How will China's clampdown on mislabeled cargoes affect sanctioned oil

Chinese customs authorities are stepping up inspection checks on cargoes of heavy crude oil after uncovering several Iranian shipments that were mislabeled as diluted bitumen in an effort to bypass import quotas, said Hydrocarbonprocessing.

The checks, begun a month ago, are delaying oil discharges into the eastern refining hub of Shandong province. They are also adding to uncertainty over the risk of disruption to shipments from Iran and Venezuela, while cutting into refining operations just as fuel demand recovers.

China's independent refiners known as teapots, which account for more than a fifth of its crude imports, have become top customers of Iranian and Venezuelan oil since late 2019. That has followed tough U.S. sanctions on the two exporters, which have supplied China for more than two decades.

The Chinese refiners have increasingly decoupled from the mainstream global oil market to focus almost solely on discounted oil from Iran and Venezuela, and more recently Russian oil in the aftermath of Moscow's invasion of Ukraine.

China has repeatedly condemned Washington's unilateral sanctions and defended trade with Iran and Venezuela as normal business practice in line with international law. Will the checks widen to all Iranian cargoes?

This is unlikely. Traders said they believed the checks were technical rather than political and aimed to regulate the domestic market and toughen scrutiny of the use of crude oil quotas. Beijing sets no quotas for state-run refiners, but allots them for independent plants, recently giving greater volumes to "mega" private refiners while cutting back on quotas for smaller plants.

The inspections have primarily targeted shipments of oil with density of less than 950 kg a cubic metre (kg/m3) - mostly Iranian heavy crudes Pars Oil and Soroosh - that account for about 10% to 20% of the Middle East nation's oil into China, compared with dominant Iranian Light and Iranian Heavy.

China's Iranian oil imports, often branded as originating from Malaysia, Oman or the United Arab Emirates, were estimated at 640,000 barrels per day (bpd) in the first quarter of 2023, according to tanker tracker Vortexa Analytics. That is up from 490,000 bpd a year earlier and down from 960,000 bpd in the fourth quarter of 2022, Vortexa estimated.

We remind, Oil prices jumped on Friday but were set for a third straight week of losses after sharp declines earlier in the week on fears about interest rate hikes, U.S. banking sector problems and slowing Chinese demand. Brent crude rose USD2.86, or 3.9%, to USD75.36 a barrel by 1058 a.m. ET (1458 GMT). U.S. West Texas Intermediate was up USD2.93, or 4.3%, at USD71.51 after four days of declines that sent the contract to lows last seen in late 2021.

mrchub.com

Oil prices jumped on Friday but were set for a third straight week of losses after sharp declines earlier in the week on fears about interest rate hikes, U.S. banking sector problems and slowing Chinese demand, said Hydrocarbonprocessing.

Brent crude rose USD2.86, or 3.9%, to USD75.36 a barrel by 1058 a.m. ET (1458 GMT). U.S. West Texas Intermediate was up USD2.93, or 4.3%, at USD71.51 after four days of declines that sent the contract to lows last seen in late 2021.

The Brent benchmark was on track to finish the week with a decline of about 5.2%, while WTI was set for a 6.6% loss, despite heading for their biggest daily percentages rises in a month. "Crude is trying to reverse the recent washout in prices triggered by higher interest rates and recession fears mostly in the banking sector," said Dennis Kissler, senior vice president of trading at BOK Financial.

Technically, crude has been through an exaggerated liquidation sell-off, Kissler said, adding that long positions by hedge fund were at some of their lowest point in years, implying "plenty of buying power on the sidelines." Analysts also said that there was a disconnect between oil demand and supply fundamentals and prices.

"The upshot is that there is a big disconnect between oil balances and oil prices," said PVM oil market analyst Stephen Brennock, while Commerzbank analysts noted oil demand concerns were overblown and expect a price correction upward in coming weeks. Equities, which often move in tandem with oil prices, also edged up. A better-than-expected jobs report helped ease some fears of an imminent economic downturn, spurred in part by renewed banking fears.

Meanwhile in China, factory activity contracted unexpectedly in April as orders fell and poor domestic demand dragged on the sprawling manufacturing sector. However, expectations of potential supply cuts at the next meeting of the OPEC+ producer group in June have provided some price support, said Kelvin Wong, a senior market analyst at OANDA in Singapore. Investors also broadly expect the Fed to pause rate hikes at its June policy meeting.

We remind, North American chemical railcar traffic fell for a second week, with loadings for the week ended 29 April down 1.3% year on year to 47,654, led by a 1.9% decline in the US, according to the latest freight rail data by the Association of American Railroads (AAR). For the first 17 weeks of 2023 ended 29 April, North American chemical rail traffic was down 3.2% year on year to 776,704, with US traffic down 6.0%, to 552,069 loadings.

mrchub.com

PPG has announced the completion of a EUR13,5 mln investment to enhance its powder coatings production facility in Brazil, Indiana, said the company.

The plant, which employes 90, has been expanded by 20,000 square feet to accommodate two state-of-the-art lines for bonded metallic powder and automated packaging capabilities.

The Brazil plant expansion project is part of PPG’s strategic efforts to expand its powder coatings offerings and increase production to meet growing customer demand. Since 2019, PPG has focused on growing its powder coatings capacity and capabilities, making four strategic acquisitions and expanding production and service elements at seven powder plants across the globe. Additional capacity enhancements across the U.S. and Latin America are being planned for 2023.

We remind, PPG will invest USD11 million to double the production capacity of its powder coatings plant in San Juan del Rio, Mexico. The expansion project is expected to be completed by mid-2023 and will allow the plant to meet the expected future demand for powder coatings in Mexico.

PPG is a leading supplier of powder coatings to the automotive, transportation, appliance, furniture and other markets. The company expanded the business with its 2020 acquisition of Alpha Coating Technologies, which manufactures powder coatings for light industrial applications and heat-sensitive substrates, and its 2021 acquisition of Worwag, which makes liquid, powder and film coatings for industrial and automotive applications. PPG recently agreed to acquire the powder coatings business of Arsonsisi, including a manufacturing plant in Verbania, Italy.

mrchub.com

A fire burned for a third day on Sunday at Shell Plc's chemical plant in the Houston suburb of Deer Park, Texas, said Hydrocarbonprocessing.

The fire initially ignited on Friday afternoon in an explosion in an olefins unit, used to make plastics and rubber. The fire was extinguished for a few hours on Saturday morning before it reignited around 3 p.m. CDT (2000 GMT), said Shell spokesperson Curtis Smith.

No injuries were reported from the fire. Nine people were evaluated and released at local hospitals on Friday for possible chemical exposure. Water is being sprayed onto the fire to keep it under control until the chemicals, which were being processed at the time of the explosion, burn away, Smith said.

Water may continue to be sprayed for up to 36 hours after the fire is extinguished to keep nearby equipment cool, he said. Water runoff has exceeded the chemical plant's wastewater capacity and is being diverted into the Houston Ship Channel, Smith said. A boom has been deployed in the channel to contain any chemicals that may be carried by the water runoff.

Smith said air monitoring in neighboring communities "has not detected any harmful levels of chemicals" from the fire. Jennifer Hadayia, executive director of Air Alliance Houston, said Shell's statements about risks to the community were self-serving.

"History has shown that these early statements are for the benefit of industry public relations and not public health," Hadayia said. Olefins units are the central units in petrochemical complexes, producing ethylene, butadiene and propylene from hydrocarbon feedstocks.

We remind, Shell has awarded the Serikandi Kent Energy Solutions joint venture a five-year commissioning and start-up services contract for its activities in Brunei Darussalam. Details and the value of this long-term contract – the first win for Serikandi Kent Energy Solutions - were kept under wraps although Joe McCormick, Kent’s executive vice president for Asia Pacific, said the JV would be building up its local resources in tandem with the BSP work.

mrchub.com

The Abu Dhabi National Oil Company (ADNOC) has informed at least three buyers in Asia that it will supply full contractual volumes of crude in July, steady from the previous month, said Reuters.

But ADNOC has informed the term buyers that it will load 5% less crude in May, the minimum operational tolerance, the people said, reflecting the additional cut announced last month by the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+. ADNOC does not comment on commercial matters.

The oil cartel plans to reduce production by 1.16 million barrels-per-day (bpd) from May to the rest of the year. "We may see less loading from ADNOC from May onwards," said one of the people.

The Abu Dhabi National Oil Company (ADNOC) has informed at least three buyers in Asia that it will supply full contractual volumes of crude in July, steady from the previous month, trade sources said on Friday.

But ADNOC has informed the term buyers that it will load 5% less crude in May, the minimum operational tolerance, the people said, reflecting the additional cut announced last month by the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+.

ADNOC does not comment on commercial matters. The oil cartel plans to reduce production by 1.16 million barrels-per-day (bpd) from May to the rest of the year. "We may see less loading from ADNOC from May onwards," said one of the people.

We remind, Eni and ADNOC will explore potential opportunities in the areas of renewable energy, blue and green hydrogen, carbon dioxide capture and storage (CCS), in the reduction of greenhouse gas and methane gas emissions, energy efficiency, routine gas flaring reduction and the Global Methane Pledge, to support global energy security and a sustainable energy transition. In addition, they will evaluate areas of cooperation for sustainable development and promoting the spread of a culture of sustainability within the energy industry and its stakeholders.

mrchub.com