Petroleo Brasileiro SA (PETR4)’s board will resume talks tomorrow over a demand from the oil producer’s auditor to remove a top executive cited in a corruption investigation, said two people with knowledge of the issue.
Petrobras, as the state-run company is known, suspended an Oct. 31 meeting without reaching a decision on whether to dismiss Sergio Machado as head of transport unit Transpetro after PricewaterhouseCoopers refused to sign off on quarterly results bearing his signature, the people said, asking not to be named because the matter isn’t public. Some directors were reluctant to oust Machado on concern it would cause friction in President Dilma Rousseff’s ruling coalition, they said.
The Rio de Janeiro-based producer is at the center of a multi-billion-dollar money-laundering and bribery investigation that has put Rousseff, who was Petrobras chairwoman from 2003 to 2010, on the defensive. It was a major theme in last month’s elections that Rousseff won by a small margin.
Machado has denied any irregularities and says the accusations are absurd, Transpetro said in an e-mailed response from its press department. Machado has no knowledge about discussions at Petrobras’s board meeting or any recommendations from PwC, according to the response. Petrobras and PwC didn’t respond to phone calls and e-mails requesting comment after normal business hours. Rousseff’s press office directed all questions to Petrobras when contacted by phone.
Shares fell 1.5 percent to 15.05 reais at 10:26 a.m. in Sao Paulo. The stock rallied 6.7 percent on Oct. 31 amid speculation the board would approve a fuel-price increase.
Video Testimony
Petrobras, which delayed the release of its earnings without explaining why, suspended the Oct. 31 meeting without discussing a possible fuel price increase that investors were hoping for, one of the people said.
The former head of refining Paulo Roberto Costa, who’s under house arrest under a plea bargain deal with prosecutors, said in videotaped testimony he received 500,000 reais ($202,000) from Machado, the only Petrobras executive cited by Costa for alleged bribing who still works at the company.
A majority of the 10-member board favored dismissing Machado to guarantee compliance with PwC’s requirements, while others voiced concern that firing a former senator and ally of Senate President Renan Calheiros, the people said. Executives at the meeting said Machado has refused to step down on his own, the people said.
Calheiros’s office didn’t answer phone calls or respond to e-mails sent over the weekend. Transpetro declined to comment on Machado’s political ties in an e-mailed response.
Political Alliance
Machado, who was first elected to the senate in 1994, joined Calheiros’s PMDB party in 2001 that became part of former president Luiz Inacio Lula da Silva’s ruling coalition in 2003, and it remains part of Rousseff’s political alliance. Machado has headed Transpetro since 2003.
PwC alerted Petrobras in written correspondence before the board meeting that it wouldn’t approve Transpetro accounts signed by Machado and urged it to take action, according to the documents reviewed by Bloomberg. PwC said it may need to notify U.S. authorities and cancel the contract with Petrobras that expires at the end of this year, the documents show. PwC may have additional demands before it approves the earnings report, one of the people said.
PwC’s ultimatums highlight how the corruption allegations expose Petrobras to scrutiny in other jurisdictions where its securities trade. It also shows the company is deepening internal investigations to comply with market rules outside of Brazil at the request of third parties.
Congress Testimony
Management is dedicating time to investigate the claims and executives, including Chief Executive Officer Maria das Gracas Foster, have been traveling to Brasilia to testify before congress at a time it is trying to double production from deep-water fields in the Atlantic.
Earlier last month Petrobras hired two law firms to investigate alleged corruption after PwC said it wouldn’t sign off on quarterly results, the people said. PwC told Petrobras it would have to alert U.S. authorities if appropriate action wasn’t taken, the people said. On Oct. 30 PwC said it doesn’t comment on its clients in an e-mailed response.
Petrobras is a “victim” in the investigation and is collaborating with authorities, it said in a Oct. 27 statement.
Management Integrity
Under U.S. regulations, the CEO and CFO must certify accounts, saying they are free from material misstatements, including fraud. Most companies have sub-certifications, in which heads of divisions, units or others would certify that the accounts from the areas that they oversee are correct, said Jason Flemmons, managing director at FTI Consulting Inc. in Washington DC, and the former deputy chief accountant of the Division of Enforcement for the SEC.
“If the auditors believe there is a concern about relying on any certification or representation that could impact the financial statement, they would have to get comfortable with it before they would release the financial statement,” Flemmons said. “This is a management integrity issue at its core.”
When a company or an auditor files a letter to the SEC under section 10a of the Securities Exchange Act of 1934, it is routed first to the office of the chief accountant, which then sends out copies both to the SEC’s enforcement division and the division of corporation finance, Flemmons said.
The threshold for an auditor or a company to report the issue to the SEC is whether a violation of the law has or may have occurred, he said, meaning that a violation doesn’t have to be proven before a so-called 10a-letter must be filed.
By Winnie Zhu Nov 3, 2014 6:30 PM GMT+0800
China National United Oil Co., a unit of China’s biggest energy company, halted a buying spree of Middle East crude on a Singapore trading platform after a record haul last month amid oil’s slide into a bear market.
The company, known as Chinaoil, didn’t purchase any cargoes today for the first time in a month on the so-called window, used to determine benchmark prices by Platts, a unit of McGraw Hill Financial Inc., according to a Bloomberg News survey of traders. It bought 47 cargoes, equivalent to 23.5 million barrels, of Middle East crude in Oct. through the system, data from the energy-pricing company show.
A Beijing-based press officer at CNPC, Chinaoil’s parent company, didn’t immediately respond to four calls to his mobile phone and three calls to his office phone.
Brent prices have fallen to the lowest levels in almost four years amid signs of an expanding global supply glut, led by the fastest pace of U.S. production in three decades. China’s crude stockpiles increased to a new high even as it consumed the second-largest amount on record in September.
The Asian nation ships more than half of its crude from overseas. It plans to build emergency reserves equivalent to 100 days of net imports by 2020, according to China Petrochemical Corp. That’s about 680 million barrels. The country had 141 million barrels of strategic reserve capacity at the end of last year, said China National Petroleum Corp.
Bear Market
Brent crude traded at $82.60 a barrel on Oct. 16 on the London-based ICE Futures Europe exchange, the lowest intraday price since November 2010. Prices have slid more than 20 percent from their June peak, meeting a common definition of a bear market. The contract for December settlement was at $86.16 at 6:12 p.m. Singapore time today.
On the Platts Dubai window, so-called partial cargoes, each of 25,000 barrels, must be combined into one 500,000 barrel shipment when the same buyer and seller trade 20 lots in a single month.
Traders report bids, offers and transactions to Platts through e-mails, instant messages and phone conversations in a defined period each day, which are then used to create end-of-day price assessments for various commodities and used as benchmarks for trading around the world.
Bloomberg LP, the parent of Bloomberg News, competes with Platts and other companies in providing energy-market news and information.
The cheapest crude in 2 1/2 years has the world’s two biggest oil producers glad they held onto their refineries when rivals were shunning the business.
Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) surprised investors and analysts with higher quarterly profits as slumping crude prices made it cheaper to manufacture gasoline, diesel and jet fuel. The results showed the benefit of the so-called integrated model pioneered by John D. Rockefeller in the late 19th century that combined oil fields with refineries to squeeze more value from each barrel, said Brian Youngberg, an analyst at Edward Jones in St. Louis.
“What we’re seeing is the integrated model providing outstanding earnings,” he said in an interview yesterday.
Exxon’s refineries made $1 million in profit every two hours during the third quarter -- a 73 percent increase from a year earlier. Chevron more than tripled its profit from turning petroleum into fuels, helped by a U.S. refining network stretching from the Pacific Ocean to the Gulf Coast that processed enough crude during the quarter to fill 42 supertankers.
The refining business benefits from lower crude prices in a number of ways, said John Auers, vice president at Turner Mason & Co., a Dallas-based consulting firm. Refiners make some products, such as asphalt, that are insulated from oil price fluctuations. U.S. refiners are free to export their fuels to higher paying foreign markets. Also, cheaper gasoline can encourage people to drive more.
Refining Counterweight
For both companies, the refining boon more than made up for gloomy returns from oil and natural gas production as tumbling crude prices and faltering output dented profits from those businesses.
The question is how long they can continue to outrun falling oil prices. Refining profit margins already are shrinking as gasoline and diesel prices are dragged lower by the crude from which they’re derived. Fuel-price declines tend to lag a downturn in crude markets.
Exxon and Chevron make the lion’s share of their revenues from oil and gas exploration and production, where profits fell in the quarter by 4.4 percent and 8.6 percent, respectively. And if crude prices rebound, profit from making gasoline and diesel will typically plunge.
Stung by the volatility of operating refineries, Marathon Oil Corp. spun off its plants in July 2011. At the time, then-Chief Executive Officer Clarence Cazalot said in an interview that the integrated model had been a failure for his company, partly because its oil wells were too far away from its refineries.
Refining Spinoffs
ConocoPhillips followed suit 10 months later, spinning off its refineries to create a company now known as Phillips 66.
Booming production from North American oil fields has helped drive down energy prices globally. U.S. crude lost 25 percent of its value since touching this year’s peak of $107.73 a barrel on June 20. West Texas Intermediate settled at $80.54 in New York. The current four-month slide is the longest such streak since July 2008 to January 2009.
The profit margin on processing crude into motor fuels and other products rose more than 4 percent during the quarter to an average of $18.29 a barrel, according to data compiled by Bloomberg. Since the beginning of the current quarter, that margin has contracted to $13.69 a barrel, a 25 percent reduction.
Exxon’s third-quarter net income was $8.07 billion, or $1.89 a share, from $7.87 billion, or $1.79, a year earlier, the Irving, Texas-based company said in a statement yesterday. The per-share result was 18 cents more than the $1.71 average of 20 analysts’ estimates compiled by Bloomberg.
Model Leverage
“This really shows the leverage of the integrated business model,” Steven Hoedt, senior research analyst at Key Private Bank in Cleveland, said in an interview. “Their refineries provide a counterweight to lower crude-oil prices.”
Exxon and Chevron are direct descendants of the Standard Oil empire that Rockefeller assembled beginning in the late 1800s that was split apart by the U.S. Supreme Court during the second decade of the 20th century.
Exxon’s refining profit climbed to $1.02 billion from $592 million a year earlier even though the company processed less oil in every region where it operates refineries except Europe. Sales of gasoline and the family of fuels that includes diesel and kerosene increased, although demand for fuels used in airplanes and cargo ships declined during the quarter, Exxon said.
Refining Profit
Exxon’s $432 million increase in refining profit more than offset the $297 million decline in earnings from its oil and gas business.
For Chevron, profit rose to $5.59 billion, or $2.95 a share, from $4.95 billion, or $2.57 a share, the San Ramon, California-based company said in a separate statement yesterday. Excluding one-time gains and losses, the per-share result exceeded the average of 20 analysts’ estimates by 43 cents.
Chevron reaped another $1.01 billion from its refineries compared with a year earlier, more than making up for the $443 million drop in oil and gas proceeds.
Chevron’s refineries processed an average of 1.76 million barrels of crude during the July-to-September period, a 2.5 percent increase from a year earlier, according to the statement. In the U.S., so-called refinery throughput jumped by 11 percent.
Exxon gained 2.4 percent to $96.71 yesterday in New York, the biggest climb in more than eight months. Chevron rose 2.4 percent to $119.95.
Falling Prices
Exxon Chairman and CEO Rex Tillerson’s search for big oil discoveries may be hindered by collapsing crude prices, which erode cash flow needed to pay for exploration costs such as floating drilling rigs that rent for upward of $600,000 a day.
Boosting Exxon’s oil and gas production has been a perennial problem for Tillerson -- the company has seen output declines in more than half the quarters since he became CEO in January 2006, according to data compiled by Bloomberg.
Russian Freeze
Exxon is looking for the next frontier in oil exploration after sanctions forced the company to halt its venture with Russia’s OAO Rosneft (ROSN) last month on a billion-barrel discovery in the Arctic Ocean off Siberia.
The sanctions forbidding American companies from helping Russia drill Arctic, deep-water and shale wells were imposed to punish President Vladimir Putin’s regime for its support of Russian-speaking separatists in eastern Ukraine. The U.S. has said the measures won’t be relaxed until Putin withdraws support for the Ukrainian rebels.
As for Chevron, the second-largest U.S. oil producer by market value warned investors in August that full-year output will be 1 percent to 2 percent below the company’s previous estimate. Chevron is counting on new gas-export and deep-water oil developments from Australia to Angola to revive production during the next two years, Chairman and CEO John Watson said in a September interview.
Watson has so far shrugged off any long-term impact from the slump in world oil prices, which have fallen 25 percent from this year’s high in late June. The company is in the process of assembling its 2015 capital projects budget and plans to announce it in December, Chief Financial Officer Patricia Yarrington said during a conference call with analysts yesterday.
The company leading the Gorgon liquefied natural gas development in Australia -- the most-expensive of its kind ever -- only invests in projects that can turn a profit even during bear markets, Watson said during the interview.
Natural gas futures rose the most in four months on predictions for unusually cold weather that would stoke demand for the heating fuel and reduce stockpiles.
Forecasts turned colder over the weekend, with below-normal temperatures blanketing the eastern half of the U.S. from Nov. 8 through Nov. 17, according to MDA Weather. By the end of last winter, the coldest since 1982 based on heating demand, gas inventories were a record 55 percent below average after beginning the season at a small surplus. Gas jumped to $6.493 per million British thermal units on Feb. 24, a five-year high.
“The forecasts are reinforcing the risk of what could happen to stockpiles during the winter,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Traders are a little leery, given what happened last year.”
Natural gas for December delivery rose 17.3 cents, or 4.5 percent, to $4.046 per million Btu on the New York Mercantile Exchange, the highest settlement since Sept. 30 and biggest one-day gain since June 12. Volume for all futures traded was 67 percent above the 100-day average at 2:41 p.m. Prices dropped to $3.541 on Oct. 28, the lowest since last November, before ending last week up 6.9 percent.
“The market is rebalancing after reaching an 11-month low,” McGillian said. “It’s inevitable that traders on the short side of the market would start to get cold feet as it gets closer to winter.”
Less Bullish
Net-long wagers on U.S. natural gas dropped 41 percent in the week ended Oct. 28 to 19,686 contracts, the least since March 2012, according to the Commodity Futures Trading Commission’s Oct. 31 Commitments of Traders report. The measure includes an index of four contracts adjusted to futures equivalents.
The low in New York on Nov. 12 may be 31 degrees Fahrenheit (minus 1 Celsius), 11 less than average, according to AccuWeather Inc. in State College, Pennsylvania. Chicago temperatures may drop to 27 degrees, 9 lower than usual.
About 49 percent of U.S. households use gas for heating, data from the U.S. Energy Information Administration show. The agency is the energy department’s statistical arm.
“As of Friday’s close, we have switched our daily bias from neutral to bullish,” Stephen Schork, the president of Schork Group Inc., a consultant in Villanova, Pennsylvania, said in an e-mailed report today.
Gas stockpiles were 8.2 percent below the five-year average in the week ended Oct. 24, the biggest deficit for the time of year since at least 2005. Inventories totaled 3.48 trillion cubic feet as of Oct. 24, compared with 3.774 trillion the same time last year, EIA data show.
Gas demand may rise 1.6 percent to average 72.5 billion cubic feet a day this year, with the industrial sector leading growth, the agency said Oct. 7 in its monthly Short-Term Energy Outlook report.
NEW YORK, Nov. 3 (UPI) -- Crude oil prices for Monday, the first full trading day in November, started on a high note, recovering slightly from last week's pitfalls.
West Texas Intermediate crude oil for December delivery moved back above the $80 per barrel mark to gain 36 cents to trade at $80.90 in early Monday trading.
Prices last week drifted lower after a report from Goldman Sachs found little optimism that WTI would hold above the $80 mark near term. All future contracts from WTI showed a price above the $80 mark in trading Monday, however.
Crude oil prices are in a bear market, shedding about 20 percent of their value since June. A report published Monday from IHS, released to UPI, found capital investments from some of the biggest oil companies in the world could witness steady declines if oil prices continue to fall.
"We were previously expecting a 2 percent decline in exploration and development spending in 2014, based on an IHS survey of 50 of the largest global upstream companies," energy researcher and author of the report Daniel Pratt said in a statement.
IHS found major energy companies were spending more as costs and profitability decline.
Total Chief Executive Officer Patrick Pouyanne said when releasing third quarter results last week the decline in crude oil prices highlights the importance of efforts to "reduce costs and control investments to strengthen the resilience" of the company.
Brent, the global benchmark for crude oil prices, moved close to $86 per barrel, up more than 10 cents in early trading for the December contract. The December 2015 contract for Brent was $90.20 per barrel during Monday trading.
Pre-market data show modest gains in store for the start of the week on Wall Street.
TEHRAN, Nov. 3 (UPI) -- The Iranian economy isn't expecting a budget shortfall despite the steady decline in global oil prices, the country's economic minister said.
"We will face no budget deficit stemming from the oil price slump," Iran's Minister of Economic Affairs and Finance Ali Tayyebnia said Sunday.
An increase in oil production from North American shale deposits means market dynamics are skewed toward the supply side, pushing oil prices to historic lows. Some economies that depend on oil exports for revenue could start feeling the impacts, while producers elsewhere may find prices too low to sustain development.
"If oil prices keep falling, the government will definitely make plans to head off a budget deficit problem next [calendar] year," the minister said.
The National Development Fund of Iran is structured in such a way as to be protected from oil price fluctuations and may be a source of stability for the Iranian economy, he added.
An assessment from the World Bank finds the dependence on oil revenue makes the Iranian economy "intrinsically volatile."
DAMASCUS, Syria, Nov. 3 (UPI) -- A group monitoring terrorist activity in the Middle East says Islamic State militants have seized control of a natural gas field in Homs province in Syria.
The Long War Journal reported Sunday that it has viewed photographic evidence suggesting IS has captured parts of the al-Shaer natural gas field in Syria and several caches of weapons taken from defeated Syrian military forces.
"Pictures show that the Islamic State has taken control of the Hayan gas plant," Sunday's report stated.
The U.S. Defense Department and its coalition counterparts have hit oil installations controlled by the Sunni-led terrorist group to cut off a source of revenue and deplete fuel supplies used to make territorial gains.
At the height of its campaign, IS controlled as many as seven oil fields and was said to be generating as much as $2 million per day in oil revenue.
No information was immediately available on how much gas capacity was available from the Homs facility.
ABERDEEN, Scotland, Nov. 3 (UPI) -- Oil services company Maersk Oil said Monday the 70,000 barrels of oil expected from the Golden Eagle field in the North Sea represents a regional milestone.
Maersk holds a minority stake in the Golden Eagle development area in the North Sea alongside China National Offshore Oil Corp. The two wells now in service in the area are producing around 18,000 barrels of oil per day and output should reach 70,000 bpd by next year.
"A project of this scale is important for the U.K. North Sea and for Maersk Oil - to deliver it safely, on time and on budget is an excellent performance," Martin Rune Pedersen, managing regional director for Maersk, said in a statement.
Oil production from the North Sea has been in decline since the late 1990s. Government data show a decline of 7 percent from last year to 618,985 barrels per day in July, the last full month for which data are available.
The government in February said it was moving forward with recommendations from retired businessman Ian Wood, who led a panel tasked with finding ways to breathe new life into North Sea reserves.
By focusing on a regional strategy, rather than specific fields, and funneling more investments into the North Sea, the government said it could secure $330 billion during the next two decades by embracing Wood's recommendations.
MOSCOW, Nov. 3 (UPI) -- Russian government data show domestic natural gas production and exports increased during the first 10 months of the year, though output from Gazprom slumped.
Russia's government said natural gas production increased 2.1 percent through October. The largest producer, Gazprom, posted a 1.3 trillion cubic feet decline year-on-year to 124.3 trillion cubic feet for the period.
Oil company Rosneft, Russian independent gas producer Novatek and the financial arm of Russian natural gas Gazprom were included on the list of sanctioned entities by the U.S. government in July. Sanctions were imposed in response to the crises that grew out of Ukraine's November move closer to the European Union.
For Novatek, gas production for the first 10 months of the year was up 9 percent to 184 trillion cubic feet, data released Sunday show.
Exports of crude oil, petroleum products and natural gas account for nearly 70 of all Russian export revenues in 2013.
A report from the World Bank finds Russia's export-based economy leaves it vulnerable to geopolitical crises.
MEXICO CITY, Nov. 3 (UPI) -- A Kuwaiti exploration company said it signed a memorandum of understanding to work alongside its counterparts in the Mexican energy sector.
Kufpec, the upstream subsidiary of the state-owned Kuwait Petroleum Corp., signed the deal with an international division of Petroleos Mexicanos, known also as PEMEX, for exploration and production work in Mexico.
Kufpec Chief Executive Officer Nawaf Saud al-Nasir said in a statement Saturday the deal came "as a result of the recently enacted energy reform in Mexico."
Mexican President Enrique Peña Nieto is drawing international energy companies into the nation's energy sector by breaking up the 70-year-old Pemex monopoly on the energy sector.
A study from the U.S. Energy Information Administration said Mexico should produce around 2.9 million barrels of oil per day through 2020 under the reform agenda, erasing expected declines without the reforms.
Peña Nieto set a goal of producing 3.5 million barrels of oil per day by 2025, which would be a 40 percent increase from 2013 levels.
BAKU, Azerbaijan, Nov. 3 (UPI) -- Divers recovered the body of a rig worker missing since a late October platform collapse in the Caspian Sea, the State Oil Co. of the Azerbaijan Republic said.
SOCAR said Oct. 23 parts of a platform at the Narimanov oil and gas field in the Caspian Sea collapsed during repair operations. Three workers were confirmed dead and a fourth was reported missing.
The company said Monday divers recovered the body of the 53-year-old fourth worker from the sea floor.
There were about 40 people on board the platform at the time of the incident, which is still under investigation.
A section of the platform housing worker units collapsed into a natural gas pipeline during the incident. A fire on board the structure burned for about 45 minutes, authorities said.
The Azeri-Chirag-Guneshli oil and natural gas complex and the Shah Deniz gas field off the coast of Azerbaijan are among the largest of their kind.
STAVANGER, Norway, Nov. 3 (UPI) -- The Johan Sverdrup field in the Norwegian waters of the North Sea represents the future of the energy industry, a vice president from Statoil said Monday.
"Johan Sverdrup represents all we stand for as an industry and our faith in the future," Arne Sigve Nylund, Statoil executive vice president for Norwegian development and production, said in a statement Monday. "This will be a gigantic project that will secure energy supply and jobs and result in substantial spin-offs and value for Norwegian society, the industry and the partnership behind the development."
Statoil and its partners at Johan Sverdrup, Maersk Oil and Lundin Petroleum, in April outlined a development plan for the field based on multiple phases.
Full development plans for Phase 1 should be submitted to the Norwegian government for its approval in early 2015.
Statoil said at least half of the secondary construction contracts should go to Norwegian companies. For the economy, the company estimates Johan Sverdrup should generate $200 billion in revenues over the next 50 years.
Peak production is expected to be as high as 650,000 barrels of oil equivalent per day.
DOHA, 14 hours, 54 minutes ago
Qatar International Petroleum Marketing Co, or Tasweeq, plans to renew its contract to supply condensate to the United Arab Emirates (UAE) for 2015, the company's chief executive said on Monday.
Under the current 2014 contact, Tasweeq supplies three cargoes a month to the UAE, two to Dhabi's Emirates National Oil Company (Enoc) and one to Abu Dhabi's National Oil company (Adnoc), Saad al-Kuwari told reporters on the sidelines of an industry event in Doha.
Each cargo has 500,000 tonnes of condensate, he said.
"The Enoc contract expires soon and we plan to renew it. We will supply (Enoc) with same volumes and any extra demand will depend on availability," said Kuwari.
Last year, Enoc said it had started importing condensate from Qatar to replace sanctioned Iranian oil.
Enoc was the biggest buyer of Iranian condensate in 2012 when its imports rose to an average of 127,000 barrels per day (bpd), up from 106,000 bpd in 2011, despite US pressure to stop the trade.
Asked if Qatar would discount its condensate to compete with Iran, Kuwari said there were no plans to do so.
"The price is market driven and the outlook for demand is positive for next year. We have no plans to discount because we have a different quality of products and long-term contracts," he said.
Qatar expects a drop in its condensate exports to 350,000 tonnes per annum in 2017, compared with the current half a million tonnes a year, as the phase two of the Ras Laffan refinery will come online by the end of 2016.
"I don't think this will cause any major disruption in the market because there will be more supply coming from the US," said Ibrahim al-Sulaiti, marketing director for filed condensates at Tasweeq.
He added that in terms of exports 70-80 per cent of contracts were on a long-term basis and 60 per cent were sold to Korea and Japan. – Reuters
HOUSTON:, 1 days ago
The tanker Carabobo carrying Algerian light crude to Venezuela has finished unloading at Jose terminal and has set sail to the Caribbean island of Saint Eustatius, where it will deliver the rest of its content, according to Reuters vessel tracking data and a document from state-run PDVSA.
Arrival of the Algerian crude cargo marked the first crude import made by the Opec-member country, which in late 1990s bought condensates from Nigeria also to mix with its extra heavy production while its crude upgraders were built. Those purchases ceased in 2000.
The Singapore-flagged tanker, managed by a joint venture of PDVSA and PetroChina, delivered 700,000 barrels of Algerian Saharan Blend in Venezuela to be used as diluent for extra heavy crudes produced at the vast Orinoco belt, says PDVSA's exports and imports report.
The vessel, with capacity of two million barrels, set sail to Statia terminal, operated by NuStar in Saint Eustatius. PDVSA has leased part of the facility since the beginning of 2014 for blending and storing operations. It is scheduled to arrive to the Caribbean island.
Venezuela, long an exporter, does not have a vast infrastructure to handle imports. Only a few of its ports can manage unloading and transportation of oil purchases and most of them are being used for increasing fuel imports.
A second Algerian crude cargo for Venezuela, the Very Large Crude Carrier (VLCC) Boston, is being loaded at the port of Bejaia and expected to set sail to Jose terminal in the coming days.
After confirming purchases, PDVSA said this month that oil imports are "occasional" and most of them will be made while a 270,000 barrel per day (bpd) crude upgrader operated with Norway's Statoil and France's Total is halted for a major maintenance as of November.
But experts say that a decline in domestic production of light and medium crudes that were used as diluents in Venezuela, and delays in construction of new upgraders, are leaving PDVSA without options to replace imports in the short term.--Reuters
BAGHDAD, 1 days ago
Iraq's oil exports fell in October to an average 2.461 million barrels per day (mbpd) from 2.54 mbpd in the previous month, the oil ministry spokesman said.
October shipments generated $6.241 billion in revenue. Iraq sold its crude for $81.8 per barrel.
Meanwhile, bad weather trimmed oil shipments from Iraq's southern Basra terminals, with only 1.44 million barrels being exported compared with 2.28 million the previous day, a shipping source said.
"High winds around the Basra oil terminals made it difficult for ships to reach the ports. Loading operations have been disrupted," the shipping source said.
Opec member Iraq exports the bulk of its oil from its southern ports.
Shipments from the northern oilfields of Kirkuk have been shut since March 2 due to attacks on a pipeline to Turkey, keeping total exports below their potential.--Reuters
CAIRO, 1 days ago
Egypt signed $350 million worth of financing agreements with Saudi Arabia on Saturday aimed at upgrading its power grid and securing imports of petroleum products as it seeks to end its worst energy crisis in decades.
Power cuts have become common in Egypt as the cash-strapped government struggles to supply enough gas to its power stations let alone upgrade a grid suffering from decades of neglect.
The energy crunch has become a political hot potato in the Arab world's most populous country, which has turned from a gas exporter into a net importer in recent years as it diverts gas once destined for export to meet burgeoning domestic demand.
Lines at petrol stations and a shortage of gas were among the main public grievances against former President Mohamed Mursi of the Muslim Brotherhood. But oil-producing Gulf allies have come to Egypt's aid since the army, prompted by mass protests, ousted Mursi last year.
Two loan agreements signed on Saturday worth a total of about $100 million will be invested in two electricity stations that are expected to boost the capacity of the national grid. A further $250 million in assistance will come in the form of petroleum products.
Saudi Arabia sent Egypt $3 billion worth of refined oil products between April and September of this year, according to an Egyptian oil official, while the total value of Saudi oil aid since July 2013 amounted to about $5 billion.
Egypt has also turned to the United Arab Emirates for oil products, signing deal in September that commits it to purchasing about 65 per cent of its needs from its Gulf ally in the next year.
Egypt introduced deep cuts to energy subsidies in July, which have resulted in price rises of more than 70 per cent, as it seeks to curb public spending and fuel waste. – Reuters
SINGAPORE, 2 days ago
A strong Dubai price in a weak oil market has created a dilemma for top oil exporter Saudi Arabia as it works out official monthly selling prices for December, said indutsry experts.
The largest Opec producer is expected to raise the December prices for most of the crude grades it sells to Asia when it notifies customers early next week.
A hike would be in line with a strong Dubai market, but traders said that benchmark is not reflecting weak demand and poor refining margins in Asia, they stated.
"It's a tricky one this month," said a trader with a Western firm. "They will go up, but by how much, I'm not sure, particularly as they have been very aggressive on securing market share."
Members of the Organization of Petroleum Exporting Countries (Opec) - in no hurry to cut output despite global benchmarks at multi-year lows - have been competing on their official selling prices as they fight for market share, analysts said.
Saudi Arabia slashed November prices last month, sparking talk of an emerging price war.
For December, the kingdom could raise official selling prices (OSPs) across the board by at least $1 a barrel if it adheres to an informal formula typically used as a guide, a survey of five refiners and traders in Asia showed.
The formula is loosely based on the average monthly changes in the spread between the first and third month Dubai cash prices and refining margins for oil products.
"It's a special situation. If you just call it, there should be a big jump," a trader said.
Cash Dubai flipped into what traders called an "artificial backwardation" supported solely by strong demand from Chinaoil in a market assessment process in Singapore, even as Brent was in contango and has lost a quarter of its value since June.
Prompt prices are higher than those in future months in a backwardated market, indicating strong spot demand. The reverse is true in a contango market.
But Saudi Arabia may raise prices by a smaller than expected margin for December, traders said, as the producer could take into account weak spot demand in Asia, especially after the strength in Dubai snubbed out refining margin gains seen in September.
A slump in naphtha cracks could also cap price hikes for light grades such as Arab Super Light and Arab Extra Light, traders said.
"Refiners hope Saudi will consider not to reflect the distorted window market," a trader with a North Asian refiner said, referring to deals revealed during pricing agency Platts' market assessment process.
Saudi crude OSPs are usually released by the fifth of each month, and set the trend for Iranian, Kuwaiti and Iraqi prices.
Amid increasing signs that Gulf producers are engaged in a price war to compete for market share, Kuwait has maintained a wide discount between the crude it sells to Asia against Saudi Arab Medium for November.-Reuters
LONDON, 2 days ago
The oil supply of Organization of the Petroleum Exporting Countries (Opec) in October has fallen by 120,000 barrels per day (bpd) due to lower production in Angola and Nigeria, a Reuters survey found, although recovery in Libya and growth in Iraq kept output close to September's two-year high.
The survey also indicates Saudi Arabia and heavyweight Gulf producers are showing no sign of deliberately cutting exports to address oversupply and support prices that slipped to a four-year low below $83 a barrel this month.
Opec supply has averaged 30.72 million bpd in October, down from a revised 30.84 million bpd in September, according to the survey based on shipping data and information from sources at oil companies,Opec and consultants.
The organisation pumps a third of the world's oil and meets in November to set output policy for early 2015. Despite oil's drop below $100, the price manyOpec members had endorsed, the group appears unwilling to forego market share by cutting supplies.
"The big question for me is willOpec be willing to reduce its supply sufficiently to rebalance the market next year," Carsten Fritsch, analyst at Commerzbank in Frankfurt, said in the Reuters Global Oil Forum. "I have doubts."
September's output wasOpec's highest since November 2012, when it pumped 31.06 million bpd, according to Reuters surveys. Involuntary outages, such as in Libya, kept output belowOpec's nominal 30 million bpd target in earlier months of the year.
Lower exports scheduling from Angola and Nigeria reduced supplies by a combined 100,000 bpd, while Saudi output was assessed a marginal 50,000 bpd lower due to a reduced need for crude to fuel domestic power plants.
"Exports are flat, refinery runs are not much changed and direct burn lower, so overall supply is down," said one of the sources who monitors Saudi output.
The shutdown of the Khafji oilfield, jointly run by Saudi Arabia and Kuwait, slightly curbed Kuwaiti output but has not affected Saudi production as Riyadh holds a vast amount of capacity in reserve, sources in the survey said.
Of the countries boosting output, the largest gain has come from Libya. Supply has edged up another 40,000 bpd in October, although it fluctuated during the month due to bouts of unrest and the rate of increase has slowed from earlier months.
In Iraq, oil output rose due to higher exports from the country's southern terminals, despite some weather-related delays, and increased output from fields in Kurdistan.
While someOpec members have voiced concern over the drop in prices, indications are thatOpec is unlikely to cut its output target when it meets in Vienna on Nov. 27.
OPEC's most recent published forecast suggests demand for its crude will fall to 29.20 million bpd in 2015 due to rising supply of U.S. shale oil and supplies from other producers outside the group.
However,Opec Secretary-General Abdullah al-Badri this week said demand forOpec crude could be as high as 30 million bpd in 2015, taking into account "abnormal circumstances" such as unplanned outages.
"I don't think 2015 will be far away from 2014 in terms of production," he said during a visit to London. "I am sure the market will balance itself."-Reuters
