WEEKLY ENERGY RECAP: Rocketing tanker rates lead to surprise surge in US crude inventories

In this June 13, 2019 file photo, an oil tanker is on fire in the Sea of Oman. Rising tanker rates has contributed to lower US crude oil exports and surging inventories in the country for the fifth consecutive week. (AP Photo/ISNA, File)
Updated 19 October 2019

WEEKLY ENERGY RECAP: Rocketing tanker rates lead to surprise surge in US crude inventories

Brent crude trended lower to $59.42 per barrel, while WTI also retreated to $53.78 per barrel.

Weak economic data from China added to concerns about the US-Chinese trade relationship.

However, the big news of the week came from the shipping sector as tanker rates rocketed which contributed to lower US crude oil exports and surging inventories in the country for the fifth consecutive week.

The US Energy Information Administration (EIA) reported a 9.3 million barrel gain in US crude inventories for the week ended Oct. 11, which was much higher than the market expected.

Even with heavy discounts applied to US shipments, producers struggled to sell their oil because of rising tanker charter costs.

Rates for chartering a supertanker from the US Gulf Coast to Singapore were reported to have hit record highs of more than $17 million and a record $22 million to China.

This trend is also likely to be reflected in US export data for October. Adding to shipping pressures is the fact that some ships are being taken out of service to fit sulfur-reducing scrubbers ahead of the International Maritime Organization (IMO) environmental rules that are set to take effect in January 2020.

It is noteworthy that US producers export most of their oil on a cost and freight (CFR) basis where the seller is required to arrange for the carriage of oil to the final destination port. 

The expected drop in US crude oil exports as a result of spiking tanker rates shows a serious financial fragility in the US crude oil export system.

Although shipping rates for very large crude carriers hit refinery margins, saddling additional premium shipping cost on the refiners, the physical market for oil strengthened further, and trading in Arabian Gulf sour crude grades continued to pick up.

Now the US will be hoping that higher tanker rates will reduce demand for very large crude carriers, which could ease tanker rates. 

However, until then, US shale producers will likely pay more to have their oil shipped to longer-haul destinations such as the Asian market.


Bank jobs go as HSBC and Emirates NBD reduce costs

Updated 15 November 2019

Bank jobs go as HSBC and Emirates NBD reduce costs

  • Others have also reduced headcount amid economic downturn and property market weakness

DUBAI: HSBC Holdings has laid off about 40 bankers in the UAE and Emirates NBD is cutting around 100 jobs, as banks in the Arab world’s second-biggest economy reduce costs.

The cuts come amid weak economic growth, especially in Dubai, which is suffering from a property downturn.

HSBC’s redundancies came after the London-based bank reported a sharp fall in earnings and warned of a costly restructuring, as interim CEO Noel Quinn seeks to tackle its problems head-on.

HSBC has about 3,000 staff in the UAE, part of a nearly 10,000-strong workforce in the Middle East, North Africa and Turkey.

The cuts at Dubai’s largest lender Emirates NBD came in consumer sales and liabilities, one source said, while a second played down the significance of the move.

HSBC and Emirates NBD declined to comment.

“The cuts are part of cost cutting and rationalizing to drive efficiencies in a challenging market,” the second source said.

Other banks have also reduced staff this year. UAE central bank data shows local banks laid off 446 people in the 12 months until the end of September. Foreign banks added staff in the same period.

Staff at local banks account for over 80 percent of the 35,518 banking employees in the country.

The merger between Abu Dhabi Commercial Bank, Union Commercial Bank and Al Hilal Bank saw hundreds of redundancies.

Commercial Bank International (CBI) said it would offer voluntary retirement to employees in September, which sources said saw over 100 departures. Standard Chartered, too, cut over 100 jobs in the UAE in September.

Rating agency Fitch warned in September a weakening property market would put more pressure on the UAE’s banking sector.