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.


Nvidia deal for Arm will drive computing power growth, says SoftBank’s CEO

Updated 23 October 2020

Nvidia deal for Arm will drive computing power growth, says SoftBank’s CEO

  • Saudi Arabia's Public Investment Fund (PIF) is an anchor investor in the $100 billion Vision Fund

TOKYO/DUBAI: SoftBank Group Corp. CEO Masayoshi Son said on Thursday the sale of chip designer Arm to Nvidia Corp. will drive growth in computing power, in his first public comments since the $40 billion deal was announced in September.
Son made the comments at a virtual summit about artificial intelligence hosted by Saudi Arabia, an anchor investor in the $100 billion Vision Fund, at which he reiterated his belief that AI would transform society.
The Nvidia deal, part of a series of asset sales by Son, whose group has been shaken by soured investments and the COVID-19 pandemic, has raised concerns it will threaten Arm’s role as a neutral supplier in the industry.
Son is set to speak next week with Nvidia CEO Jensen Huang at SoftBank World, the group’s annual event for customers and suppliers that is being retooled as it focuses on investing.
SoftBank’s growing cash pile is driving speculation about future investment plans, with the Vision Fund targeting external funding for a blank-check company, a source said, in a sign the group is regaining its mojo.
“I am a risk taker,” Son said on Thursday.
Rajeev Misra, CEO of SoftBank Investment Advisers which oversees the Vision Fund, said the market share gained by online commerce companies in the last six to eight months is more than what they gained in the previous four years put together.
“COVID has accelerated the acceleration of AI even further,” Misra told the same conference, adding in the 105 companies Vision Fund 1 and 2 have invested in, artificial intelligence is the core of their businesses.