Western Canadian Select crude risesto 41-week high on summer demand
Western Canadian Select crude oil jumped to its highest price differential in 41 weeks on Thursday as trading for June injection picked up with the start of the new month.
Sources said WCS traded as high as the calendar month average of NYMEX light sweet crude (WTI CMA) minus $16.90/barrel, its highest differential since hitting minus $15.80/b on July 18, 2013. WCS was assessed Wednesday at WTI CMA minus $18/b.
Sources said that trading had been slow for June through the end of April, but Thursday saw substantial activity throughout the morning, with demand strong after the recent lull.
Some sources said that the strength appeared to be anticipating summer demand, while one trader said low stocks in the US Midwest could have contributed to the rise.
A second trader, however, said that the rise “doesn’t make much sense” given the recent weakness.
A broker, meanwhile, noted: “I can’t see WCS coming down to the Gulf Coast at that level. It’s almost not worth it.”
Unlike Wednesday, when Canadian pipeline markets rose in unison, the jump in WCS contrasted with a decline in the differential for Syncrude, the benchmark for light Canadian crude. Sources said Syncrude traded as high as WTI CMA plus $4.00/b before falling back to plus $3.00/b, down 25 cents/b from the Platts assessment on Wednesday.
Syncrude had been supported by maintenance at Canadian Oil Sands’ Syncrude refinery in Alberta, but similar light crudes in the Bakken saw a sharp drop on Wednesday. Bakken pipeline assessments declined 65 cents/b on Wednesday, though the wellhead differential rose 10 cents/b on a wider Brent/WTI spread.
OPEC oil exports fall to720,000 b/d in four weeks to May 17
OPEC crude exports, excluding those from Angola and Ecuador, are expected to average 23.45 million b/d over the four weeks to May 17, down 720,000 b/d from the previous four-week period, UK-based tanker tracker Oil Movements said Thursday. Compared with the same period a year earlier, the latest forecast from
Oil Movements shows a fall in OPEC crude exports of 670,000 b/d. Shipments from the Middle East over the four weeks to May 17 are expected to average 17.11 million b/d, down 690,000 b/d from the previous four- period of 2013, Middle East shipments are expected to register a decline of 670,000 b/d.
Train derailment Wednesday was carrying Bakken crude
The CSX train that derailed and caught fire Wednesday in downtown Lynchburg, Virginia, was carrying Bakken crude, the company said Thursday. The train, which had two locomotives and 105 rail cars, originated in the Bakken shale region in North Dakota, was handedoff to CSX at Chicago and was heading to Yorktown, Virginia, the company said in a statement.
About 15 of the rail cars derailed at 2:30 pm EDT (1830 GMT), CSX said. CSX said Thursday that it had safely removed the non-derailed cars from the scene and added that the National Transportation Safety Board is leading the investigation of the derailment.
Trade sources told Platts Wednesday that the train was headed to PlainsAll American’s terminal in Yorktown, which can unload 130,000 barrels a day of crude and is located on the site of Plains oil product terminal.
Four refineries on the East Coast can take crude by rail: Philadelphia Energy Solutions’s 330,000 b/d refinery in Philadelphia; Phillips 66’s 238,000 b/d Bayway refinery in Linden, New Jersey; Delta’s 185,000 b/d refinery in Trainer, Pennsylvania; and PBF’s 190,000 b/d refinery in Delaware City, Delaware.
A Phillips 66 spokesman said his company had no rail cars or crude on the derailed CSX train. A source familiar with operations at the Delta refinery said the crude was not destined for that facility.
Spokeswomen for Philadelphia Energy Solutions said the crude was not destined for the Philadelphia refinery. A PBF spokesman recommended logistic questions be directed to CSX.
Chevron's Q1 profit plunges on prices, lower production
Xinhua, May 3, 2014
Chevron Corp., the second largest U.S. oil company, said Friday that its net income fell 27 percent in the first quarter because of lower global oil prices and decreased production of oil.
The California-based company said in a press release that it earned 4.5 billion dollars in the first three months of this year on revenue of 50.1 billion dollars.
During the same period last year, Chevron earned 6.2 billion dollars on revenue of 54.3 billion dollars. On a per share basis, Chevron earned 2.36 dollars, down from 3.18 dollars last year.
"Our first quarter earnings were down from a year ago primarily due to lower prices and volumes for crude oil," said Chairman and CEO John Watson. "Crude prices were tempered by global economic factors, while our current year production volumes were affected by weather-related, unplanned downtime, particularly in Kazakhstan."
Chevron's worldwide oil-equivalent production was 2.59 million barrels per day in the first quarter, down from 2.65 million barrels per day last year.
Chevron's profit report came one day after both Exxon Mobil and ConocoPhillips reported drops in first quarter earnings this year due to the shrinkage in demand for petroleum products in the Unites States and internationally.
Oil Minister: Iran Ready To Export Gas To Europe
TEHRAN, May 3 (Bernama) -- Oil Minister Bijan Namdar Zanganeh said Iran is ready to play its role in the European market by exporting gas both via pipelines and the liquefied natural gas (LNG).
According to Iran's IRNA, he said that Iran, as a country that is capable of providing gas in huge quantities, is interested to be a player in the European energy market.
Given the critical situation in Ukraine, he reiterated that Europe is willing to diversify its energy resources.
Once the new phases of the South Pars project are operational, Iran will have extra gas to export, he added.
-- BERNAMA
Keystone Gulf Coast pipeline running at 530,000 b/d: TransCanada
Washington (Platts)--2May2014/644 pm EDT/2244 GMT
TransCanada's Gulf Coast Keystone oil pipeline extension is running at about 530,000 b/d, below its 700,000 b/d capacity, a company official said Friday.
Flows for the Keystone extension should ramp up to 700,000 b/d next year, CEO Russ Girling said during an earnings call.
The extension, which runs from Cushing, Oklahoma, to Nederland, Texas, and began service in January, is adding 300,000-400,000 b/d in Gulf Coast flows while also feeding the Upper Midwest and Cushing markets, said Paul Miller, president of TransCanada's liquids pipelines.
Miller said roughly three-quarters of the 400,000 b/d in flows to the Gulf Coast are contracted under take-or-pay contracts which obligate the shipper to pay for capacity whether they ship or not.
"From a throughput perspective we are watching the inventory levels at Cushing, but we are also watching the new production coming out of Permian as well as some inbound pipelines that we anticipate later on this year," he said.
Miller stressed that the pipeline extension has the ability to take both domestic light and heavy crudes in the Cushing market. He said increased domestic production has pushed out foreign light crude in the Gulf Coast and would likely push out medium crude and medium sour crudes, largely due to blending, as more domestic crude from the Eagle Ford is sent to other US markets.
"I think you'll see changing market dynamics going forward, I think you'll see a general build of inventory on the Gulf Coast which will necessitate additional storage, but I think it will also mean additional barrels moving to other parts of the United States and Canada," Miller said.
--Brian Scheid, brian.scheid@platts.com
--Edited by Jason Lindquist, jason.lindquist@platts.com
Oil trade tracks Libya cargo as test of nation’s return
By Grant Smith, Maher Chmaytelli
Bloomberg
A port in eastern Libya is once more the focus of oil markets, three years after it was the scene of a battle in the overthrow of Moammar Gadhafi.
The Zueitina oil terminal, 885 kilometers east of the capital Tripoli, is due to load its first tanker Friday since being seized in July by separatists. The restart matters because it’s a condition for the return of two bigger rebel-held export terminals to government control, according to Danske Bank A/S. Should all three become operational, crude prices would drop about 5 percent, the bank estimates.
Oil output in Libya slumped about 80 percent since the start of the uprising against Gadhafi in 2011. Supply from what is now OPEC’s smallest producer influences the price of Brent, Europe’s benchmark crude, relative to West Texas Intermediate, its U.S. equivalent. The world’s most-traded oil spread widened to as much as $23 a barrel last year, from about $3 at the end of 2010. It has since narrowed to $8 as the central government reached peace deals with the rebels.
“Developments in Zueitina are a good litmus test for how swiftly the bigger ports can resume,” Miswin Mahesh, an oil analyst at Barclays PLC in London, said April 30. “The reopening of these ports is crucial and negotiations around this are expected to take place once there is good faith achieved between both parties.”
An oil tanker will collect a 600,000 barrel cargo at Zueitina Friday for shipment to Europe, Mohammad Elharari, a spokesman at state-run National Oil Corp., said by phone from Tripoli Thursday. The tanker Ottoman Tenacity was due to arrive there, according to ship-tracking data compiled by Bloomberg.
The announcement on April 28 that Zueitina loadings would resume cut the premium of Brent to WTI by $1.70 a barrel, the most in four months. Brent is used to price more than half the world’s oil.
With the 70,000 barrel-a-day Zueitina port open, traders are waiting now for the restart of the 340,000 barrel Es Sider terminal, the nation’s largest, and Ras Lanouf, with a daily capacity of 220,000 barrels, Olivier Jakob, the managing director of Petromatrix GmbH, a consultant in Zug, Switzerland, said by email on April 29.
The 110,000 barrel-a-day Hariga terminal resumed exports on April 17 and has since shipped a total of 1.85 million barrels, almost enough to fill a supertanker.
Brent’s premium to WTI raised costs for refineries in Europe relative to other regions, contributing to the biggest wave of plant closings in decades. It also diminished the competitiveness of exports from suppliers that use Brent as a benchmark, such as Algeria and Nigeria.
Brent futures for June settlement traded at $108.69 a barrel at 10:10 a.m. London time, bringing this year’s drop to 1.9 percent. The benchmark grade climbed by about a third during the 2011 uprising against Gadhafi, reaching that year’s peak of $127.02 on April 11.
A resumption of shipments from Es Sider and Ras Lanouf would almost triple Libya’s export capacity to 885,000 barrels a day, according to Oil Ministry data. It could drive Brent down by about $5 a barrel, Danske Bank estimates.
While Libya’s government said on April 24 that it would have control of all eastern terminals within a month, officials said at least four times between August and December that ports could restart, only for blockades to persist. The Brent-WTI spread is currently about twice as wide as it was just after the peace deal was announced in early April, reflecting traders’ caution about the agreement.
Zueitina and the nearby town of Ajdabiya were a strategically important front line in battles three years ago that led to the ouster of Gadhafi, Charles Gurdon, an analyst at Menas Associates, said by phone from London. It was the smallest facility blockaded by the separatists.
The self-declared Executive Office for Barqa, which seeks autonomy for the eastern Libyan region also known as Cyrenaica, has occupied the terminals since July. Rebels agreed on April 6 to hand over control of Zueitina and Hariga in exchange for an amnesty and the payment of salaries to defectors from Libya’s Petroleum Facilities Guard.
While rebels are showing cooperation with the accord by reopening Zueitina, they will still require back payments of salaries and jobs for former Petroleum Facilities Guards before restarting Es Sider and Ras Lanouf, according to Richard Mallinson, an analyst at Energy Aspects Ltd. in London.
Once the conditions on jobs and pay are met, “the rebels are still looking for commitments on revenue and power sharing for the Cyrenaica region,” Mallinson said by email on April 29. The Executive Office for the Barqa region said in February it was seeking 15 percent of revenue from national crude sales.
A resolution of the dispute with eastern rebels would still leave the government contending with protests from groups in the west that have also curbed oil output.
Daily crude production in Libya was about 300,000 barrels on April 30, according to Elharari. The country pumped 1.6 million a day prior to the 2011 uprising, data compiled by Bloomberg show.
“ Libya has been one of the top factors in impacting Brent prices since the beginning of the revolution in 2011,” Abhishek Deshpande, a London-based analyst at Natixis SA, said in an email on April 30. “Zueitina’s reopening lays a potential foundation to improving the relationship between the Libyan government and rebel forces.”
