Energy and commodities highlights: Crude contamination, alternatives to Iranian oil, China shale gas

Supply-side issues continued to preoccupy oil markets at the start of May, after Russian crude exports to Central and Eastern Europe were hit by a contamination problem that caused disruption all along the supply chain.

Problems with crude quality on Russia’s Druzhba (Friendship) pipeline began to emerge on April 18, and the pipe was subsequently shut down. The Czech Republic, Hungary and Poland responded by releasing emergency stocks. Exports from the Ust-Luga terminal on the Gulf of Finland were also disrupted.

By May 2, clean Russian crude was again entering Eastern Europe via Belarus, although a full clean-up to deal with the consequences of the contamination is expected to take months. Although countries in the region have been trying to reduce their dependence on Russian oil, some reliance persists, particularly for landlocked refineries.

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Alongside the Russian supply disruption, oil traders were also considering how the sudden gap in Iranian exports could be filled, after the US decided not to extend sanctions waivers.

Nonetheless, crude oil futures shifted down later in the week, on expectations that the US, Russia and Saudi Arabia would step in, with a build-up of inventories in the US seen as a further bearish driver.

Other producers could also stand to gain from the further restrictions on Iranian exports. S&P Global Platts visualized how alternative suppliers could step in to provide replacement grades with similar characteristics to Iranian types of crude:

INFOGRAPHIC: WHAT ARE THE ALTERNATIVES TO IRANIAN OIL?

Click for full-size infographic

PODCAST: RUSSIAN CRUDE OIL CONTAMINATION

S&P Global Platts reporters Paula Vanlaningham and Robert Perkins tell Joel Hanley the latest on the Russian crude oil contamination scandal, looking at the logistical and price implications.

GAS

China to miss 2020 shale gas production targets amid tough upstream conditions

China is likely to miss its 2020 shale gas production target as technical and commercial challenges dog efforts to tap into what are considered the largest shale gas resources outside the US, according to production estimates compiled by market participants.

PETROCHEMICALS

Venezuela sanctions weigh on US MTBE prices

The sharp dropoff in Venezuela's purchasing of MTBE, a gasoline blending component, has dragged US prices for the product to multi-year lows relative to other regions.

SHIPPING

Panama Canal reduces maximum authorized draft in Neopanamax locks

The Panama Canal Authority has reduced the maximum authorized draft for vessels transiting the Neopanamax locks for the fifth time this year, following a serious drought that has reduced water levels in two of the canal's largest tributary lakes.

THE LAST WORD

"Nobody I know is looking at subsidizing coal, period."

– US Department of Energy assistant secretary Bruce Walker told reporters April 29 that there is no intention to adopt policies that would specifically support uneconomic coal-fired power plants.