Tuesday, May 31, 2011

OPEC oil output rises in May – Survey


Opec crude oil output is expected to rise in May as extra oil from Saudi Arabia, Nigeria and Iraq counters a further decline in Libyan supply.

Any extra supply from the Organization of the Petroleum Exporting Countries is likely to be welcomed by consumer nations concerned about the impact of oil prices well above $100 a barrel on economic growth and inflation.

Supply from all 12 members of OPEC is expected to average 28.90 million barrels per day (bpd) this month, up from a revised 28.79 million bpd in April, the survey of oil companies, OPEC officials and analysts found.

“OPEC is not producing what it was producing in January before Libya went down,” said Paul Tossetti, senior energy adviser at PFC Energy. “But the market seems to be fairly well supplied currently.

The Libyan crisis has almost shut down output in what used to be Africa’s third-largest producer. OPEC in January pumped 29.63 million bpd, the most since December 2008, according to estimates.

OPEC meets on June 8 in Vienna to review its output policy, which it has not changed since it agreed to a record cut in production in December 2008 in the aftermath of economic crisis.

Since then the target has become obsolete as the economy recovered and Saudi Arabia and others in OPEC unilaterally raised supplies. Most officials in the group say supplies are adequate, although a delegate from one of OPEC’s Gulf countries has suggested OPEC could raise its output target in Vienna.

In May, Saudi Arabia has boosted supply by 100,000 bpd from an upwardly revised April level, partly due to increase demand from the country’s power plants, the survey found.

Nigerian supply has risen as Royal Dutch Shell added extra cargoes of Bonny Light crude to export programmes for April and May as production surprised to the upside. Iraqi output, excluded from OPEC output agreements, was slightly higher with exports in the country’s south climbing to 1.7 million bpd due to higher production at the Rumaila field which BP Plc and CNPC are developing.

Among the countries with lower output, Libya’s production posted a further decline of 50,000 bpd in May to average 200,000 bpd. Until violence broke out earlier this year, output had been running near 1.6 million bpd. Angolan supply continued to reflect the impact of field maintenance, technical problems and declining output at some of the country’s older fields., participants in the survey said.

Initial estimates suggest little impact on supply to the market from maintenance work at the Upper Zakum field in the United Arab Emirates. OPEC has not officially changed its output policy since cutting output by a record 4.2 million bpd in December 2008 to 24.84 million bpd for 11 members, all except Iraq. They produced 26.23 million bpd in May, according to the Reuters survey.

The group does not provide timely official production figures, so the oil industry relies on supply estimates from news agencies, consulting firms and organisations such as the International Energy Agency.

DBO: A Better Way to Gain Exposure to Crude Oil


By Tim Hesselsweet

Stock quotes in this article: DBO, USO, OIL, DBA, DBE, DBB, DBS, DBP, DBC

"Crude Oil Tracking Error", I explained some of the difficulties of investing in crude oil. While spot crude oil prices may be informative, there's a difference between buying crude oil for an industrial process (conversion into products such as gas and heating oil) and buying crude as an investment. Once you purchase crude, you have to store it and that incurs a cost that eats into your return. Spot crude "returns" are fictitious in the sense that you can't realize them as an investor.

ETFs that offer exposure to crude oil typically use futures to gain exposure to crude. Using futures and rolling from one contract to another as it nears expiration eliminates the messy storage problem. Futures returns have three components. First when you fund a futures account, you buy short-term treasury bills (usually 3-month or 6-month) that can be used as collateral for trading futures. Changes in spot prices are the next component and the only one most people consider. Finally there's a roll yield determined by the term structure of the futures contract. When distant contracts are priced less than near contracts (backwardation), you'll realize a positive roll yield and when distant contracts are higher than near contracts (contango), you'll realize a negative roll yield.

If you read the fine print in ETF prospectuses, you can find out what "index" each ETF attempts to track. The United States Oil Fund(USO_) and the iPath S&P GSCI Crude Oil Total Return Index ETN(OIL_) rolls front-month crude futures. The PowerShares DB Oil Fund(DBO_), uses a roll-optimized strategy. When it's time to roll, rather than simply rolling to the next month contract, DBO looks at the crude oil term structure and find the contract that will maximize backwardation or minimize contango (as is the case currently). Here are the year-to-date returns for each:
More on DBO

This shows the significance of an effective roll strategy. I recommend the PowerShares family of commodity ETFs as a better way to get commodity exposure without having to trade futures. PowerShares also offers the DB Energy Fund (DBE_), DB Base Metals Fund(DBB_), DB Agriculture Fund(DBA_), DB Silver Fund(DBS_), DB Precious Metals Fund(DBP_), and DB Commodity Index Tracking Fund(DBC_).

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Oil pares gains, at $116 on weaker dollar


By Claire Milhench


LONDON (Reuters) - Oil jumped by more than $2 on Tuesday then pared gains with Brent crude above $116 a barrel, as the dollar weakened on improved prospects for a bailout for heavily indebted Greece and U.S. confidence data disappointed.

The euro rose to a three-week high against the dollar as the European Union stepped up efforts to draft a second bailout package for Greece.

Brent crude futures were up $1.60 to $116.28 a barrel at 1408 GMT, after pushing to an intraday high of $117 in choppy trading when U.S. home sales data for March entered double-dip territory and the dollar weakened.

U.S. crude was up $1.95 a barrel to $102.54, after reaching a high of $103.39. Both contracts pared gains after U.S. May consumer confidence data disappointed and business activity in the Midwest grew by less than expected in May.

But the weaker dollar helped put a floor under oil prices, analysts said. The dollar .DXY was down 0.57 percent against a basket of currencies at 1411 GMT. A weaker dollar makes oil cheaper for those holding other currencies.

Roy Jordan, research associate at Facts Global Energy, said the dollar was being weighed down by the relatively weak economic data that has come out over the last few days.

"There has been an inverse correlation between oil and the dollar over the past month," added Thorbjorn Bak Jensen, oil analyst at Global Risk Management.

U.S. crude has also gained support from the temporary closure of the 591,000-barrel-a-day Keystone pipeline, which carries oil from Alberta to U.S. oil hub Cushing.

"While the shutdown was implemented around midnight following a leak, it is still unclear when operations will be resumed," said analysts at JBC Energy in a note. "In case of a longer disruption, we might see a noticeable crude stockdraw in Cushing in next week's US inventory reports."

Brent is similarly being supported by production problems in the North Sea which are disrupting the Forties program.

Bak Jensen also pointed to Germany's decision to cease producing electricity from nuclear power plants by 2023. "Over 20 percent of their electricity comes from nuclear power at the moment so this will give support to coal and oil as well as alternative energy," he said.

Despite the rally as traders in London and New York returned to their desks after a long weekend, both oil contracts are still down for the month of May.

Brent is down about 8.7 percent and U.S. crude is down about 10.8 percent following a broad commodities sell-off at the start of the month.


The market's focus is now turning to the upcoming OPEC meeting in Vienna in June. Analysts JBC Energy believe an increase in output allocations of 2-2.5 million barrels per day would be justified given the current fundamental situation.

"Nevertheless, the outcome of the meeting will once again depend strongly on OPEC kingpin Saudi Arabia's stance on the issue, with the Middle Eastern country holding some three quarters of the group's idle capacity," they said in a note.

Oil was supported by the end of a truce between tribal groups and forces loyal to Yemen's President Ali Abdullah Saleh, which brings the country closer to civil war.

"It's providing continued support to oil prices and protection to the downside," Carsten Fritsch, an analyst at Commerzbank said.

Yemen's Saleh has refused to step down despite efforts by regional nations to broker a departure amid widespread protests, causing concern that unrest may spill into neighboring states.

"Yemen is regarded as a center of the al Qaeda terror network and directly borders with Saudi Arabia, the world's largest oil producer," said Commerzbank analysts. "Consequently, there is a high risk of unrest destabilizing the entire region."

South African President Jacob Zuma made little headway toward brokering a Libya peace deal in talks on Monday with Gaddafi, who is adamant he will not leave Libya.

(Additional reporting by Seng Li Peng in Singapore; editing by James Jukwey)

Monday, May 30, 2011

Oil Prices Ease



LONDON—Crude-oil futures traded lower as the dollar made gains against the euro.

Oil prices typically weaken when the dollar rises, as commodities priced in the greenback become more expensive to buy for investors holding other currencies.

Oil prices are likely to move with little conviction for the rest of the day as public holidays in the U.S. and U.K. keep many investors away from the market, although analysts also said a lack of liquidity means small volumes of trade could lead to larger-than-usual price swings.

"Today, volumes are expected to be thin, given the Bank holidays in the U.S. and the U.K., so it would not take a lot to move the market significantly one way or the other," said Glen Ward, head of retail derivatives at London Capital Group.

The front-month July Brent contract on London's ICE futures exchange was recently down 35 cents, or 0.3%, at $114.68 a barrel. The front-month July contract on the New York Mercantile Exchange was trading lower 43 or 0.4%, at $100.16 per barrel.

The Organization of Petroleum Exporting Countries is to meet next week amid mounting political pressure from consuming nations for the exporting group to increase supply as a way to help lower crude prices. Those countries also need to avoid a supply glut that could trigger a sharp slide in prices and hurt the group's domestic finances.

Ahead of the meeting, Saudi Prince Alwaleed bin Talal said in an interview Saturday that his country wants oil prices to come down to between $70 and $80 a barrel to avoid Western countries seeking replacement energy sources.

A raft of U.S. economic data released last week did little to assuage fears of an economic slowdown and a slump in oil demand in the coming months.

Write to Reza Amanat at reza.amanat@dowjones.com

Saturday, May 28, 2011

NATO strikes command center at Gadhafi compound


Russian President Dmitry Medvedev, left, speaks with Japanese Prime Minister Naoto Kan during a bilateral meeting at the G8 summit in Deauville, France, Friday, May 27, 2011. G8 leaders, in a two-day meeting, will discuss the Internet, aid for North African states and ways in which to end the conflict in Libya. Photo: Alexander Zemlianichenko / AP

TRIPOLI, Libya (AP) — NATO airstrikes struck a command and control center at Moammar Gadhafi's compound in Tripoli on Saturday, as the new rebel administration warned it was fast running out of money because countries that promised financial aid have not come through.

Ali Tarhouni, the rebel finance minister, complained that many countries that pledged aid have instead sent a string of businessmen looking for contracts from the oil-rich country.

"They are very vocal in terms of (offering financial) help but all that we have seen is that they are ... looking for business," Tarhouni told The Associated Press on Saturday.

Tarhouni recently returned to Benghazi, the rebel bastion, from a trip overseas to drum up aid that included a visit to Rome where the contact group on Libya promised to set up a fund to speedily help finance the rebel administration.

"I think even our friends do not understand the urgency of the situation. Either they don't understand, or they don't care," Tarhouni said.

Tarhouni singled out Qatar and Kuwait for their "generous, very generous help" but did not say if those countries had sent money. Qatar is the only Arab nation to send jet fighters to help NATO enforce a U.N.-designated no-fly zone in Libya.

Tarhouni also praised France, which was the driving force behind the U.N. no-fly zone. But "other than that, everybody is just talking," he said. "So far, nothing has come through and I am fast running out of cash."

Tarhouni emphasized that the rebels' National Transitional Council will be signing no long-term contracts. While the rebel administration will honor previously signed contracts, Tarhouni indicated a new democratically elected government might do otherwise.

"Right now, I am not going to sign any contract that has any consequences for the future of Libya, with the exception of what I need in terms of food, medicine, fuel," he said.

Meanwhile, nearly two dozen Libyan soldiers, including a colonel and other officers, fled their country in two small boats and taken refuge in neighboring Tunisia, where thousands fleeing the fighting in Libya have taken refuge.

A person who met with some of them says they fled rebel-held Misrata, arriving at Ketf port, near Ben Guerdane, on the Tunisian side of the border. The person who met with them Saturday asked to remain anonymous for security reasons. The group turned over their weapons to the Tunisian Army.

The official TAP news agency said 22 military, some ranking officers, arrived Friday in boats carrying a dozen civilians, two with bullet wounds.

Three dissident officers from Moammar Gadhafi's army reached Tunisia in a boat May 15.

Also Saturday, an alliance spokesman said NATO fighter jets struck Gadhafi's Bab al-Aziziyah compound in Tripoli in the early hours Saturday. He said the Libyan leader was not a target and there was no way to know if he was there at the time of the attack.

The spokesman said that around noon a vehicle storage area in the same area was hit.

The strike sent a shuddering boom through Tripoli and rattled windows. Such a daylight attack is fairly unusual since NATO began its aerial attacks over Libya three months ago.

Airstrikes over the past week have pounded the large barracks area that lies close to the Gadhafi compound. The same compound was badly damaged by U.S. warplanes 25 years ago in response to a bombing that had killed two U.S. servicemen at a German disco.

Saturday's airstrike came after leaders at a summit of the Group of Eight world powers reiterated that Gadhafi had to leave power.

Russia, a leading critic of the NATO bombing campaign and one-time Gadhafi ally offered to mediate a deal for the Libyan leader to leave the country.

Speaking at the summit in Deauville, France, Russian President Dmitry Medvedev, said he was sending an envoy to the rebel stronghold of Benghazi immediately to start negotiating, and that talks with the Libyan government could take place later.

National Transitional Council head Mustafa Abdul-Jalil told reporters in Benghazi on Saturday that the rebels would accept negotiations led by anyone willing to find a solution, though they will accept nothing less than the departure of Gadhafi and his sons.

Faul reported from Benghazi. Bouazza Ben Bouazza contributed from Tunis, Tunisia.

Read more: http://www.stamfordadvocate.com/news/article/NATO-strikes-command-center-at-Gadhafi-compound-1399062.php#ixzz1NfPnwdCC

Friday, May 27, 2011

Russia offers to mediate ex-ally Gadhafi's exit


By ANGELA CHARLTON, Associated Press

DEAUVILLE, France – Russia abandoned one-time ally Moammar Gadhafi and offered Friday to mediate a deal for the Libyan leader to leave the country he has ruled for more than 40 years.

The striking proposal by a leading critic of the NATO bombing campaign reflects growing international frustration with the Libyan crisis and a desire by the Kremlin for influence in the rapidly changing Arab landscape.

With Gadhafi increasingly isolated and NATO jets intensifying their attacks, Russia may also be eyeing Libya's oil and gas and preparing for the prospect that the lucrative Libyan market will fall into full rebel control.

Early on Saturday, two NATO air strikes shook the Libyan capital, Tripoli. It was not immediately clear what was targeted.

"He should leave," Russian President Dmitry Medvedev said of Gadhafi. "I proposed our mediation services to my partners. Everyone thinks that would be useful."

The proposal thrust Medvedev into the spotlight at a summit in France of Group of Eight rich nations. Talk of this year's Arab world uprisings has dominated the summit.

Analysts question whether Russia still has any leverage over Gadhafi, and the leaders of France, Britain and Germany said there's no point in negotiating directly with the Libyan leader himself.

"If Gadhafi makes this decision, which will be beneficial for the country and the people of Libya, then it will be possible to discuss the form of his departure, what country may accept him and on what terms, and what he may keep and what he must lose," Medvedev told reporters.

Medvedev said he is sending envoy Mikhail Margelov to the rebel stronghold of Benghazi immediately to start negotiating, and that talks with the Libyan government could take place later. Margelov said earlier Friday that it's necessary to negotiate with all "reasonable" representatives of the government, including Gadhafi's sons.

In response, Libya's deputy foreign minister, Khaled Kaim, said: "Russia is one of the traditional friends of Libya. ... We don't think that Russia will sway its position to side with NATO."

He would not say whether Gadhafi had been informed of Medvedev's proposal, but told reporters in Tripoli that the Libyan leader was constantly watching the news.

South African President Jacob Zuma is also using his party's ties to Gadhafi to work out a peaceful outcome, heading to Libya on behalf of the African Union.

In Washington, U.S. State Department spokesman Mark Toner called Russian, South African and U.N. mediation efforts with Gadhafi "constructive," but said they needed to make clear that the Libyan leader must leave power.

"I don't know if it's up to the international community, given what Gadhafi has done against his own people, to prepare him any kind of easy exit or some kind of golden parachute to leave Libya," Toner told reporters.

Asked what value the mediation might then hold, Toner said the efforts could be useful "to make him or his regime see clearly the writing on the wall."

"There's no way out," Toner added. "He's no longer the legitimate leader in the eyes of the international community, in the eyes of his own people. The sooner he accepts that and moves on, the better."

It's unclear what exactly Gadhafi — known as the Leader of the Revolution or Brother Leader in Libya — could step down from. He has no constitutional executive position, but wields power by force of his personality and presence, making it difficult to guarantee that he has given up power as long as he and his sons remain in the country.

The opposition wants Gadhafi exiled. Medvedev said he wouldn't offer Gadhafi refuge in Russia but said with a grin, "such countries could be found" that would be willing to take him in.

Russian officials have been critical of Gadhafi but also say NATO is using excessive force. Russia recently held talks with representatives of both Gadhafi's government and the rebels.

Russia often straddles the divide between the Western nations with which it shares a table in the G-8, and the Arab nations that Moscow nurtured during the Soviet era.

Moscow offered to negotiate with Saddam Hussein in Iraq in the 1990s, and is a member of the so-called Quartet negotiating for Mideast peace, alongside the United States, European Union and United Nations.

Over the past decade, the Kremlin sought to revive its influence in the Middle East and saw Gadhafi as one of its partners in the region. Libya struck multibillion dollar deals to procure Russian-made weapons, and Russia's gas monopoly Gazprom has big investments in Libya that have been threatened by Gadhafi's attacks on rebel forces.

Medvedev discussed the mediation offer with President Barack Obama at talks on the sidelines of the G-8.

"The Russians of course have long-standing relationships in Libya that frankly we don't have," U.S. deputy national security adviser Ben Rhodes said Friday. "We are going to be in close touch with the Russians as they pursue their conversations with the Libyans."

A Libyan rebel spokesman, Abdel-Hafidh Ghoga, said Russia's offer should have come sooner. "It's too late, and it's not a big deal," Ghoga, the vice chairman of the opposition National Transitional Council, told a rally in the eastern city of Benghazi.

But the timing may be propitious.

Libya's rebels have consolidated their position, and NATO pounded Tripoli with its heaviest strikes yet this week. Fuel and food shortages in the capital are starting to take a toll.

"The world does not see (Gadhafi) as the Libyan leader, and this is the position of not only the G-8 but also of all the African states that attended today's summit," Medvedev said.

A Moscow-based Middle East expert expressed doubt that Gadhafi will agree to step down after Benghazi-based opposition leaders rejected a cease-fire agreement proposed by the African Union in late March.

Gadhafi "will fight to the end with unpredictable consequences for everyone involved," Yevgeny Satanovsky, head of the Moscow-based Middle East Institute, told The Associated Press.

On Friday, rebel fighters clashed with government forces to the south and west of the insurgent-held city of Misrata. Dr. Mustafa Omar of Hikma hospital said five rebels were killed and 26 wounded. It was unclear if any government soldiers were killed.

While rebel fighters have pushed Gadhafi's troops to Misrata's outskirts, the city, Libya's third largest, has been under siege for months, receiving food and medical supplies only by sea.

French President Nicolas Sarkozy, hosting the G-8 summit, said Friday there is "great unanimity" about an "intensification of the military intervention" to protect civilians.

He did not say how, but France and Britain said this week they are ready to deploy attack helicopters in the campaign.

British Prime Minister David Cameron told reporters in Deauville that the deployment of helicopters was "part of the process of turning up the pressure" on Gadhafi. He said the campaign is entering a "new phase."

So far, the NATO campaign has relied largely on strike jets dropping munitions from an altitude of about 15,000 feet (4,600 meters). The helicopters, flying much lower and slower, could more accurately identify targets in densely populated areas while risking fewer civilian lives. But such flights would also expose the helicopter crews to greater risks.

Michelle Faul in Benghazi, Ryan Lucas in Misrata, Vladimir Isachenkov and Mansur Mirovalev in Moscow, Don Melvin in Brussels, and Jamey Keaten and Julie Pace in Deauville, and Bradley Klapper in Washington contributed to this report.

Nigeria will send stand-in for oil min to OPEC


ABUJA (Reuters) - Nigeria will send a stand-in government official to a meeting of the oil producer group OPEC because Africa's largest crude exporter will be without an oil minister after the country's cabinet is dissolved next week.

The Organization of the Petroleum Exporting Countries (OPEC) meets in two weeks time to discuss its members' oil output quotas with prices hovering above $100 a barrel.

"There will be no gap to worry about, we will be sending a representative to the meeting," a spokesman for Nigeria's state oil company told Reuters. He did not say who this would be.

Nigerian President Goodluck Jonathan will be inaugurated on Sunday and his cabinet is expected to be dissolved soon after. Jonathan has said it will take two weeks for his new cabinet to be assembled following his signing in ceremony.

Civil servants will run the country in the interim.

Nigeria: 'Cartel Wants Me Out As Minister'

Petroleum Minister Diezani Alison-Madueke


Mohammed S. Shehu

Petroleum Minister Diezani Alison-Madueke said that those calling for her exclusion from the next cabinet are doing so because she has created a level playing field that has denied them the opportunity to defraud the country through the oil and gas sector.

Fielding questions from newsmen at the State House, Abuja, against the backdrop of criticism mounting against her nomination as a minister in the next dispensation, Alison-Madueke insisted that there is no going back on the ongoing reforms of the sector.

She said, "They are fighting President Jonathan because since assuming duties as president of this country he has taken the uncharacteristic step to break the cartel in the petroleum sector that had almost strangulated the economy for over a decade. That is why the frenzied and sudden campaign of calumny by the cartel, all in a bid to deter me from carrying out Mr. President's reform agenda."

She said Nigerians would not allow a small group of individuals to deprived millions the benefits drivable from the oil sectors. She also described the corruption allegations against her as one of the tricks deployed by her enemies to derail her efforts in transforming the oil and gas sector.

"I would not want to join issues with those criticizing me because they are crying foul that through us Mr. President has broken the old order where the common man had to spend nights on queues in petrol stations and pay higher prices for products. We have also ensured that the business in the entire oil and gas industry of the economy is no longer business as usual. They can no longer undermine government's good intentions for the sector and cause untold hardship for millions of our people," she said adding that the ministry under her leadership has also initiated a 24 months rehabilitation programme for the three refineries in the country.

She maintained that this was the first time the Nigeria National Petroleum Corporation, NNPC, "is undertaking such gigantic and extensive rehabilitation project without asking the Federal Government for funds."

The minister said "once the comprehensive rehabilitation of the refineries is completed, the country will considerably reduce importation of PMS (Petrol) and become self-sufficient in kerosene and diesel production, thus ending the long years of sufferings of the ordinary Nigerian".

27,580 barrels of Shell oil spilt in Nigeria in 2010


LAGOS — Anglo-Dutch oil giant Shell said on Friday that theft, sabotage and operational reasons caused 27,580 barrels of oil to spill from its facilities in Nigeria last year.

"Sabotage and crude oil theft was the cause of 22,310 barrels spilled from SPDC (Shell Petroleum Development Company) facilities in 112 incidents, an average of about one spill every three days," the company said in a document released to AFP here.

It said the balance of 5,270 barrels was due to 32 operational spills recorded during the period.

The company said security agents arrested 187 people and seized 20 tankers, 15 vehicles, 28 barges and 38 other boats allegedly involved in oil theft in 2010.

Shell said it paid more than $1.7 million in compensation only to those affected by operational spills. Under Nigerian law, compensation is not paid on damages caused by sabotage.

It said that on average sabotage accounted for more than 75 percent of oil spill incidents and more than 70 percent of oil spilled from Shell facilities in the Niger Delta between 2006 and 2010.

In January, environmental campaigners in the Netherlands accused Shell of destroying lives and the environment in the Niger Delta, and urged Dutch MPs to wade into the matter.

Shell said in its defence that it applied "global standards" to its operations around the world.

Wednesday, May 25, 2011

Worlds top 21 largest oil refineries.


by David Rachovich

World's Largest Refineries (minimum capacity of 400,000 b/cd)

Rank / Company

Location / Crude Capacity / barrels per calendar day (b/cd)

1. Paraguana Refining Center Cardon/Judibana, Falcon, Venezuela 940,000
2. SK Corp. Ulsan, South Korea 817,000
3. GS Caltex Corp. Yeosu, South Korea 750,000
4. Reliance Petroleum Ltd. Jamnagar, India 660,000
5. ExxonMobil Refining & Supply Co. Jurong/Pulau Ayer Chawan, Singapore 605,000
6. Reliance Industries Ltd. Jamnagar, India 580,000
7. S-Oil Corp. Onsan, South Korea 565,000
8. ExxonMobil Refining & Supply Co. Baytown, Texas, USA 560,500
9. Saudi Arabian Oil Co. (Saudi Aramco) Ras Tanura, Saudi Arabia 550,000
10. Formosa Petrochemical Co. Mailiao, Taiwan 540,000
11. ExxonMobil Refining & Supply Co. Baton Rouge, Louisiana, USA 503,500
12. Hovensa LLC St. Croix, Virgin Islands, USA 500,000
13. Kuwait National Petroleum Co. Mina Al-Ahmadi, Kuwait 466,000
14. Shell Eastern Petroleum (Pte) Ltd. Pulau, Bukom, Singapore 462,000
15. BP PLC Texas City, Texas, USA 451,250
16. Citgo Petroleum Corp. Lake Charles, Louisiana, USA 440,000
17. Marathon Petroleum Co. LLC Garyville, Louisiana, USA 436,000
18. Shell Nederland Raffinaderij B.V. Pernis, Netherlands 404,000
19. Sinopec Zhenhai, China 403,000
20. Saudi Arabian Oil Co. (Saudi Aramco) Rabigh, Saudi Arabia 400,000
21. Saudi Aramco-Mobil Yanbu, Saudi Arabia 400,000

Notes: RIL's new refinery in the Special Economic Zone at Jamnagar is the world's sixth largest and has a Nelson Complexity Index of 14.0, making it one of the most complex refineries globally. The refinery has a capacity of processing 580,000 barrels of crude oil per stream day. With the commissioning of the new refinery in its SEZ, Jamnagar has now become the petroleum hub of the world. With 1.24 million barrels per day of nominal crude processing capacity (i.e., No. 6 Jamnagar + No. 4 Jamnagar, above), it is the single largest refining complex in the world. This is equivalent to 1.6% [sic] of global capacity or one third of India’s capacity, and places RIL amongst the top ten private refiners globally. Please read RIL's website, here. For 2010, OGJ's survey shows total capacity at more than 88.2 million b/cd in 662 refineries, an increase of 1 million b/cd over the figure for 2009 of 87.2 million b/cd for 661 refineries. OGJ's refinery survey for 2008 listed a global capacity of 85.6 million b/cd in 655 refineries. – Please read Warren R. True and Leena Koottungal, "Global Capacity Growth Slows, But Asian Refineries Bustle," OGJ, Dec 6, 2010. South Korea is home to three of the ten largest crude oil refineries in the world – SK Energy's Ulsan (No. 2), GS Caltex's Yeosu (No. 3) and S-Oil's Onsan (No. 7).

Source: Oil & Gas Journal, Dec 6, 2010.

Gas Prices Take Well-Timed Drop For Memorial Day Travel


By Brandie Jefferson

“In all of my years with AAA, this is the first time we’ve had a Memorial Day where they’re dropping drastically,” said Lon Anderson, director of public and government relations at AAA Mid-Atlantic.

He’s been with AAA for 17 years.

Of course, gas prices in the area have risen more than a dollar per gallon in the past six months, according to AAA. But in the past seven days, they’ve dropped about 11 cents per gallon. In Potomac, regular gas averaged $4.089 on May 25, according to AAA. This time last year, regular gas was $2.947.

“In all my years,” Anderson said, “always, gas prices have peaked on Memorial Day or they were on their way up and peaked in June.”

That means AAA’s estimate that 30.9 Americans will be driving 50 miles or more for a weekend vacation may actually be low. The survey that was the basis for that estimate was conducted April 19 and 24, when experts were speculating that gas prices could hit $5 in the near future.

Have we really seen the highest gas prices for the summer? “Analysts say we have, which is welcome news for motorists,” Ragina C. Averella, manager of government affairs for AAA Mid-Atlantic, said in a statement.

“Despite higher gas prices, the automobile is still the primary mode of travel for Americans for the Memorial Day holiday,” Averella said, “and while travel by this mode is slightly down this year, the percentage decline is negligible."

Still, she added, “Seventy percent [of travelers] say they will compensate for higher fuel costs by cutting other areas of their travel budgets.”

In addition to cutting expenses, online tools such as AAA’s Travel Planner and GasBuddy.com allow people to find the price of gas along their route.

In all, the AAA Travel Forecast, based on research in partnership with IHS Global Insight, found that about 34.9 million people are expected to travel by car, plane, bus, train and even boat during the holiday weekend, defined by AAA as Thursday, May 26, to Monday, May 30. The full report can be found online.

About 8 percent of travelers are expected to fly, according to AAA. That’s an 11 percent increase from last year even though airfares are about 14 percent higher than this time last year.

As to the true number of travelers, that’s yet to be seen. “Memorial Day, because it’s a short holiday, many people make a last moment decision,” Anderson said.

There's also another variable at play--rising temperatures.

The National Weather Service is forecasting temperatures in the high 80s for the rest of the week, reaching the low 90s by Memorial Day.

“The mayor of Ocean City, he’s got to be doing cartwheels,” Anderson said. “Give the region several 90-degree days, a three-day weekend and cheaper gas … and off they go."

OIL FUTURES: Nymex Crude Lower Ahead Of US Inventory Data



NEW YORK (Dow Jones)--Crude oil futures fell Wednesday ahead of a weekly government report on U.S. oil inventory levels.

Light, sweet crude for July delivery recently traded 81 cents, or 0.8%, lower at $98.78 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange traded 5 cents lower at $112.48 a barrel.

U.S. oil stockpiles are expected to fall by 1.2 million barrels in data from the Department of Energy due 10:30 a.m. EDT Wednesday, according to a survey of analysts by Dow Jones Newswires.

Gasoline inventories are predicted to fall 100,000 barrels, after rising for the past two weeks. Inventories of distillates, including heating oil and diesel, are expected to remain unchanged.

Investors will likely be focused on the products markets, particularly gasoline, for hints on what demand may look like in the important summer driving season.

"It's all about gasoline. You can throw everything else out for the next three weeks because that's where the market is focused now," said Phil Flynn, an oil analyst with PFG Best.

The American Petroleum Institute, an industry group, late Tuesday said its own survey showed crude inventories last week fell 860,000 barrels. Stocks of gasoline rose by 2.4 million barrels, while distillate stocks fell by 850,000 barrels.

Retail U.S. gasoline prices, on average, are at $3.85 a gallon, according to the Energy Department, after nearly breaking $4 a gallon earlier this month.

Traders are worried that the high price of gasoline has strained the budgets of consumers and businesses, and could result in lower fuel consumption.

The threat of falling demand has been a major factor in oil's retreat below $100 a barrel in recent weeks. After two major price plunges earlier this month, crude futures have held in a tight range between roughly $101 a barrel and $95 a barrel.

Fears about slowing economic growth in China and debt problems in Europe have kept a lid on rising prices. But traders are still worried about the effect of lost oil supplies from Libya. The International Energy Agency, which represents the major oil-consuming nations, has also called on the Organization of Petroleum Exporting Countries to increase production.

"In the short term, the market is likely to be in a consolidation mode," said James Zhang, energy analyst at Standard Bank, in a client note.

Front-month June reformulated gasoline blendstock, or RBOB, recently traded 3.18 cents, or 1.1%, lower at $2.9610 a gallon. June heating oil recently traded 0.57 cent higher at $2.9154 a gallon.

-By Jerry A. DiColo, Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com.

Tuesday, May 24, 2011

Gas leak, not sabotage, caused blast at Iran oil refinery, state media say


By Borzou Daragahi, Los Angeles Times

Reporting from Beirut— A gas leak and not sabotage caused an explosion Tuesday at a newly inaugurated section of an oil refinery in Abadan just before President Mahmoud Ahmadinejad spoke at the ribbon-cutting ceremony, state media reported.

But Ahmadinejad quickly drew criticism from a lawmaker and some staff members at the refinery who suggested that the facility in the southwestern city was launched too soon, a semiofficial news agency reported.

The blast, which killed as many as four people and injured up to 25 more, did not halt Ahmadinejad's speech, which included fairly typical denunciations of U.S. relations with Middle East autocrats and the course of the Israeli-Palestinian peace talks, according to news agencies. He did not mention the explosion during his 20-minute speech.

The gas leak that caused the explosion and subsequent fire also sickened some oil workers, Mehr News Agency reported.

Iran's industrial sector has long been riddled with deadly accidents, from train and plane crashes to troubles at petrochemical facilities.

The government also is seeking to put down an uprising in the southwest by the country's ethnic Arab minority, which was inspired by pro-democracy movements across the Middle East and brutally crushed by authorities, which led to initial concerns that the blast might have been an act of sabotage.

In a sign of the harsh infighting that has come to characterize relations between Ahmadinejad and his rivals, officials all but accused Ahmadinejad, who had recently appointed himself caretaker oil minister amid howls of protest by his many political opponents, of rushing to open the plant too early in order to ingratiate himself with Iranians.

According to the semiofficial Fars News Agency, "managers and staff of the refinery have said this incident was a natural occurrence because the refinery was not technically prepared for inauguration and its third phase was inaugurated hastily, after some unsuccessful attempts were made a night before the incident to adjust and prepare [the refinery] for inauguration."

Hamid-Reza Katouzian, head of parliament's energy committee, also told Fars that experts had warned officials that the Abadan facility was not ready to launch.

The addition to the refinery will eventually produce 1.5 million gallons of gasoline a day to help satiate Iran's energy-hungry consumers.

U.S. Suit Sees Manipulation Of Oil Trades

Cushing, Oklahoma



After oil prices surged past $100 a barrel in 2008, suspicions that traders had manipulated the market led to Congressional hearings and regulatory investigations. But they produced no solid cases in the record run-up in gasoline prices.

Ahmadinejad Backs Out of Key Role at OPEC (May 25, 2011) But on Tuesday, federal commodities regulators filed a civil lawsuit against two obscure traders in Australia and California and three American and international firms.

The suit says that in early 2008 they tried to hoard nearly two-thirds of the available supply of a crucial American market for crude oil, then abruptly dumped it and improperly pocketed $50 million.

The regulators from the Commodity Futures Trading Commission would not say whether the agency was conducting any other investigations into oil speculation. With oil prices climbing again this year, President Obama has asked Attorney General Eric H. Holder Jr. to set up a working group to look into fraud in oil and gas markets and “safeguard against unlawful consumer harm.”

In the case filed Tuesday, the defendants — James T. Dyer of Australia, Nicholas J. Wildgoose of Rancho Santa Fe, Calif., and three related companies, Parnon Energy of California, Arcadia Petroleum of Britain and Arcadia Energy, a Swiss company — have told regulators they deny they manipulated the market.

If the United States proves the claims, the defendants may give up $50 million in profits that were believed to be made as a result of the manipulation and also pay a penalty of up to $150 million.

The commodities agency says the case involves a complex scheme that relied on the close relationship between physical oil prices and the prices of financial futures, which move in parallel.

In a matter of a few weeks in January 2008, the defendants built up large positions in the oil futures market on exchanges in New York and London, according to the suit, filed in the Federal Court in the Southern District of New York.

At the same time, they bought millions of barrels of physical crude oil at Cushing, Okla., one of the main delivery sites for West Texas Intermediate, the benchmark for American oil, the suit says. They bought the oil even though they had no commercial need for it, giving the market the impression of a shortage, the complaint says.

At one point they had such a dominant position that they owned about 4.6 million barrels of crude oil, estimating that this represented two-thirds of the seven million barrels of excess oil then available at Cushing, according to lawsuits.

This type of oil is also the main driver of prices of the futures contracts, and their actions caused futures prices to rise, the authorities say. “They wanted to lull market participants into believing that supply would remain tight,” the agency said. “They knew that as long as the market believed that supply was tight and getting even tighter, there would be upward pressure on the prices of W.T.I. for February delivery relative to March delivery, which was their goal.”

The traders in mid-January cashed out their futures position, and then a few days later began to bet on a decline in oil futures, with Mr. Wildgoose remarking in an e-mail about the “inevitable puking” of their position on an unsuspecting market, the federal lawsuit says.

In one day, Jan. 25, they then dumped most of their holdings of West Texas Intermediate oil, and profited by the drop in futures.

The traders repeated the buying and selling in March 2008, and were preparing to do it again in April but stopped when investigators contacted them for information, the suit says.

Between January and April, average gas prices rose roughly to $3.50 a gallon, from $3. It was not until later in 2008, after the defendants had ceased their reported actions, that oil prices soared higher — reaching $145 that July. By the end of the year, prices had fallen to about $44. The Texas oil is now around $100.

Many other factors were at work, including tight oil supplies in the Middle East and fears that a growing global economy would consume more oil. Yet the enforcement action by the commodities regulator was the first credible evidence that a small group of traders also played a role in manipulating prices.

“This will help to satisfy the desire to find a culprit and throw them under the wheels of justice,” said Michael Lynch, an oil market specialist at Strategic Energy and Economic Research, a consulting firm.

Calls to Arcadia Petroleum in London were not immediately returned. A person who answered the phone at Arcadia Energy in Switzerland said that he was unaware of the complaints and that Mr. Dyer and Mr. Wildgoose were on vacation and unavailable for comment.

In the last few years, the commission has settled a handful of cases of manipulation in the natural gas market.

In 2007, it settled charges for $1 million against the Marathon Petroleum Company for trying to manipulate West Texas Intermediate crude oil in 2003.

The agency brought an action similar to its latest case in 2008, asserting that Optiver Holding, a proprietary trading fund based in the Netherlands with a Chicago affiliate, used a trading program in 2007 to issue orders to manipulate the crude oil market. The case is pending. It involved claims of manipulation of futures contracts for light sweet crude, New York Harbor heating oil and New York Harbor gasoline.

Clifford Krauss contributed reporting.

A version of this article appeared in print on May 25, 2011, on page B1 of the New York edition with the headline: U.S. Suit Sees Manipulation Of Oil Trades.

Crude Oil: Nigerian Indigenous Operators Target 400,000bpd


Crude oil production by private indigenous oil companies in Nigeria will hit 400,000 barrels per day in the next three years, from the current level of about 80,000barrels per day, Chief Executive Officer of Seplat Petroleum Development Company Limited, Mr. Austin Avuru , has said.

Speaking at an investors’ forum in Lagos, Avuru attributed the anticipated growth in indigenous production to the current release of oil blocks to the local companies by Shell Petroleum Development Company (SPDC) Limited.

Local operators account for only about three per cent or 80,000 barrels per day of the 2.6million barrels per day of crude oil production in the country.

“We have spent 20 years of indigenous capacity building and only achieved 80,000barrels per day but with Shell’s current transactions, indigenous production will hit 400,000 barrels per day in the next three years,” he said.

Avuru’s company, Seplat Petroleum Company Limited, an indigenous consortium jointly formed by two Nigerian firms - Platform Petroleum Limited, and Shebah Petroleum Development Company Ltd, along with Maurel & Prom of France had acquired Shell’s three oil blocks in 2010.

The consortium also bought Total Exploration &Production Nigeria Limited’s 10per cent stake; and Nigeria Agip Oil Company’s 5per cent interest in the three licenses – Oil Mining Licenses (OML) 4, 38 and 41, which Avuru said was currently producing 36,000barrels per day.

Avuru stated that apart from the three blocks acquired by his company, Shell was also offering five additional blocks to the local companies.

“OMLs 26, 30, 34, 40 and 42 are being sold now,” he said.

He stated that as part of the strategy to ensure that crude oil production was not disrupted due to the change of ownership of the three blocks, his company inherited 27 workers, who disengaged from Shell on August 1, 2010, after the parties got ministerial consent to close the deal on July 31, 2010.

Seplat commenced formal discussions with Shell on the acquisition of the 45 per cent stake in June 2009, while the parties signed the agreement on January 29, 2010.

On January 29, 2010, SPDC agreed to transfer its interest in three production licences and related equipment in the Niger Delta to a consortium led by two Nigerian companies.

“This sale of assets supports the Nigerian government’s goal of expanding opportunities for local energy companies. We have been in Nigeria for more than 50 years and remain committed to doing business here. This transaction should be seen in the context of Shell’s active portfolio management of its assets and interests across the world,” said Mutiu Sunmonu, Managing Director of SPDC.

The agreement, which covers Shell’s 30per cent interest in oil mining leases 4, 38 and 41 covering approximately 2,650 square kilometres in the north western Niger Delta, later included the 15 per cent interest held by Total and Agip.

SPDC was the operator of the joint venture between NNPC (55 percent), Shell (30percent), Total E&P Nigeria Limited (10 percent), and Nigeria Agip Oil Company (5percent). Total E&P Nigeria Ltd and Nigeria Agip Oil Company will also transfer their interest in the three oil mining leases.

The area includes about 30 wells with a production capacity of approximately 50,000 barrels of oil equivalent per day.

The wells also produce natural gas for domestic and industrial use. Crude production is currently shut down awaiting completion of repairs to an export pipeline damaged in late 2008.

Nigerian ex-militant's protest has warning for president

Mujahid Dokubo-Asari, head of the Niger Delta Peoples Volunteer Force


(Codewit World News) PORT HARCOURT, Nigeria

An ex-militant in Nigeria's oil region Tuesday led a march of over 1,000 youths and warned of a possible return to armed struggle if conditions did not improve in the impoverished delta.

Mujahid Dokubo-Asari, head of the Niger Delta Peoples Volunteer Force, said during the march that armed struggle would be a last resort for his group if President Goodluck Jonathan did not take action in his native region within one year.

Jonathan, who won last month's presidential election, is the first head of state from the Niger Delta, the heart of one of the world's largest oil industries.

"We are on sabbatical," he said during the march in the oil hub of Port Harcourt, correcting someone who asked about his group having given up armed struggle.

"We are giving Goodluck a chance to make a difference to bring about change ... Goodluck does not have four years. He has one year."

He added that "armed struggle is a last resort."

Jonathan, first thrust into office following the death of his predecessor Umaru Yar'Adua in May 2010, has stirred hope in the region by winning last month's election.

The Niger Delta, a vast area of swamps and creeks badly polluted by oil spills, saw years of unrest before a 2009 amnesty deal.

While the amnesty has been credited with greatly reducing unrest, many have warned that fundamental problems of deep poverty, unemployment and widespread corruption could lead to more violence.

Asari, whose group was involved in violence particularly in the early part of last decade, called for a conference to look at whether communities in the Niger Delta should be given some type of sovereignty.

Tuesday's march was also held to commemorate the life of Niger Delta activist Isaac Boro, who died in 1968.

Asari, from the mainly Christian Ijaw ethnic group but who converted to Islam, continues to have a significant following in parts of the region, but his precise intentions are unclear.

Some have speculated that he may be seeking to gain more leverage over the government, with other militant leaders having recently been more prominent. Asari was at one time perhaps Nigeria's best known militant leader.

Violence in the Niger Delta has been carried out by militants claiming to be fighting for a fairer distribution of oil revenue as well as criminal gangs.

Asari's group, along with others, was accused of involvement in Nigeria's lucrative illegal oil industry.

Oil minister explains revocation of ExxonMobil leases



By Adeola Yusuf, Senior Correspondent, Lagos

Minister of Petroleum resources, Alison-Madueke has clarified issues relating to the reported revocation of oil leases renewal granted ExxonMobil in 2009.

The Minister noted at a special news briefing in Lagos that review of the process revealed that the renewal was not properly executed and was therefore not in compliance with the provisions of the Petroleum Act of 1969.

The Act Empowers the Honourable Minister of Petroleum Resources to cancel leases that are not properly executed.

However, the Minister noted that in view of the harmonious relationship with ExxonMobil over the years and the substantial investments the company has made in Nigeria, “Government has taken the decision to invite Mobil Producing Nigeria Unlimited to express interest in the grant of fresh leases.’’

She said: “Just a few days ago, the papers were awash with the news that my ministry invalidated the ExxonMobil oil lease renewals granted to them in 2009. Our review of the process revealed that the renewal was not properly executed and was therefore not in compliance with the provisions of the Petroleum Act of 1969. The Petroleum Act empowers the Honourable Minister of Petroleum Resources to cancel leases that are not properly executed.

“We have certain due process we follow in renewal of oil mining licences, which Mobil didn’t follow. There were certain issues with the renewal of Mobil’s oil mining leases in terms of cost and other procedures but what we are saying is that government and the company will have to sit and come to an agreement. “

The company had earlier said that it would work with the federal government to resolve “confusion” about the status of three oil leases following a media report they have been canceled.

Oil leases 67, 68 and 70, which together produce 580,000 barrels of crude a day, were nullified by Petroleum Minister Diezani Alison-Madueke in a March 4 letter to Exxon Mobil.

Exxon Mobil “will vigorously protect the rights it acquired in 2009,” Gloria Essien-Danner, a company spokeswoman, said in by e-mail today. “We will work with the Minister of Petroleum Resources and other relevant government officials to resolve any confusion that may exist on this matter.”

Negotiations for 16 oil blocks operated by companies including Exxon Mobil, Royal Dutch Shell Plc and Chevron Corp. have been under way for two years. Exxon Mobil was the only energy company to have its licenses renewed when it signed a deal in November 2009 covering oil leases 67, 68 and 70. Shell and Chevron remain in talks with Nigeria on renewing their expired oil licenses. China National Offshore Oil Corp. had expressed an interest in taking over some of the permits, raising concern they wouldn’t be renewed.

Nigeria, Africa’s top oil producer, is the fifth-biggest source of U.S. oil imports. Shell, Exxon Mobil, Chevron, Total SA and Eni SpA run joint ventures with the state-owned Nigerian National Petroleum Corp., which pumps about 90 percent of the country’s crude.

El Paso To Split Pipeline, Exploration Groups Into 2 Public Cos

El Paso National Piepline



El Paso Corp. (EP) intends to separate its pipeline and midstream operations from its exploration and production groups as it plans to split into two publicly traded businesses by the end of the year.

The move follows in the footsteps of several other large U.S. companies that have determined in recent months that the sum of their parts is worth more than the whole. Hedge fund JANA Partners LLC boosted its stake in El Paso earlier this month to just over 4%, a move that was widely viewed as an effort to help force the natural-gas provider to break up.

Shares of El Paso recently were trading up 7.7% at $20.45 premarket. The stock has risen 79% over the past 12 months as of Monday's close.

"With the completion of what was an $8 billion pipeline backlog, the elevation of our E&P business to one of the top independent producers, outstanding leadership and employees in each of our businesses, and the accelerated improvement of our balance sheet, we are ready to take this important step," said Chairman and Chief Executive Doug Foshee.

El Paso said its pipeline company, with a planned 2012 annual dividend of 60 cents a share and a targeted low double-digit dividend growth rate, will be an attractive corporate yield investment.

The company's exploration and production business has more than 10 years of low-risk, repeatable drilling inventory to fuel its future growth, making it well-positioned to compete with other independent producers.

El Paso, which owns the largest network of interstate natural-gas pipelines in North America, has been focused on completing an expansion that includes five major pipeline and liquid-natural gas projects. Earlier Tuesday, the company said it increased its budget for exploration and production programs by $300 million to $1.6 billion.

Following the proposed spinoff, El Paso wil be composed of its pipeline group, midstream group and its general and limited partner interests in El Paso Pipeline Partners LP (EPB).

The move to split the company follows similar recent plans disclosed by Williams Cos. (WMB), Marathon Oil Corp. (MRO), Sara Lee Corp. (SLE) and ITT Corp. (ITT), among others.

El Paso reported earlier this month its first-quarter profit dropped 84%, as the company's pipeline group saw pretax earnings rise 10% and the exploration and production unit swung to a loss.

-By Melodie Warner, Dow Jones Newswires; 212-416-2283; melodie.warner@dowjones.com

Monday, May 23, 2011

NATO airstrikes hit Tripoli, heaviest bombing yet


By DIAA HADID and MICHELLE FAUL, Associated Press

TRIPOLI, Libya – NATO warplanes bombarded targets in Tripoli with more than 20 airstrikes early Tuesday, striking around Moammar Gadhafi's residential compound in what appeared to be the heaviest night of bombing of the Libyan capital since the Western alliance launched its air campaign against his forces.

The rapid string of strikes, all within less than half an hour, set off thunderous booms that rattled windows, sent heavy, acrid-smelling plumes of smoke over the city, including from an area close to Gadhafi's sprawling Bab al-Aziziya compound.

Government spokesman Moussa Ibrahim said at least three people were killed and dozens wounded in NATO strikes that targeted what he described as buildings used by volunteer units of the Libyan army.

NATO said in a statement that a number of the strikes hit a vehicle storage facility adjacent to Bab al-Aziziya that has been used in supplying regime forces "conducting attacks on civilians." It was not immediately clear if the facility was the only target hit in the barrage. Bab al-Aziziya, which includes a number of military facilities, has been pounded repeatedly by NATO strikes.

The military aircraft whooshed low over the city during the night, the strikes coming in series of three loud booms, a pause of minutes punctuated by the hissing sound of low-flying jets, then more shaking, shuddering strikes, shaking windows miles away from Bab al-Aziziya. The sound of other more distant explosions could also be heard.

Pro-Gadhafi loyalists beeped their car horns and fired guns, shouting their support for the Libyan leader. Armed men sprayed the night sky with gunfire in response. Men screamed and shouted outside the hotel where journalists were staying, declaring their loyalty to Gadhafi.

Observers described the bombing as the heaviest attack on the Libyan capital since NATO began its air campaign on March 19 after the passage of a U.N. Security Council resolution to protect civilians after Gadhafi responded to the public uprising against his rule by unleashing his military and his militias.

In one room of the Tripoli Central Hospital, the bodies of three mangled men in their twenties lay on stretchers, their clothing ripped and their faces partially blown away and dusty. A nurse, Ahmad Shara, told reporters taken on a government-escorted visit to the facility soon after the strikes that the men were standing outside their homes when they were killed, presumably by shrapnel.

One man who identified himself as a relative walked into the room where the bodies lay. He halted at their sight, turned around and loudly slapped his hands on a wall as he cried out in shock.

Around 10 other men and women lay on stretchers. They appeared moderately to lightly wounded.

"We thought it was the day of judgment," said Fathallah Salem, a 45-year-old contractor who rushed his 75-year-old mother to the hospital after she suffered shock. The wide-eyed man described how his home trembled, his mother fainted and how the younger of his seven children cried as they heard the rolling explosions.

"You were in the hotel and you were terrified by the shaking — imagine what it was like for the people who live in slums!" Salem said, as he interrupted a government spokesman to speak to a crowd of foreign reporters at the hospital.

"Honestly, we used to have problems (with the regime)," he said in Arabic. "But today we are all Moammar Gadhafi."

NATO, which said in its statement that it took care to "minimize the risk of collateral damage to the fullest extent possible," has been escalating and widening the scope of its strikes over the past weeks, hiking the pressure on Gadhafi, while the alliance's members have built closer ties with the rebel movement that has control of the eastern half of Libya. On Monday, the highest-ranking U.S. diplomat in the Middle East, Jeffrey Feltman, was in the de facto rebel capital of Benghazi in a show of support.

Despite NATO bombing runs, the rebels have not been able to break Gadhafi's grip on the west of the country, including the capital Tripoli.

In a significant new deployment of firepower, France and Britain are bringing attack helicopters to use in the strikes in Libya as soon as possible, French Defense Minister Gerard Longuet said Monday.

The use of attack helicopters would appear to mark a new strategy for NATO, which has relied on strikes by fighter planes and seen that result in a stalemate on the ground as Gadhafi forces adapted, often turning to urban fighting to make such strikes more difficult.

Nimble, low-flying helicopters have much more leeway to pick targets with precision than high-flying jets. But they also are much more vulnerable to ground fire. The alliance has had no military deaths since it first started enforcing a no-fly zone on March 31.

Longuet said the helicopters would be used to target military equipment such as Libyan tanker and ammunition trucks in crowded urban areas while causing fewer civilian casualties. Longuet said France would essentially use Gazelle helicopters, which have been around for some 40 years, but can also use the Tigre, a modern helicopter gunship.

The U.S. State Department statement said the visit by Feltman, Assistant Secretary of State for Near Eastern Affairs, was "another signal of the U.S.'s support" for the rebels' National Transitional Council, which it called "a legitimate and credible interlocutor for the Libyan people."

Several countries, including France and Italy, have recognized the NTC, while the United States, Britain and others have established a diplomatic presence in Benghazi.

Feltman plans to meet with council head Mustafa Abdul-Jalil and others before his scheduled departure on Tuesday. He declined to answer questions Monday by a reporter from The Associated Press.

The visit follows the opening of a European Union office on Sunday by that body's top diplomat, Catherine Ashton, who said she looked forward to a better Libya "where Gadhafi will not be in the picture."

Rebel leaders welcome the diplomatic contact, but say only better weapons will help them defeat Gadhafi.

"It is just not enough to recognize (us) and visit the liberated areas," spokesman Abdel-Hafidh Ghoga told AP. "We have tried very hard to explain to them that we need the arms, we need funding, to be able to bring this to a successful conclusion at the earliest possible time and with the fewest humanitarian costs possible."

Rebels now control the populated coastal strip in the country's east and the western port city of Misrata, which Gadhafi's forces have besieged for months. They also control pockets in Libya's western Nafusa mountain range.

Ghoga warned that residents of the Nafusa mountains face a "major humanitarian disaster" because government troops have been cutting supply lines to communities. Rebels say about 225,000 people live in the area.

Col. Jumaa Ibrahim, who defected from Gadhafi's forces and is now a member of the mountain military council, said two villages, Galaa and Yefren, are facing critical shortages. "There is no water, money or food. They are bombed everyday with launchers, tanks and whatever they can," Ibrahim said.

Villagers raise goats and sheep and grow apricots and almonds on the plain near their town, he said. Many fear Gadhafi's troops have destroyed their orchards and stolen or killed their animals.

Gadhafi's forces fired rockets at the mountain town of Zintan on Monday, damaging houses and the tanker trucks residents use to bring in water, resident Hamid Embayah told the AP via Skype. No one was injured.

Faul reported from Benghazi, Libya. Associated Press Writer Ben Hubbard in Cairo and Bouazza Ben Bouazza in Tunisia contributed reporting.


Utah Legalizes Gold, Silver Coins As Currency



SALT LAKE CITY -- Utah legislators want to see the dollar regain its former glory, back to the days when one could literally bank on it being "as good as gold."

To make that point, they've turned it around, and made gold as good as cash. Utah became the first state in the country this month to legalize gold and silver coins as currency. The law also will exempt the sale of the coins from state capital gains taxes.

Craig Franco hopes to cash in on it with his Utah Gold and Silver Depository, and he thinks others will soon follow.

The idea is simple: Store your gold and silver coins in a vault, and Franco issues a debit-like card to make purchases backed by your holdings.

He plans to open for business June 1, likely the first of its kind in the country.

"Because we're dealing with something so forward thinking, I expect a wait-and-see attitude," Franco said. "Once the depository is executed and transactions can occur, then I think people will move into the marketplace."

The idea was spawned by Republican state Rep. Brad Galvez, who sponsored the bill largely to serve as a protest against Federal Reserve monetary policy. Galvez says Americans are losing faith in the dollar. If you're mad about government debt, ditch the cash. Spend your gold and silver, he says.

His idea isn't to return to the gold standard, when the dollar was backed by gold instead of government goodwill. Instead, he just wanted to create options for consumers.

"We're too far down the road to go back to the gold standard," Galvez said. "This will move us toward an alternative currency."

Earlier this month, Minnesota took a step closer to joining Utah in making gold and silver legal tender. A Republican lawmaker there introduced a bill that sets up a special committee to explore the option. North Carolina, Idaho and at least nine other states also have similar bills drafted.

At the moment, Franco's idea would generally be the only practical use of the law in Utah, given the legislation doesn't require merchants to accept the coins, either at face value – $50 for a 1-ounce gold coin – or market value, currently almost $1,500 per ounce. And no one expects people will be walking around town with pockets full of gold and silver.

Matt Zeman, market strategist for Kingsview Financial in Chicago, expects more people will start investing in gold as America's growing debt and bankruptcies in other countries continue to decrease the value of government-backed money.

"You've seen gold replacing these currencies as safety instruments," Zeman said. "If I don't feel good about the dollar or other currencies, I'm putting my money in precious metals."

Some supporters, including the law's sponsor, seek to push Congress toward removing the tax burdens that discourage use of the coins, such as a federal capital gains tax.

"Making gold and silver coins legal tender sends a strong signal to Congress and the Federal Reserve that their monetary policy is failing," said Ralph Danker, project director for economics at the Washington, D.C.-based American Principles in Action, which helped shape Utah's law. "The dollar should be backed by gold and silver, so we have hard money."

The U.S. and many other countries largely abandoned gold-backed money during World War I because they needed to print more cash to pay for the war. Later, during the Great Depression, President Franklin D. Roosevelt took steps that essentially prohibited gold and silver as legal currency to prevent hoarding.

In 1971, President Nixon formally abandoned the gold standard.

Fifteen years later, the U.S. Mint began producing the gold and silver American Eagle coins, primarily aimed at investment portfolios and allowing people to trade them at market value but with capital gains taxes on profits.

Utah is now allowing the coins to be used as legal tender while levying no taxes.

Opponents of the law warn such a policy shift nationwide could increase the prospect of inflation and could destabilize international markets by removing the government's flexibility to quickly adjust currency prices.

"We'd be going backward in financial development," said Carlos Sanchez, director of Commodities Management for The CPM Group in New York. "What backs currency is confidence in a government's ability to pay debt, its government system and its economy."

Larry Hilton, a Utah attorney who helped draft the law, disagrees and says the gold standard would restore faith in American money at a time when spiraling debt is weakening confidence.

"We view this as a dollar-friendly measure," Hilton said. "It will strengthen the dollar by refocusing policy matters in Washington on what led to the phrase, `the dollar is as good as gold.'"

Nigerian oil exports to fall in July


By Emma Farge

LONDON (Reuters) - Nigerian oil exports are set to dip slightly from a six-month high reached in June but will remain above the key 2 million barrels per day level (bpd) as relative calm prevails, provisional loading programmes showed.

This amounts to around 2.06 million bpd or 64 million barrels. In June, preliminary shipping fixtures showed that exports were due to reach 2.15 million barrels per day.

Africa's top oil exporter and member of the Organization of the Petroleum Exporting Countries (OPEC) has experienced years of militant attacks on oil facilities which has hampered output.

But an amnesty in 2009 has helped reduce attacks and the election in April took place without affecting oil flows.

Official prices of Nigerian crude for June fell as a result of the more comfortable supply picture with the benchmark Qua Iboe level down 60 cents to $3.20 a barrel above dated Brent in June, traders said.

Current export levels indicate the west African country is producing above its implied OPEC oil production target of 1.67 million bpd.

The loading schedule showed fewer cargoes of the two benchmark Qua Iboe and Bonny Light grades compared with June. These grades are set to load around 337,000 bpd and 215,000 bpd each.

Traders said the dip in exports for July is also due to the fact that it is a longer month than June, lowering daily output.

But the shorter programmes for these two grades was partially offset by a small increase in Yoho exports as one cargo for late June loading was moved to early July.

Nigeria also produces a significant amount of condensate , a very light hydrocarbon -- such as the Akpo and Oso streams -- which is excluded from the crude export totals and from its OPEC output target.

VLCCF - First Quarter 2011 Results


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◦Knightsbridge reports net income of $8.6 million and earnings per share of $0.35 for the first quarter of 2011.
◦Knightsbridge announces a cash dividend of $0.50 per share for the first quarter of 2011.


Knightsbridge Tankers Limited (the "Company" or "Knightsbridge") reports net income of $8.6 million and earnings per share of $0.35 for the first quarter compared to net income of $6.0 million and earnings per share of $0.25 for the fourth quarter of 2010. The average daily time charter equivalents ("TCEs") earned by the Company's VLCCs, excluding bareboat charters, and Capesize vessels were $34,200 and $36,700, respectively, compared with $34,400 and $36,900 in the preceding quarter. There were drydock costs of $1.1 million in the first quarter for Hampstead and loss of revenue during the drydock period of $1.4 million although net income in the first quarter benefited compared with the prior quarter as there were drydock costs of $2.1 million in the fourth quarter for Kensington and loss of revenue during the drydock period of $1.5 million. Net income also increased in the first quarter compared to the fourth quarter due to a full quarter trading for Golden Zhejiang.

Cash and cash equivalents decreased by $0.6 million in the quarter. The Company generated cash from operating activities of $12.6 million, used $1.0 million to repay loan facilities and debt fees and paid $12.2 million in dividends. In May 2011, the Company has an average cash breakeven rate for its VLCCs, which are on time charter, and Capesize vessels of $18,700 and $8,500, respectively, per vessel per day. The VLCCs which are on bareboat contract have a cash break even rate of $4,300 per vessel per day.


The market rate for a VLCC trading on a standard 'TD3' voyage between the Arabian Gulf and Japan in the first quarter of 2011 was $20,200/day, representing an increase of $4,600/day from the fourth quarter of 2010 and a decrease of $29,700/day from the first quarter of 2010. Present market indications are approximately $10,000/day in the second quarter of 2011.

Bunkers at Fujairah averaged $600/mt in the first quarter of 2011 compared to $488/mt in the fourth quarter of 2010. Bunker prices varied between a low of $517/mt at the beginning of January and a high of $674/mt at the end of February.

The International Energy Agency's ("IEA") April 2011 report stated an average OPEC oil production, including Iraq, of 29.8 million barrels per day (mb/d) during the first quarter. This was an increase of 320,000 barrels per day compared to the fourth quarter of 2010 and an increase of 740,000 barrels per day compared to the first quarter of 2010.

IEA further estimates that world oil demand averaged 88.8 mb/d in the first quarter, representing a decrease of 680,000 barrels per day compared to the fourth quarter of 2010 and an increase of approximately 2.3 mb/d from the first quarter of 2010. Additionally, the IEA estimates that world oil demand will average approximately 89.4 mb/d in 2011, representing an increase of 1.6 percent or approximately 1.4 mb/d from 2010.

The VLCC fleet totalled 565 vessels at the end of the first quarter of 2011, up from 548 vessels at the end of the previous quarter. 17 VLCCs were delivered during the quarter versus an estimated 25 at the beginning of the year. The orderbook counted 167 vessels at the end of the first quarter, down from 184 orders from the previous quarter. No new orders were placed during the quarter and the current orderbook represents approximately 30 percent of the VLCC fleet. During the quarter, no vessels were removed from the trading fleet and according to Fearnleys the single hull fleet still stands at 43 vessels.


While 2010 surprised on the upside taking into account a net fleet growth of approximately 15 percent, the first quarter of 2011 has been a rough experience for owners of dry bulk vessels. In particular, the capesize segment has suffered with average earnings during the first quarter barely covering operating expenses of $ 8,414 per day based on average time charter earnings from the Baltic Exchange Index.

Weather disruptions in Australia and steel capacity shutdowns in Japan following the earthquake and tsunami on the March 11 both impacted negatively on the demand for dry bulk transportation. In addition, the filing for bankruptcy protection by Korea Line added to an already negative market sentiment. But in spite of the above, the overall demand growth measured in ton miles has been, and is expected to be, healthy going forward supported by the general temperature of the global economy.

For quite some time, dry bulk forecasters have been focusing on the supply side. This has been on the back of a historically high order book, which sooner or later had to bring down the utilization of the dry bulk fleet. By the end of the previous quarter, the total order book was close to 45 percent of the existing fleet. But based on what has been experienced over the last two years, question marks must be raised as to the "official" order book itself. There are reasons to believe that cancellations and restructuring of contracts have not been accounted for and several yards are struggling to meet delivery dates, all of which are leading to a much lower delivery rate than forecast. At the start of 2011, it was expected that 142 million dwt of new capacity would enter the market this year. During the first quarter, approximately 22 million dwt was delivered, giving a delivery ratio of 60 percent.

Scrapping is first and foremost a function of the spot market, but presently it is also supported by strong prices for scrap steel. In the first quarter of 2011, approximately four million dwt was scrapped. One approach to forecast scrapping going forward is to take all capesizes older than 20 years and panamaxes and smaller bulk carriers older than 25 years, which are due for special survey during 2011 and we could potentially see 15 million dwt being scrapped this year.

In spite of increasing scrapping and fewer vessels being delivered, we should expect a net fleet growth of approximately 75 million dwt or 14 percent of the existing fleet. We need to get through this year and a slightly lower number of deliveries in 2012, before the order book is expected to be at a healthy level compared with the existing fleet. Consequently dry bulk forecasters do not see utilization of the dry bulk fleet to be higher than 90 per cent the next 18 to 24 months.


The VLCC Kensington will be redelivered from her time charter to Frontline in May 2011. She will remain with Frontline under commercial management and will trade in the spot market while the Board monitors possibilities in the bareboat and time charter markets.

The Board has been actively looking for tonnage, which can contribute to the Company's future dividend payments. Various vessel types within the second hand and resale market for bulk carriers and oil tankers have been explored. It has, however, been a challenge to find the optimal combination of asset price and time charter rate. The Board will, therefore, continue to monitor the sale and purchase and time charter market for vessels that will support the Company's future dividend capacity. The recent developments in the sale and purchase market have created more attractive opportunities and the Board believes the possibility for acquisitions is enhanced.

The Company's VLCC and Capesize fleet is fixed on time and bareboat charters expiring between 2012 and 2015, except for the VLCC Kensington which will be employed in the spot market from the second half of May.

The VLCC Hampstead finished her dry dock in the second quarter 2011 and part of the dry dock cost will be recognized in the second quarter of 2011. During dry dock, damage to the vessel's propeller shaft was discovered. The propeller shaft will require replacement and the Company expects to claim for losses under its insurances.

On May 9, 2011, the Board declared a dividend of $0.50 per share. The record date for the dividend is May 25, 2011, the ex dividend date is May 23, 2011 and the dividend will be paid on or around June 9, 2011. The Board's intention is to continue to pay out a major part of the free cash flow after debt services as dividend to its shareholders.

24,425,699 ordinary shares were outstanding as of March 31, 2011, and the weighted average number of shares outstanding for the quarter was 24,425,699.


Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.

Knightsbridge desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "except," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "will," "may," "should," "expect" "pending" and similar expressions identify forward-looking statements.

The forward-looking statements in this document are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, our management's examination of historical operating trends, data contained in our records and other data available from third parties. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.

In addition to these important factors, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charterhire rates and vessel values, changes in demand in the tanker market, as a result of changes in OPEC's petroleum production levels and world wide oil consumption and storage, changes in Knightsbridge's operating expenses, including bunker prices, drydocking and insurance costs, the market for Knightsbridge's vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by Knightsbridge with the Securities and Exchange Commission.

The full report is available in the link enclosed.

The Board of Directors
Knightsbridge Tankers Limited
Hamilton, Bermuda
May 9, 2011

Questions should be directed to:


Ola Lorentzon: Chairman, Knightsbridge Tankers Limited
+ 46 703 998886

Inger M. Klemp: Chief Financial Officer, Knightsbridge Tankers Limited
+47 23 11 40 76
1st Quarter 2011 Results