IEA predicts oil supply surplus amid weak China demand in 2025
Global oil prices are currently around $70 per barrel, having dropped over 7 percent last week, even amid rising geopolitical tensions in the Middle East
Updated 22 October 2024
Arab News
RIYADH: The International Energy Agency forecasts weak oil demand growth in China for 2025, despite recent stimulus measures from Beijing.
As the world’s second-largest economy shifts toward electrifying its car fleet and experiences slower growth, this trend is expected to continue, according to IEA Executive Director Fatih Birol.
Historically, China has driven over 60 percent of global oil demand growth over the past decade, with an average economic growth rate of 6.1 percent. However, Birol noted that with the economy projected to grow around 4 percent, energy needs are likely to decline. He highlighted that the demand for electric vehicles, now competitive with traditional cars, will contribute to this decrease.
Birol remarked that the impact of China’s fiscal stimulus has been less significant than anticipated, stating, “It will be very difficult to see a major uptick in Chinese oil demand.”
Global oil prices are currently around $70 per barrel, having dropped over 7 percent last week, even amid rising geopolitical tensions in the Middle East.
Birol pointed out that one reason for the muted price reaction is the weak demand observed this year, with expectations of continued weakness next year.
He noted that without the petrochemical sector, Chinese oil demand would have remained flat.
Additionally, increased supply from non-OPEC producers — such as the US, Canada, Brazil, and Guyana — outpaces global oil demand growth, further limiting price increases.
When asked about the possibility of OPEC+ unwinding production cuts in 2025, Birol stated that the decision lies with OPEC, but he anticipates a surplus in the oil market next year unless significant geopolitical changes occur.
Brent crude futures rose by $1.16, or 1.6 percent, to reach $74.22 a barrel at 10:36 GMT. Meanwhile, U.S. West Texas Intermediate crude futures increased by $1.32, or 1.9 percent, settling at $70.54 a barrel.
Both Brent and WTI experienced significant declines last week, with Brent falling over 7 percent and WTI losing around 8 percent.
Alfanar Projects, SEC sign $5.33bn deals to support Saudi energy modernization
Updated 18 November 2024
Nadin Hassan
RIYADH: Energy deals worth SR20 billion ($5.33 billion) have been signed between Alfanar Projects and Saudi Electricity Co. to advance the Kingdom’s power modernization and sustainability efforts.
The agreements, announced during the Energy Localization Forum hosted by the Ministry of Energy, include the construction of the Middle East’s largest High-Voltage Direct Current Converter Station, according to a press release.
This facility, developed in partnership with China Electric Power Equipment and Technology Co., will deliver 7 gigawatts of power between the Central, Western, and Southern regions.
The deals also include projects for battery storage systems, smart distribution centers, and renewable energy integration, aimed at improving grid reliability and supporting Saudi Arabia’s Vision 2030 goals of energy self-sufficiency and sustainability.
Saudi Arabia aims to get 50 percent of its power from renewable energy by 2030, with a total capacity of 130 GW. This includes 58.7 GW from solar and 40 GW from wind, making it the most ambitious renewable energy target in the Gulf Cooperation Council.
Amer Al-Ajmi, executive vice president of sales and marketing at Alfanar Projects, said: “The confidence placed in us by the Ministry of Energy, through its representative, Saudi Electricity Co., affirms our commitment to deliver and execute transformative projects of this scale.”
He added: “At Alfanar Projects, we combine our robust resources, technical expertise, and a highly skilled national workforce to create a sustainable energy infrastructure that supports the Kingdom’s self-sufficiency goals and strengthens its role as a leader in renewable energy.”
The signing ceremony was attended by Saudi Energy Minister Prince Abdulaziz bin Salman, Minister of State Hamad bin Mohammed Al-Sheikh, and Minister of Industry and Mineral Resources Bandar bin Ibrahim Alkhorayef.
Other key representatives included Khaled Al-Ghamdi, CEO of Saudi Electricity Co., and Sabah Al-Mutlaq, vice chairman of Alfanar Co. and managing director of Alfanar Projects, who represented both organizations.
Alfanar Projects is a Saudi-based company developing sustainable energy projects that support economic growth and environmental goals in the Kingdom and beyond.
Earlier this month, Saudi Electricity Co. reported a net profit of SR5.6 billion for the first nine months of 2024, up from SR 4.6 billion last year. The company’s power generation capacity grew by 1.4 percent, with its directly owned capacity rising to 56.9 GW.
Saudi Aramco, Sinopec begin construction of petchem complex in Fujian
Updated 18 November 2024
Nirmal Narayanan
RIYADH: Saudi energy giant Aramco, in collaboration with China Petrochemical & Chemical Corp. and Fujian Petrochemical Co., has launched the construction of a refinery and petrochemical complex in Fujian province, China.
The project, which is slated to be fully operational by the end of 2030, will feature an oil refinery with a capacity of 320,000 barrels per day, according to a company statement. In addition to the refinery, the complex will include a 1.5 million-tonne-per-year ethylene unit, a 2 million-tonne paraxylene unit with downstream derivatives capacity, and a 300,000-tonne crude oil terminal.
Aramco’s long-standing relationship with China spans more than three decades. This new venture is part of Aramco’s broader strategy to solidify its position as a key player in the global energy sector, while also supporting Saudi Arabia’s economic growth.
“Building on our strong relationships with both Sinopec and Fujian Petrochemical, today’s groundbreaking further expands Aramco’s growing downstream investment portfolio in China,” said Mohammed Al-Qahtani, Aramco’s downstream president.
He continued: “We will supply in excess of 1 million barrels per day of our crude oil to these high chemical conversion assets in China, reinforcing Aramco’s role as a reliable and long-term partner in China’s development. This also advances our liquids-to-chemicals strategy, through which we intend to direct more of our crude toward helping meet rising global petrochemicals demand.”
The new facility will also supply around 5 million tonnes of feedstock annually to the Gulei Petrochemical Base, the statement added.
The Fujian Petrochemical Complex will be a joint venture, with FPCL, a collaboration between Sinopec and Fujian Petrochemical Industrial Group Co., holding a 50 percent stake. Aramco and Sinopec will each own a 25 percent share.
Ma Yongsheng, chairman of Sinopec, highlighted that the Fujian project represents a significant milestone in the partnership between Saudi Arabia and China.
“Both Sinopec and Aramco are committed to promoting the high-quality development of the petroleum and petrochemical industry. Aramco’s participation supplies long-term reliable and competitive feedstock for the project and further boosts the healthy development of Gulei Petrochemical Base,” said Yongsheng.
This new deal further deepens Aramco’s collaboration with Sinopec in the energy sector. Earlier this year, in January, Aramco awarded contracts worth over $3.3 billion to Sinopec and Spain’s Tecnicas Reunidas for the construction of a gas facility in Saudi Arabia. The project involves the development of a new natural gas liquids facility at the Jafurah unconventional gas production site in Saudi Arabia.
In October, Aramco also strengthened its ties with Chinese partners, signing a five-year partnership with China National Building Material Group to explore advanced materials, including the potential manufacturing of wind turbine blades in the Kingdom.
Oil Updates – crude nudges up after Russia-Ukraine tensions escalate
Updated 18 November 2024
Reuters
SINGAPORE: Oil prices edged up on Monday after fighting between Russia and Ukraine intensified over the weekend, although concerns about fuel demand in China, the world’s second-largest consumer, and forecasts of a global oil surplus weighed on markets.
Brent crude futures gained 29 cents, or 0.4 percent, to $71.33 a barrel by 8:02 a.m. Saudi time, while US West Texas Intermediate crude futures were at $67.20 a barrel, up 18 cents, or 0.3 percent.
Russia unleashed its largest air strike on Ukraine in almost three months on Sunday, causing severe damage to Ukraine’s power system.
In a significant reversal of Washington’s policy in the Ukraine-Russia conflict, President Joe Biden’s administration has allowed Ukraine to use US-made weapons to strike deep into Russia, two US officials and a source familiar with the decision said on Sunday.
There was no immediate response from the Kremlin, which has warned that it would see a move to loosen the limits on Ukraine’s use of US weapons as a major escalation.
“Biden allowing Ukraine to strike Russian forces around Kursk with long-range missiles might see a geopolitical bid come back into oil as it is an escalation of tensions there, in response to North Korean troops entering the fray,” IG markets analyst Tony Sycamore said.
Saul Kavonic, an energy analyst at MST Marquee, said: “So far there has been little impact on Russian oil exports, but if Ukraine were to target more oil infrastructure that could see oil markets elevate further.”
In Russia, at least three refineries have had to halt processing or cut runs due to heavy losses amid export curbs, rising crude prices and high borrowing costs, according to five industry sources.
Brent and WTI slid more than 3 percent last week on weak data from China and after the International Energy Agency forecasted that global oil supply will exceed demand by more than 1 million barrels per day in 2025 even if cuts remain in place from OPEC+.
China’s refinery throughput fell 4.6 percent in October from last year and as the country’s factory output growth slowed last month, government data showed on Friday.
Investors also fretted over the pace and extent of interest rate cuts by the US Federal Reserve that has created uncertainty in global financial markets.
In the US, the number of operating oil rigs fell by one to 478 last week, the lowest since the week to July 19, Baker Hughes data showed.
COP29: Clean energy a catalyst for stability, recovery in conflict zones
Environmental solutions reduce dependence on imports
Micro-grids support conflict-ridden communities
Updated 15 November 2024
MANAL AL-BARAKATI
BAKU: As COP29 progresses in Baku, attention is turning to the ways in which clean energy can transform post-conflict recovery efforts, bringing both environmental resilience and social stability to regions affected by war.
This year’s discussions have highlighted how renewable energy offers more than environmental benefits, having the potential to catalyze economic recovery, improve living standards and build long-term resilience in areas most vulnerable to conflict.
Renewable energy in conflict recovery: A new dimension of aid
Experts have highlighted how sustainable infrastructure can reduce dependence on foreign energy imports and fuel local economies in war-torn areas.
Hafed Al-Ghwell, a North African geopolitics expert, said in an interview with Arab News that “clean energy isn’t just about generating power; it’s about autonomy and resilience.” For regions dependent on volatile foreign fuel supplies, renewables offer a more stable power source that strengthens local autonomy.
Gilles Carbonnier, vice president of the International Committee of the Red Cross, highlighted the critical role of renewable energy in supporting communities severely affected by both conflict and climate change.
“The people who are most affected by climate change risks are those who live in zones of armed conflict and have the least capability to adapt and face these risks,” Carbonnier said.
He described how the ICRC is using solar power to help protect communities from droughts, floods and extreme weather across the Sahel, the Horn of Africa and the Middle East.
“What we need is to scale these efforts, which means directing much more climate funding to conflict zones,” Carbonnier added.
This local approach provides immediate aid while laying the foundation for sustainable recovery in areas struggling with limited resources and infrastructure damage.
Gaza: The intersection of war and environmental crisis
The war and occupation in Gaza represents a severe environmental and humanitarian crisis.
Crown Prince Hussein of Jordan addressed COP29. In calling for global solidarity with Gaza, he said: “Saving our planet must start from the premise that all lives are worth saving.” He described how the war is “compounding environmental challenges for Gaza and beyond.”
A recent UN Environment Program report highlighted severe contamination of Gaza’s land, water and air due to the destruction of critical infrastructure, including sewage and waste systems, leaving communities surrounded by hazardous debris.
Carbonnier said that Gaza is emblematic of the dual crisis faced by many conflict zones, where war intensifies environmental damage and deepens humanitarian challenges.
“In Gaza, conflict has degraded critical infrastructure to the point where basic resources like clean water and electricity are scarce,” he said.
“Renewable energy solutions, such as solar micro-grids, could offer essential relief by providing stable power to hospitals, schools and homes,” he added.
In Gaza, solar micro-grids deployed by NGOs are already providing essential power for hospitals and emergency shelters, offering a sustainable alternative to fuel imports which have been blockaded by Israeli forces since the conflict began.
An image from the COP29 conference in Baku. AN
Resilience through clean energy infrastructure
Renewable energy infrastructure, particularly solar and wind power, is highly adaptable to conflict and post-conflict settings due to its low maintenance requirements and modular design.
Solar panels and wind turbines require minimal upkeep and their modular nature allows for incremental infrastructure development as security improves.
This approach has proved effective in Syria, where solar-powered micro-grids are supplying power to refugee camps, providing consistent electricity for vital services like sanitation and healthcare.
According to Carbonnier, these micro-grids “reduce dependence on often costly and dangerous fuel deliveries and stabilize power supplies for communities under stress.”
Renewable energy micro-grids are now recognized as a cornerstone of humanitarian aid, offering stability to populations affected by protracted crises.
Policy implications and international support
For renewable energy to become a reliable tool in post-conflict recovery, coordinated international support and robust policy frameworks are essential.
Azerbaijan’s lead COP29 negotiator, Yalchin Rafiyev, highlighted the need for financial support specifically directed at conflict zones. “Bridging the gaps between climate finance and peace-building efforts can unlock substantial benefits for communities emerging from conflict,” Rafiyev said.
Rumen Radev, president of Bulgaria, highlighted the link between climate resilience and global stability, telling Arab News: “Extreme meteorological events threaten not just people and economies, but also the security and stability of the world.”
His remarks highlight the importance of COP29’s goals in fostering peace through enhanced climate resilience.
Oil Updates – crude heads for weekly loss as Chinese demand continues to underperform
Updated 15 November 2024
Reuters
SINGAPORE: Oil prices fell on Friday on signs demand in China, the world’s biggest crude importer, continues to underperform amid its uneven economic recovery.
Brent crude futures were down 65 cents, or 0.9 percent, at $71.91 a barrel by 7:50 a.m. Saudi time. US West Texas Intermediate crude futures were down 62 cents, or 0.9 percent, at $68.08.
For the week, Brent is set to fall 2.7 percent while WTI is set to decline 3.3 percent.
“While oil prices have somewhat stabilized around the $71.00 level of support this week, the lack of a concrete bullish catalyst suggests that price recovery remains tepid for now,” Yeap Jun Rong, market strategist at IG, said in an email.
The prospect of higher supplies from the US and OPEC+ along with doubts over China’s economic recovery continue to be of concern, while the odds of a December rate cut are now “closer to a coin flip” under a less dovish Federal Reserve, Yeap added.
China’s oil refiners in October processed 4.6 percent less crude than a year earlier, falling year-on-year for a seventh month, amid the closures of some plants and reduced operating rates at smaller independent refiners, data from the National Bureau of Statistics showed on Friday.
The decline in run rates occurred as China’s factory output growth slowed last month and demand woes in its property sector showed few signs of abating even though consumer spending increased, government data showed.
Oil prices also fell this week as major forecasters indicated market fundamentals remained bearish.
The International Energy Agency forecast global oil supply will exceed demand in 2025 even if cuts remain in place from OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, as rising production from the US and other outside producers outpaces sluggish demand.
The Paris-based agency raised its 2024 demand growth forecast by 60,000 barrels per day to 920,000 bpd, and left its 2025 oil demand growth forecast little changed at 990,000 bpd.
OPEC this week cut its forecast for global oil demand growth for this year and 2025, highlighting weakness in China, India and other regions, marking the producer group’s fourth-consecutive downward revision to its 2024 outlook.
US crude inventories last week rose by 2.1 million barrels, the Energy Information Administration said on Thursday, much more than analysts’ expectations for a 750,000-barrel rise.
Gasoline stocks fell by 4.4 million barrels last week to the lowest since November 2022, the EIA said, compared with analysts’ expectations in a Reuters poll for a 600,000-barrel build.
Distillate stockpiles, which include diesel and heating oil, also fell unexpectedly by 1.4 million barrels, the data showed.
