U.S. crude stocks soar 15 mln bbls amid record surge in net imports -EIA
U.S. crude oil stockpiles last week surged the most since April, jumping more than 15 million barrels, as imports rose and exports plunged, the Energy Information Administration said on Wednesday. The unexpected supply build and record rise in net imports stunned the oil market, which has been weighed down by low demand due to the coronavirus pandemic. “It defies the math that is in the market, for sure,” said Bob Yawger, director of Energy Futures at Mizuho in New York. “Do U.S. refiners, at a time when they’re closing refineries, need to increase imports by a million barrels a day? That’s ridiculous.” Crude inventories rose by 15.2 million barrels in the week to Dec. 4 to 503.2 million barrels, the EIA said, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel drop. Net crude imports rose by a record high of 2.7 million barrels per day, the EIA said. That boosted U.S. Gulf Coast stocks by 11.8 million barrels, the most in one week ever, according to EIA data. U.S. crude exports plunged by 1.6 million bpd to just 1.8 million bpd, the lowest since 2018, while imports rose 1.08 million bpd. Crude markets gave up early gains on the news, with U.S. crude and global benchmark Brent changing course to trade lower. U.S. crude settled 8 cents lower at $45.52 a barrel, after touching a session low of $44.95 a barrel. Gasoline and distillate stocks were also higher, causing U.S. gasoline futures to pare gains as heating oil futures turned negative. Gasoline stockpiles rose by 4.2 million barrels in the week to 237.9 million barrels, the EIA said, compared with expectations for a 2.3 million-barrel rise. Distillate stockpiles, which include diesel and heating oil, rose by 5.2 million barrels in the week to 151.1 million barrels, versus expectations for a 1.4 million-barrel rise, the EIA data showed. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.4 million barrels in the last week, EIA said. Refinery crude runs rose by 424,000 bpd, as refinery utilization rates rose by 1.7 percentage points, the EIA said.
Explained: Why fuel prices are rising sharply in India
A litre of petrol now costs upwards of Rs 90 in some Indian cities like Mumbai and Jaipur. Across most other cities and towns in the country, petrol costs remain in the upper band of Rs 80. Diesel prices have also increased sharply, well-above Rs 80 in cities like Jaipur. The fresh hike in petrol and diesel prices could pose a major challenge as India’s economy looks to recover from the damage inflicted by the coronavirus-induced economic slowdown. But why are fuel prices rising in the country? There are two possible explanations — Increase in global crude oil prices and higher fuel taxes levied by the central and state governments. Mapping the fresh rise Just over two weeks ago, fuel prices started rising in India. And five days ago, Brent crude oil price rose to its highest level since March. This happened after an OPEC+ output cut deal. After increasing initially, crude oil prices have fallen again as many countries are mulling restrictions due to rising Covid-19 infections. Though petrol and diesel prices have been kept unchanged today, the latest round of hikes — Over Rs 2.3 per litre for petrol and over Rs 3 per litre for diesel — over the past 17 days can impact improving fuel consumption demand in the country.
Qatar Set To Significantly Boost Energy Investments In India
Major energy importer India and one of the world’s top liquefied natural gas (LNG) exporters, Qatar, agreed on Tuesday to create a special task force to explore and facilitate Qatari investments in India, including in the energy sector. In a telephone conversation today, India’s Prime Minister Narendra Modi and the Emir of Qatar, Sheikh Tamim Bin Hamad Al-Thani, agreed to deepen cooperation in the energy sector, the Indian government said in a statement. “The two leaders discussed the robust cooperation between both countries in the fields of investment flows and energy security, and reviewed recent positive developments in this regard. They decided to create a special Task-Force to further facilitate investments by Qatar Investment Authority into India, and also resolved to explore Qatari investments in the entire energy value-chain in India,” the government of India said. India, the world’s third-largest oil importer, is also a major importer of LNG, of which Qatar delivers around 80 percent. At the beginning of this year, India asked Qatar for renegotiation of its long-term supply contract, but Qatar was not inclined to renegotiate the prices. “Qatar is our largest source of LNG. India’s appetite for energy, particularly gas is increasing considerably. We see an enormous potential to further expand India-Qatar energy ties and also expect to increase our bilateral engagements beyond buyer-seller relationship,” India’s Oil Minister Dharmendra Pradhan said at the end of January. India wants to significantly boost its gas consumption and expand its gas infrastructure. “An estimated investment of 60 billion US dollars is lined up in developing gas infrastructure which includes pipelines, city gas distribution and LNG re-gasification terminals,” Pradhan said in September. Qatar, for its part, sees LNG as an important part of India’s plans to increase its gas-based economy. “We believe that natural gas is a critical component of India’s energy mix as the country seeks to boost its use across all sectors, while at the same time playing an important global role in curbing global warming,” Qatar’s Minister of State for Energy Affairs and President and CEO of Qatar Petroleum, Saad Sherida Al Kaabi, said at a virtual Indian energy forum in October.
Oil rises on vaccine rollout, concern on Iraq oilfield attack
Oil prices rose in early trade on Thursday, buoyed by a COVID-19 vaccine rollout in Britain and the imminent approval of a vaccine in the United States, which could spur a rebound in fuel demand, despite a large build in U.S. crude stocks last week. U.S. West Texas Intermediate (WTI) crude futures rose 23 cents, or 0.5%, to $45.75 a barrel at 0200 GMT, while Brent crude futures climbed 21 cents, or 0.4%, to $49.07 a barrel. Prices were little changed overnight. “Optimism over the vaccine prevails and continues to limit any serious downside action,” Axi chief market strategist Stephen Innes said in a note. Vaccinations could start as soon as this weekend in the United States, with a panel of advisers to meet on Thursday to discuss whether to recommend to the Food and Drug Administration emergency use authorization of the Pfizer/BioNTech vaccine. Canada approved its first COVID-19 vaccine on Wednesday and said inoculations would start next week. Oil prices were also supported by some nervousness after two wells at a small oilfield in northern Iraq were set ablaze in what the government called a “terrorist attack”, though production was not affected. “While the wells were small, it has raised concerns of further disruptions,” ANZ Research said in a note. Analysts were surprised that the market had shrugged off an unexpectedly large build in U.S. crude stocks in government data released on Wednesday, largely due to a plunge in U.S. crude exports to their lowest since 2018. Crude inventories rose by 15.2 million barrels in the week to Dec. 4, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 1.4 million -barrel drop.
Quarter of forecast LNG supply needed by 2040 to meet 2C global warming limit – Wood Mac
Only a quarter of forecast new liquefied natural gas (LNG) supply will be needed to meet demand by 2040 under measures aimed at curbing global warming below 2 degrees Celsius, a report by consultancy Wood Mackenzie showed on Wednesday. Under a climate pact to cut global warming, nations have committed to a long-term goal of limiting the average temperature rise to below 2C above pre-industrial levels and to pursue efforts to limit it even further to 1.5C. Wood Mackenzie said tougher government measures to curb warming will increase renewables investments and energy efficiency, putting gas demand under pressure. Green hydrogen fuel, extracted from water with electrolysis powered by renewable electricity, will become a major competitor to gas towards the end of 2040 and achieve a 10% share of total primary energy demand by 2050. This will be a challenge for companies considering final investment decisions (FID) on new LNG projects. “In a 2 degree world, only about 145 billion cubic metres (bcm) per annum of additional LNG supply is needed in 2040 compared to 450 bcm/yr in our base case outlook,” said Wood Mackenzie principal analyst Kateryna Filippenko. The consultancy’s “base case” scenario implies 3C warming. “If we consider the imminent FID for the Qatar North Field East expansion, the space for new projects shrinks down by 77% to 104 bcm/yr by 2040 compared to our base case,” she added. In stark contrast to last year’s record level of approvals for LNG production plants, this year’s oil and gas price drops have forced companies to delay decisions on new projects and write down investments in existing plants. However, industry executives in September said they expected LNG demand to increase steadily for several decades, helped by economic growth in Asia. Wood Mackenzie said only a few Australian backfill projects – those which commit new gas to existing projects to allow them to continue operating beyond their expected life – will go ahead, pushing the country down the list of top LNG exporters. The expansion of Canadian and Mozambique LNG capacities is unlikely to materialise, it added. Backfill projects do not add new capacity but prevent volumes from leaving the market. Low LNG prices could wipe out any new investment in more economically challenging projects, and only the most cost-efficient and flexible ones will survive. Around 12 trillion cubic metres of undiscovered gas resources could be stranded – more than three times the amount of gas produced worldwide this year.
How oil majors shift billions in profits to island tax havens
Bermuda and the Bahamas aren’t exactly big players in the oil-and-gas world. They don’t produce any of the fuels at all. Yet the islands are deep wells of profit for European oil giant Royal Dutch Shell Plc. In 2018 and 2019, Shell earned more than $2.7 billion – about 7 per cent of its total income in those years – tax-free by reporting profits in companies located in Bermuda and the Bahamas that employed just 39 people and generated the bulk of their revenue from other Shell entities, company filings show. If the oil-and-gas major had booked the profits through its headquarters in the Netherlands, it could have faced a tax bill of about $700 million based on the Dutch corporate tax rate of 25 per cent. The bill would have been much steeper if the income were reported in oil-producing countries – some of which levy rates exceeding 80 per cent. Shell and other oil majors are avoiding hundreds of millions of dollars in taxes in countries where they drill by shifting profits to thinly staffed insurance and finance affiliates based in tax havens, according to a Reuters review of corporate filings and rating agency reports. Shell, BP Plc, Chevron and Total use subsidiaries in the Bahamas, Switzerland, Bermuda, the UK Channel Islands and Ireland to provide their global operations with banking, insurance and oil-trading services, the documents show. These subsidiaries, in turn, book profits that go lightly taxed or entirely tax-free. Such arrangements are not illegal. But they highlight the ability of international oil corporations to game global tax systems and avoid handing over revenue to nations where they conduct their core business, according to academics who study corporate taxation. The profits generated by those offshore units are enormous, despite their tiny operations. BP’s so-called captive insurer – meaning it serves only other BP entities – had $6.5 billion in cash on hand at the end of 2018 after years of robust annual profits, according to insurance rating agency AM Best Co. The insurer, Jupiter Insurance Ltd, has accounted for as much as 14 per cent of BP’s global annual profits in recent years, according to AM Best figures and BP’s financial statements. Jupiter has six directors but no employees; BP outsources insurance administration to a brokerage located in Guernsey, a tax haven in the UK Channel Islands. The big oil firms’ captive insurers are far more profitable than a typical insurance company. That’s because the amount they pay in claims accounts for a far lower proportion of the money collected in premiums – all from other affiliates of the oil giants – than is the case at other insurers, Industry data shows. That means the captive insurance units absorb part of the revenue made by the oil majors’ subsidiaries elsewhere – often in high-tax countries where they extract oil and gas – and shift it to operations located in low-tax or no-tax jurisdictions. The oil companies have also transferred capital to tax havens to establish banking units that lend money to sister companies. Shell established an oil trader in the Bahamas that generates revenue primarily by buying and selling oil among other Shell affiliates. The companies named in this story all said they followed tax rules of the nations where they do business. Their subsidiaries in tax havens, the companies said, were located there for commercial or operational reasons rather than to avoid taxation. Shell denied that its arrangements constituted tax avoidance and said the location of its subsidiaries were driven by business rather than tax reasons. BP declined to answer questions about its insurance subsidiary but a spokesman directed Reuters to a 2018 tax policy statement – published to meet a regulatory requirement – which said the company does not engage in profit-shifting. Profit-shifting has long been a concern among the Group of 20 nations, which have asked the Organization for Economic Cooperation and Development (OECD), which helps coordinate international taxation rule-making, to find ways to rein in corporate tax avoidance. The organization in February issued new guidance on the treatment of intra-group financial transactions, advising nations to limit deductions on such payments. Critics of corporate tax planning say oil firms’ profit-shifting undermines their claims to responsible corporate governance and exacerbates the deep budgetary problems that many oil-producing countries face amid the coronavirus pandemic and a related drop in oil prices. “These companies are deliberately exploiting gaps in tax law and weak enforcement, and they are doing so in order to make enormous profits,” said Raymond Baker, president of Global Financial Integrity, a Washington D.C.-based not-for-profit organization that has lobbied for stricter international action against corporate tax avoidance. “The victims are the countries and their budgets and their people.” Nations such as Angola, Brazil and Trinidad, who rely heavily on oil tax revenues, have had to moderate spending and increase borrowing to respond to the health crisis. Nigeria is another country that relies heavily on oil tax revenues. Waziri Adio – executive secretary of the Nigeria Extractive Industries Transparency Initiative, which advocates for stronger governance of oil revenues – said the practices of oil companies may be legal but aren’t fair. “This is something that robs Nigeria of legitimate revenues and will affect the ability of the government to deliver badly needed services to its citizens,” Adio said. The governments of Nigeria, Angola, Brazil and Trinidad did not respond to requests for comment. Tax advisors said companies owe it to their shareholders to pay the lowest-possible tax bill. “Tax planning is a legitimate part of business,” said Bryan Kelly, a partner with law firm Withers in Los Angeles. “The board of directors has a fiduciary duty to maximize profits.” ‘THE NUMBERS DON’T MAKE SENSE’ Shell booked $1.3 billion in 2018 and 2019 profits through Bermuda-based banking and insurance subsidiaries that together employed three people, according to the company’s ‘Tax Contribution Reports’ published in November this year and December 2019 which detail tax payments. The tiny firms provide insurance and loans to Shell oil-producing facilities worldwide,
TAP pipeline explores feasibility of blending hydrogen
Developers of the Trans Adriatic Pipeline (TAP) have started feasibility studies on blending hydrogen with the natural gas the pipeline will bring in from Azerbaijan, the TAP head said. “The company has kicked off a technical study and we hope to be in a position to make a first assessment by the end of June next year,” TAP managing director Luca Schieppati told Reuters on Wednesday. TAP is the final leg of a $40 billion project named the Southern Gas Corridor, which will carry 10 billion cubic metres of gas per year from the giant Shah Deniz field into Europe. The pipeline, already commercially operative, is set to start pumping its first gas into Italy at the end of this year. Schieppati said any commitment on hydrogen blending could come in tandem with a decision, expected in July 2021, on the possible doubling of the infrastructure’s gas capacity. Hydrogen is seen as an energy source that could partly replace natural gas in future, helping to cut emissions provided it is produced using renewable power and is therefore carbon-free. TAP shareholders include BP, Azerbaijan’s SOCAR, Snam , Fluxys, Enagas and Axpo. Many gas grid companies around the world are committing to a wider use of hydrogen as a way to extend the long-term life of their infrastructure because of increasing requirements to move away from fossil fuel, such as gas. Snam, Europe’s biggest gas pipeline operator, has been experimenting with a 10% mix of hydrogen in part of its gas network and has said 70% of its grid is “hydrogen ready”. Earlier this year it reached a deal with SOCAR to study the possible use of renewable gases for delivery through the Southern Gas Corridor.