Russia has agreed to deliver 23 million mt of crude oil to Belarus in 2015, raising the volume to 24 million mt/ year between 2016 and 2024, with Belarus agreeing to process 50% of the supply at its refineries and return at least 1 million mt/year of gasoline to Russia, Russian daily Kommersant said Friday.
Additionally, Moscow allowed Minsk to keep $1.5 billion/year in duties emerging from exports of the remaining oil product volumes to third countries, the daily reported citing sources familiar with the agreement.
Under the agreement currently in force, Belarus is to transfer all duties from exports of oil products produced from Russian crude to the Russian federal budget. Russia receives some $3 billion-4 billion each year in oil product duties from Belarus, according to various estimates.
According to earlier reports, Russia plans to supply 23 million mt of crude to Belarus this year. The agreement secures 100% deliveries to Belarus’ two refineries — Mozyr and Naftan, the report said, citing Sergei Rumas, who represents Belarus in the Eurasian Economic Commission, the regulatory body of the economic union between Russia, Belarus and Kazakhstan.
Moscow and Minsk reached the deal Thursday in Kazakhstan’s capital of Astana within the framework of the wider agreement on the set-up of the Eurasian Economic Union between Russia, Belarus and Kazakhstan.
The Eurasian Economic Union is the next step towards closer economic cooperation between the three countries that formed the Customs Union in 2010.
Japan imported 201,871 barrels of Oyong crude from Indonesia for the first time in April, according to preliminary monthly oil data released Friday by Japan’s Ministry of Economy, Trade and Industry.
Oyong is a light, sweet crude with an API gravity of 41 degrees and a sulfur content of 0.07%. It gives a low yield of residual products.
One market source said that the crude is likely to be refined to produce light oil products in Japan, rather than for use as a direct-burning feedstock for power generation. The Oyong field is located offshore East Java.
Crude from the field is piped to the Surya Putra Jaya floating storage and offloading vessel for storage and export. Operator Santos holds a 45% interest in the field, together with Singapore Petroleum Company (40%) and Cue Energy (15%).
The rapid growth of US crude oil production will continue to be driven largely by light, sweet crudes, which could spark costly shifts in refining, construction of new splitters and increases in crude oil exports, the US Energy Information Administration said Friday. Domestic production should reach 9.2 million b/d in 2015, up from 7.4 million b/d in 2013, the EIA said in a report.
The agency said 60% of this estimated growth will come from production of sweet crude with an API gravity of 40 or above. Similar light, sweet grades were almost entirely responsible for current US crude production growth. About 96% of the 1.8 million b/d in production growth from 2011 and 2013, which climbed from 5.7 million b/d to 7.4 million b/d, was from sweet crude with API gravity of 40 or above, EIA said.
Crude production growth and its makeup varies by region, according to the report, anticipated to be the first in a series of reports on the potential implications of easing US restrictions on crude oil and condensate exports. The analysis largely showed a move towards a higher percentage of sweet crude with an API gravity between 40 and 50 API, with a diminishing percentage of crudes with API gravity above 50, which is commonly produced from wells targeting natural gas.
For example, about 35% of crude production in the Eagle Ford in 2011 was from crude with an API above 50, a percentage forecast to drop to about 15% in 2015. Meanwhile, crude with an API between 40 and 50 is forecast to climb from 45% in 2011 to 65% in 2015 of Eagle Ford production.
Similarly, in the Niobrara, crudes with an API above 50, which made up 40% of the region’s total crude production in 2011, will fall to 30% in 2011. At the same time, crudes with an API between 40 and 50 will climb from 30% to 50% of the total.
In the Permian, crudes with an API between 40 and 50 will climb from 35% of overall production to roughly half, the EIA said.
In the Northern Great Plains, primarily the Bakken, crudes with an API of between 40 and 45 will make up 80% of the region’s production, up from 45% in 2011, the EIA said.
The US on Friday formally awarded to ExxonMobil the first three oil and gas leases in the Gulf of Mexico area subject to the US-Mexico Transboundary Hydrocarbons Agreement, confirming remarks made Wednesday by ExxonMobil CEO Rex Tillerson to reporters.
ExxonMobil had submitted bids at Western Planning Area Sale 233 in August 2013 for the blocks in the Alaminos Canyon Area, which is within three statute miles of the maritime and continental shelf boundary with Mexico, the area covered by the Transboundary Agreement.
The US Department of Interior said ExxonMobil’s three leases, totaling $21.3 million, would be subject to the terms of the agreement when it becomes effective July 18.
“With the agreement now in full force, we can make additional oil and gas along the resource-rich boundary between the United States and Mexico available and we have a clear process by which both governments can provide the necessary oversight to ensure exploration and development activities are conducted safely and responsibly,” US Interior Secretary Sally Jewell said in a statement.
At ExxonMobil’s annual meeting in Dallas on Wednesday, Tillerson said the company sees “some prospectivity” in the awarded blocks and added there is “some technical work we can undertake that could be useful, but it would hard to say” what is there until more studies are carried out.
He added that ExxonMobil would wait until Mexico’s energy ministry decides which of the fields state-owned Pemex will get to keep for its own development, a determination expected in mid-September.
The US Congress approved the Transboundary Agreement in December, after the Mexican Senate approved it in 2012. The pact allows US companies and Mexico’s Pemex to enter unit agreements that include production-sharing terms.
If terms can not be agreed upon, the Transboundary Agreement includes provisions governing how US companies and Pemex can develop the resources on each side of the border.
With Mexico currently hashing out the details of major reforms to its energy sector, including Pemex’s operations, observers have said that oil and gas development in the transboundary area may not happen for a while.
US Atlantic Coast refinery yield of residual fuel oil averaged 5.5% during the first quarter of 2014, compared to more than 8% during the same quarter five years ago, a dramatic shift as regional refineries switch to a less sulfur-intense domestic crude supply.
Bakken formation crude oil is taking over. Philadelphia Energy Solutions is the largest refinery on the East Coast and also the largest processor of Bakken crude in the US, running about 25% Bakken feedstock, or more than 200,000 b/d of the grade, at its 335,000 b/d refinery. Phillips 66’s Bayway refinery in Linden, New Jersey, is not far behind while other refiners move toward using more of the light crude.
In March, the sulfur content of crude input into East Coast refineries was 0.66%, the lowest since May 2011, while the API gravity was 35.20, second only to the record-high 35.30 set in January 2000, the latest US Energy Information Administration data shows.
The switch means less production of fuel oil, a product that had a reliable consumer in the electric utility market until the recent natural gas boom in the eastern US shifted demand toward that product.
Bakken has an API gravity of 41 and a sulfur content of 0.2%, a lighter crude than most imports to which East Coast refiners have access. With Bakken production routinely reaching new all-time highs — 977,051 b/d in March — crude imports to the East Coast have been steadily declining: the East Coast imported 576,000 b/d of crude in March, the third-lowest total ever and a 210,000 b/d drop year on year, according to the most recent EIA figures.
While a changing crude slate reduces East Coast fuel oil production, the opposite situation is happening on the other side of the US. West Coast fuel oil production has been steadily rising of late and reached a more than two-year high in the first week of May. Furthermore, West Coast fuel oil production as a percentage of total US production is at its highest level since August 2010.
The oil rich Arab nations are looking to help Egypt's new leader and prevent the Muslim Brotherhood rebuilding a legitimate support base on the back of a weak economy.
Saudi Arabia and the United Arab Emirates are thought to be readying a financial aid package of $20bn (£12bn) to boost Egypt’s economy and support the incoming government of ex-Field Marshal Abdulfattah el-Sisi.
The oil-rich Middle East powerhouse Arab nations, which combined account for more than a tenth of the world’s supply of crude, have already held preliminary talks with authorities in Cairo to discuss how the line of funding will be structured, according to a report in the Arabic media over the weekend.
Abu Dhabi has already pumped $4.9bn into supporting the economy in Egypt - the most populous Arab states in the Middle East - as it seeks to support Mr El-Sisi and prevent the Muslim Brotherhood from rebuilding a legitimate support base on the back of a weak economy. The government in Riyadh has also pumped almost $5bn into supporting the Egyptian economy already as it seeks to influence events in Cairo and prevent a reawkening of political unrest across the region.
The brotherhood has been banned as a “terrorist” organisation in Egypt since the overthrow of Mohammed Morsi.
Qatar’s support for the brotherhood movement especially in Egypt had driven a wedge between Doha, Saudi Arabia and a number of other Gulf states . However, all sides in the Gulf Co-operation Council agreed to resolve their differences on the issue last month.
Egypt’s economy - once seen as progressive in terms of liberalisation and foreign investment - has failed to recover since the ousting of former President Hosni Mubarak’s regime during the Arab Sprint uprisings which saw a number of governments in the region fall. El Sisi - who is backed by the army - is understood to have won 97 pc of the vote, according to state media last week.
Meanwhile, Egypt stock market plunged on Sunday amid reports that a new government would move quickly to impose a capital gains tax. The EGX30 benchmark index closed 4.22pc lower, or at 7,894.7 points, continuing to slide after trading was suspended after the broader EGX100 index fell by 5pc.
During the Arab Spring uprisings the Egyptian stock market was closed for a period of months.
OPEC Crude Output Advances from 3-Year Low
http://cdn.akamai.thisdaylive.com/0bef99d6-acf5-4e2c-9779-8fa02ba3fcd4/assets/OPEC-headquarter08032011.jpg?maxwidth=400&maxheight=540
Obinna Chima with agency report
The Organisation of Petroleum Exporting Countries (OPEC) crude production climbed in May for the first time in three months, led by gains in Angola and Saudi Arabia, a Bloomberg survey showed.
Output from the 12-member OPEC countries rose by 75,000 barrels a day to an average 29.988 million, according to the survey of oil companies, producers and analysts.
Last month’s total was revised 50,000 barrels a day higher to 29.913 million because of changes to the Saudi Arabian and United Arab Emirates estimates.
Members increased production as the International Energy Agency projected further increases will be needed to meet demand during the second half of the year.
The IEA had said in a May 15 report that OPEC would need to provide an average of 30.7 million barrels a day in the last six months of 2014.
“There’s still room for OPEC production to increase further,” Managing Principal of ESAI Energy Incorporated, in Wakefield, Massachusetts, Sarah Emerson said.
“Both the IEA and OPEC said this month that there’s a need for additional barrels.”
Brent crude for July settlement advanced 16 cents to close at $109.97 a barrel last Friday on the London-based ICE Futures Europe exchange. Brent is the benchmark grade for more than half the world’s oil. West Texas Intermediate crude for July delivery increased 86 cents, or 0.8 per cent, to settle at $103.58 a barrel on the New York Mercantile Exchange.
Saudi Arabia, the group’s biggest producer, bolstered output by 70,000 barrels a day to 9.67 million, the first gain this year.
Nigeria’s production fell 70,000 barrels a day to 1.95 million in May, the second-biggest decrease in the survey. Royal Dutch Shell Plc lifted a force majeure on Forcados crude exports on May 15 after removal of theft points, according to e-mailed statement. Force majeure is a legal step that protects a company from liability when it can’t fulfil a contract for reasons beyond its control.
Libyan output fell by 35,000 barrels a day to 180,000, the lowest level since September 2011. Production this month was down 87 per cent from a year earlier.
OPEC ministers kept their output target unchanged at 30 million barrels a day on December 4. The group will next meet on June 11 in Vienna.
HEESU LEE , Bloomberg News
The U.S. will benefit from increased oil production and lower gasoline prices if the government lifts restrictions on crude exports, according to IHS Inc.
The world’s largest oil consumer may save an average of $67 billion a year from its import bill as domestic output may rise as much as 949,000 barrels a day in 2016 with the removal of the export ban, the Colorado-based consultant said in a report Thursday.
Such a scenario would support 964,000 additional jobs in 2018, it predicted.
“Making U.S. oil available to global markets would unlock the current supply and refining gridlock,” IHS said. “It would lead to a total of $746 billion in additional investment during the study period of 2016 to 2030 and an average of 1.2 million barrels per day more oil production per year.”
A 1975 U.S. federal law bans most oil exports, with only shipments of refined products such as gasoline and diesel allowed.
Gasoline prices in the U.S. may potentially drop by 8 cents a gallon each year on average if the export ban is lifted, according to IHS.
This would translate to $265 billion in savings for U.S. motorists during the 2016 to 2030 period.
“The 1970s-era policy restricting crude oil exports — a vestige from a price controls system that ended in 1981 — is a remnant from another time,” said Daniel Yergin, vice chairman at IHS. “It doesn’t reflect the dramatic turnaround in domestic oil production, led by tight oil, which has reversed the U.S. oil position so significantly.”
The mismatch between rising U.S. oil production from shale and the country’s ability to refine it is driving the debate over whether to lift the ban on crude exports, Energy Secretary Ernest Moniz said.
“The driver, or the consideration, is that the nature of oil we’re producing may not be well matched to our current refinery capacity,” Moniz said in Seoul last month.
U.S. crude inventories rose last month to the highest level since the government’s Energy Information Administration began publishing weekly data in 1982.
Saudi oil exports hit SR472bn in 5 months
Saudi Arabia's oil exports reached 1.17 billion barrels in the first five months of this year 2014, with proceeds amounting to SR472.8 billion, local media said quoting an expert.
On the other hand, domestic consumption during the five-month period stood at nearly 317 million barrels, or 21 percent of the total output of the same period, Fahad bin Jumaa was quoted by Al-Riyadh daily as saying.
The figures come on the back of an announcement made by Minister of Petroleum and Mineral Resources Ali Al-Naimi in mid-May saying that the Kingdom is the world’s biggest oil exporter and is ready to supply markets with more crude oil if tension escalates between Russia and the West in the aftermath of the Ukraine crisis.
He stated that the Kingdom’s current oil production stands at 9.6 million barrels per day (mbpd) and is prepared to increase production capacity to 12.5 million bpd.
Jumaa said Saudi oil exports have improved with the increased demand by China that is trying to increase its strategic stockpile in light of the political developments in Ukraine, which sent the prices of Brent oil to higher levels exceeding $110 per barrel compared to $ 104 for West Texas oil for July future deals.
Last May, the International Energy Agency (IEA) announced that OPEC (the Organization of Petroleum Exporting Countries) will be required to increase production in Q3 (2014) by 900,000 barrels per day as from April to meet growing global demand, which is expected to rise by 65,000 per day in the current year to reach 92.8 mbpd, he said.
It is to be recalled that Saudi oil exports hit 715.72 million barrels in the first quarter of the year with proceeds amounting to SR288.91 billion.
June 1, 2014 - 19:57 AMT
PanARMENIAN.Net - Iraq's crude oil exports increased slightly in May despite constant militant attacks that have left a vital oil pipeline idle, the Oil Ministry said Sunday, June 1, according to the Associated Press.
The oil exports averaged 2.582 million barrels a day last month, an increase from the 2.510 million barrels per day in April, ministry spokesman Assem Jihad said. Jihad said the sales grossed $8.68 billion, based on an average price of $100.08 per barrel. April's revenues stood at $7.582 billion.
He added that all the oil was exported through the country's facilities on the Persian Gulf as the pipeline which goes to Turkey's Mediterranean port of Ceyhan has been idle since March because of terrorist attacks. The pipeline, which pumps 300,000 to 400,000 barrels a day and traverses restive Sunni-dominated areas of northern Iraq, has been a favorite target for militants.
Iraq holds the world's fourth largest oil reserves, some 143.1 billion barrels. Insurgent attacks, infrastructure bottlenecks and disputes with the northern self-ruled Kurdish region over rights to develop natural resources have been the main obstacles to Iraq increasing oil production and exports.
In 2009, the Kurds contributed oil officially from the first time through a Baghdad-controlled pipeline, but shipments were interrupted many times over payment disputes. Last month, the dispute took a new turn when the region decided to unilaterally export oil through an independent pipeline.
Baghdad has called the move "smuggling" and "robbery" and has filed a request for arbitration against Turkey, vowing a lawsuit against the Kurdish regional authorities as well as the traders and the buyers.
On Sunday, the Oil Ministry renewed its warning to potential buyers of the nearly 1.05 million barrels still loaded on a vessel called the United Leadership, which left Turkey on May 22, according to the AP.
"The Oil Ministry considers the oil loaded on the mentioned vessel stolen and smuggled," the statement said. "Any party or oil company that deal with or market the cargo of the vessel will face legal action."
Iraq has been struggling to develop its oil and gas sectors since the 2003 U.S.-led invasion, when deteriorating security scared many investors away. Daily oil production and exports have climbed steadily since 2011, nearly two years after Iraq awarded rights to develop its major oil fields to international oil companies. Oil revenues make up nearly 95 percent of Iraq's budget.
June 1, 2014
BAGHDAD,— Iraq threatened on Sunday to take legal action against any buyer of oil exported via a new independent pipeline from the autonomous Kurdistan region to Turkey.
The Iraqi Ministry of Oil warned on Sunday the global markets and companies from buying a load of "the United Leadership" loaded with crude oil extracted from fields of Kurdistan region.
The first cargo of piped oil from Kurdistan left Turkish shores 10 days ago aboard the United Leadership tanker, despite objections from Baghdad, which has since filed for international arbitration against Ankara for facilitating the sale.
Iraq says its State Oil Marketing Organisation (SOMO) has exclusive rights to manage sales of crude from all the country, including Kurdistan.
"SOMO, on behalf of the Iraqi federal ministry of oil, is hereby warning all companies, individuals and bodies from buying the Iraqi crude oil cargo that is loaded on the vessel (United Leadership)," SOMO said in a statement signed by General Director Majid Alhilfi.
"The Iraqi federal ministry of oil and SOMO ... shall reserve the right to take all legal measures against any company, individual and/or body that bought or might consider buying the said cargo," it added.
After leaving Turkey's Ceyhan port, the United Leadership sailed through the Mediterranean and appeared to be heading in the direction of the United States, but on Friday reversed course, ship tracking data showed.
Some sources in the market and others that monitor the movement of ships have said that the United Leadership tanker sailed in the direction of the U.S. coast on the Gulf of Mexico since loading it from the Turkish port of Ceyhan last week .
Kurdistan Regional Government confirmed that crude will go to Europe in response to a question about the ship going to the United States and whether this shipment is "the first of several similar deals."
The Prime Minister of the Kurdistan region, Nechirvan Barzani, stated in a press conference Friday, "The Kurdistan region has respected the Iraqi constitution,www.Ekurd.net and we do not have any secret plans to sell oil...we continue to sell Kurdistan region's oil, currently 100 thousand barrels per day”. He added that by the end of 2014, sales will be increased to reach between 450-500 thousand oil barrels.
Copyright ©, respective author or news agency, Reuters | Ekurd.net | Agencies
AFP
Baghdad (AFP) - Iraqi oil exports rose for a second consecutive month in May, figures showed Sunday, despite a northern pipeline remaining disabled and a central government row with the country's Kurdish region.
Crude exports averaged around 2.58 million barrels per day (bpd) last month, all of which were shipped from Iraq's southern export terminals, the oil ministry said in a statement.
The sales raised $8.68 billion in revenues.
The average daily exports marked an increase from April's figure of 2.50 million bpd, but fell short of February's multi-decade high of 2.80 million bpd.
Exports in Iraq have been hit by persistent militant attacks on a pipeline connecting the northern province of Kirkuk to the Turkish Mediterranean port of Ceyhan.
The pipeline has been disabled since early March, and it is not expected to be up and running for several days.
At its peak, it was carrying upwards of 500,000 bpd to international markets via Turkey.
Exports have also been limited by a row between the central government and the autonomous northern Kurdish region.
Iraqi Kurdistan shipped oil to international markets via Turkey last month, sparking a furious response from Baghdad, which insists such shipments without the expressed consent of the central government constitute smuggling.
Iraq has filed an arbitration case against Turkey at the Paris-based International Criminal Court and has threatened legal action against any companies which buy the oil.
Iraq's draft 2014 budget calls for the Kurdish region to export around 400,000 bpd.
Oil revenues account for the lion's share of government income, and the authorities are seeking to dramatically ramp them up to fund much-needed reconstruction of Iraq's conflict-battered economy and infrastructure.
By Christine Harvey May 31, 2014 2:53 AM GMT+0700
Diesel futures fell to the lowest level in eight weeks after stockpiles in the U.S. central Atlantic region surged to a four-month high.
Futures declined 1.2 percent. Stockpiles in the area, which includes the delivery point for New York futures, rose 1.24 million barrels to 17.6 million in the week ended May 23, the highest level since Jan. 10, government data show. Nationwide demand was 4.2 million barrels a day.
“There was a pretty significant rise in supplies in New York and there’s no real basis for demand to increase in coming weeks,” said Tom Finlon, director of Energy Analytics Group Ltd. in Jupiter, Florida. “Export flows are muted because of significant supplies in Europe.”
Ultra low sulfur diesel for June delivery slid 3.44 cents to settle at $2.8846 a gallon on the New York Mercantile Exchange, the lowest close since April 2. Volume was 36 percent above the 100-day average at 2:54 p.m. The more actively traded July contract declined 3.17 cents to $2.8882. June contracts expire today.
Futures declined 7.03 cents this week, or 2.4 percent, the biggest weekly drop since March 7.
Diesel’s spread narrowed by 46 cents a barrel to $18.59 against West Texas Intermediate crude oil and by 77 cents to $11.89 against Brent.
June-delivery gasoline slid 1.71 cents to $2.9965 a gallon. Volume was 8.4 percent above the 100-day average. The motor fuel this week slid 2.7 cents, or 0.9 percent.
The average U.S. pump price rose 0.1 cent to $3.661 a gallon, according to Heathrow, Florida-based AAA.
Gasoline’s spread against WTI narrowed by 13 cents to $22.11 a barrel and against Brent by 44 cents to $15.41.
To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Charlotte Porter, Richard Stubbe
Repsol Wins Approval for $10 Billion Project Off Spain
By Todd White May 30, 2014 10:16 PM GMT+0700
Repsol SA (REP) won government approval to start a $10 billion oil drilling project off Spain’s Canary Islands, signaling success in its 12-year campaign to start exploration near the Atlantic archipelago.
Spain’s environment ministry cleared the plan with conditions, Deputy Minister Federico Ramos said in a briefing yesterday. The decision follows a reconfirmation in 2012 of an exploration license first awarded in 2001 and later tied up in court battles. The decision advances plans by Spain’s largest oil company to hunt for fields in an area geologists estimate may be able to supply about 10 percent of national demand.
Letting Repsol drill about 40 miles (64 kilometers) off Lanzarote and Fuerteventura islands, where political leaders oppose the project for fear of harming the environment and tourist industry, shows the resolve of Prime Minister Mariano Rajoy to revive domestic energy exploration after decades of decline.
Several hurdles remain for Repsol. The Supreme Court is set to rule June 10 on a challenge to its exploration permit. Repsol shares rose 1 percent in U.S. trading after the news and today in Madrid climbed 0.7 percent to 20.72 euros.
Central to the review was whether there are enough safeguards to stop an oil spill. That’s of heightened concern after the Macondo disaster in the U.S. Gulf of Mexico. The volcanic islands’ beaches, nature reserves and clear waters off Africa make them a top draw for tourists to Spain, the world’s most-visited nation after the U.S. and France. The ministry said it’s demanding the most sophisticated safeguards available.
No Accidents
“We’ve had 267 tests in Spain and never has there been an accident,” Ramos said at the briefing, referring to offshore exploration wells done over the years. Most showed poor results.
Spain buys about 99 percent of its oil and natural gas abroad -- among the highest proportions in Europe. That’s the biggest import cost for an economy emerging slowly from a six-year economic slump.
The central government’s support for offshore and shale prospecting has collided with an environmental protection movement that enjoys decades-old backing from many local governments and conservationists.
“Today’s ruling shows that the activities we are proposing are compatible with respect for the environment,” Repsol spokesman Kristian Rix said in Madrid after the decision. The study cost more than 4 million euros ($5.4 million).
Majorca Island
Spain is considering opening areas for hydraulic fracturing, known as fracking, or conventional exploration from the Mediterranean waters off Majorca island to the emerald Valley of Pas in the north. This pits a tourism industry that draws 61 million visitors a year and generates 11 percent of gross domestic product against the administration’s goal to bring down a 25 percent jobless rate.
The Canaries regional government joined with Fuerteventura and Lanzarote and environmentalists in a court challenge to the legality of Repsol’s exploration permit, granted in 2012 a few months after Rajoy was elected.
That’s when his Popular Party-led national government agreed to confirm, with some changes, Repsol’s 2001 permit. The 11-year-old authorization had been frozen after earlier legal battles also went all the way to the Supreme Court.
“We have little to gain and a lot to lose,” said Mario Cabrera, president of the local government of Fuerteventura, one of the closest islands to the prospects, whose dramatic cliffs and remote beaches helped win it a designation as a Unesco biosphere reserve in 2009. “Tourism needs a clean sea,” he said in e-mailed remarks.
Output Estimate
Repsol forecasts it will produce as much as 110,000 barrels a day should the prospect deliver its expected reserves of 900 million to 2.2 billion barrels. That dwarfs today’s biggest domestic well in Spain, also run by Repsol, off Tarragona in the Mediterranean. It pumps about 9,000 barrels a day.
The ministry approved Repsol to drill three test wells in waters about 800 meters (1/2 mile) deep. Then it can perforate further into the ocean floor about 2,300 meters in two of the sites, and 5,000 meters in the other.
Should Repsol discover enough oil, it will need an additional permit for production and another for environmental clearance, before starting the full drilling program, which the company estimates will cost 7.5 billion euros.
Trading in Repsol shares yesterday was 11 times its three-month average. Some 134.8 million shares traded hands, or 10 percent of the stock outstanding, the most in almost 2 1/2 years, according to data compiled by Bloomberg. The previous day, Repsol announced its extraordinary dividend would be payable on June 6.
To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net
To contact the editors responsible for this story: Timothy Coulter at tcoulter@bloomberg.net Stephen Cunningham, John Viljoen
Oil Price Becalmed as Supply Growth Means Record Low Volatility
By Grant Smith May 30, 2014 9:14 PM GMT+0700
Oil-price volatility fell to a record amid speculation that crude-supply growth in the U.S. and spare Saudi Arabian production capacity will avoid any shortages resulting from strengthening economies.
The 20-day historical volatility of Brent crude declined to 8.1 percent at 3 p.m. in London today, set to be the lowest since the contract began trading in 1988, according to data compiled by Bloomberg News. Spare capacity in Saudi Arabia and booming U.S. output of oil from shale-rock formations are preventing price surges, while stable global economic recovery and steady stimulus measures by the Federal Reserve avert a slump, BNP Paribas SA said.
“It can be taken as a sign that markets are deemed to be in equilibrium, with no clear fundamental imbalances,” Olivier Jakob, managing director at consultants Petromatrix GmbH in Zug, Switzerland, said by e-mail today.
Brent futures traded as low as $103.95 a barrel and as high as $112.39 this year. In comparison, the 2008 peak was $147.50 and the low that year was $36.20. The International Energy Agency, an adviser to 29 nations, anticipates that growth in supply and demand will be closely matched. Oil markets are less vulnerable to supply shocks because of the surge in U.S. shale production, which this year will reach the highest since 1986, Barclays Plc says.
Speculators Deterred
Expectations that prices will remain little changed are deterring oil consumers and producers from trading in futures to lock in costs, and also limiting speculation by hedge funds and other money managers, Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas in London, said May 20. Volatility will remain muted into 2015, Barclays said in a report on May 27.
While volatility has diminished, there are still strategies to benefit from the reduction in price movements, according to BNP Paribas. Deutsche Bank AG started an index in March enabling investors to effectively sell Brent’s implied volatility.
BNP Paribas repeated on May 28 its recommendation, first made in January, to bet that prices will stay between $85 and $115 a barrel using a “strangle” strategy that involves trading put and call options.
Volatility may rebound because high levels of bets by speculative traders leave Brent vulnerable to a decline, according to Petromatrix’s Jakob. The premium on immediate deliveries of Brent crude, a condition known as backwardation which often attracts investors, may be set to narrow, he said. This would cause traders to cut positions, and triggering a price slump that would bolster volatility, Jakob said.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Sharon Lindores
By Rakteem Katakey and Debjit Chakraborty May 30, 2014 11:27 AM GMT+0700
Oil & Natural Gas Corp. (ONGC), India’s biggest energy explorer, reported its steepest increase in profit in seven quarters after writedowns from dry wells fell and a lower rupee countered discounts on crude oil sales.
Net income rose 44 percent to 48.9 billion rupees ($829 million), or 5.71 rupees a share, in the fourth quarter ended March 31 from 33.9 billion rupees, or 3.96 rupees, a year earlier, the New Delhi-based company said in a stock exchange filing yesterday. That missed the 54.8 billion-rupee median profit estimate of 27 analysts surveyed by Bloomberg. Sales fell 2.3 percent to 209 billion rupees.
The discounts ONGC gives to state-run refiners are eroding its cash pile and risking cuts in its 11 trillion-rupee spending plan on oil fields and overseas acquisitions by 2030. The explorer is mandated by the government to partly compensate Indian Oil Corp. (IOCL) and other state-run refiners, which sell fuel below cost to help curb inflation in a nation where more than 800 million people earn less than $2 a day.
The rupee’s depreciation and lower writedowns from the drilling of unsuccessful exploration wells helped boost profit, A.K. Banerjee, ONGC’s director finance said at a press conference in New Delhi yesterday. The company wrote off 19.06 billion rupees during the quarter for dry wells, compared with 41.27 billion rupees a year earlier, he said.
ONGC climbed as much as 2.2 percent to 382.45 rupees in Mumbai today, extending its gain to 32 percent this year. The benchmark S&P BSE Sensex (SENSEX) has gained 15 percent in the period.
Dollar Billing
The rupee averaged 61.79 in the quarter compared with 54.17 against the dollar a year earlier. ONGC bills its customers in dollars and its selling price increases when the money is converted into rupees.
“It’s the rupee supporting earnings,” said Dhaval Joshi, a Mumbai-based analyst at Emkay Global Financial Services Ltd. “The fall helped ONGC make up for the higher subsidy it had to bear.”
The currency has increased 1.6 percent since the beginning of this quarter. The explorer’s discounts on crude oil sales to state refiners increased 32 percent to 162 billion rupees in the quarter from 123.1 billion a year earlier, according to the statement. This reduced net income by 91.2 billion rupees, ONGC said.
Brent oil in London trading, a benchmark price for more than half the world’s oil, averaged $107.87 a barrel in the three months ended Dec. 31, 4.2 percent lower than a year earlier.
To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net; Debjit Chakraborty in New Delhi at dchakrabor10@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net; Pratish Narayanan at pnarayanan9@bloomberg.net Abhay Singh, Indranil Ghosh
By Volodymyr Verbyany, Daryna Krasnolutska and Ilya Arkhipov May 30, 2014 7:29 AM GMT+0700
Pro-Russian rebels downed a military helicopter in eastern Ukraine, killing a general and 13 troops, as a spokesman for U.S. President Barack Obama blamed “outside” assistance in providing weapons.
Insurgents used a shoulder-fired missile to shoot down an Mi-8 transport chopper amid heavy fighting in Slovyansk, 100 miles (160 kilometers) from the Russian border, Speaker Oleksandr Turchynov told Ukraine’s parliament yesterday.
“We are concerned that this indicates separatists continue to have access to advanced weaponry and other assistance from the outside,” White House spokesman Jay Carney told reporters in Washington.
Ukrainian forces used aviation and artillery assets to “destroy” the rebel unit that downed the helicopter, the Interior Ministry’s National Guard unit said in a statement. The surge in fighting produced a new round of finger-pointing between the U.S. and Russia.
Russia demanded that Ukraine halt its “fratricidal war” and withdraw troops from the mainly Russian-speaking region of the east after separatists, in other fighting, suffered the heaviest casualties of their campaign. The U.S. and other countries should use their influence to stop Ukraine from “sliding into a national catastrophe,” the Foreign Ministry in Moscow said on its website.
Sergei Glazyev, an economic adviser to Russian President Vladimir Putin, said the U.S. controls the new Ukrainian government and is seeking to use the conflict to start a “third world war.”
Kerry’s Call
U.S. Secretary of State John Kerry, in a phone call with Russian Foreign Minister Sergei Lavrov, raised concerns about foreign fighters crossing the border from Russia, particularly reports of the involvement of Chechens, according to the State Department. Kerry pressed Lavrov to “end all support for separatists, denounce their actions, and call on them to lay down their arms,” department spokeswoman Jen Psaki said.
Questions also were raised anew about Russia’s pledge to pull back its troops from Ukraine’s borders.
The Russian RBC news service reported that the troop withdrawal had been halted, and that a significant amount of equipment remains near border. The service cited an unidentified person in the army’s General Staff.
Dmitry Peskov, Putin’s spokesman, declined to comment when reached by phone late yesterday.
Withdrawal Halt
Earlier yesterday, the press service of Ukraine’s border guards said Russia had reduced the number of soldiers stationed on its border with Ukraine to about 20,000 from about 50,000. The Russian troops were leaving behind military assets, suggesting they may return, the service said, without being more specific.
A “majority of the Russian forces” have been withdrawn from the Ukrainian border, Rear Admiral John Kirby, a Pentagon spokesman, told reporters traveling to Singapore with U.S. Defense Secretary Chuck Hagel. About seven battalions of Russian forces, or “several thousands” of troops, remain, Kirby said.
Ukrainian President-elect Petro Poroshenko has vowed to wipe out the insurgents and re-establish order after winning office on May 25 with 54.7 percent of the vote. He’s faced with trying to stabilize an economy that the European Bank for Reconstruction and Development expects will shrink 7 percent this year while reclaiming swaths of territory captured by pro-Russian militias.
Putin’s Power
“Russia’s goal was and is to keep Ukraine so unstable that we accept everything that the Russians want,” Poroshenko said in an interview with German paper Bild. “I have no doubt that Putin can end the fighting with his direct influence.”
Obama plans to meet with Poroshenko during a trip to Europe next week, the U.S. leader told NPR News in an interview. Obama told the radio network he expects to discuss Russia’s seizure of Crimea with Poroshenko during their meeting.
Putin flew to Astana, the capital of Kazakhstan, to sign a treaty yesterday with his counterparts from Kazakhstan and Belarus creating a trading bloc of more than 170 million people to challenge the U.S. and the European Union. Two other former Soviet states, Kyrgyzstan and Armenia, plan to join the Eurasian Economic Union this year.
Russia and Ukraine remained at loggerheads over payments for natural gas as a compromise proposal from the EU to try to prevent a disruption in fuel supply to the continent as soon as next month failed to elicit support.
EU Talks
Talks between the two sides and European officials today in Berlin aren’t expected to lead to progress, Ukrainian First Deputy Energy Minister Yuri Zyukov told reporters yesterday in Kiev.
Russia is unfortunately now an “enemy,” Zyukov said in the capital. It “speaks in ultimatums,” he said, and the only solution is likely to be arbitration in court.
The battle over billions of dollars of payments for Russian gas from its former Soviet ally threatens deliveries of the fuel bound for the EU, about half of which transits through Ukraine. Similar rows over prices and debt between the two sides held up European supplies during freezing weather in 2006 and 2009.
Under the EU plan announced May 26 after earlier trilateral talks, Ukraine was to pay $2 billion of its gas debt by May 30 and $500 million more by June 7. When OAO Gazprom got the first tranche, Russia’s gas exporter would then maintain deliveries without demanding payment in advance and begin talks on prices.
To contact the reporters on this story: Daryna Krasnolutska in Kiev at dkrasnolutsk@bloomberg.net; Daria Marchak in Kiev at dmarchak@bloomberg.net; Ilya Arkhipov in Astana at iarkhipov@bloomberg.net; Volodymyr Verbyany in Kiev at vverbyany1@bloomberg.net
To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net Larry Liebert, Michael Shepard
By Christine Buurma Jun 2, 2014 6:01 AM GMT+0700
Natural-gas stockpiles are recovering faster than estimated from a winter battering in the U.S., with prices now 30 percent below a peak in February.
Hedge funds reduced their bets on a rally for a fifth week and to the lowest level since December, U.S. Commodity Futures Trading Commission data show.
Prices dropped 5.7 percent in May as inventory gains surpassed analysts’ estimates for four consecutive weeks. Stockpiles are now 40 percent below the five-year average, from 50 percent in April.
“We’ve had a pretty mild May and that’s raised hopes that these big storage injections will continue all summer,” Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said by phone May 30. “There’s growing optimism about the supply picture.”
Natural gas fell 4.7 cents, or 1 percent, to $4.505 per million British thermal units on the New York Mercantile Exchange in the week end May 27, the period covered by the CFTC report. Prices settled at $4.542 on May 30 in New York.
Supply Gain
An Energy Information Administration report on May 29 showed inventories rose 114 billion cubic feet in the week ended May 23 to 1.38 trillion, topping the median increase of 110 billion in analyst estimates compiled by Bloomberg. The gain was greater than the five-year average for a sixth week.
“The pace of restocking picked up and traders began to have heightened expectations about the size of weekly supply increases,” Teri Viswanath, director of commodities strategy at BNP Paribas SA in New York, said in a May 30 phone interview.
Gas demand fell on average by 5.7 billion cubic feet a day, or 8.8 percent, in May to 56.7 billion from April’s daily average of almost 65 billion, data show from LCI Energy Insight, an analysis and consulting firm in El Paso, Texas.
The EIA, the Energy Department’s statistical arm, estimates that record production will boost stockpiles to 3.405 trillion cubic feet by the end of October, which would be the lowest level for the time of year since 2008.
Record Production
Marketed gas output in 2014 will climb for the ninth straight year, reaching an all-time high of 72.26 billion cubic feet a day, as new wells come online at shale deposits such as the Marcellus in the Northeast, EIA forecasts show.
In other markets, speculators raised bets on crude to a record as supplies at Cushing, Oklahoma, decreased to a five-year low and gasoline demand grew.
Money managers boosted net-long position in benchmark West Texas Intermediate futures by 7.4 percent to 348,069, the highest in data going back to 2006, in the week ended May 27, CFTC data show, pushing prices to a one-month high and helping WTI cap the first monthly gain since February.
Supplies at Cushing, the delivery point for WTI futures, fell for the 16th time in 17 weeks in the week ended May 23, the EIA said. Stockpiles have dropped as the southern leg of the Keystone XL pipeline began moving oil to Gulf Coast refineries from Cushing.
WTI futures gained $1.67 to $104.11 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report. The contract fell 87 cents to $102.71 on May 30, ending the month up 3 percent.
Gasoline Bets
Net-long positions in gasoline rose by 1,311 futures and options combined, or 2.2 percent, to 60,130, the CFTC report showed. Futures advanced 1.1 percent to $2.9952 a gallon on the Nymex in the week covered by the report and settled at $2.9965 on May 30. The fuel fell 0.4 percent for the month.
Gasoline at U.S. pumps, averaged nationwide, rose 0.1 cent to $3.669 a gallon on May 31, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring group. Retail prices are down 1.8 cents for the month.
Money managers’ bets on ultra low sulfur diesel slipped by 753, or 2.7 percent, to 27,657 futures and options combined, the CFTC report showed. Futures dropped 0.3 percent to $2.9399 a gallon in the week covered by the report and were down 1.7 percent for May.
Net-long positions on four U.S. natural gas contracts held by money managers slid by 13,300 futures equivalents to 326,711 in the week ended May 27, according to the CFTC. Long positions decreased by 1.6 percent, falling for a fifth week, while bearish bets gained 4,059 to 229,460.
The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Henry Hub, in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.
“We would need a very cool summer to push gas prices much lower,” Price Futures Group’s Flynn said. “Inventories are still at an 11-year seasonal low, so we still have a long way to go to get back to normal levels.”
To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Bill Banker
"The agreement has been prolonged until 2025. It is synchronized with the current contracts up to 2019 plus five-year-long periods by which the contract is automatically extended, if within six months one of the sides does not inform the other on the decision to withdraw from the deal," Anatoly Yanovsky said.
The document was signed in Astana on Thursday. Also on Thursday, Moscow signed new oil deals with Belarus and Kazakhstan as the three countries merged into the Eurasian Economic Union (EAU).
This year, Kazakhstan plans to import around 1 million tons of petroleum and some 600,000 or 650,000 tons of diesel oil from Russia. Local oil refinery plants plan to produce 2.9 million tons of petroleum with consumption estimated at 4.2 million tons in 2014, RIA Novosti reports.
Under the Russian-Kazakh intergovernmental agreement up to 2025, quotas will be established for duty-free supplies from Russia of oil and light oil products, while Kazakhstan's supplies of light oil products to third countries as well as black oil products from Russia to Kazakhstan are banned.
