Oil prices pared losses on bargain hunting on Thursday after sharp falls overnight on an unexpectedly large buildup in US gasoline stocks and seasonally tepid demand.The global benchmark November Brent contract climbed 22 cents to $47.97 a barrel by 0517 GMT, after ending the previous session down $1.33 at $47.75 a barrel.US crude rose 31 cents to $44.79 a barrel, having slumped $1.88 on Wednesday to settle at $44.48."A combination of a slightly better supply-side scenario in terms of prices and a bit of an improvement in industrial sentiment globally has brought in some support," said Michael McCarthy, chief market strategist at CMC Markets in Australia.Data from the Energy Information Administration on Wednesday also showed that U.S. crude oil stocks fell 1.9 million barrels in the week to Sept. 18, the second straight weekly drawdown. Analysts had expected a draw of 533,000 barrels.Still, gasoline stocks rose 1.4 million barrels, compared with analyst expectations in a Reuters poll for an 819,000-barrel gain.The build in motor fuel in the world's largest oil consumer after the end of its summer driving season raised new concerns about high product stocks during autumn months.And longer-term, many analysts still see a continuing supply surplus weighing on the market."Despite early signs of a cutback in US shale production, the underlying supply and demand fundamentals remain weak for both Brent and WTI. This, alongside uncertainties surrounding China and the broader health of the global economy, is capping any recovery in prices," said BMI Research, part of the Fitch ratings agency.BMI added that it was holding to below-consensus forecasts for both key crude benchmarks for the next two years."Major supply additions in West Africa, North America, the North Sea and the Middle East will continue to outpace the growth in demand, contributing to a rising overhang of crude in the market," BMI said.A planned shutdown of Britain's North Sea Buzzard oilfield, has been reset to November from October, its operator Nexen said, contributing to a more immediate outlook for ample supplies. The field is the biggest contributor to the Forties oil stream, which has the largest volume of the four North Sea crudes used in the Brent benchmark.Asian shares were subdued on Thursday after more dour economic news in China and the United States prompted a bruising selloff the previous day. In the currency market, the euro was helped by comments from European Central Bank President Mario Draghi that the bank needed more time to decide on whether further stimulus is required.(Reuters)
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Iran has offered to supply natural gas at $2.95 for a urea plant that India will set up at Chabahar port on the Persian Gulf, but New Delhi wants rates to be lowered. With the US and other western powers easing sanctions against Iran, India has been in talks with Tehran to set up a gas-based urea manufacturing plant at the Chabahar port, besides developing a gas discovery ONGC had made. The total investment in the projects will be around Rs 1,00,000 crore, Road Transport, Highways and Shipping Minister Nitin Gadkari said today. Asked about the development of the port, he said: "Various ministries will give their report by September 28, based on which a final decision will be taken. India is ready to invest more than Rs 1 lakh crore, but that depends on negotiations with Iran." On talks on supply of natural gas, Gadkari further said: "Iran is offering gas to India at $2.95 per million British thermal unit to set up urea plant at the Chabahar port in Iran. India is negotiating the gas price and has demanded it at $1.5 per mmBtu rate." The rate offered by Iran is less than half the rate at which India currently imports natural gas from the spot or current market. Long-term supplies from Qatar cost four-times the Iranian price. India, which imports around 8-9 million tonnes of the nitrogenous fertiliser, is negotiating for a price of $1.5 per mmBtu with the Persian Gulf nation in a move which if successful will see a significant decline in the country's Rs 80,000 crore subsidy for the soil nutrient. India has already pledged to invest about $85 million in developing the strategic port off Iran's south eastern coast, which would provide India a sea-land access route to Afghanistan bypassing Pakistan. "India is ready to make huge investments in Iran. If urea plant is set up, it will result in slashing of urea prices in India by 50 per cent and cut on huge subsidy on urea, which is Rs 80,000 crore," he added. Earlier this month, Gadkari said: "I had been to Iran and we are trying to procure gas at a very economical rate. In 2013, they had offered it at the rate of 82 cents, less than a dollar. We make urea from naphtha. We are trying to set up a urea plant in Iran." Ministries of Chemical & Fertiliser and Petroleum are working on the proposed 1.3 million tonnes per annum plant, which once successful will led to urea prices coming down by 50 per cent, he had said then. The Minister had visited Tehran in May, and both the nations had inked a pact to develop the Chabahar port. Iran's Foreign Minister Mohammad Javad Zarif had also called on Gadkari last month. In August, Gadkari said Iran has given "very good offers" to India to develop the integrated Chabahar port, which has a special economic zone (SEZ). (PTI)
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Oil prices edged up in early trading in Asia on Monday (21 September) as US drilling slowed and analysts estimated that $1.5 trillion worth of planned American production investment was uneconomical at prices of $50 per barrel or lower.Crude oil prices have plunged almost 60 percent since June 2014, when soaring global production started to clash with slowing demand. This includes losses of more than a quarter since June this year as a sharp slowdown in China has sparked concerns over the health of the world economy.Analysts said the low prices were beginning to impact production as drillers slow down new projects, especially in cost-sensitive North America where drillers react fast to changing prices.US energy firms cut oil rigs for a third week in a row last week, a sign that the latest crude market weakness was causing drillers to put on hold production plans, triggering an increase in prices on Monday.US West Texas Intermediate (WTI) crude futures were trading at $45.04 per barrel at 0421 GMT, up 36 cents from their last settlement. Globally traded Brent futures were at $47.84 per barrel, up 37 cents."The current rig count is pointing to US production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day at the observed path of the US horizontal and vertical rig count across the Permian, Eagle Ford, Bakken and Niobrara shale plays," Goldman Sachs said."The implied year-on-year growth by 4Q15 of 120,000 barrels per day is lower than the prior week's estimate of 125,000 barrels per day," it said.Analysts said low prices would have a bigger impact in the longer term as producers struggle to cut enough costs."While operators are seeking an average cost reduction of 20-30 percent on projects, supply chain savings through squeezing the service sector will only achieve around 10-15 percent on average," energy consultancyWood Mackenzie said."$1.5 trillion of uncommitted spend on new conventional projects and North American unconventional oil is uneconomic at $50 a barrel," Woodmac added.(Reuters)
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Oil prices fell on Monday (14 September) in Asian trading as weakening demand weighed on markets, although U.S. futures received some support from reduced American drilling.Front-month Brent crude futures were down around 40 cents from their last settlement at $47.73 per barrel at 0402 GMT. US crude futures dipped 16 cents to $44.46.The US oil rig count fell by 10 to 652 last week, the second straight monthly drop, and the International Energy Agency said on Friday that ongoing production cuts would lead to a rebalancing of the market by next year.Yet several banks said the immediate outlook remained weak."Both the supply and demand pictures look less favourable over the coming months ... Outside the US, oil fundamentals appear to be slipping seasonally," Morgan Stanley said on Monday, adding that there was potential for floating storage within the second half of 2015.Macquarie noted that falling global auto sales in August were dragging on demand."Sales were 1.0 per cent lower YoY (year-on-year), slightly more than the 0.8 per cent fall seen in July 2015," the bank said, although it added that sales could pick up towards the end of the year.ANZ bank said high production in the Middle East remained a concern on the supply side. OPEC's monthly market report will be published later on Monday.In part due to oversupply and to defend market share, Kuwait set its October Official Selling Price for crude to Asia60 cents lower than September, at a discount of $1.95 per barrel versus Oman/Dubai levels.Cheap oil undermines the health of energy firms, which have already seen steep share devaluations since prices started falling in 2014."The trajectory of the (oil price) recovery keeps getting shallower as our expectations for OPEC output shifts up ... The financial condition of the sector deteriorates further through 2017," Jefferies bank said."We are lowering our Brent oil price forecast by 9 percent to $54 per barrel (bbl) in 2015, 10 percent to $61/bbl in 2016 and 6 percent to $73/bbl in 2017," Jefferies said.Traders will this week eye U.S. monetary policy as the Fed will kick off a two-day policy meeting on Wednesday.Should interest rates be raised for the first time in years, analysts expect oil to fall as demand is hit due to higher import prices for countries not using the dollar.(Reuters)
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Chinese state-owned energy giant Sinopec Group will sell off most of its hotels by the end of 2017 and get rid of more than 4,000 company cars as part of efforts to root out corruption and waste, it said on Monday. Since President Xi Jinping's appointment in 2013, the government has cracked down on official corruption and extravagance in China, where the flaunting of personal and often illicit wealth and wasteful public spending have led to widespread criticism of the party. The big state-owned conglomerates have been a particular focus, and several high-ranking executives or former executives at Sinopec have been investigated or jailed. Sinopec Group is the parent of Sinopec Corp, Asia's largest oil refiner. In a statement released by the Communist Party's graft-busting Central Commission for Discipline Inspection, Sinopec said that the latest inspection by anti-corruption teams had been very effective at rooting out problems. "It has hit the nail on the head, grasping the essence and crux (of the issue), helping us to find the root of the disease," it said. As part of company efforts to rein in spending, all the hotels it runs will be sold off by late 2017, apart from a "small number" that are competitive or are in exploration areas with no other hotels, it said. State-owned firms in China tend to be very diversified and often own assets that have nothing to do with their core business. The number of cars the company operates will also be slashed by 4,300, it added, a move in line with other government-run organisations and departments. The probe found a series of other problems of waste, including a holiday two executives took to Taiwan in 2013 on the company dime, and four people who did not return to China immediately after a board meeting in gambling hub Macau. Sinopec is not the only state-owned energy company to have been probed by the graft watchdog. In a statement released late on Sunday, China National Offshore Oil Corp, better known as CNOOC, listed the steps it was taking to address the problems inspectors had found there, including promising not to use company money to buy high-end cigarettes and liquor. (Reuters)
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Indian refiners have been told to prepare to deposit $700 million with United Commercial Bank in readiness for it to pass on the first instalment of oil payments owed to Iran, two sources with knowledge of the matter said, ahead of the expected lifting of sanctions against Tehran. After the landmark nuclear deal between Iran and six major world powers struck on July 14, sanctions could begin to be removed later this year if U.N. inspectors confirm Tehran is complying with its provisions. The refiners -- Essar Oil, Mangalore Refinery and Petrochemicals, Indian Oil Corp, Hindustan Petroleum Corp and HPCL Mittal Energy -- together owe a total of more than $6.6 billion. The $700 million part-payment will be split in line of the proportion owed by each. Last month Reuters reported that Indian refiners were asked to be prepared to pay $1.4 billion dollars to Iran in two equal installments. India is Iran's biggest oil client behind China, though New Delhi has reduced purchases under pressure from sanctions. Indian refiners together owe Iran more than half of the bill for crude bought since February 2013, when a route to pay for Iranian oil through Turkey's Halkbank was stopped. Under an interim nuclear deal in November 2013, some of Iran's blocked funds were released by Asian buyers, including India. Indian companies have deposited 45 percent of their oil payments in a rupee-denominated account at United Commercial Bank, which Iran is allowed to use to buy goods not covered by sanctions, such as food and medicine. (Reuters)
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The world's top oil exporter Saudi Aramco will open an office in India by the end of this year to help boost its crude sales in the world's fourth largest oil consuming nation, sources with knowledge of the matter said. India is one of the biggest markets for Saudi oil. In fact, Saudi Arabia has been the top supplier to the South Asian nation for the past 14 years starting April 2001, according to the government data. Saudi Arabia's share in India's crude intake has, however, dropped to about 18.5 percent in the year to March 2015 from about a quarter a decade ago, while India's refinery capacity has doubled to about 4.6 million barrels per day in the period. "With the new office, Aramco will integrate its existing operations in India run through Aramco Overseas with the crude sales business," said one of the sources, adding that India was a bright spot in an otherwise sluggish global oil sector as fuel demand in the country was rising contrary to other regions. Saudi Arabia opened Aramco Overseas in India in 2010 but its role has been limited to engineering, material requirement and inspection-related activity, according to the company website. "Aramco's office in New Delhi will be similar to the one in Tokyo and Seoul which also look into supply of oil to these countries," said a second source. The sources did not want to be named as they were not authorised to speak to media. India will be the fifth country in Asia where the state-owned oil company Aramco will set up offices after Korea, Japan, China and Singapore. It also has Aramco services company in the United States and Aramco Overseas company in Europe. Aramco's push into India comes at a time when fuel demand in the country is rising, driven by the government's focus on local manufacturing, infrastructure development and rising car sales. Below average monsoon rains are also pushing up demand for diesel used in gensets to pump water for irrigation. Kuwait Petroleum Corp also has an office in India that looks into crude sales to the country. (Reuters)
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Indonesia is reactivating its membership of the Organization of the Petroleum Exporting Countries in December, OPEC said on Tuesday, which would add almost 3 percent to the group's oil output already close to a record high. The southeast Asian country would be the fourth-smallest producer in the Organization of the Petroleum Exporting Countries ahead of Libya, Ecuador and Qatar, and bring the number of participants to 13 countries. Indonesia was the only Asian OPEC member for nearly 50 years before leaving the group at the start of 2009 as oil prices hit a record high, and rising domestic demand and falling production turned it into a net oil importer. In a statement, OPEC said Indonesia's request to reactivate its full membership was circulated to OPEC members and following their feedback, OPEC's next meeting on Dec. 4 will include the formalities of reactivating its membership. "Indonesia has contributed much to OPEC's history," the statement from the group's Vienna headquarters said. "We welcome its return to the Organization." Indonesia's Energy Minister, who OPEC said will be invited to December's meeting, told Reuters earlier on Tuesday the country would return as a full member. The development is no great surprise as in OPEC terms Indonesia never really left. OPEC termed its departure a "suspension." Ecuador, which rejoined in 2007, set a precedent for a return from suspension. OPEC sources made clear the door was always open. Indonesia's status as a net importer had raised the question of whether it would return as a full member given that OPEC's Statute says any country with a "substantial net export of crude petroleum" may become a full member. OPEC pumps more than a third of the world's oil and is engaged in a defense of market share, having dropped its long-standing policy of cutting output to support prices in November 2014. The addition of Indonesia's output will boost OPEC's production by about 2.6 percent based on July output figures towards 33 million barrels per day (bpd) - far in excess of OPEC's 30 million bpd official target. OPEC output has not been above 32 million bpd since 2008, before Indonesia's exit. Indonesia produced 840,000 bpd in July, according to the International Energy Agency, and OPEC pumped 31.88 million bpd in July according to a Reuters survey - the highest monthly rate on record from the current 12 members. (Reuters)
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The Union government's approval of the Marginal Fields Policy (MFP) for 69 oil and gas fields, proposing market linked prices and a revenue sharing mechanism, would shift the key risks to developers says India Ratings and Research (Ind-Ra). However, the policy is also likely to result in the simplification of the method to calculate the government's share. This presupposes prudence on the part of developers while bidding as the biddable parameter is likely to be the revenue share of the government. Developers will need to consider an overall exploration, development and production (EDP) cost along with volume and price estimates, as these would be the key variables for ensuring a reasonable internal rate of return on the projects. Ind-Ra expects the market linked prices for such gas to be closer to the lower of the spot or term liquefied natural gas landed prices, as these would be the alternatives available with key end-user industries. Thus, market-linked price from these marginal gas fields could be in the range of 1.5x-2.0x of the current domestic gas price of $4.66/mmbtu. Volume off-take at these prices should not pose a challenge and the gas is likely to see demand from consumers in the fertiliser, refinery and city gas sectors. In a significant move, the methodology for the calculation of the government's share from the hydrocarbons produced from these marginal fields has been shifted to the percentage share of gross revenue. This is in stark contrast to the earlier production sharing contracts (PSC) which comprised two main elements, cost recovery and sharing of profits based on pre-tax investment multiple. Thus, exploration and development (ED) costs (till the level bid for) were pass-through and first recoverable for developers. Furthermore, the investment multiple determined the government's share. Under PSC, the profit share of the government increased gradually till ED costs were recovered. Also, there were differences over gold plating of costs given that government's share of profit was calculated post the recovery of costs incurred by developers on ED. The prior methodology as outlined in PSC meant lower risks for developers as it allowed them to first recover the costs incurred followed by the sharing of profits with the government. However, profit maximisation strategies led to the allegations of gold plating of such costs. Additionally, this methodology led to disputes and delays in terms of costs acceptances due to the highly technical nature of cost details. The new methodology, though simplifies the basis of calculation of government's share, would place a greater risk on developers as they would need to estimate three key variables in advance before placing a bid a) EDP costs b) quantum of hydrocarbon extractable and c) market prices. Generally, revenue sharing contracts have been more amenable for businesses where upfront costs and output are fairly ascertainable. However, in case of hydrocarbon discovery both costs and output are not ascertainable completely and the success of the exploration activity itself is a low probability event. Thus, there might be situations where in developers could incur higher-than-expected EDP costs and thereafter the need to share a percent of the revenue with the government could lead to a longer payback or breakeven period, thus depressing project returns. Additionally, the nuances with respect to the percentage sharing methodology whether it would be a fixed percentage over the life of the block or would be a sliding scale dependent on gross revenue and cost incurred by the developer remain to be seen and would determine developers' interest in the same. In the PSC regime, the license to a particular developer was restricted to a single hydrocarbon, whether it be oil or gas and a separate license was required if any other hydrocarbon was discovered. However, the current policy would be applicable on all hydrocarbons discovered and exploited in the field which would ease the process for developers. MFP is applicable for the development of hydrocarbon discoveries made by national oil companies i.e. Oil & Natural Gas Corporation Limited and Oil India Limited. These discoveries could not be monetised earlier due to reasons such as isolated locations, small size of reserves, high development costs, technological constraints, fiscal regime among others. Under MFP, exploration companies would submit their bids for exploiting these oil fields under competitive bidding.
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Oil and Natural Gas Corp (ONGC) has paid just over $1.25 billion for a 15 per cent stake in Russian oil major Rosneft's Vankor oil field, a source with direct knowledge of the deal said on Friday. ONGC expects to get more than 3 million tonnes of oil a year (between 66,000 and 70,000 barrels per day) from its holding in the huge Siberian oil field, the source told Reuters on condition of anonymity. Rosneft earlier announced the deal to sell the interest in Vankor, a key source of supply to markets in the Asia-Pacific. Chief executive Igor Sechin said that talks with China's CNPC on a Vankor stake were continuing.
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