May 4, 2022

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North Sea Trade Constrained by Refining Capacity

  • June North Sea crude exports drop nearly 30% month on month to 540,000 b/d, a result of ongoing maintenance on the Ekofisk stream.
  • The dated Brent structure is in shallow contango, signaling some weakness in the prompt buying of physical cargoes.
  • Several legacy buyers of Urals in Europe have increased intakes of regional crude to compensate for self-sanctioned volumes of Russian barrels.

Most North Sea spot prices have stabilized, but both Brent and Forties are now showing small discounts to dated Brent. Demand for regional crude remains rigorous, with Forties partly filling for the missing Urals crude barrels for Russia. But the prompt structure indicates that, despite a shorter loading schedule, there is no rush for spot volumes — partly a reflection of ongoing refinery turnarounds and partly due to technical limitations on crude quality.

Ekofisk Maintenance

The Brent, Forties, Oseberg, Ekofisk and Troll (BFOET) streams that make up the Brent pricing basket will load only 14 cargoes in June, or 540,000 barrels per day, down from 27 cargoes, or 775,000 b/d, scheduled in May.

To be sure, this huge drop is roughly in line with a similar fall of 560,000 b/d in June 2021. This time of year is characterized by maintenance works on the benchmark streams, which are usually telegraphed well in advance. Buyers therefore are not panicking.

The Brent CFD swaps, which are traded on a weekly basis and tie the Brent forward and future markets together, are currently trading in a shallow contango, signaling a lack of appetite for prompt barrels.

Both Brent and Forties are now trading at a 15¢ discount to dated Brent, while the other grades have been flatlining at premiums of $2.50 per barrel for high-gasoline-yield Ekofisk to $5.50/bbl for more distillate-rich Oseberg.

North Sea Loadings for June and May 2022
(million bbl) JunMay
NorwayStandard CargoNo.Vol.No.Vol.
Ekofisk60021.2116.6
Oseberg60042.453.0
Troll60063.684.8
UK
Brent60021.231.8
Forties600137.8127.2
Total----16.2--23.4
Total ('000 b/d)----540--755

North Sea Relief

Norway’s Johan Sverdrup has been one of the main beneficiaries of the demand uptick for North Sea oil, replacing stigmatized Russian volumes. Its properties are similar to Urals but it has less metal pollutants.

The bulk of volumes previously shipped to China are now staying in Europe. Neste Oil’s Porvoo refinery in Finland, formerly one of the largest buyers of Russian oil in Northwest Europe, has replaced its Urals volumes with a larger intake of Sverdrup: from 55,000 b/d in February to 160,000 b/d in April.

Shipping data show that Porvoo in May is taking volumes of Balder crude — a heavy, borderline sweet crude yielding a large share of heavy gasoil. Smaller streams are finding new buyers as refiners tweak their crude slate to replace Urals. These range from very light, sweet grades like Norway’s Asgaard or Aasta Hansteen, to heavier, sour grades like Grane.

Created with Highcharts 9.0.0(b/d)NORTH SEA LOADINGS: DATED BRENT BENCHMARK STREAMSFortiesEkofiskTrollOsebergBrentJun'22May'22Apr'22Mar'22Feb'22Jan'22Dec'21Nov'21Oct'21Sep'21Aug'21Jul'21Jun'210250,000500,000750,0001,000,000Source: Energy Intelligence

Refining Constraints

Refining Brent-linked crude in Europe yields margins of more than $28/bbl, Energy Intelligence data show. At this level of profitability, refiners are more than eager to resupply a tight middle distillate market now that shunned Russian diesel has left a sizable vacuum.

But running at higher rates with less Urals and hence lighter, replacement crude feedstock amounts to a test of distillation units. It yields too many light factions, including gas and light naphtha, and not enough gasoil/diesel and jet.

Spring maintenance was already standing in the way, taking some refining capacity off line. But the recent and rapid changes to crude slates in response to the Russian shortfall are placing more constraints on capacity and reducing immediate crude demand.

omb_SankeyJune2022.svg

North Sea Loading Program for June 2022
LoadingBarrels(b/d)ParcelEquity
Brent
09-11600,00020,000B0601EnQuest
22-24600,00020,000B0602Glencore
Forties
01-03600,00020,000  F0601CNOOC
03-05600,00020,000  F0602Glencore
05-07600,00020,000  F0603Shell
07-09600,00020,000  F0604BP
10-12600,00020,000  F0605Suncor
12-14600,00020,000  F0606CNOOC
14-16600,00020,000  F0607Shell
17-19600,00020,000  F0608Eni
19-21600,00020,000  F0609Repsol
22-24600,00020,000  F0610Shell
24-26600,00020,000  F0611BP
26-28600,00020,000  F0612Suncor
28-30600,00020,000  F0613CNOOC
Oseberg
07-09600,00020,00020220501Equinor
14-16600,00020,00020220502Total
21-23600,00020,00020220503ConocoPhillips
27-29600,00020,00020220504Equinor
Ekofisk
15-17600,00020,000C12970Equinor
29-01600,00020,000C12973BP
Troll
28-03600,00020,00020220506ConocoPhillips/Equinor/Idemitsu
31-08600,00020,00020220507Equinor
12-14600,00020,00020220601Neptune
16-18600,00020,00020220602Equinor
18-20600,00020,00020220603Okea/PGNIG/Shell
26-28600,00020,00020220604ConocoPhillips/Equinor/Idemitsu
Johan Sverdrup
31-022,000,00066,66720220630Equinor
04-06700,00023,33320220631Lundin
06-082,000,00066,66720220632Equinor
10-12600,00020,00020220633Lundin/Total
11-132,000,00066,66720220634Equinor
14-16700,00023,33320220635AkerBP
15-171,000,00033,33320220636Lundin
16-181,000,00033,33320220637Equinor
18-20600,00020,00020220638Lundin/Total
18-20700,00023,33320220639AkerBP
TOTAL BFOET*16,200,000540,00027 cargoes--
Total Johan Sverdrup11,300,000376,66710 cargoes--
Total BFOET Plus Johan Sverdrup26,200,000873,33337 cargoes--

Julien Mathonniere, London