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Oil market
Oil prices are cooling off after hitting their highest level since late 2014. Despite fears over a potential loss of some of Iran’s oil exports and the collapsing Venezuelan production, Brent is now trading just 75 USD on fears that OPEC will boost production. Rumor has it that the United States has quietly asked Saudi Arabia and other OPEC nations to raise oil production by 1MM bbl. Also, funds are unwinding their positions, exacerbating the move down. The WTI/Brent spread has widened again: The discount is now at 10 USD on pipeline capacity constraints in combination with soaring US shale production.
The crude curve is coming off as well, Brent expired in contango last month but is now showing some resilience on the new front spread, WTI Jul/Aug is now gradually moving lower again as well and is now shy of being flat with probably more room to the downside.
Fuel oil is strong, Jun-Dec is above 25 USD backwardation. Physical flows are lower and exports from ARA to Singapore are lower as well.
Distillates are still strong, inventories keep dropping both here and in the US but the curve is cooling off as demand will gradually start to weaken and supplies are picking up. Jun/Dec has moved lower from 12 USD to 4 USD backwardation in a week on a less tight outlook.
The Gasoline driving season is starting off on a weak note and inventories in the US continue to build. The curve is cooling off and the back-end has weakened quite a bit too.
Ethanol & Biodiesel
Lately we see a lot of activity in Ethanol and Biodiesel requests. We are gradually moving to 2020 where new regulations will come in play for the European Union, not just on the fuel oil (IMO2020) side but also for diesel and gasoline side. B10 and E10 are names that are becoming more relevant - B10 is a diesel grade which contains 10% biodiesel and E10 a gasoline grade with 10% fuel grade ethanol. As from 2020 the automotive industry in the European Union is obliged to use these types of grades at a minimum. A direct impact on the storage industry is already seen as regular distillate tanks are used for Biodiesel and even now and then in some parts of Europe the more sophisticated Class 1 tanks are being used for Biodiesel, which is in higher demand than gasoline storage and therefore higher storage fees are concluded than with gasoline contracts, which is a win for the storage operator. The storage fees for biodiesel vary a lot from the larger longer-term contracts which are in the range of distillates but for smaller, multimodal, heated tanks the prices can go up to chemical-like storage rates. For Ethanol storage the demand is not as high as for Biodiesel but we see an incline and notice that terminals who are not usually focused on storing Ethanol are considering converting their Class 1 tanks capable for storing fuel grade Ethanol. All in all, it looks like that changing regulations have a larger impact on the demand and prices for storage tanks than declining overall demand.
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