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INSIDE U.S. OIL
Thursday, February 26, 2015
Futures (Front Month)
NYMEX light crude
Close
Net Change Pct Change U.S. Cash Crude
$50.99
$0.65
1.27
NYMEX RBOB gasoline
$1.72
$0.08
4.54
NYMEX heating oil
$2.10
-$0.01
0.39
ICE Brent crude
$61.63
$1.41
2.29
ICE gas oil
$579.75
-$1.75
0.30
Brent/WTI spread
-$10.64
-$1.23
11.56
Reuters 321 Crack Spread
$29.85
$2.35
7.87
CHART OF THE DAY
Click on the chart for full-size image
Price
Net Change Differential Diff Change
Light Louisiana Sweet
$54.40
$54.40
4.85
$4.85
Poseidon
$49.05
$49.05
0.80
-$0.80
Thunder Horse
$50.65
$50.65
2.63
$2.63
U.S. Cash Crude Products
(Values in Cents/Gal)
Price
Net Change Differential Diff Change
NYH Prompt Heating oil
192.61
192.61
NYH RBOB
171.35
171.35
-1.50
1.50
USG ULSD
191.11
191.11
-20.75
20.75
USG Prompt Gasoline
168.10
168.10
-15.75
15.75
-18.00
18.00
JOHN KEMP ON MARKETS
COLUMN– Bakken oil drillers retreat to the core
North Dakota’s oil producers have pulled back to the core areas of the
Bakken formation to cut costs and maximise output amid the slump in
prices. John Kemp is a Reuters market analyst. The views expressed are his
own. Click here to read the rest of his column
TODAY’S MARKETS
OIL: Oil rose above $62 a barrel on Thursday as indications of a coming
recovery in demand offset a further jump in U.S. crude stockpiles which
underlined currently ample supplies. "The comments yesterday, the change
of tone from Saudi Arabia, is still an element," said Olivier Jakob, analyst at
Petromatrix, of Brent's gain. "The market is still reacting to that."
MARKET NEWS
 INTERVIEW-Tocom faces hurdles to launch world's first
LNG futures
 Gazprom oil arm moves trading from Austria back to
Russia
 U.S. crude stocks rise, distillates draw down to record low EIA
 U.S. refinery strike continues with no steps toward
settlement
 U.S. set to buy 1 mln tonnes of gasoil from Europe as cold
bites
FOREX: The Australian and New Zealand dollars were the main movers
among major currencies on Thursday, pushed in opposite directions by
contrasting signals on the health of two struggling economies. "In Australia
people knew the mining numbers would be weak but were expecting construction investment to make up for that. When it didn't we saw the reaction
on the (Aussie) dollar," said Adam Myers, European head of FX strategy at
Credit Agricole in London.
GLOBAL MARKETS: German seven-year bond yields fell below zero for
the first time ever on Thursday, as investors positioned themselves for an
extended era of cheap money ahead of the European Central Bank's looming bond-buying scheme. "The massive liquidity on the market has been
pushing yields down," said Saxo Bank trader Andrea Tueni.
 EXCLUSIVE-Petrobras hires JPMorgan for $3 bln in asset
sales -sources
 Repsol net profit jumps 27 pct as refining boost offsets
cheap oil
 Enterprise says clients must pay for dock work as BP
grumbles
BEYOND THE HEADLINES
Saudi satisfaction with ‘calm’ oil markets signals $60
anchor
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE
U.S. EVENTS TO WATCH TODAY (EST)
 U.S. CONSUMER PRICES JAN (0830)
 U.S. DURABLE GOODS ORDERS JAN (0830)
 U.S. WEEKLY JOBLESS CLAIMS (0830)
 U.S. MONTHLY HOME PRICE INDEX DEC (0900)
REFINERY NEWS
 Venezuela's 146,000 bpd El Palito refinery down -union leader
 Exxon Baytown gasoline unit output unaffected by leak -sources
INSIDE U.S. OIL
February 26, 2015
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE (0830 GMT)
ICE BRENT FUTURES FORWARD
ICE Brent Fut. Fwd Curve
1M 2M
3M
4M
5M
DUBAI SWAPS FORWARD CURVE
Dubai Swaps Fwd Curve
1M - 1Y 1M
Yield
67.12
6M
7M
8M
9M 10M
66.00
63.00
63.00
60.00
60.00
57.00
.12
.12
1M 2M
1Y 1M
FO180 FOB CARGO SG FWD CURVE
FO180 FOB Cargo SG Fwd Curve
1M - 1Y 1M
Yield
63.73
3M
4M
5M
6M
7M
8M
9M 10M
1Y 1M
FO3.5% BARGES ARA FORWARD CURVE
2M - 2M
Yield
359.00
FO3.5% Barges ARA Fwd Curve
2M - 2M
329.50
Yield
330.00
320.00
350.00
310.00
340.00
300.00
.12
.12
2M
2M
FO380 FOB CARGO SG FORWARD CURVE
FO380 FOB Cargo SG Fwd Curve
NAPHTHA CFR JAPAN FORWARD CURVE
2M - 2M
Yield
351.00
350.00
Naphtha CFR Japan Fwd Curve
2M - 2M
Yield
535.00
530.00
340.00
520.00
330.00
.12
.12
2M
2M
2
INSIDE U.S. OIL
February 26, 2015
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE (0830 GMT)
NAPHTHA CIF NWE FORWARD CURVE
Naphtha CIF NWE Fwd Curve
NAPHTHA FOB SG FWD CURVE
2M - 2M
513.25
Yield
Naphtha FOB SG Fwd Curve
1M - 1Y 1M
Yield
510.00
56.95
57.00
500.00
56.00
490.00
.12
55.00
.12
2M
1M 2M
ICE GO FUT. FWD CURVE
ICE GO Fut. Fwd Curve
4M
5M
6M
7M
8M
9M 10M
1Y 1M
GO FOB CARGO SG FORWARD CURVE
2M - 2M
Yield
603.75
600.00
GO FOB Cargo SG Fwd Curve
1M - 1Y 1M
Yield
76.35
76.00
580.00
74.00
560.00
.12
72.00
.12
2M
1M 2M
JET FUEL FOB CARGO SG FWD
Jet Fuel FOB Cargo SG Fwd Curve
3M
1M - 1M
Yield
77.60
76.00
74.00
.12
1M
3
3M
4M
5M
6M
7M
8M
9M 10M
1Y 1M
INSIDE U.S. OIL
February 26, 2015
MARKET NEWS
INTERVIEW-Tocom faces hurdles to launch world's first
LNG futures
Gazprom oil arm moves trading from Austria back to
Russia
Tokyo Commodity Exchange Inc (TOCOM) faces a struggle to
launch the world's first futures for liquefied natural gas (LNG),
scheduled for 2016, after a preliminary instrument launched last
year failed to attract interest, a senior official said.
Gas giant Gazprom's oil arm is shifting its trading operations
from Austria back to Russia, it said on Wednesday, with
industry sources saying the firm wanted to protect huge
revenues from potential seizure as Moscow's relations with the
West worsen. A decision by Gazprom Neft to relocate trading
from Vienna to St Petersburg, Russia’s second-largest city and
the home town of President Vladimir Putin, follows a similar
move by its mother company Gazprom to move trading offices
from London to St Petersburg.
Shelving the plans would be a blow for Japan, which takes in
about a third of global LNG shipments and is trying to cut costs
after the shutdown of the country's nuclear plants in the wake of
the 2011 Fukushima disaster pushed demand for gas to record
levels. A lack of trades in a LNG non-deliverable forward
reflecting Japan's weak demand for spot LNG and the renewed
appeal of oil-linked long-term LNG supplies after a plunge in
crude prices raise questions about the viability of the futures,
TOCOM's Executive Officer Mitsuhiro Onosato said.
Both moves show how sanctions imposed on Russia over its
actions in Ukraine are forcing a retreat from the West by once
acquisitive Kremlin-controlled firms. The sanctions have
drastically curtailed Russian firms’ ability to borrow and expand
abroad after a decade of asset accumulation, which included
purchases of businesses across Europe and creation of trading
desks similar to the ones of oil majors BP and Shell
U.S. crude stocks rise, distillates draw down to record low EIA
U.S. refinery strike continues with no steps toward
U.S. crude stocks rose last week to a seasonal record high for
the seventh straight week as refineries cut output, while refined
product inventories fell with distillates at seasonal record low
levels, data from the Energy Information Administration showed
on Wednesday. Crude inventories rose 8.4 million barrels in the
week to Feb. 20, double analysts' expectations for a 4 millionbarrel rise, to 434.1 million barrels, their highest for the time of
year since records began 80 years ago, the EIA said. Crude
stocks at the Cushing, Oklahoma, delivery hub for U.S. crude
futures rose 2.4 million barrels, EIA said. U.S. crude
futures extended losses after the data but by 11:27 a.m. (1627
GMT, were up about 1 percent at $49.75 a barrel. "The report is
relatively bullish, despite the large crude oil inventory build,"
said John Kilduff, partner at Again Capital LLC in New York.
"The drawdowns in the refined product categories represent an
offset and are supportive."
settlement
The largest U.S. refinery strike since 1980 continued through its
25th day on Wednesday with no movement toward renewed
talks to end a walkout by 6,550 union workers at 15 plants,
including 12 refineries accounting for one-fifth of domestic
capacity. A spokesman for lead refinery owner representative
Shell Oil Co, the U.S. arm of Royal Dutch Shell Plc said no face
-to-face meetings have been scheduled with the United
Steelworkers union (USW) as of Wednesday.
"No date has been set (for talks to resume,)" said Shell
spokesman Ray Fisher. "Not sure if there has been any contact
(between the two sides)." A USW spokeswoman declined to
discuss the status of negotiations on Wednesday.
EXCLUSIVE-Petrobras hires JPMorgan for $3 bln in asset
sales -sources
U.S. set to buy 1 mln tonnes of gasoil from Europe as cold
bites
Petróleo Brasileiro SA has hired JPMorgan Chase & Co to
handle $3 billion in planned asset sales this year, as fallout from
a corruption scandal has shut access to financing for Brazil's
state-controlled oil producer, two sources with direct knowledge
of the situation said on Wednesday.
Around 1 million tonnes of diesel and heating oil are planned to
ship from Europe to the U.S. East Coast in the coming weeks as
freezing weather sparked the rare arbitrage for a second year in
a row. The cold snap that hit eastern United States has
increased demand for heating oil and caused disruptions at local
refineries, pushing prompt benchmark New York diesel
futures up by more than 30 percent in February. In a sign of
tightening supplies, East Coast distillates stocks, which include
diesel and gasoil, sunk to their lowest for this time of year since
2000, according to weekly data from the Energy Information
Administration (EIA). Tankers carrying around 750,000 tonnes
of diesel and gasoil have been booked to go from Europe and
the Baltic Sea to the East Coast in February, according to
Reuters shipping data and traders.
JPMorgan will be tasked with luring the largest number of
bidders possible for the assets and then structuring their sale,
said a first source, who asked for anonymity since the process
is private. Properties and drilling licenses are among assets that
could be put on the block, the source added.
According to a second source, meetings are being scheduled in
the coming weeks to further look at deal opportunities. late on
Tuesday.
4
INSIDE U.S. OIL
February 26, 2015
MARKET NEWS (Continued)
Repsol net profit jumps 27 pct as refining boost offsets
cheap oil
Enterprise says clients must pay for dock work as BP
grumbles
Spanish oil group Repsol said its 2014 adjusted clean net profit
jumped 27.1 percent, boosted by a big boost in refining margins
that more than offset falling revenue in its production business
amid plummeting world oil prices.
Unlike other European competitors which are drastically cutting
back on spending and investments in the face of lower energy
prices, Repsol last year announced the acquisition of Talisman
Energy to grow its exploration and production arm.
Average recurring net profit, adjusted for one-time gains and
inventory effects, for the whole of 2014 came in at 1.707 billion
euros ($1.9 billion) against a 1.695 billion euro forecast in a
Reuters poll of analysts.
For the fourth quarter alone, adjusted clean net profit was 370
million euros, three times what Repsol made in the OctoberDecember period a year earlier..
]
Enterprise Products Partners LP said on Wednesday that companies using its crude oil storage facility in the Houston Ship
Channel must pay extra for dock services, brushing off complaints from client BP Plc . "We believe if you want a service,
you pay for it," Enterprise Chief Operating Officer Jim Teague
told analysts when asked about concerns, first reported by the
Wall Street Journal, that the company's strong position in Gulf
Coast storage gives it too much pricing power.
Britain's BP has reportedly told the U.S. Federal Trade Commission that Enterprise, a major midstream company, has started
charging $1 a barrel in dock fees for crude it handles at the
Houston site, on top of storage fees.
Since Houston is the top U.S. petrochemicals port, the dock
fees could add up to big revenue.
REFINERY NEWS
Venezuela's 146,000 bpd El Palito refinery down -union
leader
Exxon Baytown gasoline unit output unaffected by leak sources
Venezuelan state oil company PDVSA's 146,000-barrel-per-day
El Palito refinery has been halted since Monday due to problems with a compressor and a demineralization plant, union
leader Ivan Freites said on Wednesday.
"It's completely down," said Freites, adding there was no indication of when the refinery would restart.
Amuay, the OPEC country's biggest refinery, is operating at
370,000 bpd, well below its 645,000-bpd capacity, because its
flexicoker and a crude distillation unit remain out of service, Freites added.
Cardon, which along with Amuay makes up the major Paraguana refining complex, is operating at about a third of its total
310,000-bpd capacity, workers and Freites said earlier on
Wednesday.
Production on the 125,000 barrel per day (bpd) gasolineproducing fluidic catalytic cracking unit at Exxon Mobil
Corp's 560,500 bpd Baytown, Texas, refinery was unaffected
by a leak in ductwork on the unit, said sources familiar with
plant operations on Wednesday.
The leak developed on Tuesday and was repaired by Wednesday afternoon, according to a notice the refinery filed with the
Texas Commission on Environmental Quality.
Workers on the FCCU have repaired at least two leaks in a duct
on the FCCU in the past 24 hours, the sources said.
One of the leaks released ammonia, nitrogen dioxide, particulates and more than 2,000 pounds of sulfur dioxide, according
to the notice filed with the Texas commission.
5
INSIDE U.S. OIL
February 26, 2015
BEYOND THE HEADLINES (Continued)
COLUMN-Bakken oil drillers retreat to the core
developments, saying he saw oil demand growing and that
markets were "calm".
A day earlier, a senior Gulf OPEC delegate said oil prices had
started to stabilise around current levels, effectively dropping a
price anchor at $60 a barrel and saying he saw no need for any
emergency OPEC meeting.
"The Saudis are saying – look, everything is happening the way
it needs to happen. Others are cutting capex, production growth
is slowing and low prices are stimulating demand," said OPEC
watcher Yasser Elguindi from economic consultants Medley
Global Advisors.
Saudi Arabia, the Organization of the Petroleum Exporting
Countries' leading producer, is also one of the cheapest oil
producers in the world, with production costs of just a few
dollars per barrel.
Modern techniques of extracting oil from hard rock, which are
behind a U.S. shale oil revolution, are much more expensive
and production costs range from as low as $25 and as high as
$80 per barrel.
"Of course, the main unknown is how resilient U.S. oil
production will be. It may take more than just two quarters for
markets to adjust to new patterns. It may take a year or two to
sort out what is fair value for crude," said Elguindi.
"Price may need to be at $60 to allow for a rational supplydemand trajectory. It doesn’t mean of course that we can’t
temporarily go to $40 or $80 under certain circumstances," he
added.
By John Kemp
North Dakota’s oil producers have pulled back to the core areas
of the Bakken formation to cut costs and maximise output amid
the slump in prices.
The number of active rigs in the state has fallen to just 121, from
190 a year ago, according to an active rig list published by the
state’s Department of Mineral Resources (DMR) on
Wednesday.
The rig count is now below the threshold of “at least 130” DMR
Director Lynn Helms identified last month as needed to sustain
output at the current level of just over 1.2 million barrels per day.
But more important than the raw number is their distribution
across the state, with drilling now increasingly concentrated in
only the most promising areas.
Of the 121 rigs active on Wednesday, 115 are drilling in just four
counties at the heart of the Bakken - Dunn, McKenzie, Mountrail
and Williams.
The number of rigs operating in the core has fallen by 30
percent from 165 on Dec. 12, according to DMR records.
The four core counties accounted for 89 percent of the state’s oil
production in December, a little over 1 million barrels per day.
Only six rigs are operating outside the core counties, down from
17 in mid-December, a decline of 65 percent.
Non-core counties produced just 128,000 barrels per day in
December, so they account for a trivial amount of output on a
national scale.
Some analysts argue that producers will be able to offset the
smaller number of rigs by concentrating them in only the most
prolific parts of the Bakken.
But with the number of rigs in even the core areas down by 30
percent in just over two months, it seems more likely production
will begin to plateau or fall in the coming months.
Once the backlog of well completions inherited from 2014 is
worked off, which will take another two to three months, decline
rates from existing wells should match or overtake production
from the smaller number of new wells being drilled.
(John Kemp is a Reuters market analyst. The views expressed
are his own)
Saudi
satisfaction
signals $60 anchor
with
‘calm’
oil
'HAPPY NAIMI'
Samuel Ciszuk, senior adviser on security of supply to the
Swedish Energy Agency, believes that Naimi calling for
calmness was a sign he was happy with current prices.
"That means he wants prices roughly where they are or
somewhat lower. Effectively, Naimi is saying he is OK with the
inventory build-up, instead looking ahead towards the slow build
of demand growth, to take care of those inventories at a later
stage,” said Ciszuk.
U.S. shale oil output growth is not expected to start slowing
before the second part of 2015. This means an accelerated
build up of global stockpiles, which could put oil prices under
more pressure.
However, withstanding a long period of oil prices below $60 per
barrel might be problematic even for cash-rich Saudi Arabia, not
to mention poorer members and traditional OPEC price hawks
Venezuela, Algeria and Iran.
"It is interesting that Naimi says he doesn’t like to talk about oil
because he wants calmness," said Olivier Jakob from
Petromatrix consultancy.
"After the OPEC meeting...we had the oil ministers of Saudi
Arabia, Kuwait and the UAE going to the newswires to talk the
market down. They did like to talk oil then and (Naimi's current
remarks) is probably another indication that they have reached
their objective," said Jakob.
He added that another big unknown was nuclear talks between
the West and Iran, which could lead to a softening of sanctions
against the Islamic Republic and a potential release of as much
as 1 million barrels per day of additional oil to the market.
"Any nuclear deal will reopen the gates of speculation about the
role of OPEC and its place in the current oil market," said
Jakob.
markets
By Dmitry Zhdannikov and Alex Lawler
OPEC kingpin Saudi Arabia is feeling vindicated after a strategy
of allowing oil to flood the market has begun to achieve what it
was aiming for.
As a global oil glut pushed prices down 60 percent between
June 2014 and January 2015, signs began to emerge that
OPEC's rivals, including North American producers, will have to
curtail output of their expensive barrels.
Two months into 2015, oil prices have recovered to around $60
per barrel from their January lows of $45 - much faster than
Saudi Arabia had hoped for when it convinced fellow OPEC
members in November not to cut output to defend market share
against shale oil and other competing supply.
In his first public comments since oil prices rebounded, veteran
Saudi Oil Minister Ali al-Naimi signalled satisfaction with
6
INSIDE U.S. OIL
February 26, 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 U.S. Oil is compiled by Vishaka George in Bangalore)
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7
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