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Oil Dips Near $40 With IEA Warning of Fragile Market Outlook

Oil Dips Near $40 With IEA Warning of Fragile Market Outlook

(Bloomberg) — Oil slipped near $40 a barrel in New York as the IEA cautioned on a fragile outlook and Russia indicated OPEC+ may stick with its current plans to lift output.

The group’s plans to boost production in January will leave the market in a precarious balance, and potentially unable to handle higher supply from elsewhere or a drop in demand, the International Energy Agency said. Russia’s energy minister said his nation expects to be able to gradually raise production without harming the market.

Though prices edged lower, there were bright spots. A Chinese mega-refiner is snapping up barrels of Middle Eastern crude to feed trial runs of its expanded plant. At the same time India’s refiners have cranked up processing to meet higher demand during a festive period.



graphical user interface: WTI close to 50-, 100- and 200-day moving averages


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WTI close to 50-, 100- and 200-day moving averages

A lot of traders’ attention is turning to plans by OPEC+ to raise supply next year in line with its agreement earlier this year. While some producers inside the group are said to be having doubts, the United Arab Emirates and now Russia have said that, for the time being, the group will proceed as scheduled. Saudi Arabian Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin on Tuesday urged the alliance to comply with agreed cuts as virus infections rise again.

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“OPEC+ could provide a silver bullet by not tapering cuts at the start of next year as planned,” said PVM Oil Associates analyst Stephen Brennock. “But such a proposition will be hard to swallow by some of the group’s members.”

Prices
West Texas Intermediate for November delivery fell 0.4% to $40.05 a barrel at 12:10 p.m. London timeBrent for December settlement lost 0.2%, to $42.38

Despite its cautionary outlook, the IEA said that the

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OPEC+ Oil Boost to Leave Market in Precarious Balance, IEA Says

OPEC+ Oil Boost to Leave Market in Precarious Balance, IEA Says

(Bloomberg) — The outlook for oil “remains fragile” as the pandemic depresses demand, and OPEC’s plans to increase supply next year will leave global markets precariously balanced, the International Energy Agency said.

“There is a risk that the demand recovery is stalled by the recent increase in Covid-19 cases in many countries,” the IEA said in its monthly market report.

At the same time, markets are set to receive fresh supplies in January as OPEC and its partners relax some of the measures they’ve taken to prevent a glut. Once the taps are opened, “there is only limited headroom for the market to absorb” anything more, the Paris-based agency said.



text: A Precarious Balance


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A Precarious Balance

The acceleration in virus infections is leading many in the market to question if the Organization of Petroleum Exporting Countries and its allies will increase supply from January. Producers inside the group are also having doubts, according to delegates. Still, United Arab Emirates Energy Minister Suhail Al Mazrouei said on Tuesday that, for now, OPEC+ plans to proceed with the supply boost as scheduled.

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Global oil demand remains on track for an unprecedented 8% slump this year because of the economic fallout from the virus. To offset the drop, and prop up prices, the OPEC+ alliance led by Saudi Arabia and Russia has made vast reductions in output.

Also see: Saudi Prince and Putin Urge OPEC+ Compliance as Oil Prices Sag

Their measures have “shown some success,” depleting the world’s swollen inventories in the third quarter at a rate of 900,000 barrels a day, the IEA said. Crude futures are hovering just above $40 a barrel in London.

Inventory Drop

Yet the declines in inventories will slow markedly in the first half of next year, the report showed.

Having phased out some of

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Mega-Refiner Buying Oil a Bright Spot for Constrained Market

Mega-Refiner Buying Oil a Bright Spot for Constrained Market

(Bloomberg) — A Chinese mega-refiner is snapping up barrels of Middle Eastern crude in a rare bright spot for a market hampered by dwindling import quotas after a buying spree earlier in the year.

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Rongsheng Petrochemical Co.’s Singapore unit has purchased at least 7 million barrels in the spot market so far this month for delivery in December and January, according to traders who asked not to be identified because the information is private. The company is buying up crude to feed a trial run operation of its expanded refinery in Zhejiang province this quarter.

Chinese crude imports rose in September for the first time in three months as companies sought oil for new and expanding plants. Inbound shipments may struggle to reach June’s peak through the rest of the year after independent refiners used up most of their quotas. The processors, known as teapots, played an outsized role in supporting oil prices this year after a buying frenzy following a rapid recovery from the pandemic.



chart: China's oil imports last month were at the highest level since July


© Bloomberg
China’s oil imports last month were at the highest level since July

Rongsheng’ Singapore unit purchased medium-sour grades from the Persian Gulf — the baseload for its refinery — such as Abu Dhabi’s Upper Zakum, Qatar’s Al-Shaheen and Iraq’s Basrah Light cargoes, according to the traders. The phase 2 expansion of its Zhoushan-based refinery is expected to double processing capacity to 800,000 barrels a day.

Rongsheng Petrochemical didn’t immediately respond to an email seeking comment on the matter.

Teapots are expected to ramp up crude purchases for January-arrival, traders said, with some companies already showing interest for spot purchases.

Beijing started allowing teapots to directly import crude in 2015 as part of an effort to increase private investment in the energy industry. The independent refiners, mainly based in Shandong province,

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Mega-Refiner’s Oil Buying a Bright Spot for Constrained Market

Mega-Refiner’s Oil Buying a Bright Spot for Constrained Market

(Bloomberg) — A Chinese mega-refiner is snapping up barrels of Middle Eastern crude in a rare bright spot for a market hampered by dwindling import quotas after a buying spree earlier in the year.



a group of people on a bridge over a body of water: A crew man stands on the deck of the crude oil tanker 'Devon' as it sails through the Persian Gulf towards Kharq Island oil terminal to transport crude oil to export markets in the Persian Gulf, Iran, on Friday, March 23, 2018. Geopolitical risk is creeping back into the crude oil market.


© Bloomberg
A crew man stands on the deck of the crude oil tanker ‘Devon’ as it sails through the Persian Gulf towards Kharq Island oil terminal to transport crude oil to export markets in the Persian Gulf, Iran, on Friday, March 23, 2018. Geopolitical risk is creeping back into the crude oil market.

Rongsheng Petrochemical Co.’s Singapore unit has purchased at least 7 million barrels in the spot market so far this month for delivery in December and January, according to traders who asked not to be identified because the information is private. The company is buying up crude to feed a trial run operation of its expanded refinery in Zhejiang province this quarter.

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Chinese crude imports rose in September for the first time in three months as companies sought oil for new and expanding plants. Inbound shipments may struggle to reach June’s peak through the rest of the year after independent refiners used up most of their quotas. The processors, known as teapots, played an outsized role in supporting oil prices this year after a buying frenzy following a rapid recovery from the pandemic.

Rongsheng’ Singapore unit purchased medium-sour grades from the Persian Gulf — the baseload for its refinery — such as Abu Dhabi’s Upper Zakum, Qatar’s Al-Shaheen and Iraq’s Basrah Light cargoes, according to the traders. The phase 2 expansion of its Zhoushan-based refinery is expected to double processing capacity to 800,000 barrels a day.

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Rongsheng Petrochemical

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BP Ignores Oil Market Fundamentals In Latest Energy Outlook

BP Ignores Oil Market Fundamentals In Latest Energy Outlook

Peak demand has been on the oil industry’s radar for some time but mainly as a distant event with vague implications. BP tried to change that last month with a bearish long-term forecast for oil demand that said peak demand is either here now or will arrive in the next few years.

The UK oil major has made a cottage industry of its long-term Energy Outlook, which is eagerly awaited by oil and gas companies for its insights about future supply-demand trends. However, the overall response this time from most in the industry was that BP jumped the shark.

It’s true that the Covid-19 pandemic has stunted oil demand — and continues to do so — but to suggest that the market won’t recover to its pre-virus growth trajectory is quite a leap. One only has to look at BP’s new business strategy to see what is more likely driving the forecast. 

Along with several of its European peers, BP aspires to “net-zero” carbon emissions by 2050 and plans to shift investment away from its core oil and gas operations to low-carbon and renewable energy projects in the coming years. 

Under its plan to become an “integrated energy company,” BP will boost its low-carbon spending to $5 billion annually by 2030 while reducing oil and gas production by at least 1 million barrels of oil equivalent per day from 2019 levels. That

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