WEEKLY ENERGY RECAP: Strong demand, despite ample supply

The logo of the Organization of the Petroleum Exporting Countries (OPEC) sits outside its headquarters in Vienna, Austria. (REUTERS/Lisi Niesner/File Photo)
Updated 17 November 2019

WEEKLY ENERGY RECAP: Strong demand, despite ample supply

Brent crude rose above $63 for the first time in more than seven weeks despite a bearish International Energy Agency (IEA) 2019 outlook that was published shortly before the monthly report from the IEA.

As usual, that highlighted weak demand and rising non-OPEC supply of some 2.3 million bpd in 2020, which is higher than the 1.8 million bpd this year.

The Paris-based organization opined that this would eat from the Organization of the Petroleum Exporting Countries (OPEC) market share and lead to a decline in OPEC’s crude oil output by around 1 million bpd.

However the IEA neglected to report that the US oil and gas rig count continued to fall for the 12th time in the past 13 weeks. 

According to Baker Hughes data, the total oil and gas rig count dropped to 806. 

Still, Brent crude still continued to hover in a narrow range most of the year trading sideways at around $60 per barrel both prior to and after the Sept.14 attacks on Saudi Aramco oil facilities. 

Year to date, Brent crude rose above $70 per barrel only for a short time during April and May and never made it above $80 per barrel, unlike last year.

Oil prices managed to edge higher despite the 2.2 million barrels build in US crude oil inventories, which makes it the 9th rise in US crude inventories for 8 weeks, that added a total of more than 40 million barrels of oil to US commercial inventories, as reported by the US EIA.

The IEA continues to push the thesis that higher US output will shrink the market share of OPEC members and Russia in total oil production. 

The timing of this conclusion is very questionable ahead of OPEC’s early December 2019 meeting, as it is premature to conclude that OPEC+ producers will face a major challenge in 2020 as demand for their crude is expected to fall sharply.

The IEA also irrationally emphasized that the market is currently well supplied not only from the US, but also from relatively new growth prospects like Brazil’s offshore fields, and even from older, mature Norwegian fields in the North Sea.

The IEA completely ignores the market’s strong fundamentals. For instance, China’s refining capacity remains historically high at 13.68 million bpd, jumped 9.2 percent, or around 1.15 million bpd year on year, according to data from the China National Bureau of Statistics. 

Consequently, China’s crude oil imports surged 1 percent year-on-year to hit a historical high of 10.76 million bpd in October. 

Higher demand is further expected as refineries in China will strive to maximize petrochemical yields ahead of the Christmas manufacturing season. 

Another market positive downplayed by the IEA is the strength in the physical sour crude oil market, representing tighter supply fundamentals.

Such factors suggest the market may be in better shape than the IEA suggests.

 

Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco.  Twitter:@faisalfaeq

 

 

 

 


Berlin’s ill-fated new airport finally ready for take-off

Updated 28 October 2020

Berlin’s ill-fated new airport finally ready for take-off

  • The airport, located in the south-east of the capital, was originally due to open in 2011
  • BER initially projected to cost $2 billion but already was past the $7.6 billion mark

BERLIN: Nine years late and eye-wateringly over budget, the Berlin region’s new international airport will finally open on Saturday — in the middle of a global pandemic that has crippled air travel.
“We are ready for take-off!” insists the management team at the new Berlin Brandenburg Airport (BER), set to replace the German capital’s aging Tegel and Schoenefeld airports.
But the mood is one of relief rather than celebration.
Ever since construction began on BER in 2006, the project has been dogged by one failure after another, becoming a financial black hole and a national laughing stock — not exactly an example of German efficiency.
The airport, located in the south-east of the capital, was originally due to open in 2011.
Now it is opening its doors in the middle of the worst crisis the aviation industry has ever seen, as COVID-19 restrictions continue to suffocate air travel.
And as if that were not enough, there’s also the climate crisis: pressure group Extinction Rebellion is planning acts of “civil disobedience” on the opening day to protest against the impact of aviation on global warming.
Against that backdrop, “We will simply open, we will not have a party,” according to Engelbert Luetke Daldrup, president of the airport’s management company.
Lufthansa and EasyJet will be the first two airlines to touch down on the tarmac of what will be Germany’s third-largest airport, after Frankfurt and Munich.
A few days before the opening, around 200 staff were busy disinfecting the 360,000-square-meter Terminal 1.
Some 100 alcoholic hand gel dispensers have been installed and robot vacuum cleaners hum over the floors.
The “Magic Carpet,” a huge, bright red artwork by American artist Pae White suspended from the ceiling, brings a touch of color to the check-in hall.
The airport has been designed to welcome 27 million passengers a year, but in November it will see only 20 percent of usual air traffic thanks to the pandemic.
Terminal 2 won’t open until spring 2021.
About 15 shops and restaurants out of just over 100 will remain shut, while the rest will be forced to keep “limited opening hours” because of low traffic through the airport, a spokesman said
None of this good news for BER, initially projected to cost $2 billion but already past the $7.6 billion.
The airport has been granted $353 billion in state aid to help safeguard the jobs of the 20,000 people who will eventually work there until the end of 2020.
The health crisis is already having an impact on employment at the hub: at the end of July, Berlin’s airports announced the loss of 400 jobs out of a total of 2,100.
EasyJet has said it will cut 418 jobs in the German capital, and Europe’s leading airline Lufthansa, Germany’s flagship carrier, is to shed 30,000 jobs worldwide.
“We fear even greater job losses in the future,” a spokesman for the Verdi union said.
Luetke Daldrup hopes the situation will improve “from the spring onwards.” But the International Air Transport Association does not expect global air traffic to reach pre-crisis levels until 2024.
In the state of Brandenburg, which surrounds Berlin, local leaders remain optimistic about the prospects for development.
“No hotel has so far postponed its investment plans because of the pandemic,” insists Olaf Luecke, president of the local branch of Germany’s hotel and catering trade union (DEHOGA).
Construction work began in September on two 14,000-square-meter (150,000-square-foot) hotel complexes, due to open in 2022.
And in anticipation of the opening of BER, US electric-car giant Tesla has chosen Brandenburg as the location of its first European factory, which is set to employ 40,000 people.
“Having new, modern infrastructure will be beneficial in any case, despite the pandemic,” according to Carsten Broenstrup of the state employers’ association.
But “if there is not a vaccine soon, it will be a very big problem,” he admits.