1. business and industrial
2. energy
3. oil

INSIDE OIL
Tuesday, February 3, 2015
Futures (Front month)
Price
Net Change Pct change
Asia Cash Prices
Price
Net Change Differential
Diff Change
NYMEX light crude
$49.57
$1.33
2.7%
Dubai Crude
$49.10
$3.80
2.37
$0.94
NYMEX RBOB gasoline
$1.5446
$0.1294
8.4%
Tokyo Naphtha (Ts)
$480.50
$25.50
6.50
-$1.00
NYMEX heating oil
$1.7575
$0.0712
4.1%
Gasoline (92 RON)
$58.70
$2.90
7.49
$0.07
ICE Brent crude
$54.75
$1.76
3.2%
Diesel (0.5 pct)
$62.31
$2.40
-1.20
-$0.05
ICE gas oil
$512.25
$34.00
6.6%
Jet-Kerosene
$66.28
$2.72
-0.05
-$0.02
Fuel Oil (180 cst)
$299.95
$14.45
3.14
$1.08
Fuel Oil (380 cst)
$287.08
$13.66
0.75
-$0.05
DME Oman crude
NYMEX Natgas
$52.75
$2.680
$6.77
-$0.011
12.8%
-0.4%
CHART OF THE DAY
Click on the chart for full-size image
OIL ANALYTICS:JAN CRUDE OIL FLOWS
ASSESSMENT; 18.3-18.5 MILLION MT
India weekly: Jan arrivals higher on month at 18.3-18.5 mln mt
Thomson Reuters Oil Research and Forecasts have projected January
seaborne crude arrivals into India at 18.3-18.5 million metric tonnes
(mt), up 9.15% from December imports at 16.73 million mt and 17.8%
higher on-years as refines raised their imports to take advantage of the
current dip in crude prices while at the same time ramp up their diesel
production. To read more click here
TODAY’S MARKETS
MARKET NEWS
 Greece outlines debt "menu" in bid to win over sceptical
Euro zone
 Shell, union resume contact on second day of refinery
strike
 OPEC delegates cautious over oil-price rebound
 Shell plans to start North Sea Brent platform
decommissioning
 Nascent U.S. oil export boom stalled by topsy-turvy
market
 Fed loan survey cites worries in oil and gas sector
 Pacific Rubiales says impossible to predict Colombia
LNG start-up
 MDU resources says oil unit sale won't be this year
BEYOND THE HEADLINES
 COLUMN-Oil prices jolted as falling rigs wrong-foot
bears
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE
OIL: Oil opened firmly in Asian trading after clocking up gains of 11
percent in the prior two sessions, but prices began coming off their best
on persistent worries over China's demand outlook. Some investors are
betting that a bottom had formed to the seven-month long rout on the
market even as others remained pessimistic.
FOREX: The Canadian dollar and Norwegian crown held onto solid
gains early, having rallied on a further rebound in oil prices which also
led other commodity currencies higher as well. With the U.S. dollar
sidelined for the moment against the yen and euro, it was time for
beaten-down currencies to regain some ground. The Canadian dollar
rallied to C$1.2557 per USD, well off a near six-year low of C$1.2800.
GLOBAL MARKETS: Asian stocks gained as hopes for an agreement
on Greece's debt situation lifted risk appetite, while a sharp rebound in
oil prices boosted commodity currencies such as the Canadian dollar
and Norwegian crown. MSCI's broadest index of Asia-Pacific shares
outside Japan rose 0.2 percent. Japan's Nikkei gained 0.3 percent and
Australian shares were up 0.7 percent.
EVENTS TO WATCH TODAY (GMT)
 EURO ZONE PRODUCER PRICES DEC (1000)
 U.S. ISM-NEW YORK INDEX JAN (1445)
 U.S. FACTORY ORDERS DEC (1500)
 U.S. IBD ECONOMIC OPTIMISM FEB (1500)
CLICK HERE FOR TECHNICAL CHARTS
INSIDE OIL
February 3, 2015
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE (1630 UKT)
ICE BRENT FUTURES FORWARD
ICE Brent Fut. Fwd Curve
1M 2M
3M
4M
DUBAI SWAPS FORWARD CURVE
Dubai Swaps Fwd Curve
1M - 1Y 1M
Yield
63.32
63.00
5M
6M
7M
8M
9M
10M
60.00
57.00
57.00
54.00
54.00
.12
51.00
.12
1M 2M
1Y 1M
FO180 FOB CARGO SG FWD CURVE
FO180 FOB Cargo SG Fwd Curve
1M - 1Y 1M
Yield
60.22
60.00
3M
4M
5M
6M
7M
8M
9M
10M
1Y 1M
FO3.5% BARGES ARA FORWARD CURVE
1M - 1M
Yield
330.75
330.00
FO3.5% Barges ARA Fwd Curve
1M - 1Y 1M
Yield
301.75
300.00
290.00
320.00
280.00
310.00
270.00
.12
.12
1M
1M 2M
FO380 FOB CARGO SG FORWARD CURVE
FO380 FOB Cargo SG Fwd Curve
1M - 1Y 1M
Yield
323.25
320.00
5M
6M
7M
8M
9M
10M
6M
7M
8M
9M
10M
1Y 1M
1M - 1M
Yield
504.75
500.00
490.00
480.00
.12
4M
5M
Naphtha CFR Japan Fwd Curve
300.00
3M
4M
NAPHTHA CFR JAPAN FORWARD CURVE
310.00
1M 2M
3M
.12
1Y 1M
1M
2
INSIDE OIL
February 3, 2015
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE (1630 UKT)
NAPHTHA CIF NWE FORWARD CURVE
Naphtha CIF NWE Fwd Curve
NAPHTHA FOB SG FWD CURVE
1M - 1Y 1M
Yield
481.25
480.00
Naphtha FOB SG Fwd Curve
2M - 3M
Yield
55.25
55.00
54.00
470.00
53.00
460.00
52.00
.12
1M 2M
3M
4M
5M
6M
7M
8M
9M
10M
.12
1Y 1M
2M
ICE GO FUT. FWD CURVE
ICE GO Fut. Fwd Curve
3M
GO FOB CARGO SG FORWARD CURVE
1M - 1M
Yield
562.00
560.00
GO FOB Cargo SG Fwd Curve
550.00
540.00
70.00
530.00
68.00
520.00
510.00
.12
.12
66.00
1M
2M
JET FUEL FOB CARGO SG FWD CURVE
Jet Fuel FOB Cargo SG Fwd Curve
2M - 3M
Yield
72.85
72.00
2M - 2M
Yield
74.05
74.00
72.00
70.00
.12
2M
3
3M
INSIDE OIL
February 3, 2015
MARKET NEWS
Greece outlines debt "menu" in bid to win over sceptical
Euro zone
Shell, union resume contact on second day of refinery
strike
Greece's new government dropped calls for a write-off of its
foreign debt and proposed ending a standoff with its official
creditors by swapping the debt for growth-linked bonds on Monday, a week after its election on an anti-austerity platform.
Finance Minister Yanis Varoufakis, in London to reassure private investors that he was not seeking a showdown with Brussels over a new debt agreement, said the new left-wing government would spare privately held bonds from losses, a source
told Reuters.
The reported proposals, which included a pledge to reform the
Greek economy, contrast sharply with the government's strident
vows in Athens last week to ditch the tough austerity conditions
imposed under its existing bailout.
Late on Monday, Varoufakis issued a statement saying that
comments of his to financial investors had been misinterpreted.
He gave no details but he was widely reported in Greek media
to be backing down from the government's aim of reducing the
debt.
Royal Dutch Shell Plc said late on Monday it resumed contact
with the union representing workers at U.S. refineries as a strike
stretched into a second day after talks on a new national contract broke down.
Walkouts called on Sunday at nine plants with a combined 10
percent of U.S. refining capacity were the first since 1980 in
support of a nationwide pact that would cover 63 refineries.
Contract talks broke down on Sunday with workers asking for
higher wages against a backdrop of crude prices that have
plunged nearly 60 percent since June, prompting oil companies
to cut spending.
"Representatives from Shell and the United Steelworkers union
(USW) resumed communications on Monday in hopes of coming to a mutually satisfactory contract agreement," said Shell
spokesman Ray Fisher.
OPEC delegates cautious over oil-price rebound
Oil Company Shell intends to start a 10-year process to dismantle and remove one of Britain's oldest and biggest oil platforms,
Brent Delta, the company said on Tuesday.
Britain's North Sea basin is one of the most mature oil and gas
production areas in the world and many of its oldest fields are
approaching the end of their operational life.
Decommissioning about 500 offshore installations and 10,000
kilometres of pipelines is expected to cost 10.4 billion pounds
($15.7 billion) by 2022, according to industry estimates.
Shell has submitted plans to the government to start the decommissioning process of its old Brent platforms, starting with the
removal of the above-water topside at Brent Delta, the company
said on Tuesday.
Shell plans to
decommissioning
Oil prices may stay depressed until summer due to weak seasonal demand even as Saudi Arabia's strategy of curbing the
output growth of rival producers might have started achieving
tangible results, OPEC delegates told Reuters.
Delegates from the Organization of the Petroleum Exporting
Countries and external experts are meeting at OPEC's Vienna
headquarters this week to discuss the producer group's longterm strategy. Such meetings do not set output policy.
The talks arise as data from the United States showed a record
drop in drilling rigs, prompting oil prices to jump above $50 a
barrel on Friday as traders said they saw it as a sign that
OPEC's strategy was taking a toll on the U.S. shale boom.
start
North
Sea
Brent
platform
Fed loan survey cites worries in oil and gas sector
Nascent U.S. oil export boom stalled by topsy-turvy market
Banks that tightened lending standards in the United States
cited concerns about the oil and gas sector, according to a
quarterly survey of loan officers conducted by the Federal Reserve.
The survey respondents reported little change in standards on
commercial and industrial (C&I) loans, and also said modest
fractions of large banks experienced stronger demand for auto
and credit card loans.
The Fed survey covered the last quarter of 2014, and included
the responses of 73 domestic banks and 23 U.S. branches and
agencies of foreign banks.
Though the loan officers reported lending conditions as largely
unchanged, banks that did tighten conditions cited concerns
about specific industries, particularly those in the energy sector,
given the steep drop in oil prices.
Just as the Obama administration is starting to pull down barriers to exporting an abundance of U.S. shale oil, the topsy-turvy
global oil markets have thrown up new ones.
The stunning 60 percent collapse in oil prices since last summer has upended the relationship between regional markets,
briefly pushing U.S. benchmark prices above those for global
Brent crude - and effectively closing the arbitrage for exporting
processed condensate just as U.S. export regulators began
giving some firms the green light to press ahead.
For the moment, that's proving to be a less profitable prospect
than many expected. Enterprise Products Partners, which had
gained a jump on rivals with export clearance last summer,
failed to award a one-year tender to sell processed condensate
after a round of low bids, U.S. and Asian trade sources said last
week.
4
INSIDE OIL
February 3, 2015
MARKET NEWS
MDU resources says oil unit sale won't be this year
Pacific Rubiales says impossible to predict Colombia LNG
start-up
MDU Resources Group Inc said on Monday it would wait until
2016 at the earliest to try and sell its North Dakota oil production
division, citing low crude prices.
MDU, a conglomerate that also owns a construction company
as wells as a utility that provides much of North Dakota's electricity, had previously tried to sell its Fidelity Exploration and
Production division arm before postponing the sale last month.
Crude oil prices have dropped sharply in recent months due to
global oversupply, making the business far less profitable than
even a year prior. A sale of any oil or natural gas asset now
would likely come at a firesale price.
Pacific Rubiales, forced by low oil prices to delay the start-up
of its Colombia liquefied natural gas (LNG) plant, said it was
impossible to predict when exports would begin, but it was
working with buyer Gazprom on alternative options.
"The significant drop in oil prices has meant that we have had
to reconsider all of our capital expenditures," Peter Volk, General Counsel at Pacific Rubiales, told Reuters.
Under a deal signed last year, Gazprom was contracted to receive half a million tonnes of LNG per annum over four years
from the Colombian project.
BEYOND THE HEADLINES
lion barrels per day in the week ending Jan. 23, according to the
latest edition of the Energy Information Administration’s (EIA)
Weekly Petroleum Status Report.
COLUMN-Oil prices jolted as falling rigs wrong-foot bears
(John Kemp is a Reuters market analyst. The views expressed
are his own)
Goldman Sachs President Gary Cohn said in an interview with
CNBC last week oil prices could go as low as $30 per barrel.
Cohn’s bearishness is typical of many oil analysts and hedge
funds.
By John Kemp
Oil prices surged 8 percent on Friday as the market digested
news another 94 rigs previously drilling for oil in the United
States had been idled over the previous week.
The problem with this view is that it is inherently backwardlooking. Current production is a lagging indicator - unlike rig
counts which are a leading indicator. Focusing on current output
numbers rather than rig counts is a bit like driving using the rear
-view mirror to navigate the road ahead.
It was the largest number of rigs de-activated in a single week
since at least 1987 and triggered the biggest one-day percentage increase in Brent prices since 2009.
In practice, no one knows how much oil is being produced in the
United States at the moment. Production data is collected by
the states from reports filed by well operators, but there is normally a lag of several months while the reports come in, and
only then are they compiled and shared with federal statisticians.
Yet there was nothing remotely surprising about either the continued fall in the rig count - or the volatile market reaction.
The number of rigs drilling for oil has now fallen 24 percent from
1,609 to just 1,223 since early October, according to oilfield
services company Baker Hughes
North Dakota, for example, has provisional production data for
November 2014 based on returns from some but not all wells,
and it is likely to be substantially revised as the last records are
filed. Provisional production data for December will not be published until the middle of February and January’s numbers will
not be available until mid-March.
But large declines had been reported in each of the previous
seven weeks. Several prominent forecasters have predicted the
oil-directed rig count will fall below 1,000 by the end of the first
quarter.
Continental Resources, one of the largest drillers in North Dakota’s Bakken shale, promised late last year it would cut the
number of rigs it employs by 30 percent by the end of the first
quarter and by an average of 40 percent in 2015.
Production data in the Weekly Petroleum Status Report are
therefore estimates. Extreme care should be taken in basing an
argument upon them. More accurate data based on state records is contained in the EIA’s monthly publications, but the
most recent data is for November, before most of the decline in
drilling.
If those cuts were mirrored across the entire shale industry,
which is a reasonable assumption, the rig count would fall below 1,100 by the end of March and average just 950 in 2015 as
a whole.
Rig counts, on the other hand, provide some information (albeit
imperfect) on what will happen to production in the months
ahead.
REAR-VIEW MIRROR
Many market participants have ignored the falling rig count to
focus on continued production increases in the short term as a
reason why oil prices will fall further.
Based on the rig counts, it is possible to argue about how much
production will slow and when. But the idling of almost a quarter
of all the oil-drilling rigs in the country in less than four months
must have some negative impact on output in future.
For these bearish investors, the more relevant statistic is the
continued rise in production, which hit a new high of 9.213 mil-
5
INSIDE OIL
February 3, 2015
BEYOND THE HEADLINES
FORK IN THE ROAD
No one knows for certain exactly what oil price is needed to
sustain replacement drilling in the major U.S. shale plays but it
is almost certainly significantly above current levels.
In the meantime, investors are increasingly divided over the
direction of crude oil prices.
North Dakota’s Department of Mineral Resources (DMR) has
estimated the state’s producers need a wellhead price of around
$55-65 per barrel to sustain current output of 1.2 million barrels
per day. Current wellhead prices are just $40 per barrel.
In the week to Jan. 27, hedge funds and other money managers
boosted their bullish bets on WTI-linked oil prices to the equivalent of 373 million barrels, the highest since July 2014.
But other hedge funds raised their bearish bets on WTI to almost 130 million barrels, the highest since November 2010,
according to records published by the U.S. Commodity Futures
Trading Commission.
Other experts have their own predictions for sustaining price
levels -- but almost all of them are above current prices.
Just as oil prices above $100 throughout much of 2012-2014
were unsustainably high, current prices below $60 are unsustainably low.
The existence of these large short positions, when oil prices
have already fallen by more than half since the middle of 2014,
leaves the market very volatile in the event of unexpected bullish news, such as a larger than anticipated fall in the weekly rig
count reported late on Friday.
Prices could remain unsustainably low for some time, but the
rapid decline in the rig count, coupled with signs of growing demand, means that a modest rebound is likely sooner rather than
later.
Oil prices are unlikely to rebound to $100 any time soon, a point
which has been made by Saudi Oil Minister Ali al-Naimi. But
prices must recover to the level needed to sustain enough drilling to keep shale production roughly constant in the face of
rapid declines on existing wells.
It is possible to construct a case for remaining bearish, even
with oil prices at or below $50, but the balance of risk and reward is unfavourable.
There are more reasons to think prices might rise modestly to
reach $60 or even $65 over the course of the year than expect
them to hit $40 or $30.
6
INSIDE OIL
February 3, 2015
ANALYTIC CHARTS
Daily NYMEX Crude - 30 Min
Daily ICE Brent Crude - 30 Min
Daily ICE Gas Oil - 30 Min
Daily NYMEX RBOB Gasoline - 30 Min
Daily ICE Heating Oil - 30 Min
Daily NYMEX Heating Oil - 30 Min
(Inside Oil is compiled by Atiqul Habib in Bangalore)
For more information:
Learn more about our products and services for commodities
professionals, click here
For questions and comments on Inside Oil newsletter, click here
Contact your local Thomson Reuters office, click here
Your subscription:
To find out more and register for our free commodities newsletters
click here
© 2015 Thomson Reuters. All rights reserved. This content is the intellectual property of Thomson Reuters and its affiliates. Any copying,
distribution or redistribution of this content is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters
shall not be liable for any errors or delays in content, or for any actions
taken in reliance thereon. Thomson Reuters and its logo are registered
trademarks or trademarks of the Thomson Reuters group of companies
around the world.
Privacy statement:
To find out more about how we may collect, use and share
your personal information please read our privacy statement here
To unsubscribe to this newsletter, click here
7