Russia accuses US of cover-up over ISIS oil smuggling to Turkey


Author: Orville Davis ; Last update: 11 December , 2015 03:41:16

Russian Federation won them all. Meanwhile, a vast number of U.S.-backed anti-Assad rebels in Syria are ethnic Turkmens with strong cultural ties to Turkey. With reports that Russian Federation is apparently poised to expand its military operation in Syria by deploying additional 120 combat aircraft to the war-torn country, Moscow wants to turn the already volatile situation in Syria into chaotic mess. Turkey’s goal was to see the regime of Bashar al-Assad defeated and rebel Islamist parties, friendly to Turkey, take over. “Pravda journalism’s only message is to support Russia’s attitude in Ukraine and Syria, and cause confusion overseas”, Wilson says. “This was clearly an ambush”, said George Petrolekas, a fellow at the Canadian Global Affairs Institute. Since the annexation, North Atlantic Treaty Organisation planes have intercepted scores of Russian military planes that were probing North Atlantic Treaty Organisation defense, mostly in worldwide airspace close to member-state borders and mainly in the military alliance’s weakest link near Sweden – the Baltic states of Latvia, Estonia, and Lithuania that the former Soviet Union used to occupy. “I think Turkey had hoped to drive a wedge between the North Atlantic Treaty Organisation countries and Russian Federation”, he explained, in order to break up the new coalition against the Islamic State that had come together in the wake of the Paris attacks. That protects Turkey’s protégés and forces other powers to recognise Turkey’s special status in the region. But Turkey’s action forced Russian Federation to go on the offensive, politically. President Obama has expressed regret to Russian President Vladimir Putin over the downing of a Russian bomber by a Turkish fighter last month. Also, Russian media alleged that there was a picture of Turkish President Recep Tayyip Erdogan’s son Bilal Erdogan with ISIL members. Russia’s defence ministry on Saturday accused the United States of turning a blind eye to the trafficking of oil into Turkey from Syrian areas under Islamic State control, after Washington called the amounts involved insignificant. The Turkish strongman said Russian Federation had made “no sign” that the crisis would affect their energy partnership. Turkey rejects any suggestion it is not playing its part in the fight against the Islamic State. Who cares if you buy it or not? The deployment of S-400 anti-air missiles means Russian Federation has effectively imposed a no-fly zone over Syria. And Turkey was not exactly happy with Putin dropping bombs on Turkmen villages inside Syria, because it weakens Turkey’s ability to shape Syria’s future, according to Friedman. The top US priority is for Turkey to secure its southern border with Syria, the first official said. Mr. Putin has been escalating Russia’s confrontation with North Atlantic Treaty Organisation since annexing Crimea past year and is thus responsible for the tragic death of a Russian pilot and a Russian serviceman in the incident. The Comment
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How ISIS Oil Flows Through Turkey And Israel On Its Way To Europe

By Kit O’Connell
Kurdish fuel trucks are seen in northern Iraq (REUTERS/Azad Lashkari).

RAQQA, Syria — It’s widely recognized that Daesh (the Arabic acronym for the terrorist group often called IS, ISIS or ISIL in the West) depends on oil sales to fuel its armies. Until recently, it’s been less clear who is buying Daesh’s oil, and how it ends up in their hands.However, recent reports suggest that the oil flows to Europe and Asia through a complex process that implicates allies of the United States like Turkey and Israel. The U.S. is also facing increasing criticism for its failure to target the terrorist group’s oil infrastructure in a serious way until recently.

Cam Simpson and Matthew Philips, writing in November for Bloomberg Businessweek, called recent U.S. attacks on oil trucks an attempt by the Obama administration to “quietly” fix a “colossal miscalculation.” Government experts now argue that the U.S. dramatically underestimated Daesh’s oil profits:

“The Obama administration ‘misunderstood the [oil] problem at first, and then they wildly overestimated the impact of what they did,’ says Benjamin Bahney, an international policy analyst at the Rand Corp., a U.S. Department of Defense-funded think tank, where he helped lead a 2010 study on [Daesh’s] finances and back-office operations based on captured ledgers.”

U.S. intelligence officials now believe Daesh is making at least $500 million from oil sales each year, $400 million more than previous official estimates. “You have to go after the oil, and you have to do it in a serious way, and we’ve just begun to do that now,” Bahney told Bloomberg.

Officials also cited potential civilian casualties to explain their reluctance to go after truckers transporting oil from Daesh-controlled territories. That reluctance apparently ended on Nov. 16, when the U.S. destroyed 116 oil trucks after airplanes “first dropped leaflets warning drivers to scatter.”

Reluctance to harm civilians hasn’t prevented the U.S. from creating high civilian death tolls on other fronts of the “global war on terror.” In August, Airwars, a coalition of independent journalists, estimated that at least 459 civilians had been killed in U.S. airstrikes on Daesh, and those numbers are continuing to rise, with the group’s most conservative estimate of civilian casualties now standing at least 682. Additionally, U.S. drone strikes have proven especially ineffective, hitting more civilians than members of al-Qaida, according to a September report from the United Nations.

Recent developments suggest that U.S. allies directly benefit from the flow of cheap terrorist oil and, given the United States’ role in the creation of Daesh, this could suggest that the reluctance to target Daesh’s oil profits prior to the Paris attacks may be motivated by self-interest.

How ISIS Oil Reaches Israel

On Nov. 26, Al-Araby Al-Jadeed, a London-based media outlet focusing on the Arabic world, published a detailed investigation tracing Daesh’s oil from the massive oilfields in Iraq and Syria to refineries in Israel, where it’s ultimately exported to Europe.

The enormous scale of Daesh’s oil production infrastructure in the Middle East is further evidence of the importance of energy exports to the group. The oil is first extracted from captured oil fields:

“IS oil production in Syria is focused on the Conoco and al-Taim oil fields, west and northwest of Deir Ezzor, while in Iraq the group uses al-Najma and al-Qayara fields near Mosul. A number of smaller fields in both Iraq and Syria are used by the group for local energy needs.

According to estimates based on the number of oil tankers that leave Iraq, in addition to al-Araby’s sources in the Turkish town of Sirnak on the border with Iraq, through which smuggled oil transits, IS is producing an average of 30,000 barrels a day from the Iraqi and Syrian oil fields it controls.”

Unfortunately, like many reports on the topic, many of Al-Araby’s sources remain anonymous for their own safety. A member of the Iraqi intelligence services informed the reporters about the complex path the oil takes, traveling in dozens of tankers at a time into Zahko, a city controlled by Iraqi Kurds near the border with Turkey:

“After [Daesh] oil lorries arrive in Zakho – normally 70 to 100 of them at a time – they are met by oil smuggling mafias, a mix of Syrian and Iraqi Kurds, in addition to some Turks and Iranians,” the colonel continued.”

The gangs compete in sometimes deadly bidding wars to purchase and smuggle the oil onto the next stage, and “[t]he highest bidder pays between 10 and 25 percent of the oil’s value in cash — US dollars — and the remainder is paid later, according to the colonel.”

These “oil mafias” then bring the product to rudimentary refineries for simple processing from crude into oil, “because Turkish authorities do not allow crude oil to cross the border if it is not licensed by the Iraqi government,” the colonel explained.

Kurdish Smugglers and Turkish elite transport Daesh’s oil

Al-Araby’s sources reported that from Turkey the oil flows through three ports — Mersin, Dortyol and Ceyhan — into Israel. And from Israel, the oil seeps into Europe:

“According to a European official at an international oil company who met with al-Araby in a Gulf capital, Israel refines the oil only ‘once or twice’ because it does not have advanced refineries. It exports the oil to Mediterranean countries – where the oil “gains a semi-legitimate status” – for $30 to $35 a barrel.”

Reports also suggests that Daesh’s oil is not just passing through Turkish soil on its way to Israel, but also being aided in its journey by the country’s elite. A July investigation by AWD News accused Bilal Erdogan, son of Turkish president Recep Tayyip Erdogan, of owning one of the maritime companies responsible for shipping this contraband oil:

“Bilal Erdogan who owns several maritime companies, had allegedly signed contracts with European operating companies to carry Iraqi stolen oil to different Asian countries. Turkish government unwittingly supports ISIS by buying Iraqi plundered oil which is being produced from the Iraqi sized oil wells. Bilal Erdogan’s maritime companies own special wharfs in Beirut and Ceyhan ports transporting [Daesh]’s smuggled crude oil in Japan-bound oil tankers.”

However, an anonymous writer on ZeroHedge, an economic news website, noted on Nov. 30 that while Bilal Erdogan does seem to be moving Kurdish oil in his tankers, “we’ve yet to come across conclusive evidence of Bilal’s connection to [Daesh].”

In a Nov. 19 investigation, international security scholar and journalist Nafeez Ahmed, documented the mounting evidence of direct ties between Turkey and Daesh, noting that a Turkish daily reported that Daesh fighters had 100,000 fake Turkish passports, a number the U.S. Army’s Foreign Studies Military Office reported was likely exaggerated even as it corroborated reports of the flow of fake passports. Digging further, Ahmed cites a number of other credible reports, from a November Newsweek report that Daesh “sees Turkey as an ally,” to accusations of oil sales in Turkey from June 2014 by a member of Turkey’s opposition party, and leaked Turkish-language documents that show Saudi royalty shipped weapons to Daesh through Turkey.

An August report from Financial Times supports Al-Araby’s assertion that massive quantities of oil flow through the hands of Kurdish sellers into Israel. According to David Sheppard, John Reed and Anjli Raval, “Israel turns to Kurds for three-quarters of its oil supplies. They allege that Israel purchased about $1 billion in oil from the sellers between May and August of 2015.

In his analysis of the flow of oil, Shadowproof’s Dan Wright noted that Daesh seems “embarrassed” by the reports of oil sales to Israel. Al-Araby reported that “someone close to [Daesh]” reported via Skype:

‘To be fair, the organisation sells oil from caliphate territories but does not aim to sell it to Israel or any other country,’ he said. ‘It produces and sells it via mediators, then companies, who decide whom to sell it to.'”

Even without the potential ties to Daesh, Kurdish oil trading has proven controversial. The Iraqi government is struggling to put an end to the trade that they claim circumvents deals that were made to limit sales, while Kurdish officials claim the sales are necessary to maintain their financial independence. Iraq’s leaders are also threatening lawsuits against maritime shipping companies that accept Kurdish oil.

Russia weighs in on Erdogan oil smuggling

When Turkey shot down a Russian jet on Nov. 24, Russia responded by claiming the jet had been involved in an anti-terror mission targeting Daesh’s oil transportation infrastructure near the Turkey-Syria border:

“According to a press release from Russia’s Ministry of Foreign Affairs, [Sergei] Lavrov pointed out that, ‘by shooting down a Russian plane on a counter-terrorist mission of the Russian Aerospace Force in Syria, and one that did not violate Turkey’s airspace, the Turkish government has in effect sided with [Daesh].”

… The Russian Minister reminded his counterpart about Turkey’s involvement in the [Daesh’s] illegal trade in oil, which is transported via the area where the Russian plane was shot down, and about the terrorist infrastructure, arms and munitions depots and control centers that are also located there,”

Further complicating the tense international incident, WikiLeaks noted that a pseudonymous whistleblower on Twitter known as Fuat Avni claimed in October that Turkish President Erdogan was considering shooting down a Russian jet plane in order to leverage the resulting international tensions to boost his popularity both before and after recent elections.

RT reported that on Dec. 2, Russia’s Deputy Defense Minister Anatoly Antonov offered what he claimed was “proof concerning the illegal oil trade by [Daesh] and Ankara’s ties to it”:

“‘According to our data, the political leadership of the country [Turkey], including President Erdogan and his family, is involved in this criminal business,’ Antonov told the journalists in Moscow.”

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Are These The Tankers Bilal Erdogan Uses To Transport ISIS Oil?

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Regular readers are by now well acquainted with Bilal Erdogan, the son of Turkish autocrat Recep Tayyip Erdogan. Although Erdogan senior masquerades as President of a democratic society, he is in reality a despot who just weeks ago, capped off a four-month effort to nullify an undesirable ballot box outcome by scaring the electorate into throwing more support behind the ruling AKP in a do-over vote designed specifically to undermine the pro-Kurdish HDP, which put up a strong showing in the last round of elections, held in June.

As the world’s interest in Islamic State’s illicit oil trade has grown over the past 60 or so days, so too has the scrutiny on how the group gets its stolen crude to market. In the seven days since Turkey shot down a Russian Su-24 near the Syrian border, Moscow has done its best to focus the world’s collective attention on the connection between ISIS and Turkey. It’s common knowledge among those who pay attention to such things that Ankara is part of an alliance that includes Riyadh, Doha, and Washington whose collective goal is to fund and arm the Syrian opposition. What’s up for debate is the extent to which that alliance supports ISIS and, to a lesser extent, al-Nusra.

Earlier today, Vladimir Putin explicitly accused Ankara of attempting to protect ISIS oil routes by shooting down Russian warplanes which have destroyed hundreds of Islamic State oil trucks in November.

Erdogan of course denies the allegations, but as we’ve shown, it would be very easy for Turkish smugglers to commingle ISIS and KRG crude (which, by the way, is also technically illegal), effectively using Kurdish oil to mask Turkey’s participation in the Islamic State oil trade.

Some contend that Bilal Erdogan’s marine transport company BMZ Group (which owns a Maltese shipping company) is involved in trafficking ISIS oil (see our full account here).

Here’s what Syrian Information Minister Omran al-Zoub said on Friday:

“All of the oil was delivered to a company that belongs to the son of Recep [Tayyip] Erdogan. This is why Turkey became anxious when Russia began delivering airstrikes against the IS infrastructure and destroyed more than 500 trucks with oil already. This really got on Erdogan and his company’s nerves. They’re importing not only oil, but wheat and historic artefacts as well.”

While we’ve yet to come across conclusive evidence of Bilal’s connection to ISIS, we would note that the Turkish port of Ceyhan is state-run and given Turkey’s extensive experience in smuggling KRG crude, it seems entirely fair to suggest that sneaking in 40,000 or so barrels of ISIS oil each day wouldn’t be that difficult a task. Indeed, given that Kurdish oil is, like ISIS crude, technically undocumented, Turkey will always have plausible deniability on its side (unless of course the oil is being moved into the country straight from Syria which is what Putin seems to be suggesting). 

In any event, if Bilal Erdogan is in fact engaged in the trafficking of stolen crude (and take it from us, Baghdad will tell you that Kurdish crude sold independently of SOMO is every bit as illegal as Islamic State oil) it’s probably worth tracking BMZ Group’s fleet. Here’s a list of ships that Turkish or other regional media have at one time or another confirmed belong to Bilal:

Mecid Aslanov

Begim Aslanova

Poet Qabil

Armada Breeze

Shovket Alekperova

You can track them all, free of charge at

Just don’t let Erdogan senior catch you monitoring his son’s fleet or you, like Can Dündar, editor in chief of Cumhuriyet, and Erdem Gül, the newspaper’s capital correspondent in Ankara, could end up sitting in a Turkish jail for 100 + 42 years.

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No turning back for China’s oil production

China’s domestic oil production likely peaked this year and is about to enter a long-term structural decline, according to Nomura. It notes the experience from Alaska’s Prudhoe Bay, which peaked in 1988: “Once the steep stage of the terminal decline output phase begins, there is generally no turning back.” The takeaway is that China could be a buyer on global energy markets next year, importing bigger volumes as it seeks to offset waning domestic production. Nomura says demand from China should help offset new supply from Iran, with prices stabilising at an average US$55 per barrel next year.

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Chart of the day: Beware of oil patch

After collapsing last year, front month Nymex crude oil futures are this year toying with secular trend-line support. Media headlines as energy, and generalised commodity price weakness, takes global inflation to its lowest post second world war levels – making a mockery of central bank inflation targeting. On a quarterly basis, its RSI is at its most oversold since 1988. On monthly and weekly charts, the RSI is also oversold. It is quite close to support at US$32 per barrel, a level that was resistance during the 20 years before the frenzied rally to 2008’s record high. The drop from there is an A, B, C-type correction, which looks very mature. Proceed with caution.

Chart Book
PUBLISHED : Sunday, 15 November, 2015, 11:10pm
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Latest Energy, Petrochemical, Metal News Headlines | Platts


Houston (Platts)–13 Nov 2015 551 pm EST/2251 GMT
The outright price for Gulf Coast conventional gasoline hit six-year lows Friday on continued weakness in the cash gasoline and oil futures markets.
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The differential for CIF 0.1% sulfur Northwest European gasoil cargoes to the front-month ICE low sulfur gasoil futures contract slumped to a seven-and-a-half month low Thursday, as warmer-than-usual temperatures and a overhang of product in end-user tanks weighed on the market.
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State-run refiner Indian Oil Corporation plans to step up imports of heavier crudes from suppliers such as Mexico and Kuwait when its refinery in the eastern state of Odisha is fully operational, a senior IOC official said Thursday.
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The outright price for US Gulf Coast low sulfur vacuum gasoil reached a six-year low Thursday on weaker front-month WTI futures, which fell on bearish government data.
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The Nigerian crude oil market remains under pressure — many grades have lost around $1/b in value since the start of October — as an abundance of sweet crude and high freight rates have failed to excite interest from refinery buyers.

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Job losses among oil and gas workers in Texas, resulting from sustained low oil and gas prices, could be even more severe than initial grim estimates indicate, an economist who tracks the energy industry in the Lone Star State said this week.
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Russia’s Gazprom has reduced its forecast for natural gas output in 2015 to 427 Bcm, the first time this year it has forecast that production will drop.
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A proposed rule that would regulate the safety of US offshore oil and natural gas operations could instead cripple a struggling offshore sector, an official with the Independent Petroleum Association of America said Thursday.
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Gas flows through one of the two lines that make up the Nord Stream pipeline network from Russia to Germany resumed Thursday after work to remove a piece of munitions discovered near the line offshore Sweden was completed, Nord Stream said.

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German weekend power prices plunged Friday as wind power output was forecast to rise again towards 30 GW as a second storm system approached Germany, with a third 30 GW potential storm now forecast for the middle of next week, according to sources.
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PJM Interconnection’s total resources will exceed expected peak demand this winter by almost 46,000 MW, or about 35%, the independent system operator said Thursday.
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French day-ahead prices fell Thursday as wind generation was predicted to increase from 600 MW to 3.6 GW at peak times amid otherwise stable fundamentals, sources said.
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Dominion’s Millstone-2 nuclear power unit in Waterford, Connecticut, was shut at 1 pm EST (1800 GMT) Tuesday “to address an oil leak from a reactor coolant pump,” plant spokesman Kenneth Holt said in an email Wednesday.
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German utility E.ON has sold ahead all of its planned outright power output for 2016 and 2017 at above market prices, the company said Wednesday.

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Colombian October thermal coal exports rose to a five-month high of 7.092 million mt, up 15.6% year on year and marginally higher month on month, data from Colombian shipping agent Deep Blue showed.
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More cuts and changes to improve efficiency are expected to CSX’s Central Appalachian coal network, the railroad’s chief financial officer said Tuesday.

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Argentinian state-owned YPF’s return to the downstream petrochemical segment with the purchase of polypropylene producers Petroken and Petroquimica Cuyo is close to being completed, a source close to YPF’s business operations said Friday.
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The EU 28 imported 251,315 mt of propylene for the first nine months of the year, up 32% from 191,007 mt in 2014, latest Eurostat data showed Friday. At the same time, propylene imports were down 31% on the year for the Jan-Sep period to 19,989 in 2015.
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The Asian FOB Korea/European FOB ARA styrene monomer spread flipped to negative Thursday, hit by a surge in European SM spot prices after an unplanned outage at Shell’s Dutch Moerdijk site.
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Thailand’s Indorama Ventures Public Co.

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Mexican flat steel producers have stepped back from price increases they announced months ago and lowered prices for hot- and cold-rolled products, as well as for galvanized, local service center executives said Friday.
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Rhodium prices dipped this week in light trading as speculators and producers continued to lower their offers in the face of declining platinum and palladium prices.
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More than 50%, or 14 million mt, of aluminum production outside China was unprofitable amid falling prices, Russian producer Rusal said Friday.
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Steel industry CEOs from NAFTA countries met Thursday with appointed US government officials, including Trade Representative Michael Froman, to impress upon them the “urgency” of the steel trade “crisis,” said Thomas Gibson, president and CEO of the American Iron and Steel Institute.

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Preliminary data from a crop survey done by a regional sugar industry association shows cane crush in North-Northeast Brazil is expected to reach no more than 55 million mt, local sources said Friday.
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British Sugar representatives are mulling offering fixed prices to beet farmers beyond the EU-wide lifting of sugar quotas in 2017, delegates at an industry event heard Friday.
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Calls to levy a 20% tax on sugar within the UK may not have a significant impact on sugar demand, delegates at an sugar industry conference were told Friday.
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Extreme tightness of ethanol supply in Rotterdam is expected to continue in the very short term, but prices are likely to weaken in the medium term, sources said.
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US ethanol production rose by 13,000 barrels to 982,000 b/d for the week ending November 6, the highest level in 17 weeks, Energy Information Administration data showed Thursday.

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India to Lead the Growth in Oil Usage (2014-2040)

On This Day – 14 November 2015

India to Lead the Growth in Oil Usage (2014-2040)

India today imports around 70% of the oil that it consumes. Thus, it goes without saying that in the longer term, India needs to focus on becoming self reliant as far as its energy needs are concerned. But is the country anywhere close to this goal? Probably not. As reported in the Mint, India’s energy consumption is set to double from current levels by 2040. In other words, India will topple China to see the fastest growth in energy demand during this period. The International Energy Agency (IEA) expects India’s oil demand to rise by 6 million barrels per day to 9.8 million barrels per day in 2040. Further, it opines that oil production will fall behind demand. Thus, oil import dependence will rise above 90% by 2040. Coal will continue to account for a larger chunk of India’s energy mix. Increasing import dependence does not bode well for India in the longer term as there could be constant pressure on the Indian rupee and could have major implications in terms of managing trade balances. It will be interesting to see how the government tackles this particular issue in the coming years.

Data Source:World Energy Outlook 2015, Livemint

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