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Russia Is Struggling to Repair Refineries Due to Sanctions

Russia Is Struggling to Repair Refineries Due to Sanctions

Due to the sanctions, Russia cannot access spare parts from Western engineering companies that have provided refinery equipment in the past, leaving Russian refiners struggling to repair damaged units, multiple industry sources in Russia have told Reuters.

Western firms including America’s UOP and Swiss ABB have supplied parts and equipment to major Russian refineries in the past. After the invasion of Ukraine, they no longer fulfill new orders from Russia, leaving local engineers scrambling to find spare parts and equipment.

One example of such difficulty is Lukoil’s Norsi refinery in Nizhny Novgorod on the Volga River. A turbine malfunctioned there in early January and Russian engineers have struggled to have the equipment replaced since then, according to Reuters sources.

This has left the refinery with a reduced capacity to produce gasoline.

The malfunction at the refinery compounded last month after a fire broke out at the facility following a drone attack.

Since all major Russian refineries use at least some part of Western technology, they could struggle to repair equipment and units that broke down or have been damaged by Ukrainian drone attacks, which have intensified in recent weeks and have taken an estimated 14% of Russia’s refining capacity offline.

Russia claims it can repair all damaged units within two months.

On Wednesday, Russia’s Energy Minister Nikolai Shulginov said that all damaged refineries in the country would be restarted by the beginning of June.

“Repairs are underway at the refineries. We plan to re-launch a number of refineries after repairs in April-May, possibly before the beginning of June,” Russian news agency Interfax quoted Shulginov as saying.

“All facilities that were damaged will be re-commissioned,” the minister added.

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Implications of Refinery closures for Homeland Security & critical infrastructure safety

Implications of Refinery closures for Homeland Security & critical infrastructure safety

Preface. The talk of electric vehicles saving the world from greenhouse gases is nonsense, a red herring to distract everyone from what’s really at stake, and from the material requirements to build them with rare earth and other scarce minerals, and the immense amount of fossil energy required to make them in mining, smelting, manufacture and transport of thousands of parts, and so on. But just focusing on greenhouse gases is a very sneaky way to ignore myriad obstacles.

Cars are just 14% of emissions, and EV only replace gasoline, not the diesel essential for heavy-duty trucks, locomotives, and ships, the kerosene for airplanes, the lubricants essential for all motors, including EV, or the road asphalt EV and diesel trucks move on. EV are less than 1% of cars and always will be, they are too expensive for all but the richest 5% who also have garages and want one and live in places where heat and cold won’t reduce performance and battery life.

A National Laboratory scientist on Chinese gasoline, refining, and petroleum products:

Over the years I have taken the opportunity to ask oil companies about how they would deal with a demand slate stripped of it gasoline fraction, given that that is about the only fraction being targeted by electrification. Chevron’s answer was fairly simple: “It’s our profit center so we’d probably close the refinery” (thus no oil products). Two years in a row I asked the same question to Exxon during some briefings, and both times they said they were “looking into it” and would get back to me (but they never did)…

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Hurricane Ida Shuts Down More Than 90% of Oil and Gas Production in the Gulf of Mexico

Hurricane Ida Shuts Down More Than 90% of Oil and Gas Production in the Gulf of Mexico

Experts say the oil refineries that have been shut down account for 9% of the country’s total.

 A gas pump with gas selling for $1.04 a gallon is shown on May 07, 2020 in Baltimore, Maryland.
A gas pump with gas selling for $1.04 a gallon is shown on May 07, 2020 in Baltimore, Maryland. 
Photo: Rob Carr (Getty Images)

As if reversing the course of the Mississippi River, forcing hospitals to hunker down with patients that couldn’t be moved, and nearly shutting off the power and internet in New Orleans wasn’t enough, Hurricane Ida has also disrupted oil and gas production.

The Bureau of Safety and Environmental Enforcement on Sunday said that 95.6% of current oil production and 93.7% of the gas production in the Gulf of Mexico had been shut down in response to Hurricane Ida, which made landfall as a powerful Category 4 storm in Louisiana. Offshore Gulf operators had to evacuate personnel due to Ida and as of Sunday had moved workers off 288 production platforms, or 51.4% of manned platforms in the area, and 11 rigs, or 100% structures in the area.

In addition, the BSEE reported that 10 dynamically positioned rigs—which are not moored to the seafloor and can change locations in a relatively short period of time—had moved out of the storm’s projected path. They represent 66.7% of the total dynamically positioned rigs in the Gulf of Mexico.

A hurricane making landfall in this area is the one of the worst things that could happen to the oil industry, experts told CNN, and could impact the pipelines that ferry fuel to the East Coast. Andy Lipow, president of the Houston-based consulting firm Lipow Oil Associates, told the outlet that six refineries in New Orleans are currently shut down. These refineries—which include PBF, Phillips, Shell, Marathon, and two Valero refineries—produce 1.7 million barrels per day, or 9% of the country’s total.

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“Extremely Dangerous” – Hurricane Ida Almost Category 5 Strength As It Nears Louisiana

“Extremely Dangerous” – Hurricane Ida Almost Category 5 Strength As It Nears Louisiana

Hurricane Ida has rapidly strengthened into a major hurricane with maximum sustained winds of 150 MPH, just seven mph shy of a Category 5. The storm is set to strike Louisiana later this afternoon/evening, and on the same day, 16 years ago, Hurricane Katrina struck the area.

As of 0600 ET, National Oceanic and Atmospheric Administration (NOAA) plane flew into the storm and found Ida is an “extremely dangerous Category 4 hurricane about to make landfall in southeastern Louisiana later today.”

Reports from an NOAA Hurricane Hunter aircraft indicate that maximum sustained winds have increased to near 150 mph (240 km/h) with higher gusts. The latest minimum central pressure estimated from reconnaissance aircraft data is 935 mb (27.61 in).

An elevated NOAA C-MAN station at Pilot’s Station East near Southwest Pass, Louisiana, recently reported a sustained wind of 82 mph (131 km/h) and a gust to 107 mph (172 km/h). Another NOAA elevated C-MAN station at Southwest Pass recently reported a sustained wind of 77 mph (124 km/h) and a wind gust of 93 mph (150 km/h).

Ida is currently over the Gulf of Mexico where it could strengthen even more before making landfall around 1800 ET.

A Hurricane Warning has been posted for Intracoastal City, Louisiana, to Pearl River, Mississippi.

Storm surges could be significant across Louisiana and Mississippi. For instance, a 10-foot to 15-foot storm surge is forecasted from Morgan City, Louisiana, to Ocean Springs, Mississippi. A storm surge of 5-8 feet is possible for Lake Pontchartrain.

…click on the above link to read the rest of the article…

The Oil Refinery Crisis Will Worsen This Winter

The Oil Refinery Crisis Will Worsen This Winter

It was only to be expected that many of the world’s refiners would be pinched between low demand for finished products and rising inventories as the pandemic lockdowns continue to stifle activity. But the warm December that is expected this year is also threatening finished products demand. And it’s possible that many of the older, small refiners won’t survive at all.

According to HIS Markit, eleven U.S. refiners are scheduled to close.

The largest refinery in the United States, Royal Dutch Shell’s Convent, Louisiana refinery has shut down after it was unable to find an interested buyer. But the Dutch oil major is closing six more refineries according to Reuters, because it cannot sell those refineries either.

Then, the largest U.S. refiner, Marathon Petroleum, is set to close several refineries, including its Gallup, New Mexico, refinery and its refinery in Martinez, California.

Japan’s Eneos Corp has shut its Osaka refinery, too, but the real pain is in Australia.

BP announced back at the end of October that it was shutting down its aging 65-year-old Kwinana refinery in Perth, because it was simply “no longer economically viable.”  Instead, the refinery will be turned into an import terminal. After this closure, BP has only three refineries left in Australia.

PBF Energy shut 85,000 bpd of its Paulsboro, NJ, refinery down. Phillips 66 shut its Alliance refinery down in the runup to Hurricane Sally, but just left it shut while it waits for better days.

Other refineries that are not shutting down are simply extending maintenance or bringing maintenance forward.

Australia’s Caltex is a prime example of this, when in early April it brought forward—and extended—maintenance on its only refinery, Lytton. Caltex vaguely said that it would restart the refinery when conditions recover.

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Refiners Boost Output, But Irma Could Dent Demand

Refiners Boost Output, But Irma Could Dent Demand

Refinery

Texas continues to recover from Hurricane Harvey, and many of the disrupted refineries are ramping up production once again. But the ripple effects from the outages are still being felt, and some Midwestern refineries are benefitting from surging margins stemming from the havoc.

Bakken Midwest refining margins more than doubled between August 23 and September 1, according to S&P Global Platts, jumping from $9 per barrel to temporarily over $20 per barrel, although they have since fallen back a bit.

The margins are inflated because of gasoline shortages in certain parts of the country, the unfortunate consequence of the massive refinery outages along the Gulf Coast after Hurricane Harvey. Refining margins were also helped along by the initial downward pressure that WTI exhibited as crude oil backed up without any place to go.

That means that refineries outside of the Gulf Coast could temporarily enjoy super profits. September is typically a time of the year when refineries undergo some maintenance and retool to prepare for winter fuel blends, but few are likely to take their plants offline in this market. “Nearly every refinery outside Louisiana and Texas is operating near full capacity,” Thomas Pugh, commodities economist at Capital Economics, told the Wall Street Journal.

“Refineries outside the affected area may delay maintenance to benefit from high processing margins,” Commerzbank oil analyst Carsten Fritsch said in late August. “Hence, the negative impact on crude oil demand and oil product supply might be less severe than feared.”

Indeed, refineries unaffected by Hurricane Harvey have been called into action, but the ramp up has its own consequences. As Midwestern refineries scramble to produce at max capacity, the demand for crude is pushing up benchmark prices in the region. Bakken crude started trading at a large premium relative to WTI as supplies tightened. From S&P Global Platts:

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From Homes to Refineries, Finding Pollution and Loss in Harvey’s Path

From Homes to Refineries, Finding Pollution and Loss in Harvey’s Path

Mobil station with floodwaters from Hurricane Harvey

Getting there was no easy matter. I was forced to drive west in the eastbound lane of the interstate because the lanes I should have been driving in were flooded up to the top of the highway divider. All the while, I tried not to worry about the water rushing through cracks in the cement divider, which had the potential to give way.

Parts of Vidor were only accessible by boat or in a high-clearance vehicle. I hitched a ride in a monster truck, which pushed water over cars stuck in the floodwaters as we passed by a Mobil gas station, also submerged. I noted the irony considering ExxonMobil’s history of funding climate science denial and Harvey’s intensity tied to climate change.

Mobil gas station underwater in Vidor, Texas
Mobil gas station in Vidor, Texas, on August 31.

A Texas house flooded up to the roof
Home in Vidor, Texas, flooded up to its roof.

People and a dog in a motor boat navigate the flooded streets of Vidor, Texas

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Harvey Hangover Hits Pump Prices, Jet Fuel Premium Highest Since 2008

Harvey Hangover Hits Pump Prices, Jet Fuel Premium Highest Since 2008

“It’s only just beginning,” warned one seasoned veteran energy trader as the hangover from Hurricane Harvey flows downstream to retail gas prices and jet fuel premiums.

As Bloomberg notes, Harvey impact currently includes:

  • Colonial says it’ll commingle Rbob and conventional gasoline
  • Explorer Pipeline planning to start lines Saturday, Sunday
  • Logjam grows to 29 oil tankers as 11 ports remain closed
  • Total Port Arthur is said facing extended shutdown on power loss
  • Texas storm bucks N.Y. traders with wild gasoline expiry swings
  • NHC issues final advisory on Harvey; losing tropical character

Which has left retail gas prices at the pump are now at their highest in 2 years…

And judging by their usual lagged response to RBOB, are set to go dramaticaly higher in the next few weeks…

And while inventories are high, deliveries are slow and fears of shortages have created lines at many Texas gas stations…

 “This is going to be a substantial ouch for consumers,” said Tom Kloza, global head of energy analysis for Oil Price Information Service. “Satan could not have drawn up a more horrible geographic scenario for knocking out Texas refining.”

But it is Jet Fuel premiums that are even more worrisome…

New York jet fuel’s premium to Nymex futures rises 20.5c to 36c/gal., widest since 2008, data compiled by Bloomberg show.

And U.S. Gulf jet fuel premium widens 10.25c to 19c/gal., also widest since 2008

And unlike Gasoline – where inventories are high – Jet fuel inventories are below average.

The latest EIA data implies jet fuel inventory levels are just over 23 days of forward cover, seasonally-adjusted, 8% below the five-year average. Flooding and crude oil supply disruptions have led to the temporary closing of more than 21% of the country’s refining capacity, primarily in the Gulf Coast, contributing to further draws on jet fuel inventories.

…click on the above link to read the rest of the article…

Hurricane Harvey Is A Disaster For OPEC

Hurricane Harvey Is A Disaster For OPECOPEC

The skies are clearing over Houston, but the damage from the remaining elements of Hurricane Harvey has spread east to Port Arthur and Lake Charles along the Texas-Louisiana border. That has knocked more refineries offline, including the largest refinery in the United States.

In the aftermath of the storm, the most serious threat to the energy industry is the extended outage of refineries and pipelines, according to Goldman Sachs. The problem actually looks worse than it did earlier this week as the deluge has shifted towards Port Arthur, another refining hub. Motiva, which runs the U.S.’ largest refinery in Port Arthur, began to completely shut down its 600,000 bpd facility on Wednesday.

Goldman says the refinery shut downs, as of August 30, have spiked to 3.9 million barrels per day (mb/d), although upstream oil production outages have dropped below 1 mb/d. More ports are now closed – in addition to Corpus Christi and Houston, the ports of Lake Charles, Beaumont, and Port Arthur have shut down.

These outages, the investment bank says, will mean that the “ongoing recovery in production will only be partial.” The refinery and pipeline closures are “leaving the oil market long 1.9 mb/d of crude vs. last Thursday, short 1.1 mb/d for gasoline and 0.8 mb/d for distillate.” Related: Venezuela’s “Oil Fire Sale” To Benefit Russia, China

More worrying is that the recovery might not be quick. While most refineries had controlled shut downs, there are quite a few, especially in the Port Arthur region, that have been inundated with water, which means that the damage to them is still unknown. Based on the past major hurricanes of Rita and Katrina, Goldman speculates that about 10 percent of the 4 mb/d of refining capacity that has been disrupted will remain offline for several months.

…click on the above link to read the rest of the article…

How Long Can U.S. Refineries Remain Offline?

How Long Can U.S. Refineries Remain Offline?

Refinery

When Hurricane Harvey blew into Texas last weekend, it dumped more than 30 inches of rain, flooding Houston and large areas of southeastern Texas, while leaving thousands homeless or without power. The worst storm to hit the U.S. since 2004 and by some estimates the largest rain-storm in U.S. history, Harvey has had a profound impact on the nation’s largest oil-producing and oil-refining region.

Refinery shutdowns, pipeline closures and other consequences of Harvey has sent the Gulf oil industry into a tailspin while throwing oil markets into disarray. The question facing industry analysts, investors and consumes is how long this chaos will last.

The storm forced several major Gulf refineries to shut their doors and limit operation. ExxonMobil and Total shut down facilities in the Port Arthur and Beaumont areas, while Valero, Marathon and Citgo were forced to reduce operations in refineries from Corpus Christi to Galveston Bay and Texas City.

Motiva, owned by Saudi Aramco, is the largest refinery in the U.S. with a total throughput of overly 600,000 bpd. It was forced to close at 5 a.m. on Wednesday August 30, having already reduced capacity by forty percent on Tuesday. Related: Can Mexico Capitalize On This Golden Oil Opportunity?

In total, some twenty percent of U.S. refinery capacity was affected by the storm. On Tuesday Platts reported that eighteen percent of capacity, or 3.36 million bpd, had been shut-down, while vessel traffic to coastal facilities in Corpus Christi had largely ceased. Another ten percent of capacity remains threatened as the storm moves East.

The shut-downs have sent gasoline prices soaring, offering lucrative opportunities to European refiners and depressed crude, which continues to struggle with over-supply and is now limited by the sudden loss of refinery capacity in the Gulf.

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US Releases 500,000 Barrels Of Oil From Strategic Reserve As Largest US Refinery May Be Shut For 2 Weeks

US Releases 500,000 Barrels Of Oil From Strategic Reserve As Largest US Refinery May Be Shut For 2 Weeks

The U.S. Energy Department announced on Thursday that it would release 500,000 barrels of crude oil from the US Strategic Petroleum Reserve as a result of the disruption to the US petroleum industry following Hurricane Harvey amid fears of a surge in motor fuel prices, which have been compounded by the previously reported shuttering of the Colonial pipeline. According to the DOE statement, the oil will be delivered to the Phillips 66 refinery in Lake Charles, Louisiana, a plant which has not been affected by the storm.

According to Reuters, the release – the first emergency release from the reserve since 2012 – will include 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil. It was an exchange agreement, meaning the government will loan crude to Phillips 66, which is required to replace the reserve’s oil at a later date.

The Energy Department “will continue to provide assistance as deemed necessary, and will continue to review incoming requests for SPR crude oil,” spokeswoman Jess Szymanski said.

The reserve, a legacy from the 1970s Arab oil embargo which caused panic over fuel supply, currently contains 679 million barrels of oil. It is a small release of crude for a country that uses nearly 20 million barrels of petroleum daily.

Do you ever have questions about when the right time to enter or exit a market is? Do you ever wonder what the signs or trends are that can help you identify these moments well in advance? In futures trading, timing is everything, and with the Technical Analysis Trading guide from RJO Futures, our experts will give you the tools you need to make educated decisions on your trading strategy. Our FREE guide is jammed packed with tips and advice from our futures brokers – it’s like they’re sitting next to you!

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Oil storage tanks filled to levels not seen in 80 years

Oil storage tanks filled to levels not seen in 80 years

U.S. oil inventories at levels not seen in at least 80 years

North American oil prices could take a hit this fall as there are renewed concerns about a lack of storage capacity.

A recent report by the U.S. Energy Information Agency suggests crude oil inventories “remain near levels not seen for this time of year in at least the last 80 years.”

The concern is what will happen this fall and whether oil supplies will hit “tank top.” North American refineries are running at near capacity this summer, buying up oil and converting it to gasoline and other products. Several refineries will shut down in a few months for maintenance and there could be more unplanned outages because refineries are operating at such a high level.

Each fall, it’s typical for inventories to begin to build, but “the problem is we are at a much higher starting point,” said Jackie Forrest, a vice-president with ARC Financial, who monitors trends in the Canadian oil and gas industry. A lack of storage could impact North American oil prices and in particular West Texas Intermediate (WTI), the benchmark for the continent.

“It could cause a bit of a disconnect where WTI becomes a bit cheaper than global crudes, but I don’t think it is going to cause a serious problem where there is no room to store crude,” said Forrest.

CDN crude oil production

Canadian oil production is expected to rise over the next few decades.

The oilpatch had similar concerns in the spring. At that time, some companies began turning to ‘fracklog’ as one method of storing oil. Producers continue to drill wells, but stop just short of pumping out the oil. It’s a way of storing the oil in the ground. The goal is to hold on to the oil until prices rebound.

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Saudis Expand Price War Downstream

Saudis Expand Price War Downstream

The undisputed king of oil and gas is making some moves that could change the face of the global refining sector.

In June 2015, Saudi Arabia pumped a record 10.564 million barrels a day, a record level. As if being the world’s biggest exporter of oil was not enough, the desert kingdom is now looking to conquer the refining sector as it has quickly become the fourth largest refiner in the world. “Saudis have moved into the product business in a big way,” said Fereidun Fesharaki of FGE Energy. With Saudi Arabia’s refined fuel contributing to the global supply glut, what will be its impact on the refining markets especially those in Asia?

How will Saudi Arabia Capture Market Share Downstream?

A refinery’s success is measured by its ‘gross refining margins’. The gross refining margin is nothing but the difference between the value of the refined products and price of the crude oil. In case of Saudi Arabia, the price of crude oil would be extremely low. “The crude is so cheap it’s pretty much free for them, the margins are going to be massive. It makes trade flows in products very different,” said Amrita Sen of Energy Aspects.

Related: Senate Sidesteps Key Issues In Latest Energy Bill

There is little doubt then as to why the Saudis are shifting their focus to domestic refining. Along with acquiring a controlling stake in Korea’s S- Oil, the desert kingdom is commissioning a new refinery in Jizan which would have a capacity of around 400,000 barrels per day when it begins operations in 2017. Jizan will come on top of Saudi Arabia’s two other 400,000 bpd- refineries at Yasref and Yanbu, and will turn the country into a major global player in the downstream sector, expanding its campaign for market share beyond just crude oil.

SaudiRefinedProducts

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