The Brent/Dubai Exchange of Futures for Swaps reached its highest level in over seven months, driven by a tightening North Sea market, continued troubles in Ukraine and Libya, and a bearish Middle East crude market. This was limiting Asian demand for Brent-related grades in Europe and West Africa, said traders Tuesday. The second-month (August) EFS reached $4.74/barrel Monday, its highest since September 25 last year, when it was $4.79/b, Platts data showed.
The July EFS was assessed at $4.87/b Monday, compared to $4.76/b Friday, and heard at similar levels Tuesday afternoon. “The Brent/Dubai EFS is much wider [now], and interest from Asia for WAF grades may be modest for July,” said one trader.
On fundamentals the North Sea’s rising physical differentials this month have been driven mainly by supply tightness, according to traders, with Norway’s Gullfaks and Statfjord areas and Denmark’s DUC platforms shut down during parts of June.
European refineries buying crude ahead of their return from turnarounds in May and June has boosted demand over the last month, but from this point, traders see little chance of a crude demand increase from Europe. Northwest European refining margins reached an eight-week low at the end of last week in the face of rising crude costs, since then recovering slightly, and, in products, diesel especially has failed to keep up with crude prices, under pressure from US imports.
Sources said a wide EFS, along with a slightly softer Middle East crude market, meant there was less interest from Asian buyers for WAF crudes. Sources also said that crude pricing against Dated Brent was becoming less attractive, even among nearby European refiners, as some of them were taking a closer look at crude grades that price against Dubai.
Almost 3 million barrels of Abu Dhabi’s Murban crude were expected to load for 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.
The EFS is an important measure of the difference between Brent-related prices and Dubai prices, which for Asian refiners means a relative value for local crudes — based on Dubai — versus other grades priced off Dated Brent, such as West African, Mediterranean and North Sea crudes.
Koch Pipeline plans to build and bring into service a new 24-mile crude oil pipeline with a capacity of 200,000 b/d in the second quarter and link it to its existing South Texas crude oil pipeline system, the company said Tuesday.
“We are seeing additional opportunities with the Eagle Ford shale play and this new pipeline will help us move domestic crude to the US market more efficiently by using a combination of new and existing pipeline infrastructure,” Bob O’Hair, executive vice president of Koch Pipeline, said in a statement. “South Texas is an important area for Koch Pipeline and we?ll continue to invest in it to ensure we have a system that meets the shippers’ needs in terms of capacity and reliability.”
This new pipeline will run from Taft to Ingleside, near the port of Corpus Christi, spokeswoman Deanna Altenhoff said in an email. Flint Hills Resources’ 300,000 b/d Corpus Christi refinery, which is part of Koch Industries, is supplied Eagle Ford Shale crudes by Koch’s pipelines.
More than 50% of Flint Hills’ Corpus Christi refinery is made up of Eagle Ford Shale crude oil. from the Eagle Ford Shale, sources said.
Bakken crude is not riskier to transport by rail than other types of oil, according to a study commissioned by the North Dakota Petroleum Council, which urged federal regulators not to focus their safety efforts on DOT-111 tank cars and instead work to prevent derailments.
The study, released days after a similar one done for the American Fuels and Petrochemical Manufacturers, also found no greater risk in transporting Bakken crude by rail. It found that oil from the Bakken formation has a similar API gravity to other light crudes, low corrosivity, and vapor pressures far below the threshold limit for liquids under federal hazardous materials regulations.
“Since Bakken crude is no more dangerous than other products moved by rail, accident prevention efforts focused on track maintenance, staff training, and train speeds will be the key to improving safety,” said Kari Cutting, vice president of the NDPC.
The NDPC’s study was performed by consulting firm Turner, Mason and Company. The results differ from those announced by US and Canadian regulators, who have said that Bakken crude is more flammable and explosive than other types of crude regularly shipped by rail.
The US Pipelines and Hazardous Materials Safety Administration is soon due to release its own testing results, but officials with the agency have said preliminary results indicate a greater hazard in shipping Bakken crude.
Canada’s Transportation Safety Board said in March that the Bakken crude that spilled and exploded in a deadly train derailment in Lac-Megantic, Quebec, last July had a flash point “similar to that of unleaded gasoline,” as well as a low viscosity that helped it spread quickly through the town.
The TSB has ordered the phase-out of DOT-111 tank cars by 2017, while the US Department of Transportation is drafting tighter tank car regulations and other safety measures for crude-by-rail shipments.
The oil industry has pushed back against tighter rules, saying that requiring more stringent testing and classification of Bakken cargoes could delay shipments, and that a complete phase-out of older DOT-111 tank cars that many safety advocates say are deficient could cause a tank car shortage.
Petroleum futures settled mixed Tuesday in light volume ahead of weekly inventory data that is expected to show minimal changes in US crude stocks.
NYMEX June crude settled 17 cents lower at $102.44/barrel on the contract’s day of expiration. July crude settled 22 cents higher at $102.33/b. ICE July Brent settled 32 cents higher at $109.69/b.
In products, NYMEX June ULSD settled 83 points higher at $2.9492/gal and June RBOB ended 6 points lower at $2.9640/gal.
Tim Evans, commodity analyst at Citi Futures Perspective said there was light volume book-squaring ahead of US weekly inventory data, with consensus expectations for little change in crude stock levels last week.
Analysts polled by Platts are estimating a 300,000-barrel draw in crude stocks for the May 16 reporting week and a 150,000-barrel build in gasoline stocks. Distillate stocks are expected to fall 250,000 barrels.
“With the Memorial Day holiday coming up as the traditional kickoff to the summer driving season, we see potential for a sharp price swing in reaction to any surprises,” Evans said.
Matt Smith, commodity analyst at Schneider Electric, said expectations by some that crude stocks may have risen last week had a bearish influence on futures during the session, which offset ongoing geopolitical tensions in Libya and Ukraine.
In Libya, said Mike Fitzpatrick of the Kilduff Group, the situation may be reaching a turning point as attacks on militant strongholds is underway that may end the uprising. “The oil infrastructure in Libya appears to be very much intact, and exports will rise rapidly, once the situation clears,” Fitzpatrick said. “We saw how quickly output rose after [late Libyan dictator Moammar Qadhafi] was overthrown, and we expect to the same to happen again.”
http://www.naturalgasasia.com/content/12502/egypt_flag_ap_328_550x300.jpg
State owned Egyptian Natural Gas Holding Company (EGAS) will sign an agreement with Gazprom and French company EDF to supply 12 shipments of LNG this summer to meet the needs of power plants, Daily News Egypt quotes EGAS president Khaled Abdel Badie as saying.
Abdel Badie said last week that the legal procedures for the agreement with the two companies have been completed.
Gazprom will deliver seven shipments of LNG while EDF will supply five shipments, reports Daily News Egypt. Each shipment will carry 170,000 cubic metres of LNG.
According to Badie, power plants use an estimated 500m cubic feet of gas per day.
EGAS is currently also in negotiations with the Algerian company Sonatrach regarding the supply of six shipments of gas, adds Daily News Egypt.
21 May 2014 | 03:37 | FOCUS News Agency
Japan's trade deficit shrinks 7.8% on-year in April Picture: Focus Information Agency
Tokyo. Japan's trade deficit shrank 7.8 percent on-year in April, helped by higher exports as well as lower oil imports, data showed Wednesday.
Japan logged a deficit of 808.9 billion yen ($8.0 billion) against the year-before shortfall of 877.4 billion yen, the finance ministry said, as cited by AFP.
Exports climbed 5.1 percent to 6.07 trillion yen on robust shipments of automobiles and other items.
Imports rose 3.4 percent to 6.88 trillion yen, a much slower rate than high-paced rises seen over more than a year.
Purchases of natural gas remained high to plug the resources-poor country's energy gap after the 2011 Fukushima crisis forced the shutdown of nuclear reactors, which had supplied a third of the nation's power.
The yen's plunge since late 2012 contributed to boosting import bills.
But in April crude oil imports fell 11.2 percent in reaction to rush demand before a Japanese sales tax hike took effect.
Japanese domestic demand for gasoline and other products picked up in the months before the April sales tax hike from 5.0 percent to 8.0 percent.
By John Daly | Tue, 20 May 2014 21:18 | 0
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On June 30, 2013, U.S. President Barack Obama announced a “Power Africa” initiative to double access to power in sub-Saharan Africa, intended to assist the population of sub-Saharan Africa, more than two-thirds of who lack electricity. That rate rises to more than 85 percent of people living in rural areas.
According to a White House press release, “Power Africa will build on Africa’s enormous power potential, including new discoveries of vast reserves of oil and gas, and the potential to develop clean geothermal, hydro, wind and solar energy. It will help countries develop newly-discovered resources responsibly, build out power generation and transmission, and expand the reach of mini-grid and off-grid solutions.”
The Power Africa initiative builds on Obama’s Presidential Policy Directive (PPD) on Sub-Saharan Africa, “New U.S. Strategy Toward Sub-Saharan Africa,” announced on June 14, 2012.
The PPD says Africa could be “the world’s next major economic success story” and in a measure of its importance, it represents the first time that promoting U.S. trade and investment has been a cornerstone of a PPD on sub-Saharan Africa.
Providing increased electricity to six million Africans will not come cheap; according to the International Energy Agency, sub-Saharan Africa will require more than $300 billion in investment to achieve universal electricity access by 2030.
But the business potential in renewable energy in Africa is immense, given that Africa is home to seven of the 10 fastest growing economies in the world, as other countries besides the U.S. enter the African energy market.
In an example of rising foreign investment in Africa’s renewable energy markets, on May 15, a consortium led by British company Globeleq officially launched two solar power plants in the Northern Cape. The De Aar and Droogfontein facilities represent a combined investment of $290 million.
Speaking at the inauguration of the two sites, South African Deputy Science and Technology Minister Michael Masutha said, "The Department of Science and Technology (DST) is focusing on setting up the necessary systems to support the sustainable solar energy industry. This is done through supporting research, development and innovation in the energy sector, informing and influencing energy policy decisions, and supporting human capital development."
The De Aar and Droogfontein solar photovoltaic plants, each containing more than 165,000 photovoltaic panels, were constructed under the government's Renewable Energy Independent Power Producer Procurement Program (REIPPP).
The South African Department of Energy notes about its REIPPP program, “South Africa has a high level of Renewable Energy potential and presently has in place a target of 10,000 Gigawatt hours of Renewable Energy. The minister has determined that 3,725 megawatts to be generated from Renewable Energy sources is required to ensure the continued uninterrupted supply of electricity. This 3,725 MW is broadly in accordance with the capacity allocated to Renewable Energy generation in IRP 2010-2030. This IPP Procurement Program has been designed so as to contribute towards the target of 3,725 megawatts and towards socio-economic and environmentally sustainable growth, and to start and stimulate the renewable industry in South Africa.”
Droogfontein Solar Power General Manager Mark Pickering said, "We are proud to be one of the first private power producers established in terms of government's Integrated Resource Plan, which encourages a diverse range of supply technologies to meet the country's future electricity needs, reduce its carbon emissions and make a positive impact on local communities. Education and training are vital if we are to unlock the potential of this new industry and best utilize South Africa's abundant solar resources. To this end, Droogfontein Solar Power will be devoting the bulk of its social economic development budget to support education."
South Africa’s development of solar power represents a significant governmental shift away from its traditional power generating fuels. According to the U.S. government’s Energy Information Agency, in 2012, 72 percent of South Africa's total primary energy consumption came from coal, with oil accounting for 22 percent, followed by natural gas (3 percent), nuclear (3 percent), and renewables (less than 1 percent, primarily from hydropower).
South Africa's energy sector is critical to its economy, the second largest in Africa, only recently overtaken by Nigeria. South Africa has the world's ninth-largest amount of recoverable coal reserves and holds 95 percent of Africa's total coal reserves.
The De Aar and Droogfontein solar photovoltaic plants represent only a portion of the REIPPP plans for solar power in South Africa, which is now soliciting bids for the eventual construction of solar facilities with a total output of 1,450 megawatts.
Washington is not overlooking South Africa; the U.S. department of Commerce in its “Renewable Energy Top Markets for U.S. Exports 2014-2015” report noted, “South Africa is typically the first African market most American exporters consider when developing an export strategy. Its energy demand growth and economic vitality make it an attractive destination, as well as a base for future projects in other African markets.”
Farther afield, Washington sees great opportunity in Africa’s hunger for electricity. On May 17, U.S. Secretary of Commerce Penny Pritzker headed to West Africa with a delegation of 20 American companies on a five day Energy Business Development Mission, visiting Ghana and Nigeria in an effort to promote U.S. exports to Africa by helping American firms launch or increase their business in the West Africa’s energy sector.
Among the companies accompanying Pritzker are executives from General Electric, Hightowers Petroleum Co., Intermarine LLC, MacLean Power Systems, PW Power Systems, SolarReserve, Symbion Power LLC and Unified Electrics LLC.
Given Africa’s power potential, expect to see many similar trade missions in the near future, all seeking a slice of that $300 billion pie.
By John Daly of Oilprice.com
Amsterdam (Platts)--20May2014/955 am EDT/1355 GMT
The US shale gas and oil boom of recent years is "very profound, but sometimes taken out of proportion," International Energy Agency chief economist Fatih Birol said at the Flame conference in Amsterdam Tuesday.
Birol said that of the projected reduction in US oil imports from Tuesday to 2035, while 35% was expected to be the result of changes in oil supply, with more oil produced at home, and 8% from oil switching to gas, some 57% would be the result of demand-side policies.
"US oil imports are set to plummet due to increasing oil supplies and recently adopted policies to improve efficiency of cars and trucks," he said.
Birol added that even as the US became a major oil producer, it was wrong to downplay the continued role of the Middle East.
US and Brazilian oil would step up until the mid-2020s, "but the Middle East is critical to the long-term oil outlook," Birol said.
Middle East oil would "continue to be indispensable" and "the right signals to invest must be sent," he said.
Birol also questioned the importance of an often-cited increase in US coal exports as a result of US shale gas freeing up coal formerly used in the country's power generation sector.
The US had made up only 7% of the increase in global steam coal since 2007, he said, against massive increases from Indonesia.
Moreover, the slowdown in Chinese demand growth compared with previous expectations had been more significant.
"China's move away from coal will have a much greater impact on global coal markets than the US shale gas revolution," Birol said.
Curbing of demand growth in China had 20 times the impact of the increase in US coal exports in 2012, he said.
Birol said the shale revolution had a "major impact," but that in global gas pricing, "large disparities between regions will persist."
He added that Europe needed to think hard about the competitiveness of its industry in such a climate.
"Europe's energy strategy needs to focus on competitiveness and energy security in addition to climate concerns," Birol said.
--Alex Froley, alex.froley@platts.com
--Edited by Peter Lucas, peter.lucas@platts.com
New York (Platts)--20May2014/515 pm EDT/2115 GMT
US commercial crude stocks fell 10.3 million barrels to 390.69 million barrels for the reporting week ended May 16, American Petroleum Institute data showed Tuesday.
The draw is far larger than analysts had expected. A Platts survey of analysts Monday showed stocks were expected to have fallen 300,000 barrels.
NYMEX July crude rose to $102.90/b in electronic trading shortly after the data. The contract had earlier settled at $102.33/b.
The draw comes amid a sharp, 468,000 b/d decline in US Gulf Coast crude imports, which fell to 3.52 million b/d last week. USGC crude runs edged higher, up 47,000 b/d to 8.28 million b/d.
These factors combined to cut USGC crude stocks by 6.41 million barrels to 202.05 million barrels.
Total US imports fell 860,000 b/d to 6.78 million b/d, while crude runs rose 170,000 b/d to 15.87 million b/d.
The increase in runs helped to boost US refinery utilization 1.2 percentage points to 90.3% of capacity. Analysts had been expecting a smaller, 0.5 percentage point increase.
Meanwhile, crude stocks at Cushing, Oklahoma -- the delivery point for the NYMEX crude contract -- fell 261,000 barrels to 23.22 million barrels. Greater Midwest stocks fell 898,000 barrels to 89.69 million barrels.
US Atlantic Coast stocks dropped 1.63 million barrels to 11.16 million barrels, amid a 375,000-b/d decline in imports, which fell to 615,000 b/d. USAC crude runs rose 39,000 b/d to 1.15 million b/d.
West Coast regional stocks fell 1.36 million barrels to 56 million barrels.
US distillate stocks rose 1.36 million barrels to 116 million barrels last week, counter to analysts' expectations of a 250,000-barrel draw.
The build was largest in the Midwest, where stocks rose 717,000 barrels to 28.55 million barrels.
USGC ULSD production was steady around 2.39 million b/d, while ULSD stocks fell slightly, down 267,000 barrels to 31.25 million barrels.
US gasoline stocks rose 135,000 barrels to 214.41 million barrels, in line with analysts' expectations.
Stocks on the USAC -- home to the New York Harbor-delivered NYMEX RBOB contract -- rose 675,000 barrels to 56.1 million barrels amid a 113,000 b/d increase in production.
--James Bambino, james.bambino@platts.com --Edited by Katharine Fraser, katharine.fraser@platts.com
London (Platts)--20May2014/813 am EDT/1213 GMT
Indications or offer levels for Angolan crude oil cargoes loading in July show a mixed picture compared with June, traders said Tuesday.
Most offer or indications levels for Angolan crudes loading in July were either stable or higher except for the medium sweet crude Girassol.
Sources said Cabinda was indicated at Dated Brent plus $1.10/barrel for July compared with $1.20/b in June.
Cabinda had sold slowly for June but with more Asian refineries coming back from maintenance in July demand was expected to stay steady.
But Angolan heavy crudes like Dalia and Pazflor, which sold briskly last month, were offered at much higher levels.
Asian, European and Western demand for these heavy sweet grades has been very strong and as result indications increased, sources said.
Dalia was heard indicated at Dated Brent minus $0.80/b, compared with minus $1.10/b for June, they said.
Similarly, Pazflor was heard indicated at Dated Brent minus $0.60/b, compared with minus $0.90/b for June.
Girassol indications, however, were much lower. Girassol was heard indicated at Dated Brent plus $1.20/b for July compared to $2/b in June.
Sources said there was a big fall in Girassol offer levels as demand for this grade was particularly weak for May and June.
"I think the last Girassol [stem to trade] June 13-14 suffered and the market had to take that into account and adjust accordingly," said a trader.
"[Girassol] struggled to clear last month but that [the indication] does seem low," said a second trader.
July Kissanje cargoes were offered at Dated Brent minus $0.15/b compared with Dated Brent minus $0.30/b the previous month. July indications for Nemba were at Dated Brent minus $0.60/b.
--Eklavya Gupte, eklavya.gupte@platts.com
--Edited by Jonathan Fox, jonathan.fox@platts.com
Similar stories appear in Crude Oil Marketwire See more information at http://www.platts.com/Products/crudeoilmarketwire
London (Platts)--20May2014/849 am EDT/1249 GMT
BP shares were 1% lower Tuesday after a US appeals court late Monday rejected the British oil major's latest bid to stem compensation payments from its Gulf of Mexico spill fund.
The fifth appeals court of New Orleans declined to reconsider a previous ruling which required BP to honor its original spill settlement from 2012, which allows payouts for damage claims with no proven connection to the 2010 spill.
It was the third time a US appeal court has upheld the settlement, scuppering BP's attempts to limit spiraling payouts as the terms of the deal required no proof that claimants' losses were actually traceable to the Deepwater Horizon accident.
BP, whose shares were trading at 504.3 pence at 1235 GMT, said it was disappointed by the decision -- which was backed by eight of full 13 appeal court judges -- and was now considering whether to appeal further.
BP first filed an appeal in a New Orleans court in March 2013 to thwart growing numbers of what it said were fictitious and absurd oil spill compensation payouts related to the 2010 spill.
It initially told investors its spill settlement would not exceed $7.8 billion, but this was soon raised to $9.6 billion as claims escalated sharply, and BP has said the final bill may be "significantly higher."
BP has taken a charge of $42 billion related to the spill and has already spent more than $26 billion to cover the clean up and claims by individuals and businesses.
--Robert Perkins, robert.perkins@platts.com
--Edited by Dan Lalor, daniel.lalor@platts.con
Amsterdam (Platts)--20May2014/649 am EDT/1049 GMT
Norway will have only limited scope to increase its gas deliveries to Europe this winter in the event of disruption to Russian supplies as a result of the Ukraine crisis, a senior Statoil executive said Tuesday.
"I think many producers, including us, can adjust on the margins, but most of the production capacity from Norway is typically designed to produce at maximum in winter and that is what we'll do," Statoil senior vice president Rune Bjornson told delegates at the Flame gas conference in Amsterdam.
However, Europe retains the option to move into the LNG market, in the absence of significant additional Norwegian supply, Bjornson said."That is even more important as a mid-term solution, but of course they will have to compete [with other consumers]," he added.
But well stocked storage sites and the move into the warm summer months meant there was no immediate challenge to European security of supply from a disruption to Russian deliveries, Bjornson said.
Russia has threatened to cut off supplies to Ukraine on June 3 unless it receives advance payments for gas by June 2. Ukraine is a key transit country for Russian gas to Europe and on the previous two occasions that Russia cut Ukrainian supplies (in 2006 and 2009), it also stopped transit deliveries through Ukraine after accusing it of siphoning off gas intended for European customers.
--Reginald Ajuonuma, reginald.ajuonuma@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com
By Christine Harvey May 21, 2014 12:07 AM GMT+0700
Diesel futures rose, reversing an earlier decline, on speculation demand will climb from a six-month high and as U.S. exports rise.
Futures climbed as much as 0.6 percent in New York. Demand for distillates in the four weeks ended May 9 was 4.09 million barrels a day, the highest level since November, according to government data. That may reach 4.5 million this week as export flows are forecast to increase, according to Energy Analytics Group Ltd., a fund adviser.
“Demand is already exceptionally high and exports are growing dramatically,” said Tom Finlon, director of Energy Analytics in Jupiter, Florida. “It’s very good for diesel.”
Ultra low sulfur diesel for June delivery advanced 1.25 cents, or 0.4 percent, to $2.9534 a gallon at 12:59 p.m. on the New York Mercantile Exchange. The fuel’s crack spread versus West Texas Intermediate crude swelled 72 cents to $21.63 a barrel while the motor fuel’s premium to European benchmark Brent crude oil gained 7 cents to $14.05.
Stockpiles of distillate fuel dropped 1.12 million barrels to 112.9 million in the week ended May 9, the lowest since April 18, according to U.S. Energy Information Administration data.
Shipments abroad from the U.S. Gulf Coast, home to half of the nation’s refining capacity, rose 22 percent to 33 cargoes in the week ended May 16, according to Charles R. Weber Co., a shipbroker in Greenwich, Connecticut.
Regional Shipments
Voyages to Europe from the Gulf Coast totaled eight, while those to Latin America were “largely stable” at 12, a weekly report from the shipbroker showed. Ships calculated are transporting refined products including diesel and gasoline.
June-delivery gasoline gained 0.73 cent, or 0.3 percent, to $2.9719 a gallon. The premium of June over July narrowed 0.16 cent to 1.39 cents, the smallest differential for the two contracts nearest expiration since March.
Gasoline’s crack spread versus WTI gained 51 cents to $22.41 a barrel, while the premium to Brent retreated 10 cents to $14.39.
The average U.S. pump price slipped 0.4 cent to $3.642 a gallon, according to data from Heathrow, Florida-based AAA. Prices are 1.2 cents below a year ago.
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@bloomb
By Maher Chmaytelli and Ayman Kekly May 20, 2014 5:00 AM GMT+0700
http://www.bloomberg.com/image/iQrEFwuvprWg.jpg
Source: AFP/Getty Images
Khalifa Haftar, retired Libyan military leader, speaks during a news conference in the... Read More
A rogue general in Libya who’s confronting Islamist militias and seeking to shut down the country’s parliament gained support in the east of the country among both soldiers and some separatist groups.
Rebels who hold ports in eastern Libya, where they’ve been blocking oil exports since July, expressed support for Khalifa Haftar, the retired military leader who heads a self-proclaimed National Army. Haftar’s stated goal of crushing armed Islamist groups also won backing from a key army commander in the east.
As Libya’s government accuses Haftar of attempting a coup, his forces put on a show of strength at both ends of the country, attacking Islamist groups in Benghazi and storming the parliament in Tripoli. The fighting is the latest evidence of the breakdown of authority in the oil-rich north African nation three years after the overthrow of Muammar Qaddafi.
Conflicts in Libya, where oil production has slid to less than a fifth of its capacity, helped drive up the price of Brent crude by as much as 18 percent to $117.45 a barrel between April and August last year. Brent for July settlement traded at $109.37 a barrel at 4:15 p.m. in New York yesterday.
Oil-producing regions haven’t been affected by the latest violence, according to Mohamed Elharari, a spokesman for the National Oil Corp.
The Executive Office for Barqa, the group seeking autonomy in eastern Libya, said it backs Haftar’s operations. In another blow to the Tripoli government, the leader of the army’s special forces in the east, Colonel Wanis Abukhamada, said that he was joining forces with Haftar’s rogue unit.
Militia Summoned
In a statement on Al-Nabaa TV, Abukhamada said Haftar’s campaign is targeting “gangs of extremists” that have taken the lives of many Libyans, including members of the security forces. “Anything that jeopardizes the lives of civilians or the nation will be crushed,” he said.
Haftar’s National Army is deploying tanks and artillery to Tripoli, according to its Facebook page. In the capital, the head of the General National Congress summoned the Libya Shield militia to defend “vital facilities” after the assembly was raided by supporters of Haftar two days ago, according to the official news agency Lana.
Libya’s governments since the fall of Qaddafi have failed to disarm the rebel groups that helped overthrow him, weakening central authority in the country. Crude production declined to 215,000 barrels a day last month after export terminals in the east were seized by the separatists.
Saudi Arabia, the United Arab Emirates and Algeria were among countries that said they were shutting their embassies in Tripoli and sending staff home. The United Nations mission in Libya urged all sides to “cease all military action” and called on the government to “quickly address the lawlessness.”
‘Rescue’ Pledge
“If push comes to shove, the conflict could spin out of control and oil production could be further disrupted,” said Theodore Karasik, director of research at the Institute for Near East and Gulf Military Analysis in Dubai. Islamist groups could retaliate against the Barqa rebels for backing Haftar, he said.
Haftar defected from Qaddafi’s army in the 1980s, finding refuge in the U.S. He was one of the commanders of the rebellion that broke out in February 2011 in Benghazi and ended Qaddafi’s 42-year rule. He declared his intention to “rescue” the country in February this year. The government dismissed his claim at the time, saying Haftar had no authority.
On May 18, his ally, Mukhtar Fernana, declared that parliament had been disbanded after his militia stormed the assembly. Nuri Abu Sahmain, the head of parliament, denied that it had been suspended and said he was running it from a “safe place.”
Two people were killed and 66 wounded in the Tripoli clashes, according to Al Jazeera. At least 70 people have been killed and 141 injured since fighting broke out in Benghazi on May 16, according to the Health Ministry.
To contact the reporter on this story: Maher Chmaytelli in Dubai at mchmaytelli@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Ben Holland, Larry Liebert
By Elena Mazneva, Stepan Kravchenko and Aibing Guo May 21, 2014 3:00 AM GMT+0700
http://www.bloomberg.com/image/isd_.1MpkNFU.jpg
Photographer: Sasha Mordovets/Getty Images
The presidents of China and Russia failed to sign a $400 billion gas supply deal at a meeting yesterday in Shanghai, prolonging negotiations that started more than 10 years ago.
Talks are continuing as the two countries seek a compromise, Alexey Miller, chief executive officer of Russian gas-exporter OAO Gazprom (OGZD), said in a statement after Vladimir Putin and his Chinese counterpart Xi Jinping signed bilateral agreements that didn’t include the gas deal.
Russian officials said before the meeting that the two sides were very close to a deal on gas price, opening the way to building a pipeline linking the world’s largest energy producer with the biggest consumer. That has been the stumbling block throughout the past decade, though with
Putin facing sanctions from the U.S. and Europe after he annexed Crimea, an agreement had been seen as more likely than at previous summits.
“It shows that Russia is not willing to cut a low-price deal just to make a political point with the west,” said Chris Weafer, founder at Macro Advisory in Moscow. “The danger is if a deal is not concluded this year China may switch its efforts to secure pipeline gas elsewhere.”
The two countries are working out pricing, and an agreement could be reached at any time, Dmitry Peskov, Putin’s spokesman, said after yesterday’s meeting.
Russian President Vladimir Putin, left, is greeted by Chinese President Xi Jinping... Read More
Gazprom shares fell 1.8 percent to 145.35 rubles in Moscow yesterday.
“It’s time we reached an agreement with the Chinese on this issue,” Russian Prime Minister Dimitry Medvedev said in a Bloomberg Television interview in Moscow on May 19. “It is very likely that there will be a contract, which means long-term contracts.’
Gazprom plans to build a $22 billion pipeline to China able to carry as much as 38 billion cubic meters (1.34 trillion cubic feet) annually after years of false starts. The company may begin supplying China in 2019 to 2020, Russia Energy Minister Alexander Novak said in March.
That amount of gas is almost a quarter of China’s current consumption and about 10 percent of its estimated demand by 2020, said Gordon Kwan, head of oil and gas research at Nomura International Hong Kong Ltd.
For Gazprom, it is about 20 percent of gas sales in Europe, the company’s largest export market.
The deal has been delayed because Russia wanted to use sales contracts in the EU as a benchmark price, while China proposed a lower price, based on its imports from central Asia.
‘Fair Price’
‘‘I believe that in the long run the price will be fair and totally comparable to the price of European supplies,” Russia’s Medvedev said on May 19.
Gazprom’s average price in Europe was $380.5 per thousand cubic meters last year. CLSA Ltd. forecasts a price for Russia’s gas of $9.50 to $10 per thousand cubic feet ($335 to $350 per thousand cubic meters) delivered to the Chinese border.
That target, worth almost $400 billion over a 30-year contract, compares with the $10 per thousand cubic feet China pays for imports from Turkmenistan and is substantially lower than liquefied natural gas at about $15, CLSA said.
“If the Russia-China gas deal isn’t signed in the near-term, the window of opportunity may be closing fast as other supply sources enter the market,” Xizhou Zhou, director of China Energy at IHS Inc., a consultant, said before yesterday’s meeting.
LNG projects in Australia will begin operations next year, making global gas supply “much more abundant,” according to Zhou. Gazprom’s proposed pipeline exports to China may well have to compete with LNG terminals being built in Russia.
To contact the reporters on this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net; Elena Mazneva in Moscow at emazneva@bloomberg.net; Stepan Kravchenko in Moscow at skravchenko@bloomberg.net
To contact the editors responsible for this story: Will Kennedy at wkennedy3@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net Alex Devine
By Christine Harvey May 21, 2014 12:07 AM GMT+0700
Diesel futures rose, reversing an earlier decline, on speculation demand will climb from a six-month high and as U.S. exports rise.
Futures climbed as much as 0.6 percent in New York. Demand for distillates in the four weeks ended May 9 was 4.09 million barrels a day, the highest level since November, according to government data. That may reach 4.5 million this week as export flows are forecast to increase, according to Energy Analytics Group Ltd., a fund adviser.
“Demand is already exceptionally high and exports are growing dramatically,” said Tom Finlon, director of Energy Analytics in Jupiter, Florida. “It’s very good for diesel.”
Ultra low sulfur diesel for June delivery advanced 1.25 cents, or 0.4 percent, to $2.9534 a gallon at 12:59 p.m. on the New York Mercantile Exchange. The fuel’s crack spread versus West Texas Intermediate crude swelled 72 cents to $21.63 a barrel while the motor fuel’s premium to European benchmark Brent crude oil gained 7 cents to $14.05.
Stockpiles of distillate fuel dropped 1.12 million barrels to 112.9 million in the week ended May 9, the lowest since April 18, according to U.S. Energy Information Administration data.
Shipments abroad from the U.S. Gulf Coast, home to half of the nation’s refining capacity, rose 22 percent to 33 cargoes in the week ended May 16, according to Charles R. Weber Co., a shipbroker in Greenwich, Connecticut.
Regional Shipments
Voyages to Europe from the Gulf Coast totaled eight, while those to Latin America were “largely stable” at 12, a weekly report from the shipbroker showed. Ships calculated are transporting refined products including diesel and gasoline.
June-delivery gasoline gained 0.73 cent, or 0.3 percent, to $2.9719 a gallon. The premium of June over July narrowed 0.16 cent to 1.39 cents, the smallest differential for the two contracts nearest expiration since March.
Gasoline’s crack spread versus WTI gained 51 cents to $22.41 a barrel, while the premium to Brent retreated 10 cents to $14.39.
The average U.S. pump price slipped 0.4 cent to $3.642 a gallon, according to data from Heathrow, Florida-based AAA. Prices are 1.2 cents below a year ago.
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@bloomb
By Nick Cunningham | Tue, 20 May 2014 22:17 | 0
Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.
Russia’s seizure of Crimea has led to speculation that a major motivating factor was to acquire potentially vast energy resources in the Black and Azov Seas. I wrote back in March on the eve of the Crimean vote to secede from Ukraine about reports that Russia was eyeing the oil and gas reserves off the coast of Crimea.
But taking control of territory rich in oil and gas is different from being able to successfully pull those energy resources from the ground. The New York Times published an article on May 17 that suggested that Russian President Vladimir Putin quietly achieved a massive windfall – acquiring “rights to underwater resources potentially worth trillions of dollars.”
The Black and Azov Seas could certainly hold a huge bounty, potentially up to almost 10 billion barrels of oil and 3.8 trillion cubic feet of natural gas. The most promising field is the Skifska field just southwest of the Crimean coastline. Early estimates suggest that Skifska holds 200 to 250 billion cubic meters of natural gas.
However, just because Russia now controls this territory does not mean they will be able to take advantage of it, at least not anytime soon. Although there are rough estimates of significant reserves of oil and gas, the area is still relatively unexplored. Ukraine had trouble attracting any bidders for two of its four blocks off the coast of Crimea, despite heavy salesmanship by the government in Kiev.
Also, Russian energy companies still do not have a thorough understanding of the geology in Crimean waters. LUKoil, one of Russia’s largest oil companies, was outbid in an auction for the Skifska field by an international consortium led by ExxonMobil. The consortium had been in talks with the Ukrainian government under Viktor Yanukovych over a deal for the Skifska field right up until the annexation of Crimea. The oil companies had plans to spend $735 million to drill two wells. The deal was never finalized and ExxonMobil and its partners obviously shelved those plans when things took a turn for the worse a few months ago.
Presumably, with Russia now moving in, Russian companies will have to redo some of the preliminary exploratory work that the private consortium had already done.
But, more importantly, offshore oil drilling is highly technical, and requires enormous upfront capital. Russia has often teamed up with international oil companies – like ExxonMobil, BP and Royal Dutch Shell -- to tackle some of the extraordinarily difficult-to-reach oil fields, as Russia’s companies can’t always do it on their own. That’s why Russia has sought partners for offshore oil drilling in the Arctic, constructing LNG terminals in Sakhalin, and for tight oil drilling in Western Siberia.
But in Crimea – which much of the world does not recognize as Russian territory – finding international partners, should Russia need them, will be extremely difficult to do.
For example, on April 30, Shell’s Chief Financial Officer Simon Henry ruled out new Russian ventures for the foreseeable future. “I don't think we'll be jumping into new investments (in Russia) anytime soon,” he said. With Crimea in international legal limbo, other companies won’t invest, either.
Even if Russia can go it alone in the Black Sea – and since the waters are shallower and less remote than some of its other major new projects, they probably will try to – it will take years before any oil and gas will come online.
In the meantime, Russia is paying the price for its international isolation. The economy will probably enter recession in the second quarter, according to Russia’s economy minister. Capital flight from Russia reached $63.7 billion in the first three months of this year, exceeding last year’s total. The ruble is also down 6 percent against the dollar so far this year, pushing up inflation, which hit an annual rate of 7.2 percent.
Moreover, in the long-term, Russia may have severely damaged its reputation as a place for doing business. That will hurt the economy for years to come and is much harder to rectify than playing with interest rates or money supply, which can be used for short-term fixes. The darkening economic climate is inflicting real costs on Russia, and that flies in the face of headlines describing Russia’s takeover of Crimea’s oil and gas reserves as a major strategic triumph.
By Nick Cunningham of Oilprice.com
By Daniel J. Graeber | Tue, 20 May 2014 21:29 | 0
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The recent decision by a French energy company to sign a deal to send liquefied natural gas from the United States to a utility company in Japan shows that, despite the rhetoric on Capitol Hill, the energy market is driven by commercial interests, not political winds.
GDF Suez, a member of the U.S.-based consortium leading the development of the Cameron LNG facility in Louisiana, signed the deal with Japanese utility company Tohoku Electric Power to supply 270,000 tons of liquefied natural gas (LNG) starting in 2018.
"This sales agreement seals our first long term LNG sale with a Japanese partner, as well as the emergence of U.S. LNG contributing to Japan energy supply, thanks to the benefit of the shale gas revolution in America," said Jean-Marie Dauger, executive vice president of the French company's LNG business.
The Cameron LNG facility received conditional authority in February from the U.S. Department of Energy to send domestic natural gas to countries that don't have a free trade agreement with the United States.
As domestic production of natural gas has increased, U.S. imports have declined. The U.S. Energy Information Administration (EIA) said in its latest monthly market report that it expects marketed gas production to grow by an average of 3 percent this year. By 2018, EIA expects the United States will be a net exporter of natural gas.
Of the planned LNG terminals in the United States, Cheniere Energy's Sabine Pass terminal is the only one to have the full export license for sales to European countries. Demand, meanwhile, is increasing from the expanding economies in Asia. Japan, in particular, is taking on more natural gas because its nuclear power sector was crippled by the Fukushima nuclear disaster in 2011. With few natural resources of its own, Japan is the largest LNG consumer in the world.
All this makes statements from U.S. policymakers about how American gas exports could be used to check Russian influence in Eastern Europe sound a little like lip service.
Rep. Fred Upton (R-MI), the chairman of the House Energy and Commerce Committee, said March 3 that expanding U.S. LNG exports would send a strong message to Russia. "We will continue to advance legislation and develop new proposals that allow market forces and technology to help expand Eastern Europe's access to affordable energy beyond Russia," he said.
Upton, his Republican counterpart from Oregon, Cory Gardner, and several of their colleagues on the right all say U.S.-sourced LNG can take away Russia’s leverage in energy dependent Eastern Europe, through which pipelines also carry gas to European customers.
But Cheniere's boss, Jean Abiteboul, told Bloomberg News that LNG can't push Russia out of the European energy sector, especially LNG from the United States.
"It will probably force people to think more accurately on the diversification of supply [and] security of supply," he said.
EIA shows that natural gas consumption in Europe has been in a general decline since 2008. Though it may be politically necessary to show solidarity with the European community as the Ukrainian crisis drags on, the market for U.S. LNG in Europe isn't as ripe as some lawmakers suggest it is.
It's the Asian economies that are thirsty for gas. Even Putin, the very adversary the U.S wants to contain, is looking East for new markets.
For now at least, U.S. LNG exports are going to where customers, not politicians, want them.
By Daniel J. Graeber of Oilprice.com
By Alexander Kolyandr
MOSCOW--Russia's natural gas company Yamal LNG said Tuesday its signed a supply deal with China National Petroleum Corp., know as CNPC.
Under the contract, which underlines Russia's desire to diversify its energy supplies and increase the share of the Asian markets in its export, Yamal will supply 3 million metric tons of liquefied natural gas annually for 20 years.
The Yamal LNG project envisages the construction of an LNG Plant in northern Russia. The main shareholder in the project is Russia's largest independent gas producer Novatek (NVTK.LN), one of the largest shareholders of which is Gennady Timchenko--a close ally of Russian President Vladimir Putin who was put on a list of sanctions by the U.S. after Russia annexed the Ukrainian province of Crimea.
CNPC and French energy giant Total SA (TOT) each hold 20% in Yamal.
Write to Alexander Kolyandr at alexander.kolyandr@wsj.com
