Charts: Soaring Russian Oil Imports Drag OPEC’s Market Share in India to Record Low

Source : Oil Price

Infographic: The World’s Biggest Oil Producers in 2023

Source : Visual Capitalist

Chart: Russia Diverts Oil Exports to India and China

Source : Statista

The World’s 280 million Electric Bikes and Mopeds Are Cutting Demand for Oil Far More than Electric Cars

Muhammad Rizwan Azhar and Waqas Uzair wrote . . . . . . . . .

We hop in the car to get groceries or drop kids at school. But while the car is convenient, these short trips add up in terms of emissions, pollution and petrol cost.

Close to half (44%) of all Australian commuter trips are by car – and under 10km. Of Perth’s 4.2 million daily car trips, 2.8 million are for distances of less than 2km.

This is common in wealthier countries. In the United States, a staggering 60% of all car trips cover less than 10km.

So what’s the best solution? You might think switching to an electric vehicle is the natural step. In fact, for short trips, an electric bike or moped might be better for you – and for the planet. That’s because these forms of transport – collectively known as electric micromobility – are cheaper to buy and run.

But it’s more than that – they are actually displacing four times as much demand for oil as all the world’s electric cars at present, due to their staggering uptake in China and other nations where mopeds are a common form of transport.

How can that be?

On the world’s roads last year, there were over 20 million electric vehicles and 1.3 million commercial EVs such as buses, delivery vans and trucks.

But these numbers of four or more wheel vehicles are wholly eclipsed by two- and three-wheelers. There were over 280 million electric mopeds, scooters, motorcycles and three-wheelers on the road last year. Their sheer popularity is already cutting demand for oil by a million barrels of oil a day – about 1% of the world’s total oil demand, according to estimates by Bloomberg New Energy Finance.

What about electric vehicles, you ask? After all, EVs have been heralded as a silver bullet for car emissions and air pollution in cities, as their tailpipe emissions are zero. If charged with renewable power, they get even greener.

But to see them as an inarguable good is an error. They are cleaner cars, but they are still cars, taking up space on the roads and requiring a lot of electricity to power them. Their batteries make them heavier than a traditional car, and draw heavily on the extraction of rare earth elements. While EVs are overall much greener than internal combustion engine cars, battery manufacture can undermine some of the gains.

On the plus side, petrol cars cost about A$0.14 per kilometre in fuel, or about $1,820 in fuel annually for the average car doing 12,000km. Maintenance averages at $910 a year, bringing the total to $2,730 for a petrol car.

By contrast, charging an EV would cost around $480 for that distance. Maintenance of $240 takes annual running costs to $720. So EVs are much cheaper to run. But they are expensive to buy.

What advantages do electric mopeds and bikes have?

The electric transport revolution is a great chance to rethink how we move through our cities – and whether we even need a car at all.

Cars, after all, often have only one occupant. You’re expending a lot of energy to transport yourself.

By contrast, electric mopeds and bikes use a lot less energy to transport one or two people. They’re also a lot cheaper to buy and run than electric cars.

If you commute on an e-bike 20km a day, five days a week, your charging cost would be about $20 – annually.

In Australia, electric bikes are very rapidly going from a hobbyist pursuit to a serious mode of urban transport. Over 100,000 e-bikes were sold here last year.

Of course, you’re unlikely to use electric mopeds or bikes to drive from Sydney to Melbourne. Their real value is in short-hop trips – the school run, the milk and bread run or even the commute – where they take roughly the same time or shorter than a car.

Smaller electric options like scooters and skateboards also offer a way to overcome the last kilometre problem which plagues public transport systems. This, in short, is the inconvenient distance between your home and the station or bus stop. Being able to cover this distance fast can be a game-changer for public transport.

If taken up, electric micromobility can cut urban emissions. A study of e-scooter riders in the United Kingdom found these trips produced up to 45% less carbon dioxide than alternatives.

US researchers estimate that if e-bike trips expanded to 11% of all vehicle trips, transport emissions would fall by about 7%.

As petrol prices increase and battery prices fall, the cheaper running costs of electric vehicles and even cheaper running costs of electric mopeds, bikes and scooters will keep eating away at the demand for oil.

Global oil demand is now projected to peak in 2028 at 105.7 million barrels per day – and then begin to fall, according to the International Energy Agency.

Electric vehicles will play a role in cutting oil demand. But it may well be that electric micromobility cuts demand faster, given how fast these cheaper, more plentiful options are being taken up.

What does this mean for me?

If you’re looking to go electric, it’s worth taking a close look at your transport needs. If you live in an outer suburb or regional towns, you may find the longer range and larger capacity of an electric car is better suited.

But for many people, it’s likely you’ll have a range of options. You might have one electric vehicle for longer trips, or group trips, as well as an e-bike for the school run or groceries.

Source : The Conversation

Chart: Which Country Consumes the Most Oil?

Source : Statista

Three New China-Russia-Iran and Iraq Agreements Confirm The New Oil Market Order

Simon Watkins wrote . . . . . . . . .

The last week or so has seen a flurry of major cooperation agreements – including in energy, security, and logistics – between various permutations of Iran, Iraq, Russia, and China. Like a very dark version of the old U.S. soap opera parody ‘Soap’ this real-life version is equally convoluted, albeit a lot less funny. Its key elements constitute a significant part of the new global oil market order, but the three most recent principal cooperation agreements will have immediate consequences for oil and gas flows around the world and their pricing.

The best place to start here is at the end point of what China wants in its grand scheme of things, as delineated in its multi-generational power-grab project, ‘One Belt, One Road’. What it wants is to turn the Middle East into a large oil and gas station by which it can fuel its economic growth to overtake the U.S. as the number one superpower by 2030. The three biggest oil and gas reserves in the region belong to Iran, Iraq, and Saudi Arabia, so it wants to control those to begin with. For Russia, which already has lots of oil and gas – over which China already has significant control – the objectives in the Middle East are more varied. One objective is to continue to exert influence in several countries that it regards as being key to maintaining some of its hold over the Former Soviet Union states. Another, more recent one, is to use this influence to bolster its position as a partner of note to China. As for the other countries in this soap opera –Iran, and Iraq, and now also more clearly, Saudi Arabia – they are in this new global alliance partly for the economic and political support from China (and to a lesser degree, Russia) and because their political systems are naturally much closer to the authoritarian regimes of China and Russia than they are to the democratic ones of the U.S. and its allies.

To the money shot, then, which was Iran and Iraq signing a new set of oil and gas agreements within the last two weeks. Iran has long exerted enormous influence over its neighbour directly and indirectly through its political, economic, and military proxies. Iraq was always pre-disposed to such cooperation in the energy sector, as the two countries share several of their biggest oil reservoirs. These include Azadegan (on the Iran side)/Majnoon (on the Iraq side), Azar/Badra, Yadavaran/Sinbad, Naft Shahr/Naft Khana, Dehloran/Abu Ghurab, West Paydar/Fakka and Arvand/South Abu Ghurab. This has long proven extremely useful to Iran in avoiding sanctions, as oil from its side of these reservoirs can easily be re-branded as non-sanctioned Iraqi oil and then shipped anywhere in the world. It has also proven a useful tool for Iraq through which it can extort billions of dollar from the U.S. by promising to stop the import of Iranian electricity and gas, only to renegue on those promises the second the money hits the downtown Baghdad bank accounts. The latest cooperation agreements strengthen all these ties between Iran-Iraq further.

Cue the other recent cooperation agreements aimed at making sure that whatever is Iran’s (including control over Iraq’s oil and gas reserves) it is also China’s and Russia’s. First up was Moscow, signing 10 new cooperation agreements with Iran for the oil sector alone on 18 May. According to a source who works closely with Iran’s Petroleum Ministry spoken to exclusively last week by OilPrice.com, the agreements comprise six memorandums of understanding, two contracts, one broader military cooperation roadmap, and another roadmap related to bilateral cooperation in the fields of industry, transfer of technology and oil recovery enhancement. In essence, these add up to a renewal and extension of the previous five-year and 10-year rolling agreements between Russia and Iran. These allow Russia (together with China in separate agreements, to be covered in a moment) to have its firms present in any oil and gas field in Iran that Moscow chooses. It also allows for the exchange of the most promising military officers between the two countries and for Russia to have full access to Iran’s airports and seaports. Additionally, it allows for continued cooperation in other military and security matters, including intelligence, equipment and technology sharing.

Russia’s man in Iran – Deputy Prime Minister and co-chair of the Permanent Russian-Iranian Commission on Trade and Economic Cooperation, Alexander Novak – stressed as well that the two countries are working on on banking interactions and using their national currencies in bilateral transactions. Further progress was also made on the North-South Transport Corridor (NSTC), with several agreements reached in the rail, road, maritime, and air transport sectors. Moscow is interested in developing the corridor all the way to India and beyond. Aside from boosting trade between Russia and Iran through the Caspian and Persian Gulf regions, these routes would also provide many opportunities for ‘dual purpose’ use – both civilian and military – of the airports and seaports.

Always looking to make a big entrance, China waited for the dust to settle before it too signed new cooperation agreements with Iran on 23 May. According to the Iran source spoken to by OilPrice.com, these agreements were simply nailing down some of the remaining details on financial, investment, and energy cooperation contained in the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ signed in March 2021. In the 25-Year Agreement, China is guaranteed oil and gas prices from Iran at least 30 percent lower than the relevant oil pricing benchmarks. However, since the Russian invasion of Ukraine in February 2022, China has been demanding an extra discount on Iranian oil to the 30 percent discount at which it can currently also buy Russian oil, according to the Iran source. “On average, the Chinese discount for Iranian crude oil to the international benchmark over the last 12 months has been around 44 percent,” he said. “But, it is even worse for Iran, as – from 11 November 2022 – China has been paying Iran in non-convertible Yuan, that is Yuan that can only be used inside China and/or spent buying Chinese goods,” he added. “Worse still is that whilst Yuan is the key instrument in payment, China is also using the currencies of Angola, Zambia and Kenya to pay Iran, and China is doing this as a means to induce Iran to buys goods from these countries so that these countries, in turn, can service their loans to China,” he concluded.

Source : Oil Price

---

Read also at Middle East Institute

The 25-year Iran-China agreement, endangering 2,500 years of heritage . . . . .

Infographic: How EV Adoption Will Impact Oil Consumption (2015-2025P)

See large image . . . . . .

Source : Visual Capitalist

Is Saudi Arabia Selling Oil to China for Gold?

Jan Nieuwenhuijs wrote . . . . . . . . .

Rumors are making rounds that Saudi Arabia is selling oil for yuan, which it converts into gold on the Shanghai International Gold Exchange (SGEI). Such a development would make sense as large parts of the world want to de-dollarize, but the renminbi is not suitable to be used as a reserve currency. China has a closed capital account and a weak rule of law. Not using the dollar could be done by using the renminbi as a trade currency and converting yuan revenue into gold on the SGEI. If the rumor is true, Saudi Arabia is buying 1 Kg bars as there is virtually no trading in 12.5 Kg bars on the SGEI. The benefit of 1 Kg bars is that they are more fitting for fully allocated trading.

The SGEI was set up in 2014 for foreigners to access gold trading on the Shanghai Gold Exchange Main Board in the Chinese domestic gold market and trading on the International Board in the Shanghai Free Trade Zone (SFTZ). Foreigner entities can’t load-in and load-out gold into and from Main Board certified vaults, but they can load-in and load-out gold into and from International Board certified vaults (and thus import into and export from the SFTZ).

The objective of the International Board is to facilitate “offshore” gold trading in renminbi in the SFTZ, which has almost no effect on China’s current account. This is comparable to offshore gold trading in US dollars in London (offshore dollars pricing internationally traded commodities). Through the SGEI China wants to increase the role of the renminbi in the global economy.

Overview from a few years ago on domestic and foreign clients’ SGE(I) trading privileges (source: Spot Trading Rules of the Shanghai Gold Exchange). I can’t find an update of this overview on the SGE(I) website, but I don’t expect the essence has changed. As you can see, the SGEI is the International Board and the SGE is the Main Board. Both exchanges fall under the same umbrella.

Investment possibilities for foreigners in Chinese financial assets are limited, but there are no restrictions to converting yuan into gold on the SGEI. I will write more on the mechanics of the Chinese gold market in a forthcoming article because this will be important in the coming years with respect to de-dollarization.

Last week, Christopher Wood from Jefferies mentioned in a note that the Saudis might be converting yuan into gold on the SGEI.

Source: Chris Wood from Jefferies, Greed and Fear, April 2023. H/t VBL Gold Fix and @LukeGromen.

If Saudi Arabia would convert yuan into gold on the SGEI, I would expect them to buy large bars weighing 400 ounces (12.5 Kg). Data from the SGE and SGEI, though, reveals there has practically been no trading in 12.5 Kg bars since the SGE was erected in October 2002.

Weekly Shanghai Gold Exchange trading volume (12.5 Kg contracts)

In the above chart volume is shown for exchange trading of 12.5 Kg contracts. Not shown, over-the-counter (OTC) trading in the 12.5 Kg contract on the International Board was zero in the past year. OTC trading in the 12.5 kg contract on the Main Board isn’t reported, which makes me think it’s not existent. All in all, large bar trading on the SGE(I) is extremely low.

Based on 12.5 Kg contract trading volume on the SGE(I) it’s hard to prove the rumor is true, which doesn’t mean it can’t be true. Saudi Arabia can also buy 1 Kg bars on the SGEI (and SGE, but it wouldn’t be able to export gold traded on the Main Board). Trading in 1 Kg contracts on the SGEI (iAu9999) and SGE (Au99.99) is not subdued. Although, there hasn’t been a significant uptick in trading of iAu9999 recently.

Weekly Shanghai Gold Exchange trading volume (1 Kg contracts)

Interestingly, according to my sources, in China’s foreign exchange market (CFETS) all gold traded is settled and cleared through the SGE and is fully allocated. One of the reasons for this is because the underlying assets are the SGE 1 Kg (9999 fine) and 3 Kg (9995) contracts. In Western foreign exchange markets, the underlying for gold trading is usually the LBMA Good Delivery bar that weighs approximately 400 ounces, which is more convenient to trade on an unallocated basis. As an example, exchanging exactly 20,000 ounces in London is easy on an unallocated basis, while it’s difficult to collect a batch of large bars that together weigh precisely 20,000 ounces. Perhaps Asia is shifting to an alternative benchmark and that’s why the Saudis are buying 1 Kg bars? Time will tell.

Xi Jinping, President of the People’s Republic of China, visited Saudi Arabia in December 2022 where he pledged to continue buying oil and gas from Gulf Cooperation Council (GCC) nations, and proposed these trades to be settled in yuan. From Xi:

China will continue to import large quantities of crude oil from GCC countries, expand imports of liquefied natural gas, strengthen cooperation in upstream oil and gas development, engineering services, storage, transportation and refining, and make full use of the Shanghai Petroleum and National Gas Exchange as a platform to carry out yuan settlement of oil and gas trade…

Shortly after, in January 2023, Saudi Arabia shared it’s open to discussions about trade in currencies other than the US dollar, according to the kingdom’s finance minister.

The Wall Street Journal wrote in March 2023 that, “Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan.”

These statements tell us there is a will in both countries to de-dollarize. Selling oil for yuan and then converting those into gold would be a logical step, given the renminbi’s shortcomings as a reserve currency. But I would like to see more evidence before confirming this trend.

A few months ago, a person familiar with the matter but who prefers to stay anonymous told me Saudi Arabia is covertly buying gold, though he refrained from saying where it was bought. Perhaps the Saudis are slowly working on a transition; de-dollarization isn’t done overnight.

Source : Gainesville Coin

Russia Overtakes Saudi Arabia To Become China’s Top Oil Supplier

Tsvetana Paraskova wrote . . . . . . . . .

Russia was the single largest crude oil supplier to China in January and February, overtaking Saudi Arabia which was the number-one supplier of oil to China last year, according to Chinese customs data cited by Reuters.

As China accelerated the buying of cheap Russian crude oil at discounts to international benchmarks, Chinese imports of crude from Russia jumped by 23.8% year over year to 1.94 million barrels per day (bpd) in January and February 2023, per the data reported by China’s General Administration of Customs.

China reports trade and economic data for January and February together to remove distortions around the fluctuating week-long Lunar New Year holiday.

In the first two months of this year, Russia beat Saudi Arabia to the top spot of Chinese crude oil suppliers as imports of Saudi crude fell by 4.7% to the equivalent of 1.72 million bpd, compared to 1.81 million bpd for the same period of 2022.

For the full-year 2022, Saudi Arabia was China’s top crude oil supplier – ahead of Russia – with shipments averaging 1.75 million bpd.

In recent months, China has been buying increased volumes of Russian crude as Moscow pivoted its sales to Asian markets following the Western embargoes and price caps on its crude oil and refined petroleum products.

The independent refiners in China, often referred to as the teapots, are importing a large portion of the Russian volumes, taking advantage of the deep discounts at which Russia sells its oil to customers.

Despite a sluggish start to 2023, China’s energy commodity imports are expected to rise later this year, while oil demand is set to rebound and lead global oil consumption to a record high, forecasters say.

China’s reopening is set to add momentum to global economic growth, OPEC said in its Monthly Oil Market Report (MOMR) this week, as it revised up its forecast for Chinese oil demand growth.

The International Energy Agency (IEA) said in its report last week that “Building stocks today will ease tensions as the market swings into deficit during the second half of the year when China is expected to drive world oil demand to record levels.”

Source : Oil Price

---

China’s Refinery Output in First Annual Decline Since At Least 2011

Chen Aizhu wrote . . . . . . . . .

China’s refinery throughput for the six months to June marked the first annual decline for the period since at least 2011, data showed on Friday, as strict COVID-19 restrictions and fuel export curbs dampened production.

For June, output was 54.94 million tonnes, according to data from the National Bureau of Statistics (NBS), bringing January-June processing volumes to 332.22 million tonnes or 13.4 million barrels per day (bpd), down 6% from a year earlier.

The production in June was equivalent to 13.37 million bpd – up 5% from 12.7 million bpd in May, but about 10% below the all-time high of 14.8 million bpd reached in June 2021.

The month-on-month rebound came as some independent refiners began raising production late in May, after steep cuts between February and April, in response to a moderate pick up in demand as some COVID-19 curbs were eased.

The return of Sinopec Corp’s Yangzi and Hainan refineries from overhauls also contributed to the higher processing, though the state major had to close a 320,000 bpd plant in Shanghai due to a fire on June 18.

China’s demand for refined oil products has been falling since March amid strict curbs to contain the spread of COVID, with gasoline and aviation fuel the worst hit.

But analysts expect throughput to pick up in the third quarter as Beijing tweaks its COVID policy and accelerates infrastructure spending to help revive a flagging economy. read more

China has already issued fuel export quotas earlier than expected, which could help refiners boost output. read more

The NBS data showed China’s crude oil production rose 3.6% on the year to 17.19 million tonnes last month, with daily output hitting an all-time high at 4.18 million bpd.

Production in the first six months rose 4% versus a year earlier to 102.88 million tonnes (4.15 million bpd), as national oil firms accelerated developing conventional and unconventional resources on Beijing’s call to boost domestic supply security.

Despite record production, the increase remains marginal as China imports nearly three quarters of its crude oil needs.

Growth in natural gas production, however, slowed to 0.4% in June from a year earlier to 17.3 billion cubic meters, but output year-to-date rose 4.9%.

(tonne = 7.3 barrels for crude oil)

Source : Reuters