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Insight Conversation: Hugo De Stoop, Euronav

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Hugo De Stoop, chief executive of one of the world’s largest crude tanker companies, Euronav, took an hour in September to answer questions from S&P Global Platts on supply and demand, floating storage, strategies to manage the coronavirus pandemic, the post-IMO 2020 landscape and the future of marine fuels. Here are the key takeaways.

The company, which operates shipping and storage of crude oil, benefited from soaring demand for oil storage at sea as buyers struggled to find storage space on land for surplus crude during a global economic slump caused by the coronavirus pandemic.

Would you say it has been a year of two halves for Euronav and the tanker industry?

Around 150 vessels out of a fleet of 820 were taken for storage at a time where, indeed, we had less cargo to be transported. We had such a massive potential for storage or other services outside the trading, I would say, that our rates went through the roof, and we have enjoyed a very good first quarter and a spectator second quarter. When you say it’s a year of two halves, I want to be a little bit more uplifting than that. I think it’s a year of three good quarters followed by one probably bad quarter, because the third quarter will also be — it’s not going to be as good as the first or second quarter, but nevertheless, it will benefit from a lot of fixtures that had been done in the second quarter and that are long enough to impact positively the third quarter. Where are we today? And that’s the reason why we believe the fourth quarter will be less interesting. We are at a time where there is still not the same consumption in the world of oil that we have pre-COVID.

What does the situation look like today?

We probably still have about 10 million b/d consumption lower than where we were. And at the same time, there is almost the same amount of ships and many of those that have been used for different types of jobs than transporting — namely storage and so on — are starting to come back. So we see an imbalance between the capacity to transport the oil and the number of cargoes we need to transport. We are hitting relatively low levels in freight rates, and we don’t see this situation improving before we get back the consumption that we had pre-COVID.

Hugo de Stoop, CEO of Euronav

What is your strategy in the tanker market?

It seems like a number of people, after making very good profits over the last three or four quarters, are now looking to sell their vessels. They will try to do so as early as possible in the declining part of the value cycle. And we, of course, are going to try to do that as late as possible in the declining part of the value cycle. What we have demonstrated in the past, we are always optimistic in terms of acquisition in the down part of the cycle. It’s also a time where people are a bit more reluctant to have the courage to invest in an asset that will not return immediately in terms of return on investment, but we know we are in cyclical markets, so we know that when we invest in the low part of the cycle, it usually pays off on the high side of the cycle.

At Euronav, you have said you always looked at growth, not in absolute terms, but in relative terms. Can you explain that?

There are different ways to grow the company. And one of the ways we could have grown the company over the years is by ordering many ships then growing our fleet by simply ordering new vessels. It is like in the airline industry, with what Ryanair or Easyjet and so on have done. They always order the latest generation of planes and then they grow the fleet and tend to outperform the incumbent because they have sort of old generation planes which would consume more. We always thought that, though running eco-ships has a benefit, it has a disadvantage that every time you add a ship to the market, you are deteriorating your supply at a time with the demand for your services is growing at a good pace, but we’re talking about 1% growth. So we have always favored buying second-hand assets or resale of contracts, other terms. People place an order, they can’t finance it or no longer want to deliver the ships, we buy it from them, usually at a discount. That’s how we have tried to grow the company. We don’t want to change that. We certainly don’t want to place an order at a time where we don’t know whether this existing technology and combustion engine using fuel oil are still going to be there in the next 20 years. And we are waiting for the next technology not only to be available, but to be future-proof that we’re not going to change several times technology before knowing exactly what to do. So we’re going to stick to our guns of buying second-hand vessels. We’re obviously going to try to buy modern vessels.

And how do you see supply and demand playing out in the coming years?

Every year, you have, roughly speaking, 5% of the ships that are too old so they go to the recycling yard or scrapyard. As long as you don’t renew that, your industry can reduce the size of supply by 5% every year, and we don’t believe that the oil demand will be reduced by 5% every year. We believe that we’re going to reach peak oil relatively soon, certainly in this decade. But from there on, the decline will be very gradual. The world will continue to need oil in order to transition to a world that can be less dependent on it. So our service will be needed for the long-term future. And at the same time, we are an industry that can adapt with decline rather than a growing market.

How has the industry managed the impact from the International Maritime Organization’s new sulfur cap in bunker fuels at 0.5% as of the start of 2020? What challenges have there been in the shift form high sulfur fuel oil to low sulfur marine fuels and has there been a winner?

The shipping industry has been involved with the change from high sulfur fuel oil or HSFO to low sulfur fuel oil or LSFO, and Euronav has said that’s a very good change, and has always supported that change. Having said that, it has led to many technical issues. A lot of people are still suffering from it. We may have suffered a little bit less because we were able to accumulate the product that we tested before putting into our engine. Normally, the way to look at it is that you go to the pump station with your ship and you are provided something that has a certificate of quality, but unfortunately, the certificate of quality does not really match the new fuel. It’s more a match of the old fuel, and then I will give you a percentage of the sulfur content. Today, LSFO is probably a winner in the sense that HSFO is forbidden unless you have a scrubber and the retrofitting of scrubbers is too expensive. People have had the demonstration. The spread between the two fuels [HSFO and LSFO] was expected to be a lot higher. At the end of the day, it seems to remain around $50/b. And if you look at the forward curve for the next three or four years, it’s going to stay there.

As we move to cleaner shipping fuels, both oil-based and beyond, do you see the emergence of stronger candidates to surpass LSFO or are we still in a guessing game?

I think that the winner is already decided, and that’s going to be hydrogen or ammonia. The only problem that we have is that we don’t know when it’s going to be ready and available. I’m speaking about an engine that is really capable of burning efficiently ammonia in a safe way because ammonia is a very toxic gas. But also the infrastructure. And at the moment, it will produce a certain amount of ammonia. It uses fertilizer, but the way it is produced is brown, meaning that we’re using energy to produce it, which is coming from fossil fuels. So it’s a little bit ridiculous to be proud to burn ammonia or hydrogen on board your vessel if you have produced it that way. There are obviously other ways to do it. If your electricity is green and has been made using renewable energy, then co-sharing. That’s what people will tend to. So I think that for the biggest vessels, ones on long voyages over 70, 80, 90 days — any where from 40 to 100 — it is the solution that we will have in the future. It’s going to take time to put the infrastructure in place, and it’s going to take time to finish the development of the engine, which I understand we are nearly there and we talk about two years’ time. That is the biggest question.

In the meantime, do we try to be even more efficient with the existing technology, and it seems that we have reached a limit, and maybe there’s another 5%, 7%, potentially 10% saving on the consumption and therefore, the emissions on the existing technology, but then we hit a brick wall. LNG is offering a solution for the transition, but the problem with LNG is that it is indeed lower in terms of CO2 emission, but it emits another greenhouse gas, not so much onboard the ships. That is methane, CH4, but very much the supply chain. It was mostly because of leakage. So you can address that, but it doesn’t seem that there is political will to address it at the moment. And so we, as an end-user, need to be honest with ourselves. If we swap from LSFO emitting CO2 to using LNG, but we see that from what they call the well to wake, from the production to the burning on board the vessel, damage to the environment is far greater than using CO2, even though on board the vessel, it’s lower. I think we should ask the right questions and not jump into this technology. The risk, of course, is a little bit like with the scrubber. Everybody jumped on the technology, not really knowing what the regulation would be or the spread between the two fuels. We can find ourselves in exactly the same situation. We all order LNG then, five years later, someone finally admits that it is polluting more because we have not been able to solve the leakage problem, and everybody goes back to square one.

What are your thoughts on floating storage and recent tanker flows?

This oil crisis has affected many people in many directions in terms of investment capacity. And so temporary storage and the fact that it can be used as a buffer is extremely interesting. We have seen the traders become a little more active than they were before. So it seems that we are getting further away from traditional oil and production, transporting, delivering to the refinery and then sending it to the consumer market. It seems that there are more trades, more sophisticated movement, more deviation of the ships even on a VLCC from time to time. It was rarely the case in the past, we were on route with the cargo towards the US Gulf and suddenly, we do a U-turn, and we do the delivery in China. I cannot remember seeing that. In the last six months, we’ve seen that on three of our own vessels. So I guess it is happening more and more.

I think that inevitably China will continue to grow its consumption and is one of the most important markets. I think that the US will try to limit its consumption, we will try to increase its production. And shale will probably come back when we are around $50/b or more, and it’s a very, very flexible type of production. Because even when people say, my God, there’s a number of companies going bankrupt because of the crisis, what does it mean? It only means restructuring the balance sheet, the production is not really affected. It stops. And then when it makes economic sense, it restarts because people have bought the rights to produce, they have bought all the assets that were stranded for a short period of time. It’s a very dynamic market, it seems to have many lives over and over again.

One of the biggest challenges for the shipping industry has been what you yourself have called “the scandal at sea” with difficulties operating under COVID-19 given the challenges around staffing vessels in various locations.

I think that we’ve been in a luxury position that went through the lockdown. We all live in our apartments or in our homes close to our families and made the best out of it. If we are thinking about our colleagues at sea then we can call it a humanitarian crisis. Because of travel restrictions, because of the diplomacy side, all the embassies have not been able to work fully staffed or issue visas. We have had a lot of people stranded at sea. They were forbidden to embark, forbidden to arrive. We have tried to do a lot. We’ve tried to use by all the relationships that we have try to move these. It’s working a little bit. It’s an absolute worldwide disaster and we will continue to fight.

Now I have to admit that shipping might be guilty of its own way of doing business. So the fact that we are always trying to be discreet, that we are always trying not to be regulated as an industry is back-firing. When we need the world to co-operate, when we need the world to pay attention to shipping, of course everybody is ignoring us simply because they don’t even know we exist. Despite the fact that we are so important for the world economy, for transporting 80% or 90% of all the goods and all the good things that we know about shipping. When you don’t have people that you vote for who are responsible for the crisis to do something about it, chances now are it’s going to be pretty low on their to-do list. And that is a pity but maybe a lesson to be learned as to what it would take to rebrand shipping as a noble good.



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Biden presidency could cut slow path to resumed Iran, Venezuela oil exports By Reuters

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© Reuters. FILE PHOTO: Democratic presidential candidate Joe Biden attends a Voter Mobilization Event in Cincinnati

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By Timothy Gardner, Marianna Parraga and Bozorgmehr Sharafedin

WASHINGTON/MEXICO CITY/LONDON (Reuters) – Democratic U.S. presidential hopeful Joe Biden’s promised return to diplomacy with OPEC-members Iran and Venezuela could cut a path for a return of their oil exports should he win, but not before many months at least of verifications, talks and deal-making.

The timing of a potential resumption of shipments is crucial to world oil markets: U.S. President Donald Trump’s unilateral sanctions on the two countries since taking office in 2017 have blocked up to 3 million barrels per day (bpd), or 3% of world supply. Iran has taken the biggest hit, with exports shrinking by around 2 million bpd to around 500,000 bpd.

The sanctions fit squarely with Trump’s policy of energy dominance to boost oil exports from the United States, which in 2018 became the world’s largest producer of crude.

A broad change in Iran policy would likely come first, but the soonest that full, sustainable oil exports could return from that country is about a year from now, said Richard Nephew, the lead sanctions expert on the U.S. team that helped land a deal with five other world powers on Tehran’s nuclear program in 2015.

Trump withdrew the United States from that deal in 2018 over the objections of European and Asian counterparts. He argued the deal did not address Iran’s ballistic missiles program and militancy across the Middle East.

Biden, who was vice president under President Barack Obama when the 2015 deal was struck, has said he wants to offer Tehran a path back to diplomacy. If Iran commits to not acquiring a nuclear weapon, he would rejoin the deal and strengthen it.

Nephew, now a research scholar at Columbia University’s Center on Global Energy Policy, said the requirement that Iran return to compliance with the 2015 deal would probably create implementation delays regardless of political agreements.

For example, Iran would need to downgrade its supplies of enriched uranium, which have built up during the Trump administration. Down-blending takes time, and verification by U.N. inspectors could take months.

As for negotiating a follow-on deal, that would take longer. A Biden administration would first be busy with the basic work of finalizing leadership teams and prioritizing policies, he said. Moreover, organizing multilateral negotiations on a new Iran deal would take additional time.

“This is going to wait,” Nephew said.

Bob McNally, a national security council energy expert under former President George W. Bush and president of the Rapidan Energy Group, predicted a return of Iran’s oil exports in the second half of next year.

European officials are eager for a renewed relationship with Iran if Biden wins, but have not attempted to engage with his campaign on the issue ahead of the election, fearing blowback from the Trump administration should Trump win, three EU diplomats said.

The Biden campaign did not comment on Iran about this story, but pointed to a Biden piece https://www.cnn.com/2020/09/13/opinions/smarter-way-to-be-tough-on-iran-joe-biden/index.html on CNN.com in September that said he would make an “unshakable commitment” to preventing Iran from acquiring a nuclear bomb.

Iran is not anticipating quick relief from sanctions that have slammed its economy, said the head of an oil trading firm in Tehran. A presidential election scheduled in Iran for June 18 would almost certainly delay talks on the issue.

“It will take a long time,” the source said.

Once the politics are resolved, large shipments could return quickly. Iran has accumulated about 100 million barrels of oil in floating storage and offshore tanks in countries like China, according to Iman Nasseri, managing director for the Middle East with consultancy FGE.

“Iranian oil can reach markets overnight,” he said. “Iran can rely on this export for months, while working to bring its production to previous levels.”

In the meantime, a Biden administration could be more lax in enforcing sanctions and award a new round of waivers, allowing a few countries to buy limited amounts of Iranian oil, said Ed Crooks, vice chairman, Americas for Wood Mackenzie. Trump axed the waiver program in 2019.

MURKIER PATH ON MADURO

Biden shares Trump’s desire to see the replacement of Venezuelan President Nicolas Maduro, a socialist whose 2018 election was widely seen as fraudulent.

Biden would likely retain sanctions against Venezuela’s state oil company PDVSA in the near-term, according to Leopoldo Martinez, a strategist for Biden’s campaign on the Latino vote.

But the strategy would probably shift substantially under Biden, with more input from allies and trading partners on a path forward.

“We are not seeking to dismantle the sanction policy, but to apply sanctions in an intelligent way, helped by a multilateral effort and with specific goals to be achieved, mainly free, fair and credible elections,” Martinez said.

Sanctions could theoretically be lifted once those goals are achieved.

Meanwhile, a Biden administration would also push for humanitarian relief in Venezuela, where much of the population has suffered under sanctions on oil, the lifeblood of its economy, Martinez said.

Rapidan, McNally’s group, said in a note that humanitarian relief could include an easing of U.S. sanctions on Venezuelan imports of fuels like gasoline, but not a break on sanctions on petroleum exports.

Even in the event of a change of leadership that resulted in a lifting of sanctions, a quick return of Venezuela’s exports beyond about 1 million bpd, up from about 500,000 bpd currently, is unlikely for six months to a year, Rapidan said.

A lack of investment has left equipment and fields in Venezuela, which holds the largest oil reserves in the world, in a state of disrepair.

“That one is a much more distant scenario than Iran,” Columbia’s Nephew said about Venezuela. “I’m not sure we have the same ability to call the shots there.”





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Monsanto loses final appeal over French farmer’s weedkiller accident By Reuters

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© Reuters. The logo of Monsanto is seen at the Monsanto factory in Peyrehorade

PARIS (Reuters) – Bayer’s (DE:) Monsanto (NYSE:) division on Wednesday lost a final appeal in a long-running French legal battle in which the crop chemical maker has been held liable for the accidental inhalation of a weedkiller by a crop farmer.

Monsanto had been trying to overturn a decision by an appeals court in 2019 that had found the company’s product safety information to have been inadequate in relation to the accident involving farmer Paul Francois in 2004.

France’s highest court rejected Monsanto’s latest appeal in a ruling published on Wednesday, opening the way for another court to decide on what damages should be awarded to Francois.

The farmer has argued that the fumes he inhaled from the weedkiller Lasso, a product that was subsequently withdrawn from the French market, caused neurological problems, including memory loss, fainting and headaches.

Bayer said in an emailed statement that it was reviewing the court ruling. Bayer also said in the statement that court-appointed medical experts had found previously that the incident did not cause the illnesses cited by Francois.

Crop protection products “do not present a risk to human health if they are used under the conditions of use defined in the context of their marketing authorisation,” Bayer said.

Anti-pesticide group Generations Futures, which has supported Francois in his court case, said it welcomed “this historic decision in which an agro-chemical multinational is at last found liable for the harm caused to this courageous farmer.”

Francois has previously sought damages of around 1 million euros ($1.2 million).

Bayer, which acquired Monsanto for $63 billion in 2018, has been facing a wave of litigation in the United States over allegations that Monsanto’s glyphosate-based weedkiller Roundup causes cancer.

Bayer, which argues Roundup is safe, is trying to settle the litigation through a proposed $11 billion payment.

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Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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How High Are Copper Prices Going ? – Growing Your Money

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How High Are Copper Prices Going ?

Copper Futures—Copper futures in the December contract is trading higher for the 3rd consecutive session up another 465 points at 3.1955 a pound hitting a 2 ½ year high continuing its bullish momentum as this trend is strong to the upside.

Copper prices are trading far above their 20 and 100 day moving average as this trend continues to accelerate on a weekly basis as the housing market in the United States is extremely strong therefore demand for copper at the present time remains high as I still do not believe a top has been formed.

At the current time I’m not involved, however I do believe the entire precious metal sector is headed higher as I am keeping a close eye on gold and silver as I see no reason to be short copper and if you are long a futures contract continue to place the stop loss under the 10-day low which stands at the 3.03 level as an exit strategy.

The next major level of resistance is between the 3.30 / 3.50 level as there is still room to run to the upside as the volatility could even increase exponentially as historically speaking copper can have crazy price swings on a daily basis.

TREND:HIGHER

CHART STRUCTURE: POOR

VOLATILITY: HIGH

 

If you are looking to contact Michael Seery (CTA—COMMODITY TRADING ADVISOR) at 1-630-408-3325 I will be more than happy to help you with your trading or visit www.seeryfutures.com 

 

TWITTER—@seeryfutures 

 

 Email: mseery@seeryfutures.com

If you’re looking to open a Trading Account click on this link www.admis.com 

 

There is a substantial risk of loss in futures and futures options. Furthermore, Seery Futures is not responsible for the accuracy of the information contained on linked sites. Trading futures and options is Not appropriate for every investor.

 



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