Quiet start to the day with gasoline the outperformer this am higher by 1% in the front.  Chinese stocks were in the red again on further trade worries, while Euro stocks, US index futures and the dollar are all lower this morning.  Russian Energy Minister Alexander Novak said this morning that all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria later this month.  Novak said OPEC+ would also discuss supply and demand forecasts for Q4’18. He added that Russia was also ready to discuss cooperation with the United States to balance the oil market, but that such discussions were not being held.  Middle east crude prices were higher today with Cash Dubai trading +1.48 over swaps.  13 Nov Dubai partials traded in the window with Shell buying form Glencore, Chinaoil and Reliance.  Sep/Oct Dubai spreads are trading at 76c back while Oct/Nov spreads are trading 62c back.  Brent/Dubai is trading around 3.55/b while WTI/Dubai for Nov is trading at -5.80.  Talk of lower Iranian flows continue with South Korean Aug data showing an 86.5% drop y/y and Indian flows being cut to less than 12m bbls for each of the next two months.  V8 WTI options expire today with the largest OI on the 70 strike.  X8 Brent options expire later a week from tomorrow (9/25)

 

Top stories listed below

Russia Says OPEC+ August Compliance W/ Output Target Around 108%

China won’t just play defense in trade war, Global Times says – Reuters News

Middle East Crude-Benchmarks edge higher; Iran supply cuts support – Reuters News

Crude oil export, transit from Russia to rise by 1 pct in Q4 – schedule – Reuters News

Angola to export 44 cargoes of crude oil in November – Reuters News

South Korea’s Iranian crude oil imports plunge 86.5% on year in Aug – Platts

Kazakhstan’s Kashagan to boost oil output after 2019 upgrade – sources – Reuters News

China’s Aug diesel output falls y/y to lowest since May as crude runs drop – Reuters News

New Asian Refinery Capacity Additions to Rebalance Sector: JBC

North Dakota Is Now Pumping as Much Crude as Venezuela

Impact of EM Rout on Oil Demand Offset by Supply Shocks: BofAML

U.S. oil refiners’ weekly capacity seen down 435,000 bpd -IIR – Reuters News

Asian middle distillates lose steam as demand fizzles out – Platts

 

Vol change this morning

WTI Vol	17-Sep	Change
X8	25.62	0.43
Z8	25.47	0.07
F9	25.99	-0.02
G8	25.36	-0.05
H9	25.36	-0.09
M9	24.93	-0.19

 

BRT Vol	17-Sep	Change
X8	26.00	2
Z8	25.28	0.27
F9	24.92	0.05
G8	25.76	0.02
H9	25.30	-0.05
M9	25.17	-0.22

 

Russia Says OPEC+ August Compliance W/ Output Target Around 108%

OPEC and its partners still haven’t recovered combined crude output to levels agreed on in 2016 following their June pact, Russian Energy Minister Alexander Novak tells reporters in Moscow.

• OPEC+ compliance was around 108% in August
• Ministers from OPEC+ will discuss output levels in Algeria this weekend
• Ministers will also discuss 4Q supply-demand forecasts, including countries not covered by output pact, notably U.S.
• Russia in general is ready to cooperate with U.S., including on oil; no discussions currently underway

China won’t just play defense in trade war, Global Times says – Reuters News

China will not be content to only play defense in an escalating trade war with the United States, a widely read Chinese tabloid warned, as U.S. President Donald Trump was expected to announce new tariffs on $200 billion in Chinese goods as early as Monday.  The United States and China have already levied duties on $50 billion worth of each other’s goods in an intensifying row that has jolted global financial markets in the past few months.  Last week, the U.S. Treasury Department invited senior Chinese officials, including Vice Premier Liu He, to more talks on the tariff dispute, though skepticism remained high among trade observers on both sides over the prospects of a breakthrough.  China’s Foreign Ministry reiterated that the escalation of the trade conflict was not in anyone’s interest.  "We have always maintained that the only correct means to resolve the trade dispute is through dialogue and consultation on an equal basis with mutual trust and respect," ministry spokesman Geng Shuang told a regular news briefing.  A senior administration official told Reuters over the weekend that Trump was likely to announce the new tariffs as early as Monday.  "It is nothing new for the U.S. to try to escalate tensions so as to exploit more gains at the negotiating table," the Global Times, which is published by the ruling Communist Party’s People’s Daily, wrote in an editorial.  "We are looking forward to a more beautiful counter-attack and will keep increasing the pain felt by the U.S.," the Chinese-language column said.  Besides retaliating with tariffs, China could also restrict export of goods, raw materials and components core to U.S. manufacturing supply chains, former finance minister Lou Jiwei told a Beijing forum on Sunday, according to an attendee.  Lou is chairman of the National Council for Social Security Fund.  The person who attended the event and is familiar with the White House’s thinking said such a move would likely attract sharp retaliation from Washington, which has studied its own limits on exporting key technologies to China.  "Lou Jiwei’s approach would feed the most hawkish sentiments in the U.S. government," the person said, declining to be identified given the sensitivity of the matter.  China is a key supplier of minor metals and rare earths used in consumer electronics and other goods.  Beijing has said it would retaliate to trade war escalation with tariffs of its own as well as qualitative measures, which it has not specified but are perceived within the U.S. business community as likely to include increased customs and regulatory scrutiny.  Beijing may also decline to participate in the proposed trade talks with Washington later this month if the Trump administration goes ahead with the additional tariffs, the Wall Street Journal reported on Sunday, citing Chinese officials.  The Journal report quoted one senior Chinese advisory official saying China would not negotiate "with a gun pointed to its head".  China has not publicly committed to join a new round of negotiations, but in the past it has pulled back from the prospect of talks in the face of escalations in the dispute.  In April, when Trump threatened tariffs on $100 billion of Chinese goods, then seen as a major escalation, China responded by saying it would not conduct talks "under these conditions".  The Chinese government’s top diplomat, State Councillor Wang Yi, will visit New York this week for the annual United Nations General Assembly, Beijing announced on Monday.

"LAGGING EFFECT"

Trump has demanded that China cut its $375 billion trade surplus with the United States, end policies aimed at acquiring U.S. technologies and intellectual property, and roll back high-tech industrial subsidies.  Repeated Chinese vows to reform what critics have argued is one of the world’s most restricted markets among major economies have in recent years triggered "promise fatigue" among foreign business groups that viewed changes as piecemeal.  Trump has said he will no longer allow China to take advantage of the United States on trade, though opposition to escalating tariffs has swelled in recent weeks within U.S. business circles.  Michigan Governor Rick Snyder, known as a moderate Republican and a former computer executive, told Reuters on a trip to China that the anxiety and uncertainty around tariffs risked limiting Chinese investment in the United States.  "If you don’t know what the rules are or how it’s going to operate, you are going to be fairly hesitant about making that investment," said Snyder, who was in China to promote his state’s industries, including autonomous vehicle technology.  There was likely to be a "lagging effect" from U.S. trade disputes with China, Canada and Mexico that could undercut the positive impacts of Trump’s tax cuts, he said.  "I would encourage the national governments to resolve it as quickly as possible, because it’s a concern for all."

Middle East Crude-Benchmarks edge higher; Iran supply cuts support – Reuters News

Middle East crude benchmarks edged higher on Monday, underpinned by lower exports from Iran and purchases from Shell on window, while a wide Brent-Dubai spread buoyed demand for Middle East and Russian grades which are priced on Dubai.  Iran’s oil exports have been declining in recent months as more buyers, including its second-largest buyer India, cut imports ahead of U.S. sanctions that take effect in November. Washington aims to cut Iran oil exports down to zero to force Tehran to re-negotiate a nuclear deal.  Spot premiums for Murban edged down from 2018 highs after middle distillates margins weakened slightly, traders said.  Fuji Oil bought a Murban cargo from Total at a premium slightly below 45 cents a barrel to the grade’s official selling price, they said.  Gasoil cracks are now under $15 a barrel, after hitting a three-year peak of $16.66 a barrel on Sept. 4, data on Thomson Reuters Eikon showed.

RUSSIA: More Russian cargoes are expected to trade this week. Sakhalin Energy issued its monthly tender to sell a Sakhalin Blend crude cargo loading on Dec. 10-16, while Surgutneftegaz will sell an ESPO cargo loading on Oct. 31-Nov. 5 in a tender that will close on Tuesday.  Premiums for the two grades are likely to rise from the previous month after ONGC sold a cargo of November-loading Sokol at the highest premium in four months last week.  Exxon closed a tender on Monday to sell at least one of three Sokol cargoes loading in November. The tender result has yet to emerge.

WINDOW: Cash Dubai’s premium to swaps rose 10 cents to $1.48 a barrel, after Shell snapped up 13 November partials.

 

Crude oil export, transit from Russia to rise by 1 pct in Q4 – schedule – Reuters News

CRUDE OIL EXPORT AND TRANSIT FROM RUSSIA SET AT 63.8 MLN T FOR OCT-DEC 2018 VS 63.3 MLN T FOR JUL-SEP 2018 – QUARTERLY SCHEDULE

EXPORT AND TRANSIT OF URALS CRUDE OIL VIA RUSSIA’S BALTIC SEE PORTS SEEN AT 19 MLN T IN Q4 VS 19.15 MLN T IN Q3 – SCHEDULE

URALS AND SIBERIAN LIGHT OIL EXPORTS FROM NOVOROSSIISK SEEN RISING TO 8.8 MLN T IN Q4 FROM 8.5 MLN T IN Q3 – SCHEDULE

 

Angola to export 44 cargoes of crude oil in November – Reuters News

Angola will export 44 cargoes of crude oil in November, compared with 49 cargoes in October, according to a preliminary monthly loading program seen by traders on Monday.

 

South Korea’s Iranian crude oil imports plunge 86.5% on year in Aug – Platts

South Korea’s crude oil imports from Iran plunged 86.5% in August from a year earlier due to pending re-imposition of US sanctions on Tehran, according to preliminary data released by the Korea Customs Service Monday.  The country imported 232,723 mt (1.71 million barrels or 55,161 b/d) of Iranian crude, including condensate, in August, down 86.5% from 12.63 million barrels in the same month last year.  This marks the 10th consecutive decline since November last year when imports fell 26.8% year on year to 10.37 million barrels.  The volume of 1.71 million barrels was the smallest monthly imports since September 2012 when South Korea purchased no cargoes from Iran amid US-led sanctions on Iran. The August imports were also down 72.4% from 6.20 million barrels in July.   The data is based on customs clearance and there can be a time discrepancy between clearance and actual arrival of the goods, according to customs officials.  Most domestic importers told S&P Global Platts that they had no Iranian crude since August, with Platts trade flow software cFlow showing no oil cargoes from Iran to South Korea for delivery in August.   Final oil trade data for August will be released later this month by state-run Korea National Oil Corp.   For the first eight months this year, Iranian crude oil imports fell 42.3% year on year to 57.91 million barrels, from 100.44 million barrels in same period last year, according to the customs data.   In 2017, Iranian crude oil imports increased 32.1% to 147.87 million barrels. The country’s monthly imports of Iranian crude had increased since January 2016 when the US and EU lifted sanctions on Iran.   South Korea has been trying to pare back crude oil shipments from Iran for the past months in a bid to secure an exemption from the US’ decision to re-impose sanctions on Tehran.   South Korea, one of the closest allies to the US in Asia Pacific, would be keen to abide by Washington’s foreign policies as it requires full US support and influence in its quest to completely denuclearize North Korea and improve diplomatic and economic ties with Pyongyang.  The US has pressed Iran’s oil customers, including South Korea, to completely eliminate imports by November 4. South Korea’s crude oil imports from its biggest supplier Saudi Arabia also fell 4.8% year on year to 3.89 million mt, or 28.51 million barrels, in August, from 29.95 million barrels a year earlier. But the August imports were up 16.9% compared with 24.38 million barrels in July.   In total, South Korea imported 12.62 million mt (92.50 million barrels or 2.98 million b/d) of crude oil in August, down 8.8% from 101.45 million barrels a year earlier. But the August imports were also down 4.3% from 96.67 million barrels in July.  For January-August, the country’s crude oil imports rose 1.2% year on year to 746.62 million barrels, compared with 737.72 million barrels in the year-ago period.   In 2017, the country imported a total 1.118 billion barrels of crude oil, up 3.7% from 1.078 billion barrels in 2016.

 

Kazakhstan’s Kashagan to boost oil output after 2019 upgrade – sources – Reuters News

Oil production at the giant Kashagan oilfield in Kazakhstan will rise to 370,000 barrels per day (bpd) from the current 349,000 bpd after an upgrade next year, three oil industry sources said.  Kashagan, the world’s most expensive oil project, had aimed to reach a target of 370,000 bpd target last year and to maintain that output throughout the first phase of its development. But it missed that deadline.  The planned field stoppage next year for the upgrade work means Kazakhstan’s total output might fall significantly for several weeks before hitting the new high.  The three sources familiar with the plans, who asked not to be named as they were not authorized to discuss them publicly, told Reuters the upgrade works on Kashagan wells and oil processing plant would begin in April and last for 50 days.  NCOC, a consortium which develops Kashagan and includes Eni, Total, Shell, ExxonMobil, Kazakh state firm KazMunayGaz, China’s CNPC and Japan’s Inpex, said it would briefly shut the field for maintenance in the spring of 2019.  NCOC provided no details about its impact on oil output.  PSA, a KazMunayGaz subsidiary dealing with Kashagan and other large projects, also said maintenance was planned at the oil processing plant next spring and said it expected Kashagan’s output to reach 370,000 bpd next year.

China’s Aug diesel output falls y/y to lowest since May as crude runs drop – Reuters News

• China’s diesel production fell 2.7 percent from a year ago to 14.55 million tonnes in August, the lowest level since May, data from the National Statistics Bureau showed
• China’s gasoline output was up 5.4 percent in August from a year ago to 11.46 million tonnes, the data showed
• China’s diesel and gasoline production both fell in August from the previous months, however, as refinery runs eased, the statistics bureau said
• China’s crude processing rate fell in August to its lowest since December, with independent refiners prolonging maintenance shutdowns as higher oil prices and a new tax regime ate into margins

New Asian Refinery Capacity Additions to Rebalance Sector: JBC

String of new refining capacity coming online in Asia is set to re-balance the region’s domestic oil market, Vienna-based JBC Energy says in emailed report.

• China’s 400k b/d Hengli refinery to run trial operations in September
  • Uptick in regionwide refining margins, return of higher crude imports, and the new refinery ramp-up should “slow or reverse the downturn in Chinese crude intake going forward"
• Reliance in India to bring online a gasification plant capable of consuming most of the country’s petcoke supply
  • Indian petcoke demand fell by 90k b/d y/y in August after the ban on use of petcoke outside of key sectors
• Vietnam’s 200k b/d Nghi Son refinery set to ramp-up commercial operations in the coming months and reduce Vietnamese net product imports, says JBC
  • Oil product imports dropped by 30% y/y in July and August, citing Vietnam customs data
  • Future exports may pressure the surplus gasoline market but may help ease the tight middle distillate market in the region

North Dakota Is Now Pumping as Much Crude as Venezuela

North Dakota’s oil production surged to a new record in July, putting the mid-western state on par with OPEC member Venezuela.  Home to the Bakken shale play, North Dakota pumped 1.27 million barrels a day in July, according to state figures released Friday. That’s roughly the same output as Venezuela during the month. The South American nation, whose oil industry has collapsed amid a prolonged financial crisis, saw production fall further in August to 1.24 million barrels a day — about half the level seen in early 2016, according to data from OPEC secondary sources.  Soaring output from shale formations, including the Bakken, helped the U.S. overtake Russia and Saudi Arabia to likely become the world’s biggest oil producer earlier this year, according to preliminary estimates from the Energy Information Administration. At the same time, Venezuela’s output is expected to tumble even lower, to 1 million barrels a day by the end of the year, according to the International Energy Agency.

 

Impact of EM Rout on Oil Demand Offset by Supply Shocks: BofAML

Ongoing EM rout may curb oil demand by 100k-300k b/d, but supply shock from Venezuela and Iran now exceeds 1.4m b/d, BofAML analysts including Francisco Blanch say in report.

• Widespread contagion from EM rout would be needed for bigger demand drop
• Consumption in China, India remains robust
• Oil price collapse only likely if President Trump goes ahead with “worst case” scenario trade war with China
• “We see no imminent risk of a broad EM crisis unless the Trump tariff war escalates abruptly. Oil prices should push higher heading into 2019”

 

U.S. oil refiners’ weekly capacity seen down 435,000 bpd -IIR – Reuters News

U.S. oil refiners are estimated to have 949,000 barrels per day (bpd) of capacity offline in the week ending Sept. 21, decreasing available refining capacity by 435,000 bpd from the previous week, data from research company IIR Energy showed on Monday.  IIR expects offline capacity to rise to 1,362,000 bpd in the week to Sept. 28.  The following are IIR weekly figures for offline capacity (in thousands of bpd):

Week ended Friday	Sept. 17	Sept. 14	Sept. 12
9/28/18	1,362	1,244