Oil leaps to $51 as US crude stocks fall - Reuters
Oil surged more than a dollar to over $51 a barrel on Wednesday, building on two sessions of gains, after U.S. data showed an unexpected fall in crude inventories. U.S. light sweet crude for July delivery (CLc1: Quote, Profile, Research) was up $1.56 at $51.23 a barrel, after climbing above the $50 a barrel mark for the first time since May 12. Brent crude also climbed above $50 (LCOc1: Quote, Profile, Research) and was trading $1.42 a barrel higher at $50.24. Prices had already risen by more than a dollar over Monday's and Tuesday's sessions. They gained strength on Wednesday after government data showed U.S. crude stocks had fallen by 1.6 million barrels to 332.4 million barrels, but remained 31.8 million barrels higher than the same time a year ago. The fall in crude inventories countered analyst expectations of a rise, while product stocks rose by more than forecast. Gasoline stocks increased by 600,000 barrels to 215.4 million and distillate stocks rose by 1.9 million barrels to 105.7 million. "The rise in refinery utilisation and the slight decline in imports created the unexpected draw in crude stocks," said Marshall Steeves, analyst at Refco Group. "The product numbers are a little bearish," he added. Crude stocks remain close to the highest level for six years and gasoline stocks are comfortably above levels the same time a year ago, though some traders are nervous about high levels of demand. The AAA auto and travel group said in a survey last week a record number of drivers would take to the roads over the upcoming Memorial Day weekend that kicks off the peak demand summer driving season. U.S. crude stocks, which have risen for 13 out of the past 15 weeks, have been boosted by increased supplies from the Organization of the Petroleum Exporting Countries. The cartel this month has raised production to new 25-year highs, OPEC sources have said. On Wednesday, an OPEC delegate said OPEC producers had increased supply to above 30 million bpd in May to help build global stockpiles ahead of expected high demand in the fourth quarter, with Saudi Arabia contributing around 9.5 million barrels per day. Estimates of the producer group's actual production have varied considerably. An OPEC source had said earlier on Wednesday that Saudi Arabia had raised production by 150,000 bpd this month to 9.65 million bpd. OPEC President Sheikh Ahmad al-Fahd al-Sabah, also Kuwait's oil minister, said earlier this month that Saudi output was running at almost 10 million bpd. Most OPEC ministers have signaled there should be no change in output policy when OPEC meets on June 15 in Vienna. Surging demand from China played a major role in bringing about the rally that pushed U.S. crude futures to a record $58.28 at the start of April. Demand is still growing in China, but the rate of growth has slowed compared with last year. In the latest indication on Wednesday, the National Development and Reform Commission said China would consume 170 million tonnes of refined oil products in 2005, eight percent more than it did last year. But the growth would be lower than last year's 19 percent, said Zhu Hongren, vice director of the commission's Economic Operations Bureau.
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Iraq suspends oil exports to Turkey because of shortage - Boston Globe
Iraq has suspended oil exports to the Turkish port of Ceyhan because of a production shortage in the northern fields of Kirkuk, an Iraqi official said Tuesday. The northern pipeline and facilities regularly are sabotaged by insurgents. In the south, Iraq's oil output has fallen by nearly 190,000 barrels a day since Monday because of technical problems, said the Oil Ministry official, who asked not to be named for security reasons. ''There has been no pumping from Kirkuk to Ceyhan since Saturday and the pipeline won't be pumping until probably Thursday,'' the official told Dow Jones Newswires, adding that there was not enough crude to pump. He said pumping has continued sporadically for the past two weeks. On Friday and Saturday, the pipeline pumped a total of 200,000 barrels, bringing stores of Kirkuk crude at Ceyhan export terminal to 2.2 million barrels. Iraqi officials say the country's northern oil production has been averaging 500,000 barrels per day, of which about 380,000 barrels are being pumped to nearby refineries for domestic use. The remaining 120,000 barrels a day are kept in storage tanks at the pumping stations or at Beiji refinery. Baghdad needs to fill its storage facilities in Ceyhan, whose capacity is estimated at 7.6 million barrels, before deciding how to sell the accumulated crude. Persistent sabotage of the pipeline network and facilities has kept Kirkuk exports shut in for most of this year. Meanwhile, production from the oil-rich south has fallen from 1.85 million barrels a day to 1.66 million barrels because the gas separation stations at the southern oil fields have failed, the official said. Oil exports from the south have been averaging 1.4 million-1.5 million barrels a day. The technical problems are not expected to impact exports from the south immediately, because oil is held in storage near the offshore oil terminals. However, if the problems persist, exports will fall, the official said.
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Saudis pump more oil - San Francisco Chronicle
Saudi Arabia has boosted the amount of oil it pumps and will produce more to meet surging world demand, the kingdom's petroleum minister said in a speech in San Francisco on Monday. Ali Naimi said his government remains committed to seeking stable oil prices. But in response to questions, he declined to say where prices will level off. Crude oil prices have slid 14 percent since peaking at $57.27 on April 1, but remain far above historic norms. "The kingdom has long played a stabilizing role in oil markets," Naimi told a lunch gathering in the Carnelian Room, high above San Francisco's Financial District. "We have been there in times of disruption and shortage to provide additional supplies to the market." He said current high prices are the direct result of years when oil flooded the market during the late 1980s and 1990s. The resulting low prices discouraged new production and helped raise demand, he said. "Past experience teaches us that very low prices and very high prices are not sustainable," he said. Naimi's comments drew close attention from an audience that included many whose fortunes are closely linked to oil. San Ramon oil giant Chevron Corp. helped sponsor the lunch, along with the World Affairs Council of Northern California and the Council on Foreign Relations. Much of Chevron's top tier of management filled the restaurant's tables. Naimi came to California in part to meet with Chevron executives at the end of a U.S. business trip with the governing board of Saudi Aramco, the kingdom's state-run oil company. Chevron's predecessor, Standard Oil Co. of California, drilled the first successful oil well in Saudi Arabia and helped create Aramco, whose board joined Naimi at Monday's lunch. Chevron still drills in a zone on the border of Saudi Arabia and Kuwait. Chevron Chief Executive Officer David O'Reilly, who introduced Naimi, referred to Chevron as Aramco's grandparent. "This is a company where the grandchild has grown to be an order of magnitude larger than the grandparent," he said. Naimi's comments carry weight far beyond the petroleum industry. Sometimes called the world's "central banker of oil," Naimi has the power to stoke or stifle economies throughout the world. His comments can rattle financial markets as investors look for clues to his country's oil production plans. The minister said that Saudi Arabia can produce 11 million barrels per day, of which 1.5 million is considered a cushion over and above demand. Total capacity should increase to 12.5 million barrels by 2009. The kingdom could conceivably boost production to 15 million barrels per day if needed, he said. He disputed the notions that global oil demand has outstripped supply and that reserves are running out. Although he said the world in general, and the United States in particular, need more refineries to convert oil into gasoline, he described petroleum supplies as adequate. "Right now, it looks like the fundamentals of the oil market are healthy, at least in supply," he said. Keeping the market stocked in future years, however, could be a challenge. The developing world's thirst for oil is growing and will continue to increase, he said. Alternative energy sources, such as fuel cells, won't be able to replace oil for years. Conservation and new, fuel-efficient technologies will lessen the impact of increased demand, he said, but the market still will need increasing amounts of oil. "The world is going to need everybody's barrels," he said. Naimi also addressed topics removed from petroleum production. In response to written questions from the audience, he talked about instability in the Middle East, young Saudis' attitudes toward the United States and the problems Saudi business travelers endure to visit America, where their trip through airport security can last for hours. He also addressed the prospects for increased democracy in the Middle East, praising Kuwait's recent decision to give women the right to vote, but he warned the audience not to expect rapid change. "It took you 200 years to develop what you have today," he said. "Eventually, the Middle East will develop systems that work for it. It may not be U.S. democracy, but it will be something the people are comfortable with."
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OPEC to get in tune with oil markets - Aljazeera
Opec's president has vowed that his organisation will respond to new forces in the fast-changing oil market by the end of the year. Speaking at the World Economic Forum meeting on Saturday, Shaikh Ahmed Fahd al-Sabah said Opec will change its culture and reformulate its price band of $22-28 a barrel. The price band has been suspended since January after sharp rises in oil prices to well over $50 made it a virtual irrelevance. "The culture of the market has changed and in the second quarter (where demand normally drops) there is a growth in demand," Shaikh Ahmed, who is also Kuwait's Energy Minister, told a panel discussion on oil. "We are waiting until the end of the year to review the experience of the last two years to reformulate our culture and price band." Shaikh Ahmed said global demand for oil grew 2.6 million barrels per day to 82.5 million bpd in 2004, and by the fourth quarter this year demand is expected to increase to 85 million bpd."Last year demand grew 4-5% while this year it is growing 3-4%. We've normally had such an increase in four years [in the past], while we had it in one year," the Opec chief said. The market is no longer only governed by supply and demand, as several other factors have started to play a role. "The market has changed ... Factors like the environment, geopolitics, [higher] economic growth and stockpiles are now playing a major role," Shaikh Ahmed said. The Opec president said members of the cartel are committed to ensure enough supplies in the market. "Our main target is to ensure continuity of supplies. There is already two million bpd of oversupply in the market," he said. Opec members are willing to invest to increase output capacity, but they are concerned about the security of growing demand and other sources of energy. "We are willing to invest to increase our capacity. We will increase our production capacity by one million bpd by the end of the year. "But we have two main worries; security of demand and other alternatives of energy," said Shaikh Ahmed, adding that Opec members do not want to invest and then lose out. Opec officials have said that current Opec's capacity is approaching 32.7 million bpd and it will reach 33 million bpd by the end of 2005. Shaikh Ahmed said Opec is looking to achieve a fair and stable price for oil. "We are looking at a fair price for both consumers and producers," he said, adding that Opec's strategy committee is studying the most ideal price band. World oil prices rose on Friday amid higher US crude stocks, a continuing strike at French energy giant Total and speculation of an Opec production cut. New York's main contract, light sweet crude for delivery in June, added eight cents to $47.00 per barrel in early deals on Friday, after earlier hitting $46.70 - the lowest point since 14 February. In London on Friday, the price of Brent North Sea crude oil for delivery in July gained 14 cents to $48.02 per barrel. Shaikh Ahmed called on international oil companies to enter into joint ventures with Opec countries to have "comprehensive investments" which involve upstream and downstream projects, including refineries.
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Can oil unite the elephant and the dragon? - Business Standard - India
As is customary during visits of foreign leaders, Delhi went into an emotional overdrive during Chinese Premier Wen Jiabao’s visit and talked of a new chapter in Sino-India relations, focussing on trade issues and cooperation in energy projects. Indeed, even now, Petroleum Minister Mani Shankar Aiyar appears keen on the two countries cooperating to secure their future energy needs. Given the historical rivalry between the two nations, however, it is not immediately clear as to why China should cooperate with India in this field. As far as the zero-duty trading corridor between the two countries is concerned, something that Premier Jiabao wanted to discuss, reports from the Federation of Indian Chambers of Commerce and Industry (Ficci) and other industry bodies indicate that Indian industry will suffer and Chinese exports will multiply. The reason is obvious: Chinese makers are much more efficient and productive compared to India. For instance, China has a worldwide market share of 50 per cent in cameras, 30 per cent in air conditioners and televisions, 25 per cent in washing machines and 20 per cent in refrigerators. Wal-Mart buys products worth $ 18 billion from China when India’s total exports of manufactured products are only about $ 50 billion. No wonder China, always a realist, showed great interest in establishing trade links with India. It is guided solely by self-interest and it is important that we approach trade ties with caution. China has cultivated relations when it mattered, but otherwise practiced a policy of containment towards India, says G Parthasarathy, a former high commissioner to Pakistan, in an article. Just on the eve of Jiabao’s visit to Pakistan, China agreed to supply Pakistan four modern frigates and it is deepening the Gwadar Port, which Pakistan announced would be available for use by the Chinese navy in the event of a security threat. Moreover, Pakistan and China signed a “Friendship Treaty” during Jiabao’s visit, which according to diplomats includes provisions for China to defend Pakistan’s sovereignty in case of war. But while the Indian government doesn’t appear too keen to push forward on the trade corridor, what of the possible cooperation in the energy sector? So far, it appears the Chinese are not really responding to petroleum minister Aiyar’s overtures. Indeed, one of the reasons for the Chinese not really endorsing India’s demand for a Security Council permanent seat could be to blunt India’s edge while scouting for oil overseas. Energy, it is obvious, will fire economic growth in both India and China. Both economies will stutter without supplies of adequate oil and gas to run trucks, factories and power plants. So it would be a fallacy to think that China would cooperate with India in the energy sector when state oil companies from both countries are fiercely competing for the same oil fields. Beijing, with its financial muscle and political clout — courtesy partly because of its permanent seat on the UN Security Council — looks to have won the early rounds, helping Chinese state oil companies prevail over their Indian counterparts. ver the past few years, both countries have clashed over assets in Russia, Indonesia, Sudan and Angola. China has taken large equity stakes and operatorship in some cases in Africa, Russia and Asia. Right now, Indian acquisitions are few and far between — 25 per cent of the Greater Nile Petroleum Operating Co. in Sudan, 20 per cent of Sakhalin-1, and other exploration blocks in Africa. China has a head start. “The Chinese have a lot of cash and are robustly tying up long-term crude arrangements,” says an Indian foreign ministry official. In 2002, the rivalry centred on Indonesian assets held by US Devon Energy and Spain’s Repsol YPF, but China was “willing to pay much more than us,” says a former senior official of ONGC Videsh, the overseas arm of state Oil and Natural Gas Corporation. China National Offshore Oil Corp (CNOOC) bought most of Repsol’s assets for $ 585 million while PetroChina picked up Devon’s oil fields, establishing their hold on the Indonesian oil sector. The focus was then on Africa, Angola in particular. In October 2003, Sonangol said it would sell 50 per cent of offshore Block 18 to a Chinese firm, invoking contractual pre-emption rights, after Royal Dutch/Shell had agreed to sell its half-share in the block to ONGC for $ 600 million. The Chinese sweetener was a $ 2 billion aid package, nearly 10 times the amount on offer from India. Beijing is an important donor and potential trading partner for Angola, which has built up hefty hard currency debts. Indian officials also claim that China tried to stop ONGC buying Talisman Energy’s 25 per cent stake in Sudan’s Greater Nile Petroleum Operating Co. in 2003, but was foiled when the Sudanese government backed ONGC. Now Beijing is trying to usurp New Delhi as a key partner in gas developments in Myanmar (Burma). India has a stake in Block A-1, which is estimated to hold 6 trillion cubic feet of gas, as well as Block A-3. Recently, a consortium led by China National Offshore Oil Corporation signed two production sharing contracts with state-owned Myanmar Oil and Gas Enterprise for exploration in offshore blocks A-4 and M-10. Even India’s staunch ally Russia and the Caspian countries are turning more to China because of its vast economic clout. Rosneft borrowed money from China to take over Yuganskneftegas, the key Yukos subsidiary sold at a controversial auction in return for crude supplies to China. ONGC Videsh is still trying to gain a foothold in Yukos. Also, on the basis of a gas-purchase commitment, Iran offered China operatorship of Yadavaran field and a large stake. India, which has signed up to buy 7.5 million tonnes of LNG from Iran, was left with a minority equity stake. Given such intense competition and Chinese demand of close to six million barrels a day, making it the world’s second largest oil consumer, it is unlikely that Chinese state oil companies will give room to ONGC or Indian Oil Corporation. Scarce resources will intensify competition not cooperation. The only reason why China might join hands with India would be to contain west Asian oil producers. But that could be a slender hope.
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