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Crude Crashes As Asia Trading Opens; Stocks Slump, Gold Jumps, Yuan Dumps

Crude Crashes As Asia Trading Opens; Stocks Slump, Gold Jumps, Yuan Dumps

While gold is spiking higher and stocks are getting hammered lower after a weekend of ugly headlines surrounding the lethality and spread of the novel coronovirus, the Saudis are desperately talking down the crash in crude oil prices

Brent is back below $60 and WTI has crashed to almost a $51 handle…

Saudi Arabia is “closely monitoring” the impact of the coronavirus outbreak on oil markets, but so far sees the crisis having a “very limited impact” on global demand, Energy Minister Prince Abdulaziz bin Salman says in a statement.

Current market impact on oil, “primarily driven by psychological factors and extremely negative expectations adopted by some market participants, despite its very limited impact on global oil demand.”

It seems that “psychological” impact is sending gold higher…

And stocks lower… Dow futures down over 300 points, back below 29,000…

And S&P futures back below the key 3,300 level…

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

Tanker Operators Suspend Travel Through Strait Of Hormuz

Tanker Operators Suspend Travel Through Strait Of Hormuz

Following Iran’s decision to lob missiles at US-Iraqi bases last night, several major tanker operators have suspended sailing through the Straits of Hormuz, the site of several tanker attacks last year.

Petrobras, Bahri – Saudi Arabia’s state-run tanker operator – and other tanker companies have suspended sailing through the Straits of Hormuz, WSJ reports, citing unidentified people familiar with the matter.

Meanwhile, Gulf officials are already trying to convince the world that there’s nothing to worry about in what’s essentially a tinderbox inside another tinderbox. United Arab Emirates’ Energy Minister Suhail al-Mazrouei said on Wednesday he saw no immediate risk to oil passing through the critical gateway through which 20% of the global supply of crude travels. al-Mazrouei made the comments on the sidelines of a conference in Abu Dhabi, the UAE capital.

The source of their concerns is clear: Iran carried out its “retaliation” for the killing of General Suleimani last night – though the Pentagon has confirmed that there have been no American casualties from Iran’s strikes. However, many fear that Iran isn’t finished with its retaliation. 

Mazrouei added that OPEC was not discussing any precautionary steps at the moment, but would re-evaluate the situation if a supply shortage emerged, according to Reuters. He said earlier that the global oil market was well supplied.

Oil prices initially moved higher after last night’s attacks, but prices have since settled, and the market largely ignored the news about the tanker suspensions, as it was already largely priced in.

On Tuesday, Washington warned about “the possibility of Iranian action against US maritime interests” in the Middle East.

“U.S. commercial vessels are advised to exercise caution and coordinate vessel voyage planning for transits of the Persian Gulf and nearby waterways,” the U.S. Maritime Administration said in a statement on its website.

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

IEA: An Oil Glut Is Inevitable In 2020

IEA: An Oil Glut Is Inevitable In 2020

Sohar oil tanks

Despite the OPEC+ cuts, the oil market is still facing a supply surplus in 2020, according to a new report from the International Energy Agency (IEA).

OPEC+ announced additional cuts of 500,000 bpd, which sounds more impressive than it is because the group was already producing under its limit. In November, for instance, OPEC was producing 440,000 bpd below the agreed upon ceiling.

Saudi Arabia agreed to shoulder an additional 400,000 bpd of voluntary cuts. But the deal also exempts 1.5 million barrels per day (mb/d) of Russia’s condensate production, allowing Russia to actually increase condensate output by 0.8 mb/d.

Still, the deal should take supply off the market. “If all the countries comply with their new allocations and Saudi Arabia delivers the rest of its voluntary cut of 0.4 mb/d, the fall in production volume versus today will be about 0.5 mb/d,” the IEA said.

OPEC said in its own report that the oil market would be largely in balance in 2020, albeit with a temporary glut in the early part of the year. The IEA sees inventories building at a rate of 0.7 mb/d in the first quarter.

The IEA cut its forecast for non-OPEC supply growth from 2.3 mb/d to 2.1 mb/d, due to weaker growth from Brazil, Ghana and the United States. The U.S. typically gets all of the attention, but disappointing news from Brazil and Ghana also led the IEA to revise forecasts lower.

Notably, Tullow Oil revealed a major disappointment from its Ghana operations, causing a complete meltdown in its share price this week. Its stock fell nearly 70 percent in a single day as investors overhauled their valuation of the company. Tullow admitted that its production from Ghana would decline in the years ahead.

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

Saudi Bases and the Bin Ladens: A Love Story

Saudi Bases and the Bin Ladens: A Love Story

What is Trump really up to? It’s almost unknowable. At the same time that the president was pulling (some) troops out of Northeast Syria, giving an antiwar speech, and then sending other troops back into Syria to “secure the oil,” he also quietly sent another 1800 service members into Saudi Arabia. What little Trump did say about it consisted of a peculiar defense of his actions. Faced with the obvious question from a reporter: “Mr. President, why are you sending more troops to Saudi Arabia when you just said it’s a mistake to be in the Middle East?” Trump argued that there was no contradiction in his policy because, well, the Saudis “buy hundreds of billions of dollars’ worth of merchandise from us,” and have “agreed to pay us for everything we’re doing to help them.” It seems the U.S. military is going full mercenary in the Gulf.

While I’ve noted that Trump’s recent antiwar remarks were profound – though largely unfulfilled – these words will amount to nothing if followed by a military buildup in Saudi Arabia that leads to a new, far more bloody and destabilizing, war with Iran. Nothing would please the “three Bs” – Israeli Prime Minister Bibi Netanyahu, Saudi Crown Prince Mohammed Bin Salman, and former National Security Adviser John Bolton – more than a US military strike on the Islamic Republic, cost and consequences be damned.

It’s just that an Iran war isn’t the only risk associated with basing majority-Christian, foreign American troops in the land of Islam’s two holiest cities. And a brief historical review of US presence in Saudi Arabia demonstrates quite clearly the potential transnational terrorist “blowback” of Washington’s basing decisions. In fact, Trump’s latest deployment constitutes at least the third time the US military has been stationed on the Arabian peninsula.

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

The troubled Saudi Aramco IPO: It’s what you can’t see that counts

The troubled Saudi Aramco IPO: It’s what you can’t see that counts

It’s what you can’t see—the oil beneath the Arabian sands—that potential investors in Saudi Aramco’s on-again, off-again initial public offering (IPO) ought to focus on. The truth about the remaining oil resources beneath the Saudi desert continues to be a state secret. I’ll elaborate on this after a little background to set the context.

Recently, Saudi Aramco, the state-owned Saudi oil company, delayed its planned IPO again. For those who missed the previous time, plans for the IPO first came to light in 2016 as part of Saudi Arabia’s 2030 Vision, essentially a plan to diversify the country’s economy away from heavy dependence on oil. The feverish attention the proposed IPO produced abated when the world’s largest company unexpectedly withdrew it in 2018. The financial firms advising the government were let go as the government looked for other ways to raise money for its 2030 Vision plans.

And yet, the IPO idea remained a possibility and was later revived. The problem has been that both times the IPO looked like it was about to happen, the Kingdom of Saudi Arabia got cold feet, worried that it might not get the $100 billion it wants for 5 percent of the company.

Initial hopes of listings on prominent international exchanges such as the New York Stock Exchange and the London Stock Exchange have long since been abandoned. But the most recent IPO attempt was to be made wholly on Saudi Arabia’s own domestic exchange. Even that apparently looked like it might fail.

So, the big question is why. The answer is probably right beneath the Saudis’ feet: The oil under Saudi sands—or rather the uncertainty about the amount of extractable oil that still lies there.

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

Major Blaze At Iran Oil Refinery Raises Suspicions Of Saudi Revenge Attack

Major Blaze At Iran Oil Refinery Raises Suspicions Of Saudi Revenge Attack

A section of Iran’s sprawling Abadan oil refinery in the southwest of the country went up in flames Saturday, and state media sources reported the emergency was under control as of Sunday morning. 

State media is describing it as “a fire in a canal carrying waste from Iran’s Abadan oil refinery,” with Iranian official broadcaster IRIB saying, “The refinery’s fire department contained the fire and prevented it from spreading to other units.”


#BREAKING
A fire in a canal carrying waste from #Iran’s #Abadan oil refinery was brought under control on Sunday: State Media


However, given the extent of the blaze captured in social media circulating videos, and especially given it comes after a tense summer of attacks on tanker and refineries — notably the Sept. 14 Saudi Aramco drone and missile attack — the newest Iran facility fire raises serious question. 

Could the clearly massive Abadan blaze, which Iranian state sources appear ready to downplay, be the result of a Saudi revenge attack? 

Though unverified and unconfirmed, Iranian opposition sources are pointing to a potential cyber attack as a possible cause for the fire.

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

Uncertainties following the Abqaiq attack have shrunk the world’s safe oil reserves by around half (part 1)

Uncertainties following the Abqaiq attack have shrunk the world’s safe oil reserves by around half (part 1)

The world has returned to business as usual after the Saudis assured oil markets that production will be back soon and as oil prices have returned to pre-attack levels and even lower, indicating that oil traders focus on a weak global economic outlook.

Fig 1: Abqaiq’s oil price spike
Fig2: Saudi crude oil production drop after the Abqaiq attack

The peak oil barrel blog monitors OPEC’s oil production and published the above graph for September 2019, using data from OPEC’s Monthly Oil Market Report. The drop from around 9,800 kb/d to 8,500 kb/d translates into an approximate loss in September of 40 mb Arab Light.  Saudi oil stocks were 180 mb before the attack. Maybe tanks are filled with partially processed oil with a high sulfur content.

Iran’s oil exports

From the IEA Monthly Oil Market Report dated 12/9/2019 (2 days before the Abqaiq attack):

Fig 3: US ended sanction waivers in May 2019
https://www.iea.org/media/omrreports/fullissues/2019-09-12.pdf

The data on Iranian oil exports are fuzzy. On 13 Sep 2019 S&P Global Platts reported 424 kb/d in August (mainly to China and Syria) but warns that Iranian storage is filling up quickly, including 50 mb on tankers (mostly condensate). During the last round of sanctions in 2016 storage reached 55-60 mb.

Fig 4: Iranian oil exports by Platts

 

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/091319-analysis-iran-builds-50-mil-barrel-oil-armada-as-exports-plunge

In July 2019 the Atlantic Council calculated in an article entitled

Iran’s Crude Oil Exports: What Minimum Is Enough to Stay Afloat?

that Iran needs to export 1.5 mb/d to balance the budget and 720 Kb/d as an absolute minimum in survival mode (withdrawals from the National Development Fund, foreign exchange and gold reserves)

Changed balance of power in Middle East

As Iranian oil exports have dropped below these thresholds, attacks have intensified:

12 May:  Fujairah, UAE, 4 tankers damaged in Gulf of Oman by limpet mines

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

Iran Claims To Have Video Evidence Of Oil Tanker Attacks

Iran Claims To Have Video Evidence Of Oil Tanker Attacks

By – Oct 16, 2019, 2:30 PM CDTJoin Our Community

Drone

Iran has claimed that it has footage of last week’s attack on its oil tanker while off the Saudi Arabian Jeddah port, and it proves that the attacks were carried out by Israel, Saudi Arabia, and the United States, according to Mehr news agency, who quoted Abolfazl Hassan Beigi, Iran’s National Security and Foreign Policy Commission member.

This evidence, Hassan Beigi said, will be provided to the UN and Security Council.

“Saudi Arabia and the U.S. are trying to put the blame on the ISIL [Islamic State] or the Taliban for the attack, but the documents dismiss such a notion as no ISIL or Taliban terrorists are present in the Red Sea,” Hassan Beigi said, adding that both ISIS and the Taliban were created and sponsored by Saudi Arabia and Israel.

Iran’s President Hassan Rouhani on Tuesday, in his first media conference in over a year, that the attack on the tanker would not go unpunished, adding that it was “carried out by a government” rather than an individual.

Rouhani stopped short of naming that state actor, however.

“If a country thinks that it can create instability in the region without getting a response, that would be a sheer mistake,” Rouhani said.

The Iranian tanker, the Sabiti, was attacked last Friday in the Red Sea, damaging the vessel and causing oil to spill into the water. The Sabiti belongs to the National Iranian Oil Company.

The attack on the Iranian oil tanker follows the September 14 attack on Saudi Aramco’s oil infrastructure that took offline nearly 6 million bpd of production. Tensions in the Middle East have been flaring up as the United States continues to sanction Iran’s oil industry for noncompliance with the nuclear deal.

US To Send ‘Thousands’ More Troops To Saudi Arabia

US To Send ‘Thousands’ More Troops To Saudi Arabia

Reuters reports, citing defense or administration sources, that the US is set to send thousands of additional  troops to Saudi Arabia in the wake of last month’s Aramco attacks. 

“The United States is planning to send a large number of additional forces to Saudi Arabia following the Sept. 14 attack on its oil facilities, which Washington and Riyadh have blamed on Iran,” according to a breaking Reuters report

Though the Pentagon has yet to officially confirm the report with comment, Reuters noted the “sources did not specify exactly how many troops would be deployed but said it was expected to be in the thousands.”

And Bloomberg reports this could be as many as 1,800 new personnel, pending an official Pentagon statement:

Defense Secretary Mark Esper is expected to announce a new deployment of U.S. forces to the Middle East as tensions rise over Turkey’s military operations in northern Syria and an explosion on an Iranian oil tanker.

As many as 1,800 military personnel, including two air squadrons, are expected to be deployed to the region,including to Saudi Arabia, according to a defense official.

Earlier in the month the Pentagon deployed 500 troops in coordination with King Salman and crown prince MbS for “regional stability” and to counter Iran. 

Ironically this comes as Trump has promised to “slowly” get “out of the Middle East”.

Iranian Oil Tanker Struck By 2 Missiles Near Saudi Port

Iranian Oil Tanker Struck By 2 Missiles Near Saudi Port 

Many questions remained unanswered early Friday after an attack on an Iranian oil tanker in the Red Sea sent oil prices higher, in the latest attack on energy-industry infrastructure in an increasingly volatile part of the world. According to the New York Times, a fire erupted on an Iranian oil tanker about 60 miles from the Port of Jeddah on Friday after the tanker’s two major tanks were struck by missiles, causing an oil spill.

No crew members were hurt and the ship is reportedly in stable condition, according to Iranian state news media. The National Iranian Oil Company, which owns the tanker, said the ship was struck at 5 am local time and 5:20 am local time. Iranian officials said Friday that the incident was “an act of terrorism”, but they insisted that the ship had suffered minimal damage and that only a small amount of oil had spilled into the ocean. The Iranians also denied that the ship had caught fire, despite photos purportedly depicting the blaze.


#BREAKING: There is No longer fire & oil leakage in #Iran‘s oil tanker #SABITI. Images taken an hour ago show the oiler in #RedSea after changing its course. There are two possibilities behind the two explosions in the ship: 1-#SaudiArabia‘s attack 2-#Israel Navy attack.

View image on Twitter
View image on Twitter
View image on Twitter

Iranian media said “technical experts” are still investigating the cause of the explosion, though Iranian state media initially blamed Saudi Arabia. The Kingdom, meanwhile, denied any responsibility for the attack. However, according to conflicting reports, the National Iranian Oil Company denied that Saudi Arabia, Iran’s archrival in the region, was behind the attack, and instead pointed the finger toward Israel.

Another inconsistency emerged when Iran said a tanker known as the Sabiti had been hit. But the ship-tracking website Marine Traffic shows the vessel hasn’t transmitted any location data since mid-August.

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

The Attacks on Abqaiq and Peak oil in Ghawar

The Attacks on Abqaiq and Peak oil in Ghawar

Fig 1: The attackers hit at Fajr prayer time

When the late Houston based investment banker Matt Simmons wrote his 2005 book “Twilight in the desert, the coming Saudi oil shock and the World economy”

Fig 2: Matt Simmons’ book

he could not have imagined that Saudi Arabia would be threatened by a pre-dawn drone & missile attack on a plant in Abqaiq, processing oil from Ghawar, the very oil field Matt had warned suffered from high water cut rates and could not maintain production rates of 5 mb/d (chapter 7). 

One of Matt’s slide shows is here: 

Fig 3: Ghawar’s properties worsen from North to South

Indeed, Saudi Aramco’s prospectus for the London Stock Exchange (Initial Public Offering IPO), published in April 2019, has Ghawar producing a sustainable maximum of only 3.8 mb/d, 1.2 mb/d less than was generally assumed. 

Fig 4: extract from Saudi Aramco’s prospectus

According to the prospectus, the maximum sustainable oil production capacity (MSC) from the first 3 fields (affected by the attacks)  in the above table should be 3.8 + 1 + 1.45 = 6.25 mb/d. 

Fig 5: Graph from the same prospectus showing how Abqaiq is connected to Ghawar, Khurais and Shaybah oil fields

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

Three Saudi Brigades Annihilated in Devastating Houthi Offensive in Saudi Arabia

Three Saudi Brigades Annihilated in Devastating Houthi Offensive in Saudi Arabia 

Many may have hitherto been led to believe that the Houthis were a ragtag armed force lacking in sophistication. Many, seeing the drone and missile attacks on Saudi oil plants, may have declared it to be a false-flag attack carried out by Riyadh to boost Aramco’s market value; either that or it was an operation carried out by Iran or even Israel. On Saturday September 28, the Houthis put paid to such speculation by confirming what many, like myself, have been writing for months; that is, that the asymmetrical tactics of the Houthis, combined with the conventional capabilities of the Yemeni army, are capable of bringing the Saudi kingdom of Mohammed Bin Salman to its knees.

The Yemeni army’s missile forces are able to carry out highly complex attacks, no doubt as a result of reconnaissance provided by the local Shia population within the Kingdom that is against the House of Saud’s dictatorship. These Houthi sympathisers within Saudi Arabia helped in target identification, carried out reconnaissance within the plants, found the most vulnerable and impactful points, and passed this intelligence on to the Houthis and Yemeni army. These Yemeni forces employed locally produced means to severely degrade Saudi Arabia’s crude-oil-extraction and processing plants. The deadly strikes halved oil production and threatened to continue with other targets if the Saudi-conducted genocide in Yemen did not stop.

On Saturday 29 the Houthis and the Yemeni army conducted an incredible conventional attack lasting three days that began from within Yemen’s borders. The operation would have involved months of intelligence gathering and operational planning. It was a far more complex attack than that conducted against Aramco’s oil facilities.

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

MbS: War With Iran Would Send Oil To Highs “That We Haven’t Seen In Our Lifetimes”

MbS: War With Iran Would Send Oil To Highs “That We Haven’t Seen In Our Lifetimes”

In an interview that aired just days before the one-year anniversary of Saudi journalist Jamal Khashoggi’s disappearance and presumed murder, Saudi Crown Prince Mohammad bin Salman sat for an interview with 60 Minutes – reportedly the most extensive interview he has ever given to a Western media outlet.

During the nearly 15-minute discussion with ’60 Minutes’ correspondent Norah O’Donnell (in an interview that, fittingly, was aired during ’60 Minutes’ 52nd season premier), MbS addressed every controversy afflicting his regime: tensions with Iran and the recent attacks on Abqaiq, the murder of Khashoggi, MbS’s hopes for peace in Yemen and the arrest of female activists despite MbS’s landmark gender reforms like granting women the right to drive.

The two issues from the interview that garnered the most attention were MbS’s insistence that he wasn’t aware of the plot to kill Khashoggi (but that he ‘accepts responsibility’, as a leader should), and the disruption in global oil supplies – triggering a spike in global prices – that could result from a war with Iran (just look at how global benchmarks responded to the attack on Abqaiq, with the largest one-day spike since Saddam Hussein invaded Kuwait).

Asked point-blank whether he ordered Khashoggi’s murder, MbS replied “absolutely not” and described the attack as a “heinous crime” (all via a translator).

“Absolutely not. This was a heinous crime. But I take full responsibility as a leader in Saudi Arabia, especially since it was committed by individuals working for the Saudi government.”

When pressed about how he could’ve been unaware of a mission in which some of his closest associates participated, MbS insisted that it would be ‘impossible’ for him to monitor what KSA’s 3 million government employees do on a daily basis.

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

Peak oil in Asia: where will the oil come from for the Asian Century?

Peak oil in Asia: where will the oil come from for the Asian Century?

Asian oil production peaked above 8 mb/d for the period between 2008 and 2016 (with spikes in 2010 and 2015). The 2015 peak was mainly caused by peak oil in China. Since then Asia’s decline  was almost 800 kb/d or 9%.

Asia-Pacific-oil-production_BP-1965_2018
Fig 1: The Asian oil peak lasted 8 years

The rest of Asia peaked already in 2000 (the year Australia peaked) followed by a very modest decline of 1.1% pa. Let’s go through the countries one by one.

In the following, net oil imports are defined as the difference between oil consumption and production. Please see the note at the end of this post.

Indonesia_oil_production_vs_consumption_1965-2018
Fig 2: Indonesia is in terminal production decline since the 1990s
Australia_oil_production_vs_consumption_1965-2018
Fig 3: Australia’s net oil imports
Malaysia_oil_production_vs_consumption_1965-2018
Fig 4: Malaysia is a net importer since 2010
Vietnam_oil_production_vs_consumption_1965-2018
Fig 5: Vietnam’s net imports are increasing fast
Thailand_oil_production_vs_consumption_1965-2018
Fig 6: Thailand was always a net importer

Thailand’s consumption increases faster than production.

India_oil_production_vs_consumption_1965-2018
Fig 7: India’s consumption exceeded 5 mb/d in 2018

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

Oil Set To Spike After Report Saudi Repairs At Abqaiq May Take “Up To Eight Months”

Oil Set To Spike After Report Saudi Repairs At Abqaiq May Take “Up To Eight Months”

While S&P futures may spike at the open following Saturday’s news from the NYT that the “the delegation of Chinese agriculture officials that had planned to travel to Montana and Nebraska in the coming week didn’t cancel the trip because of any new difficulty in the trade talks” but “instead, the trip was canceled out of concern that it would turn into a media circus and give the misimpression that China was trying to meddle in American domestic politics”, oil too is likely to catch a bid after the WSJ reported that it may take “up to eight month”, rather than 10 weeks company executives had previously promised, to fully restore operations at Aramco damaged Abqaiq facility, suggesting the crude oil shortfall will last far longer than originally expected.


Saudi officials say there is little sense of calm at the highest levels of the company and the Saudi government, however. It could take some contractors up to a year to manufacture, deliver and install made-to-measure parts and equipment, the Saudi officials said. #OOTT https://twitter.com/summer_said/status/1175859119061909506 …https://www.os-repairs-could-take-months-longer-than-company-anticipates-contractors-say-11569180194 243:52 PM – Sep 22, 2019


The official reason for the delay: the supply-chain is unable to respond to the Saudi needs. Specifically, Aramco is” in emergency talks with equipment makers and service providers, offering to pay premium rates for parts and repair work as it attempts a speedy recovery from missile attacks on its largest oil-processing facilities.” 

Following a devastating attack on its largest oil-processing facility more than a week ago, Aramco is asking contractors to name their price for patch-ups and restorations. In recent days, company executives have bombarded contractors, including General Electric , with phone calls, faxes and emails seeking emergency assistance, according to Saudi officials and oil-services suppliers in the kingdom.

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

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