Yorkers, we would like to thank the Governor for his leadership and keeping his word in listening to the science and protecting the health and safety of New Yorkers over the special interests of the oil and gas industry," the group said.

The New York State Petroleum Council, a program of The American Petroleum Institute, issued a statement Wednesday calling the decision "the wrong direction for New York." The group's executive director, Karen Moreau, called it a "politically motivated and equally misinformed ban on a proven technology."

Magellan Processing receives EPA permit for Corpus Christi splitter

http://www.tankstoragemag.com/industry_news.php?item_id=8649

The US Environmental Protection Agency (EPA) has issued a final greenhouse gas (GHG) Prevention of Significant Deterioration (PSD) construction permit to Magellan Processing, a subsidiary of Magellan Midstream Partners, to build a new condensate splitter plant at the company's existing terminal.

The facility is in Nueces County, in Corpus Christi, Texas.

Magellan will construct a 100,000 bpd natural gas condensate splitter at the Corpus Christi facility.

The project includes two natural gas-fired hot oil heaters, two natural gas-fired fractionator heaters, storage tanks, and other associated equipment.

The company estimates capital costs for the project at around $400-450 million (€320-€360 million).

The project will create around 500 construction jobs and 105 long-term jobs. In June 2010, EPA finalised national GHG regulations, which specify that beginning on 2 January, 2011, projects that substantially increase GHG emissions require an air permit.

Since then, projects in Texas that increase GHG emissions have required an air permit from the EPA. In Texas alone, EPA has received 86 GHG permit applications from businesses since 2011.

Texas is No. 1 in the country for receiving EPA-issued GHG permits – with over 61 permits being issued by EPA. On 31 October, 2014, EPA announced both its approval of the state air plan and the withdrawal of the federal air plan making the Texas Commission on Environmental Quality (TCEQ) the primary GHG permitting authority in Texas.

The approval became effective upon publication in the Federal Register on 10 November.

This action eliminates the need for businesses to seek air permits from two separate regulatory agencies in Texas and moves the permitting program to TCEQ.

EPA and TCEQ will continue to work closely with pending permit applicants during the transition period and ensure no unnecessary project delays result from this action. Read the EPA press release here.

- See more at: http://www.tankstoragemag.com/industry_news.php?item_id=8649#sthash.TxyE8A1m.dpuf

Crashing crude may blow a $1.6 trillion hole in the global oil sector, annually

http://www.marketwatch.com/story/crashing-crude-may-blow-a-16-trillion-hole-in-the-global-oil-sector-annually-2014-12-14

NEW YORK (MarketWatch)—Talk about an oil spill. The spectacular unhinging of crude oil prices over the past six months is weighing mightily on the U.S. stock market.

And while it may be too early to abandon all hope that the market will stage a year-end Santa rally, it appears that if Father Christmas comes, there’s a good chance his sleigh will be driven by polar bears, instead of gift-laden reindeer.

Wall Street’s gift: a major stock correction.

Indeed, the Dow Jones Industrial Average DJIA, +0.00%  already endured a bludgeoning, registered its worst percentage decline since Nov. 25, 2011, down 677.96 points, or 3,78%. It was also the worst week for the S&P 500 SPX, -0.70% on a percentage basis since May 18, 2012. The S&P 500 was down 73. 04 points and 3.52% on the week.

But all that carnage is nothing compared to what may be in store for the oil sector as crude oil tumbles to new gut-wrenching lows on an almost daily basis. On the New York Mercantile exchange light, sweet crude oil for January delivery settled at $57.81 on Friday, its lowest settlement since May 15, 2009.

Moreover, the largest energy exchange traded fund, the energy SPDR XLE, +1.19% is off by 14% over the past month and has lost a quarter of its value since mid-June.

The real damage, however, is yet to come. By some estimates the wreckage, particularly for the oil-services companies, may add up to a stunning $1.6 trillion annual loss, at oil’s current $57 low, predicts Eric Lascelles, RBC Global Asset Management chief economist.

Since it’s a zero-sum game, that translates into a big windfall for everyone else outside of oil players.

In his calculation, Lascelles includes the cumulative decline in oil prices since July and current supply estimates of 93 million barrels a day. It’s a fairly simplistic tally, but it gets the point across that the energy sector is facing a serious oil leak. Here’s a look at a graphic illustrating the zero-sum, wealth redistribution playing out as oil craters:

RBC Global Asset Management/MarketWatch

It’s important to note that Lascelles believes that the downdraft in oil is largely a positive. The economist also believes that oil sector’s pain will be confined mostly to the energy sector.

Asia Tankers-VLCC rates to stay firm after Mideast climbs to near 5-yr high

http://www.hellenicshippingnews.com/asia-tankers-vlcc-rates-to-stay-firm-after-mideast-climbs-to-near-5-yr-high/

Rates for very large crude carriers (VLCCs) on key Asian routes are likely to hold firm next week but are unlikely to continue the surge seen earlier this week, brokers said.

Freight rates from the Middle East to Japan soared to their highest level since Feb. 2011, buoyed by a raft of fixtures by Shell, brokers and Reuters chartering data showed.

Average VLCC earnings on the Middle East-Japan route this year are at the highest level since 2010, said Ralph Leszczynski, head of research at Italian shipbroker Banchero Costa.

“Average earnings on the Middle East-Asia route so far in 2014 are $22,000 per day, against $32,000 per day in 2010. But this is still way better than the last three years,” he told Reuters on Friday

“I expect the VLCC market to stay pretty firm for fixtures in the first 10 days of next month. I see rates holding the line around 68-73 on the Worldscale measure,” a Singapore-based VLCC broker said on Friday.

Rates soared after Shell fixed three VLCC Middle East cargoes at around W73, equivalent to $81,500 per day, and around nine points higher than the prevailing charter rate for the route.

“Rates have edged up considerably and we are now seeing this year’s final cargoes in the Middle East being concluded and rates could possibly add further,” said Norwegian ship broker Fearnley in a weekly note on Wednesday.

Rates from West Africa to China climbed, helped by fixtures from Unipec and Shell, Reuters chartering data showed.

At least one charterer resisted owners’ attempts to push the market significantly higher with Taiwan’s Chinese Petroleum Corp (CPC) rejecting offers of W80 for a VLCC charter from the Middle East to Taiwan this week, the broker said.

Around 125 VLCC charters from the Middle East to Asia had been concluded for December loading. But charterers could hold back January cargoes to take some heat out of the market, the broker added.

VLCC rates for the benchmark route from the Middle East to Japan climbed to W73 on Thursday compared with W60 a week earlier.

Rates for West Africa to China rose to W66 on Thursday, against W59 last week, the highest since January.

In other trades, rates for 80,000-tonne Aframax tankers from Southeast Asia to East Coast Australia dropped to around W111 on Thursday, from W114 last Thursday, continuing a steady fall that stated on Nov. 25.

Clean tanker rates from Singapore to Japan slipped to W119 on Thursday, down from W119.50 a week earlier.

“The market is fairly okay. Rates are steady,” said a Singapore-based clean tanker broker on Friday.
Source: Reuters (Reporting By Keith Wallis; Editing by Anupama Dwivedi)

Nigerian oil workers go on strike

Fuel was sold on the black market during a previous strike

http://www.bbc.com/news/business-30479898

Nigeria's two main oil workers' unions have begun a nationwide strike, threatening to hurt the output of Africa's largest oil producer.

BBC reporters say long queues have formed at many petrol stations.

The unions, Pengassan and Nupeng, said the strike would continue until the government addressed its concerns.

These include the adoption of the delayed Petroleum Industry Bill, aimed at overhauling the sector and maintenance work on oil refineries.

The unions frequently go on strike or threaten to strike.

This time, the two unions were initially demanding the reinstatement of representatives who had been dismissed by oil companies, but now their list of complaints has grown.

They are now protesting that the government has allowed Nigeria's oil refineries to fall into disrepair and that the poor state of the country's roads is hindering the transport of oil.

They are also asking for the price of petrol to be reduced and oil theft to be stopped.

"We've commenced the strike. It will affect oil production, since all operations are on strike," Pengassan chief Babatunde Oke told Reuters.

However, an oil executive said the strike was not expected to affect output, because it would require the co-operation of large numbers of workers at production sites who would be unwilling to go that far.

"It's very difficult to shut them down, and once they do, it would take them a week to get them back up. They never do it. That's the last thing anyone wants," an oil executive told Reuters.

The BBC's Will Ross in Lagos said most of the unions' demands seemed "unrealistic, especially with an election looming".

"The refineries are not suddenly going to be fixed because of this strike. Some oil industry watchers suggest the unions are simply trying to force the government to pay them off and get a hefty Christmas present," he added.

A strike in September had little impact on oil production.

Many Nigerians, whether Christian or Muslim, travel home over the Christmas and New Year holidays and so they are stocking up on fuel now, in case of shortages in the next couple of weeks, analysts say.

OPEC Cuts 2015 Crude Demand Forecast to 12 Year Low

Crude oil prices hit 5 year low

http://www.eagletribune.com/news/crude-oil-prices-hit-year-low/article_6f641ca5-ae69-564f-bd7c-6cd74dc78fb5.html

NEW YORK (AP) — The price of oil took another dive Wednesday, plunging to five-year lows amid mounting evidence that global supplies are far outstripping demand.

The U.S. Energy Department reported a surprise increase in domestic oil inventories and OPEC projected that demand for its crude would sink next year to levels not seen in more than a decade.

Benchmark U.S. crude slumped 4.5 percent, or $2.88, to close at $60.94 a barrel on Wednesday. Prices have not been that low since July of 2009. U.S crude prices have fallen 17 percent in two weeks and are now 43 percent below the $107.26 that a barrel fetched at its peak this year.

Brent crude, an international benchmark used to price oil used in many U.S. refineries, fell $1.95 to close at $64.24 in London.

Energy analyst and trader Stephen Schork said in an interview that he expects that the combination of weak economic news out of Asia and growing global supplies will push oil down further, to below $60, by the end of the week. "It's the proverbial 'trying to catch a falling dagger' and I'm not going to try to catch it," he said.

OPEC said Wednesday that it expects demand for its crude to fall to 28.9 million barrels per day next year, 400,000 barrels per day less than in 2014. The cartel's official production target is 30 million barrels a day, which would mean far more oil on the world market than is being consumed.

Also on Wednesday, the Energy Department reported a surprise increase in U.S. crude supplies of 1.5 million barrels last week. Analysts were expecting a decline of 2.2 million barrels. Gasoline stocks also increased more than expected.

Falling oil prices are making for sharply lower prices of gasoline, diesel, jet fuel and heating oil, giving consumers, shippers and airlines a lift.

Economists say lower gasoline prices act like a tax cut, leaving more money in consumers' pockets to spend on other things. The national average price of gasoline fell Wednesday to $2.64, according to AAA, saving drivers $1.05 per gallon compared to what they were paying in late June.

Market sell-off deepens, Dow plunges 268 points

Photograph by Brendan McDermid — Reuters

It was the third-straight day of declines for the Dow and S&P 500.

http://fortune.com/2014/12/10/market-selloff-dow-268/

The dreary start to the week for U.S. stocks continued Wednesday as the market had its worst day in two months while oil prices continued their slide.

The Dow Jones Industrial Average fell for the third straight day, plummeting 268 points, or 1.5%, to 17,533. The blue-chip index has now fallen more than 425 points this week after coming tantalizingly close to the 18,000-point milestone on Friday afternoon. The index, which crossed the 17,000-point mark for the first time in July, is down 2.3% for the week.

It was also the third-straight day of losses for the S&P 500, which dropped 33 points, or 1.6%, on Wednesday. Meanwhile, the Nasdaq composite, which actually posted a gain on Tuesday, fell 82 points, or 1.7%, on Wednesday. The indices are down 2.4% and 2% for the week, respectively.

Falling oil prices battered the markets.Crude oil hit a five-year low after the Organization of Petroleum Exporting Countries (OPEC) cut its projection for the amount of oil it will need to produce in 2015 thanks to global oversupply. OPEC said it expects to need to produce only 29.8 million barrels of oil per day next year, which is 300,000 fewer barrels than previously thought. As a result, the price of Brent crude oil slipped 3.5% on Wednesday, to $64.50 per barrel, while West Texas Intermediate crude fell 4%, to $61.21.

In addition to the price of oil, the market has taken a hit on concerns over sluggish global economies, particularly in Asia and Europe. Tuesday saw a massive sell-off in China as well as a historic decline by the Athens stock exchange after the Greek government’s decision to hold an early vote in its presidential elections.

It has been a turbulent fall for the U.S. market, which experienced a broad sell-off in early October that briefly erased all of the year’s gains. But, a steady rebound through November and early December, which included a string of record finishes for the Dow Jones and S&P 500, pushed the market to record levels coming into this week.