Oil Prices Forecasted to Enter Boom Cycle by 2035 Amid Rising Global Demand

Oil Prices Forecasted to Enter Boom Cycle by 2035 Amid Rising Global Demand

December 13th, 2024 IndexBox Leave a comment

The global oil market is on the brink of a significant upsurge in prices, anticipated to commence by the middle of the next decade due to sustained demand growth in markets like China, reports consultants Rapidan Energy Group. The advisory firm predicts that with the receding expectations of peaking global demand by 2030, the reality of a structurally short supply will become evident.

As spare capacity is projected to diminish drastically by 2035, oil prices could potentially enter a boom cycle. Interestingly, despite various scenarios evaluating the escalation of electric vehicles, world oil consumption is expected to grow continuously until 2050. Specifically, gasoline demand will persist through to 2035, with no apparent decline even in China, a primary driver of electric vehicle adoption.

Data from the IndexBox platform highlights the significant role China plays as the top oil import country, with values reaching USD 337.3 billion in 2023. Other leading import nations include the United States (USD 165.2 billion), India (USD 140.4 billion), South Korea (USD 86.5 billion), and Japan (USD 80.9 billion).

The oil market dynamics are further complicated by varying forecasts from major entities like the Vitol Group and the International Energy Agency, which foresee a stagnation in demand growth this decade due to a global pivot toward renewable energy sources. Rapidan’s report indicates short-term price reductions, possibly dropping to USD 55 a barrel owing to strong production from non-OPEC countries such as the U.S., Brazil, and Guyana. This situation might compel OPEC+ to either relinquish more market share or endure lower prices to force competitors out of the market, positioning the alliance in a difficult strategic dilemma.

Source: IndexBox Market Intelligence Platform

Global Trade Daily, Market insight

Saudi Arabia Slashes Oil Prices for Asian Markets Amid OPEC+ Delays

December 9th, 2024 IndexBox Leave a comment

In a notable move, Saudi Arabia has decided to cut oil prices for its Asian buyers beyond expectations as OPEC+ once again postpones a planned output increase. According to Bloomberg, the state oil producer Saudi Aramco will offer its flagship Arab Light crude with a reduced premium of 90 cents a barrel over the regional benchmark starting January. This marks a significant decrease from the current month’s premium of $1.70 a barrel. Initially, industry analysts anticipated a less drastic reduction to $1 a barrel based on surveys conducted among traders and refiners.

The decision to cut prices isn’t limited to just the Asian market; adjustments were similarly made for buyers in north-west Europe and the Mediterranean. Contrastingly, prices for North America remained unchanged, underscoring the strategic variability in pricing across different regions.

The global benchmark oil prices are experiencing a downtrend, with concerns over tepid demand growth—particularly in China—creating fears of a surplus in the global market by next year. The price for Brent crude is hovering just above $71 a barrel. This occurs as geopolitical tensions ease with the ceasefire between Israel and Hezbollah holding, which has influenced traders to withdraw the risk premium that had previously inflated prices.

In parallel with these developments, recent data from the IndexBox platform reveals that Saudi Arabia’s oil export value in 2023 reached a staggering $206.7 billion USD, emphasizing the kingdom’s significant role in the global oil market. Saudi Arabia’s import value is comparably modest at $68 million USD, with major import partners including Nigeria and the United States contributing $68 million USD and $28.2 thousand USD, respectively. The strategic postponement by OPEC+, led by Saudi Arabia in conjunction with Russia, to delay the production increase by an additional three months places them in a bind. The threat of an impending oversupply prompts a critical decision: whether to maintain production cuts well into 2025 or to risk a potential slump in prices.

Source: IndexBox Market Intelligence Platform

Global Trade Daily, News

One of the Country’s Most Business-Friendly States Welcomes Chevron

August 12th, 2024 Peter Frerichs Leave a comment

After nearly a century and a half in California, Chevron decided to pack its bags and head southeast to Texas. The multinational energy giant arrived in California long before Hollywood and Silicon Valley took root, but policy and regulatory differences over the past decades pushed the company to a decision that ultimately came to nobody’s surprise.

Chevron will now make its home in Houston, the energy capital of the US, if not the world. Equipment vendors up and down the oil and gas supply chain are within close proximity, as are preeminent universities that Chevron will no doubt tap for talent and research.

California Governor Gavin Newsom ran for reelection in 2022 with an expressed vow to wage war on Big Oil. Needless to say, Chevron and others were concerned, but Newsom was just the latest in a long line of California politicians who have made the state an uncomfortable fit for oil and gas.

California implemented sweeping measures to cut tailpipe emissions during the 1960s, which fed directly into recent climate policies pushing the state to be net zero by 2045. The cost of doing business for Chevron has become increasingly demanding, and Chevron, Shell, and Exxon Mobil are frequently named in state, climate-related lawsuits. Meanwhile, Texas has long been business-friendly, with light taxation, few regulations, and a comparatively low cost of living. Between 2010 and 2019, Texas registered a net influx of 7,232 companies and the addition of approximately 103,000 jobs.

As the move advances, however, a looming battle with the city of Richmond plays out in the background. The city will decide this fall on a $1-per-barrel refining tax on Chevron’s local refinery. Should the measure pass, Chevron has threatened to shut the refinery, directly impacting California’s oil supply. The expected outcome would undoubtedly be higher gas prices.

Chevron already has roughly 7,000 employees operating in Houston. Texas Governor Greg Abbott was quick to welcome the news and the predictable political jabs between Governor Newsom and Governor Abbott have been playing out over social media. Chevron is the latest in a series of major company exits from California, with Hewlett Packard Enterprise Co., Oracle Corp., and Tesla Inc. also deciding to call it quits in the golden state.

Archives, Global Trade Daily, United states news, War

The Middle-East Conflict is Driving US Oil Production to Record Highs

November 7th, 2023 Peter Frerichs Leave a comment

In the face of a long and drawn-out conflict in the Middle East and Ukraine, US oil production has reached record highs. As of early October, total Stateside petroleum production registered 13.2 million barrels a day. Based on data from the Energy Information Administration this is the highest figure since 1983.

Active US drilling rigs number 501 nationwide and output for 2024 is expected to drop just slightly to 13.12 million barrels a day. Active rigs are down significantly (610 in 2022), however, making output even more impressive considering the erratic US regulatory environment. The current administration is only planning for three oil and gas leases over the coming five years – if this holds it will be the fewest leases offered ever.

Yet, despite record output the world at large is still highly dependent on Saudi Arabia and a handful of other OPEC nation producers. For example, should Iran be drawn into the Israel-Hamas war the country’s 3 million barrels a day would be at risk. A massive explosion at a Gaza City Hospital alone sent prices skyrocketing northward.

Before the Israel-Hamas war, the Saudis were negotiating with Israel to increase their oil production to lower prices globally. Most analysts believe the Saudis would prefer oil in the $80 to $100 per barrel range and will continue pursuing this strategy. One-third of seaborne oil passes through the Strait of Hormuz and greater entanglement with neighboring countries would likely affect vital traffic flows.

The Exxon Mobil purchase of Pioneer Natural Resources in early October was a boost to US domestic energy production. While the merger will naturally result in increased production, the two companies would still only represent 13% of Permian Basin production. The Permian is a shale basin and features high production decline rates. This means that maintaining the status quo production rate takes significant effort and resources.

In late September oil prices reached $93.68 a barrel on the New York Mercantile Exchange. Meanwhile, the Brent crude BRNOO hit $96.55 a barrel, the highest since November. The Exxon move clearly communicates that the demand for fossil fuels is not abating. However, it is still unclear how Russia and Saudi Arabia would react to a potential market share grab by Exxon and Pioneer.

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A Sour Outlook for Q4: Crude Supply Cuts and Refinery Challenges

September 28th, 2023 Peter Frerichs Leave a comment

The Organization of the Petroleum Exporting Countries (OPEC) and its allies are tightening the crude oil supply. This follows OPEC’s 2022 strategy and will likely continue through the fourth quarter of 2023. The US sectors most heavily affected are farmers, construction companies, and transportation businesses.

The benchmark Brent crude price surpassed $90 a barrel for the first time in September while 1.3 million of estimated barrels have been cut daily. Crude prices are at a 10-month high and the heavy refined fuels that ships, planes, and trucks rely upon have skyrocketed in price. Diesel is up 41% while jet fuel registered a 24% increase (year over year). The latter has been rising steadily since May and Spirit Airlines, American Airlines, and Delta Air Lines all suffered a slide in their respective stock prices. The US Global Jets exchange-traded fund also declined 19% over the last three months.

OPEC crude oil production is at its lowest since August 2021. Global economic contraction had led to slumping oil prices prompting OPEC’s (and its allies) response as one of aggressive supply restraint. On the other end, output increases by Venezuela and Iran have been notable. Iranian production reached a nearly 6-year high at 2.76 million barrels per day and Venezuela hit a 5-year peak at 810,000 barrels per day. Relaxed US sanctions post the Russian invasion of Ukraine were the likely catalyst behind the production uptick.

Apart from supply, the world’s capacity to make diesel is also driving prices northward. Refineries are the engine and the Middle East and Africa have experienced delayed refinery startups while European refiners are struggling to make enough trucking fuel. One sector that is thriving is US refiners. Phillips 66, Marathon Petroleum, and Valero Energy are trading at near-record highs. Healthy refining environments are in excellent condition based on tight supply and ever-increasing demand.

At a macro level rising energy prices pose serious risks for consumer inflation. Everything from meal deliveries to everyday goods and services is affected. Contracting inventories will likely maintain crude oil prices elevated until 2024 and the surplus that was enjoyed in the first quarter of 2023 is expected to reverse.

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Global Oil Condition Monitoring Market to Worth US$ 1,496.3 Million by 2031

April 18th, 2023 Astute Analytica Leave a comment

The oil condition monitoring market is a rapidly growing industry that utilizes various technologies such as infrared spectroscopy, lubricant condition monitoring, and wear debris analysis to assess the health of machinery and equipment. This market is driven by the need for efficient maintenance and reducing downtime costs in various industries, including manufacturing, automotive, and aerospace. The market is expected to continue to grow due to the increasing demand for predictive maintenance solutions.

The global oil condition monitoring market is experiencing significant growth, with its valuation reaching US$ 862.7 million in 2022 and a projected market size of US$ 1,496.3 million by 2031. The market is set to expand at a CAGR of 6.35% during the forecast period from 2023 to 2031.

The rapid growth is attributed to various factors, including increasing demand for machinery reliability, rising concerns over environmental protection, and advancements in technology. Oil condition monitoring is essential in ensuring machinery reliability by monitoring the quality of lubricants used in machines, thus preventing breakdowns and unplanned downtime. In a survey conducted by Plant Engineering, 77% of respondents said that predictive maintenance, including oil analysis, helped reduce their maintenance costs. A report by Astute Analytica found that the adoption of oil condition monitoring technologies helped a company in the oil and gas industry save $300,000 annually in maintenance costs and increased equipment availability by 5%.The current landscape of the global oil condition monitoring market is highly competitive, with several key players operating in the market. Some of the major players in this market include Parker Hannifin Corporation, General Electric, SGS SA, Intertek Group PLC, and Bureau Veritas SA. These companies offer a range of oil condition monitoring products and services such as spectroscopy, particle counting, viscosity measurement, and elemental analysis.

One of the major factors driving the growth of the oil condition monitoring market is the increasing demand for predictive maintenance. With the help of oil condition monitoring, companies can predict potential problems and prevent equipment failure, which can result in costly downtime and repairs. Furthermore, oil condition monitoring helps companies to reduce their maintenance costs and increase their equipment lifespan. Additionally, the development of advanced technologies such as cloud-based oil condition monitoring systems and the internet of things (IoT) is expected to create new opportunities for market players in the future.

As per Astute Analytica, the global market offers attractive investment opportunities. Companies that focus on developing advanced technologies such as cloud-based oil condition monitoring systems and the IoT are likely to be well-positioned for future growth.

Key Findings of the Global Oil Condition Monitoring Market

By Sampling Type: The offsite lab sampling type is expected to capture over 55% of the market share, primarily due to the accuracy of results obtained from laboratory testing.
By Monitoring: The online segment is anticipated to generate more than 54% market revenue, as it allows for real-time monitoring of lubricants and early detection of anomalies in their condition.
By Methods: The oil conditioning sensors segment is expected to hold over 56% market share, thanks to their accuracy and reliability in detecting any anomalies in the lubricants’ condition.
By Application: The combustion engine segment is projected to hold over 28% market share, due to the widespread use of combustion engines in various industries.
By Industry: The oil & gas industry is expected to hold more than 19% revenue share, as a result of significant investments made by the industry in predictive maintenance technologies.

Online Monitoring to Remain the Most Popular and Contribute Over 54% Revenue to Global Oil Condition Monitoring Market

Online monitoring is dominating the global market due to its numerous benefits over traditional methods of oil condition monitoring such as its ability to provide real-time monitoring, enabling early detection of potential equipment failures, thereby reducing downtime and maintenance costs. It also facilitates remote monitoring, eliminating the need for on-site personnel and providing access to data from anywhere in the world.

Another factor contributing to the dominance of online oil condition monitoring is the growing adoption of Industry 4.0 and the Internet of Things (IoT) in various industries. With the increasing use of sensors and connected devices, it has become easier to collect and analyze data in real-time, making online oil condition monitoring a preferred choice. Moreover, companies opt for online oil condition monitoring to ensure the reliability of their equipment, prevent unplanned downtime, and reduce maintenance costs. They also see it as a way to improve operational efficiency, optimize equipment performance, and extend the lifespan of their assets.

According to a survey conducted by Astute Analytica on the oil condition monitoring market, the majority of respondents (57.8%) preferred online oil condition monitoring over traditional methods. The survey also found that the most significant drivers for adopting online oil condition monitoring were cost savings (29.1%), increased equipment reliability (23.5%), and improved maintenance planning (17.2%). The survey also revealed that the primary application areas for online oil condition monitoring were in the manufacturing and energy sectors. In the manufacturing sector, online oil condition monitoring was used to monitor critical equipment such as compressors, turbines, and pumps. In the energy sector, it was used for monitoring generators, transformers, and other electrical equipment.

Current Opportunities and Trends: Emergence of IoT and Big Data Analytics

The advancements in technology have been instrumental in driving the growth of the oil condition monitoring market. The introduction of new sensor technologies, such as optical sensors, vibration sensors, and acoustic sensors, has improved the accuracy and reliability of oil condition monitoring systems. These sensors can detect the smallest changes in the lubricant’s chemical and physical properties, enabling early detection of potential equipment failures.

Moreover, the emergence of IoT and big data analytics has enabled the collection and analysis of large volumes of data from oil condition monitoring systems in real-time. This has allowed for predictive maintenance, which involves identifying potential equipment failures before they occur and taking proactive measures to prevent them. This has led to significant cost savings by reducing equipment downtime and repair costs.

Asia Pacific is Set to Remain Second-Largest Market with over 28% Market Share

North America to dominate the global oil condition monitoring market with over 35% market share. On the other hand, Asia Pacific to remain the fastest growing with second largest revenue share until the end of the forecast period. The Asia Pacific region’s position as the second-largest market for adhesives is supported by several factors. The region’s diverse mix of end-users, including the construction, automotive, and healthcare industries, has a significant impact on the market. The growth of these industries, coupled with the region’s large and growing population, is driving demand for adhesives in the Asia Pacific region. Additionally, the region’s economic growth and focus on innovation and technological advancements have led to the development of new applications for adhesives, further driving demand in various industries.

Looking ahead, the Asia Pacific market is projected to continue to grow as the region’s population continues to expand, and economic development drives demand for adhesives in construction, automotive, and healthcare industries. The region’s emphasis on innovation and technological advancements is also expected to drive further growth by creating new applications for adhesives.

However, the market is not without its challenges, such as the increasing cost of raw materials and the need for sustainability in product development. Despite these challenges, the Asia Pacific market is poised to remain a significant player in the global adhesive market, driving innovation and growth in various industries across the region.

Oil Condition Monitoring Market is Highly Competitive: General Electric Company and Shell LubeAnalyst Contribute Over 15% Revenue

The oil condition monitoring market is highly competitive and dominated by the top 10 players who collectively hold over 40% market share. General Electric Company and Shell LubeAnalyst are two major players that hold a considerable share of over 15%, with GE Company leading the market with over 7.8% market share.

The dominance of these players can be attributed to several factors, including their significant investments in research and development to improve their products and services. These investments have helped them to remain ahead of the competition by introducing new, innovative products that are tailored to meet the ever-changing needs of customers. Furthermore, these players have a strong global presence, allowing them to reach a wider audience and expand their customer base.

In addition, the competitive landscape of the oil condition monitoring market is shaped by several other factors such as the rising demand for predictive maintenance solutions, increasing focus on equipment optimization and the growing adoption of cloud-based solutions. Companies that offer advanced solutions to these problems are more likely to gain market share and maintain a competitive edge.

As a result, smaller players in the market face significant challenges in competing with these larger, established companies. These players often struggle to invest heavily in research and development, leading to a lack of innovation in their products and services. Furthermore, they may have a limited global presence, making it difficult to compete with larger players that have established themselves in multiple regions.

Some of the Top Market Players Are:

Al Nukhba
Avenisense SA
BP p.l.c.
Bureau Veritas
Bureau Veritas
Chevron Corporation
Cm Technologies GmbH
Delta Services Industries (DSI)
Des-Case Corporation
Eaton Corporation
Element Materials Technology
General Electric Company
Gill Sensors & Controls Limited
Hydac International
Insight Services Inc.
Intertek Group Plc
Lakeside
Maxxam Analytics
OptaSense
Parker Hannifin Corporation
Poseidon Systems, LLC
SGS Group
Shell LubeAnalyst
TE Connectivity
TestOil (Insight Services, Inc.)
Other Prominent Players

Offshore drilling policy impacts shipments of export cargo and import cargo in international trade. feedstock

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14% Increase in Offshore Drilling in North America makes USA’s Petroleum Liquid Feedstock Market Highly Important for the Economy

March 3rd, 2023 Future Market Insights Leave a comment

FMI anticipates that the global petroleum liquid feedstock market valuation could reach US$ 313 billion in 2023. As per the projection of the analysts, the market is likely to record a value of over US$ 474.1 billion by 2033, registering a CAGR of 4.2% between 2023 and 2033. Increase in oil & gas prices and the demand for aromatics and growth of the petrochemical industry and automotive fleet are expected to drive the global demand for petroleum liquid feedstock during the forecast period.

A significant area of the energy sector is the petroleum liquid feedstock market. This includes the supply and demand of different petrochemical products used as feedstock in multiple applications. It entails the production, refinement, and distribution of liquid petroleum products. They have various uses, such as the production of chemicals, polymers, and other industrial products as well as fuel for vehicles.

Global supply and demand, geopolitical unrest, and technical advancements are a few of the variables that have an impact on the liquid petroleum products market. The market is also subject to price volatility, with prices often fluctuating in response to changes in global economic conditions, production levels, and supply chain disruptions.

The market is significantly fueled by the petrochemical industry. An increase in petrochemical product utilization in end-use sectors has contributed to the petrochemical industry’s growth. Additionally, political and economic considerations have an impact on the price of oil and gas globally which shapes the market expansion.

The production and processing of aromatics are one of the main applications of petroleum liquid feedstock. Owing to their high usage as feedstock for several products, aromatic compounds like xylene, benzene, and toluene are in high demand from different end-use sectors including the chemical industries. This is likely to propel the market for petroleum liquid feedstock to expansion.

Naphthalene is a significant byproduct of petroleum liquid feedstock. The naphthalene products market is an important sub-segment of the petroleum liquid feedstock market and it has experienced significant growth lately. The increased demand for naphthalene products across different end-use sectors, such as textiles, plastics, and construction, is responsible for this expansion.

The growth in technological developments is another key market factor for the petroleum liquid feedstock industry. Specifically, the transportation industry is what drives demand for petroleum liquid feedstock. Local transportation uses naphtha and oil which are petroleum liquid feedstocks. They include motor vehicles, engine vehicles, and bunkers. Marine fuel is also used in the industrial and commercial sectors.

Naphtha is an important product within this market as it is a feedstock used in the production of various products. The naphtha products market is primarily driven by the petrochemical industry which uses naphtha as a feedstock for the production of plastics, synthetic rubber, and other chemicals. The growth of the petrochemical industry across the world has driven the demand for naphtha products in recent years. In addition to its use in the petrochemical industry, naphtha is also used as a fuel for power generation and as a blending component in gasoline production.

To produce low Sulphur fuels and high-value petrochemicals, the industry is witnessing a trend towards lighter and cleaner feedstock. Natural gas liquids (NGL) are being utilized more often as a petrochemical feedstock and as a crude oil alternative while biofuels and renewable feedstocks like biomass and waste oils are also becoming more significant.

The opportunities in the market are vast and varied. Expanding the uses of petroleum products as feedstock for new and ongoing applications in the petrochemical, refining, and energy industries is substantial potential. Developing new and innovative processing technologies to convert lower-value feedstocks into high-value products is another significant opportunity.

The Oil and Gas Sector in the United States Switches to Survival Mode

The United States petroleum liquid feedstock market is highly important for the economy of the country as it is one of the leading producers and consumers of petroleum products. The World Oil research of international petroleum ministries and departments predicted a 14% increase in offshore drilling in North America in 2022.

The availability of significant shale gas and crude oil deposits is likely to have a beneficial impact on the future of the United States industrial sector. For instance, according to the Energy Information Administration (EIA), proven crude oil reserves increased to 367 million barrels in 2019. The extensive shale resource development and the expanding use of data analytics to boost drilling and production are also anticipated to hasten the adoption of oil & gas analytics.

Nevertheless, factors including a drop in exploration and production activity and an increase in inventory costs limit market expansion. With growing concerns over climate change and the transition towards cleaner energy sources, the market is likely to face significant challenges during the forecast period.

For the first time since EIA started providing statistics on renewable diesel production, renewable diesel output topped biodiesel production in the January 2023 Petroleum Supply Monthly (PSM), which contains United States’ biofuel production data through November 2022.

Competitive Landscape

The global petroleum liquid feedstock market is highly fragmented with Tier-I players accounting for approximately 25%-35% of the global petroleum liquid feedstock market, while other global players along with several local players account for the remaining market share. Global market leaders in the petroleum liquid feedstock market are BP p.l.c., Exxon Mobil Corporation, TOTAL S.A., Royal Dutch Shell plc, Idemitsu Kosan Co., Ltd., Flint Hills Resources and YPF.

Key Market Players and Their Recent Developments in the Petroleum Liquid Feedstock Market

BP p.l.c. – The British Petroleum Corporation plc and BP Amoco plc were both renamed to become BP plc, a global oil and gas corporation with its headquarters in London. According to sales and earnings, it is among the top “supermajors” in the oil and gas industry. It is a vertically integrated business that engages in electricity generation, trading, distribution, and marketing, as well as oil and gas exploration and extraction.

In September 2022, the agreement to buy EDF Energy Services was announced by BP p.l.c. This increased BP’s market share in the retail electricity and gas market for the United States commercial and industrial (C&I) customers.

In August 2022, together, BP and Eni formally launched Azule Energy, a new independent joint venture that combines the two firms’ Angolan activities in a 50/50 split.

In February 2022, a strategic partnership between Nuseed and BP was formed to quicken the market’s acceptance of Nuseed Carinata as a low-carbon and sustainable biofuel feedstock.

Exxon Mobil Corporation – The ExxonMobil Corporation is a global oil and gas company with its headquarters in the United States. It was created on November 30, 1999, by the union of Exxon and Mobil. These two retail brands are still in use today with Esso for gas stations and downstream goods. The corporation is vertically integrated throughout the whole oil and gas sector. It also has a chemicals section that creates plastic, synthetic rubber, and other chemical goods.

In January 2023, ExxonMobil disclosed that it possessed a bulk stake in Imperial Oil Limited. The business will spend around US$560 million to advance the building of Canada’s leading renewable fuel facility.

In November 2022, ExxonMobil revealed the arrival of the first LNG cargo from the $8 billion Coral South floating LNG (FLNG) project off the coast of Mozambique, adding more LNG to the world energy market.

TotalEnergies – One of the seven supermajor oil corporations, TotalEnergies SA is a French multinational integrated energy and petroleum firm that was created in 1924. Its operations span the whole oil and gas value chain, from the exploration and extraction of crude oil and natural gas to the creation of electricity. Its maneuver also includes the movement of petroleum products across international borders and the sale of those products.

In January 2023, the Lapa South-West oil development, which is 300 km off the Brazilian coast in the Santos Basin, received TotalEnergies’ approval for the final investment decision. With a 45% ownership stake and a joint venture with Shell (30%) and Repsol Sinopec (25%), TotalEnergies manages the project. Three wells will be used to develop Lapa South-West.

In September 2022, in the Grandpuits (Seine-et-Marne) zero-crude platform, TotalEnergies and SARIA reached a partnership to develop sustainable aviation fuel.

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Europe is Stocking up on LNG, but Storage is Proving Difficult

November 4th, 2022 Peter Frerichs Leave a comment

The “top-up” has begun. The reduction of Russian gas flows to Europe is spurring the continent’s quest to “top-up” on fuel to get through the winter. Europe’s summer months are colloquially known as the “filling season.” But Russia’s invasion of Ukraine has thrown a monkey wrench into these plans. To put the Russian dependence into perspective, consider the following:

Share of Russian natural-gas imports (2020)

Czech Republic – 100%
Hungary – 95%
Germany – 65%
Poland – 55%
Italy – 43%
European Union Average – 39%
Netherlands – 30%
France – 17%
Spain – 10%
Portugal – 10%

While the continent is scrambling, gridlock is preventing dozens of ships with natural gas from berthing. The waits are due in large part to only a handful of terminals equipped with the personnel and expertise to receive imported gas. Much of the gas is now arriving from the US and Qatar and delivery volumes have boomed in recent months. To make matters worse, storage facilities are at near capacity. Enagás SA from Spain expects LNG imports to continue facing delays over the coming months due to very high storage levels.

Oddly, the pileup reflects European success in securing the extra gas they’ll need for the winter months. Yet, the infrastructure has not kept pace meaning ships with enough gas to heat a million homes per month are serving as offshore gas storage facilities for the time being. Gas prices have gone down due to surging imports and this is providing an incentive for suppliers to keep their gas from berthing with the hope that prices eventually rise again.

Once liquified natural gas (LNG) makes it to a ship it is supercooled. However, to turn it back into its gaseous state, the tankers need to eventually dock at re-gasification terminals. Spain counts on one-third of Europe’s re-gasification capacity. Italy and Germany are constructing new terminals but that will take some time. Many ships have chosen the Gulf of Cadiz to wait and decide when and where they’ll unload. It is a strategic point that allows for multiple, potential destinations.

The waiting game could turn south for Europe should prices surge in Asia. This would provoke traders to take their gas to the highest buyer. For now, demand in Asia is stagnant, but should China ease its zero Covid policy the scenario could shift dramatically. Winter weather has not kicked in yet so demand is nearly the same as it was in August. But it’s clear traders have the upper hand at the moment.

prices New standards make trucks that carry shipments of export cargo and import cargo in international trade more fuel efficient.

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Softening the Blow of High Fuel Prices

November 3rd, 2022 Chris Jones, EVP of industry and services at Descartes Leave a comment

High fuel prices are on everyone’s mind, for global companies and consumers alike. OPEC+ recently agreed to deep cuts in oil production—2 million barrels per day (bpd) of output, equal to 2% of the global supply—curbing supply in an already tight market. Meanwhile, G7 leaders are considering a price cap on Russian oil, amidst concerns that Russia would ban all energy exports to any country implementing the price cap and crude oil prices could hit $125 a barrel as a result, according to a top commodities strategist. Adding fuel to the fire, the government sanctions imposed on Russia in response to its invasion of the Ukraine have disrupted the flow of complex global supply chains and continue to drive high oil prices.

While recession concerns and a flare-up of China’s COVID-19 cases may temper rising oil prices, somewhat in response to the fear of reduced global demand, fuel prices remain elevated and volatile—and a potential impediment to profitability for logistics-oriented companies, including retailers, distributors, carriers, and logistics service providers.

High Fuel Costs are a Company-wide Problem

Tackling the issue of high fuel costs is not solely the responsibility of the transportation department. In fact, many of the drivers of fuel consumption are dictated by other departments, such as sales, marketing, and customer service. As a result, companies need to look beyond their transportation and logistics teams to find solutions to rising costs.

How customers are served is a major driver of fuel costs, from how regularly customers are serviced to minimum order quantities and delivery times. The finance department is also a critical piece of the equation, helping determine the risk/reward of employing various customer service strategies to mitigate the impact of high fuel costs. The good news is that, by taking an enterprise-wide approach to implementing strategic and tactical actions to optimize fuel consumption, companies can curb the impact of elevated fuel prices on their bottom line.

3 Immediate Actions to Cut Fuel Costs

Optimize performance of drivers and delivery vehicles. Are drivers in the habit of idling, driving aggressively, or straying from their scheduled route? When was the most recent fleet inspection? To reduce fuel consumption, encourage drivers to reduce speed, minimize idling, and stick to their prescribed routes; ensure vehicle engines are tuned and tires have adequate pressure to perform at their highest fuel efficiency.
Add a surcharge for incremental fuel costs. More and more carriers and logistics-related companies are implementing fuel surcharges in response to rising fuel costs. While not popular among customers, fuel surcharges applied to new orders (or renegotiated in existing contracts) help mitigate the impact of high gas and diesel costs. Even a small rate increase can make a significant difference to a company’s bottom line over time.
Offer customers delivery service choices. In order to keep their purchase costs from increasing, many customers are amenable to slower, less convenient delivery service. Accordingly, choose slower transportation modes and longer delivery lead times. Delay shipments to look for consolidation opportunities with other orders from the customer or customers nearby. Change TMS or route planning system optimization parameters to focus on selecting slower modes and reducing distance.

STRATEGIC AND TACTICAL ACTIONS THAT PAY OFF

Optimize the logistics network. As customers come and go, buying patterns change, and product offerings grow, the efficiency of logistics networks deteriorates. Network optimization evaluates these types of changes and rebalances the network to reduce fuel consumption. Focus on service policies, operational strategies, and other ‘soft’ considerations initially to deliver quick results before revisiting brick and mortar ‘hard’ stuff to drive greater benefits.
Re-bid carrier contracts. Existing contracts may have been written when fuel prices were much lower—and now significantly penalize the organization given today’s elevated prices. Take this opportunity to establish carrier contracts that prioritize fuel cost reduction.
Steer customers and sales to delivery options that drive delivery density. Customers and sales reps may inadvertently make delivery appointment requests that decrease fleet efficiency and increase fuel consumption. Instead, provide customers with delivery appointment options that increase delivery density to help reduce distance traveled per stop, boost fuel efficiency, and lower fuel costs.
Employ customer stratification. Customer stratification enables companies to strategically evaluate customers against the revenue generated and the cost to service them. As a result, customers can be mapped into a more cost-effective delivery strategy. For example, hybrid delivery combines dynamic and static delivery in a single planning model to support customer stratification, making the fleet more productive and minimizing fuel costs.
Use dynamic delivery pricing. Not all customer deliveries cost the same. Instead, provide customers with unique delivery fees at the point of sale to better capture the real cost of the delivery. Customers can determine whether they prefer premium delivery times or a lower cost option. Many will select the latter, which will make delivery operations more productive, driving down fuel costs, driver hours, and more.
Offer eco-friendly delivery options. The environment is becoming an increasingly important factor in consumers’ purchase decisions. By offering an eco-friendly delivery option, companies can reduce fuel consumption while shrinking their carbon footprint and building customer loyalty through a commitment to the environment. It’s a win-win-win approach: the planet benefits, the customer is happy, and the organization enjoys lower fuel and other delivery costs.
Implement optimized transportation or route planning solutions. Companies that are relying on legacy systems should evaluate the capabilities of more modern systems to uncover additional fuel savings opportunities and avoid the many manual workarounds typical of legacy technologies. Manual route planning processes, for example, are handcuffed by their inability to fully optimize appointment scheduling and delivery routes to minimize distance traveled and fuel consumption. By implementing an AI-driven, automated TMS or route planning solution to increase delivery density and optimize delivery efficiency, logistics-oriented companies can reap considerable cost savings.
Deploy telematics. Aggressive driving and excessive idling waste fuel and cause unnecessary vehicle wear and tear that can compromise fuel efficiency. A telematics solution captures critical driver operating data and vehicle data (e.g., real-time vehicle diagnostics, pre- and post-trip vehicle inspections) to identify poor driver performance and help companies maximize the potential of their fleets. Plus, companies can use real-time telematics data to enhance dispatch and tracking performance and capture ongoing operational data to spot trends and support continuous improvement.

High fuel costs can erode profit margins for companies already hobbled by global supply chain disruptions and labor shortages. The good news is that logistics-oriented organizations have numerous strategies, tactics, and tools at their disposal to mitigate the impact of fuel costs today and down the road.

Archives, Global Trade Daily

Top 4 Risks Facing Oil and Gas

October 3rd, 2022 Peter Frerichs Leave a comment

There are few years in recent memory as volatile for the oil and gas industry as 2022. Rising and falling consumer demand, supplier cuts, and geopolitical issues are always in play. But unforeseen events like the Russian invasion of Ukraine and negotiations over a new Iranian nuclear deal have complicated 2022 in innumerable ways. Couple this with lingering COVID issues, China’s “zero-COVID” policies, and decarbonization efforts, rounding out 2022 is going to be a bumpy road.

Moving into 2023, four risks are front and center for oil and gas.

Global Supply

Tight supply has driven oil north of $100 per barrel. Analysts expect volatility to remain but excess supply at some point in December to early 2023 is not out of the question. If OPEC moves ahead with its commitment to continue undoing the 2020 supply cuts and US production grows, a potential oversupply scenario is in play. If a new nuclear agreement with Iran progresses that could also add a million barrels a day within months of the new pact being struck.

European and Russian Tensions

In late 2021 the reduction of Russian spot gas sales to Europe resulted in record natural gas prices for the EU. Tensions with Russia over Ukraine could keep prices high and the resulting paths are not overly obvious. There is a scenario that Europe would delay green transition energy policies to put off short-term pain. Yet, one could also envision a scenario where green transition policies are accelerated to decouple from Russian gas once and for all.

Activist Impact

Governments have been tightening the screws around the oil and gas industry for decades. But it might be the activist contingent come 2023 that could leave the greatest impact. The activist sector has always been present, but activist investors with deep pocketbooks are a relatively new phenomenon. Investment dollars moving toward green energy are hitting record highs and social media platforms are the ideal avenues to spread their message. A handful of folks have posited that while small oil and gas firms get squeezed out due to social pressures, this could be favorable for the larger oil and gas players as someone will need to pick up the demand.

Talent Shortage

An aging workforce, limited new talent, and competition (especially from the tech industry) for talent are compromising the larger industry. According to Brunel International Oil and Gas Job Search, 43% of current energy employees would like to leave the industry over the coming five years, 56% said they’d consider employment in the renewable sector, and 85% of university students considering a career in oil and gas indicated it is important that their employer’s policies align with addressing climate change. Of the four risks, this might be the single greatest issue oil and gas will face this decade.

Oil Prices Forecasted to Enter Boom Cycle by 2035 Amid Rising Global Demand

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