Thursday, December 31, 2015

Oil's Year In Review: 2015 Will End On A Down Note


Oil prices steadied on Dec. 31 but were still headed for a second year of steep declines after a race to pump by Middle East crude producers and U.S. shale oil drillers created an unprecedented global glut that may take through 2016 to clear.

Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures were on track finish 2015 down more than 30 percent after another year that showed the helplessness of Saudi Arabia and others in the once-powerful Organization of the Petroleum Exporting Countries (OPEC) to support oil prices.

The U.S. shale industry, meanwhile, surprised the world again with its ability to survive rock-bottom crude prices, churning out more supply than thought, even as the selloff in oil slashed by two-thirds the number of drilling rigs in the country from a year ago.

The United States also took a historic move in repealing a 40-year ban on U.S. crude exports to countries outside Canada, acknowledging the industry's growth.

"You do have to tip your hat to the U.S. shale industry and their ongoing ability to drive down costs and hang in there, albeit by their fingernails," said John Kilduff, a partner at Again Capital, an energy hedge fund in New York. Brent crude was up 30 cents at $36.76 a barrel by 10:13 a.m. EST (1513 GMT), rebounding from a near 11-year low of $36.10 earlier in the session.

For the month, it was down 17 percent and for the year, it fell 36 percent. In 2014, Brent lost 48 percent. WTI rose 13 cents to $36.73 a barrel. It slid 12 percent in December and 31 percent for the year, after a 46 percent loss in 2014. The immediate outlook for oil prices remains bleak. Goldman Sachs has said prices as low as $20 per barrel might be necessary to push enough production out of business and allow a rebalancing of the market.

"We have brimming oil inventories in Europe," Bjarne Schieldrop, chief commodity analyst at SEB in Oslo, said. "And our predictions are that oil inventories in Asia are going to get closer to saturation in the first quarter." Morgan Stanley said in its outlook for next year that "headwinds (are) growing for 2016 oil." The bank cited ongoing increases in available global supplies, despite some cuts by U.S. shale drillers.

"The hope for a rebalancing in 2016 continues to suffer serious setbacks," the bank said.
Industry Pain

Brent prices briefly hit a 2004 bottom below $36 this year, effectively wiping out the gains from a decade-long commodity super-cycle sparked by China's unprecedented energy demand boom. The downturn has caused pain across the energy supply chain, including shippers, private oil drillers and oil-dependent countries from Venezuela and Russia to the Middle East.

Analysts estimate global crude production exceeds demand by anywhere between half a million and 2 million barrels every day. This means that even the most aggressive estimates of expected U.S. production cuts of 500,000 bpd for 2016 would be unlikely to fully rebalance the market.

Oil began falling in mid-2014 as surging output from OPEC, Russia and U.S. shale producers outpaced demand. The downturn accelerated at the end of 2014 after a Saudi-led OPEC decision to keep production high to defend global market share rather than cut output to support prices.

OPEC failed to agree on any production targets at its Dec. 4 meeting in Vienna, cementing its decision to protect market share, as the organization braces for the return of Iranian exports to the market after the lifting of Western sanctions.

Russia and OPEC show no signs of reining in production, leading traders to establish record high active short positions in the market that would profit from further crude price falls.

Tuesday, December 29, 2015

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S&P 500 turns positive for year; tech stocks rally

Traders work on the floor of the New York Stock Exchange in New York, December 28, 2015. REUTERS/Lucas Jackson
Traders work on the floor of the New York Stock Exchange in New York, December 28, 2015.

U.S. stock indexes were higher on Tuesday, with the S&P 500 logging a small gain for the year, as tech stocks rallied and energy stocks reflected a recovery in crude prices.

The S&P 500 was up 0.8 percent for the year, while the Nasdaq Composite extended gains and was up 7.59 percent. The Dow Jones industrial average, however, was down about 0.66 percent.

"I think equities on average are destined to end 2015 in uneventful fashion," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis.

"Investors on average are at the crossroads of concern and optimism," he said. Lower oil prices put the pace of global growth in question and could translate to lackluster earnings, he added.

Crude prices edged up as colder weather entered Europe and North America, raising hopes of a short-term uptick in the tepid demand that has plagued the commodity this year.

Exxon shares were up 0.6 percent at $79.22, while Chevron was up 1 percent at $91.28.

At 11:09 a.m. ET (1609 GMT), the Dow Jones industrial average was up 173.77 points, or 0.99 percent, at 17,702.04, the S&P 500 was up 18.73 points, or 0.91 percent, at 2,075.23 and the Nasdaq Composite index was up 56.09 points, or 1.11 percent, at 5,097.08.

All 10 major S&P sectors were higher, led by a 1.16 percent rise in the tech sector.

Apple was up 0.9 percent at $107.78, the biggest influence on the S&P. Amazon was up 1.9 percent at $688 and gave the biggest boost to the Nasdaq.

Data on Tuesday indicated higher consumer sentiment, with the Conference Board's index of consumer confidence for December rising to 96.5, above the 93.8 expected.

Still, the slide in oil prices appear to have dashed hopes of a strong year-end rally, traditionally known as the Santa Claus rally.

Trading volumes are expected to remain thin this week as the year winds down.

Pep Boys was up 8 percent at $18.80 after the auto parts retailer's board found Carl Icahn's latest offer superior to the deal it accepted from Japan's Bridgestone.

Advancing issues outnumbered decliners on the NYSE by 2,062 to 863. On the Nasdaq, 1,883 issues rose and 763 fell.

The S&P 500 index showed 23 new 52-week highs and no new lows, while the Nasdaq recorded 56 new highs and 16 new lows.

(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)

Monday, December 28, 2015

Wall Street slips on crude on last trading week of the year

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, December 22, 2015. REUTERS/Lucas Jackson

Wall Street began the last trading week of the year in the red, dragged down by energy stocks, as oil prices resumed a slide brought on by a global oversupply.
All 10 major S&P 500 sectors were lower, led by the 0.63 percent fall in the energy sector. Exxon's shares were down 1.7 percent at $77.99, while Chevron was down 2.1 percent at $90.12. The stocks were among the biggest drags on the S&P 500 and the Dow.
"The 3 percent dive in crude oil this morning shows you that the sellers are still in control of the energy market and that's leading jitters on Wall Street, coupled with just normal digestive action after last week's strong gains," said Adam Sarhan, chief executive of Sarhan Capital in New York.
All three major indexes posted their best weeks since mid-November last week, rising about 2.5 percent, led by a short-lived surge in energy stocks.
The S&P 500 slipped back into negative territory for the year on Monday, while the Dow was down 1.96 percent. The Nasdaq Composite was up 6.19 percent.
At 9:39 a.m. ET (1439 GMT), the Dow Jones industrial average was down 85.98 points, or 0.49 percent, at 17,466.19, the S&P 500 was down 9.93 points, or 0.48 percent, at 2,051.06 and the Nasdaq Composite index was down 20.08 points, or 0.4 percent, at 5,028.42.
Trading volumes are expected be subdued through the week.
Global stocks ticked lower on Monday over fresh worries about Chinese growth after data showed profits at industrial companies in the world's second-largest economy fell in November for the sixth month in a row.
Valeant was down 4.9 percent at $108.57 after the Canadian drugmaker said Chief Executive Michael Pearson is going on medical leave.
Fitbit was up 4 percent at $30, after reports that the wearable gadget maker's iOS app was the most downloaded after Christmas, suggesting strong holiday demand.
Disney was up 1.1 percent at $107.02, the only Dow component posting gains, after the company's latest Star Wars installment topped $1 billion in ticket sales.
Declining issues outnumbered advancing ones on the NYSE by 2,204 to 533. On the Nasdaq, 1,642 issues fell and 719 advanced.
The S&P 500 index showed no new 52-week highs and no new lows, while the Nasdaq recorded eight new highs and 13 new lows.
(Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)

Wednesday, December 23, 2015

Oil back at $95 — but only in 24 years' time: OPEC

Oil prices will take decades to recover and will still not reach the peak seen in recent years, according to the latest World Oil Outlook (WOO) from OPEC.
In the group's latest outlook on supply, demand and prices to 2020 and 2040, OPEC predicted that a barrel of oil would cost (in real terms) around $70 by 2020 and $95 by 2040, a far cry from a high point of $114 a barrel last seen in June 2014 before prices began to plunge on oversupply. On Wednesday, a barrel of benchmark Brent crude cost $36.51, a shade above WTI at $36.47.
Price declines were exacerbated by the decision last year by OPEC, the 12-member producer group led by Saudi Arabia, not to cut production. Still, OPEC's Secretary General Abdalla Salem El-Badri said OPEC had been a bastion of stability amid volatile times for the oil industry.
"The supply and demand balance in 2015 has been one of oversupply, with stock levels rising to well above the five-year average. Despite this market instability, OPEC has continued to be an efficient, reliable and economic supplier of oil," El-Badri noted in the foreword of report.

An illuminated Grangemouth Oil Refinery emits smoke on March 29, 2012 in Grangemouth, Scotland.
Jeff J Mitchell/Getty Images
An illuminated Grangemouth Oil Refinery emits smoke on March 29, 2012 in Grangemouth, Scotland.
While the oil price plunge has been largely down to an oversupply, demand for oil has been strong but just not strong enough. Looking at potential future demand in its outlook, OPEC predicted oil demand to rise to 97.4 million barrels per day (mb/d) by 2020, a slight rise of 500,000 barrels a day compared to last year's outlook.
By 2040, OPEC predicted overall demand to be close to 110 million barrels a day – a decline of around 1 mb/d on last year's forecast.

OPEC to mop up

OPEC's decision not to cut production in order to support prices was widely seen as a way for the group to retain its market share in the face of rivals, such as shale oil producers in the U.S. and Canada. The strategy has worked with many non-OPEC members, who tend to have higher production costs, struggling to break even.
As a result, many rivals have cut rigs and cancelled drilling projects while OPEC has continued to pump at record levels, often exceeding a self-imposed ceiling of 30 million barrels a day. OPEC has long predicted that the supply of oil from producers outside of the OPEC group would contract next year, just as world oil demand rises, and reiterated that prediction in the WOO.
As non-OPEC supply faltered, OPEC would be there to meet demand, El- Badri said.
"From the supply perspective, in last year's WOO, non-OPEC liquids were expected to rise to 61.2 mb/d by 2020, whereas this year the number has dropped by 1million barrels a day to 60.2 mb/d. All this means that by 2020 the requirement for OPEC crude is anticipated to be at 30.7 mb/d, an increase of 1.7 mb/d from last year," El-Badri said.

OPEC to invest

As rivals cut back on rigs, drilling projects and investments, OPEC warned that it was important that the "necessary future investments are made" and said it would do so.
"If the right signals are not forthcoming, there is the possibility that the market could find that there is not enough new capacity and infrastructure in place to meet future rising demand levels, and this would obviously have a knock-on impact for prices," El-Badri noted in his foreword to the report.
OPEC signaled it was ready to invest in the "development of new upstream, capacity," which, El-Badri noted, underscored "OPEC's commitment to security of supply for consumers, which needs to go hand-in-hand with security of demand for producers."
The group yet again signaled that it is ready to mop up market share from its competitors – especially those cutting back on production – stating that the increase in the overall requirement for OPEC crude between 2015 and 2040 is almost 10 million barrels a day -- whereas for non-OPEC liquids it is just over 3 mb/d.
The forecast for demand had declined, however. "Overall demand by 2040 is at close to 110mb/d, around 1mb/d less than in last year's WOO. This is the result of further energy efficiency improvements, environmental policies, as well as slightly lower long-term economic growth estimates," OPEC's secretary general said.
- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.

Dominica suspends ties with ex Nigerian oil minister

Diezani Alison Madueke 1024x755

A Caribbean country, Dominica, has suspended all relations with Nigeria’s immediate past Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, following investigations into her finances in the United Kingdom in October, in connection with alleged money laundering.

A statement by the Prime Minister of Dominica, a small Caribbean Island, Mr Roosevelt Skerrit, stated this on Monday.

The prime minister said, “The Ministry of Foreign Affairs moved with dispatch to suspend all relations with Mrs. Alison-Madueke immediately following her arrest in October, 2015, pending the outcome of the investigations.

“This suspension took place in the month of October. Our position is that the relationship with Mrs. Alison-Madueke and all that flows from this will remain completely suspended until such time as the probe into her conduct as a minister of government is concluded and a determination made by the relevant authorities.”

Skerrit explained that in May of this year, during a routine stop-over visit to London, Alison-Madueke was introduced to him as the immediate past Minister of Petroleum Resources in Nigeria and also the immediate past President of the Organisation of Petroleum Exporting Countries.

He said the discussions, however, took place well before any question of an investigation by the relevant authorities arose.

He said the idea of relocating to Dominica was never discussed, far less agreed, in any discussions with Alison-Madueke.

The prime minister added, “She served as an Executive Official and Director of Shell Petroleum Development Company in Nigeria. In my budget address to the people of Dominica two years ago, I outlined the intention and policy of my government to recruit persons of experience, influence and integrity to serve and represent Dominica in various capacities abroad.

“As a small nation with very limited resources, we do not have the capacity to establish consular or other offices in many regions of the world. In this case, who is better to speak for and on behalf of Dominica in parts of the African continent than a former President of OPEC and former Chairman of the West African Gas Pipeline Authority?”

According to him, the issue of the former Nigeria’s minister relocating to the Caribbean country was not discussed.

He stated, “The arrangement of Mrs. Alison-Madueke serving in an honorary capacity, with no direct remuneration from Dominica and Dominica facilitating her travels across Europe and Africa with the issuance of a diplomatic passport, was entirely in accordance with existing convention, protocol and practice, until the very recent and unexpected development of the investigations by the UK and Nigerian authorities.

“This development was not foreseen nor anticipated by the due diligence undertaken on behalf of the government, and could not have been and was not foreseen by me or the Government of the Commonwealth of Dominica.”

The United Kingdom High Commission in Nigeria could not be reached for comment on the alleged moves by the former petroleum minister to flee the UK.

The High Commission’s spokesperson, Joseph Abuku, had yet to respond to an email sent to him as of the time of filing this report on Monday.

The former minister was reported on Saturday to have obtained the citizenship of the Caribbean country.

She was said to have been offered a post as the country’s trade and investment commissioner.

The report added that no allowance had been offered to her.

According to the report, the former minister would promote trade and investments in Dominica at no cost to the country.

In return, she would have received all the necessary assistance and protection from the small Caribbean island in accordance with international law.

Tuesday, December 22, 2015

Will Full Storage Tanks Crash The Price Of Oil?

Pipelines run toward oil storage tanks stand at the Enbridge Inc. Cushing storage terminal in Cushing, Oklahoma. (Daniel Acker/Bloomberg)

A number of analysts have suggested that oil prices might crater to $20 a barrel if storage tanks become full, which is certainly a possibility. There is significant uncertainty, but some indicators suggest this may be approaching.
Physical numbers: Storage capacity is not estimated with any accuracy and there is very little data on the amount outside the OECD. The National Petroleum Council used to do occasional studies of U.S. capacity, but hasn’t in a long while. Numbers change with a) pipeline capacity (oil has to fill it up) and b) refinery capacity. But although U.S. refinery capacity hasn’t changed much in decades, the consolidation in the industry has improved the efficiency of inventory management. Shale production has reversed this trend, and U.S. private crude oil inventories are higher than they’ve ever been: in over three decades, they never passed 400 million barrels, and now they are approaching 500.
In the past, non-OECD inventories were estimated by some analysts by taking the level relative to consumption as reported by a 1980s era Shell survey. Then, multiplying current estimates of consumption by the days of inventories in that estimate, an estimate of inventories was generated. This is not data, and involves some major assumptions, especially that inventory patterns don’t change.
In 1998, storage was described as being “full,” and some hundreds of millions of barrels were describing as “missing,” meaning they couldn’t be accounted for in the data. (These are now known as “Knappsters” after David Knapp, who coined the term “missing barrels”.) But only in recent months have inventories risen above the earlier ceiling, as the figure shows (million barrels OECD private inventories). While storage capacity has increased, this clearly suggests the world might be nearing full tanks again.

Of course, in relative terms (days of consumption, that is stocks in barrels divided by barrels per day of oil used), OECD inventories have been relatively high since the 2008 financial crisis, but soaring to well above historical highs in recent months, as the figure below shows.

Price impact: The best way to judge the adequacy (or surplus) of storage levels is the contango in the market. The difference between the current price and what people are willing to pay in future months is known as contango (when positive) and backwardation (when negative). A strong contango implies a glut in physical barrels, as it means that buying oil now requires an expectation that future prices will be high enough to cover holding costs.  Those costs include the interest rate (since capital is being tied up in the oil) and storage costs, which are the biggest component and can grow rapidly as existing storage fills.

The calculation is complicated by the expectations of future prices, which fluctuate enormously but in the short-term, a sharp increase in contango would be suggestive of an increase in the marginal cost of storage. That is, refurbishing idle tanks or renting a tanker instead of using existing storage. Of course, tanker rates vary but are obviously depressed now given weak global oil demand. Thus, a sharp increase in contango would be a sign that the current supply is in such surplus that inventory holders are having to scramble for high-cost storage.
The market does not seem to have reached that point yet. The figure below shows the 3-month contango since 1995 (as percentage of the current price), and two periods stand out: the financial crisis of 2008 saw the contango soar to 40%, but similarly, the market glut in 1998 reached nearly that level, almost 30%. Current levels of 10% indicate a surplus but not yet full tanks, although the contango is very definitely at the “high” levels.

The thing is that the outlook is for rising inventories over the next six months, when they usually decline in the winter. However, projections for mild weather combined with the return of Iranian oil, perhaps in a few weeks, could exacerbate the existing surplus and see the contango soar, which would also equate to pressure on oil prices. The question then will be: what reaction can be expected from OPEC? At least a 1 mb/d cut in production by no later than the 2nd quarter of 2016 would be necessary to bring prices back above $40.

VLCC fleet growth downside from second half next year

VLCC fleet growth downside from second half next year

Maritime Strategies International’s tanker market model predicts firm earnings scenario in first half of next year before weight of fleet growth starts to suppress rates.

The latest Tanker Freight Forecaster from Maritime Strategies International predicts further upside volatility in the crude tanker market in 2016 as a result of OPEC’s decision to effectively maintain oil output levels.

Average VLCC spot earnings for the Baltic Exchange’s ME-Japan voyage (TD3) have exceeded $100,000 a day in the first half of December.

Over the six-month horizon of the latest report, upside potential remains high, with a combination of burgeoning trade and continuing low prices supporting global oil consumption and suppressing domestic crude production in North America.

Logistical constraints continue to restrict tonnage across markets with weather playing an important role recently as well. Analysis by MSI shows that at the end of the first week of December between 30-35% of the VLCC fleet was not underway, being either moored or anchored.

Tim Smith, senior analyst at MSI, commented: “The decision by OPEC to keep the taps open implies that the inverse relationship between the crude price and VLCC rates will continue, presenting clear upside potential over the next six months. A scenario in which crude oil prices are suppressed across 2016 could lead to a boom in tanker earnings of comparable magnitude to 2007/8.”

The MSI analysis cautions that fleet growth – 2016 will see the second highest annual level of tanker deliveries ever – will start to impact the market through the second half of the year.

Other crude tanker segments are also performing strongly and MSI predicts are likely to see more upside in December and into January as crude oil prices deteriorate.

Suezmax spot earnings gained in the second half of Q4; both the Atlantic and Black Sea markets continued their progress from October. West Africa – Europe spot earnings increased to an average of $59,500 a day in November and have held close to that level in December.

Although these markets haven’t yet seen major gains, suezmaxes in the Middle East were reportedly tracking increases seen for VLCCs, suggesting higher rates will spread across the market through December.

Aframax spot earnings also rallied in November, building on gains made in October. As in the suezmax segment, further upside has yet to be seen in December from November levels, although given the magnitude and timing of the rise in the VLCC market this cannot be ruled out.

Aframaxes are likely to see fewer benefits from strong Middle East output than their larger counterparts and production in established loading regions such as Latin America and the North Sea is vulnerable to low crude prices and competition from larger sizes and long-haul trades.

U.S. Overtakes Russia As World's Largest Producer of Crude Oil

The United States is now the world's largest oil and natural gas liquids exporter and would remain so for a while, overtaking both Saudi Arabia and Russia.

U.S. production of crude oil, along with liquids separated from natural gas, surpassed all other countries with daily output exceeding 11 million barrels during the first 5 months of this year.

According to the International Energy Agency (IEA), the shale oil boom due to hydraulic fracturing and directional drilling has resulted in large volume gains in U.S. oil production on private and state lands where federal policies have little effect on output.

The US Congress had on Friday approved the lifting of the ban as part of a $1.1trillion spending bill. The bill was later signed by President Barack Obama.

President Barrack Obama had during his last visit to Kenya sometime in July this year stated categorically that his country would no longer buy Nigeria's crude oil thus heightening the call by the Organised Private Sector (OPS) that the country should intensify efforts to develop the non- sector of the economy.

The US until then was buying almost 10 per cent of Nigeria's total crude oil stock, but now buys a small amount of Nigerian crude oil due to the dramatic rise in domestic shale production.

With the lift on the ban of US's crude export, Nigeria has lost its biggest customer bringing the fortunes of its crude differential trading to the lowest in the last ten years.

Oil analysts believe that Africa-US oil trade could completely stop in the next two to three years as other leading exporters, including Angola, Libya and Algeria, suffer the same fate as Nigeria. If that materialises, Africa will have to find new customers for its oil, going head-to-head with Middle East producers in the key Asian market.

Added to this are several other African countries such as Ghana, Cote d'Ivoire, South Sudan, Equatorial Guinea, Ethiopia and Kenya, among many others, that have made commercial oil discoveries or are in the process of doing so.

Sinopec In Talks To Acquire Anadarko Petroleum

  EXCLUSIVE: Sinopec In Talks To Acquire Anadarko Petroleum

China Petroleum & Chemical Corp (ADR) SNP 0.39% -- commonly referred to as Sinopec -- is mulling a takeover of Anadarko Petroleum Corporation APC 3.65%, source familiar with the matter told Benzinga.

China Petroleum is an $89 billion market cap company involved in the crude oil and natural gas space. Anadarko is an independent exploration and production with a market cap of about $23.4 billion. Both stocks were trading lower on Monday, following weakness in the energy sector.

HSBC Bank is financing the deal, according to the source.

Shares of Anadarko spiked to a high of $47.72 on Monday following the news; The stock closed at $46.55, up 1.9 percent.

Stifel analyst Michael Scialla told Benzinga the rumor fits into the story around the China gas sector and the understood benefits of Anadarko inventory and Permian exposure. "A bid from a China company for Anadarko would make sense given APC inventories and Permian Basin exposure."

Scialla said Anadarko's inventory and exposure to Permian Basin jives with China story of oil and gas companies seeking oil inventory. The Permian Basin is a hot location and Sinopec would benefit from exposure there. However, the analyst thought Exxon Mobil Corporation XOM 0.54% looked to be the most likely buyer.

Oppenheimer analyst Fadel Gheit said that although anything is possible, a deal between Sinopec acquiring Anadarko has low probability, specifically a less than 50 percent chance due to regulatory concerns. However, he did say that Anadarko is believed to be a takeover target by other analysts.

Back in October, unconfirmed market chatter said Chevron Corporation CVX 0.72% was in advanced acquisition talks with Anadarko. Sources said Chevron could make a deal for Anadarko at approximately $83 per share in cash and stock.

A few weeks later, Bloomberg reported that Anadarko approached Apache Corporation APA 2.12% "about a combination that would be the largest for an independent U.S. oil and gas producer this year."

Calls and emails to China Petroleum and Anadarko were not immediately returned.
Jason Shubnell, Nick Donato and Garrett Cook contributed to this report.

Monday, December 21, 2015

Survey: Gas Prices Still Falling as Crude Oil Costs Nosedive

Gas pump

The price of gasoline nationwide keeps dropping.

Industry analyst Trilby Lundberg said Sunday that the average price of regular gas fell 4 cents in the past two weeks, to $2.06 per gallon. That's the lowest price since April 2009.

But the price-tracking website says the average has dropped to $1.99 per gallon, the first time it's been below $2 since March of 2009.

Prices have dropped because supplies are strong and demand hasn't been huge. GasBuddy predicts that many areas will see low prices for much of the winter, although refinery issues in the West could drive prices up.

Gas has fallen below $2 in 30 states, and more than two thirds of U.S. gas stations are selling at $1.99 per gallon or less, according to GasBuddy. The website says the national average could bottom out at $1.85 before rising in the spring as demand rises and refineries shift to federally required summer gasoline blends.

Lundberg says the average cost of midgrade is $2.35 per gallon, while Premium averages $2.55.

In California, where prices are highest, she says a gallon of regular averages $2.61, with midgrade costing $2.74 and premium at $2.83.

In the Lower 48 states, the highest average price of regular gasoline is in Los Angeles, at $2.71, while Tulsa, Oklahoma has the lowest, at $1.72, according to Lundberg.

Gold And Silver 2016 Fortunes Tied To Price Trend In Crude Oil

(Kitco News) - Gold and silver prices fell to multi-year lows in December. Not coincidentally, so did Nymex crude oil futures. Crude oil has led a “bust” in the raw commodity sector that has been playing out for the past three or four years–depending on the specific market. Most of the raw commodity sector, including the precious metals, will continue to follow the lead of crude oil. When crude oil bottoms out, it’s very likely many other commodity markets will do the same.

One bit of good news for the raw commodity bulls is the major bear market in crude oil is mature and the vast majority of its price pressure has already occurred. To put it another way: It’s likely there is not much downside price potential left in crude. Nymex crude oil prices bottomed out in 2009 at around $33.00 a barrel.
See on the monthly continuation chart for nearby gold futures that prices have dropped below the key 50% Fibonacci retracement of the move from the
2001 low to the 2011 high. That adds to the overall very bearish chart posture for gold. I would not be surprised to see gold challenge $1,000.00 an ounce in the coming few weeks or few months, before putting in a major bottom shortly thereafter.
Nearby Comex silver futures hit a high of $49.82 an ounce in April of 2011.
However, the past 4.5 years have seen this precious/industrial metal trend sharply lower and lose over two-thirds of its value. In 2015 silver prices dropped below $14.00, and it appears there is still more downside price potential in the coming months. The longer-term monthly continuation chart for nearby silver futures shows strong chart support does not show up until around the $10.00 area. For the bulls to gain some significant longer-term technical strength they would have to push prices back up to the $18.00 level, which would break the longer-term price downtrend in the silver market.
By Jim Wyckoff, contributing to Kitco News;

Thursday, December 17, 2015

Nigeria's NNPC issues 2016 crude oil contracts worth $13.5 billion

                   NNPC Lifts Embargo on 113 Crude Oil Vessels
By Julia Payne and Libby George
    ABUJA/LONDON, Dec 17 The Nigerian National
Petroleum Corporation (NNPC) has issued its 2016 crude oil term
contracts to 21 companies, going directly to international
refineries, trading houses and local downstream firms, according
to a list obtained by Reuters. 
    The contracts cover 991,000 barrels per day (bpd) of oil,
worth $13.5 billion at current crude oil prices, which is
roughly half of Nigeria's crude oil production of around 2
million bpd. 
    The list includes refiners such as Spain's Cepsa, Italy's
Saras, India's IOC and ENOC of the United Arab
Emirates, as well as trading houses Trafigura, Mercuria and
Vitol and international oil companies ENI, Total
, Exxon and Shell.
    The remainder are Nigerian downstream and NNPC trading
    In a statement, NNPC said: "Apart from ensuring
transparency, the companies were carefully chosen based on their
track records and trading experience to ensure that Nigerian
crude cargoes are not left unsold."
    The list is pared down from the final 2015 contract list,
which comprised 43 companies and did not include any global
traders. Many of the mostly local companies included then were
criticised by international watchdog groups, such as the Natural
Resource Governance Institute (NRGI), as "unqualified
intermediaries" who added little value. 
    President Muhammadu Buhari is on a campaign to root out
corruption in the NNPC and oil theft across the nation, which he
assesses at about 250,000 bpd.
    During a televised launch of the contract process in
October, when 278 companies submitting bids for crude oil
contracts, NNPC officials promised to slash the number of
winners and conduct business differently.
    "Things have changed in Nigeria," said one oil industry
source close to the contract negotiations. "The process of
tendering has been more transparent they want to work with more
reputable companies."
    Oil traders said the inclusion of Exxon and Shell was also
    "It is the first time for both," one trader of West African
oil said of direct contracts between Exxon, Shell and NNPC. "It
seems to tie up with the drive to partner with end-users."
    NNPC's current managing director Emmanuel Ibe Kachikwu is a
former Exxon executive.
    The absence of China's Sinopec, and its trading arm Unipec,
was also notable, as it is a large buyer of Nigerian oil and was
on the 2015 contract list. Oil industry sources said there was
another list of so-called "government" contracts with Nigeria's
major partners yet to come, and many expected the company to be
added at a later date. 
    On Thursday, Kachikwu told reporters that Nigeria is
producing 2.1 million bpd and aims to boost output to 2.4
million next year. 
 Contract holder            Volume ('000 bpd)
 Emirates National Oil      60
 Indian Oil Corporation     60
 Cepsa                      60
 Saras SPA                  60
        International Trading Companies
 Trafigura                  32
 Mercuria                   32
 Vitol SA                   32
 IOC Trading Companies
 ENI Shipping and Trading   32
 Totsa SA                   32
 Exxon Sale and Supply      32
 Shell Western Supply and   32
         Nigerian Downstream Companies
 Emo Oil & Petroleum/China  45
 Northwest Petroleum and    45
 Forte Oil PLC              45
 Oando PLC                  60
 Sahara Energy Resouce LTD  60
 A.A. Rano Nigeria Limited  45
 Eterna Oil                 45
 MRS Oil and Gas            60
            NNPC Trading Companies
 Calson/Hyson               32
 Duke Oil Incorporated      90
 Total: 21                  991

 (Additional reporting by Ron Bousso and Alex Lawler in London,
editing by William Hardy and David Evans)

Wednesday, December 16, 2015

AP EXPLAINS: Why US will lift restrictions on oil exports

FILE - In this July 21, 2015, file photo, an oil tanker passes a fisherman as it enters a channel near Port Aransas, Texas, heading for the Port of...

NEW YORK (AP) — The U.S. could soon end restrictions on oil exports put in place in the mid-1970s. The lifting of the embargo is part of a spending deal expected to be pushed through the House and Senate by the end of the week. Here are the reasons why the ban was in place, why is it is now being lifted and how consumers and businesses will be affected.


Of all the bad memories seared into the American consciousness from the 1970s, never-ending lines at the gas pump tops the list for many people. The Organization of Petroleum Exporting Countries put into place an oil embargo after the U.S. sided with Israel in the Yom Kippur War and the price of oil spiked from $3 to $12. A ban on oil exports was put in place in December 1975, with some exceptions. Companies were allowed to export oil to some countries with special approval, and exports to Canada have increased in recent years.


The country's oil supply problem was made more precarious when domestic production began a long decline in the 1970s as oil fields matured. Even with a temporary surge in production from Alaska in the 1980s, the U.S. was forced to rely more and more on imports. U.S. production, which had reached almost 10 million barrels per day in the early 1970s, was halved by 2008.


Technology. U.S. energy companies have developed new techniques that have dramatically increased oil production from fields once thought to be virtually empty or unreachable. U.S. oil production rose from 5 million barrels a day in 2008 to more than 9 million barrels a day this year, increasing global supply faster than demand. This week, crude prices fell below $35 per barrel, down from more than $100 per barrel in June of last year.


Major oil companies and the U.S. economy. Companies including Exxon Mobil and ConocoPhillips, along with the American Petroleum Institute, an oil and gas lobbying group, have been the biggest proponents of ending the ban. But the economic benefits could be very broad. Economists say exports could help the economy by reducing fuel prices — there are a lot of U.S. industries for which energy is a huge cost, from agriculture, to airlines, to manufacturing. Exports should also encourage investment in oil and gas production and transport, create jobs, make oil and gas supplies more stable and reduce the U.S. trade deficit.

Still, environmental groups worry that the rush by U.S. energy companies to supply the world with crude will lead to more local pollution and higher global emissions.


Allowing U.S. oil to compete in overseas markets should help lower the price of international oils, as measured by the price of Brent crude. U.S. refiners still import a large amount of foreign oil to produce gasoline and other fuels, so the price that U.S. drivers pay at the pump is closely tied to the price of Brent. Right now, thanks to low oil prices, many U.S. consumers are paying around $2 on average for a gallon of gas.


The end to the four-decade ban on U.S. crude exports was the big prize in the budget battle for Republicans, who saw it as an arcane policy given the nation's exploding production of oil and natural gas. In return, they agreed to the demand from Democrats for a five-year extension of credits for wind and solar energy producers and a renewal of a land and water conservation fund. Democrats also blocked a push by Republicans to GOP proposals to impede Obama administration clean air and water regulations.

Vitol acquires commercial interest in asphalt storage company


Vitol has acquired 50% interest in the world's largest asphalt trading, storage and transportation business.

Sargeant Marine comprises a global trading operation, which distributes asphalt to customers across the global as well as two terminals in Rotterdam and Constantza, Romania.

On completion of the interest acquisition for an undisclosed sum, it is expected that the new business will trade around 1.3 million metric tons of asphalt per annum, with hubs in Florida, London and Singapore.

It will also operate a fleet of 13 specialist vessels.

Daniel Sargeant, CEO of Sargeant Marine, says: 'Our new partnership will enable our customers to continue to benefit from our specialist expertise, with the additional backing of the world's leading energy trader.'

The transaction is expected to complete by the first quarter of 2016.

Tuesday, December 15, 2015

Surge in subsea exploration and production drives global turbine flowmeter market

The increasing offshore production activities in Brazilian and African regions will provide the major market for turbine flowmeters in subsea applications in the coming future, a new market study by Transparency Market Research says.

Turbine flowmeters are velocity measurement devices used for measuring the volumetric flow of liquid or gas.

At oil and gas facilities, turbine flowmeters are deployed for the transfer of hydrocarbons and gases in a controlled manner.

Advanced turbine flowmeters commonly used at oil and gas facilities incorporate the functionality of flow computers for correcting properties such as pressure, fluid, and temperature of the liquid or gas under observation and achieve the desired accuracy for the application.

Other than the oil and gas industry, turbine flowmeters find miscellaneous applications in water, chemicals, and the food and beverages industries.

Turbine flowmeters features that make them an excellent choice for volumetric measurement devices in the subsea industry.

The flow sensing elements used in turbine flowmeters are compact and lightweight compared to other metering technologies and as a result, turbine flowmeters are suitable for subsea operations at different depth levels.

Their high accuracy and fast speed response also make them highly viable for subsea operations.

The continuous rise in energy demands from the mounting global population and the strengthening industrial sector in the past few years, coupled with matured onshore reserves of oil and gas, have boosted exploration and production activities from subsea reserves.

With the section of subsea oil and gas exploration and production garnering an increased level of attention on a global front, the market for turbine flowmeters is also expected to tread along an upward growth trajectory in the coming years.

The market is benefitting especially from the rising offshore oil and gas exploration and production activities in Africa and Brazil in the next few years.

A number of planned expansion projects and the vast offshore reserves in West Africa are potential growth sectors for the global market for turbine flowmeters.

Strict guidelines related to operations at oil and gas facilities in Europe could prove to be another significant factor propelling the market in the near future.

Along with this, a number of shallow water exploration projects planned in European countries will significantly boost the demand for turbine flowmeters.

However, the depression that currently engulfs the global oil market owing to the continuously declining crude oil prices can hamper the overall development of the global turbine flowmeter market to a certain extent.

The development of numerous newer volumetric flow measuring devices at a rapid pace owing to technological advancements is also expected to hinder the growth of turbine flowmeters to a certain extent on the global front.

The market features a large number of companies offering customised turbine flowmeters according to the specific regulations associated with operations at subsea facilities.

Companies offer a wide range of turbine meters that are chosen on the basis of the characteristics of the fluid/gas under observation.

Based on flow range, the market is segmented into 1,100-2,250L/min, 250-1,100L/min, 50-250L/min, and 1.2-50L/min.

Some of the major vendors operating in the global turbine flow meters market for subsea operation are Environmental Technologies, Flowtechnik, Omni Instruments, AW-Lake Company, ABB, and Hoffer Flow Controls.

The full market study is available here.

Monday, December 14, 2015

Oil futures snap ugly 6-session losing streak


Natural-gas prices mark lowest settlement since 2001

U.S. oil prices finished higher for the first time in seven sessions, scoring a rebound from Monday’s lows under $35 a barrel.

The rebound for crude-oil prices comes despite concerns that a climate deal in Paris may hurt long-term oil demand.

Natural-gas prices, meanwhile, plunged to their lowest settlement since 2001 as warmer weather and hefty supplies sent prices tumbling.

Crude oil for delivery in January CLF6, +1.94%  tacked on 69 cents, or 1.9%, at $36.31 a barrel on the New York Mercantile Exchange, after tapping a low of $34.53 a barrel. Prices had posted declines in each of the past six trading sessions to tally a loss of roughly 13% since the close of $41.08 a barrel on Dec. 3.

“As speculative short positions reach a record…and as WTI gets within a whisker of the low made in late 2008, it seems prices are ripe for an oversold bounce,” said Matthew Smith, director of commodity research at ClipperData. “Whether it can be maintained is another matter.”

January Brent crude LCOF6, -0.18%  on London’s ICE Futures exchange, however, settled at $37.92 a barrel, down by a penny to hold at its lowest level since December 2008.

Analysts gauged the potential impact on oil from a historic climate deal that was signed in Paris over the weekend.

Read: These are the stocks for playing climate change
Following the climate agreement, “the pressure upon hydrocarbons just got bigger and badder, therefore opening up some huge risks to the downside, which could be difficult for the market to anticipate,” said Richard Hastings, macro strategist at Seaport Global Securities. “The situation is getting downright historic.”

On Monday, however, “contract expirations are making some noise…but that noise could easily turn to the downside on Wednesday and Thursday, depending upon other factors,” he said.

January Brent crude futures expire on Wednesday. January futures contracts for WTI oil expire in a week. Year to date, prices for both types of crude have lost more than 30%.
‘The selloff on the oil market has meanwhile taken on ludicrous dimensions.’
Commerzbank analysts
The selloff on the oil market has “taken on ludicrous dimensions,” analysts at Commerzbank said in a note. 

Meanwhile, Amir Hossein Zamaninia, Iran’s deputy oil minister for international and commerce affairs, told Bloomberg there is “absolutely no chance” the country will hold off plans to lift crude exports. He said it is prepared for the “worst scenario” for oil prices.

Back on Nymex, January gasoline RBF6, -2.44%  shed 2.6 cents, or 2%, to $1.256 a gallon, while January heating oil HOF6, -1.80%  lost 1.8 cents, or 1.6%, to $1.128 a gallon. 

Also on Nymex, natural-gas futures suffered their fourth straight session drop on Monday.

Temperature forecasts “continued to push off the eventual arrival of winter cold,” said Tim Evans, energy analyst at Citi Futures. 

January natural gas fell 9.6 cents, or 4.8%, to end at $1.894 per million British thermal units after a low at $1.862. Prices dipped to intraday levels not seen since January 2002, and based on the most-active contracts, prices haven’t settled at a level this low since September 2001, according to data from FactSet.

— Barbara Kollmeyer contributed to this article

Thursday, December 10, 2015

Opec oil production accelerates in November

 FILES - The logo of the OPEC (Organization of the Petroleum Exporting Countries) is seen on the eve of an OPEC meeting in Vienna, Austria on December 3, 2013. OPEC gathers in Vienna on December 4, 2015 to decide on whether to trim the cartel's oil output faced with a global supply glut, sliding prices and weak demand growth. AFP PHOTO / ALEXANDER KLEINALEXANDER KLEIN/AFP/Getty Images
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Oil production from Opec countries accelerated in November as an increase in Iraqi output offset a decline from Saudi Arabia, contributing to a steep drop in prices.

The producer group’s monthly oil market report on Thursday said output increased to 31.7m barrels a day last month, up from 31.5m b/d the previous month, according to secondary sources who track member output.
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The data indicate Opec continues to produce far more than its former production target of 30m b/d, which it abandoned last week after a meeting of ministers in Vienna. 

A disagreement over which members should bear the brunt of production cuts to bolster prices — close to seven-year lows at below $40 a barrel — led Opec to do away with even the pretence of maintaining an output ceiling. 

Saudi Arabia, the group’s de facto leader and largest producer, has said it will not cut its own output without contributions from others. The kingdom continued to pump around 10.1m b/d last month. 

According to data given directly to Opec by the kingdom, this figure is slightly higher. The kingdom’s output hit a record 10.6m b/d earlier this year and has far surpassed the 2014 average of 9.7m b/d for much of 2015. 

The cartel’s November increase was led by output from Iraq, which has hit record levels in recent months. 

Iraqi production rose to 4.3m b/d in November from 4.1m b/d the month before as it pumps hard to raise funds to fight Isis and provide some support to its fragile economy. 

Saudi Arabia’s Opec rivals, including Iran and Venezuela, have called on the kingdom to pull back on its production, which they believe is contributing to the oil price weakness.

A slowdown in production growth outside of the cartel — that is expected to sharpen next year — has prompted Opec to raise the demand forecast for the group’s crude for 2016 to 30.8m b/d. This is an increase of 1.5m b/d over the estimated level for 2015. 

Non-Opec supply growth for 2015 was revised lower by 310,000 b/d since the initial forecast and stands at 1m b/d. A downward revision of 200,000 b/d was made for 2016. 

“This has been mainly due to the impact of low oil prices and declining investments in the oil industry,” the group said. 

Despite slower growth, total non-Opec supply was higher in the third quarter than initially forecast. This takes the 2015 estimate to 57.5m b/d, an upward revision of 300,000 b/d. Production outside of the group is expected to stand slightly lower at 57.1m b/d in 2016. 

“Growth is seen coming mainly from Canada and Brazil, with declines also expected in the US, Mexico, Russia, Kazakhstan, the UK and Azerbaijan,” Opec said. 

Total world demand of 93.6m b/d in the third quarter was higher than initially estimated, but the 92.9m b/d estimate for 2015 remains unchanged, as does the 2016 figure of 94.1m b/d.

Wednesday, December 9, 2015

OPEC to monitor developments after no production output set


OPEC members have agreed to closely monitor developments regarding oil production in the coming months after failing to set an output ceiling at its last meeting.

At its 168th meeting in Vienna, Austria, members noted that since the last meeting in June, oil and product stock levels in the OECD have continued to rise. Latest figures see OECD and non-OECD inventories sitting well above the five-year average.

Upon reviewing the oil market outlook for 2015, and the projections for 2016, it was noted that global economic growth is currently at 3.1% in 2015 and is forecast to e4xpand by 3.4% next year. Regarding supply and demand, it was also noted that non-OPEC supply is expected to contract in 2016, while global demand is anticipated to grow again by 1.3 million barrels per day.

Ahead of the meeting on December 4, Wood Mackenzie, an energy intelligence company, said that 2014/15 was characterized by oil supply significantly outstripping demand thus adding to global storage and dramatic capital spending cuts by non-OPEC producers.

Looking ahead, 2016/17 shows a reversal where demand growth outstrips the increases in total world oil supply. This could lead to inventory draws in the second half of 2016 and a moderate price recovery.

Tuesday, December 8, 2015

The Hunt for Fossil Fuel on Anticosti Island

Crude oil storage and capacity have increased in Cushing, Oklahoma and U.S. Gulf Coast

 Energy Information Administration EIA final.jpg

Commercial crude oil inventories in Cushing, Oklahoma (located in Petroleum Administration for Defense District 2) and the U.S. Gulf Coast (PADD 3) totaled a record-high 309.4 million barrels as of the week ending November 27. Based on the recently released storage capacity and line fill data in the September Petroleum Supply Monthly(PSM), EIA estimates 70.2% utilization of working crude oil storage capacity in Cushing and the Gulf Coast on a combined basis, only slightly below the record utilization level of 71.2% set in the week ending April 24 of this year.

Source: U.S. Energy Information Administration / Note: Adjusted inventory equals commercial crude oil inventories less line fill (oil held in pipelines).

The U.S. Gulf Coast region contains 55% of the nation’s crude oil storage capacity, and Cushing contains another 13%. As of the week ending November 27, these two locations contained 67% of the nation’s crude oil inventories. They are also home to most of the growth in crude oil storage capacity over the past four and a half years. Since March 2011, the Gulf Coast and Cushing have accounted for about 85% of the nation’s increase in crude oil storage capacity, growing by 55.7 million barrels and 25.0 million barrels, respectively.

Although storage utilization levels along the Gulf Coast and at Cushing are often assessed separately, their combined utilization is currently most relevant given the increased pipeline capacity to move crude oil south from Cushing to the Gulf Coast during a time of high global crude oil inventory builds. Despite relatively high crude oil inventories and storage capacity utilization, there are still more than 100 million barrels of capacity available in these two areas. More information about the interplay between crude oil storage patterns and financial markets is available in This Week in Petroleum.

Source: U.S. Energy Information Administration

EIA has published net available shell and working crude oil storage capacity data in the March and September PSM releases since September 2010. However, until recently, calculating an effective utilization rate for this capacity was difficult. Simply dividing EIA’s total commercial inventories by working capacity overestimated utilization because the inventory data include some crude oil not stored in tanks, such as that held in pipelines (pipeline fill). As of the March 2015 release, EIA now publishes more granular data indicating estimated pipeline fill, improving the utilization calculation. Total working capacity is often the best measure of total available storage since it excludes tank bottoms and contingency space.

Source: EIA