Ganiyu Obaaro, with Agency report
Saudi Arabia has seriously ramped up its oil exports to China in recent months.
The Saudi Kingdom’s crude shipments to China have doubled in the span of a year. During the same period, its oil exports to the U.S. have dropped by nearly two-thirds.
According to TankerTrackers.com, which tracks oil tankers and shipments based on satellite imagery and ships’ automatic identification systems, Saudi Arabia exported a whopping 1,802,788 barrels per day (bpd) to China in July, compared to 921,811 bpd in August of 2018. By contrast, exports to the U.S. in July were 262,053 bpd, nearly 62 per cent down from 687,946 bpd in August of last year.
U.S. sanctions on Iranian oil have helped the shift. Major Asian energy importers like China have been forced to shift business away from the Islamic Republic -OPEC’s third-largest producer -and start buying more Saudi barrels to make up for that shortfall.
The U.S. is now more self-reliant than ever, thanks to its own Shale oil revolution, which helped it become the world’s largest oil producer by the end of last year.
But the numbers also signal a mix of short-term tactics and long-term strategy for the Saudis, industry experts told CNBC.
“Saudi Arabia learned from the last OPEC production cut in 2017 that they got the biggest bang for their buck by cutting flows to the largest, most transparent and most timely market — the U.S.,” said Matt Smith, director of commodity research at commodities analytics firm ClipperData, referring to the coordinated production cut that OPEC and its allies orchestrated to put a floor under falling oil prices.
“Choking back on flows to the U.S. was the best way to draw down inventories and turn around bearish sentiment, and they are employing the same tactic once again.”
ClipperData’s figures, which differ from that of TankerTrackers due to different tracking methods, still show U.S. imports of Saudi crude in July down over 60 per cent from last October.
Meanwhile, Smith said, as Saudi Arabia “slams on the brakes to the most transparent market, it is sending more crude into the most opaque one, China.”
This is where some industry analysts say Riyadh is employing short-term tactics: “impacting what remains the most visible and closely-watched market indicator, U.S. crude stocks,” Antoine Halff, co-founder of energy market analytics firm Kayrros, told CNBC.
The market has largely traded on weekly U.S. numbers, which — up until the growth of satellite imagery to provide greater transparency on global stocks — provided the best available picture of market conditions.
In spite of the greater availability of global market inventory thanks to satellite data, “the goal of impacting the U.S. stock metric seems to remain very real for OPEC in general and the Kingdom in particular,” Halff said. “Rightly or wrongly, this is the benchmark that everybody watches.”
China, oh the other hand, is not as forthcoming as OECD countries about its stocks, and its data isn’t as visible to the market. Halff notes that there is no established benchmark of Chinese stocks as there is for the U.S.
“Producers are far less concerned about building Chinese stocks than they are about building U.S. or OECD stocks in terms of what that may signal to the market,” he said.
TankerTrackers.com co-founder Samir Madani has described China as a sort of “black hole” for the world’s oil exports, having the ability to “easily absorb oil barrels from the market, especially when prices dip.” Looking at this, many analysts see a clear strategy from Beijing.
“The Chinese are very savvy and astute buyers, exporters who supply them have very good reasons to do so,” Halff said. In the current low oil price climate, the world’s largest oil importer is happy to up its Saudi crude purchases as its appetite increases, particularly given its launch of two new refineries which will grow its refining capacity by 800,000 bpd.
Locking in Asian market share is also a key long-term goal for Riyadh, as it is for other regional producers competing to capture downstream capacity across the continent. Saudi Aramco’s plan to acquire a 20 per cent stake in Indian refining and petrochemicals giant Reliance is the most recent example of this.
Conveniently for the Saudis, there’s also no risk of losing the U.S. as a customer, thanks to its giant Aramco-owned Motiva refinery in Texas. Therefore, “Aramco is willing to increase or decrease to the U.S. based on its own needs,” says Ellen Wald, President of Transversal Consulting and author of the book “Saudi, Inc.”
Fuel Queues: NNPC Has 2bn Litres in Stock, Says Coy
The Nigerian National Petroleum Company Limited (NNPC Ltd) says it has two billion litres of Premium Motor Spirit (PMS) In stock.
This is contained in a statement issued by Mr Adeyemi Adetunji, Executive Vice President, Downstream, NNPC Limited.
Adetunji said the stock of over two billion litres is equivalent to over 30 days sufficiency.
The NNPC, he said, has programmed vessels and trucks to unconstrained depots while massive loadouts from depots to states are closely monitored to ease fuel queues.
“The recent queues in Lagos are largely due to ongoing road infrastructure projects around Apapa and access road challenges in Lagos.
“The gridlock is easing out and NNPC Ltd has programmed vessels and trucks to unconstrained depots and massive loadouts from depots to states are closely monitored,” he said.
Adetunji said that Abuja was impacted by the challenges recorded in Lagos, adding that NNPC retail and key marketers had intensified dedicated loading into Abuja to restore normalcy.
“We want to reassure Nigerians that NNPC has sufficient products and we significantly increased products loading in selected depots and extended hours at strategic stations to ensure sufficiency nationwide.
“We are also working with industry stakeholders to ensure normalcy is returned as soon as possible,” he said. (NAN)
Reps Committee Quizzes AGIP Oil over Alleged Tax Evasion
The House of Representatives ad hoc committee on Joint Venture (JV) on Wednesday quizzed the Nigerian Agip Oil Company Ltd over alleged tax evasion.
Rep. Abubakar Fulata, the Chairman ad hoc Committee investigating the Structure and Accountability of JV Business and Production Sharing Contracts (PSCs) of the NNPC said it was not out to witch-hunt anybody.
He added that it be would be unfair for oil companies to evade taxes at a time the country was borrowing to fund budget.
He said almost all the oil companies in the country had no Certificate of Acceptance of Fixed Assets (CAFA) yet they had been enjoying capital allowance claims in violation of the nation’s law.
The committee said the oil companies did not have the right to choose the law their would, adding that ignorance of the law could not in any way be absolved.
The committee asked the representative of Agip if in the course of operations they had not short-changed the nation by way of profit tax and capital allowance
The representatives of Agip which was led by Director, and General Manager, Public Affairs, Mr.Barry Nwibani said over the years they relied only on Petroleum Tax Act for payment of taxes.(NAN)
Fuel Scarcity: MOMAN, NNPCL Collaborate to Improve Distribution – Official
The Major Oil Marketers Association of Nigeria (MOMAN) says it is working with the Nigeria National Petroleum Company (NNPC) Ltd., to improve the distribution of petrol across the country.
Mr Clement Isong, Chief Executive Officer of MOMAN, said this in an interview with the News Agency of Nigeria (NAN), in Lagos on Saturday, against the backdrop of the current scarcity of petrol and long queues at filling stations.
Isong said the association had been holding a daily logistic emergency meeting with the downstream management of NNPCL on how to improve the supply of petrol.
According to him, the collaboration with NNPCL will enhance the distribution of petroleum products in the country.
“We are doing depot to depot check-in and check-out to enhance efficiency, also having logistic supply meetings with NNPCL.
“There is also collaboration among our members to cushion supply to various MOMAN’s stations.
“We arranged it in a way that any MOMAN member who does not have product can pick from fellow members’ depot to minimise supply gaps,” he said.
Isong also said the effort was to improve the supply of petrol at filling stations across the country.
“NNPCL had an operational meeting with MOMAN to ensure that products are effectively distributed across the country.
“The logistics meeting was to ensure adequate distribution of products to stations across the country,” he added.
The helmsman said MOMAN members would be working late and during the weekend to bridge product supply gaps.
He said MOMAN had been pushing out more products than it normally did.
He added that the scarcity was as a result of delay experienced at the point of receiving products from offshore to onshore at the port.
He, however, said the logistics challenge had been resolved and members were currently trucking out products.
However, the oil marketers and petroleum depot operators, under the aegis of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), called for quick intervention by the Federal Government.
Its Chairman, Mrs Winifred Akpani, urged the Nigerian Maritime Administration and Safety Agency (NIMASA) and the Nigerian Ports Authority (NPA) to comply with the Federal Government’s directive to end payment of port charges in dollars for petroleum products brought into the country.
Akpani maintained that accessing forex through the Central Bank of Nigeria (CBN) window would enhance their capacity, facilitate seamless supply of petrol, and birth a regime of sustainability in terms of storage, distribution and supply across the nation.
“DAPPMAN hereby calls on the government to establish a level playing field in the sector by giving petroleum marketers access to forex at the CBN exchange rate for their operations,” said Akpani.
He emphasised that accessing FX at the official rate would boost fuel supply across the country.
She added that the burden of sourcing forex through the parallel market for transactions domiciled in Nigeria had left petroleum marketers in dire straits.
She said, “Accessing dollars for our operations has been an insurmountable hurdle for petroleum marketers.
“The difference between CBN exchange rate and the parallel market exchange rate continues to get wider by the day.”
NAN reports that some filling stations owned by major oil marketers were seen selling petrol at regulated price of N170 per litre, while stations belonging to IPMAN members sell between N220 and N240 per litre.
Most filling stations that have fuel collect N100 at the entrance before vehicles are allowed to enter filling stations, and additional N100 to sell product to vehicles owners.
Black marketers have taken advantage of the situation to hoard products and sell to desperate motorists at exorbitant prices. (NAN)
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