By Jonathan Tirone May 17, 2014
Diplomats negotiating over Iran’s atomic program ended the latest round of talks in Vienna without advancing their bid to reach a deal by July to impose nuclear curbs in exchange for a lifting of sanctions.
The sides will meet twice next month in the Austrian capital to try to hammer out an accord, Iran’s Deputy Foreign Minister Abbas Araghchi said. “There was no tangible progress in this round, but the trend of negotiations was good,” Araghchi said at a briefing late yesterday broadcast by Press TV. “No drafting will be done until both sides have reached a mutual viewpoint.”
A U.S. official, who asked not to be identified because the information isn’t public, said the latest talks were difficult and Iranian negotiators should be aware that more urgency will be needed to meet their July deadline.
Diplomats at this week’s meeting were expected to begin drafting the text of a possible agreement that would end the decade-long standoff over Iran’s nuclear work. Negotiators want an agreement by July 20 to rescind banking and trade sanctions in exchange for limitations on Iran’s nuclear program.
The past three days of negotiations were “complex and detailed,” Michael Mann, spokesman for European Union foreign policy chief Catherine Ashton, said in an e-mail.
Dates for the next rounds of talks will be announced by the EU in the coming days, according to the U.S. official
One of the key sticking points in the negotiation has been defining a mutually acceptable uranium-enrichment capacity for Iran. Enrichment can produce both fuel for nuclear power plants and atomic bombs.
“The negotiators should call in technical experts from Urenco, Areva (AREVA), Rosatom, USEC (USU) and CNNC (2302) to make the calculations,” said Tariq Rauf, a Stockholm-based policy analyst who formerly helped the International Atomic Energy Agency establish a nuclear-fuel bank. Officials from companies involved in nuclear work would be preferable, he said, because “the diplomats are liable to bungle this issue.”
Diplomats have so far avoided negotiations using the standard technical measure for enrichment capacity, called “separative work units,” or SWUs. The talks have instead focused on defining a raw number of centrifuges that Iran should be permitted to possess.
Looking narrowly at the number of centrifuges -- the machines spinning at supersonic speeds to separate uranium isotopes -- could be misleading, Scott Kemp, a former science adviser to the U.S. State Department, said in a telephone interview from Cambridge, Massachusetts.
“When economists do risk-benefit analysis, everything is converted into constant dollars,” said Kemp, now a nuclear scientist at the Massachusetts Institute of Technology. “That’s the standard currency for comparisons. In the enrichment business, the standard currency is SWU.”
Trying to regulate Iran’s nuclear work by concentrating on centrifuges could undermine an agreement, according to Kemp and Rauf. Machines and their parts can be upgraded to boost separative capacities.
“Industry standard calculations are available,” Rauf, who now leads the Stockholm Institute for Peace Research’s nuclear nonproliferation program, said in a written reply to questions. Using an SWU analysis, Rauf said, the IAEA assessed about 50,000 first-generation centrifuges “wouldn’t be out of sync” with the fuel needed for a 1,000-megawatt reactor.
Iran’s only reactor, the 1,000-megawatt unit at Bushehr, is currently fueled with uranium enriched by Russia. Iran, with the world’s fourth-largest proven oil reserves, has the capacity to operate 50,000 centrifuges at its Natanz facility.
“Talking about the centrifuges is like giving bribes and being greedy,” an Iranian cleric, Kazem Sedighi, said at today’s Friday prayers in Tehran. “If in the negotiations we want to discuss the level of enrichment, the level should be in line with needs of the country.”
U.S. and Iranian diplomats met alone for three hours today and had a “serious and straightforward discussion,” State Department spokeswoman Marie Harf said on Twitter.
To contact the reporter on this story: Jonathan Tirone in Vienna at jtirone@bloomberg.net
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Eddie Buckle, Ben Holland
By Barbara Powell and Bradley Olson May 19, 2014 The average price for regular gasoline at U.S. pumps fell 3.49 cents in the past two weeks to $3.6876 a gallon, according to Lundberg Survey Inc.
The survey covers the period ended May 16. It’s based on information obtained at about 2,500 filling stations by the Camarillo, California-based company.
The average retail price is 3.10 cents higher than a year ago, Lundberg said. Gasoline has risen 34.17 cents since Jan. 10.
“This decline follows 12 straight weeks of rising prices,” Trilby Lundberg, president of Lundberg Survey, said today in a telephone interview. “In the near term, there is a good chance that retail prices will continue dropping, but probably only modestly.”
The highest price in the lower 48 states among the markets surveyed was in San Francisco, at $4.17 a gallon, Lundberg said. The lowest was in Albuquerque, New Mexico, where customers paid an average $3.32 a gallon. Regular gasoline averaged $3.88 a gallon on Long Island, New York, and $4.14 in Los Angeles.
Gasoline futures on the New York Mercantile Exchange rose 2.9 cents, or 1 percent, to $2.9735 a gallon in the two weeks ended May 16.
U.S. gasoline production jumped 6.8 percent in the week ended May 9 to 9.61 million barrels a day, the most since the period ended Dec. 20, according to Energy Information Administration data.
Crude inventories rose 947,000 barrels to 398.5 million, the second-highest level in weekly reports published since 1982.
West Texas Intermediate crude gained $2.26, or 2.3 percent, to $102.02 a barrel on the Nymex in the two weeks to May 16.
To contact the reporters on this story: Barbara Powell in Houston at bpowell4@bloomberg.net; Bradley Olson in Houston at bradleyolson@bloomberg.net
To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Mark Schoifet, Sylvia Wier
By Pablo Gonzalez May 17, 2014 3
The three provinces holding Argentina’s largest shale oil and gas deposits will jointly challenge a push by federally owned YPF SA (YPF) to take control of the auction and renewal of licenses, three officials said.
Jorge Sapag, Francisco Perez and Martin Buzzi -- governors of Neuquen, Mendoza and Chubut, respectively -- met in Buenos Aires on May 13 and agreed to impel their congressional representatives to oppose any move to federalize licensing processes, the provincial officials briefed on the matter said. They asked not to be identified because the talks were private.
The three governors weren’t available to comment, their assistants said by telephone. Alejandro Di Lazzaro, a YPF spokesman in Buenos Aires, declined to comment.
The fight underscores political tensions derived from unclear rules governing Argentina’s nascent shale boom. For prospective license holders, a single federal system would remove the need to negotiate with two levels of government.
In 2004, then-President Nestor Kirchner enacted a law allowing provinces rather than federal authorities to auction oil leases to give them more control and a bigger share of their natural resources. Now YPF, which President Cristina Fernandez de Kirchner expropriated from Spain’s Repsol SA in 2012, is seeking a federal licensing system in which provinces retain ownership of oil areas, two of the people said.
Houston Roadshow
Vaca Muerta, a Belgium-sized layer of underground rock in southern Argentina, contains the world’s fourth-biggest shale oil reserves, behind Russia, the U.S., and China, and the second-largest gas reserves after the U.S.
YPF owns about 37 percent of Vaca Muerta concession areas, most of which are coming up for renewal in the next few years. President Fernandez has invited foreign companies including Chevron Corp. to help YPF’s shale exploration efforts and last year issued a decree enabling a YPF-Chevron venture to obtain rights to 3 percent of Vaca Muerta until 2048, which was passed by Neuquen’s legislature.
YPF Chief Executive Officer Miguel Galuccio in May opposed a Houston roadshow organized by Neuquen province as a preliminary step to auction shale areas through its provincial oil company, Gas & Petroleo del Neuquen, the officials said.
Galuccio wants the federal government or Buenos Aires-based YPF to handle the auctions, they said. Galuccio, who is attending a conference in Bolivia, wasn’t available to comment, an assistant said by telephone.
The dispute between YPF’s CEO and the provinces has been hurting the company’s American depositary receipts this week, said Carlos Aszpis, an equity strategist at Schweber & Cia. Sociedad de Bolsa SA.
“Not having a clear horizon for the licenses is a problem for YPF,” Aszpis said in a telephone interview from Buenos Aires. “We will only see the company shares rallying once this dispute is over.”
The company’s ADRs slid 1.1 percent to close at $29.43 in New York. The ADRs have dropped 4.1 percent this week.
To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Robin Saponar
By Nikos Chrysoloras and Georgios Georgiou May 19, 2014
Cyprus said success drilling in deep waters off the eastern Mediterranean island this year may offer Europe a way to loosen Russia’s grip on its energy supplies.
Cyprus, which has proven reserves of as much as 6 trillion cubic feet of natural gas, is looking to find another 4 trillion to 5 trillion cubic feet, Energy Minister George Lakkotrypis said. Such a discovery, about a quarter the size of Israel’s giant Leviathan find, would allow the country to proceed with plans for a liquefied natural gas terminal.
An LNG plant on Cyprus could also process gas from elsewhere in the Levant Basin, an area that may hold 122 trillion cubic feet of gas, and ship it by sea to markets in western Europe, where supplies are now threatened by the crisis in Ukraine. Russia, which provides about 15 percent of the region’s needs through Soviet-era pipelines crisscrossing its western neighbor, has threatened to cut supplies from June.
Cyprus will have “a pretty good idea” of its gas and hydrocarbon reserves within about 12 to 15 months, as companies including Eni SpA (ENI), Korea Gas Corp., and Total SA start exploration, Lakkotrypis said in an interview May 14.
Eni and Kogas will start intensive exploration within weeks in their licenses in blocs 2, 3 and 9, a campaign to last 12 to 18 months, he said. France’s Total, with licenses for blocs 10 and 11, will start exploration in the second half of next year.
Noble Energy Inc., which found proven reserves of 3.6 trillion to 6 trillion cubic feet in the Aphrodite field, will drill another well in bloc 12, Lakkotrypis said.
Noble was also responsible for the 2010 Leviathan discovery, then the world’s biggest in a decade. Cyprus last year held talks with the Houston-based explorer on the potential for taking supplies from the Israeli field for export from a Cypriot LNG plant.
An LNG plant would require upfront capital expenditure of 6 billion euros ($8.2 billion) to 10 billion euros, and Cyprus is in talks with “large financial institutions which have expressed an interest in participating,” Lakkotrypis said.
“The most pressing priority is to make another discovery,” before looking at financing options, he said in his ministry office in Nicosia. “Ultra-deep waters contain a very high risk. The probability of success is pretty low.”
Cyprus is negotiating the terms and conditions for operating an LNG plant with Noble and will make a final investment decision by 2016-2017, he said.
If sufficient gas reserves aren’t found, other options, including pipelines to existing plants in neighboring countries, are being explored. “We are not excluding anything, but the onshore plant is our No. 1 priority.”
A pipeline to Turkey isn’t an option unless the countries resolve their territorial dispute. Since 1974, when Turkey invaded the island, the country has been divided into the internationally recognized Republic of Cyprus in the south and the Turkish Republic of Northern Cyprus. A new round of reunifications talks has now entered a “substantive phase,” according to the United Nations.
Energy is one of the main potential growth sources for the island-nation’s economy, which is mired in deep recession, following a 10 billion-euro international bailout that came with strict austerity measures and included the imposition of losses to bank depositors.
To contact the reporters on this story: Nikos Chrysoloras in Nicosia at nchrysoloras@bloomberg.net; Georgios Georgiou in Nicosia at ggeorgiou5@bloomberg.net
To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net Alex Devine, Randall Hackley
By Halia Pavliva and Ksenia Galouchko May 19, 2014 3
President Vladimir Putin’s planned China visit this week is helping spark the longest rally in OAO Gazprom since 2006 as speculation mounts that he will return with a long-sought gas supply agreement.
Gazprom, the world’s largest natural-gas producer, has climbed eight straight days, rallying 15 percent over the period to 144.29 rubles ($4.15) in Moscow. The stock has gained 12 percent this month, compared with a 1.1 percent advance in the Stoxx 600 Oil & Gas index and the MSCI Emerging Markets Energy index’s 5.7 percent increase.
The stock is surging as traders read the president’s visit as a sign Russia is on the verge of getting the long-term gas supply contract it has sought for a decade. Putin is turning to Asia as the West expands sanctions tied to the incursion in Ukraine. After failing to agree on financial terms in previous talks, rising demand for fuel in China has pushed prices to a level that will probably be acceptable to both sides, Bank of America Corp. said in a May 16 report.
“Russia and China are closer to a deal than they’ve ever been before,” Karen Kostanian, an analyst at Bank of America, said by phone from Moscow last week. “While Russia seeks to diversify its natural gas exports away from Europe, China wants to diversify its fuel imports.”
Gazprom will have to spend about $56 billion through 2019 to build a new pipeline to China and develop the Kovykta and Chayanda gas fields in eastern Siberia to supply the gas, Kostanian said.
The company’s stock trades in Moscow, London and New York and it is seeking a listing in Singapore, spokesman Sergei Kupriyanov said on May 15 in Moscow. He did not respond to a message seeking comment on Gazprom’s plans in Asia left outside of normal business hours in Moscow on May 16.
Gazprom’s American depositary receipts rose 6.5 percent to $8.40 last week. It was the best performer on the Bloomberg index of the most-traded Russian shares in the U.S, which gained 2 percent.
The company aims to sign the contract, which is 98 percent ready, during Putin’s visit, Deputy Energy Minister Anatoly Yanovsky said in Moscow on May 12. The 30-year deal would allow delivery of as much as 38 billion cubic meters of gas to begin no sooner than the end of 2018, according to Gazprom.
The two sides are still negotiating the price, Zhang Xin, a spokesman for state-controlled China National Petroleum Corp., said in Beijing on May 14, Interfax news agency reported.
“There is no absolute certainty that the deal will be signed this time, as business interests still outweigh geopolitical ideas,” Kirill Pyshkin, who helps manage about $10 billion in assets at Mirabaud Asset Management in London, said by phone on May 16. “Gas prices have been the stumbling block in the talks for over a decade, and that hasn’t necessarily changed. It’s pure business at this point.”
The 14-day relative strength index on Gazprom’s Moscow-listed stock rose to 70.8 on May 16, above the threshold that indicates to some technical analysts that a security is poised to fall, data compiled by Bloomberg show.
The shares trade at three times estimated earnings for the next 12 months, compared with a multiple of 9.5 for OAO Novatek, Russia’s second-biggest supplier of the fuel, a sign Gazprom has potential for further gains, said Aleksei Belkin, who helps manage about $4 billion in assets as chief investment officer at Kapital Asset Management LLC in Moscow.
The Market Vectors Russia ETF (RSX), the biggest U.S. exchange-traded fund that holds Russian shares, added 2.9 percent last week to $24.40. RTS stock index futures expiring next month were little changed in U.S. hours on May 16 while the RTS Volatility Index, which measures expected swings in futures, climbed 4.2 percent to 28.15.
To contact the reporters on this story: Halia Pavliva in New York at hpavliva@bloomberg.net; Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net
To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Richard Richtmyer
Agency warns significant increase in OPEC production needed to match rising demand later this year
By Business Green staff 19 May 2014
The International Energy Agency (IEA) has warned that the world could face an oil supply crunch later this year unless the OPEC group of countries can significantly step up production in the coming months.
The Paris-based agency last week issued a monthly report detailing how "OPEC countries would need to hike third-quarter production by another 900,000 b/d from April levels".
The report confirmed that following a five-month low in March, April had seen a boost in OPEC oil production of 405,000 barrels a day, while global production rose 700,000 barrels a day month on month.
However, the IEA also raised its global demand forecast for this year, driven by strong demand from India, China and Saudi Arabia, and warned that OPEC production would now have to rise again to meet forecasted demand in the second half of the year.
The agency said the cartel had "more than enough capacity to deliver", but warned that "it remains to be seen whether it will manage to overcome the above-ground hurdles that have plagued some of its member countries recently".
Concerns remain that security issues in several north African countries are hampering efforts to increase OPEC production, while the Financial Times reported last week that political turmoil in South Sudan and Colombia as well as continued delays at the Kashagan offshore field in Kazakhstan were leading to lower-than-expected production from non-OPEC nations.
With the IEA also suggesting oil inventories globally are relatively tight, the latest forecasts will fuel fears of higher prices and again provide ammunition to those who warn the global economy could soon face a peak-oil scenario.
The oil industry has repeatedly rejected warnings about a peak in supplies, arguing that plenty of reserves are available.
But advocates of peak-oil theories have argued that flow rates are in danger of peaking, pointing to the drastic increase in capital investment oil companies have been forced to make in recent years, which has failed to deliver a commensurate increase in production.
Responding to the latest IEA report, peak oil campaigner and solar entrepreneur Jeremy Leggett mocked the idea that peak oil warnings were invalid. "#peakoilisdead #peakoilisdead #peakoilisdead #peakoilisdead #peakoilisdead #peakoilisdead If we oilmen repeat it enough it must be true," he wrote.
The Globe and Mail
Since 1975, the U.S. has had a near-total ban on oil exports. The Obama administration is weighing whether to ease it. Any policy change is bound to raise the ire of American politicians who fear this means further dependence on foreign oil and higher domestic prices, but the move makes eminent economic sense – for Americans, and for the global oil market.
U.S. output has been soaring as a result of hydraulic-fracturing technology that has released a flood of shale oil and gas. The International Energy Agency says that the United States is poised to become the world’s biggest oil producer in the next few years.
The growing domestic supplies still fall well short of delivering complete U.S. energy independence. But the large pools of light, sweet shale oil are far in excess of what the concentration of U.S. refineries on the Gulf Coast can handle. Many of these are designed to process heavier oil from Canada and other foreign producers, which is why they are so eager to see the Keystone XL pipeline built.
Some of the light oil is being shipped from the Gulf to eastern Canadian refiners under special permits. Refineries on the U.S. East Coast are also better equipped to deal with the lighter grades, but can’t easily access the output from North Dakota or Texas shale deposits, because of the absence of a pipeline network.
The answer to the glut of American light oil lies in the export market, where demand is strong and prices higher. U.S. oil would also help address some of the serious imbalances in the global market. The U.S. becoming an oil exporter would have the added benefit of putting pressure on Russian President Vladimir Putin, by reducing Moscow’s grip on European energy needs.
All of this will be a tough sell, particularly in an election year. The last thing politicians want is to explain to angry voters why U.S. oil is flowing abroad rather than being used to bring down gasoline prices at home. And that’s how critics, including some of President Obama’s fellow Democrats, will frame the discussion around exports. They’re missing the big picture. Producers and consumers alike would be better off with a freer, more efficient oil market.
Beijing has ordered an "unprecedented" build up of oil reserves as West prepares for possible oil sanctions against Russia.
http://i.telegraph.co.uk/multimedia/archive/02094/oil-well-afghanist_2094169b.jpg
China is stockpiling oil for its strategic petroleum reserve at a record pace, intervening on a scale large enough to send a powerful pulse through the world crude market.
The move comes as tensions mount in the South China Sea, and the West prepares possible oil sanctions against Russia over the crisis in Eastern Ukraine. Analysts believe China is quietly building up buffers against a possible spike in oil prices or disruptions in supply.
The International Energy Agency (IEA) said in its latest monthly report that China imported 6.81m barrels a day in April, an all-time high. This is raising eyebrows since China’s economy has been slowing for months, with slump conditions in the steel industry and a sharp downturn in new construction.
The agency estimates that 1.4m b/d was funnelled into China’s fast-expanding network of storage facilities, deeming it “an unprecedented build”. Shipments were heavily concentrated at Chinese ports nearest the new reserve basins at Tianjin and Huangdao. “We think this is a big deal,” said one official.
China accounts for 40pc of all growth in world oil demand, so any serious boost to its strategic reserves tightens the global supply almost instantly and pushes up the spot price.
Michael Lewis, head of commodities at Deutsche Bank, said Chinese officials at Beijing's Strategic Reserve Bureau are playing the oil market tactically, or “buying the dips” in trader parlance. They add to stocks whenever Brent crude prices fall to key support lines, as occurred earlier this Spring. This is currently around $105.
“It's is very similar to what they have been doing with copper. Whenever it drops below $7,000 (a tonne), they see it as a buying opportunity. They do the same with agricultural commodities,” he said.
China is putting a floor of sorts underneath the global oil market, calling into question predictions by the big oil trading banks that prices will deflate this year as more crude comes on stream from Libya, Iraq, and Iran, and as the US keeps adding supply shale.
The strategic buying could go on for a long time since China is rapidly expanding its reserve capacity from 160m barrels to 500m by 2020, with sites scattered across the country.
John Mitchell from Chatham House says China has stocks to cover 46 days of imports compared to 209 for the US, based on estimates from last year. India is acutely vulnerable to any disruption with just 12 days cover. The minimum safe threshold for OECD states is deemed to be 90 days.
Chinese officials are increasingly nervous as the the country's import dependency keeps climbing, reaching 60pc level this year. This is deemed to be the danger line. Planners have been studying closely what would happen in a global conflict such as full-blown Mid-East war or closure of the Straints of Hormuz. East Asia is now far more vulnerable to Mid-East oil disruptions than the US.
China's stock-build comes as the West steps up threats of “Stage 3” sanctions against Russia, to be triggered if the Kremlin continues to disrupt the Ukrainian elections through paramilitary proxies in the Donbass region.
Sources in Washington say the US may include Russian oil companies such as Rosneft among the mix of targets. This is thought less disruptive for European allies than quarantine measures against the gas monopoly Gazprom since gas is mostly supplied by pipeline contracts and is much harder to replace. The US has already sanctioned Rosneft’s chairman Igor Sechin, the chief architect of the Kremlin’s energy policy over the last decade.
Mr Lewis said any move against the energy industry would risk a disruption of physical trading in oil since most banks would be unwilling to handle the transactions. “It would effectively tighten supply and be bullish for crude prices,” he said.
A parallel drama is unfolding in South East Asia where China is building what appears to be an air base on the Johnson Reef just off the Philippine coast. China is also at daggers drawn with Vietnam after towing an oil rig into waters off the Vietnamese coast in the South China Sea. This has erupted in a wave of anti-Chinese violence over recent days, killing an estimated 20 people in Vietnamese cities and prompting China to evacuate 3,000 of its citizens.
There is the risk of a dangerous tit-for-tat spiral.The Chinese media has been calling for action to “teach Vietnam a lesson”, echoing the language of Chinese leader Deng Xiaoping before he launched an attack on Vietnam in the disastrous war of 1979.
Oil experts says there is no sign yet that China is hoarding diesel or boosting output of refined products such as jet fuel, the sorts of indicators that might point to preparations for possible conflict.
China’s oil imports in April mostly came from Russia, Angola, and Iraq. The IEA said there were also 615,000 b/d of shipments from Iran, a huge increase that underscores just how far global sanctions have eroded since Iran’s new leader Hassan Rouhani reached a preliminary deal with the major powers over the country’s nuclear programme.
Nearly 3 million barrels of Abu Dhabi’s Murban crude is expected to move into the Mediterranean in June, according to traders, as weaker demand in Asia and expectations of a bullish summer in the Mediterranean Urals market have attracted Persian Gulf barrels into the west.
“For ADNOC, an overhang of barrels [for June loading] have moved to the west,” a crude trader said, adding that as much as 3 million barrels of Murban could move that way in June. Murban is a light, sweet crude with an API of 40.2 degrees and a sulfur content of 0.79% that loads out of the Jebel Dhanna and Fujairah ports in Abu Dhabi on the Persian Gulf. It primarily moves east.
However, traders said that expanding Murban production, coupled with seasonal refinery maintenance in Asia and generally weak end-user demand, has prompted sellers to seek out other markets for June cargoes.
In the Mediterranean, where local crude supply has been constrained by sanctions against Iran and Syria, ongoing unrest in Libya and, most recently, a complete halt in exports of Iraq’s Kirkuk crude, traders have increasingly looked outside of the region to meet demand needs.
Heavy sour Latin American grades like Colombia’s Vasconia and Castilla grades, heavy Basrah from Iraq’s Persian Gulf, and even exports from Mexico and Canada have started to find their way into the Mediterranean crude supply stream this year.
European crude traders said that expectations of a strong summer for Mediterranean grades like Russia’s Urals and Azerbaijan’s Azeri Light — expectations that have so-far remained largely unrealized — prompted some sellers to increase arbitrage flows into the Mediterranean. “Everyone was expecting the summer to be strong on Urals like it was last year, so everyone came in and brought [outside crudes],” a trader said, adding that lower official selling prices out of the Persian Gulf in June have made the grades increasingly attractive. “One more point that maybe people aren’t seeing is that the Saudi OSPs are getting more competitive than they were before.”
Market sources said that OSPs across the Persian Gulf have grown increasingly competitive. A widening differential between the Brent/Dubai Exchange of Futures for Swaps [EFS] — a paper mechanism that enables holders of ICE Brent futures to exchange their Brent position for a forward-month Dubai position — has also been widening.
Market sources said that crude pricing against Dated Brent has become increasingly less attractive, which has prompted some European refiners to take a closer look at crude grades that price against Dubai.
Crude oil futures settled higher Friday, supported by ongoing geopolitical strife in Ukraine and concerns over the potential delay to production of Libyan oil.
NYMEX June crude settled 52 cents higher at $102.02/barrel; ICE July Brent settled 66 cents higher at $109.75/b. The front-month Brent-WTI spread settled at $8.17/b, down from $8.94/b on Thursday. In products, NYMEX June ULSD settled at $2.9536/gal, up 30 points; NYMEX June RBOB ended 93 points higher at $2.9735/gal.
“Ongoing concerns with Ukraine and ideas that there are troubles with the presidential election triggered geopolitical risk,” said Gene McGillian, analyst at Tradition Energy. Matt Smith, commodity analyst at Schneider Electric, said the crude complex showed modest buying interest as geopolitical tension in Ukraine left market participants loathe to sell lower.
The United Nations warned Friday of an “alarming deterioration” of human rights in eastern Ukraine, where an armed insurgency by pro-Russian separatists is threatening a presidential election just over a week away, according to an AFP report.
Brent crude oil drew upside support from clashes between government forces and local militia groups in Benghazi, Libya. Libyan air force units loyal to a retired general bombed positions held by ex-rebel Islamist groups in Benghazi on Friday, according to AFP.
In addition, doubt was cast over the ramp-up of Libya’s 130,000 b/d Elephant oil field in in the country’s southwestern region.
Traders told Platts Friday that they were receiving conflicting information as to whether the field had been shut in again by renewed protests (See story, 1706 GMT). “It seems like every day there are dueling headlines out of Libya, with some port or facility resuming production and exports, while the deal for a previous installation falls apart,” said Mike Fitzpatrick of the Kilduff Report.
Fitzpatrick said with Libya producing around 200,000 b/d, “the nettlesome round-robin of outages has added up to global supply tightness.”
Tim Evans, commodity analyst at Citi Futures Perspective, said global petroleum prices showed some resilience in the face of weaker-than-expected US consumer sentiment for May, which slipped to 81.8. from 84.1 in April, according to the Thomson Reuters/University of Michigan’s preliminary reading.
The first cargo of Vietnam’s new Thang Long crude is set to be exported around mid-July, a source close to the matter said Friday.
The cargo will be around 250,000 barrels and will be priced as a differential to Platts Dated Brent crude assessments, the source said. The crude has an API gravity of around 36 degrees and sulfur content of around 0.1%.
The new grade comes from the Thang Long-Dong Do field and is operated by the Lam Son Joint Operating Co., a 50:50 partnership between state-owned PetroVietnam and Malaysia’s Petronas Carigali. First oil is expected at the end of this month, with an initial production rate of 8,000-10,000 b/d, later rising to 15,000-20,000 b/d.
Loadings of Angolan crude oil in July are set to plunge to 46.1 million barrels, a more than 9% drop in exports from 50.685 million barrels scheduled in June, according to a copy of the provisional loading schedule obtained by Platts on Friday.
On a daily average basis, loadings in July will be 1,487,097 b/d, down from the final average daily loading rate of 1,635,000 b/d seen in June.
A total of 47 cargoes will load in July, down from 51 scheduled for June. The provisional June loading program will consist of six stems each of Nemba, Saturno, Dalia and Pazflor, five parcels each of Girassol, Cabinda, and Plutonio, four stems of Hungo, three parcels of Kissange, and a cargo each of Saxi and Mondo.
Hopes that the Elephant oil field in southwestern Libya could ramp up this week to its full 130,000 b/d production rate have been thrown into doubt after traders on Friday said they were receiving conflicting information as to whether the field had been shut in again by renewed protests.
“We really don’t know,” one trader said about reports that the field — which only restarted production late Tuesday — had been shut in. “Different information has been coming in,” the trader said, echoing comments from other sources.
A spokesman for state-owned National Oil Corp. on Wednesday said production had resumed at Elephant at a rate of about 30,000 b/d after protesters ended their blockade of the field. The restart of the field, which had been shut since mid-March, was expected to give Libya’s struggling oil sector a shot in the arm, especially as NOC looked to ramp up toward full capacity of around 130,000 b/d in coming days. NOC could not be reached for immediate comment on Friday.
Elephant crude is exported from the Mellitah terminal on Libya’s coast, but there have been no exports from the port since the field was shut in March. There was also still no sign Friday of the neighboring 340,000 b/d Sharara field restarting production.
The Libyan oil sector has been crippled by protests and strikes since May 2013. The country is producing 250,000 b/d, well below the 1.5-1.6 million b/d it was producing before the current spate of unrest began a year ago.
