Tuesday, September 30, 2014

MOL Says Ukraine Crisis Won't Disrupt Its Crude Oil Supplies From Russia


Mol GroupHungarian oil group MOL still gets most of its crude oil from Russia via Ukraine, despite the ongoing crisis in that country.

Hungarian oil group MOL is reasonably confident that its crude supplies from Russia will not be disrupted by the Ukraine conflict because its Russian partners are reputable companies, the head of its downstream business said.

Ferenc Horvath, MOL's Executive Vice President for Downstream, told the Reuters Eastern Europe Investment Summit that MOL had also started purchasing crude for its Hungarian refinery via an Adriatic pipeline, from Kurdistan and elsewhere, a year ago, although it still gets most of its crude from Russia via Ukraine.

"From a Russian point of view I don't see an execution risk. Of course, there is always a risk due to [the] Russia-Ukraine political situation for some disruption of crude deliveries," Horvath said Monday.

He said MOL was buying one cargo, or 80,000 tonnes, of crude via the Adriatic each month.

"We are ready and our system is able to supply via the Adriatic pipeline enough crude for our Hungarian refinery, and also the majority of the Slovak refinery can be served."

MOL was adjusting to the excess refinery capacity in Europe and had already transformed its Italian refinery into a logistics hub, Horvath said.

He also urged Croatian oil and gas company INA, in which MOL holds close to 50 percent, to consolidate its refining capacity at one site instead of keeping two refineries running, which is generating losses.

The Croatian economy minister, who has heading Croatia's team during negotiations with MOL, has not been willing to discuss plans to rationalize INA's refining business so far. The Croatian government is the other big shareholder in INA.

Horvath said INA refineries are probably the smallest and least competitive in Europe. INA's Rijeka refinery had a much better chance of being competitive in the market than its Sisak facility, he said.

"As I could see from the earlier calculations and materials and discussions with colleagues from INA, there is no economic rationale and no economic environment where Sisak can competitively continue its refining operation," he said.

As for MOL's outlook, Horvath said the refining and petrochemical environment had improved a lot in the third quarter, with margins increasing, and consumption rising this year in Central Europe, MOL's core markets.

This slow recovery in fuel consumption should continue in the third quarter, he said.

"And regarding the Russia-Ukraine crisis, I believe that the impact on fuel consumption in this region will not be so direct or so quick," Horvath said.

OPEC oil output hits highest since 2012 on Libya, Saudi-Reuters Survey


Supply rises by 810,000 bpd, led by Libya
* Saudi pumps more, other Gulf members keep supply flat
* OPEC output highest since November 2012 - Reuters

LONDON, (Reuters) - OPEC's oil supply jumped to its highest in almost two years in September, a Reuters survey found, due to further recovery in Libya and higher output from Saudi Arabia and other Gulf producers in the face of sub-$100 per barrel oil prices.

The lack of any cutbacks underlines the relaxed view of OPEC's core Gulf members to oil's slide from $115 in June to $97 on Tuesday - a level they can tolerate, but which puts budgets in producers such as Iran and non-member Russia under pressure.

Supply from the Organization of the Petroleum Exporting Countries averaged 30.96 million barrels per day (bpd) in September, up from 30.15 million bpd in August, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.

"Libya has increased production massively and if you look forward, OPEC is producing more than the (forecast) demand for OPEC crude in 2015," said Carsten Fritsch, analyst at Commerzbank. "This puts pressure on OPEC ahead of their next meeting."

OPEC pumps a third of the world's oil and meets next in November. This month, the largest increase has come from Libya, where supply is up by 280,000 bpd despite conflict. Iraq, Nigeria, Angola and Saudi Arabia also boosted output.

This month's output is OPEC's highest since November 2012 when it pumped 31.06 million bpd, according to Reuters surveys. Involuntary outages, such as in Libya, kept output below OPEC's nominal 30 million bpd target in earlier months of the year.

Iraq, like Libya, has also managed to increase supplies despite fighting in the country. Oil output rebounded due to higher exports from Iraq's southern terminals and increased output from fields in Kurdistan.

An advance by Islamic State fighters into northern Iraq has not reduced southern exports, but violence has hit supply of Kirkuk crude from the north and shut down the Baiji refinery, keeping crude output below Iraq's potential.

Nigerian output, disrupted in earlier months of the year, has climbed in September, and another increase has come from Angola where CLOV, a new crude stream operated by Total , is ramping up exports.

Top exporter Saudi Arabia, supported by Kuwait and the United Arab Emirates, has boosted output informally to cover for outages elsewhere in the group. So far, there is no sign of any further trimming, according to the survey.

In fact, industry sources in Saudi Arabia have talked of higher demand with the approach of winter and return of refineries from maintenance - factors that would argue against cutting output. Sources in the survey said supply to market had increased this month.

Some OPEC members have voiced concern over the drop in prices and its meeting on Nov. 27 in Vienna is likely see a debate on whether output needs to be cut.

OPEC's own forecasts suggest demand for its crude will fall to 29.20 million bpd in 2015 due to rising supply of U.S. shale oil and supplies from other producers outside the group - almost 1.8 million bpd below current output according to this survey.

Iran on Friday urged OPEC members to make joint efforts to keep the market from falling further, but the Gulf Arab producers remain unruffled according to comments from oil ministers and delegates.

Iranian output was steady in September, the survey found. Western sanctions over Iran's nuclear work are restraining its output, although supply has risen since the start of the year following a softening of the measures.

Iran's budget needs oil prices well above $100, among the highest in OPEC, while the budget of non-member Russia assumes an average of $100. (Editing by Keiron Henderson and Veronica Brown)

Friday, September 26, 2014

Interest switches to VLCCs

Aries Star vela VLCC

This year the foot has come off the accelerator in terms of MR ordering with the emphasis shifting very much to the crude carrier newbuildings.
Thus far, 2014 has been a much more rewarding year for owners than last year with positive spikes seen in the spot market and a definite shift in sentiment, with reasonable expectations for the second half of the year, Gibson Research said in a recent report

However, as of last week, the signs are not quite so positive, as oil demand declined and the price with it.

Some 31 VLCCs have been ordered this year and the vast majority were placed by well-known players. Despite the previous concerns about the Chinese ordering extensively in this sector, we can only attribute one vessel directly to Chinese interests, Gibson said.

DHT Holdings, who are publicly quoted on the NYSE, figure strongly with six vessels on order at Hyundai, which added to their recently acquired Samco tonnage of seven vessels, will take them to a total VLCC fleet of 20.

Capital Ship Management has ordered two, taking the VLCC fleet to six. Eastmed has ordered two, which will take this fleet to eight and Maran Tankers has contracted four, increasing the company’s portfolio to 28, which part of a wider fleet renewal programme.

In addition, Metrostar’s orders total six, having booked a further two this year, while Genmar has added two newbuildings in addition to a single order placed last year, taking its total to 10.

Navig8, who appear to do nothing by halves in any of the sectors that the company is  involved in, has ordered six newbuildings, adding to the previously ordered eight, which will take the company’s total number of new ships to 14 (plus three pool units) eventually taking their VLCC fleet to 17. 

Private equity player Wilbur Ross’ Transportation Recovery Fund has teamed up with Anders Wilhelmsen to order two ships each. 

It is interesting to see how many experienced VLCC operators have chosen to make a move this year and it is worth noting that prices recently firmed to around $98 mill per vessel, compared to a low point in the first half of 2013 at around $90 mill, Gibson said.

While this is a review about newbuilding orders, it would be amiss not to mention Euronav’s fleet expansion of some 19 secondhand VLCCs over the course of 2014. 

With just 6% of the current VLCC fleet over 15 years of age, it appears that there is limited scope for some fleet replacement with modern eco units being the order of the day.

This year, around 28 VLCC deliveries are scheduled for delivery, which then drops to eight in 2015 before picking up in 2016 to number 48.

Provided the Chinese keep their hands in their pockets this would seem to be a containable level of replacement in this sector, which may not be so true in others, Gibson concluded.

Chile’s oil and gas terminals closed

Due to an oil spill, ENAP’s monobuoy, multibuoy and LPG terminals at Quintero Bay, near Vaslparaiso, are closed.
Inchcape Shipping Services (ISS) Chile has advised that the oil spill was caused by a tanker - believed to be a Stamatis-controlled LR1 ‘Mimosa’ - following an incident on 24th September at the monobuoy terminal when hoses and cargo connections were severed.

This resulted in a spill of around three cubic metres into sea.

Following the incident, ENAP, in co-ordination with the National Maritime Authority of Chile, deployed an environmental personnel team to mitigate the impact on the environment.

Absorbent sleeves were used and barriers were put in place extending 800 m. An  investigation was underway with the involved stakeholders to determine the causes of this incident, ISS said.

Other port operations are continuing as normal. In the affected areas, vessels will be cleaned before departure. 

Thursday, September 25, 2014

First oil sands bitumen tanker arrives in Sorel-Tracy port

The Aframax Minerva Gloria is a mid-size tanker with a displacement of between 80,000 and 120,000 metric tons.
The Aframax Minerva Gloria is a mid-size tanker with a displacement of between 80,000 and 120,000 metric tons. (CBC)

Minerva Gloria's arrival deepens community concern for possible oil spill on the St. Lawrence River

The arrival of the oil tanker Minerva Gloria in the port of Sorel-Tracy Sunday opened a new chapter in the ongoing efforts of Quebeckers to resist shipments of diluted bitumen crude oil from Alberta through their communities.

Sorel-Tracy resident Elias Harvey said he’s seen many oil tankers in port over the years, but never one as large as the 250-metre long, 44 metre-wide Minerva Gloria.
Only a year ago, ships wider than 32 metres weren’t allowed in that part of the St. Lawrence River, but the federal government increased the allowable size in December 2013.

The Minerva Gloria is not only the first tanker of its size to arrive in Sorel-Tracy, but it will also be the first to carry diluted bitumen from Alberta’s oil sands on the St. Lawrence River.

Since July, Suncor has been transporting diluted bitumen from Alberta by train to a storage facility in Sorel-Tracy owned by Kildair Services.

The Minerva Gloria’s arrival in Sorel-Tracy marks the start of the next phase of Suncor’s plans — the transfer of that oil to tankers ships for transport east.

Communities along the rail lines that carry the bitumen have mounted protests against Suncor’s shipments, and Harvey worries about what its transfer to tankers like Minerva Gloria could mean for the St. Lawrence River.

“There’s nothing in it for us. All it brings us is the threat of polluting the river,” Harvey told Radio-Canada. “It’s a poisoned present.”

Monique Hains and other members of the group Alerte Petrole Rive-Sud said a spill in the St. Lawrence would mean disaster for the environment and riverside communities.

“Imagine a spill, it would be catastrophic. Three million people rely on the St. Lawrence River for drinking water,” she said.
Tanker graphic
Suncor, however, says that risk is reduced by the fact all tankers carrying its oil feature a double hull.
In an email to Radio-Canada, the company also said there’s nothing about Alberta bitumen crude that makes it any more dangerous than other types of oil that are already being shipped on the St. Lawrence.

“Diluted bitumen does not have any properties that augment the risks in relation to conventional crude,” Suncor said.

The federal government also has controls in place that require tankers to meet specific safety standards. Canada’s inspection regime for tanker ships is also considered one of the most stringent in the world.

University of Rimouski professor Emmanuel Guy said the safety system that is currently in place is effective for the current level of tanker traffic on the St. Lawrence River.

However, he said it should be reviewed to take into consideration the larger ships and the increasing number of tankers.

“The risk is proportional to the level of activity. If there is a rise in the volume [of oil] being transported, it’s important to adjust safety precautions now, and not after the fact,” he said.

The Minerva Gloria is due to leave Sorel-Tracy at the start of next week. Radio-Canada reports that it will sail in the direction of the Gulf of Mexico, for a refinery in Lousiana or Texas.

It’s expected that 20 to 30 tankers will take on loads of bitumen crude every year from Sorel-Tracy.

Gold price seen near tipping point for mine cuts, closures

Gold bars are stacked at a safe deposit room of the ProAurum gold house in Munich March 6, 2014.REUTERS/Michael Dalder
Gold bars are stacked at a safe deposit room of the ProAurum gold house in Munich March 6, 2014.

By Nicole Mordant

(Reuters) - The price of gold, down more than a third in three years, is approaching the tipping point where the mining industry would see a spike in the number of producers reducing output or even shutting down operations.

Several mines globally have already suspended output in the past 18 months, but not as many as industry watchers expected as producers focused on slashing costs and reworking mine plans to extract more profitable, higher-grade ounces.

But with bullion's slide this week to a nine-month low of $1,208.36 an ounce, those defenses may not be enough.

"$1,200 is a critical level. The industry has geared itself around $1,200," said Joseph Foster, portfolio manager at institutional investor Van Eck Global. "If it falls below that level, then there are a lot of mines around the world that are really going to struggle."

Van Eck is a major investor in Barrick Gold Corp and Goldcorp Inc and a top shareholder in most other large gold producers.

Production cutbacks and mine closures would spell more financial pain for producers and investors, who have watched gold mining stocks slump 67 percent since September 2011.

And cuts and closures could be swifter and deeper than in the last gold bear market as most miners this time around have not offset the risk of potential losses by hedging - the practice of selling gold forward at a fixed price.

At the end of June, only a tiny fraction of production - around 129 tonnes - was hedged compared with the last bear gold market in the 1990s when hedging peaked at around 3,000 tonnes. The practice fell out of favor when hedged producers were unable to capitalize on rising gold prices between 2000 and 2012.


In response to weaker bullion, gold miners are estimated to have slashed their all-in cost of producing an ounce of gold to an estimated $1,350 in the first half of 2014, according to data from Thomson Reuters' GFMS metals research team. That was down from $1,696 an ounce for full-year 2013.

Even so, Citibank estimated last month that 40 percent of the gold industry was burning cash at an all-in cost of $1,331 an ounce. [ID:nL2N0PU0NO] But that was at a gold price of $1,290 an ounce. Bullion was last trading at $1,217 an ounce on Wednesday.

"How many guys are going to get up and say this is a terrible, horrible price and we can’t survive at this price? Because we can’t," Doug Pollitt of Pollitt & Co, a Toronto-based brokerage firm, said at the annual Denver Gold Forum last week.

Industry participants were loathe to single out specific operations that could cut or shut down production but high-cost mines are at greater risk.

For example, Iamgold Corp and AngloGold Ashanti Ltd's Yatela mine in Mali had all-in sustaining costs (AISC) of $1,910 an ounce in the quarter to end-June. The operation halted active mining in 2013 due to high costs and weak gold prices but continues to process stockpiled ore.

"This year, as the gold price continues to remain below $1,300 per ounce, we are considering bringing an end to the movement of ore onto the stockpiles and to just continue to leach the ore already on the pad until 2016," Iamgold spokesman Bob Tait said in an email.

Other high-cost producers include St Barbara Ltd's Simberi gold mine in Papua New Guinea, which reported AISC of A$2,300 ($2,039) an ounce in the June quarter. An engineering program is underway at Simberi to improve plant performance.

Iamgold's Rosebel mine in Suriname had AISC of $1,216 an ounce in the three months to end-June.


To be sure, some in an industry known for its optimism see a proverbial silver lining: they believe that a sharp drop in production will help to lift prices.

While gold is also a financial asset that can benefit from uncertainty and inflation fears, some investors and executives say less supply cannot help but put a floor under bullion.

Miners will remain loathe to invest in new projects at gold prices below $1,500, said Douglas Groh, a portfolio manager at Tocqueville Asset Management.

"Two years from now end-2016, 2017 and even into 2018, the markets will recognize that there isn't new capacity coming on stream ... Certainly the gold price will jump," Groh said.

For Goldcorp CEO Chuck Jeannes, the industry is close to "peak gold," an expression that means production is at its all-time high as deposits get harder to find as existing production gets mined out.
"I don't think that we will ever mine as much gold as we do in 2015. That's positive for the gold price," he said in an interview.

(1 US dollar = 1.1282 Australian dollar)

(Editing by Jeffrey Hodgson and Marguerita Choy)

Wednesday, September 24, 2014

ATCO Energy and Petrogas developing Canadian salt caverns for hydrocarbon storage

Brine-filled caverns formed by solution mining of salt are suitable for gas storage

ATCO Energy Solutions, in partnership with Petrogas Energy, is to develop four salt caverns, with the capacity to store approximately 400,000m3 of propane, butane and ethylene to provide the natural gas liquids (NGL) market in western Canada with a new alternative for hydrocarbon storage.

The facility will be located at ATCO's Heartland Energy Centre near Fort Saskatchewan.

The storage facility will be connected to Petrogas' existing Fort Saskatchewan hydrocarbon truck and rail terminal that currently receives and distributes multiple products in the marketplace.

'This development will provide a unique market option and establish enhanced storage services to Alberta's Industrial Heartland,' says Stan Owerko, president and CEO, Petrogas Energy.

'The Petrogas terminal is undergoing expansion to accommodate this storage initiative and provide additional throughput and distribution capacity.

This project will support the movement of increasing volumes of Western Canadian LPG production to traditional North American markets as well as key International export markets through Petrogas' West Coast LPG export terminal in Washington.' Cavern drilling and long lead procurement is currently underway for the facility that will be built and operated by ATCO Energy Solutions.

Commercial operation for two caverns is targeted for the second quarter of 2016 and is strategically timed to offer additional product storage and handling services to meet market demands.

Two additional caverns are anticipated to be completed by the second quarter of 2017.

- See more at: http://www.tankstoragemag.com/industry_news.php?item_id=8303&utm_source=TSM+Newsletters&utm_campaign=2fc2610f39-TSM_News_24_09_2014&utm_medium=email&utm_term=0_a19947d14a-2fc2610f39-221591897&ct=t(TSM_News_24_09_2014)&mc_cid=2fc2610f39&mc_eid=d7c7dcbd33#sthash.6nF3Ai8b.dpuf

Tuesday, September 23, 2014

Crude oil in storage amid massive oversupply

Crude oil in storage amid massive oversupply

According to Reuters, the world's largest super-tanker has been booked by a Chinese trading firm in order to store crude oil at sea, increasing the number of vessels used for floating storage. Benchmark oil prices were down to below $100 a barrel.

Industry sources said that the ship the Chinese firm Unipec, the marketing arm of Beijing-backed oil giant Sinopec, has booked is the 3.2-million-barrel TI Europe. This is only one of several Ultra Large Crude Carriers that are still in operation. The TI Europe is currently the world's largest ocean-going vessel based off of tonnage, and is extremely long, measuring 380 meters.

Last week, oil and gas stocks saw losses as global crude oil prices were down following a cease fire agreement between the Ukraine and pro-Russia rebels, which was seen as an important first step toward a resolution to the five-month conflict in eastern Ukraine, reports Forbes.

In addition, surprisingly weak U.S. job data, the world's largest oil consuming country, also accounted for the drop in oil prices. According to Forbes, last week the price of front-month Brent crude oil futures contract on the ICE fell by over 2.2 percent last week.

Crude oil surplus leads to old storage method

 Traders across the global market were forced to rely on one of the oldest strategies after they were faced with these enormous amounts of crude oil, which includes putting oil into storage rather than selling it. Expert traders now have an avenue for making money despite the fact that relatively cheap front-month prices are bad news for oil bulls, for they can take advantage of current low prices and store barrels. Meanwhile, selling futures contracts can lock in the higher prices for crude to be delivered in several months. Traders will make money if the price difference is higher than the costs of storage and capital, reports The Wall Street Journal.

Therefore, the traders that will make money are those who already have access to a large amount of physical oil, such as pipeline companies, oil producers and trading houses.

The recent move to book the vessel is a sure sign that an oversupply of oil and falling prices have caused traders to store crude in the highest volumes since over five years ago during the financial crisis. Analysts expect there are over 50 million barrels of oil already in storage.The move also shows the expanding clout of state-backed Chinese firms in global oil trading, with Unipec and PetroChina creating sophisticated dealing desks in primary locations over recent years, such as London and Singapore. Trading sources have reported that Unipec will eventually ship cheap oil from Europe and store it near Singapore on the ULCC.

"It doesn't surprise me. They have been buying everything in northwest Europe," one oil trader told Reuters on Monday, referring to the large number of cargoes Unipec has purchased of Russia's main crude export since the beginning of this month.

The oversupply of global oil has played a major role in pushing the price of Brent crude under $100 a barrel. The Brent crude October contract for the global benchmark has fallen just under $100 a barrel for the first time in 15 months, at $99.95. This is approximately $3 under the peak of future prices next April. 

The amount of crude tankers used for storage has sharply increased after years in the doldrums. The balance is between Asia and South Africa's Saldhana Bay harbor, a possible cause for a boost in tanker rates. Rates have been lagging near a third of the level hit during the previous oversupply. 

Monday, September 22, 2014

Rockefellers Divesting From Big Oil

U.S. philantropist and oil magnate John D. Rockefeller gives a dime to a child, in this undated picture. Rockefeller was noted for his habit of giving coins as tips to all and sundry. (AP Photo)
U.S. philantropist and oil magnate John D. Rockefeller gives a dime to a child, in this undated picture. Rockefeller was noted for his habit of giving coins as tips to all and sundry. (AP Photo)

The Rockefeller family is divesting some of its massive fortune from fossil fuels, the New York Times reported on Sunday. The Rockefeller Brothers Fund, the family's charitable arm, will announce the landmark move in a video conference on Monday along with 49 other foundations.

According to USA Today, the 50 groups will divest from 200 major oil and gas companies.

The Rockefellers are especially noteworthy given their family history. Patriarchs John D. Rockefeller and William Rockefeller amassed their fortunes while working in their oil industry. The Rockefeller brothers were co-founders of the Standard Oil Company, the world's largest oil refiner at the time.
The Rockefellers were also celebrated for their philanthropic work. According to his 1937 New York Times obituary, John D. Rockefeller gave $530 million to charity during his lifetime. He also helped establish the University of Chicago.

The Rockefeller Brothers Fund has been a major supporter of environmental advocacy. Last year, the charity gave over $6 million in grants to sustainable development projects.

The fossil fuel divestment movement has gained many other high-profile supporters in recent months, including actor Mark Ruffalo.

"It's a snowballing movement," Stephen Heintz, president of the Rockefeller Brothers Fund, told USA Today.

According to the Washington Post, the Rockefellers plan to first divest from coal and tar-sands mining.

China slowdown worries hit stocks, commodities

By Nigel Stephenson

LONDON (Reuters) - Concern about a potential slowdown in China hit global stocks and commodities on Monday while signs of disagreement between major economic powers on the need for extra stimulus further clouded the outlook.

Shares fell in Asia and Europe as investors worried a closely watched gauge of Chinese manufacturing, due on Tuesday, could indicate activity was contracting.

The Australian dollar fell half a percent to a seven-month low of $0.8826, reflecting Australia's dependency on Chinese appetite for its natural resources exports.

Mining company stocks fell in Europe on fears over Chinese demand. British food retailer Tesco , whose shares fell more than 8 percent after it further cut its first-half profit forecast, also took its toll.
"News out of China where finance minister Lou poured cold water on hopes that China will take further measures to boost its economy is souring sentiment for stocks," Markus Huber, senior analyst at Peregrine & Black, said.

Wall Street looked set to open lower, with stock index futures pointing to losses.

Chinese steel and iron ore futures hit record lows, down 4 percent, plagued by excessive supply and demand worries.

Brent crude oil fell below $98 a barrel and three-month copper on the London Metal Exchange was down 1.5 percent at $6,733 a tonne.

"The big concern out there seems to be China. Everybody is getting increasingly worried about the economy and the real estate sector and there are question marks about when we might get additional policy stimulus (from China)," said Nic Brown, head of commodity research at Natixis.

The closely-watched Chinese manufacturing number will be released on Tuesday, as will other global flash business activity surveys for September.

Group of 20 finance ministers and central bank chiefs meeting in Australia at the weekend did little to settle investor nerves. They said they were close to adding $2 trillion to the global economy, but there were signs of disagreement.

U.S. Treasury Secretary Jack Lew cited "philosophical" differences with some of his European counterparts over the need for short-term stimulus.

German Finance Minister Wolfgang Schaeuble stressed Germany's long-held view that structural reform and strict budget controls were needed.

Chinese Finance Minister Lou Jiwei told the meeting Beijing would not dramatically alter its economic policy because of any one indicator, China's central bank said in a statement.

The G20 finance leaders also warned low interest rates and low asset price volatility could lead to a build-up of excessive risk.


European Central Bank President Mario Draghi will speak in the European Parliament on Monday, days after a lukewarm take-up of cheap loans under the bank's latest scheme to push more money into the euro zone financial system.
The pan-European FTSEurofirst stock index <.FTEU3> was down 0.3 percent at 1,397.85 points.

MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> dropped about 1.2 percent. Japan's Nikkei stock average <.N225> ended down 0.7 percent, after it marked its highest closing level since 2007 on Friday.
The dollar, which has racked up its longest weekly winning streak against a basket of currencies since the its free float in 1973, gave up ground against major rivals, with the notable exception of the Australian dollar.

The euro traded 0.1 percent higher at $1.2840, after touching a 14-month trough of $1.2826 in Asian trade, while the yen was almost flat at 109.02 to the dollar.

(Additional reporting by Lisa Twaronite in Tokyo, Patrick Graham, Atul Prakash and Harpreet Bhal; Editing by Catherine Evans/Ruth Pitchford)

Friday, September 19, 2014

Floating storage options on the horizon

ULCC"FAIRFAX" by sspalato

The current drop in oil prices has led to the re-igniting of inquiry into floating storage.
London broking house EA Gibson said that tonnage was being sought last week to take advantage of the perceived contango in oil prices.

Last week, Brent crude fell to its lowest level since April 2013 and way below this year’s high of $115.06 per tonne seen in in Mid-June.

On its own, the differential between the forward and the current oil price appeared to be insufficient to make floating storage profitable, Gibson said. The margins are currently a lot tighter than when storage became popular in 2009/10,which led to artificial support for the tanker sector.

Gibson pointed out that there are other factors besides the actual cost of chartering the tanker for storage to be taken into consideration, such as the cost of insurance and bunkers, which vary depending on the storage location.

In recent months, there has been a surge in land-based storage, including at Saldanha Bay in South Africa, but no tankers, have been fixed thus far, except for the Unipec charter of the ULCC ‘TI Europe’ for six months, option six months for storage duties off Singapore, reported last week.

However, Gibson pointed out that this vessel was being used to store oil for strategic purposes rather than for asset play. “We are just not seeing additional tonnage on the radar being chartered for floating storage, despite rumours circulating in the market and of course, inquiry,” Gibson said.

Last week, a number of other factors came into play. For example, the IEA trimmed its 2014 oil demand growth by 150,000 barrels per day to 0.9 mill barrels per day, adjusting its projected demand for this year to 92.6 mill barrels per day.

Saudi Arabia said that last month the country had cut production by around 400,000 barrels per day amid signs of an oil glut. There was also a reluctance for crude oil tanker owners to get locked into short term timecharters, as the normal winter spike approaches.

There is an anticipation/hope that this year’s winter spike will reach even higher levels than seen last winter. Therefore, owners are preferring to remain in the spot market, rather than loosing out to a fixed short term rate, Gibson said.

Thursday, September 18, 2014

Brent keeps gains, stays near $99 on OPEC output cut talk

Iran and Venezuela urged collaboration with non-OPEC members to help resolve the issue of tumbling oil prices (File)

(Corrects paragraph 3 to show November Brent settled $1.17 higher on Tuesday, not $2.40, which was the gain in Brent prices versus Monday's settlement of the expiring October contract)

* OPEC could trim 2015 output to 29.5 million bpd - Badri
* Libya cuts El-Sharara field output
* U.S. crude stocks up 3.3 million barrels last week - API
* Coming Up: Fed issues statement; 1800 GMT
By Jane Xie

SINGAPORE, Sept 17 (Reuters) - Brent crude steadied below $99 per barrel on Wednesday, after staging its steepest climb in two weeks in the previous session, on hopes the Organization of the Petroleum Exporting Countries (OPEC) will cut output and reduce a global supply glut.

The European benchmark sank to a 26-month low this week on continued worries about rising supplies and slower demand growth in China and Europe, but prices rose on Tuesday after OPEC's secretary general Abdullah al-Badri said the group could trim its 2015 output target by 500,000 barrels per day.

November Brent edged down 9 cents to $98.96 a barrel by 0401 GMT, after settling $1.17 higher in the previous session. November Brent's close on Tuesday was $2.40 higher than where the expiring October contract went off the board on Monday.

U.S. crude, or the West Texas Intermediate (WTI), was also down 13 cents to $94.75 after rising 2.1 percent on Tuesday.

"Thanks to the comments from OPEC, WTI and Brent went up sharply but at the moment, there is still a lot of supply," said Ken Hasegawa, a commodity sales manager at Newedge Japan.

Oil prices on both sides of the Atlantic have dropped over the past two months, dragged down by soaring U.S. shale oil production that has replaced many imports from West Africa, Europe and other regions, leading to a supply glut in the Atlantic Basin and Asia.

Brent has stayed below OPEC's preferred level of $100 for more than a week, prompting talk of a cut in OPEC output. Any production cut by OPEC, which is due to meet in late-November, would be the group's first since 2008.

Lower crude output from Libya also underpinned oil prices. The National Oil Corp said on Tuesday that output at its El-Sharara oil field has been reduced after rockets landed close to the nearby 120,000 bpd Zawiya refinery.

Despite the overnight price gains, oil investors remained concerned about the global economic outlook, the strength of the U.S. dollar and the outcome of an independence vote in Scotland that could rock financial markets.

"Still, the market has not stabilised and is waiting for Fed and Scotland's decisions," Hasegawa said. "Another reason is the increase in crude stocks from the API data."

Data from the American Petroleum Institute on Tuesday showed a surprise build of 3.3 million barrels in U.S. crude stocks last week, compared with analysts' expectations of a 1.6 million barrel draw.

The Energy Information Administration will release official inventory data at 1430 GMT.

Investors are now eyeing the U.S. central bank's policy meeting that ends on Wednesday for any hints on when the Fed could raise interest rates.

Despite earlier expectations of a more hawkish stance, flat U.S. producer prices in August, which points to muted inflated pressures, could allow the Fed to bide its time as it considers when to raise interest rates. (Editing by Florence Tan and Himani Sarkar)

Wednesday, September 17, 2014

Total books VLCC with storage option as crude oil falls below $100

File VLCC Tankship DHT Ann: Photo courtesy of DHT


Oil traders are aggressively looking to hire VLCCs for storage purpose due to weak demand and falling prices, with French oil major Total reportedly fixing a VLCC with a storage option in the Persian Gulf, participants tracking the supertanker segment said Tuesday.

The company has taken the Xin Yong Yang at 43 Worldscale points for September 25 loading on the Persian Gulf to East route, basis 270,000 mt, with a 10-to-30 days storage option at $37,500/day, owners, brokers and charterers said.

"We heard that the storage will be at Fujairah," said a VLCC broker in Tokyo. Charterers think crude price will be higher later, the broker said.

Total executives could not be immediately reached for comment.

Another broker in Singapore said, "There is plenty of crude floating around but this is done more in smaller ships."

ICE Brent crude futures traded below $100/b Tuesday due to oversupply as Libyan exports and the upcoming maintenance runs by some refineries weighed on prices.

Weak crude demand has also brought down the number of VLCC fixtures.

One of the reasons driving demand for ships for storage is that there have been fewer loadings this month from the Persian Gulf and the Red Sea, the same Singapore-based broker said.

So far, 79 VLCC fixtures for Persian Gulf and Red Sea loading are estimated done for September, including 67 for the East, four for the West and eight for optional voyages, according to brokers.

Overall fixtures are estimated at 123 for August, including 17 for destinations in the West and 106 for the East.

Though there are still outstanding cargoes for loading in the third decade of September that are yet to be covered with tonnage, market participants expect fixtures to be lower than August.

Weaker demand has dragged down crude prices, leaving suppliers with no option but to hold back their inventories and hope for higher rates in the short term.

Storage of crude in landed tanks is not always available at a preferable location and for exactly the duration a company wants to hold the volume.

In contrast, chartering of ships for storage is relatively flexible in terms of location and duration.

"One possibility is that they [Total] will sell this cargo if they get the price [they are aiming at] and then top up the ship with another cargo," one of the brokers said.

Recently, an ultra large crude carrier, the 442,000 dwt, 2002 built TI Europe, was taken on a six-month time charter by Unipec at a daily rate of $25,600.

There is an option to extend the time charter period by another six months at $28,600/day.

Such options impart flexibility in the trade of floating crude.

Shipowners are also hoping that the trend of holding crude in floating storage will pick up.

"If the price of crude continues to fall, there will be more opportunities for ships being taken for storage," said a Singapore-based source with a VLCC owner.

Owners said that a short-term storage deal can be compared with a round-voyage from Persian Gulf to China, which will take almost two months.

If the daily earnings are attractive, owners will give the ship for storage for the same duration, they said.

Nevertheless, the current forward structure of crude prices is not really an attractive storage opportunity because the contango is not deep enough for storage economics to work well, said an analyst with a North Asian refiner.

"This push into storage is not because there is a contango. [Instead] it is because there is [less] demand, which has led to a contango," he said.

The spread between the front-month and three-month forward Brent crude has declined below $10/mt from $12/mt nearly a month earlier.

Time charter rates for VLCCs are also on the rise in anticipation of more demand, though not necessarily for storage.

Earlier this year, the 2010-built, 321,000 dwt Blue Topaz was taken for a 12-month time charter by Koch at a daily rate of $22,000, according to brokers.

Market participants said time charter rates for the same duration would now be above $25,000/day, perhaps even close to $28,000/day.

--Sameer C. Mohindru, sameer.mohindru@platts.com
--Edited by Alisdair Bowles, alisdair.bowles@platts.com

Brent Trades Near Week-High as Libyan Field Halts

Brent crude trade near its highest closing level in a week after Libya said it halted its Sharara oil field after a rocket attack on the connected Zawiya refinery. West Texas Intermediate was little changed.
Brent advanced as much as 0.6 percent in London, reversing an earlier loss. Libya halted the Sharara field, which had been producing 250,000 barrels a day, as a precaution following the attack two days ago, Mansur Abdallah, director of oil movement at the Zawiya plant, said by phone. Nigerian authorities are in talks to avoid the disruption of oil exports as a strike enters its second day.
“Libya might have been one of the reasons behind the slump before,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail. “So ongoing insecurity might well lead the price recovery.”
Brent for November settlement added as much as 56 cents to $99.61 a barrel on the ICE Futures Europe exchange and was at $99.24 as of 1:32 p.m. in London. It closed at $99.05 yesterday, the highest since Sept. 9. The European benchmark crude was at a premium of $5.56 to WTI on ICE for the same month. It closed at $5.24 yesterday.
WTI for October delivery was at $94.66 a barrel in electronic trading on the New York Mercantile Exchange, down 22 cents. The volume of all futures traded was about 15 percent more than the 100-day average for the time of day. Prices have decreased 3.8 percent this year.

Libya Losses

A rocket exploded near a crude storage tank at the Zawiya plant on Sept. 15, National Oil Corp. spokesman Mohamed Elharari said yesterday. Libya has been in the process of restoring output after more than a year of unrest that had reduced it to the smallest producer in OPEC.
Sustaining higher production in Libya in the longer term might be difficult “given the absence of strong governance mechanisms,” Miswin Mahesh, an analyst at Barclays Plc in London, said by e-mail.
The Organization of Petroleum Exporting Countries’ output target may fall next year, Secretary-General Abdalla El-Badri said yesterday in Vienna. OPEC’s daily output target may fall by 500,000 barrels to 29.5 million barrels in 2015, El-Badri said.

OPEC Target

“The first official signs that OPEC is starting to feel a little uneasy about the current market environment and the price of oil are emerging,” David Wech, an analyst at consultants JBC Energy GmbH in Vienna, said in a report.
Saudi Arabia cut its crude supply by 408,000 barrels a day in August, the biggest reduction since 2012, a submission made by the country to OPEC shows. Demand for OPEC’s oil will drop to 29.2 million barrels a day in 2015 from 29.5 million this year, the group said in a Sept. 10 report.
Crude output is at risk in Nigeria, Africa’s biggest producer, because of a strike over pensions, according to Babatunde Oke, a Lagos-based union spokesman. State-owned NNPC is optimistic that export terminals won’t be affected, according to Ohi Alegbe, a company spokesman.
In Iraq, the second-biggest producer in OPEC, U.S. personnel will help Iraqi forces with planning, logistics and coordination as part of the campaign against the Islamic State, Army General Martin Dempsey, the chairman of the Joint Chiefs of Staff, told a Senate committee yesterday. Iraqi forces are “doing fine” for now and don’t need help in the field, he said.

U.S. Stockpiles

U.S. crude supplies probably shrank by 1.5 million barrels last week to 357.1 million, according to a Bloomberg News survey before an Energy Information Administration report today. That would be a fifth weekly decline.
Gasoline inventories fell by 125,000 barrels to 212.2 million during the week ended Sept. 12, according to the median estimate of 10 analysts surveyed by Bloomberg. Distillate supplies, which includes heating oil and diesel, rose by 750,000 barrels to 128.2 million, the survey showed.
The industry-funded American Petroleum Institute was said to report U.S. crude stockpiles increased by 3.3 million barrels last week, while gasoline supplies fell by 1.2 million, according to Bain Energy. The API in Washington collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines, while the government requires that reports be filed with the EIA.
To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net Rachel Graham

Nigerian oil workers start strike, oil exports at risk

Nigerian oil protests
Photo: Thousands of protesters have demonstrated in Nigeria's commercial capital Lagos. (AFP: Pius Utomi Ekpei)


Oil workers in Nigeria started an indefinite strike Tuesday that could disrupt oil production and exports from the OPEC member, said officials of the unions and state-owned Nigerian National Petroleum Corp.

The unions took the action after failing to resolve a dispute over pensions and other issues.

"Today, we have called our members out to begin an indefinite strike until management addresses our demand for a complete overhaul of the NNPC pension scheme, which in its present form is depriving our members of their full dues," a spokesman for the NNPC branch of Nupeng and Pengassan oil workers' unions told Platts.

NNPC's headquarters in Abuja has been shut to workers and visitors, the union official said.

Platts could not immediately confirm the situation in other NNPC offices, particularly in the oil-producing Niger Delta region.

The union spokesman said that if NNPC management failed to meet workers' demands, "in the shortest time possible, oil export terminals will be shut down."

NNPC has had difficulty meeting its portion of cash call contributions to funding joint venture operations with its foreign oil partners, a source said. For pension contributions, the company has fallen Naira 85 billion ($531 million) short, according to the source.


NNPC spokesman Ohi Alegbe said Tuesday morning the company was prepared to address the workers' pension concerns and to end the strike.

"NNPC is taking steps to avert a looming industrial action by the corporation's arm of the National Union of Petroleum and Natural Gas Workers and the Petroleum and Natural Gas Senior Staff Association of Nigeria," Alegbe said.

"While acknowledging the existence of some funding gaps in the scheme, measures have since been put in place to steadily bridge the funding deficit, which stood at N298 billion in 2010," he said.

NNPC manages the government's interest in joint ventures with foreign firms, including Shell, ExxonMobil, Chevron, Eni and Total. It accounts for about 90% of Nigeria's 2 million b/d of oil production.

NNPC staff monitors and approves crude shipment documents at the terminals in conjunction with industry regulators.

Officials also said Tuesday the NNPC strike could hit gasoline imports and distribution as the corporation accounts for 60% of the Nigeria's gasoline imports.

"Management called on members of the public not to engage in panic buying [of gasoline], assuring further that plans are on top gear to address the situation," Alegbe said.

--Staff, newsdesk@platts.com
--Edited by Meghan Gordon, meghan.gordon@platts.com

Cushing oil hub to expand with new pipeline projects

cushing tankage

The Cushing interchange is currently undergoing an expansion project, which will add pipelines to the existing hub.

One new pipeline is already in operation, with another close to completion and one more major project to be announced later this month.

Tulsa-based NGL Energy Partners have teamed up with Rimrock Midstream to create the Grand Mesa Pipeline.

The Grand Mesa will be open to oil producer commitments shortly and will be a 550-mile system from Weld County, Colorado, to the Cushing hub.

Flanagan South, once operational in the coming weeks, will run 600 miles and carry up to 600,000 barrels per day.

The new pipeline runs along a similar route to Enbridge's existing Spearhead system from the Flanagan, Illinois, terminal to Cushing.

 - See more at: http://www.tankstoragemag.com/industry_news.php?item_id=8272&utm_source=TSM+Newsletters&utm_campaign=b9febedf2a-TSM_News_17_09_2014&utm_medium=email&utm_term=0_a19947d14a-b9febedf2a-221591897&ct=t(TSM_News_17_09_2014)&mc_cid=b9febedf2a&mc_eid=d7c7dcbd33#sthash.vt1TlQc2.dpuf

Tuesday, September 16, 2014

A dilapidated Philippine Navy ship LT 57 (Sierra Madre) with Philippine troops deployed on board is
SPRATLY ISLANDS, PHILIPPINES - AUGUST 06: (CHINA OUT, SOUTH KOREA OUT) The dilapidated Sierra Madre, a former U.S. tank landing ship, in Ayungin Shoal, as the Philippines' outpost against China in Spratly Islands on August 6, 2014 in Spratly Islands, Philippines. China, which has been flexing its military muscle in recent years to expand its maritime presence, is ratcheting up pressure at this particular site. The Philippines occupies nine islets and reefs in the Spratlys. But Ayungin Shoal is the only spot that is constantly exposed to the surveillance activities of Chinese patrol vessels. In 1995, Beijing upped the ante by erecting a structure in Mischief Reef, which is located in the Philippines' exclusive economic zone, calling it a 'shelter for fishing boats.' The Philippine military countered the move by deliberately running the Sierra Madre aground in Ayungin Shoal four years later as an outpost to keep the islands under its control. In South China Sea, Spratly Islands are disputed area, where China, Vietnam, the Philippines and Malaysia have claimed sovereignty. (Photo by The Asahi Shimbun via Getty Images)


BEIJING (AP) - The Chinese exploration rig at the center of a tense maritime standoff with Vietnam earlier this year has made its first deep sea gas discovery in the politically volatile South China Sea, state media announced Tuesday.

The discovery by China National Offshore Oil Corp. was made about a month after its rig withdrew in July from Vietnam's exclusive economic zone to far less-contested waters closer to China.

The find by CNOOC's two-year-old, $1 billion deep sea rig is about 150 kilometers south of China's southernmost island of Hainan. It's unclear whether the discovery will become commercially viable, but the announcement represents a significant step in China's ability to seek resources beneath the South China Sea.

Petroleum reserves and fisheries are among the resources at stake in disputes over the sea, which is one of the world's busiest shipping routes and a patchwork of overlapping claims by governments including China, the Philippines, Malaysia, Vietnam and Taiwan. China claims virtually all of the South China Sea.

The find was China's first without the participation of foreign partners that in the past have included companies such as Chevron and BP, said Felix Tan, a Beijing-based analyst for energy and resources consultant Wood MacKenzie.

"This is the first discovery they've done all by themselves," Tan said in an interview. CNOOC has rapidly developed a deep-water exploration capability, he said.

"It's a bit premature to talk about the viability" of the field, however, Tan said. "There are a lot of tests to be done."

The gas field was discovered Aug. 18 at a depth of about 1,500 meters, CNOOC said on its website.
The depth is at the extreme cusp of what the industry considers a deep-water field, or those from 400 to 1,500 meters. Below 1,500 meters would be ultra-deep, where extraordinary pressures make the building of facilities extremely difficult.

Xinhua said the field's viability is still to be proven, but quoted a CNOOC manager, Xie Yuhong, as saying the well could be capable of producing up to 56.5 million cubic feet of gas per day, or about 9,400 barrels.

Monday, September 15, 2014


OPEC heavyweights play down oil price fall

By Margaret McQuaile in London


OPEC Reference Basket Price

What a difference three months can make. Oil prices were fairly buoyant when OPEC met on June 11, with its crude basket valued at $106.20/barrel and heading towards the $110.48/b it would reach nine days later.

By September 11, the basket had plunged to $95.35/b.

The extent of the plunge should, in theory, worry OPEC, which has informally embraced $100/b as the optimal oil price level.

But there are no obvious signs of panic emanating from the oil producer group. Indeed, the past few days have seen three OPEC heavyweights -- Saudi Arabia, Kuwait and Iran -- play down the need for action to combat the price slide.

Saudi oil minister Ali Naimi, in Kuwait for a regular meeting of Gulf Cooperation Energy ministers, couldn't see what the "big fuss" was about.

Oil prices "always go up and down," he said, quoted by AFP, and any measures OPEC might need to take regarding the price drop "should be discussed when OPEC meets" next, in November.

Naimi's OPEC and GCC colleague, Kuwaiti oil minister Ali al-Omair, said prices had not dropped to the extent that OPEC would call an emergency meeting.

In fact, he said, quoted by AFP, "prices are likely to rebound ahead of the winter season."

Iranian oil minister Bijan Zanganeh, whose country is subject to swinging international sanctions that have deprived it of crucial oil revenue by slashing its crude exports, also dismissed the need for OPEC to meet to discuss the price slide.

"Under the current circumstances, holding an urgent meeting is not necessary," he said, quoted by semi-official news agency Mehr, and it was too early to say whether the group would discuss an output cut in November.

Most OPEC countries are producing at or very close to their current limits, in particular those outside the high-reserves Gulf region.

And even within the Gulf camp, only Saudi Arabia has the kind of crude output capacity that can feed or starve markets.

It is largely Saudi Arabia that drives OPEC policy, adjusting supply informally in response to changing market conditions.

No sign of panic

The Saudis, as Naimi's comments show, are not exactly panicking, which is not surprising in view of the extent to which they can cope with lower oil prices.

Saudi investment bank Jadwa said last December that the kingdom would likely need an average oil price of $81/b for Saudi export crude, or about $85/b for Brent, to balance state revenues with government spending.

Brent traded below $97/b on September 11. On September 12, it was trading slightly above $98/b.

That begs the question: how low is Saudi Arabia willing to see oil prices go before taking action?

Analysts are trying to work out whether Saudi Arabia sees market share as a greater priority than outright prices and is prepared to allow the price drift further down in order to maintain that share.

Riyadh has simultaneously given conflicting signals, on the one hand telling OPEC that it cut oil production by 408,000 b/d between July and August, and on the other Saudi Aramco reducing crude prices to all regions for October.

Neil Atkinson, director of research at Lloyds List Intelligence, said it was unclear at this point whether Riyadh's priority was to support oil prices -- as might be interpreted from the 408,000 b/d output cut -- or to maintain its market share -- as the Aramco price reductions might suggest -- in an increasingly well-supplied market.

"In 2014, US oil production is already 1 million b/d more than it was last year. Canadian production is about 400,000 b/d higher than it was last year," he said, adding that year-on-year world oil demand growth was only 1 million b/d and that expectations of demand growth were constantly being revised downward.

With demand growth stagnant globally and oil supply rising, "over time, it's inevitable that prices are going to fall. Unless there's a major change in dynamics, it looks as if we're in a new era for oil prices, which is at a level $10/b lower than we've been used to in the past two or three years," he said.

Rocks and hard places

Saudi Arabia, Atkinson said, "is caught between a rock and a hard place." Lowering prices to preserve market share -- particularly in Asia, where it faces competition from West African producers that have seen their exports to the US drop -- makes sense.

"On the other hand, cutting output to prop up prices creates another quandary. If they cut production, they're losing market share," he said.

The International Energy Agency said September 11 in its latest monthly oil market report that the Saudi supply dip "seems primarily to reflect reduced import demand from US refineries, as well as weaker-than-expected crude demand in Europe and Asia."

Indeed, the IEA said, "Saudi exports as a whole are likely to have run below 7 million b/d for the last four months, their lowest level since September 2011.

Exports to the US led the drop amid rising Saudi domestic demand for crude burn and refinery runs."

Furthermore, the IEA said, "state oil company Saudi Aramco appears to be pricing oil out of the US market by ratcheting up official selling prices to North America, while OSPs to Asia have come off, likely setting the stage for a broad rebalancing of trade flows. This is the global crude market continuing to adjust to the new North American supply reality."