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Hello Power Up readers! While the banking crisis has engulfed a number of players around the world, players in the commodities industry say it won’t be a problem for them. Famous last words, of course. Meanwhile, we’re looking at the growth of shadow tankers and China’s investment decisions, among other things. Here we go.

People swim and surf in the sea after an offshore oil spill drenched much of Israel’s Mediterranean shoreline with tar, near Atlit, Israel. REUTERS/Ronen Zvulun

Jonathan Saul is out here with a story on the fleet of “shadow” tankers carrying oil around the world, eight of which were involved in either a grounding, collision or a near miss that could have resulted in a massive oil spill. That figure is equal to how many incidents occurred in the previous three years – and that’s worrying people in the industry.  

“The risk of having an accident is definitely going up,” said Eric Hanell, CEO of tanker operator Stena Bulk. “We might be affected being at a port … because someone is running into us or loses control, which is a much bigger risk on those kinds of ships because they are older and not as well-maintained.” 

Right now, there’s a lot of oil that’s been sanctioned by major world economies – and that’s adding to the number of “shadow” vessels that operate outside of shipping controls. There are about 650 such vessels, Trafigura estimates, which ship from various countries including Iran, and they’re doing ship-to-ship transfers, which is even more worrisome.  

“We do not have visibility on maintenance and safety as no one is really boarding the ships and doing checks – that is missing,” said Jan Dieleman, president of commodities group Cargill’s ocean transportation division.  

China has a lot of ways it can go on energy production. 

China’s plans for about 100 new coal-fired power plants are at risk of becoming just loss makers, as David Stanway and Muyu Xu report. The country wants to cut its reliance on coal, but the experience of the pandemic and the supply crunch that has occurred has resulted in the nation boosting coal investment. Coal accounted for 58% of China’s total power generation last year, but more than half of the country’s large coal power firms were loss-making in the first half of 2022, according to the China Electricity Council. 

“The reality is that China has more coal power capacity than it needs,” said Zhang Shuwei, director at Draworld Energy Research Centre. “It doesn’t make sense to give more incentives for more coal-fired power investments.” 

China is the world’s largest and fastest-growing producer of renewable energy, which is expected to account for a third of all power supplied to its grid by 2025, up from 28.8% in 2020. But last year’s record drought slashed hydropower output, forcing factories throughout the southwest to shut down. So the country is more worried, and therefore started to invest heavily in coal so it isn’t as reliant on wind and solar power.   

Oil that is, black gold, Texas tea.

U.S. crude oil stocks are at 22-month highs, a far cry from the supply crisis that emerged last year in the wake of Russia’s invasion of Ukraine and subsequent sanctions on Moscow from the EU and United States. Gasoline stocks, however, are painting a less rosy picture, as Shariq Khan reports here. 

Crude stocks are now at 481 million barrels as of last week – but the overall gasoline stockpile is at 229.6 million barrels, which is the lowest for this time of year since 2015. That’s a potential danger for U.S. motorists who could see prices rise in coming months as driving demand starts to pick up.  

Gasoline futures are currently at about $2.59 a gallon and the retail price is $3.43 a gallon – not too far from where it was a month ago, but prices do tend to rise into the summer. Vehicle travel in the United States started the year 5.6% higher than last year, and refiners are doing a lot of maintenance now, leading to less crude processing.  

Pipelines run down the deck of Hin Leong’s Pu Tuo San VLCC supertanker in the waters off Jurong Island in Singapore. REUTERS/Edgar Su/File Photo

Asian gasoil stocks are up big in recent weeks in Asia, due to the Russian export ban that has scrambled fuel market flows worldwide, as Trixie Sher Li Yap reports here. Russia was a big seller of gasoil to Europe, but with that avenue closed, most of those shipments are going to the Middle East and Africa. 

As a result, the traditional sellers of those cargoes are stuck exporting to markets east of the Suez. The premiums on gasoil have slumped – dropping in the past two months to 70-90 cents per barrel versus Singapore gasoil prices from a high of $1.60 per barrel in mid-February. Singapore’s weekly stockpiles, meanwhile, are up near more a one-year high in the week ended March 15, which shows that those cargoes are going there to be stored temporarily.  

“Anticipation is that (the stock) build-up will last three to six months. However, it will depend on global demand growth led by the economic situation in the Western countries,” said David Jorbenaze, a senior analyst at analytics and consulting firm ICIS. 

“The risk of a major pollution incident is very high.”

Andrea Olivi, head of wet freight at commodity trader Trafigura, on the growth in shadow tankers. 

Pretty obviously the Trafigura logo. 

The current banking crisis shouldn’t hit the big commodities merchants, according to – who else – the CFOs of those merchants themselves, as Julia Payne reports here from the Financial Times Commodities Global Summit on Wednesday.  

The CFOs of Swiss traders Trafigura, Vitol, Gunvor, Mercuria and U.S. firm Castleton said they did not anticipate a finance squeeze particularly as commodity prices have dropped. However, that doesn’t mean that they won’t face certain problems, as Mercuria CFO Guillaume Vermersch said there could be a squeeze on smaller trading firms that relied on credit from both UBS and Credit Suisse (the former is buying the latter, somewhat reluctantly). 

And execs on the sidelines of the conference said traders may not be able to hold onto lines as big as the ones they’ve had in the past once the acquisition is completed. A number of global banks had already exited the space in recent years.  

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