India: Reliance a major buyer of Russian oil

India's Reliance Industries, operator of the world's largest refining complex, is snapping up Russian refined fuels, including rare purchases of naphtha, after some Western buyers stopped Russian imports, trade flows data from Refinitiv showed.

Western sanctions against Russia over its invasion of Ukraine have led to an emergence of rare trade routes for Russian crude and refined products that were mainly sold to European countries.

India imported about 410,000 tons of naphtha, used for making petrochemicals, in Sept-Oct, the Refinitiv data showed.

Of this figure, Reliance received about 150,000 tons from the Russian ports of Ust-Luga, Tuapse and Novorossiysk during the two months, the data showed.

The private refiner did not buy Russian naphtha in 2020 and 2021. Its annual imports of Russian naphtha were restricted to just one parcel in four years to 2019, the data showed.

The data showed a panamax carrier Okyroe sailing towards India laden with about 59,000 tons of Russian naphtha.

"With European countries shutting down Russia, they need to find outlets for their naphtha," a trader based in India said, referring to Russian firms.

Russian naphtha is being sold at lower premiums to countries like India, two Asian naphtha traders said.

Reliance, its two plants together capable of processing 1.4 million barrels of oil a day, has emerged as a key buyer of Russian oil since Moscow's February military action in Ukraine.

It also buys straight run fuel oil from countries, including Iraq and Russia, to process at cokers in the two refineries in the western Indian state of Gujarat to boost refining margins.

Reliance's fuel oil imports from Russia have surged to a record 3 million tons since the beginning of this fiscal year in April, as compared to about 1.6 million for all of 2021/22, Refinitiv data shows.

Reliance is expected to receive about 409,000 tons of fuel oil in December, the data showed.

 

Saudi Arabia extends term for a US$3 billion deposit to Pakistan

The Saudi Fund for Development (SFD) has extended the term for the deposit provided by the Kingdom amounting to US$3 billion to the State Bank of Pakistan (SBP).

The extension of the term of the deposit is a continuation of the support provided by Saudi Arabia to Pakistan, as the deposit aims to shore up the foreign currency reserves in (SBP) and help Pakistan in facing the economic repercussions of the COVID-19 pandemic.

This also contributes to meeting external sector challenges and achieving sustainable economic growth for the country.

It is worth noting that the US$3billion deposit agreement was signed through the Saudi Fund for Development (SFD) with SBP in November 2021.

The issuance of the royal directive reflect the continuation of the close relationship between the two countries.

Chevron allowed bringing Venezuelan crude to United States

The US oil refiners that once were regular buyers of Venezuelan crude are jockeying to win access to coming cargoes chartered by Chevron Corp under a newly issued US license, reports Reuters.

The Biden administration last week authorized Chevron to expand operations in Venezuela and resume taking prized heavy crude to the United States. It was first easing in more than three years of a US ban on imports from the South American nation.

A further relaxation may follow if Caracas and opposition leaders agree on terms of a presidential election, Washington has said.

Valero Energy Corp, PBF Energy and Citgo Petroleum have shown interest in getting access to the oil Chevron is expecting in coming weeks.

Venezuelan heavy crude grades, popular among US refiners for producing products from asphalt to motor fuels, had been partially replaced by Russian supplies in the aftermath of sanctions on Venezuela.

Some of these companies began contacting Chevron, shipping agencies and vessel owners to check timetables, the sources added. No Venezuelan oil officially has been allocated to Chevron yet and no chartering contracts have been signed to transport cargoes to the United States, according to Venezuelan export schedules and Refinitiv freight data.

The most recent chartering contracts to transport Venezuelan oil to the US Gulf Coast are from late 2018, right before sanctions, the Refinitiv data showed.

Valero, PBF and other US independent refiners would not need any new authorization to buy Venezuelan oil from Chevron. But Citgo, owned by Venezuela's PDVSA, may require clearance from the US Treasury Department since it operates under a license, analysts and experts said.

Chevron could prioritize its own refineries, especially Pascagoula, Mississippi, and El Segundo, California, which were regular receivers of Venezuela oil in the past.

On Thursday, Chevron CEO Michael Wirth said the company is not likely to add investment to boost Venezuela's output in the next six months as the sanctions framework will take time to be eased. The primary effect will be to allow some Venezuelan oil to flow back to the United States, "which will help the US refining system," Wirth said.

A total lifting of sanctions is unlikely in the near term, said analysts, but Venezuela's former customers, its business partners and creditors are taking steps to collect pending debts in the wake of the Chevron authorization. Washington has not signaled it would authorize other companies to collect on those debts.

Because spring and summer in the United States are the most active seasons for asphalt paving and peak driving, Venezuela's heavy Boscan crude produced by Chevron and PDVSA at their Petroboscan project could be the first exported.

To restart those shipments, dredging Maracaibo Lake's navigation channel might be needed to allow Panamax and Aframax tankers reach Venezuela's western oil terminals, shipping sources said.

A glut of Boscan crude in storage earlier this year forced a total shutdown of its processing. Draining those stocks must come first to restart output, PDVSA documents showed.

There are separate stocks of Hamaca oil and diluted crude for immediate export at the nation's largest terminal. But as of November 29, there were only 1.47 million barrels available, enough for only two cargoes, according to the PDVSA documents.

Petropiar's crude upgrader, operated by PDVSA and Chevron, was halted last week over a naphtha leak. It restarted days later to produce about 100,000 barrels per day of Hamaca.

In November, PDVSA sent 1.2 million barrels of Hamaca to its refineries for processing. About 1 million barrels of fuel oil were also shipped from Petropiar to Iran's state firm Naftiran Intertrade Co LTD (NICO) as part of an oil swap, the documents showed.

 

Emerging shortage of seafarers

The shortage of seafarers, in particular qualified senior officers, was an issue that came up repeatedly at Crew Connect Global in Manila.

While some believe the industry faces an acute shortage of seafarers, others say this is simply not true and not borne out by the situation on the ground, while some point to a mismatch in supply and demand, and a failure by the ship owners to provide cadet berths.

Setting the scene in the opening sessions of the conference Guy Platten, Secretary-General of the International Chamber of Shipping (ICS) detailed the expected shortage of officers.

” According to the latest ICS/Bimco study, 96,000 seafarers short by 2026. That's a huge challenge. That's certified officers we're going to be short of, so that's something that we need to embrace,” Platten said.

The move to alternative low and zero carbon fuels will complicate things yet further with research commissioned by the Just Maritime Transition Coalition showing that up 800,000 seafarers will require additional training by the mid-2030’s so as to be able to use alternative fuels safely.

The extreme lack of diversity in the seafaring workforce of which just 2% is female was highlighted as an issue that needed to be addressed. “Diversity is on the agenda and is going to be a very hot topic,” stated Andreas Nordseth, Director General of the Danish Maritime Authority told the conference. “We have to find out what to do. It’s not just to do with fairness of gender.”  

Nordseth said that have a more diverse is better for safety, retention and a wide range of factors.

Platten was in agreement saying, “It’s a disgrace really that only 2% of our workforce is women. And we're just missing out so much talent and with the digitalization with technologies, with all that's happening, we've got a golden opportunity to change that.”

The crew supply forum later on in the first day of the conference grappled further with the issue of the shortage of officers.

The lack of cadet berths was highlighted as an issue along with the longstanding huge mismatch between the numbers of graduates from Philippines maritime schools and academies and the actual number that ever work on board a ship. Philippines maritime schools churn out around 25,000 – 30,000 graduates annually yet only around an estimated 5,000 of those will ever serve on board a merchant vessel.

It was an issue pressed by conference chairman John Adams, Senior Advisor to V.Group, and whether it related anyway to the quality of the training and issues such as STCW compliance.

Iris Baguilat, President of Dohle Seafront Crewing, questioned the lack of cadet berths and the long-term commitment of ship owners to Filipino seafarers. As to why so few Filipino graduates managed to get jobs at sea she said, “It’s a question you have to ask the ship owners, why are they not hiring our graduates.”

Marlon Rono, President and CEO, of Magsaysay People Resources Corp, said, “That really is a big issue, and one is because not so many ship owners take cadets.” Rono highlighted the policy of Japanese ship owners that two cadets have to be taken on every ship, and if cadets are not taken there is penalty levied to a fund for training. The result is it is better to take cadets than not.

Speaking from the audience Kuba Szymanski, Secretary General of Intermanager, said he did not believe there was a shortage of crew noting that in a capitalistic world if there is a shortage of something the price goes up. “Do you see salaries going up now except LNG? I’m sorry, no, and if there are its only 1% to 2%,” he said.

As many as 800,000 seafarers serving global shipping will need up skilling by the mid-2030’s to meet the industry’s decarburization ambitions according to research commissioned by the Maritime Just Transition Task Force.

The task force launched a 10-point action plan at COP27 based on the new research which it commissioned from DNV Maritime’s consultancy modeling three different scenarios for decarburization of shipping through to 2050. The Maritime Just Transition Task Force was launched at COP26 last year bringing together UN Global Compact, the International Chamber of Shipping (ICS), and International Transport Workers Federation (ITF) with an aim to ensure seafarers at the frontline of decarburization were properly looked after and trained in shipping’s energy transition.

The research modeled three scenarios based on the original IMO 2018 targets of a 50% emission reduction by 2050, zero carbon by 2050, and decarburization by 2050.

The zero carbon by 2050 scenario, modeled Lloyds Register and University Maritime Advisory Services (UMAS), foresees 450,000 seafarers would require some additional training by 2030, and 800,000 by the mid-2030’s to handle alternative fuels.

Under the decarburization by 2050 scenario, modeled by DNV, 750,000 seafarers would require additional training by 2050, and under the IMO 2018 scenario, also modelled by DNV between 310,000 and 750,000 seafarers would require additional training by the 2040’s.

Guy Platten, Secretary General, International Chamber of Shipping, said, “There is an urgent need to establish the infrastructure and training required to prepare our seafaring workforce, both in developed and developing countries, to help meet our decarburization objectives. This should be done as of today, so they are ready and able to meet the challenges that new green fuels and propulsion technologies will pose and mitigate any potential health and safety risks for ships, communities, the environment and seafarers themselves.”

The Action Plan makes recommendations to industry, governments, seafarer unions and academia in terms of meeting the challenge of training for alternative fuels. Recommendations include: strengthening global training standards, ensuring a health-and-safety-first approach, and establishing advisory national maritime skills councils.

While the urgent need for training is clear which fuels this training need to be for is not. In its general conclusions the report notes a lack of clarity viability and uptake of alternative fuels, and uncertainty over regulatory developments and finance made it difficult to plan further training for seafarers.

The safety of handling for alternative fuels was stressed by the ITF. “The good news is that seafarers are prepared and willing to be part of this transition. But crew want to know that the fuels they’re handling are indeed safe, and that we as an industry have the training pathways established to upgrade their skills,” Stephen Cotton, General Secretary of the International Transport Workers’ Federation (ITF).

Safety was also stressed by DNV Maritime CEO, Knut Ørbeck-Nilssen, who said: ​​”Decarburization is bringing new opportunities, new technologies but also new risks. Our first priority must be to achieve safe decarburization. We must take a collaborative approach to safeguard our people, our ships and our environment.”

In terms of the regulatory challenge IMO Secretary-General Kitack Lim said it would be in “sharp focus” in a review of the STCW Convention.

 

 

 

 

Volatility of oil prices will be name of the game in December 2022

The month of December has started and it can be rightly termed the most crucial for the energy market as several events and factors would determine the trend in prices by the end of year 2022 and beyond.

While the Chinese zero-Covid policy and protests against that policy weigh negatively on market sentiment, the OPEC plus meeting on December 04 and the beginning of the European Union embargo on Russian seaborne crude oil imports on the next day are likely to shape the course of the prices. Uncertainty is high, which would stoke further volatility in prices. 

Oil slumped early on Monday to the lowest level in nearly a year – since December 2021, weighed down by risk aversion in commodity markets amid protests in China over the authorities’ strict Covid curbs policy. 

The recent price rout, with Brent plunging by 10% in one week, intensified speculation that OPEC Plus members could consider another production cut when they meet on Sunday, December 4. On the following day, December 5, the EU ban on imports of Russian crude oil and the associated G7-EU price cap begins, with the exact price of the cap yet to be agreed on and announced. 

With so many uncertainties, oil prices are seesawing on every rumor or report. This week and the ones after that will likely see more of the same and prices could swing either way depending on the OPEC Plus meeting, the EU ban and price cap on Russian oil and Russia’s reaction to it, and the developments in China, which, so far, is singlehandedly dragging down oil prices due to fears of weak demand in the world’s top crude oil importer at least in the short term. 

A violent move down in prices began on November 21 after The Wall Street Journal citing OPEC delegates that the members of the group had informally discussed whether there would be a need for more oil on the market in view of the EU embargo on Russian crude oil imports. The report was immediately denied by OPEC’s top producer Saudi Arabia and another influential member of the cartel, the United Arab Emirates (UAE). 

“United Arab Emirates denied that it is engaging in any discussion with other OPEC+ members to change the last agreement, which is valid until the end of 2023,” its Energy Minister Suhail al-Mazrouei said on November 21.

“We remain committed to OPEC Plus aim to balance the oil market and will support any decision to achieve that goal,” the minister added. 

As of November 29, speculation is mounting that OPEC Plus could consider a cut at its December 4 meeting due to gloomier-than-expected oil demand outlook amid Chinese Covid curbs and protests and slowing economies elsewhere. 

Considering that oil prices slumped to the lowest level since December 2021, OPEC Plus could indeed decide to defend an US$80 floor under prices, but it will have a difficult task in predicting how the embargo on Russian crude will impact trade flows and prices. 

The structure of the oil futures market is showing sign of sluggish global oil demand and sufficient supply just ahead of the embargo on Russian oil. Weakening physical demand and plunging spot premiums for Middle Eastern crude could prompt OPEC Plus to announce a fresh cut on Sunday. 

The alliance of OPEC and non-OPEC producers led by Russia regularly denies it’s defending a certain oil price, but it always says that it looks at the market fundamentals.

These days, the physical market is showing signs of weakness and even an oversupply in the short term, considering the contango in both WTI and Brent front-month to second-month futures. 

Iraq, OPEC’s second-largest producer, signaled this weekend that the OPEC+ meeting would focus on the current market conditions and balances.  

Several hours after the OPEC+ meeting, the EU embargo and the price cap on Russian oil enter into force. There are so many uncertainties surrounding the measures that analysts cannot predict anything but further volatility in oil prices. The uncertainties range from the exact price of the cap – with the EU still at odds over this five days before the embargo kicks in – to how many vessels Russia would need to place its oil to willing buyers, where ship-to-ship transfers can occur for Baltic exports bound for Asia, how big the ‘dark fleet’ under the radar could be, and last but not least, whether Putin will go through with his promise to stop supplying oil to anyone joining the price cap. 

“All of these things are so significant to the oil markets that they could whip prices from one direction to the other very significantly,” Michael Haigh, Global Head of Commodities Research & Strategy Societe Generale, told The Wall Street Journal.   

Equities remain under pressure in November

Pakistan Stock Exchange, in a repeat of recent performance failed to hold onto mid-month gains, November closed with a muted gain as the benchmark index gained 2.6% increase in Rupee terns and paltry 1.2% in US$ terms.

Politics remains in flux, with PTI keeping up the pressure on the ruling coalition, while the economy - and the external account position in particular - remains vulnerable.

However, these top-down concerns are balanced against ultra-cheap valuations, with the market absorbing the surprise 100bps rate hike reasonably well and foreign investors turning net buyers in oil & gas exploration after a significant gap.

Analysts believe economic outlook takes precedence over political developments, with the former paramount in determining the near-term course of the KSE-100. The pending 9th IMF review is the key deriver.

Imran Khan had an eventful November, to say the least! He survived an assassination attempt, ended his march to Islamabad, and has threatened to dissolve the Punjab and Khyber Pakhtunkhwa provincial assemblies. The overall calculus remains the same, to force early general elections but there is some change in tack, with the US no longer blamed for his ouster, and a less combative stance adopted towards the army in the run up to the appointment of the new army chief.

General Munir faces the tough task of regaining lost face for the army (in farewell speeches, his predecessor vowed the institution will be apolitical), while also focusing on preserving hard-fought security gains given the Tehreek-e-Taliban Pakistan (TTP) has recently ended its ceasefire.

The major win in November for PML-N was the issuance of a diplomatic passport to Nawaz Sharif. His eventual return to Pakistan, subject to legal relief, cannot be ruled out.

The PML-N led ruling coalition is anticipated to complete its term in the center, but there is still a significant lack of clarity on political outlook.

Sustaining the IMF program remains critical. There is greater realization that Pakistan needs stability to put economy on track.

After no change in the preceding two monetary policies, the State Bank of Pakistan (SBP) raised the policy rate by 100bps to 16%, with high inflation and external account vulnerabilities outweighing weak GDP growth.

A return to prudent policymaking possibly signals the overarching importance of sustaining the ongoing IMF program but there are challenges – no date has been set for the 9th IMF review

 The PKR appears to have been kept in check by import controls and restrictions on the movement of foreign exchange and fear of a mini-budget to impose additional taxation may yet be in play to make up for flood-related losses.

There are positives, with the SBP Governor announcing Pakistan will repay its international Sukuk ahead of its scheduled December 05, 2022 maturity, as partial offsetting funding from the AIIB has already been secured.

However, with the import cover a shallow 1.5 months, analysts believe Pakistan not only needs to sustain the IMF program, but also fast-track the promised assistance from Saudi Arabia and China (debt rollover and additional financing). Potential measures such as a higher levy on diesel may be taken as leading indicators for the government’s will in keeping the IMF program on track.       

Analysts expect equities to respond more closely to the evolution of foreign exchange reserves in the near-term, rather than noisy politics which may already be in the price. Valuations are ultra-cheap backed by more companies announcing share buybacks, most recently BAFL, and mean reversion implies significant upside through the cycle.

MSCI changes are also generally positive, with LUCK, SYS, TRG and POL added to the FM100 Index effective end-November. For our top picks, we replace EFERT with ENGRO and PSO with APL. EFERT’s theme of a high dividend yield loses a little luster in the higher interest rate environment, while ENGRO offers a good blend of both yield and growth. With tough reforms appearing unlikely for now, including on the energy side, APL’s stronger fundamentals win out over cash-strapped PSO. 

 

Iran sentences four people to death for cooperating with Mossad

Four people were sentenced to death on Wednesday by Iran's judiciary for allegedly cooperating with Mossad, the Israeli intelligence service and committing kidnappings, the semi-official Mehr news agency reported.

The Islamic Republic has long accused arch-enemy Israel of carrying out covert operations on its soil. Tehran has lately accused Israeli and Western intelligence services of plotting a civil war in the country, now gripped by some of the biggest anti-government protests since its 1979 Islamic Revolution.

Mehr named the four accused and, referring to Israel, said they were sentenced to death for the crime of cooperating with the intelligence services of the Zionist regime and for kidnapping.

It added, "With guidance from the Zionist intelligence service, this network of thugs was stealing and destroying private and public property, kidnapping people, and obtaining fake confessions."

Mehr said the accused had been arrested by the Revolutionary Guards and the Ministry of Intelligence.

Three other people were handed prison sentences of between five and 10 years for allegedly committing crimes such as acting against national security, aiding in kidnapping, and possessing illegal weapons, it said.