Sour Vs Sweet

A few days ago, the Maran Apollo, a 1,100-feet long oil tanker, left the U.S Gulf of Mexico for the Chinese port of Rizhao hauling a cargo of two million barrels of U.S. crude. Sitting for almost two months, the supertanker held demand-less crude during the coronavirus outbreak. This crude sitting on the tanker is known as medium-heavy sour crude and is now in high demand because of its higher content in sulfur and denseness. Sour crude is typically from Canada and the U.S. Gulf Coast whereas West Texas Intermediate (WTI) is a “sweet” crude oil. WTI, which is typically lighter and is less expensive to produce. Known as “sour” which is typically undesirable for both processing and end-product quality, it’s the kind of oil that Saudi Arabia and its allies produce. Urals of Russia and Arab Light from Saudi Arabia are normally two of the most widely consumed in today’s market, but crude is in increasingly short supply due to record output cuts by the two nations and their allies.

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Crude ‘Coaster Adrenaline

Much like some of the most daunting roller coasters in the world, crude oil has provided adrenaline building hill climbs, steep drops, twists, and turns.  Historically, you will be hard pressed to find a more erratic fuel market than the one we have witnessed over the past few months. COVID-19 has sparked drastic demand destruction, the warm winter months have curtailed heating oil demand, wet seasons are delaying farming, and OPEC+ cannot seem to agree on the production levels of crude to help negate the excessive supply on a global scale.

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Tanker Ship Parking Lot

The sharp decline in oil demand from China due to the coronavirus is causing oil cargoes to be stranded off the country’s coast and across Asia.  Last week, OPEC lowered its forecast for global oil demand by nearly a quarter million barrels per day as the pandemic of the coronavirus has crippled fuel consumption in China.  Demand from China, the world’s largest importer of oil, has dropped by three million barrels per day which is twenty percent of Chinese consumption.

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Is the U.S. a Net Oil Exporter?

The United States has significantly ramped up oil production over the past decade, but just how far have they come?  Depending on how you view oil production, the U.S. has just become a net oil exporter for the first time in 70 years.  Bloomberg describes the U.S. as a net petroleum exporter, but Forbes is quick to point out that this includes both crude oil and finished products, as opposed to just crude oil.

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Oil Output Falls in November

A recent survey conducted by Reuters found that OPEC oil output has dropped during the month of November from October by 110,000 barrels per day (bpd). The cause is from Angola Production fell due to maintenance, along with Saudi Arabia halted supply output before the initial public offering of state-owned Saudi Aramco.

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The Race Is On

A growing number of companies are “running” to build export terminals in the Gulf of Mexico. The reason for this growth is an excess amount of oil in the ports of Houston and Corpus Christi. Deepwater crude export terminals are needed from the thriving Permian Basin. Requiring billions of dollars of investment, they would stretch from Brownsville, Texas to southeastern Louisiana. “The congestion is shifting from the Permian Basin to the Gulf Coast,” said Sandy Fielden, director of oil and products research at investment research firm Morningstar. “There’s lots of traffic that these offshore terminals can sort of bypass.”

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Tanker Attack Jolts Markets

Early this morning the U.S. navy responded to an attack on two burning tankers after reports came that there was an attack in the Gulf of Oman. Off the coast in Iran, the USS Bainbridge was dispatched after the vessels suffered severe damage.

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