Tag Archives: OPEC

Tracking the Oil Movements

oil tanker. image from wikpedia

The oil he industry counts on a small group of little-known companies whose main job is to count the number of tankers leaving ports, at best using data gathered from satellites, at worst using simple binoculars. They then guess how much crude is being carried by measuring the depth of the vessels in the water.

Swiss-based Petro-Logistics S.A., one of those companies, calls its work “the art and science of tanker tracking,” with the aim being to discover what oil producers “are really doing as distinct to what they say they are doing,” according to a statement on its website. While the information produced by companies such as Petro-Logistics and U.K.-based Oil Movements serves as a main input for estimates by consultants, traders and official bodies, it’s not the only measurement stick in use.

The matter becomes even more complex for oil moved within pipelines. Russia, for instance, exports roughly 30 percent of its crude via pipeline, according to official data. That flow is most often measured by independent groups using infra-red photography, which provides only a rough approximation of output.

The Organization of Petroleum Exporting Countries traditionally has published a measure of production based on what the group calls “secondary sources,” in effect consultants who calculate flows from a variety of sources, including tanker tracking data. The cartel also publishes production figures based on what OPEC countries release publicly.

The IEA and the U.S. government also publish estimates, as do many news organizations, including Bloomberg. The most recent addition to this flood of information is the Joint Organisations Data Initiative (JODI), a project begun in 2002 that’s backed by some of the world’s richest countries.Although all of these sources rely on tanker-tracking data as a base of their data, each group also incorporates its own market intelligence and different methodologies to come up with their data

Excerpt from the Art and Science of Tanker Tracking, Bloomberg, Mar. 14, 2016

The OPEC Cartel and the US

Saudi Aramco headquarters

The OPEC often described as a cartel, it is better seen as an anti-glut group. When demand is weak, its members can curb production to prevent the price plummeting. But when demand is healthy, its ability to curb new producers is limited. And new producers abound.

America’s domestic production of crude (and gas, which displaces some oil) is rocketing. The IEA says the country will produce 14m barrels a day (b/d) next year, on a par with Saudi Arabia . That has reduced America’s imports, as well as boosting exports of fuels (exports of crude oil are mostly banned). That frees crude from other places, such as West Africa, to go to Europe instead. Similarly, Latin American and Middle Eastern oil that once would have gone to America now goes to Asian customers.

For the oil-rich, even worse is in store. Other factors that have propped up the price over the past decade are likely to wane in importance. Even the slightest easing of sanctions helps Iran, potentially a huge producer….The Economist Intelligence Unit…forecasts a “significant boost” in 2014 from 2.4m b/d last year. This assumes new investment pays off, and a deal with the semi-autonomous Kurdish region. Libya could be another source of production: its exports have collapsed to only a few hundred thousand barrels a day, against 1.6m in June last year…

An alternative for Saudi Arabia would be to increase production sharply. That would send the price down: painful for the kingdom, but even more painful for higher-cost producers (not least America, where the “tight oil” now coming on stream requires prices of $50 and above to be profitable).  OPEC’s best hope is continued American protectionism. Any easing of the restrictions on the export of liquefied natural gas (LNG) or crude will exert more downward pressure on the oil price. That might be good for the world economy, but it is not a priority for American consumers, who would like cheaper petrol for cars and propane for heating…

OPEC and oil prices: Leaky barrels, Economist, Feb. 22, 2014, at 63

The Oil Needy and the Iran Sanctions: China and India

China is considering sovereign guarantees for its ships to enable the world’s second-biggest oil consumer to continue importing Iranian crude after new EU sanctions come into effect in July, the head of China’s shipowners’ association said.  Tough new European Union sanctions aimed at stopping Iran’s oil exports to Europe also ban EU insurers and reinsurers from covering tankers carrying Iranian crude anywhere in the world. Around 90 percent of the world’s tanker insurance is based in the West, so the measures threaten shipments to Iran’s top Asian buyers China, India, Japan and South Korea.

Global crude oil prices have risen nearly 20 percent since October, partly on fears over supply disruptions from Iran.  “(Ship) operators are worried that if the insurance issue cannot be resolved, they will not be able to take orders for shipping Iranian oil any longer,” Zhang Shouguo, secretary general of China Shipowners’ Association, told Reuters in a rare interview with foreign media.  “We have put forward our concern and related government departments are studying the issue.”

Iran, OPEC’s second-largest producer, exports most of its 2.2 million barrels of oil per day to Asia, and major buyers have yet to find a way around pending EU sanctions.  Like China, India and South Korea were also mulling sovereign guarantees for their tankers. Indian shipping firms indicated last week they would continue to transport Iranian oil even if limited insurance cover exposed them financially to a spill or accident.  Chinese insurers and shipowners would not take the risk on themselves and government intervention was necessary, Zhang said. Major ship insurer, China P&I club, told Reuters earlier this month it would not provide replacement cover for domestic tankers carrying Iranian oil.  Most of China’s tanker fleet, owned by firms such as China Shipping, COSCO Group and Nanjing Tankers, were covered by European insurers, analysts said.

Several government departments were considering the industry’s request, including the Ministry of Finance, China Insurance Regulatory Commission, Ministry of Transport and National Development and Reform Commission (NDRC), Zhang said. He did not say when a decision might be made.  Until recently, China was Iran’s top customer, taking more than 20 percent of its crude exports but customs data last week showed China halved its Iranian crude imports in March compared with the same month in 2011.

Excerpt, Alison Leung, China mulls guarantees for ships carrying Iran oil, Reuters, April 30, 2012