Oil Edges Higher on Inventory Drawdowns, Brent Tops $75 a Barrel

By Dmitry Zhdannikov

Brent crude oil futures were up 45 cents, or 0.6%, at $75.19 a barrel by 1342 GMT, having traded as high as $75.55. U.S. West Texas Intermediate (WTI) crude oil futures were up 56 cents, or 0.8%, to $72.95 a barrel.

Brent topped $75 a barrel for the first time in more than two years in June, but fell back sharply this month on fears about the rapid spread of the Delta variant of coronavirus and a compromise deal by leading oil producers to increase supply.

“The (oil inventory) falls suggest the rise in cases of COVID-19’s Delta variant is having little impact on mobility,” ANZ analysts said in a note on Thursday.

Crude inventories fell by 4.1 million barrels in the week to July 23, the U.S. Energy Information Administration (EIA) said, helped by lower imports and a decline in weekly production.

The U.S. economic recovery is still on track despite the rise in coronavirus infections, the U.S. Federal Reserve said on Wednesday in a policy statement that flagged ongoing talks around the eventual withdrawal of monetary policy support.

“While the risk to the demand outlook could increase due to governments across Europe reducing permission for public gatherings, we note that markets have already undergone several rounds of mobility restrictions… yet, the global recovery was not significantly derailed,” analysts from Citi said in a note.

Also supporting prices was a statement from Iran blaming the United States for a pause in nuclear talks, which could mean a delay in a return of Iranian barrels to the market.

(Reporting by Jessica Jaganathan and Dmitry Zhdannikov; Editing by Edmund Blair, Jason Neely and Susan Fenton)

Big Oil Back to Boom After Pandemic Bust, Aiding Climate Push

By Ron Bousso

After swiftly cutting spending and jobs in response to the unprecedented collapse in energy demand last year, executives from Royal Dutch Shell, TotalEnergies and Norway’s Equinor were eager to highlight the rapid reversal in fortunes.

“We wanted to be really clear and signal to the market the confidence that we have in our prospects and our cash flows,” Chief Executive Ben van Beurden said on Thursday, after Shell launched a $2 billion buyback programme and boosted its dividend for a second consecutive quarter, a year after cutting it for the first time since the 1940s.

Energy companies have come under heavy pressure from climate campaigners, governments and shareholders to speed up the shift from fossil fuels to cleaner sources.

While some investors welcome the change as they perceive carbon-intensive, fossil fuel energy as unsustainable, others are worried about the implications for profit margins of new business models.

Benchmark Brent crude oil prices more than doubled in the second quarter from a year earlier to around $69 a barrel, driven by recovering demand and tightening global supplies.

As profits surged, France’s TotalEnergies also announced on Thursday plans to buy back shares.

The group said it expected to generate more than $25 billion in cash flow this year, based on current high oil price forecasts, and would invest in more new projects and return surplus amounts to shareholders if oil prices remained high.

Equinor also said on Wednesday it would begin a long-planned share buyback that will reach $300 million by the end of the third quarter after profits surged.

BP reports its second quarter results on Aug. 3. It launched a $500 million buyback in the previous quarter after halving its dividend last year.


BP, as well as Shell, TotalEnergies and Equinor, plans to sharply reduce greenhouse gas emissions in the coming decades while reducing reliance on fossil fuels.

Oil prices are expected to remain elevated in the coming years as supplies stay tight because of lower investments.

High fossil fuel prices are double-edged. They can tempt operators to maximise conventional output, but they also produce income needed to invest in lower carbon sources.

Shell’s free cashflow – money left after deducting spending and shareholder payouts – soared in the second quarter to $9.7 billion, its highest in a year, while debt also declined.

“The quarter proves without doubt that Shell’s earnings power is intact and that they’re willing to pay investors handsomely to come on their transformation journey,” Bernstein analyst Oswald Clint said.

TotalEnergies’s results are a “confirmation that the group is geared to the macro environment and can deliver both on the energy transition and cash returns to shareholders,” Barclays analysts said in a note.

Despite the surge in revenue, Shell and TotalEnergies indicated they would stick to previous spending plans.

Shell said it will not spend more than its planned $22 billion this year and any increases in the futures will go mostly towards low-carbon businesses.

TotalEnergies said investments would reach between $12 and $13 billion in 2021, with half of that earmarked for growth projects, including a major chunk in renewable energy and electricity.

Graphic: Big Oil’s energy transition: https://graphics.reuters.com/OILMAJORS-SPENDING/qzjpqxgwmvx/chart.png

(Reporting by Ron Bousso; editing by Barbara Lewis)

U.S. Goods Trade Deficit Widens; Inventories Rise

By Lucia Mutikani

The U.S. economy has rebounded more quickly from the pandemic compared to its global rivals, thanks to massive fiscal stimulus, low interest rates and vaccinations against COVID-19. But bottlenecks in the supply chain have hampered manufacturers’ ability to boost production, drawing in more imports.

“The widening in the advance nominal goods deficit in June is further evidence that net exports will be a drag on second- quarter GDP,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

The goods trade deficit increased 3.5% to $91.2 billion last month, the Commerce Department said on Wednesday. Imports of goods advanced 1.5% to $236.7 billion. There were increases in imports of food, industrial supplies and capital goods.

But imports of motor vehicles and consumer goods fell. While that could hint at a possible moderation in consumer spending in the months ahead, the drop could reflect a global shortage of semiconductors, which has weighed on the production of motor vehicles and some household appliances.

Goods exports rose 0.3% to $145.5 billion, amid a sharp decline in food shipments. Capital goods exports also slipped. But the nation exported more motor vehicles and consumer goods.

The report was published ahead of Thursday’s advance second-quarter gross domestic product data.

According to a Reuters survey of economists, the economy likely grew at a robust 8.5% annualized rate last quarter, an acceleration from the first quarter’s 6.4% pace. The anticipated growth pace in the second quarter would be the fastest since 1983 and could mark a peak in the current cycle.

Some of the imports last month were used to replenish inventories at wholesalers and retailers, which could soften the drag on GDP growth from trade.

The Commerce Department reported wholesale inventories increased 0.8% last month after rising 1.3% in May. Stocks at retailers gained 0.3% after dropping 0.8% in May. Retail inventories excluding autos, which go into the calculation of GDP, climbed 0.6% after advancing 0.9% in May.

Business inventories were drawn down in the first quarter.

(Reporting By Lucia Mutikani; Editing by Dan Burns and Andrea Ricci)

Bunge Lifts Profit Outlook as Food and Fuel Demand for Vegetable Oil Grows

By Tom Polansek and Arunima Kumar

Shares jumped 3% in morning trading after the company projected full-year 2021 adjusted income of at least $8.50 per share, up from its previous estimate of about $7.50 per share.

Bunge’s results offer an insight into how global grain traders are emerging from the COVID-19 pandemic that triggered massive shifts in demand last year as consumers cooked more meals at home and avoided unnecessary travel.

Increased demand for vegetable oils from U.S. food-service companies and the renewable diesel sector are now lifting Bunge’s expectations for earnings, Chief Executive Greg Heckman said. Renewable fuel demand, in particular, has triggered a “structural improvement” in oilseed markets, he told analysts on a conference call.

Unlike other green fuels such as biodiesel, renewable diesel can power auto engines without being blended with diesel derived from crude oil, making it a low-pollution option. Refiners can produce renewable diesel from animal fats, plant oils and used cooking oil.

“There’s going to be more capacity needed to meet this demand growth,” Heckman said.

Heckman in May said Bunge was working to squeeze more production out of its existing oilseed crush and refining operations to capitalize on soaring vegetable oils demand.

Rival Archer-Daniels-Midland unveiled plans for a new U.S. oilseed facility the same month.

Adjusted earnings in Bunge’s vegetable oils segment surged 135% to $113 million in the quarter that ended on June 30 from a year earlier. Adjusted earnings in the bigger agribusiness unit fell from last year, though net sales increased.

Total adjusted net income in the quarter rose to $2.61 per share from $1.88 a year earlier, beating analysts’ estimates for $1.62, according to Refinitiv IBES. Revenues of $15.391 billion topped Wall Street estimates for $11.583 billion.

(Reporting by Arunima Kumar in Bengaluru and Tom Polansek in Chicago; editing by Uttaresh.V, Kirsten Donovan)

Climate Activists Challenge Britain’s Support of North Sea Oil and Gas Producers

The legal challenge revolves around tax breaks oil and gas producers receive in order to help cover costs for dismantling and clearing up ageing infrastructure, in what is known as decommissioning.

The case names as defendants the Oil and Gas Authority (OGA) which oversees the North Sea industry as well as the Secretary of State for Business, Energy and Industrial Strategy (BEIS) Kwasi Kwarteng.

The OGA earlier this year said it will focus on “managing the declining production and maximising value” from the North Sea, one of the world’s oldest offshore oil and gas basins, as part of the government’s plans to reduce greenhouse gas emissions to net zero by 2050.

The claimants argue that the decommissioning tax breaks are not consistent with the government’s net zero emissions targets. Many countries offer producers decommissioning tax relief.

“Instead of using public money to prop up the oil and gas industry, the UK should be funding a just transition that retrains workers and builds the low-carbon industries of the future,” Mikaela Loach, one of the three claimants, said in a statement.

The OGA said in a statement that its strategy “which includes net zero requirements on industry, is the primary tool the OGA has to hold industry to account on emission reductions.”

BEIS did not immediately respond to a request for comment.

Royal Dutch Shell and BP, which have both operated in the North Sea for decades, paid no taxes to the British government in 2019 as a result decommissioning tax relief, according to the firms’ tax reports.

(Reporting by Ron Bousso; editing by David Evans)

Oil Prices Gain on U.S. Fuel Drawdown Despite Rising Covid-19 Cases

By Sonali Paul and Koustav Samanta

Brent crude futures rose 28 cents, or 0.4%, to $74.76 a barrel at 0506 GMT, after shedding 2 cents on Tuesday in the first decline in six days.

U.S. West Texas Intermediate (WTI) crude futures were up 33 cents, or 0.5%, at $71.98 a barrel, reversing Tuesday’s 0.4% decline.

“Crude oil prices are steady ahead of the U.S inventory data from EIA on Wednesday as traders balance the spread of Delta variant coronavirus cases against tight supplies,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures.

Data from the American Petroleum Institute industry group showed U.S. crude stocks fell by 4.7 million barrels for the week ended July 23, gasoline inventories dropped by 6.2 million barrels and distillate stocks were down 1.9 million barrels, according to two market sources, who spoke on condition of anonymity.

That compared with analysts’ expectations for a 2.9 million fall in crude stocks, following a surprise rise in crude inventories the previous week in what was the first increase since May.

Traders are awaiting data from the U.S. Energy Information Administration (EIA) on Wednesday to confirm the drop in stocks.

“A more significant than expected fall (in EIA data) could be enough to shake Brent and WTI out of their ranges and test the upside,” said Jeffrey Halley, analyst at brokerage OANDA.

On gasoline stocks, analysts had expected a 900,000 barrel decline drop in the week to July 23.

Fuel demand expectations are undented by soaring cases of the highly infectious Delta variant of the coronavirus in the United States, the world’s biggest oil consumer, where the seven-day average for new cases has risen to 57,126. That is about a quarter of the pandemic peak.

The International Monetary Fund on Tuesday maintained its 6% global growth forecast for 2021, upgrading its outlook for the United States and other wealthy economies but cutting estimates for developing countries struggling with surging COVID-19 infections.

(Reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Richard Pullin and Christian Schmollinger)

Summer’s Gasoline Recovery Could Fizzle on Rising Infection Cases

By Stephanie Kelly, Jessica Jaganathan and Bozorgmehr Sharafedin

Gasoline demand in the United States, the world’s top oil consumer, has nearly recovered to 2019 levels following the plunge in travel and business activity during the worst of the pandemic in 2020.

Coronavirus cases worldwide, however, have started to rise after largely falling in May and June, according to the Reuters global COVID-19 tracker https://graphics.reuters.com/world-coronavirus-tracker-and-maps, undermining the recovery.

Gasoline demand in the United States and Europe is hitting a plateau, and those two regions account for roughly a third of global petroleum consumption, making them key to the rebound in oil and refining markets.

Monthly growth in mobility and transport fuel demand are believed to have slowed in June, the International Energy Agency (IEA) said in a July report. [IEA/M]

Currently, the energy watchdog expects global fuel demand to reach pre-pandemic levels by next year, but analysts say that could be pushed further out if coronavirus infections and the slow pace of vaccinations worldwide further entrenches structural changes in demand – including more telecommuting and less air travel.

“We’re still very much actively dealing with new cases here in the U.S. and also abroad, and that is putting greater pull on demand and what was originally anticipated for this recovery process in the middle of the summer for this year,” said Devin Gladden, manager of federal affairs at motorist group American Automobile Association.

The IEA, which represents oil-consuming nations, also said in March that gasoline demand was unlikely to return to 2019 levels, in large part due to a shift to electric vehicles.

Global gasoline demand is expected to total 25.4 million barrels per day (bpd) this year, down 4.5% from 2019 levels, the IEA said in March.

Countries in Asia are restricting movements again, affecting travel patterns. Indonesia, Asia’s top importer of gasoline, is grappling with the worst coronavirus outbreak in Asia. The country, with more than 270 million people, now has Southeast Asia’s biggest caseload, and is extending some restrictions.

The latest update of aggregated travel patterns Google collected from its users’ phones showed https://www.google.com/covid19/mobility retail and recreation visits fell from June 10 to July 22 by 21% in Indonesia and travel to work fell by 33%. Several other countries are dealing with outbreaks, including Vietnam, Thailand and Malaysia.

China’s refineries continue to process oil at high rates, suggesting strong consumption, but the world’s largest crude oil importer just announced a crackdown on the misuse of import quotas, which could cut its demand.

Fuel sales increased in early July in India as motorists took back to the roads after states eased COVID-19-related lockdowns, helping offset declines in other nations. However, crude imports by India, Asia’s second top importer, fell to a nine-month low in June, after the lockdowns and low demand boosted inventories.


In Europe, road traffic has started to plateau following gains in May and June. Daily average petrol and diesel sales at sampled filling stations in Britain have stagnated, while travel is declining in Russia.

Europe is one of the top consumers of global oil, taking in about 14% of the world’s petroleum in 2017, according to the U.S. Department of Energy.

“While transportation demand is still improving in many countries, demand-flattening has started in some key consumers and conditions are deteriorating in others,” Standard Chartered analysts said in a note.

England scrapped nearly all COVID-related curbs last week, while in Germany, Chancellor Angela Merkel warned more people needed to be vaccinated against COVID-19 before restrictions could be lifted in Germany.

Infections are rising in the United States, which consumes about a fifth of the world’s oil. U.S. gasoline demand recently reached 9.4 million bpd, near levels not seen since 2019, but some analysts expect that demand to plateau.

Officials in some areas, like Los Angeles, are reinstating precautions like mask mandates due to the rise in COVID-19 cases.

Demand “has been tracking at around 2-3% below 2019 levels. That’s a number you’re going to continue to see,” said Robert Campbell, head of oil products research at consultancy Energy Aspects.

(Reporting by Stephanie Kelly in New York, Bozorgmehr Sharafedin in London and Jessica Jaganathan in Singapore; Editing by Marguerita Choy)

Oil Inches Up as Tight Supply, Vaccinations Outweigh Virus Concerns

By Shu Zhang and Sonali Paul

Brent crude futures climbed 34 cents, or 0.46%, to $74.84 a barrel at 0508 GMT, extending a 0.5% gain on Monday.

U.S. West Texas Intermediate (WTI) crude futures rose 20 cents, or 0.28%, to $72.11 a barrel, after losing 16 cents on Monday.

Benchmark prices rose even after the United States issued travel warnings to Spain and Portugal due to rising COVID-19 cases and a White House official told Reuters that wider travel curbs will not be lifted due to the highly infectious Delta variant and rising domestic infections.

“Oil prices are set to range this week after recovering all of the “delta-dip” losses from the last Monday week,” Jeffrey Halley, a senior Asia Pacific market analyst at OANDA, wrote in a note. “Both contracts should continue to consolidate their gains, with volatility much reduced from last week.”

In one encouraging sign for fuel demand, Britain reported its lowest daily total of new COVID-19 cases since July 4 on Monday, suggesting the recent surge in infections has passed its peak.

Analysts tracking mobility data remain confident about fuel demand, counting on vaccinations to guard against strict new lockdowns.

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as OPEC+, to raise production through the rest of the year.

ANZ Research analysts said “robust road traffic data across most major regions suggests rising infections are having minimal impact”.

“Investors are also encouraged by the continued restraint by U.S. shale oil producers. So far they have maintained discipline, with a focus on returns rather than growth,” ANZ Research analysts said in a note.

Investors are awaiting inventory data from the American Petroleum Institute industry group on Tuesday and the U.S. Energy Information Administration on Wednesday for further evidence that demand is holding up.

Five analysts polled by Reuters estimated, on average, that U.S. crude stocks fell by about 3.4 million barrels and gasoline stocks fell by 400,000 barrels in the week to July 23.

(Reporting by Shu Zhang and Sonali Paul; Editing by Himani Sarkar and Christian Schmollinger)

Oil Steady in Undersupplied Market but Virus Clouds Demand

By Noah Browning

Brent crude futures for September were up 4 cents at $74.14 a barrel by 1342 GMT while U.S. Texas Intermediate crude slipped by 11 cents to $71.96.

Both benchmarks fell by more than $1 a barrel in earlier trading.

Coronavirus cases continued to rise over the weekend, with some countries reporting record daily increases and extending lockdown measures that could slow oil demand. China, the world’s largest crude importer, has also registered a rise in COVID-19 cases.

Furthermore, Beijing’s crackdown on the misuse of import quotas combined with the impact of high crude prices could send growth in China’s oil imports to its slowest in two decades this year despite an expected rise in refining rates in the second half.

“The Delta variant is still spreading and China has started to clamp down on teapots, so their import growth would not be that much,” said Avtar Sandu, a senior commodities manager at Singapore’s Phillips Futures, referring to independent refiners.

Strong U.S. demand and expectations of tight supplies have helped both contracts to recover from a 7% slump last Monday to mark their first gains in two to three weeks last week.

Global oil markets are expected to remain in deficit despite a decision by the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to raise production through the rest of the year.

“There is seemingly a battle within the energy complex between the prevailing supply deficit engineered by OPEC+ and the threat of the COVID-19 Delta variant in regions with low vaccination rates,” said StoneX analyst Kevin Solomon.

“The slow take-up of vaccinations will continue to limit some upside in oil demand in those regions, and there will be intermittent spells in the recovery in the coming months.”

(Additional reporting by Florence TanEditing by Bernadette Baum and David Goodman)

Protein Pinch: China’s Soybean Imports to Slow Over Rest of 2021 on Curbed Meal Use

By Hallie Gu and Gavin Maguire

A collapse in hog sector profitability and a sharp rise in wheat feed use are crimping demand in China, where imports this year may now be less than 100 million tonnes, compared with a recent U.S. forecast of 102 million tonnes.

As China accounts for 60% of global soybean imports, its diminished appetite – just as U.S. farmers pull in what is projected to be their third-largest harvest ever – stands to add further volatility to the critical crop, which rallied to nine-year highs this year.

Graphic: China soy crush margins slump along with hog margins & pork prices – https://fingfx.thomsonreuters.com/gfx/ce/gkvlgmwggpb/ChinaSoyvsHogmargins.png

“Soymeal demand is reaching rock bottom. Basis is now at minus 120 yuan (in northern China), lowest this year. Demand might come back up, but it sucks now,” said a manager with a crusher in northern China that processes two cargoes of soybeans on average per month. “We can’t really place orders to make purchases. The volume of U.S. soybean exports will surely be affected.”

His plant only had one cargo booked for August, while normally it would have been fully booked until after October. As it stands, crushers in key soy processing hub Shandong would lose nearly 400 yuan with each tonne of the oilseed crushed.

China imported a record 48.95 million tonnes in the first half of 2021, up nearly 9% on the year as hog herds recovered from a deadly disease outbreak and top producer Brazil shipped a record crop. Now, however, demand is stumbling, analysts say.


Graphic: China soybean imports by key suppliers – https://fingfx.thomsonreuters.com/gfx/ce/akpezgqlmvr/ChinaSoyImportbySuppliers.png


“The (imports) momentum earlier in the year was quite strong. But then since May, year-on-year increase of imports has been slowing down,” said Zou Honglin, analyst with Myagric.com, a trade website.


A key driver of the slowdown in soybean use has been the reversal in hog margins, which started the year strongly as farmers tried to rebuild herds after a deadly outbreak of African swine fever (ASF), but then collapsed along with pork prices as fresh ASF outbreaks sparked herd liquidations and a surge in pork output.

Hog margins in China currently range from -150 yuan to 84 yuan, down more than 100% since the beginning of the year.

“The market kept lowering estimates on full-year imports. It is very obvious that protein consumption increase lags far behind the increase of feed consumption,” said Zou, who has lowered his full-year China soybean import estimates to 97 million tonnes.

Another critical factor has been a change in feed mix in China, which reduced the volume of soymeal required in animal rations.


Graphic: Chinese feedlots replaced corn with wheat in animal rations after corn prices soared this year – https://fingfx.thomsonreuters.com/gfx/ce/zdvxoydorpx/ChinaCornvsWheatJuly2021.png


China produced 139.33 million tonnes of feed in the first six months of 2021, up 21.1% from 2020, according to China’s feed industry association. Pig feed volumes were 62.46 million tonnes, up 71.4% from the year before.

In comparison, the volume of soybeans crushed during the same period rose 1.62% on year, to 42.63 million tonnes, according Myagric, tracking soymeal’s reduced share in feed.

“Demand is not as good as expected; a large volume of wheat and rice are going into feed, which would displace a lot of soymeal,” said another manager with a major crusher that has plants across China.

The manager added that some top feed producers who bought soymeal earlier were now reselling the contracts.

Rising soymeal stocks also indicated slower consumption. Soymeal inventories held by major crushers climbed 19% in June from the month before. They are 20% above year-ago levels, and about 7% higher than the three-year average for this time of year, according to the China National Grains and Oils Information Center.

The high level of wheat in feed mixes is expected to continue into next year.


Soybean flows to China are already slowing.

China’s June soybean imports from all origins came in at 10.72 million tonnes, down 4% from 11.16 million tonnes in June 2020.

July arrivals were seen at 8.3 million tonnes, with the majority originating from Brazil, according to Refinitiv. That’s down 18% from 10.09 million tonnes in the previous year.

Graphic: China soybean imports – https://fingfx.thomsonreuters.com/gfx/ce/zgvomwbgrvd/ChinaSoyImportsJuly2021.png

“The signs don’t look optimistic for a recovery at the moment. Domestic crush margins are still in the red while soymeal inventories remain high, said Howie Lee, economist at OCBC Bank. “Using U.S. new crop orders as a proxy, China has not been placing as much bids for the new U.S. soybean crop compared to 2020.”

(Reporting by Hallie Gu in Beijing and Gavin Maguire in Singapore. Editing by Gerry Doyle)

China Crackdown Could Knock Crude Oil Import Growth to 20-year Low

By Florence Tan and Shu Zhang

Shipments into the world’s top crude importer and No. 2 refiner could be steady, or increase by up to 2% to just over 11 million barrels per day (bpd) this year, consultancies Energy Aspects, Rystad Energy and Independent Commodity Intelligence Services (ICIS) found.

That compares to an average annual import growth rate of 9.7% since 2015, and would be the slowest growth since 2001, China customs data showed.

The flat forecasts coincide with plans by OPEC+ to raise oil output by 400,000 barrels per day between August and December. News of the decision by the Organization of the Petroleum Exporting Countries and allied producers sparked a sell-off in benchmark prices this week.

China has been the global oil demand driver for the last decade, and accounted for 44% of worldwide growth in oil imports since 2015, when Beijing started issuing import quotas to independent refiners.

While analysts expect global crude markets to stay in deficit this year despite the OPEC+ output rise, China’s investigations into the trading of crude import quotas, and the resulting lower import allocations to independent refiners, have already cooled demand from the group that provides a fifth of China’s imports.

“This could mean an end to the rapid growth in China’s crude imports which we’ve seen in the past,” said a Beijing-based analyst who declined to be named because of company policy.


China’s crude imports in June fell to the lowest since 2013 after Beijing clamped down on import quota trading as part of a drive to consolidate its refining industry and reduce emissions.

Several small refiners did not receive any quotas in a second batch issued in June, while others have already used their full allocations, traders and analysts said.

The remaining refiners are expected to reserve whatever quotas they have left for the fourth quarter, when fuel demand typically peaks, FGE said.

Shandong refiners, where most of the small, independent refiners, known as teapots, are located, will reduce imports by around 350,000 bpd and 250,000 bpd in third and fourth quarters, respectively, FGE added.

“Overall, we see Shandong independent refinery runs falling by around 490,000 bpd from pre-clampdown levels to average 1.75 million bpd in 3Q. Runs should make a recovery to 1.90 million bpd levels in 4Q.”

This has curbed demand for crude from Africa, Brazil and Russia, prompting traders to divert cargoes to Europe and the United States.

A senior trader based in Singapore, who also asked to remain anonymous, said teapot refineries had lost their position as market drivers and it was wise for sellers to find other outlets.

Increasingly, he said, Brazilian and Russian ESPO crudes have been heading to the United States while Brazilian Buzios crude has gone to Europe.


Despite slowing imports, China’s crude processing could hit another all-time high this year as state-owned majors and large private refiners operate plants at higher rates and buy more crude to offset lower independent refining, analysts and traders said.

Sinopec and PetroChina are likely to consolidate their positions as the top Chinese crude traders as the independent refiners are sidelined.

Together with other refiners, they are boosting output to replace lower supplies of light cycle oil and mixed aromatics used in fuel blending, imports of which have slumped since new taxes took effect in June.

“Plugging the tax holes should support refinery runs, likely leading to higher crude imports, but the exact increase is currently difficult to quantify,” Rystad Energy analyst Julie Torgersrud said.

Rystad Energy, FGE and Energy Aspects forecast higher refining throughput at 14.5 million to 14.6 million bpd in the second half, with imports between 10.85 million and 11.5 million bpd.

Beijing-based consultancy SIA Energy forecasts processing of 16 million bpd in the second half of 2021, 6.8% higher year on year, leading to imports of 12.48 million bpd, up 15%.

Analysts were split on whether China will repeat its massive stockpiling drive that fuelled record imports in 2020. More than 100 million barrels of crude storage is expected to be commissioned in 2021, but the current market backwardation structure discourages traders from holding stocks.


China crude oil imports https://tmsnrt.rs/2WdB6Us

China is the top global crude oil importer, and accounted for 44% of global crude import growth since 2015 https://tmsnrt.rs/2W2Pui8

Teapot refineries in China’s Shandong province (updated) https://tmsnrt.rs/2XFYlEM

Current crude oil market structure dissuades traders from storing oil https://tmsnrt.rs/2UZWWtX


(Reporting by Florence Tan and Shu Zhang in Singapore, Muyu Xu in Beijing; Editing by Gavin Maguire and Barbara Lewis)

Oil Edges Up in Weekly Rebound on Forecasts for Tight Supplies

The price of oil and other riskier assets tumbled at the start of the week on concern over the impact on the economy and crude demand from surging cases of the COVID-19 Delta variant in the United States, Britain, Japan and elsewhere.

Brent crude ended the session up 31 cents, or 0.4%, at $74.10 a barrel after jumping 2.2% on Thursday. U.S. West Texas Intermediate (WTI) crude settled up 16 cents, or 0.2%, at $72.07, after gaining 2.3% on Thursday.

For the week, Brent gained 0.7% after declining for three consecutive weeks, while WTI rose 0.4% after falling for two weeks.

Both benchmarks slumped about 7% on Monday but pared those losses, with investors expecting demand to stay strong and the market to receive support from falling oil stockpiles and rising vaccination rates.

“The demand concerns proved to be exaggerated, which is why oil prices have since recovered. Despite the expansion in oil supply, the oil market will remain slightly undersupplied until the end of the year,” Commerzbank said in a note.

Demand growth is expected to outpace supply after Sunday’s deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, to add back 400,000 barrels per day (bpd) each month from August.

ANZ Research analysts said in a report that the market was starting to sense the OPEC+ increase will not be enough to keep the market balanced and inventories in the United States and across OECD countries would continue to fall.

U.S. crude inventories rose by 2.1 million barrels last week, but stocks at the Cushing, Oklahoma delivery point for WTI hit their lowest since January 2020.

U.S. oil rigs rose seven to 387 this week, their highest since April 2020, energy services firm Baker Hughes Co said. But the recovery in drilling has been modest as producers favor spending austerity.

“We still think the OPEC+ driven dip in crude and distillate prices is a buying opportunity and project Brent will hit $100 a barrel next year, with distillates tagging along for the ride,” Bank of America said in a note.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Alex Lawler in London, Sonali Paul in Melbourne, Roslan Khasawneh in Singapore and Scott DiSavino in New York; Editing by Marguerita Choy and Andrea Ricci)

Russian Central Bank Governor Speaks at Press Conference

Below are the highlights of her comments:


“The decision is based on a significant review of macroeconomic forecasts… The notable policy step we have taken is needed in order to bring inflation in line with the target.”

“Deposit and loan rates were not as quick to react to the policy rate adjustment as the OFZ bonds, today’s decision is aimed at speeding up this process.”

“The neutral (policy rate) range remains at 5-6% given inflation close to 4%… It is premature to say whether this rate hike is going to be the last one in the policy tightening cycle.”

“We considered the options of raising the rate by 50, 75, and 100 basis points.”

“We currently see the policy rate in the 6-7% range next year which will produce inflation at 4.0-4.5%.”


“Our policy will not harm economic growth rates.”


“Carry trade flows have slightly increased against the backdrop of the rate hike. This does not significantly affect the rouble exchange rate, in our view.”

“Equipment purchases using the national wealth fund money may also affect rouble exchange rate, such influence needs to be further evaluated, it is better to invest the fund’s money into projects that boost Russia’s economic potential.”


“The first signs of inflationary pressure weakening appeared in the first half of July but this is not yet sufficient to talk about sustainable inflation slowdown.”

“We must not put up with elevated inflationary expectations so that they do not anchor on this high level.”

“We expect that in annual terms the decrease in inflationary pressure will become visible in autumn.”

“There are many reasons to analyse the inflation target, we will look at how the target is formulated, its level and whether it will be a point or a range. We will discuss this for a year with experts, academics, business representatives and the public.”


“According to our forecasts, the OPEC+ oil output increase will add 0.1 percentage point to GDP growth in 2021 and 0.2-0.3 percentage point in 2022.”

“A good (grain) harvest may provide for more significant food price decline.”

“The state budget may be executed with some surplus.”


“There are signs of overheating in the unsecured loan market. Taking into account data for the last few months, we will decide on additional measures to cool down this segment.”

“Geopolitical risks are also something to which we continue to pay attention.”


“We are not changing our approach to bank regulation because of this (change in national wealth fund asset structure), but our banking regulation already includes measures aimed at making rouble deposits and loans more attractive and foreign currency ones less attractive.”


“ESG is one of the key factors that will have an ever increasing influence on Russia’s economy. We will regularly carry out stress tests in order to assess the impact of the carbon tax on our economy.”

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Darya Korsunskaya, Anastasia Lyrchikova and Tatiana Voronova; Writing by Olzhas AuyezovEditing by Katya Golubkova)

Oil Retreats on Surprise Rise in U.S. Stocks, Weakening Demand Outlook

By Sonali Paul and Roslan Khasawneh

Brent crude futures fell 36 cents, or 0.5%, to $68.98 a barrel at 0627 GMT, giving up some of Tuesday’s 1.1% gain.

U.S. West Texas Intermediate (WTI) crude futures dropped 36 cents, or 0.5%, to $66.84 a barrel, after rising $1 on Tuesday.

The market “has come under a bit of downward pressure in early morning trading today after a bearish and rather surprising inventory report from the API,” ING Economics analysts said in a note, referring to weekly figures from the American Petroleum Institute.

U.S. crude stocks rose by 806,000 barrels for the week that ended July 16, according to two market sources, citing American Petroleum Institute figures.

By comparison, 10 analysts polled by Reuters had estimated, on average, that crude stocks fell by about 4.5 million barrels.

Investors are awaiting data from the U.S. Energy Information Administration to see whether it confirms there was an increase in crude inventories, which would end an eight-week streak of inventory draw downs.

“The price moves today and potentially tomorrow will be driven by U.S. oil stocks data, but the biggest thematic will be the OPEC+ deal to add 400,000 barrels per day a month versus whether demand will hold up given what we’re seeing on the Delta variant,” Commonwealth Bank analyst Vivek Dhar said.

A deal by the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, to boost supply by 400,000 bpd each month from August through December sparked an oil price selloff on Monday, exacerbated by demand fears with cases of the Delta variant of the coronavirus picking up in major markets like the United States, Britain and Japan.

While fuel demand has improved during the peak summer months, a surge in Delta variant COVID-19 cases is taking a toll on the demand outlook.

“The Delta dread has a rather firm grip of the oil market sentiment, having put a big question-mark over the demand rebound narrative of the past several weeks,” said Vandana Hari, energy analyst at Vanda Insights.

“Crude may eke out some modest gains in the coming days, but it is hard to see prices jumping to the higher orbits any time soon,” said Hari.

Although global demand is expected to average 99.6 million barrels per day (mbd) in August, up by 5.4 mbd from April, “we only see 4Q21 demand recovering another incremental 330,000 vs a normalized 2019 baseline as colder weather sets in for the northern hemisphere and peak travel season is behind us,” analysts at JP Morgan said in a note.

(Reporting by Sonali Paul in Melbourne and Roslan Khasawneh in Singapore. Editing by Gerry Doyle and Richard Pullin)

Oil Rises but COVID-19, Supply Concerns Cloud Outlook

By Aaron Sheldrick

Brent crude gained 70 cents, or 1%, to $69.32 a barrel by 0651 GMT. The U.S. crude contract for August delivery, which expires later on Tuesday, was up 86 cents, or 1.3%, at $67.28 a barrel. U.S. crude for September delivery was up around 1.2% at $67.14 a barrel.

The selloff, which pushed prices to their lowest in two months, was driven by concerns about the Delta variant of the coronavirus that is rampaging through populations, analysts said, with equities falling and bonds rising. [MKTS/GLOB]

“Rising cases of the Delta variant of the coronavirus in some Asian and European countries and possibilities of travel restrictions have increased crude oil demand uncertainty to some extent,” analysts at ING Economics said in a note.

“However, the crude oil physical market has been tight over recent months, with the ongoing economic recovery likely to remain supportive for oil demand over the second half of the year,” they said.

The Delta variant, which is significantly more contagious than earlier ones, is now the dominant strain worldwide, U.S. officials said on Friday.

It has been detected in about 100 countries around the world and patchy rollouts of inoculation programmes in many places are undermining the battle against the virus, raising the prospect of more lockdowns that would hit demand for oil products.

Still, analysts said high frequency indicators showed that restaurant bookings over the weekend in the United States, the world’s biggest oil consumer, were at pre-COVID levels, while domestic flights were at the highest level since the pandemic started.

Oil was also hit after the Organization of the Petroleum Exporting Countries (OPEC) and allies, called OPEC+, reached a compromise on Sunday to increase output.

The OPEC+ deal takes away more of the supply curbs that buttressed the market for a year. OPEC+ is keeping about 5.8 million crude barrels per day (bpd) out of the market, a figure that will decrease by 2 million bpd by the end of 2021.

Despite the latest COVID-19 concerns and crude price falls, some analysts expect the increased supplies to be soaked up by a gradual return of economic activity.

“This deal should provide some stability to the market over the coming months .., and may ultimately support the market higher,” SSY Futures in Singapore said in a note.

(Reporting by Aaron Sheldrick; editing by Richard Pullin & Shri Navaratnam)

Oil Falls 5% After OPEC+ Producers Agree to Raise Output

By Noah Browning

LONDON (Reuters) – Oil prices fell over $3 in their largest daily decline since late March on Monday after OPEC+ overcame internal divisions and agreed to boost output, causing concern about a crude surplus as COVID-19 infections rise in many countries.

Brent crude was down $3.61, or 4.9%, at $69.68 a barrel by 1405 GMT. U.S. oil was down $3.75, or 5.2%, at $68.06 a barrel.

OPEC+ ministers agreed on Sunday to increase oil supply from August to cool prices that this month hit their highest level in more than two years as the global economy recovers from the COVID-19 pandemic.

The group of members of the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia also agreed new production shares from May 2022.

“Longer-term, free and additional production capacities from OPEC+ countries are the key reason why we see oil moving lower again,” said Julius Baer analyst Carsten Menke.

“We remain confident that the oil market is in the final phase of its upcycle.”

Goldman Sachs, however, said it remained bullish on the outlook for oil and the agreement was in line with its view that producers “should focus on maintaining a tight physical market all the while guiding for higher future capacity and disincentivising competing investments.”

But PVM Oil analyst Tamas Varga sounded a note of caution on the pace of the expected recovery of demand from the pandemic.

“The global COVID situation is turning dire again and it understandably makes investors wary although it must be stressed that restrictions are being eased in other parts of the world.”


GRAPHIC: Brent crude oil forward curve wilts after OPEC+ deal https://fingfx.thomsonreuters.com/gfx/ce/qzjvqxxwbpx/BrentCurveJuly19vsJuly62021.png


OPEC+ last year cut output by a record 10 million barrels per day (bpd) as the pandemic hollowed out demand, prompting a collapse in prices with U.S. oil futures prices at one point falling into negative territory.

OPEC+ producers have gradually eased their output curbs, which now stand at around 5.8 million bpd.

To overcome internal divisions, OPEC+ agreed new production quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

(Editing by Jacqueline Wong, Jason Neely and Angus MacSwan)

OPEC+ Agrees Oil Supply Boost After UAE, Saudi Reach Compromise

The group, which includes OPEC countries and allies like Russia, crucially agreed new production allocations from May 2022 after Saudi Arabia and others agreed to a request from the United Arab Emirates (UAE) that had threatened the plan.

“We are happy with the deal,” UAE’s Energy Minister Suhail bin Mohammed al-Mazroui told a news conference. Saudi energy minister Prince Abdulaziz bin Salman declined to answer questions on how the compromise was reached.

OPEC+ last year cut production by a record 10 million barrels per day (bpd) amid a pandemic-induced slump in demand and collapsing prices. It has gradually reinstated some supply to leave it with a reduction of about 5.8 million bpd.

From August until December 2021 the group will increase supply by a further 2 million bpd or 0.4 million bpd a month, OPEC said in a statement.[O/R] It aims to fully phase out cuts by around September 2022.

The group had agreed to extend their overall pact until the end of 2022 from an earlier planned date of April 2022, to leave more room for manoeuvre in case global recovery stalls due to new virus variants.

Whilst both Riyadh and the UAE had been supportive of an immediate output boost, the UAE had objected to the Saudi idea to extend the pact to December 2022 without getting a higher production quota.

To overcome the disagreement, OPEC+ agreed new output quotas for several members from May 2022, including the UAE, Saudi Arabia, Russia, Kuwait and Iraq.

The UAE will see its baseline production, from which cuts are being calculated, increase to 3.5 million bpd from May 2022 from today’s 3.168 million.

Saudi and Russia will see their baselines rise to 11.5 million bpd each from the current 11 million. Iraq and Kuwait will see their baselines rise by 150,000 bpd each.

Prince Abdulaziz said Nigeria and Algeria could also see their baselines revised.

He said OPEC+ would adjust its policy if and when Iranian oil returned to the market if the country reached a deal with world powers over its nuclear programme.

Iran is estimated to be able to add some 1.5 million bpd to global supply once the deal is reached and Western sanctions are lifted.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Olesya Astakhova, Rania El Gamal, ALex Lawler, Ahmad Ghaddar, Vladimir Soldatkin and Dmitry Zhdannikov; Writing by Dmitry Zhdannikov; Editing by Elaine Hardcastle, Philippa Fletcher and Hugh Lawson)

OPEC+ Plans New Output Policy Meeting on Sunday, Sources Say

The development comes after Saudi Arabia and the United Arab Emirates (UAE) reached a compromise last week in a dispute over OPEC+ policy, in a move that should unlock a deal to supply more crude to a tight oil market and cool soaring prices.

The Organization of the Petroleum Exporting Countries, along with Russia and other allies, a group known as OPEC+, still needs to take a final decision on output policy after talks earlier this month were abandoned because of the dispute between Saudi and the UAE.

OPEC could not be reached for comment outside regular business hours.

Sunday’s meeting will be held virtually as have all such discussions since last year.

OPEC+ last year agreed record output cuts of almost 10 million barrels per day (bpd) to cope with a pandemic-induced slump in demand, curbs which have been gradually relaxed since then and now stand at about 5.8 million bpd.

The dispute between Riyadh and the UAE spilled into the open after previous OPEC+ talks, with both airing concerns about details of a proposed deal that would have added an extra 2 million bpd to the market and extended the pact until end of 2022.

The objective was to ease upward pressure on oil prices that have recently climbed to 2-1/2 year highs.

One OPEC+ source said last week Riyadh had agreed to Abu Dhabi’s request to have UAE’s baseline – the level from which cuts under the OPEC+ agreement on supply curbs are calculated – set at 3.65 million bpd from April 2022, up from 3.168 million.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Olesya Astakhova and Rania El Gamal Editing by Catherine Evans and David Holmes)


Oil Falls for the Week on Supply Concerns, Rising COVID Cases

Brent futures rose 12 cents, or 0.2%, to settle at $73.59 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 16 cents, or 0.2%, to settle at $71.81. Earlier in the volatile session, both benchmarks were down over $1 a barrel.

Despite the small gains, Brent fell almost 3% for the week, marking a decline for the third week in a row for the first time since April 2020. WTI fell almost 4% this week, which would be its biggest weekly percentage decline since March.

U.S. retail sales unexpectedly increased in June as demand for goods remained strong even as spending shifts back to services, bolstering expectations that economic growth accelerated in the second quarter.

With oil prices mostly rising over the last several months, the U.S. oil rig count continued its slow increase, gaining two rigs this week to 380 active units, their highest since April 2020, according to energy services firm Baker Hughes. [RIG/U]

U.S. crude production has increased by 300,000 barrels per day (bpd) over the last two weeks, rising to 11.4 million bpd in the week ended July 9, the highest since May 2020, according to federal data. [EIA/S]

Saudi Arabia and the United Arab Emirates reached a compromise earlier this week, paving the way for OPEC+ producers to finalise a deal to increase production.

“The longer it takes for OPEC+ to announce an extraordinary meeting to vote on the extra barrels, the more it implies other OPEC+ members may also want increases to their baseline quota,” said Bob Yawger, director of energy futures at Mizuho in New York, noting reports Iraq was seeking to increase its baseline.

OPEC+, which groups the Organization of the Petroleum Exporting Countries with Russia and other producers, had earlier failed to agree after the UAE sought a higher baseline for measuring its output cuts.

OPEC said on Thursday it expected world oil demand to increase next year to around levels seen before the pandemic, about 100 million bpd, led by demand growth in the United States, China and India.

But the rise in coronavirus cases related to the highly contagious Delta variant could trigger new lockdowns that would likely reduce recent bullish oil demand forecasts.

In the United States, Los Angeles County will reimpose its mask mandate this weekend.

Britain reported its highest number of new COVID-19 cases in more than six months on Friday.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Ahmad Ghaddar in London, Aaron Sheldrick in Tokyo and Florence Tan in Singapore; Editing by Marguerita Choy, Louise Heavens, Barbara Lewis and Andrea Ricci)

Stocks, Yields Slip as Investors Await Next Catalyst

The number of Americans filing new claims for unemployment benefits fell to a 16-month low last week as the U.S. labor market steadily gains traction while other data showed import prices rose solidly in June but have probably peaked.

Wall Street traded lower even as the four largest U.S. consumer banks posted blockbuster second-quarter results earlier this week that were above analysts’ estimates.

Investors are looking for visibility into future earnings as stocks have already surged in anticipation of stellar growth.

“We had the rally going into the earnings season. Now that we’re actually here, we’re seeing some softness. I wouldn’t be surprised if we don’t see a lot of strength during this reporting season,” said Tim Ghriskey, chief investment strategist at Inverness Counsel in New York.

Analysts expect strong earnings, with IBES data from Refinitiv showing consensus looking for a 65.8% gain from a year ago, making corporate guidance more important than results.


Energy and technology stocks led the decline on Wall Street, with defensive consumer staples and utilities the only two of 11 S&P 500 sectors to gain. Staples have pricing power that could help Procter & Gamble Co, Coca-Cola Co and others rise, once it is clear their margins remain intact, said Tom Hayes, founder and managing member of Great Hill Capital LLC.

“Guidance is the name of the game. A lot of good news is already baked into the market and even with strong guidance, you may get a breather here,” Hayes said.

The MSCI world equity index, which tracks shares in 50 countries, closed down 0.33% to 723.66 after touching a record high on Wednesday. Europe’s broad FTSEurofirst 300 index closed down 0.92% at 1,761.30, less than 20 points from an all-time peak set Monday.

Losses in Europe were broad-based, with economically sensitive stocks such as banks, automakers and travel down between 0.3% and 1.6% as investors grew wary of rising COVID-19 cases and their potential economic impact.

Official data showed that the United Kingdom reported the highest daily increase in COVID-19 cases since Jan. 15.

On Wall Street, the Dow Jones Industrial Average eked out a 0.15% gain but the S&P 500 fell 0.33% and the Nasdaq Composite slid 0.70%.

Shares in emerging markets rose, bucking the global trend, with MSCI’s index gaining 0.77%.

The 10-year Treasury note fell 5.9 basis points to yield 1.2972%, while the dollar index, which tracks a basket of six currencies, rose 0.19% to 92.586.

The rally in U.S. and European bond prices, which show the inverse of yields, suggested growing investor caution.

The dollar has climbed in recent weeks as investors take stock of the Fed’s increasingly upbeat assessment of the U.S. economy, which for some investors has brought forward the timeframe for its next rate rise. Rates have fallen on Japanese buying and investors selling long-dated maturities for shorter-duration government debt, which has pushed prices up.

The euro fell 0.21% at $1.1810, while the yen traded slid 0.18% at $109.7900.

Oil prices fell as investors braced for increased supplies after a compromise agreement between leading OPEC producers and after a surprisingly low weekly reading on U.S. fuel demand.

Brent crude fell $1.29 to settle at $73.47 a barrel, while U.S. crude slid $1.48 to $71.65 a barrel.

Gold hit a one-month peak, spurred by Federal Reserve Chair Jerome Powell’s dovish comments that squashed market interest rates.

U.S. gold futures gained 0.3% to $1,830.00 an ounce.


China’s economic data showed average growth surpassed the first quarter, while June retail sales and industrial output beat expectations. But it also showed authorities, which only last week injected 1 trillion yuan into the financial system, will ensure that conditions stay loose.

The World Health Organization (WHO) COVID-19 dashboard reported the first weekly rise in global deaths from the virus in 10 weeks and a 5.6% jump in daily case numbers on Wednesday.

“The market is fearing the Delta variant could take a hold of different economies so you are almost seeing that we are back to the ‘bond yields lower, tech doing well’ scenario,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

The likes of Amazon and Google are up 6-8% this month, while China’s biggest tech firms Alibaba and Tencent have surged more than 12% since China’s central bank made a supportive policy tweak for the first time in nearly a year on Friday.

The Chinese yuan dipped to 6.4628 per dollar in Asia after hitting a three-week high of 6.4508 overnight.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Sujata Rao; Editing by Will Dunham, Alex Richardson, Barbara Lewis and Gareth Jones)