Posts Tagged ‘China’

Commodities trading: not for the faint-hearted

By Melanie Wold | May 14, 2013 12:01 AM Comments (0)

Once the darling of hedge funds, commodities are now looking like a poisoned chalice. Last year, hedge funds such as BlueGold, which specialized in crude oil; Centaurus, in natural gas; and Fortress Commodities, across all raw materials, shut down. Several commodities fund of funds also closed last year after clients fled.

Commodities trading, it seems – and in particular oil – is not for the faint of heart. The field is littered with failed ventures and prison sentences.

International sanctions on exporting countries such as Iran can make trading crude an even more dangerous game. On May 9, the US Treasury said it was penalizing Sambouk Shipping for contravening these sanctions. Sambouk is allegedly associated with Dimitris Cambis, who, along with a network of front companies, was executing ship-to-ship transfers of Iranian oil to obscure its origin.

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Chinese oil demand: suddenly, a lot slower

By News Desk | April 23, 2013 12:32 PM Comments (0)

After several months where it looked like the old China was back — the one with big year-on-year gains in oil demand — the sputtering China of mid-2012 was back in March. A paltry demand gain of 1.9% leads to the question: what’s the norm? And is there a norm? You can read Platts analysis here.

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Petrodollars: the Sinopec-KPC refinery is hitting some rough spots

By News Desk | April 15, 2013 12:01 AM Comments (0)

Sinopec and Kuwait Petroleum  have plans to build a refinery in southern China. Beyond that, how this project is going to turn out is anybody’s guess. In this week’s Oilgram News column Petrodollars, Song Yen Ling discusses the “bumpy” path the project has taken.

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Growing Russia-China links could hurt ESPO crude oil trade

By Richard Swann | April 11, 2013 12:47 PM Comments (1)

This month’s IEA oil market report highlighted some interesting developments in Russian oil production and exports, drawing attention to the possibility that stronger links with China could have a knock-on effect of cutting the amount of crude traded in international spot markets.

Recent agreements between Moscow and Beijing to double the amount of Russian oil being supplied to more than 600,000 b/d are likely to make China Russia’s top crude buyer but raise a number of big logistical challenges, the IEA said in its report.

At the very least, these are likely to prompt a reallocation of Russian crude flows until 2018 and affect spot-based ESPO blend exports via the Pacific coast port Kozmino.

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China unveils oil pricing reforms, but lacks complete clarity

By Yen Ling Song | March 27, 2013 09:51 AM Comments (0)

China’s long-awaited oil pricing reforms have finally been unveiled. But  the system may have become less,  not more, transparent.

First, some background. In 2008, the government introduced a system of setting retail prices which in theory would raise or cut regulated prices of gasoline, gasoil and kerosene if the rolling 22-working day average of a basket of Cinta, Brent and Dubai benchmark crudes fluctuated more than 4%.

The aim was to move domestic prices closer in line with international crudes so they would reflect the crude procurement costs that refiners bear. This was particularly pressing given the dramatic boost in China’s crude imports, from 30% of its total needs in 2000 to just under 58% last year.

In reality, the system only worked well under two conditions: when oil prices were around $100/barrel and when inflation in China was relatively benign. In much of 2011, when record inflation loomed, the government, worried about the impact on economic growth, made little move to adjust prices upward. That resulted in refiners bleeding at the pump and in some cases curbing production, causing shortages in some areas.

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China oil demand in February: small gain compared to ’12

By News Desk | March 26, 2013 04:48 PM Comments (0)

After a few months of year-on-year gains that exceeded 7%, Chinese oil demand in February rose at a more moderate pace compared to a year earlier. You can see our full analysis of it here.

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Petrodollars: The challenges of cleaner motor fuels in China

By News Desk | February 25, 2013 12:01 AM Comments (0)

China has a growing problem: It wants cleaner air and needs to upgrade the quality of its fuels to get there. But China traditionally has regulated retail prices to ensure they don’t get to levels that might cause unrest.  In this week’s Oilgram News column Petrodollars, Yen Ling Song discusses the conundrum.

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China’s PTA industry: a victim of its own success

By Sok Peng Chua | February 8, 2013 01:12 PM Comments (0)

In five short years, China’s purified terephthalic acid industry has gone from boom and to bust, a victim of its own success as it expanded swiftly, confident that China’s status as the world’s largest garment exporter would not be challenged.

Demand for PTA, a key polyester feedstock, was huge before the bust. China Customs data showed that in 2008, 4.97 million mt of PTA was imported. The figure rose to a record high of 5.4 million mt by 2010. Despite the flood of imports, profit margins for local PTA makers were also at an all-time high, at $120.85/mt compared to $30.83/mt in 2009, Platts data showed.

Fuelled by healthy profits, Chinese PTA producers started to expand rapidly and build ever-larger plants. In the past, a 500,000 mt/year plant was considered big. By 2010, the new plants were 1 million mt/year, and by 2012, the average size had doubled to 2 million mt/year. Last year, China’s total PTA capacity reached 26 million mt/year, of which 10.2 million mt/year started up in 2012. By 2014, the country’s PTA capacity is projected to increase by another 12 million mt/year or 48%.

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China oil demand in December: another record

By News Desk | January 23, 2013 09:44 AM Comments (0)

Showing that November’s increase was not a fluke, the Chinese once again consumed about 7.7% more oil in December than they did in December of 2011. The summer months of flat year-on-year growth in Chinese oil consumption are fading quickly in the rearview mirror. Read Platts’ analysis. Read the rest of this entry »

The IEA’s tighter oil market may be brief

By Robert Perkins | January 18, 2013 03:36 PM Comments (1)

So China again surprised to the demand upside in the IEA’s latest monthly oil market estimate. As a result, it provided, yet again, the impetus for an apparent tightening of the oil markets fundamentals at least in the short-term.

The West’s energy watchdog hiked its global oil demand estimate for the final quarter of 2012 by a massive 710,000 b/d and pushed up its forecast of demand this year by 240,000 b/d to 90.8 million b/d. This comes amid a sharp pullback in Saudi oil production of 600,000 b/d since October (half of which came in December alone) from 30-year highs, underpinning the IEA’s more bullish view.

So with 400,000 b/d more demand for OPEC’s oil in the fourth quarter than previously thought, the call on OPEC’s oil was around 30.8 million b/d in the three months to December, when the cartel was pumping 30.6 million b/d.

That’s a legitimate oil market pinch for sure, but not necessarily a tightening for very long.

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