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Tuesday
Dec. 23, 2014
www.bloombergbriefs.com
Because of the holidays, the next edition will be published Monday, Jan. 5, 2015.
What's Next for Oil as Lower Prices Reshape the Market
BY ISAAC ARNSDORF Brent Fell 45 Percent in 2014
The oil price crash of 2014 upended the
geopolitical chessboard. Worth watching
in 2015 will be who can recover and
dominate play — OPEC, Vladimir Putin or
U.S. shale drillers.
Oil’s international benchmark price
dropped as much as 49 percent in 2014.
Those looking for a quick rebound may be
disappointed, as world consumption
growth slowed to the least since 2009,
U.S. companies pumped more than they
have since the 1980s and a price war broke out among members of OPEC.
“It’s a turning point in the way people perceive OPEC, that this so-called cartel is not
really driving prices,” said Jeff Colgan, a professor at Brown University’s Watson
Institute for International Studies. “The real story is going to be about the fracking
industry. How much pain can North American producers take?”
Here are five concerns about oil markets for 2015: Will OPEC Hold Together? Saudi
Arabia, the group’s largest member, has led the opposition to reducing output and
continues to question the need. The kingdom has enough reserves to win a price war,
but at great cost to itself and other OPEC members, according to Citigroup.
Will The Shale Boom Suffer? Traders and analysts interpreted Saudi Arabia’s decision
to let prices fall as a challenge to higher-cost U.S. shale producers. At least a dozen
“tight oil” companies have cut spending plans, executives said on conference calls.
“We’re all fascinated to see what the real economics of tight oil are as prices go down,”
said Paul Horsnell, at Standard Chartered.
Will Global Demand Recover? Lower prices could help stimulate the market, according
to Citigroup and Goldman Sachs. The IEA expects oil consumption to rise by 900,000
barrels a day in 2015.
Will The U.S. Allow More Exports? Lower prices are fueling the debate over the
40-year-old ban on most exports of unrefined U.S. oil. Producers want access to higher
overseas prices, while refiners want to keep their cost advantage. The U.S. could export
up to 1.5 million barrels a day if the law changed said the EIA's Adam Sieminski.
Will Political Instability Disrupt Supply? In June, analysts were wondering how much
higher the international benchmark price would rise past $114 a barrel. Now the question
is how much $60 a barrel will strain already unstable countries. “Geopolitical risk is
definitely one of the downsides of low oil prices,” said Brian Youngberg, an energy
analyst at Edward D. Jones & Co.
OIL WATCH
QUOTE OF THE DAY
"We live and die by oil prices
because that's such a part of
our economy up here. We
know it's cyclical, we knew
that they weren't going to stay
high forever."
– Ed Sustar, senior credit officer at Moody's in
Toronto
TODAY'S EVENTS
4:30 p.m.: API U.S. oil inventories
All times eastern
NUMBER OF THE DAY
$4 to $5 — "at most" the per barrel oil
production costs for Saudi Arabia,
according to oil minister Ali Al-Naimi.
INSIDE
REFINERY OUTAGES. Exxon has
restarted its FCC unit at Gravenchon.
MARKET CALLS. Russia could
replace Saudi Arabia as China's
biggest crude supplier, according to
Petromatrix. TANKER TRACKER. Central
America doubles imports, North
America halves them, tanker
movements show.
EARLY INSIGHT. U.S. East Coast,
Gulf Coast see crude imports rise. TODAY'S NEWS. Oil rose for the
second time in three days. INSIGHT. Bakken oil production may
rise amid plunge in crude prices. PRICES. Daily spot prices and futures
prices.
Dec. 23, 2014
Bloomberg Brief
Oil Buyer's Guide
2
INSIGHT
Bakken Oil Production May Rise Amid Plunge in Crude Prices
Bakken oil production may rise 30 percent in January from a year earlier to more than 1.25 million barrels a day, based on EIA data. The
increase would come even as WTI crude oil prices plunge. Permit awards, a barometer of future drilling activity in the next 60 to 90 days, rose
12 percent to 799 in the third quarter, a new high. While permitting through the fourth quarter has declined to 710, oil and gas output from the
Bakken is likely to be resilient in the first quarter of 2015 barring any weather-related curtailment.
— Vincent G. Piazza and Gurpal Dosanjh, Bloomberg Intelligence Analysts Bloomberg Brief
Dec. 23, 2014
Oil Buyer's Guide
3
EARLY INSIGHT
U.S. East Coast, Gulf Coast See Crude Imports Rise
Waterborne crude imports into PADD 1 and 3 rose by 21,400 and 718,500 barrels a day, respectively, for the week ending Dec. 18.
PADD 5 imports were down 335,000 barrels. Total crude imports were up for the week by 404,900 barrels a day to 4.4 million barrels a
day. Total residual fuel oil imports were down 87,000 barrels a day to 670,400 barrels a day. Total crude and products into the U.S
stood at 6.62 million barrels a day, up 886,000 from the previous week.
— Christopher Sell, Bloomberg Brief Editor
Waterborne U.S. Imports for Week Ending Dec. 18, 2014 AHOY <GO>
kb/d
Crude
Oil
Finished Motor
Gasoline
Mogas Blending
Comp.
Total Motor
Gasoline
Ethanol
Jet
Fuel
Distillate Fuel
Oil
Residual Fuel
Oil
Unfinished
Oils
Total Crude and
Products*
PADD I
563.5
135.4
610.0
745.3
16.0
110.0
208.0
238.1
42.9
1907.8
PADD III
3449.7
15.5
26.8
42.3
0.0
0.0
0.0
389.8
229.4
4111.2
PADD V
432.7
17.5
17.6
35.2
0.0
45.0
10.9
42.4
34.3
600.5
Sum
4445.8
168.4
654.4
822.8
16.0
155.0
218.9
670.4
306.6
6619.5
Source: Bloomberg LP
Change from Prior Week AHOY <GO>
kb/d
Crude
Oil
Finished Motor
Gasoline
Mogas Blending
Comp.
Total Motor
Gasoline
Ethanol
Jet
Fuel
Distillate Fuel
Oil
Residual Fuel
Oil
Unfinished
Oils
Total Crude and
Products*
PADD I
21.4
81.5
268.7
350.2
7.2
24.3
154.2
50.0
-69.4
530.8
PADD III
718.5
-3.6
-45.3
-48.9
0.0
0.0
0.0
-75.6
98.0
692.0
PADD V
-335.0
2.8
17.6
20.4
0.0
0.0
10.9
-61.4
28.2
-336.8
Sum
404.9
80.7
241.0
321.7
7.2
24.3
165.1
-87.0
56.9
886.0
Source: Bloomberg LP *Total does not include ethanol. Tables compiled by Suhyung Sage
Net Flows Increase as Incoming Flow Up, Genscape Said
Cushing, Oklahoma, net flows from
Monday, Dec. 8 through Friday, Dec. 19.
averaged near 683,000 barrels a day on
monitored pipelines, according to
Genscape. Unmonitored capacity on
incoming flows equaled 82,000 barrels a
day and 350,000 barrels a day on
outgoing flows. This is the equivalent to
-268,000 barrels a day total capacity of
unmonitored net flow.
Net Flows Monitored by Genscape Increased
— Christopher Sell, Bloomberg Brief Editor
Genscape currently monitors approximately 97 percent of inbound pipeline capacity and 83
percent of outbound pipeline capacity to and from Cushing.
Dec. 23, 2014
Bloomberg Brief
Oil Buyer's Guide
4
TANKER TRACKER
Central America Doubles Imports, North America Halves Them: Tanker Movements
U.S. Gulf Coast exports rose to 3.83 million tons for the week ending Dec. 19 on a total of 91 vessels. This compared with 3.28
million tons carried on 80 vessels the previous week. Mexico received almost double the number of vessels in the week ending Dec.
19, with 20 supplying 641,850 tons compared to 11 vessels carrying 435,449 tons for the week ending Dec. 12. Central America also
saw an increase in imports to 832,489 tons from 415,279 tons. Shipments to North America declined to just nine vessels carrying
429,508 tons from 17 vessels carrying 718,459 tons in the week before.
— Christopher Sell, Bloomberg Brief Editor
Click here to see full list of tankers that sailed from U.S. ports in the Gulf of Mexico last week.
Total U.S. Gulf Coast Shipments Increase to Highest Weekly Shipments in a Month
Bloomberg Brief
Dec. 23, 2014
Oil Buyer's Guide
5
REFINERY OUTAGES
Exxon has completed the fluid catalytic
converter unit restart at its French
refinery, according to Genscape. The unit
at the Gravenchon plant completed the
restart on Dec. 20.
Current and Planned Refinery Outages
— Rupert Rowling
Bharat Petroleum Corp. will shut its
refinery in central India for 25-30 days,
B.K. Datta, the company's refineries
director, said. The company had
previously planned to shut the refinery in
January, but has now deferred the
turnaround to March. It has no plans to
shut its Kochi refinery for maintenance in
2015 as it is undergoing an expansion.
— Dhwani Pandya
Asahi Kasei is to de-commission the
504,000 metric tonnes-a-year Mizushima
naphtha cracker in 2016. The company
will permanently shut the facility in
February-March 2016, said an official who
asked not to be identified.
— Emi Urabe
PDVSA’s Petrocedeno maintenance
work will conclude on Jan. 6, according to
an official. Maintenance related to the
work stoppage was initiated in
early-November at the heavy-oil
upgrader, public affairs manager
Humberto Reyes said in a telephone
interview.
— Pietro D. Pitts
Tosoh plans to carry out maintenance
at its Yokkaichi naphtha cracker from late
March to early April, an official said. The
plant can make 493,000 metric tonnes a
year of ethylene.
— Emi Urabe
Dec. 23, 2014
Bloomberg Brief
Oil Buyer's Guide
6
TODAY'S OIL NEWS
Supply
Oil rose for the second time in three days before a report that may show the U.S.
economy expanded more than previously estimated last quarter. WTI climbed as much
as 2.9 percent in New York, paring this year’s decline to 43 percent. “We are expecting a
positive revision to U.S. growth and markets are pricing it in,” Michael Hewson,
London-based chief market analyst at CMC Markets said. “Given how far prices have
fallen since the summer, the downside is limited in the short term.”
— Grant Smith
Standard & Poor’s Ratings Services revised its outlook to negative for Royal Dutch
Shell, Total and BP as the oil-market rout driven by weakening demand and a flood of
supply from American shale fields threatens cash flow into 2016. The credit-rating
company also cast a dim eye on Houston-based ConocoPhillips, saying it’s facing
similar cash flow pressure, and said it may cut the ratings on Eni and BG Group's BG
Energy Holdings. — Joe Carroll
Saudi Arabia's oil minister Ali Al-Naimi said $20 oil is "irrelevant" to OPEC policy,
according to the Middle East Economic Survey when asked what price would prompt
OPEC to cut output. “Whether it goes down to $20, $40, $50, $60, it is irrelevant,” he
said. OPEC pumped 30.56 million barrels a day in November, exceeding its collective
target of 30 million, a Bloomberg survey of companies, producers and analysts showed.
— Grant Smith
Iraq won’t defer paying oil companies to curb the deficit, said Laith Al-Shaher, director
general of the legal department in the oil ministry. “Doing so would mean breaching the
contract or slow down the oil fields development, and in both cases it is not in the
interest of the country,” he said.
— Khalid Al-Ansary
Billionaire Harold Hamm, whose early adoption of shale drilling in North Dakota
helped usher in a U.S. energy renaissance, plans to cut spending by 41 percent at his
company after the plunge in oil prices. Continental Resources and other U.S.
producers can adjust quickly to the crude collapse and will be able to withstand the
downturn better than many producing countries, which face economic “ruin,” Hamm said
in an interview.
— Bradley Olson and Joe Carroll
Brent crude oil’s six-month contango is at its widest level since 2010. Front-month
Brent crude futures were trading at discount of $3.79 a barrel to the six-month contract,
the widest discount since May 2010, data from ICE Futures Europe exchange showed.
The front-to-six month spread can be used for calculating profitability of storing crude on
tankers.
— Grant Smith
Vaalco has resumed production from a well at the Ebouri field, off Gabon, following
successful wireline remedial work, according to a statement. Production is to stabilize at
around 2,500 barrels a day. The well was shut in early October after pressure
communication was detected between tubing and casing.
— Sherry Su
Demand
China crude imports in November show the Saudis lost market share. After gaining
market share among the top 15 suppliers for the past two months, Saudi Arabia’s market
share has fallen to around 16.9 percent, or down 3.8 percent month on month, customs
data released in China on Dec. 22 showed. Among Mideast producers, Iran and Iraq
showed market share gains of around 2.5 percent and 2.2 percent, respectively, month
on month.
— Bernard Leung
OPEC Oil Market Defense
Eludes Libya
Fighting in Libya that’s pushed oil
production below consumption in the
holder of Africa’s largest reserves is a
reminder that not all OPEC members
are in a position to defend market
share by maintaining output.
As Iraq plans to boost supplies next
year amid repeated pledges by Saudi
Arabia and the United Arab Emirates
to keep pumping the same amount of
crude, Libya’s National Oil Corp.
said output has dropped to a “very low
point.” Conflict between the
government and Islamist militias has
spread to the region of Mellitah,
where the country’s fourth-largest oil
port is located, after disrupting two
other export terminals, according to
the state-run company.
OPEC chose to maintain its output
targets last month, resisting calls for
action from some smaller members
including Libya to prop up plunging oil
prices. Benchmark crude has since
fallen a further 22 percent,
exacerbating the decline in revenue
from Libya’s shrinking crude
production.
“The current picture of ports and
producing facilities is a harbinger to
dangerous consequences should the
crisis not be solved soon,” NOC said
in a statement on its website, calling
on rival factions to “spare the
petroleum industry, the livelihood of
all the Libyans.”
The country was producing 350,000
barrels a day as of Dec. 15, according
to two people with direct knowledge of
upstream operations. It’s output was
about 1.6 million barrels before the
2011 rebellion that ended Muammar
Qaddafi’s 42-year rule.
The U.S. Energy Information
Administration estimates Libya’s
consumption was 239,000 barrels of
oil a day in 2013. Output dropped 32
percent in November from a month
earlier to 580,000 barrels, making the
nation OPEC’s smallest producer
after Ecuador, according to data
compiled by Bloomberg.
— Maher Chmaytelli, Saleh Sarrar and
Wael Mahdi
Bloomberg Brief
Dec. 23, 2014
Oil Buyer's Guide
7
OIL SPEAK
MARKET CALLS
WHAT TO READ
Russia could replace Saudia Arabia next year as the top crude supplier to China, if
current trends persist, Petromatrix said in a report. “With the west imposing sanctions
on Russia and China trying to set-up an oil supply framework that can be sanctions-proof
in a few years, it is likely that the current trend will not stop,” the report said. The Saudi
oil minister's comments about OPEC not cutting output “were much more aggressive
than before” and were “clearly taking aim at shutting down production in non-OPEC. If
the oil market becomes a new dog-eat-dog world there will be some producing countries
that will go down or fight to not go down,” it said.
Rabah Arezki and Olivier Blanchard
writing on the IMF blog argue that the
plunge in oil prices is “overall … a shot in
the arm for the global economy.” They
warn that “our simulations do not
represent a forecast of the state of the
global economy (but) we find a gain for
world GDP between 0.3 and 0.7 percent
in 2015, compared to a scenario without
the drop in oil prices." The authors also
answer seven key questions about the
price slump.
— Claudia Carpenter
U.S. shale oil production had a rapid start and “because of falling crude prices
investments will fall,” IEA chief economist Fatih Birol said at a conference in Istanbul.
Mideast, U.S., Brazil, and Canada are to dominate oil production in the coming years, he
said. The Mideast is to remain the top crude producer in the coming years, yet oil
investment appetite in region “is falling drastically,” he added.
— Ercan Ersoy
TECHNICAL ANALYSIS
NY Harbor ULSD Futures Poised to Extend Decline
Source: Kase
The NY Harbor ULSD futures broke lower out of a bearish flag formation on Monday. The break lower was anticipated and then confirmed by
KaseX short signals. The decline is now poised to extend to at least 188.9 and then 177.9. The latter is crucial because a close below this
would call for 164.1 and 151.9. Initial resistance is the small intraday double top at 199.39. A close over this would open the way for an
extended correction to 210.9 and possibly 226.0. For more information about KaseX and Kase’s weekly energy forecasts please visit
KASE<GO>.
— Dean Rogers General Manager/Senior Analyst, Kase Call Center
Dec. 23, 2014
Bloomberg Brief
SPOT PRICES
Spreads
Benchmarks
Prices as of end of day Dec. 22
Oil Buyer's Guide
8
Bloomberg Brief
Dec. 23, 2014
Oil Buyer's Guide
9
FUTURES
Futures Based Swaps PERIOD
WTI
BRNT
WTI BRNT
NYULSD
NYULSDWTI
NYULSD BRNT
NYRB
NYRB WTI
NYRBBR
NYRB ULSD
PERIOD
Bal Mo
56.01
60.82
-4.81
196.42
26.49
21.68
155.09
9.13
4.32
-41.33
Bal Mo
JAN 15
56.15
61.25
-5.10
192.31
24.62
19.52
156.46
9.56
4.46
-35.85
JAN 15
FEB 15
56.47
62.04
-5.58
189.58
23.16
17.58
158.83
10.24
4.67
-30.75
FEB 15
MAR 15
56.88
62.79
-5.91
187.85
22.01
16.11
179.51
18.51
12.61
-8.34
MAR 15
Bal Qt
56.01
60.82
-4.81
196.42
26.49
21.68
155.09
9.13
4.32
-41.33
Bal Qt
Q1 15
56.50
62.03
-5.53
189.91
23.26
17.73
164.93
12.77
7.24
-24.98
Q1 15
Q2 15
57.68
64.31
-6.63
189.09
21.73
15.11
180.46
18.11
11.48
-8.63
Q2 15
Q3 15
59.00
66.02
-7.02
193.53
22.29
15.27
173.22
13.75
6.73
-20.32
Q3 15
Bal Yr
56.01
60.82
-4.81
196.42
26.49
21.68
155.09
9.13
4.32
-41.33
Bal Yr
Cal 15
58.41
64.99
-6.58
192.67
22.51
15.93
170.64
13.26
6.68
-22.03
Cal 15
Cal 16
63.47
71.07
-7.6
202.9
21.74
14.15
179.24
11.81
4.21
-23.66
Cal 16
Updated 7:30 a.m. New York Time
Swap Curves Bloomberg Brief: Oil Buyer's Guide
Bloomberg Brief Executive Editor
Ted Merz
[email protected]
+1-212-617-2309
Bloomberg Brief Managing Editor
Jennifer Rossa
[email protected]
+1-212-617-8074
Managing Editor,
Energy and Commodities
Tim Coulter
[email protected]
+44-20-7330-7901
Oil Buyer’s Guide Editor
Christopher Sell
[email protected]
+44-20-3525-9069
Data Editor: Canadian Crude
Paul Batchler
[email protected]
+1-609-279-4128
Advertising
Adrienne Bills
[email protected]
+1-212-617-6073
Data Editor: Natural Gas
Andrew Stewart
[email protected]
+1-609-279-4258
Reprints & Permissions
Lori Husted
[email protected]
+1-717-505-9701 x2204
Managing Editor,
Newsletter Business Manager
Global Energy Markets
Data Editor: U.S. Crude Oil
Nick Ferris
Stuart Wallace
Joseph Aboussleman
[email protected]
[email protected]
[email protected]
+1-212-617-6975
+44-20-7673-2388
+1-609-279-4281
To subscribe via the Bloomberg Terminal type BRIEF <GO> or on the web at www.bloombergbriefs.com. To contact the editors: [email protected]. This
newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints and permissions group listed
above for more information. © 2014 Bloomberg LP. All rights reserved.
Bloomberg Brief
Dec. 23, 2014
Oil Buyer's Guide
10
GAS PRICES: EUROPE
NBP Prompt (GB Pence/Therm)
KEY PRICES
TICKER
LAST PRICE
CHG FROM OPEN
LAST TRADE TIME
TRADE SOURCE
FAIR VALUE
Day Ahead
NBPGDAHD Index
52.00
0.90
12:20:52
TNRG
— Jan 15
NBPG1MON Index
53.65
1.05
12:49:07
SPEC
53.25
Sum 15
NBPGS1 Index
49.09
0.13
11:16:05
EGFI
49.25
TTF Dutch Gas (EUR/MWH)
KEY PRICES
TICKER
LAST PRICE
CHG FROM OPEN
LAST TRADE TIME
TRADE SOURCE
FAIR VALUE
Day Ahead
TTFGDAHD Index
22.00
0.25
12:59:10
ICAS
— Jan 15
TTFG1MON Index
22.43
0.13
13:03:20
SPEC
22.42
2015
TTFGCY1 Index
21.85
0.02
22/12/2014
SPEC
21.98
Supply and Demand
INDICATOR
TICKER
VALUE
1-DAY CHG
GIE Total EU Gas Storage (MCM)
GIEDSTTL Index
50,681.68
-291.31
GIE Total EU Gas Storage (% Full)
GIEDFTTL Index
64.55
-0.37
Yesterday UK gas demand (MCM)
UGASDEMD Index
243.10
-6.49
Dayahead UK forecast gas demand (MCM)
UGASFD1D Index
236.55
6.73
GAS PRICES: U.S.
Henry Hub ($/MMBTU)
KEY PRICES
TICKER
LAST PRICE
CHG FROM OPEN
LAST TRADE
Spot price
NGUSHHUB Index
3.04
— — JAN 15
NG1 Comdty
3.20
0.06
12:52:14
FEB 15
NG2 Comdty
3.24
0.06
12:53:52
MAR 15
NG3 Comdty
3.23
0.06
12:52:49
Supply and Demand
INDICATOR
TICKER
MMCF/D
CHANGE FROM PREVIOUS DAY
Change in total gas storage
NAGSTSTO Index
-4,651.00
2,566.00
Total gas demand
NAGSTOTC Index
83,473.00
-398.00
GLOBAL LPG PRICING DATA
Source: Bloomberg
INDICATOR
TICKER
LAST
CHANGE
Mont Belvieu LST Propane
LPGSMBPP Index
55.62
-1.38
Mont Belvieu Non-LST Ethane
LPGSMBPE Index
18.25
0.12
Naphtha fob Singapore
NAPHSINF Index
52.39
-2.83

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