Monday, June 18, 2018

Exxon Mobil, Plains Partner on Permian Pipeline Project


Exxon Mobil is joining the race to build out pipeline networks that stretch hundreds of miles across Texas to deliver crude oil from the booming Permian Basin to refining and port hubs near Houston.

Exxon Mobil said Tuesday it plans to create a joint venture with Houston's Plains All American Pipeline to construct a multibillion-dollar pipeline stretching from west of Midland to the Houston and Beaumont areas that would carry oil and condensate.

Plains and Oklahoma-based Magellan Midstream Partners recently expanded their BridgeTex oil pipeline, which has served as the major artery from West Texas to the Houston region.

Permian oil production, however, is at a record high and rapidly rising and the lack of pipelines are creating bottlenecks that hamper the pace of growth and create discounts to Permian-produced oil.

Friday, June 15, 2018

All eyes on OPEC’s November meeting

VIENNA, June 2, 2016 (Xinhua) -- Qatari Oil Minister Mohammed bin Saleh al-Sada (C) receives interviews before the 169th meeting of the OPEC conference in Vienna, capital of Austria, on June 2, 2016. (Xinhua/Qian Yi) 

The next OPEC meeting due on 22nd June is shaping up to be one of the more significant gatherings. 
Discussions will centre around whether to maintain production cuts or increase production. Naturally, the tanker market is hoping for production increases, Poten & Partners said in a comment.
Since the current production restrictions came into effect in January, 2017, oil prices have increased from $55 to $80 per barrel for Brent. US Commercial inventories have come down by 100 mill barrels from a peak of 534 mill in April, 2017 to around 436 mill barrels in the first week of June, 2018.
While these two elements seem to indicate that the OPEC cuts have achieved their objective, it remains highly uncertain what OPEC (and non-OPEC participants, like Russia) will ultimately decide to do. The tanker market is holding its collective breath.
A meaningful increase in long-haul flows from some of the key OPEC exporters would go a long way in turning the crude tanker market around, especially since it will impact the physical market, as well as provide a boost to the all-important market psychology.
While the production cutbacks and resulting oil price increases seem to have turned OPEC members finances around, some countries are benefiting more than others.
Revenues declined by an average of 45%, before the cuts. As the largest OPEC producer and exporter, Saudi Arabia suffered the most. The value of the Kingdom’s petroleum exports dropped from $284 bill in 2014 to $153 bill in 2015, so it was no surprise that OPEC decided in 2016 that it needed to curtail production.
This led to a significant recovery in price, which boosted the revenues for all OPEC members. However, the total value of exports remains significantly below the 2013/2014 numbers.
The different OPEC members paths may diverge from here. Sticking to the production agreement may lead to higher oil prices and this will further improve OPEC’s finances. However, the world economy is not immune to higher oil prices and pressure from the US on OPEC is building to increase production.
Unfortunately, while higher prices help all OPEC members (at least in the short term), a production increase will only benefit the countries with spare capacity (ie, mostly Saudi Arabia).
Not surprisingly, Venezuela and Iran would rather keep the production cuts in place, as neither country has much, if any, spare capacity and both are facing US sanctions, which could lead to further reductions in output. Iran’s exports will be facing challenges when sanctions start to bite in November.
What are the possible scenarios for the tanker market? The worst case would be a decision later this month to do nothing, ie continue the production cuts. This will lead to rising prices, as problems in Venezuela continue to mount and many Iranian buyers gradually start to reduce their purchases to avoid US sanctions.
As we move closer to the November cut off, Iranian exports may decline further.
A tightening oil market in combination with rising geopolitical tension could push oil prices to levels where it starts to impact global demand. Rising US oil production is a positive for global oil balances, but, due to a lack of pipeline capacity, US shale producers are facing increasing problems getting their product to (export) markets.
The best-case scenario for the tanker market would be a decision by OPEC to boost output, mainly from producers in the Middle East (Saudi Arabia, UAE, Kuwait). Combined with Iranian sanctions and more floating storage, this could reverse the decline in OPEC-related tonne/mile demand that resulted from the production cuts in 2017.
Falling oil prices may provide an additional boost to tanker demand as it stimulates oil demand growth and stock building. We don’t know what will happen, but we do know what tanker owners are hoping for, Poten concluded.
Some analysts are already predicting a rise in production at next week’s meeting - Ed.

Thursday, June 14, 2018

Venezuela eyes first-ever refining of foreign oil - documents

PdVSA's Amuay refinery complex. The country's falling production has proved a boon - so far - for other producers participating in an output cut deal. Carlos Garcia Rawlins / Reuters 
FILE PHOTO: A general view of the Amuay refinery complex which belongs to the Venezuelan state oil company PDVSA in Punto Fijo, Venezuela November 17, 2016. REUTERS/Carlos Garcia Rawlins/File Photo

HOUSTON (Reuters) - Venezuela is considering producing fuels from foreign crude oil for the first time, according to planning documents seen by Reuters, as the country struggles to meet its obligations despite having the world’s largest crude reserves. 

State-run oil company PDVSA may process up to 57,000 barrels per day (bpd) of foreign crude in June at the country’s largest refinery, according to a monthly refining plan which was viewed by Reuters on Wednesday. The output would help fulfill fuel contracts for Russian, Chinese and other customers and reduce purchases of fuels for domestic use, the documents showed. 

PDVSA did not respond to a request for comment. 

PDVSA has been falling short on fuel exports in recent years due to a lack of lighter crudes to refine, a shortage of spare parts, poor maintenance, and management upheaval at its domestic refining network. PDVSA also lost access in May to inventories produced in Curacao, where it operates the Isla refinery. 

Declining revenue resulting from falling oil production and exports have driven Venezuela into a severe economic recession, and led to a loss of skilled workers, and widespread food and medicine shortages. Some energy experts say further production declines could contribute to a global crude shortfall. 

U.S.-based ConocoPhillips (COP.N) last month seized some of PDVSA’s assets in the Caribbean seeking payment for a $2 billion arbitration award, reducing PDVSA’s ability to deliver fuel and crude exports to Asian customers and regional allies. 

Venezuela, an OPEC member country, has never before imported foreign crude oil for its domestic refineries, although it has blended African, Russian and U.S. crudes with its extra heavy oil to make exportable products. It also has purchased foreign oil for Caribbean refineries and to supply allies, including Cuba. 


In May, the country produced 1.53 million bpd of crude, according to numbers delivered to OPEC, but other sources put the figure at 1.39 million bpd, which would be the lowest monthly output since the 1950s. 

If PDVSA chooses to refine the imported crude, one of two scenarios outlined in documents showing its production, supply and contract requirements, the imports would alleviate a lack of domestic lighter crudes needed at the refineries, which have been running at about a third of their capacity. It could use Russian, Iranian or Angolan crudes, according to the documents. 

“The larger processing of crude would increase our fuel availability. It would also decrease the requirements (to import) of vacuum gasoil and diesel,” said one of the documents prepared in May. 

The alternative, not using imported crude, would mean the shortfall in fulfilling contracts to supply fuel would increase, the document showed. Most of these fuel contracts cover oil-for-loans with Chinese and Russian companies. 

As of June 13, two tankers holding Russian Urals crude were waiting in Venezuelan waters to discharge, according to Thomson Reuters vessel tracking data. One of the two, the Advantage Atom, is waiting near its Amuay refinery. 

FILE PHOTO: A man walks past a gas station with the logos of the Venezuelan state oil company PDVSA in Caracas, Venezuela December 23, 2016. REUTERS/Carlos Garcia Rawlins/File Photo
Venezuela in January started routine imports of Urals crude to supply Cuban refineries, spending nearly $440 million on the purchases for its Caribbean ally. 

The Urals cargoes had been discharged in Curacao for transfer to Cuba, but since Conoco began seizing PDVSA’s Caribbean assets, tankers arriving from Russia have been diverted to Venezuela’s Paraguana Refining Center (CRP), which includes its Amuay and Cardon refineries.


To meet its domestic demands and PDVSA’s fuel supply contracts, Venezuela would have to produce some 850,000 bpd of fuels, the documents show. 

Neither of the June alternatives show it getting close to that level. If PDVSA decides to process the foreign crude, it would produce 606,000 bpd, and less if it does not. 

COP.NNew York Stock Exchange
  • COP.N
From January through March, PDVSA’s refineries supplied 78 percent of the 365,000 bpd of the fuels demanded by Venezuela’s domestic market, which forced the company to import finished products including gasoline and diesel. 

Under the plan excluding foreign oil imports, PDVSA’s domestic refineries this month would work at about 36 percent of their total capacity, or 473,000 bpd of Venezuelan crude, according to the documents, reflecting an acute lack of spare parts and delayed maintenance projects. 

On Wednesday, PDVSA’s 310,000-bpd Cardon refinery restarted a vacuum distillation unit that was waiting for spare parts to be repaired. Last week, the 645,000-Amuay refinery restarted one of its crude distillation units. 

Those repairs are just some of the many still pending, according to the documents. At Venezuela’s smallest refineries, Puerto la Cruz and El Palito, the lack of medium and light crudes has kept several distillation units out of service for months. 

The insufficient fuel production is affecting China’s CNPC [CNPC.UL] and its subsidiaries the most as PDVSA would have to ship 258,000 bpd of fuel oil and jet fuel to these companies for repaying Chinese loans extended to the Venezuelan government in the last decade, but it typically delivers less than 100,000 bpd. 

Russia’s Rosneft (ROSN.MM) this month is entitled to 80,000 bpd of fuel oil, jet fuel and natural gasoline under oil-for-loan contracts, while Cuba and members of Petrocaribe should receive at least 108,000 bpd, according to current contracts. 

Reporting by Marianna Parraga, editing by Diane Craft

It looks like North Korea is coming through with a 'major' denuclearization step for Trump

trump kim singapore

  • US president Donald Trump left experts baffled when he said North Korea had agreed to destroy a missile engine testing site, but it now looks like North Korea is making good.
  • North Korea will reportedly destroy a large-scale facility in Tongchang-ri, North Pyongan Province that was used to test engines for the intercontinental-range ballistic missile, the Hwasong-14.
  • The Hwasong-14 was the first North Korean missile experts said could hit the US mainland with a nuclear payload.
  • Measures like the destruction of testing sites in North Korea, if monitored by US and international experts, could build the kind of trust needed to carry out denuclearization.

US president Donald Trump left experts baffled when he said North Korea had agreed to destroy a missile engine testing site after emerging from his summit with Kim Jong Un, but it now looks like North Korea is making good. 

"They secured the commitment to destroy the missile engine testing site. That was not in your agreement," Trump said in a press conference after the summit, referencing the joint statement which made no mention of concrete steps towards denuclearization. 

"I got that after we signed the agreement. I said do me a favor. You have this missile engine testing site. We know where it is because of the heat. It is incredible the equipment we have to be honest with you. I said can you close it up. He's going to close it up," Trump continued. 

Trump's statement at the press conference confused many and may have even divulged a bit much on the military intelligence side, but now reports of the details of the testing site have surfaced. 

North Korea will destroy a large-scale facility in Tongchang-ri, North Pyongan Province that was used to test engines for the intercontinental-range ballistic missile, the Hwasong-14, according to South Korea's Chosun Ilbo

The Hwasong-14 was the first North Korean missile experts said could hit the US mainland with a nuclear payload.

Diplomacy in action

icbm intercontinental ballistic missile north korea hwasong 14 RTX3A3DK
The Hwasong-14.
KCNA via Reuters
"Kim promised Trump during their summit on Tuesday to dismantle this facility," a diplomatic source said told Chosun Ilbo.

"Kim Jong-un must have won a number of major concessions from Trump in other sectors in return for destroying such a major facility," the source continued.

North Korea did win a number of concessions from Trump, who agreed, also outside of the joint statement, to stop US and South Korean military drills without consulting Seoul first

World leaders have praised the summit as a great step towards peace and reducing tensions. Measures like the destruction of testing sites in North Korea, if monitored by US and international experts, could build the kind of trust needed to carry out earnest denuclearization.

Tuesday, June 12, 2018

Trump to Suspend Military Exercises on Korean Peninsula

US President Donald Trump (R) gestures as he meets with North Korea's leader Kim Jong Un (L) at the start of their historic US-North Korea summit, at the Capella Hotel on Sentosa island in Singapore - Donald Trump and Kim Jong Un have become on June 12 the first sitting US and North Korean leaders to meet, shake hands and negotiate to end a decades-old nuclear stand-off. 

President Trump said Tuesday that he was suspending military exercises on the Korean Peninsula and that he expected the North Korean leader, Kim Jong-un, to move “very quickly” to dismantle his nuclear arsenal after a day of discussions in Singapore.

But Mr. Trump said economic sanctions against North Korea would remain in place.

The summit meeting was the first of its kind between a sitting American president and a leader of North Korea, and it ended in a joint statement that opened the door to ending seven decades of hostility between the two countries.

Mr. Trump said at a news conference that the United States would stop “the war games,” in what appeared to be a concession to the North. Mr. Trump said the exercises were expensive and “very provocative.”

In their joint statement, the United States “committed to provide security guarantees.” In exchange, Mr. Kim “reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.”

Here’s what happened:

• The two leaders first met privately for less than an hour in a one-on-one session with interpreters present, before breaking off for a larger meeting and then a working lunch with aides.

• The leaders signed their joint statement, in which the United States committed to providing guarantees of security to North Korea in exchange for denuclearization.

• “We had a historic meeting and decided to leave the past behind,” Mr. Kim said as he and Mr. Trump signed the joint statement, adding, “The world will see a major change.”

Mr. Trump was similarly optimistic about the progress they achieved, saying, “We are going to take care of a very big and very dangerous problem for the world.”

Monday, June 11, 2018

Trump upbeat ahead of North Korean summit; Kim visits Singapore sites

U.S. President Donald Trump said on Monday his historic summit with North Korean leader Kim Jong Un in Singapore could “work out very nicely” as officials from both countries sought to narrow differences on how to end a nuclear stand-off on the Korean peninsula. 
Kim, one of the world’s most reclusive leaders, made an evening tour of sites on Singapore’s waterfront, on the eve of the summit that is due to get underway on Tuesday morning at a nearby resort island. 

While Trump was optimistic about prospects for the summit between the old foes, U.S. Secretary of State Mike Pompeo injected a note of caution ahead of the first-ever meeting of sitting U.S. and North Korean leaders, saying it remained to be seen whether Kim was sincere about his willingness to denuclearize. 

Officials from the two sides held last-minute talks aimed at laying the groundwork for a meeting that was almost unthinkable just months ago when the two leaders were exchanging insults and threats that raised fears of war. 

But after a flurry of diplomatic overtures eased tension in recent months, the two leaders are now headed for a history-making handshake that U.S. officials hope could eventually lead to the dismantling of a North Korean nuclear program that threatens the United States. 

Offering a preview to reporters, Pompeo said it could provide “an unprecedented opportunity to change the trajectory of our relationship and bring peace and prosperity” to North Korea. 

However, he played down the possibility of a quick breakthrough and said the summit should set the framework for “the hard work that will follow”, insisting that North Korea had to move toward complete, verifiable and irreversible denuclearization.

Friday, June 8, 2018

North American pipelines come under scrutiny

Canadian and US pipelines are a study in contrasts, writes Poten & Partners in a comment piece. 
Recently, the Canadian Government announced that they are buying the Trans Mountain pipeline system and its expansion project from current owner Kinder Morgan for Can$4.5 bill. The expansion project, if it goes ahead, is expected to cost an additional Can$7.4 bill.
This lifeline from the Canadian government became necessary after Kinder Morgan strongly considered pulling out of the project.
Its importance is that it is the only Canadian pipeline that moves domestic crude to the country’s coastline for export.
While its capacity is 300,000 barrels per day, some 221,000 barrels per day is allocated to refineries with connections in British Columbia (BC) and Washington State. Only about 80,000 barrels per day is allocated to the Westridge Terminal in Burnaby, BC (near Vancouver), which is only enough to load one Aframax (the maximum vessel size allowed at this facility) per week.
This is only a trickle when compared to Canada’s oil production which, in March 2018, was a near a record 5.2 mill barrels per day, according to the IEA. Even if the  expansion project goes ahead, tanker exports will remain relatively small.
Looking back to late 2014/early 2015, the outlook for Canadian production and exports was rosy. Several export pipelines were planned and analysts (including Poten & Partners) were forecasting a significant change in tanker trade flows in the 2017/2018 time-frame.
An overview of the North American pipeline proposals updated by the Canadian Association of Petroleum Producers (CAPP) in September, 2014, showed Keystone XL (+830,000 b/d), Energy East (+1,100,000 b/d), Northern Gateway (+525,000 b/d) and the Trans Mountain Expansion (+590,000 b/d).
These projects combined represented more than 3 mill barrels per day of additional pipeline export capacity for Canadian oil producers, all to be completed before 2019. We are now in the middle of 2018 and none of this new capacity has materialised, Poten said.
Northern Gateway and Energy East have been cancelled, the Keystone XL is still mired in legal problems (even though the Trump administration fast-tracked the State Department approval) and the Trans Mountain Expansion is on life-support.
As mentioned, Canada produces about 5.2 mill barrels per day of crude oil (mostly in the Western States) while added to that, Eastern Canadian refiners import another 700-800,000 barrels per day of foreign crude.
Canada only consumes only 2.3 mill barrels per day and almost all of the excess production (around 3.5 mill) currently goes to the US. Since US domestic production is growing rapidly, Canadian crude is facing more competition and the discount to international benchmark prices at which Canada is selling its crude to the US is significant.
This costs Canadian producers an estimated Can$15.6 bill a year. Building some of the proposed export pipelines would have gone a long way to solving this problem, Poten said.
Today, the contrast between Canada and the US is particularly stark. One analyst commented recently: “In Canada, new pipelines are met with red tape. In Texas, they are met with a red carpet.”
While Canadian pipelines are struggling, the opposite situation exists in the south of the US. As a result of the shale boom, in particular in the Permian Basin in Texas, pipeline operators are planning more than 3 mill barrels per day of additional capacity, with 1 mill barrels per day already under construction.
Oil is a global commodity and through the pricing mechanism, it will find a way to get to market. If it cannot be exported directly to Asia or Europe, Canadian crude will continue to move south of the border.
Some of it may even be transported to the US Gulf coast and exported to Asia, Poten concluded.

Venezuela close to declaring force majeure on crude exports


Venezuela could be about to declare force majeure on contracts with some of its major crude buyers.
This is due to falling output from its oil fields and tanker bottlenecks at its ports, according to a Reuters report.
There were more than 70 tankers off the coast of Venezuela earlier this week, according to Thomson Reuters vessel tracking data.
State-owned oil company PDVSA was believed to have told some customers that vessels should be equipped for ship-to-ship cargo transfers instead of loading at jetties in ports. If they do not accept this, PDVSA will consider declaring force majeure, sources told Reuters.
It was later reported that PDVSA has completed the first ship-to-ship (STS) transfer involving the Suezmax ‘Sonangol Kalandula’, which was believed bound for Tipco Asphalt's refinery in Kemaman, Malaysia.
According to the Reuters data, the vessel has not yet sailed and has been waiting since February to load Venezuelan Boscan heavy crude.
PDVSA had separately begun to notify all of its customers that it will no longer receive tankers for loading at Jose or Paraguana, its main export terminals, until ships already waiting are loaded.
Most customers have so far refused the ship-to-ship transfer request, due to the lack of  third party supervision for the operations, according to shippers and traders. Additional costs for completing the transfer have also contributed to the refusals.
PDVSA has been using sanctions imposed on the company by the US as a rationale for the change, according to one source.
Venezuela's export terminals have become congested as last month, US oil major ConocoPhillips won a court orders freezing PDVSA's key Caribbean assets, from where the Venezuelan company used to ship large cargoes to Asia.
Traders and shippers were sceptical that the transfers would succeed in easing the bottlenecks, as PDVSA will still have to load vessels at Jose to ship the cargo to the proposed offshore transfer sites, and production declines are not expected to ease.
Venezuela's crude exports declined by 28% in the first four months of this year to 1.19 mill barrels per day, compared with 1.65 mill barrels per day in the same period last year, according to Reuters trade flows data.
In January to April, crude output fell to 1.62 mill barrels per day, the lowest annual average in over three decades.
As mentioned above, aggravating the export problems, last month ConocoPhillips started to seize PDVSA's terminals, oil inventories and cargoes in the Caribbean to enforce a $2 bill arbitration award in a dispute over the socialist government's nationalisation of the US oil major's Venezuelan assets.

Thursday, June 7, 2018

CryptoMarket360 is your one-stop shop for cryptocurrency information.


Long-standing thought-leader and blogger “The Crypto Curator” merges with currency news platform CryptoMarket360

Establishing a Comprehensive Bitcoin, Altcoin and digital currency knowledge base and curation platform and announced today they are joining forces to create a unified cryptocurrency curation platform that is slated to release multiple products to address market demands, and aimed at helping subscribers develop a unique view of the world’s landscape through the lens of Crypto and Blockchain technology. 

CM360 will consist of, but not limited to, a daily briefing (CM360B), designed for the busy person who needs a clean cut of the most impactful news of the day. The CM360 readers are those who desire a 360 degree look at the market each day.A weekly recap (CM360R), designed for the casual reader that isn’t concerned with the daily action but still desires to be in the know.  

A robust database (CM360D), designed for those who want to dig deeper and analyze, uncover trends, and find statistical information. 

Live Reports (CM360L), designed to provide ongoing live updates on specific topics, companies, people, etc. Instead of getting a one time report which in the world of Crypto is dated the moment it is published, CM360 Live will be updated constantly. 

It is our belief and we’ve received empirical validation from market leaders that this platform will be instrumental for those who are interested in the world of Crypto and Blockchain Technology.

CryptoMarket360 was created by Alan Percal, a credentialed actuary and WSOP champion, with a long history of entrepreneurship, and The Crypto Curator was created by Paul McNeal, who have been involved with Crypto since 2011, a former United States Navy Veteran, Serial Entrepreneur, and Young Entrepreneur Mentor.

Alan Percal 

Alan Percal, ASA, MAAA / Co-Founder and CEO 

Alan Percal, creator of CryptoMarket360, said, “I believe crypto currencies and related blockchain projects are still very much so in their infancy. I became involved with the crypto media sphere in order to boil down the oftentimes complex crypto news so that the everyday, non-technical person could stay informed. I’m excited to be partnering up with Paul to provide an even more robust platform in which we can deliver content to casual investors as well as high tech companies.” 

Alan Percal is a credentialed actuary and WSOP champion. He spent his first three post-collegiate years working at a Fortune 100 company and has since developed an extensive background in entrepreneurship and tech startups. Alan stumbled into the crypto world early on and is now working hard to bring value to the next wave of digital asset adopters.


Co-Founder and President

Paul McNeal, creator of The Crypto Curator, said, “I spent nearly a decade providing curated news information to Fortune 500 C-Suite Executives and leaders on Capitol Hill, if there is one thing I learned is that you need to pay attention to the news because there is much you can monitor and discover to help you take action.”

Paul McNeal is a seasoned serial entrepreneur and Veteran of the United States Navy Submarine Force. He spent 8 years building an information curation company that served Congress and Fortune 500 companies. Paul became aware of Bitcoin back in 2011 and immediately knew this was the future and that he must help others become aware as well.

The two have determined to remain with the CryptoMarket360 branding due to the brand awareness that exists in the current market.


Oil Boom Bottlenecks Are Costing U.S. Investors $1 Billion a Day

  • Permian woes drill stocks for Parsley, Pioneer, Concho
  • Diverse drillers, refiners are beneficiaries in pipe shortage
More than $1 billion a day. That’s the price tag for a Permian Basin pipeline crunch that’s increasingly affecting investors as much as it is West Texas oil drillers.

Eight of the top explorers focused on the booming U.S. shale region have lost $15.6 billion in combined market value in about two weeks, as shipping constraints devour the profit they can fetch for a barrel of crude. Parsley Energy Inc. shares have wilted 16 percent in that time; Diamondback Energy Inc. has been defanged, down 18 percent.

Even as production soars, dwindling pipeline space and a rail and trucking shortage have raised shipping costs, boosting the discount Permian producers take to offload their oil. The bottleneck benefits refiners who can buy cheaper crude and pipeline owners with extra space, but it’s dragging down explorers.

“You just don’t want to touch these Permian names," said Gabriele Sorbara, a Williams Capital Group analyst in New York. "They are falling off a cliff."
Relief may not come until 2020, when new pipelines are expected to be up and running. For now, here’s a rundown of winners and losers amid the space crunch:

Permian Explorers

Being a “pure-play" shale producer, even a Permian stalwart, is no longer the ticket to success for energy equities.

Since May 21, the price of benchmark West Texas Intermediate crude has fallen about 10 percent and companies focused primarily on the Permian have been shunned. The hardest fall: Concho Resources Inc, which had lost $4.1 billion off its market capitalization as of Tuesday.

As of Wednesday, oil in Midland, Texas, was trading for about $19 a barrel below Brent crude, the global benchmark price.

Even Pioneer Natural Resources Co., with relatively strong finances and secure pipeline contracts, has been swept up, Williams Capital’s Sorbara said by telephone. It’s lost $3.2 billion in market value, or 9 percent, since May 21.

While the shortages are real, he deems much of the market selloff “overblown," since even discounted Permian crude is selling for well above where many producers set their budgets earlier this year.

Diverse Portfolios

Investors, though, are fleeing to the relative safety of larger names with more diverse portfolios such as Occidental Petroleum Corp., whose shares are flat over the past couple weeks. The Permian’s biggest oil producer also pumps in the Middle East and Colombia, with roughly 40 percent of its output this year based on higher international crude pricing, Capital One Securities said in an analyst note.

The company also operates pipelines and a Gulf Coast export terminal that will benefit from cheaper U.S. crude prices. “The largest companies or companies with diverse portfolios can rotate capital around,” Sorbara said. “If you’re a pure play, the only thing you can do is step on the brakes.”

Inland Refiners

With bottlenecks between the Permian and major Gulf Coast refiners, operators in other parts of the country served by less congested pipelines have a relative advantage, analysts say.

That includes Delek US Holdings Inc., CVR Refining LP and HollyFrontier Corp. -- with refineries in New Mexico, Arkansas and northeastern Texas, among other locations, according to Barclays Plc. Delek gets about 78 percent of its crude from the Permian, HollyFrontier gets 39 percent and CVR gets 14 percent, the bank said in a June 5 analyst report.

Delek shares have climbed 7.5 percent in the past two weeks while CVR is up 3.3 percent and HollyFrontier is up 1 percent.

"Simply put, we think U.S. refiners win big with lower input costs," analysts including Justin Jenkins at Raymond James & Associates said in a June 4 note.

Pipeline Demand

Enterprise Products Partners LP and Magellan Midstream Partners LP also stand to benefit from the blow out in Midland prices as they own crucial pipelines in the Permian and dock space on the Gulf used for exports -- and have plans to add more.

“The very idea of congestion is beneficial," said Sandy Fielden, director of oil research at Chicago-based Morningstar Inc. “If I’m going to pitch my new pipeline or expand my pipeline, and I’m going to hold my open season, I can expect to see a full crowd there anxious to sign up quickly."

Enterprise started full service in April on its 416-mile Midland-to-Sealy pipeline, which can carry some 575,000 barrels per day of crude from the heart of the Permian to key export facilities in Houston. They also own the lion’s share of crude storage tanks and docks along the Gulf.

Magellan operates and owns part of the 400,000 barrel-a-day BridgeTex pipeline, transporting oil from the Permian to Corpus Christi, Texas. That route is scheduled for expansion in early 2019 because of added interest. The company said last month that almost all existing customers on its Longhorn pipeline, connecting the Permian to Houston, have renewed their contracts for two years.

— With assistance by Catherine Ngai

Wednesday, June 6, 2018

Oil prices move higher as Venezuela supply crisis intensifies

President Nicolas Maduro together with Socialist Party Vice-President Diosdado Cabello (R) next to a portrait of Hugo Chávez. (Jorge Silva / Reuters) 
Nicolas Maduro together with Socialist Party Vice-President Diosdado Cabello (R) next to a portrait of Hugo Chávez. 

Oil prices moved a leg higher on Wednesday, extending the prior day’s gains after reports Venezuela may not deliver some of its contracted crude oil exports amid political upheaval. 

Production and exports in Venezuela have recently been hit hard by political instability. That in turn has limited global supply, helping the Organization of the Petroleum Exporting Countries hit its target for reduced output faster than expected. 

Venezuela’s state-owned PDVSA is now reportedly considering declaring force majeure on some contracts with crude oil buyers, essentially declaring they cannot be fulfilled as output from its oil fields has tanked and bottlenecks are slowing down exports at the ports. 

“As things stand, the situation is clearly reaching crisis point and has left the embattled Latin American producer staring into the abyss. The end game for Venezuela’s oil troubles is fast approaching, and when it does, price fireworks will be the order of the day,” said Stephen Brennock, oil analyst at ‎PVM Oil Associates, in a note. 

West Texas Intermediate crude CLN8, -0.99%  for July rose 11 cents, or 0.2%, to $65.62 a barrel, adding to a 1.2% gain from Tuesday that ended a three-session skid. August Brent crude LCOQ8, -0.36%  , the global oil benchmark, added 52 cents, or 0.7%, to $75.90 a barrel. 

Concerns about the Venezuelan supply drop, and about potential export disruption in Iran, have sparked speculation that oil demand will significantly outstrip supply and create a spike in prices. 

The threatened shortfall has added pressure on OPEC and its partners, led by Russia, to increase production targets when they gather for a meeting in Vienna on June 22-23. In an unusual demand, the U.S. government has reportedly asked OPEC kingpin Saudi Arabia and other cartel members to increase their oil flow by around 1 million barrels a day, to keep a lid on rising oil prices. 

Reuters reported in late May that the major oil producers were considering increasing output by 1 million barrels to plug the gap from Venezuela. That sparked a selloff in the oil market, with Brent losing sight of the $80 handle and WTI moving back below $65 a barrel. 

However, traders shouldn’t be so discouraged by the prospect of a rise in OPEC production, according to Jeff Currie, head of commodities research at Goldman Sachs. 

“Everybody is all bearish about the recent announcement of a million barrels per day extra supply, but the market needed it. It not only needs it, it is mandatory. Otherwise you just drive the bus off a cliff,” he said at the S&P Global Platts’ annual crude oil summit in London on Tuesday.

On Wednesday, traders were also waiting for the weekly supply data from the U.S. Energy Information Administration, due for release at 10:30 a.m. Eastern Time. 

In other energy products on Wednesday, July gasoline RBN8, -1.61%  climbed 0.3% to $2.11 a gallon, while heating oil for the same month HON8, -0.59%  added 0.7% to $2.16 a gallon. 

Natural gas for July NGN18, -0.21%  rose 0.5% to $2.90 per million British thermal units.

Tuesday, June 5, 2018

U.S. to ask OPEC for 1 million barrel a day output hike

Donald Trump and Steven Mnuchin are pictured. | AP Photo

The U.S. government has quietly asked Saudi Arabia and some other OPEC producers to increase oil production by about 1 million barrels a day, according to people familiar with the matter.

The rare request came after U.S. retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about OPEC policy and rising oil prices on Twitter. It also follows Washington’s decision to reimpose sanctions on Iran’s crude exports that had previously displaced about 1 million barrels a day, or just over 1 percent of global production.

While U.S. lawmakers have habitually criticized the Organization of Petroleum Exporting Countries at times of high oil prices, and the government has on occasion encouraged the cartel to pump more, it’s unusual for Washington to ask for a specific output hike, the same people said, asking not to be named discussing private conversations. It’s not clear precisely how the request was communicated.

The American request was debated at a meeting of some Arab oil ministers over the weekend in Kuwait City, the people said. A statement published after the talks pledged to “ensure stable oil supplies are made available in a timely manner to meet growing demand and offset declines in some parts of the world.” Saudi Arabia and Russia last month proposed a gradual production increase, although other members of the group have yet to agree.

Benchmark Brent oil futures dropped as much as 1.5 percent to $74.16 a barrel in London trading after the U.S. request was reported.

"Looks like OPEC is at it again," Trump wrote in mid-April in a post on Twitter. "Oil prices are artificially Very High! No good and will not be accepted!"

The White House declined to comment on specific conversations, but a spokesperson for the U.S. National Security Council said access to affordable and reliable energy underpins global economic growth and the nation’s security.

"We welcome any market-based action that increases energy access and fosters a healthy global economy," the spokesperson said.

U.S. Treasury Secretary Steven Mnuchin last month disclosed Washington had "various conversations with various parties about different parties that would be willing to increase oil supply to offset" the impact of U.S. sanctions on Iranian oil output.

Although Mnuchin declined to provide specifics, only four countries among OPEC and its allies hold enough spare production capacity to offset that impact: Saudi Arabia, Russia, the United Arab Emirates and Kuwait.

OPEC and a group of non-OPEC countries including Russia, Mexico and Kazakhstan agreed in late 2016 to cut oil output by a combined 1.8 million barrels a day in an effort to boost oil prices. Brent crude, the global benchmark, has risen from less than $45 a barrel before the deal was signed to more than $80 a barrel last month.

Consumer Anxiety

The OPEC deal removed more crude than originally intended from the market because of the collapse of the Venezuelan energy industry. With oil inventories in developed countries back to their five-year average and fuel prices approaching painful levels for consumers, Saudi Arabia and Russia have started talking about boosting output again, prompting Brent to slide back toward $75.

OPEC and its allies will discuss their production policy for the second half of the year in meetings scheduled on June 22 and 23 in Vienna. Saudi Oil Minister Khalid Al-Falih last month said the kingdom shared the "anxiety" of consuming nations about high oil prices and added that OPEC and its allies were "likely" to boost output.

The most recent comments by Trump and the request for extra oil are among the most forceful U.S. intervention in OPEC affairs since Bill Richardson, the energy secretary during the second administration of Bill Clinton, phoned the Saudi minister in the middle of an OPEC meeting in 2000 asking for a production increase. The intervention enraged other members of the cartel, exacerbating a schism between Saudi Arabia and Iran.

--With assistance from Javier Blas.

©2018 Bloomberg L.P.

Monday, June 4, 2018

Oil slips as U.S. supply grows, OPEC mulls higher output

Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma, U.S., March 24, 2016. REUTERS/Nick Oxford/File Photo 

Oil prices slipped on Monday as U.S. production hit a record high and OPEC members considered boosting supply.

Benchmark Brent crude oil lost $1.26 a barrel, or 1.6 percent, reaching a low of $75.53 before recovering to $76.29, down 50 cents, by 1330 GMT.

U.S. light crude was unchanged at 65.81 a barrel. The U.S. contract lost about 3 percent last week after a decline of nearly 5 percent the previous week.

"A sea of red is washing over the energy complex as rising U.S. production coupled with a looming relaxation in OPEC-led cuts sends bulls scurrying for the exits," said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

U.S. crude production climbed in March to 10.47 million barrels per day (bpd), a monthly record, data from the Energy Information Administration showed last week.

U.S. drillers added two oil rigs in the week to June 1, bringing the total to 861, the most since March 2015, energy services company Baker Hughes said on Friday. That was the eighth time drillers have added rigs in the past nine weeks.

Arab oil ministers agreed over the weekend on the need for continued cooperation between members of the Organization of the Petroleum Exporting Countries (OPEC) and other big producers to balance global supply, Kuwait's state news agency KUNA reported on Sunday.

OPEC ministers from Saudi Arabia, the United Arab Emirates, Kuwait and Algeria, along with their counterpart from non-OPEC Oman, met unofficially in Kuwait on Saturday.

OPEC meets formally on June 22 to set oil policy. It is expected to agree to raise output to cool the market amid worries over Iranian and Venezuelan supply and after Washington raised concerns that the oil rally was going too far, OPEC sources familiar with the discussions told Reuters last month. 

Saudi Arabia, the effective OPEC leader, and Russia have discussed boosting output to compensate for supply losses from Venezuela and to address concerns about the impact of U.S. sanctions on Iranian output.

Russia's largest oil producer, Rosneft , will be able to restore 70,000 bpd of oil output in only two days if global production limits are lifted, Renaissance Capital wrote in a client note.

Hedge funds and other money managers have cut their bullish wagers on U.S. crude futures and options, according to data released on Friday, as oil prices slumped on oversupply fears.

(Additional reporting by Naveen Thukral in Singapore; Editing by David Goodman and Mark Potter)

Friday, June 1, 2018

IMO takes autonomous ships on board


The IMO has started work on how safe, secure and environmentally sound maritime autonomous surface ships (MASS) operations may be addressed the organisations instruments.
The Maritime Safety Committee (MSC) recently endorsed a framework for a regulatory scoping exercise, as work in progress, including preliminary definitions of MASS and degrees of autonomy, as well as a methodology for conducting the exercise and a work plan.

For the purpose of the regulatory scoping exercise, MASS is defined as a ship which, to a varying degree, can operate independently of human interaction.

To facilitate its progress, the degrees of autonomy were organised (non-hierarchically) as follows - it was noted that MASS could be operating at one or more degrees of autonomy for the duration of a single voyage:

•             Ship with automated processes and decision support: Seafarers are on board to operate and control shipboard systems and functions. Some operations may be automated.
•             Remotely controlled ship with seafarers on board: The ship is controlled and operated from another location, but seafarers are on board.
•             Remotely controlled ship without seafarers on board: The ship is controlled and operated from another location. There are no seafarers on board.
•             Fully autonomous ship: The operating system of the ship is able to make decisions and determine actions by itself.

The first step involves a correspondence group, which will identify current provisions in an agreed list of IMO instruments and assess how they may or may not be applicable to ships with varying degrees of autonomy and/or whether they may preclude MASS operations.

A second step will include an analysis conducted to determine the most appropriate way of addressing MASS operations, taking into account, inter alia, the human element, technology and operational factors.

IMO’s MSC, which met for its 99th session (16th-25th May), established the MASS correspondence group to test the framework of the regulatory scoping exercise agreed and, in particular, the methodology, and will report back to MSC100 (3rd-7th December, 2018).  

The group will test the methodology by conducting an initial assessment of SOLAS regulation III/17-1 (recovery of persons from the water), which requires all ships to have ship-specific plans and procedures for recovery of persons from the water; SOLAS regulation V/19.2 (carriage requirements for carriage of shipborne navigational equipment and systems); and Load Lines regulation 10 (information to be supplied to the Master).

If time allows, it will also consider SOLAS regulations II-1/3-4 (emergency towing arrangements and procedures) and V/22 (navigation bridge visibility).

The committee also asked for proposals from member states and international organisations relating to the development of interim guidelines for MASS trials to be ready for MSC100.

The list of instruments to be covered in the MSC’s exercise includes safety (SOLAS); collision regulations (COLREG); loading and stability (Load Lines); training of seafarers and fishers (STCW, STCW-F); search and rescue (SAR); tonnage measurement (Tonnage Convention); and special trade passenger ship instruments (SPACE STP, STP).

Speaking at the opening of MSC99, IMO secretary general, Kitack Lim, highlighted the importance of remaining flexible to accommodate new technologies, and so improve shipping’s efficiency, “while at the same time keeping in mind the role of the human element and the need to maintain safe navigation, further reducing the number of marine casualties and incidents.”