here - Thomson Reuters
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here - Thomson Reuters
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. 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