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China rallies ANS
China surprises with crude buying spree, boosting ANS price above Brent
Steve Sutherlin Petroleum News
Alaska North Slope crude has been supported in maintaining its newfound premium over Brent, as China has emerged as a surprise active buyer of Pacific cargoes.
Suddenly it seems there is less oil tankered around the Pacific waiting to nail a spot market deal, and a berth at which to unload.
(See chart in the online issue PDF)
The West Coast market -- where ANS is sold -- is highly dependent on seaborne tankers to deliver its deficit consumption.
Each year of late, California oil production has declined, so more outside oil is needed. By that reasoning, seaborne oil prices are steadily gaining leverage to determine the West Coast crude price.
When a giant like China goes on a buying spree, Pacific crude prices elevate, and cargoes -- including an occasional ANS cargo -- flock to Asia.
On March 19, ANS held a $2.40 premium over Brent, versus a $2.57 premium over Brent on March 12.
In that time, ANS slid to a thin 34-cent loss -- from its March 12 close of $73.52 per barrel, to close at $73.18 on March 19.
ANS gained 6 cents on March 19, while West Texas Intermediate rose 26 cents to close at $67.16 and Brent rose 22 cents to close at $70.78.
Prices closed in the green March 19 despite a bearish build in U.S. commercial crude inventories.
China explanation for ANS boost Traders were at a loss to explain an extraordinary development March 6 as ANS skyrocketed $2.77 upward to close at $71.72, flipping positions with Brent to trade at a premium -- of $2.26 -- over the North Sea benchmark.
Stronger demand in Asia is one reason that Pacific cargo values might rise, but on March 6, analysts saw China as a weak spot for oil demand,
The crude-oil market "finds itself in the worst of all worlds right now," Michael Brown, Pepperstone senior research strategist said in a note, reported March 5 by MarketWatch.
China continues to struggle, while OPEC+ hikes production as the U.S. economy stalls, Brown said.
But government data released later in March has shown Chinese demand didn't crash despite moribund economic activity in country -- instead, Chinese refiners managed to keep run rates high despite notching a 26-month import low in January.
Seaborne crude flows were poised to rebound strongly in March after Beijing adapted to U.S. sanctions on Russia and Iran, rising by 700,000 barrels per day month-over-month to 10.6 million bpd, the data said.
China has unveiled a $41 billion government subsidy to prompt buyers to replace old consumer goods with new, while allocating $27 billion to subsidize equipment upgrades.
Industrial output has risen by 5.9% year-over-year in January-February, exceeding consensus expectations, the data said.
The industrial activity creates an internal spike for demand, but China also has a history of buying, storing and refining extra oil to serve outside customers, particularly in Asia, with finished petroleum products.
China has been known to have increased its crude storage capacity in recent years, however, hard data on the country's actual stockpiling capabilities are not accurately known outside of China.
Crude inventories rise U.S. commercial crude oil inventories for the week ended March 14 increased by 1.7 million barrels to 437.0 million barrels, 5% below the five-year average for the time of year, the U.S. Energy Information Administration said in its March 19 weekly petroleum products report.
The data were in line with a rise of 1.2 million barrels on average, according to an analyst survey by Platts S&P Global Commodity Insights.
Total motor gasoline inventories slid by 0.5 million barrels for the period to 240.6 million barrels -- 2% above the five-year average for the time of year, the EIA said. Distillate fuel inventories were drawn down by 2.8 million barrels to 114.8 million barrels -- 6% below the five-year average for the time of year.
The Platts survey forecast supply decreases of 2.3 million barrels for gasoline and 370,000 barrels for distillates.
A smaller-than-expected drawdown in gasoline inventories might indicate a "more healthy U.S. appetite for air travel," especially considering a larger-than-expected draw in distillates, which include jet fuel, Gary Cunningham, director of market research at Tradition Energy, told MarketWatch.
Oil prices fell March 18 as U.S. President Donald Trump and Russian President Vladimir Putin discussed an end to the three-year-old war in Ukraine, which potentially could lead to easing of sanctions on Russia's fuel exports, boosting world crude supplies.
Putin stopped short of endorsing a full 30-day cease-fire sought by the White House, but Putin and Ukraine President Volodymyr Zelenskyy did agree to a moratorium on energy facilities and infrastructure.
ANS fell 34 cents March 18 to close at $73.12, while WTI dropped 68 cents to close at $66.90 and Brent dropped 51 cents to close at $70.56.
On March 17, ANS added 44 cents to close at $73.46, WTI added 40 cents to close at $67.58 and Brent added 49 cents to close at $71.07.
ANS rose 53 cents March 14 to close at $73.02, as WTI rose 63 cents to close at $67.18 and Brent rose 70 cents to close at $70.58.
Prices slid March 13. ANS slid $1.03 to close at $72.50, WTI dropped $1.13 to close at $66.55 and Brent slid $1.07 to close at $69.88.
Peace deal will determine Russian gas exports Natural gas volumes from Russia to Europe have collapsed since the Ukraine invasion, from almost 150 billion cubic meters per year in 2021 to only 15 bcm per year, Wood Mackenzie's Simon Flowers said in the Edge March 19.
The terms of any future deal peace deal with Russia will determine the willingness of both the United States and Europe to re-establish political and economic ties with Russia, Flowers said, adding, "We expect that the removal of sanctions on its LNG projects will be the very least of Russian demands as it looks to reaffirm its position as a global player."
Based on early-stage dynamics of negotiations, a peace deal effectively forced on Ukraine by the U.S. and Russia looks most likely, he said. This widens the U.S./ Europe rift and allows for only a limited return of Russian piped gas and LNG into the market.
More war would mean more sanctions on Russian gas, Flowers said. A scenario where all parties sign a mutually acceptable peace agreement looks least likely at this stage, but it would "open the door to material volumes of Russian gas into Europe."
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