Oil slips as economic jitters offset U.S. debt deal

Oil slips as economic jitters offset U.S. debt deal

Oil prices slipped on Monday as economic worries over further interest rate hikes trumped a tentative debt ceiling deal reached in the U.S., possibly averting a default in the world's largest economy and oil consumer, said Hydrocarbonprocessing.

Brent crude futures slipped 68 cents, or 0.8%, to USD76.27 a barrel by 1350 GMT, while U.S. West Texas Intermediate crude was at USD72.11 a barrel, down 56 cents or 0.7%. Trade is expected to be subdued on Monday because of UK and U.S. public holidays.

U.S. President Joe Biden and House Speaker Kevin McCarthy over the weekend forged an agreement to suspend the $31.4 trillion debt ceiling and cap government spending for the next two years. Both leaders expressed confidence that members of the Democratic and Republican parties will vote to support the deal.

Still, analysts saw any boost in oil prices from the debt deal as short lived, with earlier gains in the session now lost. The U.S. Federal Reserve may still raise interest rates in June, IG's Sydney-based analyst Tony Sycamore said. "Higher U.S. rates are a headwind for crude oil demand," he added.

Markets are leaning towards expecting the Fed to raise rates by 25 basis points next month, then keep rates steady for the rest of the year. Chinese stocks fell after data showed profits slumping at China's industrial firms.

Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known as OPEC+, is due to meet on June 4. Saudi energy minister Abdulaziz bin Salman warned short-sellers betting that oil prices will fall to "watch out", in a possible signal that OPEC+ may further cut output.

However, comments from Russian oil officials and sources, including Deputy Prime Minister Alexander Novak, indicate the world's third-largest oil producer is leaning towards leaving output unchanged. "Traders have been left a little confused as to what we can expect," said Craig Erlam, senior markets analyst at OANDA.

"It may be that Saudi Arabia wants to keep traders on their toes, but to make these comments and not follow through could be perceived as weak and see prices drift lower again," Erlam said.

We remind, Russia is leaning towards leaving oil production volumes unchanged ahead of an OPEC+ policy meeting on June 4 because Moscow is content with current prices and output, three sources with knowledge of current Russian thinking told Reuters. OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, surprised the market on April 2 with further output cuts that pushed up the price of oil.

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Turkey's Urals oil purchases hit seven-month high in May

Turkey's Urals oil purchases hit seven-month high in May

Turkey's purchases of Russian Urals oil hit a seven-month high in May as Turkish refiners took advantage of low prices for the grade, Refinitiv Eikon data showed and traders said, as per Hydrocarbonprocessing.

Turkey is the only major importer of seaborne Urals in Europe after most other countries in the region agreed an embargo on such purchases over Russia's actions in Ukraine, which Moscow calls a "special military operation".

Turkish President Tayyip Erdogan and his supporters on Monday celebrated an election win that extended his rule into a third decade, promising continued trade with Russia. Russian President Vladimir Putin congratulated his "dear friend".

Some 230,000 barrels per day (bpd) of Urals oil were loaded for delivery to Turkey's ports in May, the highest level since October 2022 and nearly double April's supplies, according to Refinitiv Eikon data and Reuters calculations.

Refiners in the Mediterranean, meanwhile, are suffering from shortages of sour oil as Iraq halted around 450,000 barrels per day (bpd) of crude exports from the Kurdistan region at the end of March after winning an arbitration case against Turkey.

Turkey increased Urals oil imports last year and has bought about 150,000 bpd of the grade so far this year, according to Refinitiv Eikon data and Reuters calculations, nearly the same as in January-May 2022.

Turkey's ability to import Russian oil is limited by its refining capacity and competition with refiners in Asia, traders said.

We remind, Russia is leaning towards leaving oil production volumes unchanged ahead of an OPEC+ policy meeting on June 4 because Moscow is content with current prices and output, three sources with knowledge of current Russian thinking told Reuters. OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, surprised the market on April 2 with further output cuts that pushed up the price of oil.

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Saudi diesel imports from Russia, exports to Singapore hit records

Saudi diesel imports from Russia, exports to Singapore hit records

Leading crude exporter Saudi Arabia is maximizing refining profits by importing unprecedented amounts of cheap Russian diesel and in turn shipping record volumes to Singapore, where the fuel can achieve higher margins, shiptracking data shows, said Hydrocarbonprocessing.

Russia has had to divert the volumes it sold to Europe, previously its dominant product market, after the European Union banned oil product imports in February as part of its response to Moscow's invasion of Ukraine.

That allowed state oil giant Saudi Aramco to increase its May import arrivals to Singapore to record levels and cash in on better arbitrage netbacks in the east than Europe, driven by tighter Asian supply during the maintenance season, traders and analysts said.

"Diesel supply in Singapore is relatively tight due to regional refinery maintenance, while Middle East supplies are rising, which may create spot arbitrage opportunities for traders to move the cargoes (to Singapore)," Vortexa's head of APAC analysis Serena Huang said.

Saudi Arabia will import up to 500,000 tons (3.7 million barrels) or more of Russian diesel in May, with most of it arriving at Ras Tanura, where one of Saudi Aramco's refineries is located, two trading sources, Kpler and Refinitiv showed.

At the same time, diesel from Saudi Arabia arriving in Singapore is set to hit 400,000 tons - an unprecedented level, data from Refinitiv, Vortexa and two industry sources found. The sources asked for anonymity because they were not authorized to speak to the media.

The rise in Saudi supplies could replenish Singapore stocks as exports from northeast Asia fall during the refinery overhaul season between May and July, the sources added. It is however unclear whether Saudi Arabia was storing some of its own production and shipping mostly Russian supplies via swap trades instead since both are of typical diesel specifications.

Russian 10 ppm sulfur gasoil cargoes are traded at discounts of around USD30 a barrel to free-on-board Middle East quotes, versus Asia's spot premiums for the same grade at 16 cents a barrel to Singapore quotes, according to trade sources and Refinitiv data.

Globally, Saudi's diesel exports in April hit an all-time high of around 3.7 million tons, Kpler data showed. Jizan refinery, solely owned by Aramco, had been expected to increase diesel exports when crude runs stabilize. Aramco declined to comment.

FGE analyst Lu Yawen said more Middle East gasoil cargoes were heading east rather than west to Europe, where high inventories and weak economic growth have depressed prices. Falling freight costs also aided the arbitrage flow, two other oil and shipping analysts said.

The cost to charter a Long Range (LR) vessel on the Middle East to Singapore route has dropped to slightly below $25 a ton from around USD34 a ton in the last two months, they added. That is half the cost for the same ship to travel to Europe, they said.

Global diesel supplies have increased since the start of 2023, with China and the Middle East ramping up exports and as mild winter in Europe capped demand, helping to reduce prices. Asia's 10 ppm sulfur gasoil spot premiums and refining margins have fallen by more than USD8 and $1.50 a barrel, respectively, in the last two months, Refinitiv Eikon data showed.

Additions to refinery capacity of 700,000 barrels a day expected this year will further pressure east-of-Suez gasoil margins, Energy Aspects said in a note. The capacity includes units that are ramping up and will come online later this year.

We remind, Russia is leaning towards leaving oil production volumes unchanged ahead of an OPEC+ policy meeting on June 4 because Moscow is content with current prices and output, three sources with knowledge of current Russian thinking told Reuters. OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, surprised the market on April 2 with further output cuts that pushed up the price of oil.


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ITOCHU to become an official distributor of Neste MY Renewable Diesel in Japan

ITOCHU to become an official distributor of Neste MY Renewable Diesel in Japan

Neste and ITOCHU have agreed to extend their collaboration with a licensing agreement allowing ITOCHU to become an official distributor of Neste MY Renewable Diesel in Japan, said Hydrocarbonprocessing.

Based on this agreement, the availability of Neste MY Renewable Diesel will be expanded in the market, for example, to the area around Osaka in order to supply the fuel to the construction site of the Osaka-Kansai Japan Expo taking place in 2025.

Japan has accelerated the steps towards decarbonization in order to meet two ambitious climate goals: carbon neutrality by 2050 and a 46% reduction in greenhouse gas (GHG) emissions by 2030. Neste and ITOCHU share a common vision of renewable fuels playing a key role in reducing greenhouse gas emissions in Japan. The key focus in the current collaboration will, therefore, be not only on selling but also on promoting the use of more sustainable fuels, accelerating the transition from fossil fuels to renewable fuels, and increasing knowledge sharing on renewable diesel and the benefits it provides to its users.

“We are very excited to expand our Neste MY Renewable Diesel offering in Japan. We firmly believe that all solutions are needed to reduce transportation-related emissions and support Japan’s target of reaching carbon neutrality by 2050. We are committed to supporting our customers to reduce greenhouse gas emissions by at least 20 million tons annually by 2030,” says Peter Zonneveld, Vice President Sales, Europe and APAC at Neste’s Renewable Road Transportation business unit.

Neste and ITOCHU started collaborating in Japan already in June 2021 to make renewable diesel available to selected customers in Japan. At the time, the partners agreed to build a strategic partnership to accelerate the use of renewable diesel as a low-emission solution for diesel engines in Japan.

“The relationship between Neste and ITOCHU first started as early as in 2010, when we collaborated on renewable diesel in California. We are now very pleased to deepen the relationship by expanding the distribution of renewable diesel in Japan. Renewable diesel is getting a lot of attention as a solution for decarbonizing multiple industries such as heavy duty transportation, off-road and railways in Japan. We are very happy to strengthen the partnership with Neste and thereby help the Japanese market to reduce its greenhouse gas emissions,” says Tatsuya Tanaka, ITOCHU’s General Manager of the petroleum trading department.

By switching fossil diesel to Neste MY Renewable Diesel, GHG emissions can be reduced by as much as 75 to 95%* when emissions over the fuel's life cycle are compared with fossil diesel. Neste MY Renewable Diesel is produced from 100% renewable raw materials. It is a drop-in fuel, not requiring any modifications to the existing diesel-powered vehicles or fuel distribution infrastructures.

The expansion of the partnership between Neste and ITOCHU also builds on the existing collaboration to increase the availability of Neste MY Sustainable Aviation Fuel™ (SAF) in the Japanese market. Using Neste MY Sustainable Aviation Fuel reduces greenhouse gas emissions by up to 80% over the fuel’s life cycle compared to using fossil jet fuel**. As part of their collaboration, Neste and ITOCHU are currently supplying SAF at Haneda, Narita and Chubu International Airports, supporting Japanese airlines and the Japanese government with their emission reduction targets.

We remind, Neste is looking to build capacities at its Porvoo site to process 400,000 tons of liquefied waste plastic per year in the course of project PULSE, which is funded by the EU Innovation Fund. From 2030 onwards, Neste wants to process more than 1 million tons of waste plastic per year.

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Oil climbs after U.S. leaders strike provisional debt deal

Oil climbs after U.S. leaders strike provisional debt deal

Oil prices rose in early Asian trade on Monday after U.S. leaders reached a tentative debt ceiling deal, possibly averting a default in the world's largest economy and oil consumer, said Hydrocarbonprocessing.

Brent crude futures climbed 39 cents, or 0.5%, to $77.34 a barrel by 2317 GMT, while U.S. West Texas Intermediate crude was at $73.12 a barrel, up 45 cents, or 0.6%.

U.S. President Joe Biden and House Speaker Kevin McCarthy on Saturday reached an agreement in principle to suspend the $31.4 trillion debt ceiling. Both leaders expressed confidence on Sunday that members of the Democratic and Republican parties will vote to support the deal.

However, relief for global financial markets could be short-lived as once the deal is approved, the U.S. Treasury is expected to issue bonds that will further tighten liquidity and make funding more expensive for companies already reeling from high interest rates.

Last week, Brent and WTI notched a second consecutive weekly gain of more than 1% on the progress of the U.S. debt ceiling talks and after Saudi energy minister warned short-sellers betting oil prices will fall to "watch out" for pain.

Some investors took the warning as a signal that OPEC+, the Organization of Petroleum Exporting Countries and allies including Russia, could consider further output cuts at a meeting on June 4. However, Russian Deputy Prime Minister Alexander Novak said last week he expected no new steps from OPEC+ as a decision on voluntary production cuts was made just a month back.

U.S. energy firms cut rigs for a fourth week in a row, with oil rigs down by five to 570 last week to their lowest since May 2022, energy services firm Baker Hughes Co said in its weekly report on Friday.

Investors are watching for China's manufacturing and services data this week as well as U.S. nonfarm payroll data on Friday for signals on economic growth and oil demand.

We remind, Russia is leaning towards leaving oil production volumes unchanged ahead of an OPEC+ policy meeting on June 4 because Moscow is content with current prices and output, three sources with knowledge of current Russian thinking told Reuters. OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other allies, surprised the market on April 2 with further output cuts that pushed up the price of oil.


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