News 03/03/2015

Oil storage in US close to running out: Pro

Michelle Fox | @MFoxCNBC

U.S. crude posted its first monthly gain since June on Friday, but one expert warned that storage in the United States is filling up quickly, and that could send oil lower.

"We are really close," said Bank of America Merrill Lynch's Francisco Blanch, noting that storage could run out by the end of March or early April.

Blanch, the firm's head of global commodities and derivatives, told CNBC's "Power Lunch" that means the only option for oil producers will be to sell and therefore prices can't hold up.

"For WTI, we see those pressures being very pronounced over the next few weeks," he said.

Oil inventories in the U.S. were up 8.4 million barrels last week, according to government data.

On the other hand, the international market has held up a little better, Blanch said.

"We've seen somewhat less oil being produced out of OPEC for unexpected reasons, but the market is still oversupplied."

Those reasons include the domestic turmoil in Libya causing it to produce very little oil and disruptions in Iraq because of weather, he noted.

While U.S. crude snapped its seven-month losing streak Friday, it is still down 50 percent in the past year.

U.S. April crude settled up $1.59, or 3.3 percent, at $49.76 a barrel on Friday. The contract posted a 3 percent gain for the month of February.

Brent April crude was up $3.90 at $62.40 a barrel, on pace to post a 16 percent monthly gain, the first monthly rise since June.

—Reuters contributed to this report.

Traders expect Saudi Arabia to raise Apr crude oil OSP for Asian buyers

Singapore (Platts)--2Mar2015/835 am EST/1335 GMT

Saudi Arabia is widely expected to raise its official selling price for crude oil loading in April for Asian buyers in line with a stronger Dubai market structure as improving margins for refiners underpin spot differentials, traders said Monday.

"Definitely Saudi Arabia will revise higher as the April market was done at stronger levels though [there are] few cargoes still [out] there," said a trader with a regional refiner. "[The] prompt margin is still good and cracks are also better."

Traders polled by Platts forecast an increase in the Arab Light OSP by 70 cents/barrel to $1.30/b, with lighter grades expected to see a relatively larger gain because of strong naphtha cracks.

"I think Arab Extra Light [would be] up by $1/b at least; Arab Light will be slightly smaller but maybe $1/b makes sense," said another regional trader.

The contango in the Dubai crude market structure shrunk $1.29/b month on month over February, Platts data showed.

For March, the Arab Light OSP differential was set at a $2.30/b discount to the average of Oman and Dubai, down 90 cents/b on month.

Aramco has been lowering its prices steadily since June as large producers scramble to hold on to market share following a roughly 50% drop in benchmark crude prices.

While Asia is heading into its seasonal refinery turnaround period, sentiment in the Middle East market has been supported by strong product cracks that have pushed up spot differentials for Middle East cargoes in recent weeks.

Most Middle East sour grades traded stronger last month, fueling expectations OSPs in general would be higher in the next cycle.

Saudi Aramco is expected to announce its April OSPs later this week.

--Gurdeep Singh, gurdeep.singh@platts.com

--Edited by Wendy Wells, wendy.wells@platts.com

Russia to export 23 ESPO crude oil cargoes in Apr, down two from Mar

Singapore (Platts)--2Mar2015/959 am EST/1459 GMT

Russia is set to export 23 ESPO blend crude cargoes in April from the Siberian port of Kozmino, according to a program seen by Platts on Monday.

The level is down from the expected export of 25 cargoes in March.

Each cargo is 100,000 mt in size.

The April loading program, which runs from March 30 to May 1, will see an average of 510,879 b/d of crude loaded.

The March loading program, which runs from February 27 to April 1, will see an average of 538,971 b/d.

Premiums of ESPO blend crude cargoes for loading in April have slipped based on results of recent tenders concluded.

Surgutneftegaz has sold three cargoes at premiums of $2.70-$3.15/barrel to Platts front-month Dubai crude for loading over April 9-13, April 15-19 and April 19-23 through a tender that closed on February 26.

Those premiums are down from its earlier sale at premiums of about $3.50-$3.70/b for two cargoes for early April loading.

Fellow Russian producer Rosneft meanwhile, is offering six ESPO blend crude cargoes for April loading through a tender that closed February 27, with bids to remain valid until March 4.

Russia initially sent all crude to the port of Kozmino by rail as the first stage of the ESPO pipeline, launched in December 2009, ended at Skovorodino, 2,000 km from the Pacific coast.

In December 2012, the second stage of the ESPO transportation network saw an extension of the pipeline to Kozmino as well as expansion of the port's capacity to around 600,000 b/d, from around 300,000 b/d initially.

--Christian Schmollinger, christian.s@platts.com

--Edited by Irene Tang, irene.tang@platts.com

US fuel oil demand hits record low 257,000 b/d in 2014, down 50% from 2009: EIA

Houston (Platts)--27Feb2015/332 pm EST/2032 GMT

US residual fuel oil demand in 2014 was a record low 257,000 b/d, down by half from 2009 and further evidence the product's utility is waning, Energy Information Administration data showed Friday.

The US EIA published a host of detailed figures for December that also provide a full calendar-year 2014 look at domestic supply and demand trends.

It was another down year for fuel oil, which has set the consumption bar lower for nine consecutive years. The 2014 figure was no exception, even with increased demand from the electric sector during a brutal first quarter winter in the Northeast.

"That included some big utility buying in January-February-March and October-November," an East Coast broker said of 2014's record low. "I'm not sure we see anything like that this year."

With domestic demand all but disappearing, the US has solidified itself as a net export of fuel oil, having been so since April 2011. US fuel oil exports averaged 362,000 b/d last year compared with 172,000 b/d for imports, EIA data show.

However, refiners and blenders have taken note. US fuel oil production was 436,000 b/d in 2014, also a record low since the US government began tracking the data in the mid-1930s. That is due in large part to the changing US crude slate, which has gotten lighter and sweeter and therefore leads to lower refinery yield of fuel oil.

In the nation's largest refining center, the Gulf Coast, the weighted average API gravity of crude input into refineries in 2014 was 31.12 compared to the five-year averaged of 30.31. Meanwhile, the weighted average sulfur content was 1.55%, down from the record-high 1.7% set in 2008, EIA data show.

--John-Laurent Tronche, john-laurent.tronche@platts.com

--Edited by Richard Rubin, richard.rubin@platts.com

Oil Titan Hamm: OPEC 'Tries to Wipe Out US Production'

Monday, 02 Mar 2015 07:00 AM

Our supposed allies at OPEC have it in for our oil industry, just like they have for the last 40 years, says oil-industry star Harold Hamm, CEO of Continental Resources.

"That's just the way the game is played with them," he told CNBC. "They try to wipe out U.S. production."

Oil prices have plunged 54 percent since late June, with U.S. crude trading at $49.05 a barrel Friday morning.

Saudi Arabia has resisted requests by other OPEC members to buoy prices by cutting production and has reduced its own prices to some customers. That's a way to drive U.S. producers out of the market, Hamm and others contend.

But Continental Resources will cope. "In this type of environment, all you can do is conserve cash and cut back and wait until prices come back," Hamm said. "It will adjust. Production levels adjust and so do prices. It's just a matter of time."

As for consumers, they had plenty to cheer about a month ago, when regular gasoline prices averaged $2.04 a gallon nationally, hitting five-year lows.

Now they have a little less to cheer about, with the price at $2.37, up 16 percent over the past month. To be sure, that level still represents a 31 percent drop from $3.44 a year ago.

The price has rebounded as refineries have shut down for maintenance. "There’s a huge mountain of crude oil sitting out there ... but it’s not getting to the refineries," says Aaron Task of Yahoo Finance.

That would suggest gas prices may fall back down after the maintenance is completed, although the approach of the summer driving season could serve to boost prices.

Meanwhile, the sluggish demand that has helped push oil prices to 5 ½-year lows shows that all's not well with the global economy, says Stephen Schork, editor of The Schork Report newsletter.

"When you have such a sharp fall in commodity prices, that's because of economic demand. And I think that's a very worrisome telltale," he told CNBC.

Brent falls to $61 on Iran, US crude recovers

by Christopher Johnson, tháng ba 02 2015, 18:18

LONDON — Brent crude oil fell more than 2% to around $61 a barrel on Monday after Iran said a deal on its nuclear programme could be agreed this week if the West lifts sanctions, which could boost the country’s oil exports.

International benchmark Brent was also depressed by a stronger dollar and reports of a rise in Libyan crude output, traders said, though US crude recovered to above $50 a barrel as industry monitor Genscape reported a smaller-than-expected build in crude stocks at the contract’s delivery point.

Brent crude hit a low of $60.74 a barrel and was at $61.36 by 3.34pm GMT, down $1.22. Front-month Brent jumped 18% in February, the largest monthly rise since May 2009.

US crude was up 36 cents at $50.12 a barrel, with its discount to Brent narrowing to $11.24 having earlier touched $13.03, its widest since January 2014.

The US crude gain came after traders said Genscape reported that crude stocks at Cushing, Oklahoma, delivery point of the contract, rose by 1.4-million barrels last week, less than the 2.4-million barrel increase the week before.

Iranian Foreign Minister Mohammad Javad Zarif said a deal on Iran’s nuclear programme could be concluded this week if the United States and other Western countries had sufficient political will and agreed to remove sanctions on Tehran.

"Our negotiating partners, particularly the Western countries and particularly the United States, must once and for all come to the understanding that sanctions and agreement don’t go together," he said in Geneva.

US Secretary of State John Kerry said there had been some progress in the nuclear talks but there was a long way to go.

Iranian oil exports have been restricted by sanctions for several years as the United States and Europe responded to Tehran’s nuclear programme, although Iran says its nuclear plans are peaceful.

Analysts say Iran could increase its oil sales fairly quickly if sanctions were lifted and may eventually be able to raise exports by up to 1-million barrels per day (bpd). A Reuters survey last week showed Iran pumped around 2.8-million bpd in February.

The dollar hit an 11-year high against a basket of currencies after a rate cut in China dented the Chinese yuan and also hit emerging Asian currencies. Oil is priced in dollars on spot markets and a stronger US currency tends to depress fuel demand from holders of other currencies.

Disruption to oil supplies from members of the Organisation of the Petroleum Exporting Countries has helped support crude, with lower output from Libya and Iraq in January and February.

Libya’s production has risen to more than 400,000 barrels per day (bpd), officials said.

Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt, said much of the recent strength in oil had been due to speculative buying. "The market is still over-supplied," Mr Fritsch told the Reuters Global Oil Forum.

Reuters

Oil market recoils after bumper gains

Analysts say dealers will next be scrutinising slew of US economic data for clues on demand prospects in world's biggest crude consumer.

LONDON - Global oil prices fell Monday, after bumper gains before the weekend, as many traders took profits and eyed plentiful world crude supplies, analysts said.

European benchmark Brent North Sea crude for April delivery dropped $1.26 to $61.32 a barrel in London early afternoon deals.

New York's West Texas Intermediate (WTI) for April shed 90 cents to $48.86 a barrel.

Crude futures had rebounded sharply Friday at the end of a volatile trading week. WTI had advanced $1.59 while Brent gained a hefty $2.53.

"Oil prices came under renewed pressure," said Sucden analyst Myrto Sokou on Monday.

"Crude oil inventories continue to remain at fairly high levels following ongoing builds of crude stocks last week."

Oil has lost about 50 percent of its value since June, largely due to a global supply glut partially caused by surging US shale production.

"Although there is still a global supply glut, oil prices are on a general increasing trend especially with the falling rig count numbers indicating that US shale is responding to low prices," Ken Hasegawa, energy trading manager at Newedge Group in Tokyo, said.

The weekly Baker Hughes US drilling rig count showed the number of rigs in operation fell by 33 to 986 in the week to February 27. The count is down 39 percent since October, according to Bloomberg News.

Analysts said dealers will next be scrutinising a slew of US economic data to be released later Monday for clues on demand prospects in the world's biggest crude consumer.

Barclays: Oil Prices Have to Move Lower to Impact Supply

Dow Jones Newswires

Reuters

Oil prices slid on Monday amid concerns that oil's February rally isn't sustainable.

Crude oil futures rose last month, snapping a seven-month losing streak, on hopes that supply cuts in the U.S. will alleviate the global glut that drove prices off a cliff last year. But analysts cautioned there are little signs yet of declining production and prices could fall again before they recover.

On Monday, Brent crude for April delivery fell 2% to $61.32 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded down 1.9% at $48.80 a barrel.

Brent, the global oil benchmark, gained 18% in February registering the sharpest monthly increase since May 2009. It outpaced U.S. oil prices, which rose 3.2% for the month pressured by record-high inventory levels.

Prices have been supported by a fall in the number of oil drilling rigs in the U.S., which is seen as a leading indicator of production. But while the rig count is down 31% from a year ago, the pace of decline slowed last week, falling by 33 rigs to 986, data from Baker Hughes showed on Friday.

Analysts at Commerzbank said that the slowdown can be explained by the recent strength in prices. "If this trend were to continue, the expectation of a noticeable reduction in U.S. oil output in the second half of the year could be disappointed," the bank said in a note to clients.

Meanwhile, latest Chinese manufacturing data didn't provide much optimism for oil-demand growth.

Over the weekend, China's official manufacturing purchasing managers index for February posted a contraction for the second consecutive month. Earlier Monday, the HSBC China manufacturing PMI rose to a final reading of 50.7 in February from 49.7 in January. Additionally, China's central bank cut interest rates and economists expect more easing measures to follow this year.

China's net imports of petroleum products in January were down sharply by 48% from a year earlier, due to weak domestic demand, increased domestic refinery capacity and changes to import taxes, analyst Ivan Szpakowski at Citi Research said.

According to analysts at Barclays, oil prices will have to move lower to create a meaningful impact on supply reductions, before the market can balance in the first half of the year. The bank sees Brent averaging $47 a barrel in the second quarter, down from this quarter's anticipated $53 average.

"The necessary great rebalancing of the oil market is still months away, and we think that the oil price is likely to test its mid-January lows again soon," Barclays said.

Nymex reformulated gasoline blendstock for April--the benchmark gasoline contract--fell 1.6% to $1.9459 a gallon, while ICE gas oil for March changed hands at $587 a metric ton, down $6.75 from Friday's settlement.

Eric Yep contributed to this article.

Iran President Rouhani: Lift sanctions over nuclear talks

TEHRAN, March 2 (UPI) --TEHRAN, March 2 (UPI) -- Tehran says it's time to lift sanctions against the oil-rich country imposed in response to nuclear concerns, though a new U.N. report raises questions.

Iran and members of the international community are working to resolve long-standing issues over the country's controversial nuclear program. A sanctions package from November 2013 allows Iran to export some crude oil in exchange for concessions on nuclear research.

Iranian President Hassan Rouhani said sanctions on his country should be "lifted all at once" because of its commitment to nuclear talks.

"Iran has always honored its commitments and it is currently clear to everyone that Iran is a completely serious side in the talks," he said in a statement Sunday.

Yukiya Amano, general director of the International Atomic Energy Agency, briefed delegates in Austria on the progress of the talks. Iran, he said, has verified it hasn't diverted any of its declared nuclear material to non-peaceful activity.

"However, the agency is not in a position to provide credible assurance about the absence of undeclared nuclear material and activities in Iran, and therefore to conclude that all nuclear material in Iran is in peaceful activities," he said in a statement.

Iran is working on a budget for a new year that begins mid-March that diminishes the weight given to oil revenue. Already, Rouhani said the economic progress "has been like a miracle," even under the weight of sanctions.

The Iranian economy emerged from recession in December.

Iranian officials in Tehran said Monday that even if sanctions are lifted, the government needs to ensure economic progress can continue.

U.N. meets rivals in oil-rich Libya

TRIPOLI, Libya, March 2 (UPI) --TRIPOLI, Libya, March 2 (UPI) -- Though some oil operations in the country have resumed, the U.N. Support Mission in Libya said it was calling for a peaceful solution to divisive crises.

Disputes between rival Libya governments, coupled with increased violence attributed to Islamic State militants, have spilled over into the oil sector. British energy company BP said in a much-watched annual report published last month that long-term production issues may result from the lingering violence.

The U.N. Support Mission in Libya said it met with rival leaders to discuss ways to advance political dialogue and cease-fire proposals.

"The participants agreed on the principle of a ceasefire and underlined the need to end the bloodshed in Libya and engage in dialogue," the mission said in a weekend statement.

In its monthly report for February, the Organization of Petroleum Exporting Countries said member-state Libya was producing around 343,000 bpd as of January, a 27 percent decline from December. U.S. Ambassador to Libya Deborah K. Jones wrote in the Libya Herald the country may go broke if oil continues to get caught in the cross fire.

German energy company Wintershall last week offered a mixed report on operations in a dividing Libya. Some production has resumed, but operations are staffed entirely by Libyan personnel as "the company had to withdraw all international staff, including contractors, due to the tense security situation in the country."

Staff members assigned to the company's office in Tripoli, where operations are "very limited," are working from home.

Turkey eyes oil in northern Iraq

ANKARA, Turkey, March 2 (UPI) --ANKARA, Turkey, March 2 (UPI) -- Agreements with Iraqi administrations open the door for Turkish oil exploration in the Kurdish north, the Turkish energy minister said Monday.

"We have agreements with Baghdad and [the government in] northern Iraq," Turkish energy minister Taner Yildiz said. "In the frame of these agreements, we will explore for oil there."

The minister offered no estimate of the reserve potential in targeted fields in the Kurdish north of Iraq, nor did he outline which companies would carry out the work.

Though suspended in response to payment rows with the Kurdistan Regional Government, British energy company Gulf Keystone Petroleum has shipped tens of thousands of barrels of oil across the border to Turkey.

Yildiz said the current economic climate would provide a net benefit to Turkish consumers.

"There can be an additional discount for Turkish people due to crude oil prices," he said.

Crude oil prices recovered from below the $50 per barrel mark in February, but have been unable to sustain a rally long enough to yield enthusiasm.

An insurgency waged by the group calling itself the Islamic State is creating economic burdens in its own right and the World Bank in January said it was the Kurdish revenue stream that was suffering the most as a result of the security situation.

The announcement from Turkey comes as the federal government in Baghdad and the semiautonomous Kurdistan Regional Government work to solidify a late 2014 agreement on oil revenue and production.

Gazprom Neft gets good grade from China

MOSCOW, March 2 (UPI) --MOSCOW, March 2 (UPI) -- China's Dagong Global Credit Rating Co. gave Gazprom Neft a AA credit rating, denoting a stable outlook for its debt portfolio and long-term production potential.

A good rating from a Chinese credit agency enhances the opportunity for success in the Asian market, the oil arm of Russian energy company Gazprom said Monday.

"The high credit rating from Dagong provides a further valuable reference point for Asian investors regarding Gazprom Neft's credit, and it will support further opportunities for collaboration," Deputy Chief Executive Officer for Finance Alexei Yankevich said in a statement.

The company said it received a AA-rating because of Gazprom Neft's limited access to foreign capital markets. The one-point difference reflects a weak Russian currency, trading at 61.60 to the U.S. dollar Monday, close to an all-time low.

The Chinese rating agency last month gave parent company Gazprom one of its best outlooks in the industry, a AAA, despite sanctions imposed on Russia's energy sector in response to crises in Ukraine.

Gazprom's rating opened the company up for trade on the Hong Kong stock index at a time when Russian energy companies are pivoting toward energy-hungry economies in Asia.

Last week, Russian Energy Minister Alexander Novak said natural gas supplies to Eastern economies should increase nearly tenfold by 2035. A so-called Power of Siberia natural gas pipeline will ensure Russian gas deliveries to China and the minister said at least three related agreements will be signed later this year.

China's credit enthusiasm contrasts ratings from Western agencies. Ratings agency Moody's last week lowered its assessment of seven Russian financial institutions, including the banking arm of Gazprom, because of recessionary threats.

Standard & Poor's and Fitch Ratings each lowered their ratings for Gazprom bank and others earlier this year.

The Russian economy is entering a period of prolonged weakness because of the dual strains of Western sanctions imposed in response to crises in Ukraine and a weak crude oil market. The Kremlin in February said the economy in 2015 will enter a "prolonged decline."

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