OPIS Headlines

January 19, 2017
Mexican Election Outcome in 2018 May Impact Energy Markets, Rules

Mexican energy reform is well underway, opening up opportunities for foreign companies to invest in building up the Mexican energy infrastructure and to trade fuel freely across the Mexican-U.S. border.

Market participants and industry watchers in Mexico are monitoring closely the ongoing buildup to the looming Mexican presidential election in 2018, which could have implications on the domestic energy industry and regulations. One leading candidate on the Mexican presidential election radar could present a risk to the fruits of the ongoing energy reform.

Andres Manuel Lopez Obrador is seen in Mexico as a nationalist and a follower of ex-President Lazaro Cardenas, who was credited for nationalizing the Mexican oil industry in 1938.

Sources in Mexico said that Lopez Obrador, an ex-mayor of Mexico City, is seen as a leading candidate for the 2018 presidential election, and he has gained some momentum in recent months following the election of President-elect Donald Trump in the U.S. Both Lopez Obrador and Trump are seen as anti-establishment in the political circles and are nationalists.

"If Lopez Obrador comes into (Mexican presidential) office, there is a chance that he may try to nationalize energy assets in Mexico again," a source said. In 1938, the national oil and gas company in Mexico, Pemex, was founded, and Mexico expropriated all reserves, facilities and foreign oil companies in Mexico.

The source was responding to a query from OPIS about the possibility of the Mexican government taking back control of domestic fuel pricing down the road in an event of sharp price volatility, and heightened social and political pressure.

However, some sources played down the potential impact of a pullback on energy reform in the future.

"There is a risk (that nationalization) could happen, but it is unlikely," a second source said. "Everything is easier said than done. A president would need to secure 66% of the votes to change the constitution, which will not happen."

Lopez Obrador had run unsuccessfully for the 2006 and 2012 presidential elections.

Meanwhile, President Enrique Pena Nieto is facing plunging approval ratings following the sharp fuel price hike in early January. The fuel price increase, coupled with the weakening peso against the greenback, has sparked concerns of rising inflation. Some areas in Mexico are continuing to face protests against the fuel price hikes.

Mexico is scheduled to implement free-floating fuel prices across the country in a staggered timetable in 2017. This would free Mexico from financial burdens stemming from fuel price subsidies. Some sources said that the country is going through some short-term pains but the reform will be a long-term gain for Mexico.

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January 12, 2017
Valero, GAC Sign Three-Year U.K. Oil Terminal Deal

Valero Logistics and marine service provider GAC U.K. have signed a three-year oil terminal deal at the U.K. ports of Cardiff and Plymouth.

The two companies will manage the discharge of up to 14 million metric tons of refined oil products from around 180 tankers each year at the ports of Cardiff and Plymouth starting in February. GAC will also extend its operation services for Valero to Avonmouth in the U.K. from April onward.

GAC UK will provide secure manning of berths, ship/shore safety checks and connecting shore cargo lines to vessel manifolds. GAC will manage cargo sampling from vessel tanks before discharge, from shore-lines during the operation, and from the trucks.

GAC UK won the contract to support Royal Dutch Shell's shipping operations at Scotland's Braefoot Bay that started in November last year.

Become a better fuel buyer without ever leaving your desk – sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started. Also available en español.


January 10, 2017
G.E. Warren Serves Notice to West Coast Products Market

George E. Warren (GEW), a commercial supplier, blender and wholesale distributor of refined products in the U.S., has made a surprising move in the West Coast oil products terminaling market, showing aspirations of possibly expanding its fuel supply operations to Los Angeles for the first time.

In early January, GEW has taken over one 150,000-bbl oil products storage tank at Kinder Morgan terminal in Carson. This represents GEW's first notice of its presence in the West Coast market.

GEW has been predominantly a player in the New York Harbor and Gulf Coast products market until now. Headquartered in Vero Beach, Fla., GEW has existing fuel supply and blending operations in the Northeast and Gulf Coast. GEW is one of the largest bulk products blenders and suppliers in the New York Harbor.

It is unclear so far what are the true intentions of GEW in the Southern California products market.

A GEW spokesman in Florida declined to comment on the company's operations on the West Coast.

The blending capability of GEW with one proprietary storage tank at Carson is limited, unless GEW secures more tanks at that same location later or collaborates with a joint-venture partner to blend products in Los Angeles. With only one storage tank, a player would only possibly store finished product and not a blendstock.

GEW could also bring imports or supplies from other parts of the U.S., but it would be for partial cargo size due to the size of one tank.

It is also possible that GEW could have a supply exchange deal with another U.S. fuel distributor. This would allow GEW to supply its partner fuel in Los Angeles in exchange for supplies in other markets.

Some players said that GEW is not selling oil products at the racks in Carson so far, but this could change later.

It is noted that the West Coast is a regular exporter of oil products to Mexico, Canada and South America. This could be an attractive option for GEW which has aspired to expand its international market presence.

While GEW may be entering the West Coast market, OPIS reported last Friday that the West Coast saw an exodus of gasoline traders. Two traders had retired late last year, and one resigned last week. A fourth will leave in February. The smaller number of traders is expected to cut already-thin trading liquidity and increase price volatility.

The West Coast has become an increasingly niche market, with refiners dominating the market place amid a lack of arbitrage opportunities for gasoline and distillates imports. Some companies may want to connect the dots across the country, but it is noted that the West Coast has little synergy with other U.S. regional markets due to high freight costs for Jones Act ships.

Some new players have entered the West Coast markets in the past several years by hiring existing West Coast traders from other companies. Experience and know-how could go a long way in a niche market like the West Coast.

It is unclear if GEW has hired or appointed a West Coast trader for the new operations in Los Angeles.

In 2015, GEW appointed Paul Hawkins as a managing director. He was to support GEW's expansion into international markets and complement the firm's established position as a trader, blender and logistics solutions provider. GEW was to focus on the domestic and export gasoline markets, particularly Latin America, the Caribbean and West Africa.

In 2014, GE Warren had returned to the Gulf Coast gasoline blending market after a long hiatus of three and half years. GEW operates the Gulf Coast blending operation out of Kinder Morgan in Pasadena and Galena Park.

Pat DePalma, Eugene Astrakan and Jonathan Kaye, previously with Lukoil, head up the Gulf Coast blending operation at GEW. DePalma was in charge of the U.S. naphtha trading desk at Lukoil, and Astrakan managed the Ecuador gasoline term supply contract as well as MTBE supplies to Venezuela.

In the past few years, U.S. domestic oil production has flourished, helping to boost refining margins and turn the U.S. into a net oil products exporter.

Although gasoline export volume is significantly lower than distillates, the U.S. light distillates sales to the international markets are continuing to grow amid high refinery utilization rates. Mexico and Venezuela are showing insatiable demand for U.S. products due to domestic refinery issues.

GEW was established in 1908 and has always been in the energy distribution business. In the early years, the company's main products were coal and heating oil, which were distributed throughout the Pennsylvania and New England areas.

In the 1970s, the company divested its coal business and now focuses exclusively on refined petroleum products.

GEW distributes product by pipeline throughout the Midcontinent pipeline system and by barge and vessel from facilities in the Gulf Coast and New York Harbor regions. The company is a shipper on the Buckeye, Colonial, Magellan, Nustar and Explorer pipelines.

Become a better fuel buyer without ever leaving your desk – sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started. Also available en español.


January 5, 2017
U.S. Gulf Coast Spots Continue to Rise ahead of EIA Data

Both gasoline and distillate prices were on the rise again Thursday morning in the U.S. Gulf Coast market thanks to light basis strength and little changed futures ahead of this morning's Energy Information Administration (EIA) report.

Gasoline trading was again thin today, with market players still having through the end of Monday's session to book their currently prompt Cycle 2 needs. That long gap did make for sluggish trading in the last 36 hours, but action did have diffs moving up. There are export opportunities to move fuel to Mexico now with the recent deregulation of their market from their state-run oil company, and sources have said material feels "tight" -- especially with winter turnarounds just around the corner.

Prompt CBOB was heard at 2.25cts below futures, but sellers moved down a bit afterwards to 2.50cts under the Merc. Even with the slight intraday drop, diffs were still up more than a penny from yesterday's mean. That was enough to overwhelm the small futures decline, and prices picked up just over a penny to near $1.62/gal. That's slowly moving back up, but still has a few pennies to go to match last week's year-and-a-half peak of over $1.65/gal.

Conventional gasoline was heading higher too. Cycle 2 material was last gauged around 2.50cts ahead of the February Merc, picking up a penny from yesterday's mean diff. Like CBOB, that outweighed the futures losses and prices picked up about 90pts to just under $1.67/gal. Also similar to CBOB, prices have been moving forward over the last few sessions but still need a little more push to breach last week's $1.70-plus levels that harkened back to the summer of 2015.

RBOB again was very quiet, keeping to the relational values to CBOB. The 13.5- lb. RVP "F4" was a penny over CBOB while 15.0-lb. RVP "F5" only carried a 50pt premium to CBOB. Both products saw prices jump about a penny in tandem with futures, printing $1.63/gal and $1.6250/gal at presstime.

Colonial Pipeline Line 1 line space, which carries gasoline out of the Gulf Coast region along the Eastern Seaboard, was still moored to a 2ct discount to tariffs. There has been some pressure on line space lately with the surge in gasoline prices over the last few weeks, and there could be more pressure today if gasoline prices continue to rise.

Like with gasoline, Gulf Coast distillate spot prices were also stepping higher early Thursday.

Ultra-low-sulfur diesel moved to Cycle 3 last night, and those newly prompt barrels were last discussed around 6.65cts beneath the NYMEX February ULSD futures contract, narrowing spot discounts by 20pts compared to yesterday's closing mean differential. Working alongside NYMEX buying, implied prices increased by 69pts, to $1.6314/gal at last glance.

Prompt ultra-low-sulfur heating oil was last talked around an 8.50ct discount to ULSD, good for an implied price of $1.5464/gal at presstime.

High-sulfur diesel for Cycle 3 delivery schedules today, but that deadline had yet to have any impact on spot trade. Implied prices moved in harmony with futures, hiking to $1.5054/gal, a rise of 49pts at last look, as spot trading levels were flat with Wednesday's mean at a 19.25ct Merc discount.

Cycle 3 jet fuel was most recently heard bid at 16cts below February futures, lifting basis levels by 85pts versus yesterday's ending mean diff. That stronger bid compounded Merc gains, as implied prices advanced by 1.29cts, to $1.5424/gal at presstime.

Line space on Colonial Pipeline's Line 2 -- the main transport line for distillates -- was last gauged at 50pts above pipeline tariffs, flat with Thursday's mean.

Looking ahead, market watchers should note Colonial Pipeline has eliminated Cycle 4 for both gasoline and distillate shipping.

Become a better fuel buyer without ever leaving your desk – sign up now for the OPIS Basics of Fuel Buying eLearning course. Taught by 30+ year industry veteran Scott Berhang, this 11-module online training program will guide you through everything you need to know about purchasing physical fuel. Visit www.opisnet.com/events/fuel-buying-online.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started. Also available en español.


January 3, 2017
CFTC NGLs' Report Shows Butane Remains the Most Active Product

The weekly Natural Gas Liquids report from the Commodity Futures Trading Commission (CFTC) showed that normal butane maintained its status as the most active product.

This came when butane prices were surging, but the report was compiled before Dec. 23, when the product came off more than 13 cents from its highs. This week will provide a clearer picture as to whether those favoring the short side exerted their influence and drove prices down.

In its Commitments of Traders (COT) report for the week ended Dec. 27, the last report for 2016, Mt. Belvieu normal butane commercial long swaps added 1,937 positions to 35,241 and shorts rose 2,041 to 35,334. Speculative longs edged up 93 while shorts dipped six positions.

The commercial stake in Mt. Belvieu TET propane swaps on the long side slid 94 contracts to 123,357 and short positions dropped 392 to 130,540 positions. In the speculative or non-commercial sector, longs slipped 18 to 9,388 and shorts added 270 to 2,698. The Mt. Belvieu non-TET propane long positions gained 170 contracts to 34,761 and shorts climbed 235 to 35,814 contracts. Speculative longs rose 65 while shorts were unchanged.

For Conway propane, commercial positions saw longs add 912 to 16,768 positions and shorts rise 922 to 16,744. Speculative longs edged up 30 and shorts gained 20 positions.

Mt. Belvieu ethane commercial longs climbed 1,265 to 89,215 positions and shorts added 1,220 to 96,592. Speculative longs and shorts were unchanged.

In Mt. Belvieu natural gasoline swaps, commercial longs gained 158 to 14,105 contracts and shorts rose 182 to 16,223 positions. Speculative longs added 120 while shorts were unchanged.

Learn the fundamentals of the NGL/LPG industry from the comfort of your office – sign up now for the brand new OPIS NGL Supply & Market Basics eLearning course. Led by OPIS NGL experts Diane Miller and Jessica Nesterak, this 10-module online training program will guide you through the basics of the NGL supply chain. Visit www.opisnet.com/events/elearning/ngl-supply-market-basics.aspx or call our eLearning team toll-free at 888-301-2645 for more details and to get started.

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