Oil prices bottoming as Chinese inventories begin to draw down ??? Container Ports Ports Facing Worsening Congestion in May 2024 ?? Danger Ahead???
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Oil prices bottoming as Chinese inventories begin to draw down - Kpler
The first signs of inventory draws are starting to appear onshore in China, a crucial prerequisite for the market turnaround we have been anticipating for the summer. While our data is still preliminary, the combination of restored Chinese refining capacity and rising Dubai prices will incentivise more draws in the weeks ahead.
Two months ago, we accurately predicted the peak in oil prices. Now, we seem to be facing the opposite scenario. Market sentiment has turned increasingly bearish, just as the physical market is starting to show signs of regaining strength. A major indicator of this shift is the state of oil inventories in China. According to our data, storage at Chinese floating roof tanks decreased by 20 Mbbls in late May, following a build of 40 Mbbls between April and mid-May. This drawdown has primarily occurred at commercial storage facilities rather than refineries, which are just completing their heavy maintenance period. Floating storage in Eastern Asia and in Singapore/Malaysia has also decreased from 16.5 Mbbls in mid-May to 10.5 Mbbls.
However, weak refining margins across all continents and a not-so-encouraging outlook for products cracks even during the summer suggest that oil prices are unlikely to rebound significantly. While Brent crude prices could rise from the current $80/bbl to the mid-$80s, a further increase would likely require another supply-side shock.
Despite the weak refining margins – particularly in the gasoline sector, where cracks have fallen to seven-month lows in Singapore despite Chinese gasoline inventories being 19% below their seasonal average – crude intake is expected to rise in the summer. This increase could exceed expectations if the declining trend in global inventories continues. Specifically, we anticipate Asian refinery runs to jump by 1.67 Mbd between now and May, with half of this increase concentrated in China.
Chinese onshore oil inventories, Mbbls
Container Port Congestion Statistics: May 2024 - Beacon
Port congestion is calculated as the sum of average vessel anchor and berth times during the specified time period. Download your free copy of our container port congestion report for all the data.
Zhoushan reverses a trend of improvement over H1 2024 with a major jump in congestion from an average of 4.6 days in April to 8.7 days in May. Despite remaining heavily congested, Durban saw some improvement month over month, reducing average congestion by 10 hours. Jebel Ali moves up to third from seventh last month in our port congestion index following an increase in combined anchor and berth times of 21 hours. Congestion levels in Vancouver and Chittagong remain relatively unchanged.
Ports Experiencing Reduced Congestion in May 2024
Congestion relief in St. Petersburg, Balboa and Gioia Tauro was attributable to a combination of reduced anchor and berth times. While Tanjung Priok and Savannah also reported congestion relief, this was driven solely by a reduction in anchor times, with both ports cutting 12 hours of anchor time while berth times increased slightly.
Ports Facing Worsening Congestion in May 2024
Despite reporting reduced average anchor time, congestion at Zhoushan ballooned due to an almost doubling of the average berth time. Increased congestion levels in Charleston, Jebel Ali, Lomé and Manila were almost entirely attributable to growing anchor times.
Danger Ahead – POTEN & PARTNERS
We are in June and that means, that the Atlantic hurricane season, which runs from June 1st to November 30th, has officially started. On May 23, the National Oceanic and Atmospheric Administration (NOAA) announced their 2024 Atlantic hurricane season outlook and they expected it to be the most active one America has ever experienced.
According to the NOAA, there is an 85% chance of an above normal season. They call for 17 to 25 named storms, of which 8 to 13 are forecast to become hurricanes and 4 to 7 major hurricanes (storms with winds of more than 110 miles per hour). To put that in perspective, during the 30-year period between 1991 and 2020, the average was 14 named storms and three major hurricanes. In this Tanker Opinion we discuss how hurricanes can have a major impact on the tanker market, both directly and indirectly. There are two main reasons for the increased hurricane risk this year.
First, last month sea-surface temperatures in the North Atlantic were warmer than at any time on record in May. They were at levels usually only reached in August. The temperatures are higher than in 2005, the year when a record 15 hurricanes were formed, including the infamous Katrina and Rita, which devastated the U.S. Gulf coast and claimed 1,800 lives.
The second reason is that the weather patterns in the Pacific are expected to switch from El Ni?o to La Ni?a during peak hurricane season. La Ni?a tends to decrease wind shear in the tropical Atlantic, making it easier for storms to form, grow and persist there.
The extent of the damage and disruption caused by a major hurricane, depends very much on the location (where it makes landfall) and the strength of the associated winds. In September 2005, hurricane Katrina, followed closely by hurricane Rita, caused major damage to the U.S. oil and refining industry. It forced the evacuation of 482 production platforms and 79 drilling rigs in the Gulf of Mexico, shutting in 1.4 million barrels per day (Mb/d) of oil production. It also caused significant damage to refineries in Louisiana.
At one point, 1.8 million bpd of refining capacity (over 10% of total US capacity) was offline due to Katrina. Many refineries were offline for weeks or months due to flooding. The U.S. government released 11 million barrels of oil from the Strategic Petroleum Reserve, although that had limited impact because refining was the bottleneck rather than crude supply.
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