Home' Trinidad and Tobago Guardian : October 29th 2015 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt OCTOBER 29 • 2015
Back in the spring, oil prices
plunged to seven-year lows
amid fears that US inventories
were going to fill to the brim.
As we all know now, that
didn't happen--- although they
did peak at a mighty 490 million barrels.
Fast forward six months, and the global
crude market still resembles a saturated sponge
trying to mop up an additional two million
barrels per day of excess supply. Fears of run-
ning out of storage space in the US. during
the refinery maintenance season have retreated.
Instead, a much scarier specter is haunting
the oil markets: that of global storage topping
out. Some would dismiss this out of hand as
preposterous, but read on.
What started as hints of congestion in early
September has morphed into a body of evi-
dence for swelling floating storage. A rapid
spike in freight rates in recent weeks for VLCCs
(very large crude carriers) was initially inter-
preted as a bullish phenomenon, driven by
surging demand from China.
This was not a wholly unreasonable con-
clusion to jump to; it is common knowledge
that China has voraciously been filling strategic
petroleum reserve sites in areas such as Huang-
dao and Shandong this year. In addition, the
Chinese are historically renowned for going
on bouts of bargain-hunting amid lower oil
prices; an opportunity that the recent swoon
in prices has presented in abundance.
But as a build-up of oil tankers outside Chi-
nese ports have proven in recent weeks, the
spike in freight rates is not due to a ramp up
in demand, but instead due to over-congestion.
Wait times outside Chinese ports have length-
ened considerably, although producers have
the consolation that those barrels are already
committed to an end-user.
The situation in the US Gulf is not much
different. Over the last couple of weeks, vessels
have been sitting at anchor for longer before
off-loading. This has pushed the total overhang
sitting off-shore in the Gulf close to 20 million
barrels, double the usual volume that is waiting
to discharge. To put this into perspective: This
is an entire week's worth of imports for Gulf
Further signs of oversupply have come in
the form of idling vessels, laden with crude,
sitting off the coast of Singapore. This indicates
one of two scenarios: either no buyer can be
found for the crude, or that the buyers have
no place to store it. This anomaly was even
alluded to by the IEA in their monthly oil
report out earlier this week, highlighting that
oil at trading hubs in Europe and Asia is being
stored on ships, even though the economics
don't seem to justify this move.
But the most startling sign that global inven-
tories could be full is being pointed to by activ-
ity---or a lack thereof---in the Arab Gulf. While
a recent drop in West African crude loadings
can be explained away by the lack of vessel
availability due to the traffic jam in Asia, what
is less easy to justify is the number of oil
VLCCs idling in the Arab Gulf. Our ClipperData
shows seven cargoes holding 13 million barrels
of crude in this area, seemingly in a similar
fashion to Singapore; there is either an absence
of buyers or storage capacity. Or both.
What started with congestion in China now
appears to be a traffic jam stretching half way
around the world to the Arab Gulf. The best
case scenario is that this is a temporary phe-
nomenon caused by strong fall global refinery
maintenance season. But even if this is the
case, it serves to highlight that the current
global oil glut appears to be getting worse, not
GE to allocate part of a US$1 billion invest-
ment in Indonesia in the oil and gas sec-
tor.GE announced Monday on the sidelines
of a meeting between Indonesia's President
Joko Widodo, and US President Barack
Obama in the United States that the firm
will allocate part of the up to US$1 billion
in investment in the Southeast Asian country
in the latter's oil and gas sector.
"The current government's vision and
more recent plans to accelerate spending on
infrastructure (in Indonesia) have given us
the confidence to make this commitment.
GE's spending over the next 5 years will
target critical areas important to the economy
and cover power generation, oil and gas, and
healthcare. Through this investment, we
hope to expand our local business operations
significantly, in a way that we believe will
lead to a multiplier effect on the economy,"
GE's vice chairman John Rice said in the
GE's investments in the oil and gas space
will include expanding the current subsea
equipment manufacturing facility to include
other GE product lines, and partnering with
Indonesian companies to expand manufac-
turing and assembly locally.
More than 90 per cent of the equipment
manufactured in GE's oil and gas facility in
Indonesia such as subsea wellheads, surface
wellheads, vertical christmas trees, tubular
products and connectors used in oil and gas
exploration and production is exported for
use in global projects.
The oil glut appears
to be getting worse
GE to focus
part of a US$1B
oil and gas
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