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Canada is home to Alberta’s oil sands and has the world’s third-largest crude reserves after Saudi Arabia and Venezuela.
CALGARY, Alberta — Canadian crude oil exports to the United States exceeded 3 million barrels per day for the first time ever in the week ended Oct. 3, data from the U.S. Energy Information Administration showed on Wednesday.
Canada, the No. 1 supplier of crude to the United States, exported 3.248 million bpd of crude to its southern neighbor, the weekly data showed. That was up 18% from the previous week and up 35% from the same period a year earlier.
The four-week average to Oct. 3 was 2.977 million bpd.
Canada is home to the Alberta oil sands and has the world’s third largest crude reserves after Saudi Arabia and Venezuela. Oil production is expected to reach 3.91 million bpd next year and surge to 6.44 million bpd by 2030, according to the Canadian Association of Petroleum producers.
Analysts at CIBC World Markets said much of the increase in crude exports was due to the ramp in shipments of crude oil by rail from western Canada.
Canexus Corp reopened its Bruderheim, Alberta, rail terminal last month after a summer shutdown, while U.S. Development Group and Gibson Energy Inc’s new Hardisty unit train terminal is ramping up to full capacity of 140,000 bpd.
“As we’ve pointed out over recent weeks, the new high-water mark is indicative of a sizable pick-up in rail activity given that pipeline takeaway capacity has not increased,” CIBC analyst Mike Tran said in a note.
The bulk of crude exports is still shipped south on Enbridge Inc’s 2.5 million bpd Mainline export network, which is undergoing an expansion program to deal with frequent congestion as oil sands supply outpaces pipeline capacity.
Enbridge’s new 600,000 bpd Flanagan South pipeline from Illinois to Cushing, Oklahoma, is expected to start shipping crude in December, suggesting exports could rise further in coming months.
© Thomson Reuters 2014
Wed, Oct 08 18:31 PM BST
BUENOS AIRES, Oct 8 (Reuters) - State-controlled Russian energy company Gazprom OAO plans to invest in Argentina's natural gas sector, the South American country's industry ministry said on Wednesday.
Debora Giorgi said in a statement that she met in Russia with Gazprom head Alexey Miller, who told her a "confidential" deal had been reached with Argentine state-run energy company YPF SA to explore for and produce gas in Argentina.
"It is estimated the investment will be of $1 billion dollars, to start with," the statement said, without clarifying whether the entire amount would be provided by Gazprom or divided with YPF.
A YPF press official had no comment on the industry ministry's statement and no one from Gazprom was immediately available for comment.
On Tuesday, Gazprom put a statement on its website saying that Miller met Giorgi in St. Petersburg.
"The meeting participants looked at the development prospects for the bilateral cooperation in the gas sector, with an emphasis on exploration and production of gas from Argentine gas fields," the Gazprom statement said.
A Gazprom deal would be the second major investment for Argentina after Chevron Corp agreed last year to invest $1.24 billion into the promising Vaca Muerta, or Dead Cow, shale formation in Patagonia.
Other oil companies drilling in Vaca Muerta include Royal Dutch Shell Plc and Exxon Mobil Corp.
Argentina is keen to reverse a costly energy deficit that is pressuring foreign reserves as Latin America's No. 3 economy is hit by fallout from the government's July bond default. (Reporting by Hugh Bronstein. Editing by Andre Grenon)
Saudi Arabia Oil-Price Cuts Said to Be Aimed at Aiding Refiners
Saudi Arabia cut its oil costs last week to boost margins for refinery clients and the move didn’t signal the start of a price war, according to a person familiar with the nation’s oil policy.
Some refineries in Asia couldn’t process Saudi Arabian crude profitably, according to the person, who asked not to be identified, citing policy. Brent crude, a global benchmark, fell 20 percent since June amid signs of a supply glut.
State-owned Saudi Arabian Oil Co. cut prices for all grades and to all regions for November shipments, reducing those for Asia to the lowest level since 2008. Commerzbank AG and Citigroup Inc. were among those who said the cuts might be the start of a price war.
The average price of benchmark OPEC crudes dropped below $90 a barrel for the first time in more than two years amid muted demand and ample supplies.
The so-called OPEC basket, a weighted average of the main grades produced by the Organization of Petroleum Exporting Countries, slipped to $89.37 a barrel yesterday, the group’s Vienna-based secretariat said by e-mail today. It’s the first time their reference price has dropped below $90 since June 25, 2012.
Global demand growth slowed in the second quarter to the weakest since 2011, while U.S. output climbed to the highest in three decades, International Energy Agency and U.S. Energy Department data show. The Washington-based International Monetary Fund lowered its estimates yesterday for global economic growth this year and the next.
“It’s $10 below OPEC’s preferred target price,” Ole Sloth Hansen, an analyst at Saxo Bank A/S in Copenhagen, said by e-mail. “But so far there’s no sign of action, so the oversupplied situation remains.”
OPEC, which supplies about 40 percent of the world’s oil, is due to meet to review its output target on Nov. 27 in Vienna. The target has remained at 30 million barrels a day for almost three years.
“OPEC is still hoping that the price weakness will prove temporary and that things will look a lot better when they meet,” said Julian Lee, an oil strategist at Bloomberg First Word in London. “I don’t think the basket dropping below $90 will change that.”
The OPEC Reference Basket of Crudes comprises Saharan Blend from Algeria, Girassol from Angola, Oriente from Ecuador, Iran Heavy, Basra Light from Iraq, Kuwait Export, Es Sider from Libya, Bonny Light from Nigeria, Qatar Marine, Arab Light from Saudi Arabia, Murban from the United Arab Emirates and Merey from Venezuela.
Gazprom officials will visit Buenos Aires-based YPF as soon as November, Giorgi said today in an e-mailed statement after meeting with Gazprom Chairman Alexey Miller at the International Gas Forum in St. Petersburg, Russia. The MOU could include Germany’s BASF SE (BAS) unit Wintershall AG, she said.
YPF, Argentina’s largest energy company, is seeking partners to develop a Chubut provincial shale deposit, D129, and Vaca Muerta, a shale formation the size of Belgium in the Neuquen basin that contains at least 23 billion barrels of oil. Chevron Corp. (CVX), the third-largest oil company by market value, is producing shale oil in a YPF joint venture that may expand to $16 billion.
“We are seeking partners to finance shale projects,” Giorgi said in the statement. “The investments will be for shale deposit not only located in Vaca Muerta.”
YPF has had “promising” meetings with Gazprom though it hasn’t yet signed an MOU, the company said today in an e-mailed statement. YPF said it will inform the market if it signs such an accord.
Alejandro Di Lazzaro, a YPF spokesman in Buenos Aires, earlier referred to a press release issued yesterday by Gazprom on the meeting between Miller and Giorgi.
“The meeting participants looked at the development prospects for the bilateral cooperation in the gas sector, with an emphasis on exploration and production of gas from Argentine gas fields,” Gazprom said in the statement. “Consideration was also given to supplies of liquefied natural gas from Gazprom group’s portfolio to the country.”
Moscow-based Gazprom is the natural gas producer that meets a third of European demand for the fuel. Wintershall produces 9 percent of Argentine gas output.
YPF’s American depositary receipts gained 2.2 percent to close at $32.85 in New York. The ADRs have surged 150 percent since the company was nationalized in April 2012.
A group representing billions of dollars of liquefied natural gas projects from Royal Dutch Shell Plc (RDSA) to Chevron Corp. (CVX) is urging Canada and British Columbia to improve conditions for the investments to go ahead.
“A new LNG industry in British Columbia is not a foregone conclusion,” David Keane, president of BC LNG Alliance said today in a speech in Vancouver. “If LNG is to be a viable industry in B.C., each level of government must come together with our industry and make some difficult decisions.”
Petroliam Nasional Bhd., Malaysia’s state-owned energy company and a member of the alliance, is among companies pressing governments for tax breaks and improved financial terms to justify construction of LNG terminals to supply gas from western Canada to expanding Asian energy markets.
The group represents four LNG projects, including one led by BG Group Plc. (BG/) Apache Corp. is Chevron’s partner in one of the proposed shipping terminals. The other two are led by Petronas, as the Malaysian company is known, and Shell with several partners.
Petronas this week said it may delay construction of its C$10 billion ($9 billion) Pacific NorthWest LNG project past 2030 unless proposed taxes are lowered this month.
“The window of opportunity to sell B.C. LNG into global markets is closing,” Keane said today at a conference organized by the Vancouver Board of Trade. British Columbia’s “cost structure holds the potential to to reduce our members’ competitiveness and their ability to succeed in the global market.”
Petronas needs commitments to lower taxes by the end of October to meet its mid-December target for a decision on the shipping terminal, Chief Executive Officer Shamsul Azhar Abbas said Oct. 6 in an e-mailed statement. The project is scheduled to start operating in 2018.
Canada Costs
Costs to develop LNG are higher in Canada than elsewhere because of proposed taxes, pace of regulatory reviews and higher prices charged by contractors, Shamsul said.
British Columbia Premier Christy Clark is confident Petronas will decide to proceed with the project, she said last week after meeting with Shamsul in Vancouver.
The meeting followed similar warnings about the viability of the Canadian LNG project by Shamsul in an interview with the Financial Times of London.
LONDON, Oct. 8 (UPI) -- Advocates for a low-carbon economy cried foul over a European decision to ease restrictions on oil sands produced from Canadian fields.
The European Commission ruled Tuesday to pull back on some of the low-carbon policies governing oil sands. The Canadian government has lobbied for the measure as it tries to diversify an export economy based almost exclusively on the United States.
Caroline Lucas, a member of the British Parliament for the Green Party, told the Independent newspaper the European decision was shameful.
"It completely defies reason, enormous public opposition and paves the way for big business to profit from gross exploitation of the earth's resources," she said in comments published Tuesday. "Tar sand oil is one of the dirtiest, most polluting fuels."
Oil produced from Canada is said to be more carbon-intensive than other grades. The European Union aims to cut its emissions from fuel by 6 percent of their 2010 levels by 2020, but last year the Canadian government said oil sands in some cases produces the same or fewer emissions than conventional crude oil from countries like Nigeria or Venezuela.
Agreements signed in July under the so-called Canada's Oil Sands Innovation Alliance call for the development of new technologies meant to reduce greenhouse gas emissions and water usage from the production of oil sands in Alberta.
Greenpeace, however, characterized Canadian crude oil as a "climate wrecking" energy source.
OSLO, Norway, Oct. 8 (UPI) -- Though cash from the petroleum industry was lower than expected, the Norwegian government said Wednesday the sector was producing ample value for the economy.
The Norwegian government said the net cash flow from the petroleum industry is expected to reach $46 billion this year, about 9 percent less than Oslo expected in its budget forecast for last year. The government attributed the price to lower tax receipts and a slump in global energy prices.
In last year's budget forecast, the government said it expected a global oil price of around $103 per barrel on average. Brent crude oil Wednesday dropped below $91 per barrel.
Nevertheless, Energy Minister Tord Lien said he was pleased to find the petroleum sector providing value to the national economy.
"The industry is Norway's most important in terms of value creation, state revenue and export value," he said in a statement.
Norway has more oil reserves than any other European country. Last year, it exported 1.19 million barrels per day worth of oil, with most of that headed to the British and Dutch economies.
For August, the last full month for which data are available, the government said the average daily production of 1.48 million barrels per day was 10 percent above what was expected for the year.
GENEVA, Switzerland, Oct. 8 (UPI) -- Energy issues in eastern Ukraine are taking a humanitarian toll as residents grow concerned about supplies for the coming winter, a U.N. report said Wednesday.
The U.N. High Commissioner for Human Rights published a report on the situation in eastern Ukraine.
"For almost half a year, residents of the areas affected by the armed conflict have been deprived of their fundamental rights to education, to adequate healthcare, to housing and to opportunities to earn a living," U.N. High Commissioner for Human Rights Zeid Ra'ad al-Hussein said in a statement. "Further prolongation of this crisis will make the situation untenable for the millions of people whose daily lives have been seriously disrupted."
The report said residents across Ukraine are growing concerned about energy issues, as they fear there could be a natural gas shortage this winter. This is a particular concern for those Ukrainians internally displaced by the conflict.
Political upheaval in Ukraine in November left an already-struggling economy in shambles. Russian energy company Gazprom cut gas supplies to Ukraine earlier this year because of mounting debt.
Russia, Ukrainian and European leaders are negotiating a deal that would ensure adequate winter gas supplies.
The U.N. report said more than 3,500 people have died as a result of the fighting in eastern Ukraine since mid-April.
WASHINGTON, Oct. 8 (UPI) -- U.S. refinery startups and a steady supply of oil from the Middle East are helping keep U.S. gasoline prices at historic lows, motor club AAA reports.
AAA reports a Wednesday national average price for a gallon of regular unleaded at $3.27 per gallon, 6 cents lower than one week ago and 8 cents lower than on this date in 2013.
The national average price is the lowest it's been since February. Several states are reporting an average price at just over $3 per gallon, though Missouri posted a state average Wednesday of $2.95.
In its weekly market report, AAA said Tuesday the slump in gasoline prices was because of lower prices for West Texas Intermediate crude oil, the U.S. benchmark, and for Brent, the global benchmark.
In the U.S. market, AAA said West Coast supply concerns were eased when Exxon Mobil restarted operations at its refinery in Torrance, Calif. Two refineries servicing the Gulf Coast also returned to service, which should push the price at the pump there lower.
"Global oil prices have continued to slide as supplies have outpaced demand and markets remain relatively unmoved by geopolitical tensions in the Middle East, Europe and Africa," the AAA report read.
U.S. gasoline prices tend to decline after September because refiners start producing a winter blend of fuel, which is cheaper to manufacture. Last week, the motor club said $3 per gallon could become commonplace by the end of the year.
THE HAGUE, Netherlands, Oct. 8 (UPI) -- Dutch energy company Shell said Wednesday it started production from a deepwater field in Malaysia, where output should reach 135,000 barrels per day.
Shell started production from the Gumusut-Kakap deepwater platform in waters more than half a mile deep.
"Gumusut-Kakap is our first deep-water development in Malaysia, and uses the best of Shell's global technology and capabilities in deep water," Andrew Brown, an upstream director for Shell, said in a statement.
Oil from the field will be sent through a 125-mile pipeline to onshore terminals.
The company in August announced a natural gas discovery in the Majoram-1 well, a deepwater well located about 110 miles off the Malaysian coast, but provided no estimate of the reserve potential.
Analysis from Wood Mackenzie said Malaysia is on pace to become one of the largest suppliers of liquefied natural gas in the world.
MOSCOW, Oct. 8 (UPI) -- The head of Russian oil company Lukoil announced plans Wednesday to visit Iraq to discuss expanding operations in the country.
"I will be in Baghdad on Oct. 13 to meet the oil minister," Lukoil President Vagit Alekperov said. "I hope, we will continue our talks on the expansion of our operations in Iraq."
First oil was produced from West Qurna-2, located in southern Iraq, in March. Lukoil, Russia's largest private oil company, signed a contract revision in June to build two 75-mile pipelines and associated infrastructure.
The company said West Qurna is producing more than 280,000 barrels of oil per day. In August, the company shipped its first batch of one million barrels from the field from the southern Iraqi port city of Basra.
The shipment came as Iraq struggles to control an uptick in violence, though most of that is centered in the northwest and Kurdish parts of the country.
ABERDEEN, Scotland, Oct. 8 (UPI) -- Helicopters pulled staff from the Beatrice oil rig in the North Sea because of the approach of a ship carrying radioactive waste, authorities said Wednesday.
Cargo ship Parida, loaded with radioactive waste, caught fire, prompting its crew to shut down the engines to carry out repairs. The vessel started drifting toward the Beatrice oil platform, forcing staff to close operations earlier this week
The Sheltand Coast Guard said two rescue helicopters lifted the 52 people on board the Beatrice rig to safety.
"Ministers have been briefed and Scottish Government officials are engaging closely with the Nuclear Decommissioning Authority, the U.K. Government and key partners to ensure appropriate response arrangements are in place," Scottish Environment Secretary Richard Lochhead said in a statement.
Scottish energy company Wood Group serves as the operator at the Beatrice installation on behalf of owner Ithaca Energy. The Beatrice field came into operation in 1981 and is the largest oilfield in the area, with an estimated 485 million barrels of oil initially in place.
WASHINGTON, Oct. 8 (UPI) -- U.S. airstrikes on Islamic State targets in parts of northeastern Syria include strategic control structures and oil refineries, the State Department said.
Militants with the group calling itself the Islamic State may be on the verge of claiming control over the strategic Turkish-Syrian border town of Kobani. U.S. airstrikes have targeted Islamic State militants in the region, though U.S. State Department spokeswoman Jen Psaki said the "primary objective" was to prevent the group from gaining a safe haven in the area.
"Our focus strategically is on command and control structures, oil refineries, and that's where we're taking our military action," she said during her regular press briefing Tuesday.
The Sunni-led terrorist group is said to be generating about $2 million per day on pilfered oil. Iraqi leaders and peace advocacy groups have said action must be taken to contain oil's role in IS financing.
Last week, the Energy Intelligence Group said U.S.-led military efforts have knocked out about half of the refinery capacity captured by the group.
The report said the biggest loss for the militant network is the destruction of its oil processing capabilities in Syria.
WASHINGTON, Oct. 8 (UPI) -- Global disruptions to crude oil production have abated, though there are still lingering concerns in the Middle East, a monthly market report finds.
The U.S. Energy Information Administration said in its monthly market report for September near-term supply disruptions have abated since June, when the group calling itself the Islamic State started gaining ground in northern Iraq and Libya's production was suppressed.
Since then, EIA said much of the production from northern Iraq was spared and southern exports were largely unaffected by the violence. For Libya, its production of 800,000 barrels per day last month was the highest in more than a year.
"However, the security situation in Libya is still precarious, with a significant possibility of intermittent disruptions," EIA said in the report published Tuesday.
Violence in Tripoli forced the Libyan Parliament to move to the fortified eastern port city of Tobruk in August. Earlier this week, IS reportedly were seen displaying their banner in parts of Libya.
EIA said much of the growth in world oil production comes from outside OPEC, with North America leading the way.
Total U.S. crude oil production in September averaged 8.7 million bpd, the highest level since July 1986.
New York (Platts)--8Oct2014/514 pm EDT/2114 GMT
US crude, gasoline and distillate stocks rose last week, US Energy Information Administration oil data showed Wednesday, as the crude build was supported by the start of refinery maintenance season and higher crude imports.
US commercial crude stocks increased 5.02 million barrels to 361.65 million barrels for the reporting week ended October 3.
Gasoline and distillate stocks were also higher last week. Gasoline inventory grew 1.18 million barrels to 209.67 million barrels. Distillate stocks increased 439,000 barrels, raising stocks to 126.14 million barrels.
Analysts surveyed Monday by Platts had been expecting a 2.1 million-barrel increase in crude stocks, roughly on par with the historical pattern seen for this reporting week.
The amount of crude processed by refineries was down 135,000 b/d to 15.55 million b/d last week. It was the sixth week in a row crude runs fell, as more refineries close to perform repairs coinciding with the end of the summer driving season.
Another contributing factor behind the weekly crude build was total US imports, which rose 647,000 b/d to 9.2 million b/d. The uptick was led by Canadian imports, which increased 494,000 b/d to 3.25 million b/d, setting a weekly record high.
The build in crude stocks was largest in the Midwest, where inventories rose 3.11 million barrels to 91.6 million barrels, likely driven by higher imports. Midwest imports jumped 520,000 b/d to 2.528 million b/d, which set another weekly high. The lion's share of Canadian imports head to the Midwest.
Crude stocks at Cushing, Oklahoma -- delivery point for the NYMEX crude contract -- were down 1.58 million barrels to 18.93 million barrels.
On the Gulf Coast, inventories rose 624,000 b/d last week to 185.09 million barrels. USGC stocks are well-above the five-year average of 179.30 million barrels. This time last year, stocks were 188.61 million barrels.
USGC runs fell 73,000 b/d to 8.07 b/d last week, helping to pull run rates there down 0.3 percentage point to 90.2% of capacity.
Total refinery utilization rate was 0.5 percentage point lower, at 89.3% of capacity. Analysts had been expecting a 0.38 percentage point drop.
USAC GASOLINE STOCKS RISE
US gasoline stocks rose sharply, counter to analysts' expectation of a 1.1 million-barrel draw. The EIA five-year average shows inventories often decrease over this reporting week, falling 846,000 barrels.
Stocks on the US Atlantic Coast -- home to the New York Harbor-delivered NYMEX RBOB contract -- were up 1.36 million barrels to 54.91 million barrels.
Atlantic Coast stocks are sitting 1.12% above the five-year average, one week after gasoline stocks had dipped below historical levels for the same reporting week, tightening supply at the critical hub.
Midwest gasoline stocks remain tight, falling 213,000 b/d. At 47.11 million barrels, Midwest gasoline inventories are 5.8% below the five-year average.
On the Gulf Coast, net production of gasoline rose 114,000 b/d to 740,000 b/d. Fluid catalytic crackers -- which convert vacuum gasoil into gasoline and other high-end refined products -- returning from maintenance last week included units at Marathon Petroleum's 84,000 b/d Texas City refinery, as well as Total's 174,000 b/d Port Arthur refinery.
DIESEL INVENTORY GROWS
Diesel remains well-supplied on the US Atlantic Coast. Combined low and ultra low sulfur diesel stocks rose 439,000 barrels to 126.14 million barrels last week, putting the region at a more than 25% surplus to the five-year average.
Gulf Coast inventories shrunk 522,000 barrels to 32.19 million barrels, which represents a 19% deficit to the five-year average.
Total distillate stocks grew, contrary to analysts' expectation that inventories would drop last week. The amount of distillates carried by vessels departing the US for Europe fell 130,000 mt last week to 490,000 mt, according to Platts cFlow ship-tracking software.
Fewer exports from the region to Europe and Latin American help allow inventories to build, as less supply is pulled away from stockpiles and shipped away.
New York (Platts)--8Oct2014/201 pm EDT/1801 GMT
US imports of Canadian crude rose 494,000 b/d to 3.248 million b/d for the reporting week ended October 3, US Energy Information Administration data showed Wednesday.
This beat the previous weekly high of 2.994 million b/d set over the week ended September 12.
That said, the more accurate and most recent monthly data for July pegs Canadian flows at 2.802 million b/d. The record for monthly data was set in February 2013 at 2.852 million b/d.
The lion's share of Canadian imports heads to the US Midwest, where crude stocks last week jumped 3.107 million barrels to 91.6 million barrels.
Midwest demand for crude held steady last week, with net inputs up 3,000 b/d at 3.466 million b/d. This has helped to keep run rates above 91% even as many US refiners enter seasonal maintenance.
While runs are down from the record 3.818 million b/d seen in mid-July -- when run rates were higher than 100% of capacity -- they are 207,000 b/d higher year on year. That said, operable capacity in the region has grown year on year to 3.81 million b/d from 3.77 million b/d.
Strong refining margins in the Midwest suggest refiners are keen to keep profitable runs high. Western Canadian Select coking margins were pegged at $24.62/b Tuesday, slightly off the 30-day moving average of nearly $27/b.
Syncrude cracking margins in the Midwest were pegged at $21.62/b Tuesday, just off the 30-day moving average of around $24/b.
Butan ongoing build-out by Enbridge of new or expanded pipeline capacity -- between points in Canada and the US Midwest, and further south to Cushing, Oklahoma, and the US Gulf Coast -- could also explain the higher imports.
The Flanagan South line, which connects Patoka, Illinois, to the NYMEX crude futures hub at Cushing, was expected to see line-fill beginning in early October, according to Enbridge Energy Partners President Mark Maki in early September.
Flanagan South was designed to allow for more Western Canadian Select barrels to eventually reach the US Gulf Coast once Phase 3 of the Enbridge Seaway twin line is ready. Deutsche Bank analysts last week pegged the Seaway line to startup in October.
WCS coking margins in the USGC came off this week, pegged at $8.42/b Tuesday, down from a 30-day moving average of close to $13/b. In fact, margins are down from over $16/b at the beginning of September.
WCS differentials at Hardisty rose 25 cents Tuesday to calendar month average of NYMEX light sweet crude (WTI CMA) minus $12.70/b, its highest value since being at WTI CMA minus $10.05/b on June 17, 2013.
US fuel oil stocks hit seven-week low, USAC imports at six-month low: EIA
Houston (Platts)--8Oct2014/1124 am EDT/1524 GMT
US inventories of fuel oil fell for the second straight week to a seven-week low in the week ended October 3, drawing down 680,000 barrels to 35.833 million barrels, data released Wednesday by the US Energy Information Administration showed.
The drop brought stocks to their lowest level since hitting 35.486 million barrels in the week ended August 15 and marked the third draw in the past four weeks.
Stocks fell throughout most of the country, but the largest draw came from the Central Atlantic -- a sub-region of the Atlantic Coast including New York, New Jersey, Pennsylvania, Maryland and Delaware -- where inventories fell 626,000 barrels to 5.134 million barrels. The Gulf Coast also saw a major stock draw, falling 411,000 barrels to 21.546 million barrels.
The largest factor in the draw appeared to stem from an increase in implied demand, the EIA's estimate of demand from surrounding factors, which jumped 118,000 b/d to 310,000 b/d. Implied demand averaged only 212,000 b/d over the past 10 weeks, compared with 248,000 b/d over the same stretch last year.
Declining production continued to play a role in falling stocks, as nationwide output dropped 19,000 b/d to 392,000 b/d, its lowest level since hitting 372,000 b/d the week ended August 8. Refinery yields of fuel oil fell 10 points to 2.52%, above recent lows but still below the year-to-date average of 2.78%.
In contrast, total imports of fuel oil rose 75,000 b/d to a one-month high of 205,000 b/d. The Gulf Coast and West Coast accounted for nearly all of these imports at 79,000 b/d and 117,000 b/d, respectively. Atlantic Coast imports fell to a six-month low at only 8,000 b/d. They last reached lower when the region saw no imports the week ended April 11.
London (Platts)--8Oct2014/902 am EDT/1302 GMT
High sulfur fuel oil physical supply in on the rise in the Amsterdam-Rotterdam-Antwerp region in October due to a closed arbitrage to Singapore, the end of refinery maintenance and inflows from the Baltics, traders said.
Traders said that supply would rise sharply in the second half of October on the arrival of fresh material after stocks were depleted as a result of large arbitrage flows of HSFO to Singapore in September.
Around 1.6 million mt found a home in the Asian market in September, sources said.
"I think the market is returning to normal, we see more and more volumes coming into ARA," one trader said.
"There should be a better availability as lots of oil is coming to Rotterdam, but it depends how quickly people blend," another trader said.
European refineries' HSFO production was anticipated to pick up due to higher refining margins and strong interest in sour slate crude.
"I think the strength in October-November was overstated. Premiums are coming off and I am quiet bearish about supply fundamentals," the source said.
According to Platts data, the backwardation of physical FOB Rotterdam 3.5% barges over front month swaps narrowed sharply to $5.50/mt Tuesday, $6.75/mt from $12.25/mt Monday.
The outright price of physical barges fell $7.75 day on day to be assessed at $505.50/mt Tuesday.
Despite the HSFO barge derivatives backwardation steepening a touch on Tuesday, during midday trading on ICE Wednesday the structure narrowed reflecting physical traders' anticipation of greater availability for the rest of October, sources said.
The 3.5% FOB Rotterdam barge balance month/November swap was offered at $6/mt at 1045 GMT, having been assessed at $7/mt Tuesday.
London (Platts)--8Oct2014/900 am EDT/1300 GMT
The arbitrage to send West African crudes to the US Atlantic Coast and Gulf Coast has not materialized in many shipping fixtures yet, despite a relatively narrow WTI/Brent spread, trading sources said Wednesday.
Traders had expected to see arbitrage and shipping fixtures between West Africa and the US because of the sharp contraction in the premium of Brent futures over US light sweet crude benchmark WTI.
In the past week, the premium of Brent over WTI has been in the range of $1.51-3.20/barrel, with the $1.51/b seen Monday being the narrowest spread since July 2013. The November Brent/WTI spread settled at $4.07/b Wednesday, while the December spread closed at $5.20/b.
Demand from the US for WAF grades has not yet picked up, sources said, adding one of the reasons was that most WAF values were too high.
Nigeria's flagship crude, Qua Iboe, was assessed at Dated Brent plus $1.64/b Tuesday, its highest value seen since June 24, Platts data showed. On July 28, it was at a 5-1/2 year low of Dated Brent plus $0.65/b.
There have been inquiries from US refiners, sources said, but no arbitrage fixtures had been seen yet for November. Platts cFlow ship-tracking software shows no cargoes en route to the US Gulf Coast from Nigeria, continuing a trend seen over much of the past three months. The last Nigerian crude to come to the region was a cargo of Agbami in August, Platts cFlow data shows.
"The WAF arbitrage looks like it works [on paper] and we know there are barrels floating around," said a trader at a US Atlantic Coast refiner.
"I would not be surprised to see something show up in November, but I have not heard of anyone bringing barrels here yet," he said.
WTI, LLS STILL CHEAPER THAN BONNY LIGHT
Even as the prompt Brent/WTI spread has come in, the delivered cost of Nigerian Bonny Light, basis Platts VLCC assessments, is still higher than either Louisiana Light Sweet or West Texas Intermediate on the US Gulf Coast.
Bonny Light was at a discount to WTI on the USGC briefly last week -- by a negligible 4 cents/b on October 2, Platts data shows -- in considerably from a premium of almost $7/b at the beginning of September. The spread between the two grades is closer to $3.86/b on a 30-day moving average.
The spread between Bonny Light and LLS narrowed as far as $1.01/b on October 2, but is almost $5/b on a 30-day moving average.
Meanwhile, the arbitrage to bring North Sea Forties to the USGC also appears to be opening. Forties delivered to the region has flipped to a discount to WTI for the better part of the last two weeks, Platts data shows. Forties/LLS has also flipped to a discount on three separate days over a similar period.
Most WAF crude values have risen in the past month supported by stronger refining margins and robust product cracks amid a steep drop in the flat price of ICE Brent, which has fallen around $13/b since the beginning of September to settle at $91.38/b Wednesday, the benchmark's lowest since June 2012.
BONNY LIGHT USGC MARGINS STRONG
Despite the slightly more expensive outright price for Bonny Light on the USGC, strong cracking margins appear to provide a sufficient motivation to bring the crude to the US.
Bonny Light cracking margins on the USGC closed at $13.49/b Tuesday, down slightly from a 30-day moving average of almost $16/b. Comparatively, WTI cracking margins were just $11.27/b Tuesday, and just over $15/b on a 30-day moving average. Bonny Light yields on the USGC are over $116/b on a 30-day moving average, compared to just $112/b for WTI.
Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.
From a producer's perspective, Nigerian barrels make the most sense on the US Gulf Coast. Nigerian netbacks on the USGC are around $114.43/b over the past 30 days, versus just $112.53/b on the US Atlantic Coast. While Platts does not track Bonny Light netback data in Singapore, Angolan Cabinda netbacks in Singapore are around $96.50/b.
Energy Aspects analysts in their weekly note said that Indian and China have been able to meet their strong and growing local gasoline demand without light, sweet barrels from West Africa.
This "is worrying as it shows their refinery upgrades have made them far more able to be selective crude buyers," the analysts said. "This is particularly true for the sweet WAF crude grades, with November Angolan heavy cargoes all sold out but both Angolan and Nigerian lights still unsold."
FOB Bonny Light delivered to the Far East would come in around $103/b, basis 130,000 mt, but similar light, sweet crudes like Arab Light are likely to remain cheaper as Saudi Aramco continues to slash its official selling prices.
RISING FREIGHT RATES
A higher cost for freight has also worked against the WAF-US arbitrage. A rise in ex-WAF Suezmax rates has been attributable to a large number of fixtures in the past three weeks, which has thinned out tonnage considerably .
Most WAF fixtures in recent weeks have gone to the UK Continent and Mediterranean, and there are still several cargoes left to be covered for October-loading dates. This has led shipping sources to say WAF rates are unlikely to ease much in the near future.
Cracking margins for Nigerian Brass River in Northwest Europe closed at $7.20/b Tuesday, in line with the 30-day moving average. By comparison, Forties cracking margins were just over $4/b over a similar period.
Also boosting WAF Suezmax rates in recent weeks has been the continuing employment of Suezmaxes to take 130,000 mt crude cargoes from WAF to land-based storage in Saldanha Bay, South Africa. There are at least four shipments to Saldanha Bay from WAF in October, with potentially more in the works.
BRENT CONTANGO
While a steady contango in prompt ICE Brent futures has made physical storage profitable for some traders, it has been easing. The contango settled at 41 cents/b Wednesday, in from around 68 cents/b on September 16, the first day of prompt November trading.
The term structure contango in Brent and a sharply backwardated WTI means that the December Brent/WTI spread offers a dwindling hope for further arbitrage.
"We might see some players take advantage of this as the arb has definitely been narrowing in the last week," a trader said. "It looks attractive on the November spread, but if you see the December Brent/WTI spread it does not look as attractive, especially if you look at the values of some US crude differentials."
Knoxville, Tennessee (Platts)--8Oct2014/536 pm EDT/2136 GMT
The NYMEX November natural gas futures contract dropped 10.2 cents to a $3.855/MMBtu settlement Wednesday on expectations of a second weekly triple-digit storage injection and forecasts for mild weather into late October.
Most analysts polled by Platts are expecting an injection of 106-110 Bcf in the Thursday gas storage report issued by the US Energy Information Administration.
Such a build would be slightly lower than the previous week's 112 Bcf injection, but would be much higher than the 91 Bcf EIA reported this time last year, as well as the five-year average build of 84 Bcf.
The market is "zoned in on $3.85," with resistance at $4.15-$4.20/MMBtu and support at $3.75-$3.80/MMBtu, said analyst Stephen Schork of The Schork Report.
"It's going to take something like an early cold snap or a late Indian summer to break out of this range. But we are obviously headed into winter as well," Schork said. "Steady as she goes."
The anticipated injection and the forecast over the next 10 days "are driving prices lower again," said Gene McGillian, a broker at TFS Energy Futures. "But every day we get closer to the winter heating season, and we see a reluctance for many to get further short."
The eight- to 10-day outlook from the US National Weather Service was little changed on Wednesday, calling for above-average temperatures in most of the US save for a small band of average temperatures in the northern tier states.
The contract's move lower is "partly moderating temperatures," said analyst Jay Levine of enerjay. "No heat and no cold equals a down market. We're squarely in the middle of this trading range between $4 and $3.75."
November traded Wednesday in a range of $3.837-$3.947/MMBtu.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
Jakarta (Platts)--8Oct2014/705 am EDT/1105 GMT
Indonesia's Donggi Senoro LNG is expected to deliver its first LNG cargo in mid-2015, with the start of gas supply to the 2 million mt/year LNG plant in the first half of 2015, a senior company official said Wednesday.
And supply from the Senoro gas field to the plant will be ramped up to its full committed volume of 250,000 Mcf/d by the middle of next year, Donggi Senoro LNG president director Gusrizal told reporters on the sidelines of the inauguration of ExxonMobil's Banyu Urip oil field.
"The [LNG] deliveries are about three cargoes a month, but we make an annual delivery program. The delivery volume will be based on that," Gusrizal said.
Previously, Donggi Senoro LNG, or DSLNG, expected to ship its first cargo in Q1 2015.
DSLNG has agreed to sell 300,000 mt/year and 1 million mt/year of its LNG output to Japanese utilities Kyushu Electric and Chubu Electric, respectively.
It will also supply South Korea's Korea Gas Corp., or Kogas, with 700,000 mt/year, Platts reported previously.
The plant is expected to ramp up to full production once total required feed gas from its two main joint venture partners, Pertamina Hulu Energi and Medco E&P, is available.
Pertamina Hulu Energi and Medco E&P will supply 250,000 Mcf/day from the Senoro field.
Another 85,000 Mcf/d will be delivered from Pertamina EP's Matindok block in two phases.
First-phase delivery is expected by December 2015, with full volume to be supplied from March 2016, according to Gusrizal.
Separately, Medco Energi Internasional's president director Lukman Mahfoedz said construction of the LNG plant is 99.7% complete.
"The project has been in commissioning stage since September 28," Mahfoedz said, adding that the commissioning period will take six months.
Medco and Pertamina are still carrying out exploration in the Tomori field at Senoro-Toili block in a bid to boost their production.
The block is estimated to contain 1 Tcf of gas, according to Mahfoedz.
"We have allocated $70 million to carry out exploration in Tomori. It is expected to complete at the end of 2014. After that we will study whether it is economically viable or not," Mahfoedz said.
DSLNG is owned by Pertamina Hulu Energi (29%), Medco LNG Indonesia (11.1%) and Sulawesi LNG Development Ltd. (59.9%).
Sulawesi LNG Development itself is held by Japan's Mitsubishi Corporation (75%) and Kogas (25%).
The $2.8 billion DSLNG plant is the first Indonesian LNG project developed as a "downstream business activity" based on Indonesia's oil and gas law, which enables separate development of upstream (feedstock gas supply) and downstream (LNG manufacturing) businesses.
Iran's new development contracts will be finalised soon and presented to the cabinet for approval, its oil minister said, a sign that Tehran is pushing ahead with effort to lure foreign investors once sanctions are lifted.
Iran wants Western oil companies to revive its giant, ageing oilfields and develop new oil and gas projects and has been preparing a new investment model for oil contracts as part of its drive to win back Western business.
The Opec producer is in talks with six Western powers to reach a deal to limit Tehran's nuclear programme - which could end sanctions on oil investment and trade with Iran. The deadline to reach a deal is November 24.
"The final touches are being made to this type of contracts at the Petroleum Ministry. It will then be submitted to the government for approval," Iranian Oil Minister Bijan Zanganeh said, according to the ministry's news agency Shana.
He added that the new model of contracts does not need to win the endorsement of parliament, Shana reported.
Iran had delayed a widely anticipated London conference during which it would offer oilfields, projects and its final investment contract to foreign oil companies until February next year from November, due to sanctions on its oil sector.
"In case the sanctions are annulled, a new model of oil contracts will be unveiled in London," from February 23 to 25, Shana cited Mehdi Hosseini, the head of the Petroleum Ministry Oil Contracts Revision Committee, as saying.
Iran's new contract model, known as the Iran Petroleum Contract (IPC), aims to tempt back oil companies with 25-year deals.
Western sanctions imposed in 2012 on Iran for its nuclear programme have choked Tehran's oil production. Output is down a million barrels per day (mbpd) since the start of 2012 at 2.7 mbpd, depriving it of billions in oil revenue.
Top officials say Iran can raise production to 4 mbpd within six months of sanctions being lifted. Western experts are more conservative, saying 3 million to 3.5 mbpd is more likely.
Zanganeh had met some Western oil executives at Opec's previous meetings in Vienna, including Italy's Eni, Royal Dutch Shell and Austrian oil and gas group OMV. -- Reuters
BENGHAZI, 12 hours, 42 minutes ago
Libya's oil production has slipped below 900,000 barrels per day because of an ongoing sit-in protest at Sirte oil company by local residents demanding jobs, a source at the National Oil Corporation (NOC) said.
The source did not give further detailed figures, but Libya's production had climbed to as high as 925,000 bpd last month after the Opec nation recovered from a year-long oil port blockade by an armed faction seeking more regional autonomy. -- Reuters
The urgent need for significant investment in infrastructure and asset management to satisfy the growing demand for power and water in the Middle East and North Africa (Mena) region will be the focus of an upcoming summit in Abu Dhabi.
The Power-Gen Middle East (PGME) and WaterWorld Middle East (WWME) Conferences and Exhibition to run from October 12 to 14 at Abu Dhabi National Exhibition Centre (ADNEC).
The significant gaps between water consumption and water production in the GCC region and the demand for a further diversified power supply mix across the Mena region, will be highlighted by white papers developed by Frost & Sullivan, a leading consulting firm.
About 43 per cent of the additional power capacity required to address the growing demand for power across Mena will be created by GCC countries, which demonstrates the need to find regional solutions to address stability and sustainability challenges associated with power supply, according to Frost & Sullivan.
Nigel Blackaby, event director of PGME, said: “Ensuring the local power and water supply will continue to fuel and support the region’s economy goes beyond making strategic investments.
“Maximising the potential of assets and a commitment to conservation are important components of an effective power and water management strategy. As the host to these leading conferences, Abu Dhabi is well positioned to demonstrate its leadership towards stability and sustainability and to share best practices in support of regional goals with leaders and decision makers.”
Leaders and decision makers from more than 65 countries have been encouraged to attend the event with its proposed conference topics and the list of high calibre speakers.
The Ministry of Energy of the Russian Federation will also host a forum during the conferences as part of the Russian government’s commitment to providing global energy security, developing international energy cooperation and ensuring sustainable economic development of the Mena region.
Tom Freyberg, conference director for WaterWorld Middle East, said: “The international presence at this year’s event is an acknowledgment of the potential of the regional marketplace from both an investment and leadership perspective.
“It also demonstrates a willingness to collectively tackle the challenges associated with rapidly growing demands for power and water. Delegates will be spoilt for choice with panels featuring industry technical experts and with access to recently published white papers and research.”
The joint exhibition, coinciding with the conference sessions, will showcase the latest equipment and technologies by regional and international exhibitors. - TradeArabia News Service
Dubai crude trade heated up on the Platts window on Wednesday as Chinaoil stepped up purchases, snapping up 90 partials in what is possibly the highest daily trade volume ever, traders said.
Wednesday's trades led to the delivery of five physical cargoes, bringing Chinaoil's total purchase to 13 cargoes, or 6.5 million barrels, in five sessions this month, they said.
"It's only the 8th of the month and he has already taken 13 cargoes," a trader with a Western firm said, referring to Chinaoil's trader Zhang Yufeng who takes charge of Middle East crude trading.
Chinaoil is the trading arm of state-owned PetroChina .
In Wednesday's trade, Mercuria and Royal Dutch Shell will deliver an Upper Zakum crude cargo each while Unipec, the trading arm of Asia's largest refiner Sinopec, will deliver two Oman crude cargoes, traders said. BP will deliver a Dubai crude cargo, they said.
Oil pricing agency Platts' spokesman could not immediately comment. – Reuters
ABU DHABI, 16 hours, 40 minutes ago
Gulf Capital, one of the leading alternative asset managers in the Middle East, has completed a $25 million investment in Amak Group, a leading provider of petroleum services for the onshore and offshore sectors in Egypt.
The investment was made through Gulf Credit Partners, which the credit and mezzanine business of Gulf Capital which provides financing and growth capital to fast growing companies in Mena and Turkey.
Dr Karim El Solh, chief executive officer of Gulf Capital, said: “Gulf Credit Partners’ investment will help Amak continue its strong growth at an exciting time for Egypt’s revitalised oil & gas sector.
“Amak’s strong position in the Egyptian oil and gas service sector, as well as its ambitious growth strategy and experienced management team, are strongly aligned with our Fund’s investment strategy. Gulf Capital is proud of demonstrating its confidence in the Egyptian economy by making several investments in Egypt this year through both its private equity and credit businesses.”
Underinvestment in Egypt’s upstream segment over the last three years has held back growth and seen domestic consumption catch up with production. Oil demand is expected to increase from 34.8 million tonnes oil equivalent (TOE) in 2013 to 45.5 million TOE in 2020. Over the same period, it is estimated that shortage of hydrocarbons in Egypt will grow from 6,57,000 barrels oil equivalent (boe) per year to 28.2 million boe/year.
An improving outlook with regards to political stability in Egypt has improved investor sentiment and encouraged investment in the country’s oil & gas sector. In its attempt to bridge the supply-demand imbalance, the Egyptian government has taken steps to attract further investment to this strategic sector. In particular, the government has reached an agreement with foreign oil firms to pay off all of its arrears by 2017.
This strategy already appears to be paying dividends, with the latest auction of 22 oil & gas exploration concessions drawing substantial interest from international oil multinationals, according to a statement.
Ayman Abbas, founder of Amak, said: “This institutional investment from Gulf Capital will strengthen Amak’s capital structure, allow us to fund the rapid growth of the Company and help improve overall corporate governance, all vital components to the continued success of Amak.”
Walid Cherif, managing director of Gulf Credit Partners stated: “We are thrilled with this seventh investment of the Fund and its success in deploying over 70 per cent of its capital in thriving and fast growing businesses. Our investment in Amak represents a new milestone for the
Fund as we further diversify our portfolio by geography and industries. Gulf Credit Partners is today invested in some of the fastest growing and most defensive industries across the region, including healthcare, education, power and oil and gas services.”
Dr Mohamed Farouk, Chairman and CEO of Amak said: “Gulf Capital has shown great flexibility in tailoring a unique financing solution that meets our strategic growth needs. This institutional investment will assist Amak in achieving its target of becoming the leading provider of integrated oil and gas services in Egypt.’ – TradeArabia News Service
CB&I, a leading energy infrastructure focused company and a provider of government services, has signed a $90-million deal with Abu Dhabi Marine Operating Co (Adma-Opco) for overhaul of oil storage tanks.
The contract will include a major overhaul of five crude oil storage tanks on Das Island, the site of Adma-Opco's main industrial base in the UAE.
Luke Scorsone, president of CB&I’s Fabrication Services operating group, said: “CB&I's comprehensive capabilities and experience in designing and constructing storage tanks has made us an industry leader for more than 100 years.
"It also gives us the know-how to successfully and safely execute tank overhaul projects such as this one for Adma-Opco." - TradeArabia News Service
Written by OilOnline Press
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The price of North Sea Brent crude oil has fallen to around US$91/bbl, the lowest level in more than two years and about 21% lower than its year-to-date peak of $115/bbl on 19 June. Before its recent decline, average monthly Brent spot prices had traded within a narrow $5/bbl range, from $107 to $112/bbl, for 13 consecutive months through July 2014.
During that period of low price volatility, substantial oil supply disruptions in the Organization of the Petroleum Exporting Countries were offset by increases in US production and weaker-than-expected global demand. More recently, however, the resumption of significant Libyan oil production, combined with the weakening outlook for global oil demand, has put downward pressure on prices.
The sustained increase in Libyan production over the summer—increasing from 200,000b/d in June to 900,000b/d at the end of September—has added supplies to an already well-supplied light sweet crude market in the Atlantic basin, despite the fact that Libya's recent production has not come close to its previous level of 1.65MMb/d in 2010 and 2011, before fighting that occurred during the Arab spring.
Over the past several years, increasing US light sweet crude production has significantly reduced light sweet crude imports to the United States. Those reduced imports, which were sourced primarily from Africa, became available to replace Libyan production lost during a time of civil war and subsequent unrest. While Libyan production was disrupted, supply and demand in the Atlantic basin was relatively balanced. However, as Libyan production has returned and has remained largely online despite internal unrest, the price of Brent crude oil has fallen.
Although the return of significant Libyan production has been an important factor putting downward pressure on the Brent price, weakening global demand, particularly in Europe and Asia, is also important. Economic growth in 2014 outside of the United States has been slow, and recent data releases appear to confirm lower-than-expected growth, particularly in Asia and Europe.
China reported that its industrial production has risen at the slowest pace since 2008. In Europe, the Organization for Economic Cooperation and Development has reduced expectations for economic growth through 2015 after data showed 2Q 2014 gross domestic product fell in Germany and Italy and stagnated in France.
Near-term seasonal market conditions are also reducing crude demand, as substantial refinery maintenance in the United States, Europe, and Asia takes place in September and October, reducing demand for crude. For more analysis, including near-term factors that could alter the current oil market landscape, see the 24 September This Week in Petroleum.
OPEC members won’t lower production, says source
Al-Khobar, Asharq Al-Awsat—Iran will not be reducing its oil prices in order to match its competitors on the global market, Iran’s oil minister said on Tuesday, amid fears that discounts offered by Saudi Arabia to US and Asian customers in November could trigger a price war among OPEC members.
“There is no oil price war in the [crude] market,” Iranian Minister of Petroleum Bijan Namdar Zanganeh told reporters on Tuesday, in comments carried by state-owned Iranian news channel Press TV. He added that Iran’s state-owned oil company, the National Iranian Oil Company, was currently setting prices in a “professional” manner.
This comes as Saudi Aramco, the Kingdom’s state-owned oil company, held a discount for US and East Asian buyers of its Arabian Light crude in November, which triggered fears other OPEC members may do the same and further bring down already low prices.
Brent crude dropped below the 100-US-dollar mark per barrel for first time in over a year last month, with the drop continuing on Wednesday to send prices tumbling to 91 dollars per barrel, the first time they have reached this level in more than two years.
However, the price remains above the 90-dollar mark, which most OPEC members identify as the price cut-off point for breaking even. Iran, however, needs prices above 130 dollars per barrel in order to meet its budgetary requirements.
But oil producers remained spooked regarding the health of the market following gloomy recent outlooks on Asian economies. On Monday, the World Bank revised its economic forecast for East Asia and the Pacific region to 6.9 percent in 2014 and 2015, down from 7.2 percent in 2013. It also revised growth expectation for China to 7.4 percent in 2014 and 7.2 percent in 2015, leading to fears over lower demand next year from the world’s biggest net importer of petroleum.
But despite the fears, OPEC has said it will not be lowering its output level of 30 million barrels per day in order to stoke demand and thereby raise prices, deciding instead to postpone any such decisions until all members have met before the end of the year.
A source from OPEC, who spoke on condition of anonymity because he was not authorized to brief the media, told Asharq Al-Awsat he did not expect any of the organization’s members to lower production before its meeting in November, adding that any decisions on output levels would be taken by all members in concert and not unilaterally by any individual members.
The source said current prices were expected given the strength of the dollar and with many refineries undergoing maintenance during the third quarter of the year. He added, however, that OPEC needed to look “seriously” into the issue of supply, especially considering demand was unlikely to pick up in the coming period.
Global oil demand is further expected to fall on the back of lower appetite from China, and from the US following its recent domestic shale oil boom.
Islamic State militants have been fighting for the past week for control of a key town straddling the Syrian-Turkish border. A victory by IS in Kobani, better known in the Arab world as Ain al Arab, would be a setback for the U.S.-Saudi-led alliance fighting the world’s most dangerous and most powerful terrorist organization.
More importantly, a victory for IS would give the group prestige among the dozens of groups lined up in the fight against Syrian President Bashar Assad. It would also secure the terror organization’s flow of oil to a lucrative market – its link to the outside world via Turkey, as I reported last week.
Proof that this conflict is far from being a religious war, as IS would have the world believe, is the current battle to the finish between the Sunni militant group and the Kurds in Kobani. The Kurds are overwhelmingly Sunni Muslim, yet IS is going after them with a vengeance. It’s a revealing detail about who’s in power in IS: former members of the regime led by Saddam Hussein, who, it should be recalled, used chemical weapons against the Kurds, gassing entire villages.
Today that battle continues in Kobani. IS has surrounded the Kurds on almost every side with tanks and shelled the city with heavy weapons. Kurdish fighters are resisting as much as they can with the few weapons they have.
In moving the front line to another region entirely, IS has once again shown that it is as agile on the battlefield as it is in its business operations.
The group shifts troops and materiel from one theatre of operations to another, easily adapting to the changing political and economic outlines of the conflict. At the end of the day, their fight is not for control of the mosques, but oil fields.
Why Kobani? Why the Turkish border? Why now? Three reasons.
First: IS has devoted so much energy and fighters to winning control of this otherwise non-descriptive town mostly because of its close proximity to the Turkish border. Much of the IS’s clandestine trade -- selling oil it has illicitly acquired from Syrian and Iraqi oil fields -- transits through Turkey.
Second: It gives IS a chance to further weaken the Kurds. Although they are from the same branch of Islam, IS sees the Kurds as an obstacle on their road to total domination of the caliphate declared by their leader, Abu Bakr al-Baghdadi.
Third: Kobani represents an opportunity for IS to expand its influence in the region.
Turkey -- a regional “superpower” -- is the only country with enough troops and armor and air support to inflict serous damage on IS. Yet the government of Recep Tayyip Erdogan seems extremely reluctant to intervene, despite a government pledge to do whatever it takes to prevent Kobani from falling.
That’s the equivalent of Ankara playing with fire where relations with its own Kurdish population are concerned. Turkish Kurds are furious that Ankara is holding back from intervening in Kobani until the U.S.-led coalition meets certain demands, like establishing a no-fly zone and a buffer zone in northern Syria. Turkey also wants a clearer understanding about how, or whether, Washington is going to help drive Assad from power.
Meanwhile, Kurds have watched helplessly from across the border as the battle rages and Turkish ambulances race to bring the wounded to hospitals near the frontier.
Turkey is playing a dangerous game by using the Kurds as currency in this situation. It should remember that playing with fire so close to oil can be explosive.
By Claude Salhani of Oilprice.com
