This week, S&P Global Commodity Insights editors are monitoring the decline in Russia’s seaborne crude exports and the simultaneous increase in oil product exports. Rotterdam’s record-breaking LNG bunker sales are indicative of the growing demand for LNG-capable ships. Mexico’s petrochemical chemical industry and China’s urea exports are also in focus.
1. Russian crude exports at 12-month low, oil products exports rise
What’s happening? Russian seaborne crude exports slumped to a 12-month low in July amid thinning discounts for Moscow’s oil, improved compliance with OPEC+ output cuts, a recovery in domestic refining and a seasonal dip in demand from Indian refiners. Additionally, oil product exports rose 6% on the month, according to tanker tracking data, as Russian refineries mostly recovered from Ukrainian drone strikes absorbing more crude. Crude shipments from Russian ports averaged 3.19 million b/d in July, down 520,000 b/d from June led by a fall in cargoes of Urals crude from the Baltic port of Ust-Luga and Novorossiysk in the Black Sea, according to S&P Global Commodities at Sea.
What’s next? Despite efforts by Western countries to clamp down on a growing fleet of “shadow” tankers that bypass G7-led price cap on Moscow’s oil, discounts for Russia’s oil continue to shrink. Platts, part of S&P Global Commodity Insights, assessed Urals on a FOB Primorsk basis at a $11.95/b discount to Dated Brent on Aug. 5, the smallest discount since Feb. 23, 2022, the day before Russia’s invasion of Ukraine. Furthermore, Russia may experience further declines in crude exports as it aims to improve compliance with OPEC+ output targets.
2. Rotterdam LNG bunker sales hit record high in Q2
What’s happening? The Port of Rotterdam reported a significant increase in LNG sales as marine fuel in the second quarter reached a record high of 242,931 cu m, a jump from the previous record high of 215,247 cu m in Q1. Shipowners find LNG to be an economical choice due to discounts compared to competing fuels such as 0.5%S fuel — the prevalent bunker type. Since December 2023, LNG bunker fuel in Rotterdam has consistently been priced at a discount to 0.5%S fuel.
What’s next? The market is expected to see continued demand for LNG-capable ships, delivered from shipyards. According to trade body SEA-LNG, 109 LNG-capable ships have been ordered in the first half with over 550 LNG currently in operation. This number is projected to double in 2027.
3. Mexico’s Pemex to revive petrochemical industry, venture into lithium in new growth era
What’s happening? Mexican President-elect Claudia Sheinbaum Pardo announced that Pemex will explore new sources of revenue, including the petrochemical industry and lithium mining. The goal is to revive Pemex’s petrochemical sector by utilizing local production of natural gas and condensates. Under President López Obrador’s administration, its fertilizer production grew by 97% to 1.5 million mt. In July, Pemex signed a $1.2 billion deal with infrastructure developer Mota-Engil for the construction of a fertilizer plant in the state of Veracruz.
What’s next? Mexico heavily relies on urea imports from Russia and Pemex is facing financial challenges with debt exceeding $100 billion. Sheinbaum Pardo, who will take office in October and her team are working on a comprehensive 10-year plan for the country’s energy industry, to be unveiled once she assumes her position.
Listen: Mexico’s energy future hinges on election outcome
4. China’s urea exports unlikely on the horizon
What’s happening? Domestic urea prices in Shandong, a province in China, have slightly firmed to Yuan 2,080-2,180/mt ex-works on Aug. 1, after gradually declining since July at Yuan 2,240/mt ex-works. China’s National Development and Reform Commission denied the possibility of easing the export control in August.
What’s next? It remains unclear whether China will be able to resume exports this year. Market sources believe there will be no more exports throughout the year. The decision on China’s urea exports would depend on the government’s priorities, which focus on maintaining stable domestic prices and ensuring an adequate supply for domestic consumption.
Read:
Urea Market Report
Reporting and analysis by Robert Perkins, Max Lin, Megan Gidea, Sheky Espejo, Qystina Dayinee