New base energy news 17 march 2020 issue no. 1324 senior editor eng. khaled alawadi -

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NewBase Energy News 17 March 2020 - Issue No. 1324 Senior Editor Eng. Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
Oil plunge sets off search for tanks, revives dormant Cushing
storage trade … Chance for fuel retailers to crasp this Golden $$
Reuters + Bloomberg + NewBase
Rates to store oil at one of the world’s biggest trading hubs are surging, as traders globally scramble
to secure space in tanks to cope with slumping demand from the coronavirus outbreak and a flood
of supply from the Saudi-Russia price war.
The need for a place to park all that surplus crude is breathing new life into the market at Cushing,
Oklahoma, the nation’s hub for trading of billions of dollars of crude a day and the town that bills
itself “the pipeline crossroads of the world.”
Analysts estimate the glut could reach more than 1 billion barrels. Some of the excess crude will be
absorbed by nations snapping up cheap oil for their strategic reserves, including India and the
United States, but that will only mop up some of the supply.
Storage rates in the Caribbean, which have been weak over the past couple of years, have also
strengthened over the past week, market sources said.
www.linkedin.com/in/khaled-al-awadi-38b995b

And oil majors have shown interest in storing oil offshore in tankers, shipping sources said, although
most vessels have already been chartered for transporting crude instead as freight rates surge.
“They can ask, but ship owners don’t want it,” one shipping source said.
Storage rates at Cushing, doubled over the past month, and were seen as high as about 50 cents
per barrel per month by Friday, two traders familiar with the matter said. Storage for about 540,000
barrels at Plains All American’s Cushing tanks for sublease was offered at 50 cents per barrel (cpb)
for a term of one year, one source said.
“We average about 2 deals per day. Last week we booked 60 deals,” said Ernie Barsamian, founder
and CEO of The Tank Tiger, a terminal storage clearinghouse based in Princeton, New Jersey.
The United States currently has more than 450 million barrels in crude storage, not including
strategic reserves. The drop in prices has sparked numerous storage inquiries, particularly at
Cushing, the delivery point for benchmark U.S. crude futures.
Nearly 38 million barrels are currently parked there, half the about 76 million barrels in capacity. The
rest of U.S. storage is at smaller tank farms or refining facilities. Inventories at Cushing rose more
than 640,000 barrels in the week through Friday, traders said, citing data from market intelligence
firm Genscape.
“Everyone and their mother is scrambling to fill up tankage,” one trader said.
EXPORT FALL SEEN
Once a barometer for the health of U.S. crude supply, Cushing’s market clout waned after
Washington lifted a ban on U.S. crude exports in late 2015 amid the shale oil boom.

Companies have since spent millions of dollars building infrastructure to facilitate trading and
storage at the country’s Gulf Coast ports.
But with a wave of Saudi and Russian oil set to hit, U.S. crude exports are expected to plunge by
about 1 million barrels per day (bpd) in April and May to about 2.5 million bpd, sources at the biggest
merchants in the country said on Friday.
Domestic demand has also plunged, with U.S. gasoline prices plummeting to a record low as travel
grinds to a halt due to the pandemic.
Storage at Cushing is held by large midstream companies including Plains All American (PAA.N),
Magellan Midstream (MMP.N)and Enbridge (ENB.TO). Magellan said Monday that it is seeing
increased interest for long-term crude storage in Cushing.
Plains did not respond to a request for comment and Enbridge declined to discuss utilization rates
at Cushing, saying it contained customer-specific information.
The crude market is currently trading in what’s known as contango, where forward prices are higher
than immediate prices. That incentivizes traders to park barrels into storage in the hopes of selling
them for a profit later.
The spread between front-month U.S. crude for April delivery and those for delivery in 12 months
WTCLc1-WTCLc12 widened to the biggest discount in four years last week. The same spread for
Brent LCOc1-LCOc12 widened to the biggest discount in five years on Monday.
Barsamian said that as the spread widens, the cost for storage will as well. “The contango will begin
to feed on itself and get steeper, unless the Saudis and Russia pull an about face.”

Saudi Aramco Plans 2020 Spending Cut as Oil Plunges and Profit Slips
Bloomberg - Anthony Dipaola and Matthew Martin
Saudi Aramco is cutting planned spending this year, in the first sign that the oil-price war the
kingdom unleashed is hitting home.
Capital expenditure will be between $25 billion and $30 billion in 2020 and the spending plans for
next year and beyond are being reviewed, Aramco said. The oil giant is lowering that range from
the planned $35 billion to $40 billion announced in its IPO prospectus, and compared with $32.8
billion in 2019.
“We have already taken steps to rationalize our planned 2020 capital spending,” Chief Executive
Officer Amin Nasser said. Given the impact of the coronavirus pandemic on economic growth and
demand, Aramco is adopting “a flexible approach to capital allocation,” he said.
The oil-price war led by Saudi Arabia and Russia threatens more pain for the company as producing
nations prepare to boost supply. Discounted pricing to markets already reeling from weak demand
and crude that lost roughly half its value since the beginning of the year threaten a further hit to
revenue.
The shares fell as much as 0.5% on Sunday, extending the decline this year to 18%. Aramco’s
market value has declined from a peak of over $2 trillion in December to about $1.5 trillion.
The coronavirus’ knock-out blow to oil use has overwhelmed OPEC’s initial optimism on demand
this year, with analysts now expecting a drop in consumption. The OPEC+ group’s failure on March
6 to agree on further cuts is only exacerbating a glut as buyers search for storage tanks and vessels.

Saudi Arabia, Russia and others intend to boost production once the current accord to lower output
expires in March. The kingdom pledged to supply 25% more oil in April than it produced last month,
and Wednesday ordered Aramco to boost output capacity by 1 million barrels a day.
Key 2019 numbers:
 Net income including minority interests: 330.7 billion riyals ($88 billion) vs 416.5 billion riyals
a year ago
 Revenue: 1.11 trillion riyals vs 1.19 trillion riyals
 Operating profit: 674.9 billion riyals vs 798.4 billion riyals
Oil prices fell last year even as Saudi Arabia trimmed output as part of efforts between OPEC and
other producers to rein in production. Drone and missile attacks on two of its biggest facilities in
September temporarily slashed production by more than half, but didn’t cause a big surge in prices.
Brent crude averaged $64.12 a barrel in 2019 compared with $71.67 the previous year. Saudi
production slipped to an average of 9.83 million barrels a day from 10.65 million in 2018, according
to data compiled by Bloomberg. Aramco restored output to pre-attack levels by early October.
Aramco’s 2018 net of $111 billion made it by far the world’s most profitable company, exceeding
the combined incomes of some of the world’s biggest companies including Apple Inc., Samsung
Electronics Co. and Alphabet Inc.

U.S. gasoline refining profits slump to 2008 levels amid
coronavirus fears…. Reuters
U.S. gasoline refining margins fell a whopping 95% on Monday - even briefly turning negative - with
the cost of gasoline plunging faster than crude oil in anticipation that the coronavirus will keep people
off the road and in their homes.
The coronavirus pandemic has infected 180,000 people worldwide and caused over 7,000 deaths,
prompting governments to order travel restrictions and business closures. U.S. gasoline demand is
plunging as businesses shut and state and local governments advise people to stay home.
U.S. gasoline refining margins settled at 28 cents per barrel on Monday, their lowest since
December 2008, another signal that economic activity appears to be contracting. “Oil prices have
been dropping hard enough. For product prices to outpace them signals a huge shift in demand
expectations,” said Matthew Smith, director of commodity research at ClipperData.
Refiners process crude oil into a number of products, chiefly motor gasoline, heating oil and diesel
fuel. Normally, gasoline margins rise as driving season approaches, and distillate margins - for
making heating oil and diesel - rise in the winter months.
The United States consumes about 9 million barrels per day of motor gasoline, but fuel demand is
now expected to fall by roughly 2 million to 2.5 million bpd in the next three to four weeks, said Per
Magnus Nysveen, senior partner at Oslo-based energy research firm Rystad Energy.
Congestion in major cities worldwide has been dropping sharply, according to TomTom, which
makes navigation technology. Headed into the evening rush hour on Monday, congestion in New
York City was down by 37% from last year’s average. In Chicago, it was down 24%.
Such declines have not yet shown up in U.S. official data. As of March 6, the four-week average for
motor gasoline supplied by refiners - a proxy for demand - was up 1.7% from the year-ago period,
according to U.S. Energy Department figures.
The margin to produce distillate products is at $14.95 a barrel, a relatively healthy margin. Heavy-
duty tractor-trailers use diesel, a sign that traders believe demand for shipped goods will be less
affected as people take deliveries at their homes.

Oil prices have plunged both on the virus and the unexpected eruption of a price war between Saudi
Arabia and Russia. U.S. crude futures have fallen more than 50% since the start of the year to
$28.70 a barrel. Gasoline futures have plummeted around 57% to nearly 69 cents a gallon.
The steep drop in margins means that refiners may need to cut processing or temporarily shut to
save money.
“This shows traders believe refiners could flood a shrinking market and sends them a strong signal
to cut runs as soon as possible to prevent further losses,” said Sandy Fielden, director of oil and
products research, at Morningstar in Austin, Texas.
Tracking the steep decline in U.S. margins, Northwestern European gasoline refining margins
dropped to around -$6.6 a barrel on Monday, their lowest since January 2009.

NewBase March 17-2020 Khaled Al Awadi
NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE
Oil prices sable at lows 30s as sharp falls draw bargain buyers
Reuters + NewBase
Oil rose more than $1 on Tuesday as bargain hunters emerged after recent sharp falls due to the
coronavirus pandemic and the price war between Saudi Arabia and Russia, but fears of a recession
still dragged on the market.
Brent crude LCOc1 was up by 0.07%, or 2 cents, to $30.07 a barrel by 10.26 GMT, after hitting a
high of $31.25. U.S. West Texas Intermediate (WTI) crude CLc1 rose 1.64%, or $0.47 to $29.17,
having come off a high of $30.21.
“Presumably, the market is getting supported by physical bargain hunters and short covering,” said
Stephen Innes, chief markets strategist at AxiCorp.
Oil price special
coverage

The United States has said it will take advantage of low oil prices to fill its Strategic Petroleum
Reserve (SPR), and other countries and companies are planning similar measures to fill storage
tanks.
“But those storage facilities are rapidly filling. If storage does fill, quashing that demand, oil prices
are sure to collapse further, and the global markets will then have to hope that the dispute between
Saudi Arabia and Russia is resolved before we reach that point of no return,” Innes said.
Amid heavy demand loss from the global spread of the virus that causes COVID-19, Saudi Arabia
and Russia started a price war after failing to agree to extend their pact to cut output to support the
market.
Saudi Aramco 2222.SE has said it would likely carry over its planned higher oil output for April into
May, and that it was “very comfortable” with an oil price of $30 a barrel.
“Much focus is also falling on the Russians and Saudis, with no expectations for either side to blink
unless oil collapses toward the $15 region... If we see oil falls below the $20 level, the Saudis may
decide to come back to the negotiating table, however maybe just with OPEC and not the Russians,”
said Edward Moya of Oanda.
Countries including the United States and Canada, and nations in Europe and Asia, in the meantime
are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined
products including gasoline and jet fuel.
Gasoline refining margins in the United States, the world’s largest consumer of the motor fuel,
plunged around 95% on Monday, briefly turning negative, as people stayed off the roads.
U.S. President Donald Trump on Monday said economic disruptions from the spread of the
coronavirus and measures taken against it could lead to a recession.
In Asia, margins for transportation fuels had also plunged after more countries imposed travel
restrictions and curbed domestic movement as part of measures to slow the spread of the
coronavirus.
Chinese Oil Refiner Says No to Crude Oil From Russia’s Rosneft
The trading arm of a Chinese state-owned refiner is turning away crude from Russian energy
giant Rosneft PJSC, the parent of a unit hit by U.S. sanctions.
Sinochem International Oil (Singapore) on Monday sought crude for May-to-June delivery, company
documentation seen by Bloomberg shows. While Sinochem didn’t say why it had excluded Rosneft
Oil Co. from the tender, it specifies that supplies from the Russian company, plus its subsidiaries
and affiliates, will not be accepted. The Singapore unit is procuring barrels for Quanzhou refinery in
eastern China, operated by its parent Sinochem Group.
Sinochem’s press office couldn’t immediately comment on the matter when contacted via email.
Rosneft wasn’t immediately available to comment.
The Chinese refiner is going a step further than most of its rivals by avoiding dealings with Russia’s
largest oil producer, even though such trades aren’t prohibited. U.S. President Donald Trump’s
measures targeted a Rosneft unit called Rosneft Trading SA, alleging support of Venezuelan leader
Nicolas Maduro and helping to export Venezuelan crude.
There have been other instances where U.S. sanctions have targeted a unit of a company, only for
the parent to become embroiled. Late last year, Cosco Dalian, part of Chinese shipping giant China
COSCO Shipping Corp. was targeted. For a while, traders stopped booking other COSCO ships.

In the tender document, Sinochem also specified that it wouldn’t accept cargoes from any other
U.S.-sanctioned countries such as Iran, Syria and Venezuela. Nor will it buy from Kurdistan, where
Rosneft has commercial interests.
In the past, Rosneft has said the U.S. sanctions are illegal, that its operations in Venezuela are
commercial, not political, and that other international companies, including American ones, operate
there.
Demand Collapse Pins Oil Near $30 Amid Deepening Global Rout
Bloomberg - James Thornhill and Saket Sundria
Oil clawed back some losses after collapsing below $30 a barrel as the shut down of swathes of the
world’s economy triggers a meltdown in global fuel demand and the most volatile market on record.
Futures in New York recovered some ground after falling 9.6% to the lowest level in four years on
Monday as a gauge of volatility jumped to the highest in data going back to 2007. Governments are
restricting the movement of people by closing their borders and banning travel, hammering fuel
consumption and leading to the biggest daily drop in U.S. gasoline prices since 2005.
As airlines cut the number of flights daily and a growing number of countries go into lock-down, oil
markets are facing for an unprecedented glut. The slump in demand is coinciding with a supply flood
as Saudi Arabia and Russia look to boost production as they engage in a price war for market share.
New York futures lost 23% last week, the most since December 2008.
“The quarantine measures mean that global fuel demand is going to be hit hard, and that comes on
top of a supply shock,” said Vivek Dhar, a Melbourne-based analyst at Commonwealth Bank of
Australia. “That timing has just been the worst case scenario for oil.”
See also: Chinese Oil Refiner Says No to Crude Oil From Russia’s Rosneft

The turmoil in oil is being played out across financial markets, with Wall Street stocks suffering their
biggest plunge since 1987 on Monday after President Donald Trump warned of a possible
recession, with economic disruption from the coronavirus potentially extending into summer. U.S.
equity futures advanced on Tuesday while stock markets in Asia were mixed.
Leaders of the Group of Seven said they will do “whatever is necessary” to ensure a globally
coordinated response to the coronavirus pandemic and its economic fallout. Trump markedly
changed his tone on the outbreak and said Americans should avoid gathering in groups of more
than 10 people, while Canada closed its borders to most foreigners. France said it may further
tighten a national lock-down, while Germany partially closed its borders with five neighboring
countries.
West Texas Intermediate for April delivery added 95 cents, or 3.3%, to $29.65 a barrel on the New
York Mercantile Exchange as of 10:10 a.m. in Singapore after falling to $28.70 on Monday. Brent
crude for May settlement climbed 52 cents to $30.57 on ICE Futures Europe exchange. The
contract dropped 11.2% on Monday.
The spectacular plunge in prices hasn’t deterred Saudi Arabia from pumping historic levels of oil.
State-run Saudi Aramco plans to produce at its maximum capacity of 12 million barrels a day in
April, Chief Executive Officer Amin Nasser told investors, adding, “I doubt if May will be any
different.”
The country is showing no sign of backing down in its price war with Russia, with Aramco saying it’s
“very comfortable” with oil prices below $30 a barrel.
The collapse in demand has brought gasoline prices in the U.S. close to parity with WTI, briefly
dipping below the U.S. benchmark for the first time since 2009. As recently as March 10, Nymex
gasoline futures traded at a premium of almost $18 a barrel to WTI.

Gasoline tumbled by 23% on Monday, the biggest drop since 2005. It was up 11% at 76.60 cents a
gallon in light volumes on Tuesday.
“There is no constructive bullish case to be made for oil right now,” said Jeffrey Halley, a senior
market analyst at Oanda. “I think Brent will settle between $25-$30 a barrel range from here.”
Morgan Stanley cuts oil price outlook as oversupply worries loom
Morgan Stanley on Monday lowered its oil price forecasts further, citing the collapse of the OPEC+
deal that has stoked concerns of oversupply in a market battling sluggish global demand.
“Despite the sharp decline in oil prices, it is unlikely that OPEC+ countries will return to the
negotiation table anytime soon ... We expect that much of the announced volumes will indeed come
to the market, at least for a short period,” the bank said in a note.
Three years of cooperation between OPEC, Russia and other producers, known as OPEC+, ended
in acrimony on March 6 after Moscow refused to support deeper cuts to cope with the outbreak of
coronavirus. OPEC responded by removing all limits on its own production.
A planned technical meeting between the Organization of the Petroleum Exporting Countries and
non-OPEC countries on Wednesday in Vienna has been called off.
Morgan Stanley lowered its oil price forecasts for the second time this month, reducing its second-
quarter Brent outlook to $30 per barrel from $35.
“Temporary sell-offs to even lower levels are possible, if not likely,” the bank said.
It sees oversupply reaching 3.5 million barrels per day this year.
With the virus continuing to spread, demand for transportation fuel is unlikely to rebound
meaningfully in coming months, Morgan Stanley added.
Oil prices fell below $30 a barrel on Monday as the pandemic exacerbated fears that government
lockdowns to contain the spread of the disease would spark a global recession.

NewBase Special Coverage
The Energy world - Special 02- March-2020
OPEC shift to maintain market share will cause global
inventory increases and lower prices
Source: U.S. EIA, Short-Term Energy Outlook, March 2020
Markets for oil, as well as other commodities and equities, have experienced significant volatility
and price declines since the final week in February amid concerns over the economic effects of the
2019 novel coronavirus disease (COVID-19).
More recently, markets fell after the Organization of the Petroleum Exporting Countries (OPEC) and
partners failed to reach an agreement to continue crude oil production cuts. The U.S. Energy
Information Administration (EIA) has focused on several underlying assumptions about OPEC’s
posture regarding targeted production output and what effect it may have on global oil balances and
prices.
In its March Short-Term Energy Outlook (STEO), EIA forecasts Brent crude oil prices will average
$43 per barrel (b) in 2020, down from an average of $64/b in 2019. For 2020, EIA expects prices
will average $37/b during the second quarter and rise to $43/b during the second half of the year.
EIA forecasts that Brent prices will rise to an average of $55/b in 2021 as a result of declining global
oil inventories putting upward pressure on prices. EIA expects that global liquid fuels inventories will
grow by an average of 1.0 million barrels per day (b/d) in 2020 after falling by about 0.1 million b/d

in 2019 and that inventory builds will be largest in the first half of 2020, rising at a rate of 1.7 million
b/d.
After the March 6 meeting, OPEC and partner countries announced that they did not agree to extend
production cuts beyond those currently expiring March 31, 2020. EIA no longer expects active
production management to target balanced global oil markets among OPEC members and partner
countries. These countries have been limiting production under the Declaration of Cooperation,
initially agreed to in December 2016.
Because of the outcome of the March 6 OPEC meeting, EIA increased its OPEC liquid fuels
production forecast by 150,000 b/d in 2020 and by 200,000 b/d in 2021 from the February STEO.
EIA expects OPEC crude oil production will average 29.1 million b/d in the second and third quarters
of 2020, up from 28.7 million b/d in the first quarter.
Although this growth is a relatively small increase in a market where global production exceeded
100 million b/d in 2019, this production level represents a marked change from recent production
targets that were focused on keeping global inventories near the five-year (2015–19) average.
OPEC’s current strategy appears to be focused on regaining market share by elevating production
levels to the point that the resulting depressed prices limit production growth from other market
participants, particularly non-OPEC producers.
In addition, the increase in OPEC production is significant in light of the downward revisions to the
outlook for global demand resulting from COVID-19.
In recent STEO forecasts, EIA adjusted the outlook for OPEC total liquids supply based on changes
in demand and non-OPEC supply to maintain global inventories that were at or near the five-year
average. In the March STEO, EIA no longer assumes that OPEC production levels will follow such
a pattern and now expects significant inventory builds through 2020.
One way to look at these related patterns is to compare the call on OPEC with OPEC crude oil
production. The call on OPEC represents the OPEC crude oil production level that would balance
the global market. It is calculated as total global liquid fuels consumption minus non-OPEC supply
minus OPEC other liquids production.

When OPEC output exceeds the call on OPEC, global inventories increase, much like in 2014
through the end of 2016. From 2017 through 2019, the call on OPEC steadily declined as non-
OPEC production, primarily in the United States, grew significantly. EIA forecasts OPEC production
will exceed the call on OPEC in 2020—largely because of the significant decline in global liquids
demand—contributing to inventory builds.

Production levels targeted by OPEC amid low oil demand are very uncertain, and realized levels
will have a significant effect on crude oil prices. Because OPEC surplus capacity is more than 2.0
million b/d, member countries could produce far more than EIA currently forecasts, which would
lead to larger inventory builds and put downward pressure on prices.
On the other hand, higher-than-expected crude oil production outages could reduce supply and put
upward pressure on prices. Crude oil production in Libya has declined by 1.0 million b/d since
December 2019, and EIA estimates February production in Libya averaged 150,000 b/d. Total
unplanned OPEC production outages averaged 3.84 million b/d in February and included additional
outages in Iran, Kuwait, Nigeria, and Saudi Arabia

NewBase For discussion or further details on the news below you may contact us on +971504822502, Dubai, UAE
The Editor :”Khaled Al Awadi” Your partner in Energy Services
NewBase energy news is produced daily (Sunday to Thursday) and
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Energy
Khaled Malallah Al Awadi,
Energy Consultant
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME member since 1995
Hawk Energy member 2010
www.linkedin.com/in/khaled-al-awadi-38b995b
Mobile: +971504822502
khdmohd@hawkenergy.net or khdmohd@hotmail.com
Khaled Al Awadi is a UAE National with a total of 28 years of experience in
the Oil & Gas sector. Currently working as Technical Affairs Specialist for
Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy
consultation for the GCC area via Hawk Energy Service as a UAE operations
base , Most of the experience were spent as the Gas Operations Manager in
Emarat , responsible for Emarat Gas Pipeline Network Facility & gas
compressor stations . Through the years, he has developed great experiences
in the designing & constructing of gas pipelines, gas metering & regulating
stations and in the engineering of supply routes. Many years were spent
drafting, & compiling gas transportation, operation & maintenance agreements along with many
MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences
held in the UAE and Energy program broadcasted internationally, via GCC leading satellite
Channels.
NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE
NewBase 2020 K. Al Awadi

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New base energy news 17 march 2020 issue no. 1324 senior editor eng. khaled alawadi -