Every Wednesday, EnerCom’s Oil & Gas 360® will deliver media stories, company updates, and research commentary covering the crude oil spectrum. The theme for this week: Crude Oil Ain’t No Turkey.
CRUDE OIL INVENTORY/’000 bbls (Week Ended 11/16/12)
Current: 374,470
Actual Build/(Withdrawal): (1,466)
Economist Average Estimate: 764
Previous: 375,936
Click here for the chart with five year averages.
CRUDE OIL IN THE MEDIA
*Oil Gains More Than $1 After Tel Aviv Bus Explosion – Reuters
Brent crude oil rose by more than $1 a barrel on Wednesday after an explosion on a Tel Aviv bus intensified concerns that the clashes between Gaza and Israel could lead to a wider regional conflict that would disrupt oil flows. Brent crude futures were up about 1.1 percent at around $111 a barrel, off an earlier session-high of $111.18. U.S. crude last rose 0.8 percent to around $87 per barrel. An explosion hit a bus in the heart of Tel Aviv on Wednesday, wounding at least 10 people in what officials said was a terrorist attack. This dented mounting hopes that a cease-fire may be brokered in coming days. “It’s the main reason why oil prices are up today against the trend of falling commodities prices,” said Carsten Fritsch of Commerzbank in Frankfurt. Copper was down more than one percent. – Read More
*Brent to Eclipse US Crude as World Oil Benchmark – Reuters
It has been coming for years, but Brent looks set finally to overtake U.S. light crude as the preeminent oil benchmark next year as one of the top financial market indexes switches weightings. Brent is becoming the hedge of choice for big investors, even for U.S. companies. The volume of Brent futures and options has soared, boosting liquidity at the expense of the U.S. crude, also known as West Texas Intermediate, or WTI. The widely followed S&P GSCI index marks this on Jan.1, raising its weighting for Brent and cutting WTI, following a migration by major oil producers and consumers. Saudi Arabia and other producers have already moved away from the landlocked U.S. grade while oil refiners, end-users and hedge funds have gravitated towards the North Sea benchmark that they think tracks global risk more accurately. – Read More
*Exxon declares force majeure on Nigeria Qua Iboe oil exports – Reuters
Exxon Mobil’s Nigerian unit declared force majeure on Qua Iboe crude oil exports on Wednesday due to outages caused by a pipeline oil spill on Nov. 9, the company said. “Mobil Producing Nigeria (MPN) … confirms it has declared a Force Majeure due to the difficulty in meeting projected liftings because of repair work on a section of pipeline affected,” the company statement said. Shell lifted a force majeure on its Nigerian Bonny Light crude oil loadings on Wednesday. – Read More
*Ample Supply to Limit Oil’s Rise Despite Gaza Crisis: Poll – CNBC
The escalation of the Gaza crisis will continue to boost the risk premium in benchmark oil prices though well-stocked global inventories and weak demand will cap any move higher. “We believe this bounce has a little bit more to go but are bearish for the coming few weeks,” said Kirk Howell, Partner at Spy Ridge Capital. “While the downside is limited as missiles fly in the Middle East, the over-supply and dropping demand will outweigh the knee-jerk reactions higher over time.” World oil markets are well-supplied despite the loss of nearly 1 million barrels a day of crude from Iran following sanctions by the United States and European Union, the head of the International Energy Agency (IEA) told Reuters on Monday. U.S. oil demand fell 2.3 percent in October from a year earlier, to 18.4 million barrels a day, the American Petroleum Institute said Friday. Demand was the weakest in October in 17 years, the trade group said, and was up 1.3 percent from September. Demand in the first 10 months of the year was 2.1 percent below the same period in 2011 at 18.562 million barrels a day. – Read More
*Crude Oil Rises on Gaza Conflict Amid Declining U.S. Stockpiles – Bloomberg
Oil rose after a blast on a bus in Tel Aviv injured at least 10 people, boosting speculation that the conflict between Israel and the Palestinians of Gaza may disrupt crude supply from the Middle East. Futures climbed as much as 1.3 percent after the explosion near the military headquarters in Israel’s commercial hub. Egyptian plans to announce a cease-fire in Gaza fell through yesterday following a weeklong barrage of Palestinian rockets and Israeli airstrikes. Prices advanced earlier after American Petroleum Institute data yesterday showed crude inventories fell for the second week in three. An Energy Department report today is forecast to show supplies increased. “Until we get some further news from the Palestine-Israel situation, traders will probably trade from the long side,” Ole Hansen, senior manager of trading advisory at Saxo Bank A/S, said by phone from Copenhagen today. “There were increased hopes of a cease-fire in the Middle East yesterday. That has not really materialized.” – Read More
*Is It Time for the U.S. to Join OPEC? – Bloomberg
The announcement by the International Energy Agency that the U.S. will surpass Saudi Arabia in oil production by 2020 is testimony to the power of technology to change an industry. The U.S. is developing so-called tight oil reserves, including the huge Bakken shale formation in Montana and North Dakota, by extracting the oil through hydraulic fracturing and horizontal drilling, techniques that weren’t available 30 years ago. Within 10 years, U.S. oil imports will drop to about 4 million barrels a day from a current average of 10 million, thanks to new oil production in the U.S. and stricter fuel-efficiency standards for cars and trucks, IEA Chief Economist Fatih Birol said at a London press conference on Nov. 12. The U.S. will pump 11.1 million barrels of oil a day in 2020 and 10.9 million in 2025, according to the IEA. Those figures are 500,000 barrels and 100,000 barrels higher, respectively, than its forecasts for Saudi Arabia for those years. The U.S. is not destined to become the next Saudi Arabia, though. “Given Saudi Arabia is willing to shift production up and down, it will retain a large degree of influence and remain important as a price-influencer,” says Gareth Lewis-Davies, an analyst at BNP Paribas (BNP) in London. The U.S. will be the world’s top producer for about five years, starting in 2020. Sometime after that, U.S. production will slip behind Saudi Arabia’s again, according to the IEA’s Birol. – Read More
*America’s Oil Boom: Shape Up or Ship Out – WSJ
America’s newfound natural-gas bounty has already sparked arguments over whether or not to export it. Soon, it will be oil’s turn. The International Energy Agency reckons the U.S. could become a net oil exporter around 2030. It is a tantalizing prospect. But crude-oil exports will make headlines well before 2030. Try next year. U.S. crude-oil exports are heavily restricted. Refined products such as gasoline can be shipped abroad more easily—indeed, the U.S. became a net exporter of these last year for the first time since 1949. Refiners have been selling increasing amounts in foreign markets as domestic demand has sagged amid economic sluggishness and renewed energy-conservation efforts. Pressure to export crude oil won’t grow because the U.S. will suddenly no longer need imports. The Department of Energy expects net imports to meet 39% of domestic oil consumption in 2013. Rather, it is a matter of logistics. – Read More
*Trans-Alaska Pipeline was response to OPEC oil embargo – Lohud
On Nov. 16, 1973, President Richard Nixon authorized the construction of the 800-mile Trans-Alaska Pipeline from Prudhoe Bay to Port Valdez, shutting off legal challenges that had halted the project for four years. In 1836, Thomas Simpson of the Hudson Bay Co. reported the presence of oil on the North Slope of Alaska, and famed geologist Alfred Hulse Brooks confirmed oil seepages at Simpson’s Point, Fish Creek and Canning River east of the village of Barrow. When the U.S. Navy began large-scale conversion from coal-powered to oil-powered ships, a concerned government looked to secure strategic supplies. In 1923, President Warren G. Harding designated four strategic Naval Petroleum Reserves (the Teapot Dome scandal that erupted just after Harding’s death involved the reserves in Wyoming and California), reserving these areas for future drilling and exploitation. NPR-4 was 23 million acres near Barrow. As World War II was winding down, the Navy commissioned exploration surveys to determine the extent of the oil fields. The surveys were abandoned in 1953 with several promising but commercially unviable fields identified. The fields were determined to be unviable because of their estimated size and the complexity of getting the oil to market. – Read More
*Oil Rises on Mideast Fears – WSJ
Oil futures rose more than 1% as escalating hostilities between Israel and Palestinian militants renewed fears about a broader conflict that would disrupt supplies of Mideast crude oil. The gains came after Israel intensified its air campaign in the Gaza Strip and militants there ramped up their rocket attacks deep into Israeli cities. Israel began mobilizing tens of thousands of troops on the Gaza border, leaving observers fearful that the hostilities could heat up further. Egypt’s new government voiced support for Hamas on Friday by dispatching its new prime minister to Gaza, an unprecedented show of support for such a senior Egyptian official. Although none of the countries involved are major oil producers, the flare-up has raised fears that the conflict could spread to other countries in the region. “Your big concern is that this ends up regionalizing,” said Bill O’Grady, chief market strategist at Confluence Investment Management. The oil market tends to price in the worst-case scenario, Mr. O’Grady added. – Read More
*New Libya oil minister: corrosion expert steps from the shadows – Reuters
Libya’s new oil minister, once imprisoned under Muammar Gaddafi, is relatively unknown in the industry but brings with him technical expertise to take charge of the OPEC member’s economic lifeline after it was restored to pre-war levels. Abdelbari al-Arusi, 51, faces tough tasks ahead: improving security as plans to train former rebel fighters, now guarding oil installations, take hold, dealing with calls for more regional authority in the oil-rich east and threats of strikes. Arusi studied chemical engineering before earning a masters and doctorate in corrosion protection in Britain. He worked at Libya’s Sirte Oil for 16 years, an engineer in the field of corrosion at the Marsa El-Brega terminal in the east. Arusi later expanded his responsibilities to inspection, budgets, training as well submitting technical proposals to the country’s top oil body, the National Oil Corporation (NOC). – Read More
RESEARCH COMMENTARY
*Macquaire (11.19.12)
Oil prices were higher on Friday as a fire on a Gulf of Mexico platform and the escalating conflict between Israel and Palestinians stoked supply concerns. News of the fire at the Black Elk platform pushed oil price higher in the US morning, until Coast Guard announced that the platform was not producing oil at the time of the incident. January Brent closed the day up $0.47 to settle at $108.95 a barrel. January WTI closed the day up $1.05 to settle at $86.92 a barrel.
Event risk, stronger technical price action, optimism over the weekend on the Fiscal Cliff deal and a much leaner net long balance on oil has both barrels much better bid to begins the weeks trade– noted strength in the product pool, covering of the forward curve and buyers of vol are all contributing to the strength seen as the balmo trade could now be looking for a new/higher range on both WTI and Brent for the new vested bull. WTI length from managed money dropped 20k to 79k, down from the most recent max of 192k in late September.
*Wells Fargo Securities (11.19.12)
In crude markets, increased turmoil out of the Middle East boosted both WTI and Brent on Wednesday, following two straight days of losses. January is now the front-month for Brent, as December contracts were last traded on 11/15. Last trades for December WTI are Friday (11/16). Brent closed out at $109.10/bbl, +0.6% w/w, while WTI ended at $86.67/bbl, +0.7% w/w.
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