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CRUDE OIL INVENTORY/’000 bbls (Week Ended 3/1/13)

Current: 381,351
Actual Build/(Withdrawal): 3,833
Economist Average Estimate: 327
Previous: 377,518

Click here for the chart with five year averages.

CRUDE OIL IN THE MEDIA

*U.S. Tops Saudi Arabia as World’s Biggest Fuel Producer – WSJ

The U.S. has catapulted past Saudi Arabia as the world’s biggest fuel producer, now that abundant production from shale-oil fields has pushed U.S. crude-oil output to a 20-year high. Long the world’s biggest oil consumer, the U.S. took the largest supplier crown in November 2012 for the first time since August 2002, producing 11.654 million barrels a day of liquid fuels, including crude, refined petroleum products like gasoline and other liquids like biofuels, according to the federal Energy Information Administration. That compared with 11.252 million barrels a day for Saudi Arabia, almost all of it coming in the form of crude oil. In December, the gap with the Saudis widened, as the U.S. produced 11.63 million barrels a day of liquid fuels, a rise of 7.7% from a year earlier, compared with the Arab nation’s 10.99 million barrels a day, when Saudi Arabia also cut output. The jump in the U.S. fuel supply came amid surging output from shale-oil fields, where new drilling techniques have unlocked vast amounts of fuel. Overall U.S. crude production topped 7 million barrels a day for the first time in 20 years in November, with output averaging 1 million barrels a day above year-earlier levels in the final four months of 2012. As U.S. supply was rising, Saudi Arabia, the world’s biggest oil exporter and the de facto leader of the Organization of the Petroleum Exporting Countries, reduced its crude-oil production to 9.025 million barrels a day. The Arab nation had cut its output about 700,000 barrels a day after boosting its production to 10 million barrels a day in June 2012 to guard against supply shortages due to the European Union embargo on Iranian crude oil. Saudi officials said in January that the cut was in response to slowing oil demand, especially in Asia. – Read More

*Oil Output on U.S. Land Lagging Amid Boom, Report Finds – Bloomberg

Oil and gas production in federal areas is lagging behind the boom on private lands, a report by non-partisan congressional researchers found, bolstering complaints made by Republicans and energy-industry lobbyists. The Congressional Research Service cited Department of Interior data showing a decline in oil output on federal lands and waters from 2009 through 2012, while production on private lands jumped more than 31 percent over that same period. Statistics for natural gas production showed a similar trend. “A web of red tape and a backlog of delayed permits are blocking important energy production opportunities on federal lands,” Representative Ed Whitfield, a Kentucky Republican, said today in a statement as the Energy and Commerce Committee released the report. “Where the states have been in charge, we have seen energy development boom in a safe and responsible way, but under federal control we have seen a sharp decline.” President Barack Obama has set a target of reducing U.S. oil imports by a third by 2025 through more domestic oil production and increased use of natural gas and renewables. Net imports of crude and petroleum products accounted for 45 percent of the nation’s oil consumption in 2011, according to the U.S. Energy Information Administration. The Interior Department said it has worked to reduce a backlog of pending permits, and reports dramatic increases in deepwater drilling. An agency report in 2012 found only 24 percent of U.S. acres under lease were producing, according to the congressional document. – Read More

*Are celebrity ‘fractivists’ overlooking science in their condemnation of the fracking industry? – Fox News

The scene: a Manhattan art-house theater. The cause: a campaign against the gas drilling process known as fracking that’s being led by more than 100 celebrities, including Yoko Ono, Sean Lennon, Robert Redford, Mark Ruffalo and Mario Batali. Outside, demonstrators in hazmat suits circle the theater. Inside, actress Scarlett Johansson attends a benefit screening of “Gasland,” the documentary film that has become the movement’s manifesto. Johansson tells The Associated Press that her “Avengers” co-star Ruffalo introduced her to the cause, and that she found the film “incredibly shocking.” The campaign has galvanized hundreds of thousands of followers, but as with many activist causes, the facts can get drowned out by the glitz. Now, some experts are asking whether the celebrities are enlightened advocates or NIMBYs — crying “Not in my backyard!” — even as their privileged lives remain entwined, however ruefully, with fossil fuels. Much of the anti-fracking activism is centered in New York City, where concerts, movies and plays use huge amounts of energy, gourmet chefs including Batali cook with gas, and most people — the glitterati included — heat with gas. There’s no doubt that critics of hydraulic fracturing — a practice colloquially known as fracking that involves injecting water, sand and chemicals into underground rock to free vast reserves of gas — have some legitimate concerns. There have been documented cases of leaking gas ruining nearby well water, of air pollution and of problems from the waste the drilling generates. Experts say those are important parts of the story — but far from the whole story. – Read More

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*No Dice on a Big International Merger: Suncor CEO – CNBC

Suncor Energy has seen “a lot of interest” from potential merger partners, CEO Steve Williams said on Tuesday, yet is unlikely to consent to a deal with an oil major like ExxonMobil. Canada’s largest energy company is often credited with having a large amount of free cash and a sprawling network of refineries. In Alberta, the company produces upwards of 350,000 barrels of oil a day. After having successfully merged with Petro-Canada in 2009, “We are now a fully integrated oil company, particularly on this continent,” Williams told CNBC on the sidelines of the CERA conference in Houston. While acknowledging that there was significant interest from investors and rivals in the company, Williams bluntly ruled out a merger with energy giant ExxonMobil. He explained that legislation and competition rules all but forbid such an outcome. “When we acquired Petro-Canda, there was something called the Petro-Canada Act, which precludes a purchase of Suncor without govt approval,” Williams said. “It’s very unlikely that a company the size and strategic importance of Suncor to Canada could be acquired.” – Read More

*US Oil Has Had Renaissance Since Last Dow Record – CNBC

When the Dow last set a record high in late 2007, the U.S. was worried about waning oil supplies and was producing about 40 percent less oil than it produces now. But a technological breakthrough—the joining of hydraulic fracturing technology and horizontal drilling—has led to an energy revival in the U.S. with now both oil and gas more plentiful than would ever have been expected five years ago. Representatives of some of those companies that pioneered the new drilling of American oil participated in the IHS CERAWeek energy conference in Houston this week, and on Tuesday several discussed the industry to a standing-room-only crowd. Jack Stark, senior vice president of exploration with Continental Resources, explained how the Bakken formation in North Dakota has revealed increasingly more oil supply. The company, which went public in 2007, found that by 2012 there was far more there than originally thought, in part because of newer findings in the Three Forks area. “When we first went into the Bakken, Three Forks wasn’t even on my radar,” he said. Of the U.S. tight oil drilling plays, the Bakken is the largest, spanning 14,700 square miles and collectively holding 24 billion barrels of potentially recoverable oil equivalent, according to Continental. – Read More

*Oil Drops Fourth Time in Five Days on Inventory Report – Bloomberg

West Texas Intermediate oil fell for the fourth time in five days after an American Petroleum Institute report showed that U.S. inventories last week increased the most since May. Prices dropped as much as 0.8 percent after the industry group said yesterday that stockpiles climbed 5.6 million barrels in the week ended March 1, a third consecutive gain. Venezuelan President Hugo Chavez died yesterday, and an election must be held within 30 days in OPEC’s fourth-biggest producer. Futures pared losses after a report showed U.S. companies added more workers than projected in February. “Yesterday’s API inventory report was bearish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “People are going to wait and see what happens in Venezuela. They have an election and it’s too soon for investors to react right now.” WTI for April delivery slid 66 cents, or 0.7 percent, to $90.16 a barrel at 9:43 a.m. on the New York Mercantile Exchange. Volume was 31 percent below the 100-day average for the time of day. Brent for April settlement fell 74 cents, or 0.7 percent, to $110.87 on the London-based ICE Futures Europe exchange. Volume was 46 percent above the 100-day average. – Read More

*Fort Collins City Council votes 5-2 to ban fracking within city limits – 7 News

The Fort Collins City Council voted to ban fracking within the city limits on Tuesday night. The Coloradoan reported that council members voted 5-2 to give final approval to an ordinance prohibiting hydraulic fracturing — or fracking as the gas and oil exploration technique is called. Council members Wade Troxell and Aislinn Kottwitz opposed the ordinance. The vote came after hours of emotional testimony from about 65 speakers, nearly all urging the council to imposed the ban to protect the city’s air and water from pollution, the newspaper reported. Mayor pro tem Kelly Ohlson said state regulators have no credibility with him, nor does Gov. John Hickenlooper, who said last week the state would sue the city if it passed a ban, the Coloradoan reported. “I believe the governor should spend his time protecting the health and safety and welfare of citizens of Colorado rather than acting like the chief lobbyist for the oil and gas industry,” Ohlson said. “In fact, I think he should literally quit drinking the fracking Kool-Aid.” – Read More

*After Chávez, a Question of His Country’s Oil – WSJ

Some of the most significant ramifications of the death of Hugo Chávez for the U.S., both short-term and long-term, may have little to do with the late ruler’s politics and more to do with his country’s oil. Venezuela is one of the world’s biggest oil exporters and one of the top five suppliers to the U.S. As a result, any sign of instability following Mr. Chávez’s death could roil oil markets, boost crude prices and dent the global economy. Even a Chavista successor to Mr. Chávez—such as current Vice President Nicolás Maduro—could have a tough time maintaining the heterogeneous coalition of socialists, businessmen, and the military that has coalesced around Mr. Chávez. “Instability in Venezuela is the real risk, because that could have a dramatic impact on global oil supplies,” said Mark Jones, a Venezuela expert at Rice University. Venezuela produces about 2.5 million barrels of oil a day and supplies about 1 million barrels a day to the U.S. Oil wealth, especially in the middle of the last decade, underwrote Mr. Chávez’s “Bolivarian revolution” and allowed lavish spending on social programs. But chronic underinvestment in the state oil company, Petróleos de Venezuela, and hostility to foreign firms has steadily eroded the country’s oil-production capacity, leaving the future murky. – Read More

*Traders React: What Chavez Death Means for Oil Market – CNBC

The death of Venezuelan President Hugo Chavez leaves open the presidency of the fourth largest oil exporter to the United States. So should we get set for market-rocking political tensions that could drive oil prices screaming higher? Perhaps not. “In the near-term, we certainly had some uncertainty,” said Tim Evans, an energy futures specialist at Citi Futures. “But Venezuela elects their leaders democratically. This matter will be decided at the polls.” Evans said he doesn’t expect a dramatic shift in Venezuelan production any time soon. “What I expect to see is a period of mourning in Venezuela, during which oil production will continue at current levels – and then they’ll gather themselves for the required elections,” he said. Jeff Kilburg of KKM Financial trades crude oil along with other commodities, and he concurs with that sanguine view. “Lots of people talk about a big type of change coming,” Kilburg said, “but I definitely don’t think it’s a major market mover.” Crude oil futures added about twenty cents in the twenty minutes after the news broke. – Read More

*China Joining U.S. Shale Renaissance With $40 Billion – Bloomberg

China National Petroleum Corp., the country’s biggest oil company, is seeking its first stake in the U.S. as Chinese explorers with $40 billion of cash try to join an energy renaissance unlocking billions of barrels of crude. “We are currently studying” investing in U.S. oil, Jiang Jiemin, chairman of the state-run company, said yesterday at the National People’s Congress meetings in Beijing. Domestic rival China Petrochemical Corp. last month agreed to buy stakes in an Oklahoma field from Chesapeake Energy Corp. (CHK) for $1.02 billion. Chinese oil companies using government loans want stakes in shale fields that are fostering the most crude production in the U.S. in 21 years and helping wean it off Middle Eastern imports. They’ll be guided by the experience of China’s Cnooc Ltd. (883), whose $19 billion bid for Unocal Corp. was blocked by U.S. lawmakers eight years ago. Cnooc last month won U.S. approval for a $15.1 billion purchase of Nexen Inc. (NXY), albeit with curbs on operating the Canadian company’s Gulf of Mexico fields in U.S. waters. “Stake participation by Chinese companies in U.S. oil fields would be welcomed,” said Will Pearson, a London-based analyst for Global Energy & Natural Resources at Eurasia Group. “Full buyouts will continue to be scrutinized and opposed.” – Read More

*O&G firms booking fewer tankers – Business Times

Oil companies booked the fewest tankers since November 2010 to load two million-barrel cargoes of crude from ports in the Persian Gulf following the longest round of Organisation of Petroleum Exporting Countries (Opec) production cuts in four years. Charters plunged to 103 in February from 123 last month, according to data from Marex Spectron Group, a London- based commodities brokerage. The International Energy Agency cut its daily supply forecast for Opec this quarter by 0.3 per cent to 29.7 million barrels recorded on February 13.  Daily earnings for the supertankers, known in the industry as very large crude carriers, plunged 62 per cent to US$11,412 (RM35,300) in the past year, according to Clarkson.  They were US$7,518 in the week ended February 15, the lowest since September 2011. Frontline Ltd, the VLCC operator led by billionaire John Fredriksen, said February 22 it needs daily returns of US$24,200 to break even. – Read More

RESEARCH COMMENTARY

*Howard Weil (3.6.13)

Oil Commentary: Venezuela Regime Change Impactful to Oil Markets?

Quick Take: Hugo Chavez has officially passed leaving some questions on the future of oil markets in Venezuela. Production from the country has fallen from the 3.2MMBbl/d range toward 2.5MMBbl/d last month. Uncertainty remains on future political regime changes making it difficult to forecast the impact on the country’s oil output. At this point, we would not expect any material changes. However, a more accommodating business climate for outside investment could certainly lead to future production growth and benefit some of the larger players that maintain a decent relationship with the country such as CVX and TOT. Recall COP and XOM exited the country after having assets expropriated years ago.

*Bank of America Merrill Lynch (3.4.13)

Iraq struggling to meet production targets

Iraq is aiming to increase production from 3.1mb/d currently to a recent downwardly revised, but still very ambitious, goal of 9-10mb/d in 2020. Despite fresh efforts to spur investment, we estimate production will only grow to c. 4.3mb/d in 2015, still 220% below the government’s interim target of 5-6mnb/d. Iraq continues to struggle with lack of infrastructure, bureaucracy and shortage of water for reservoir injection. This is exacerbated by high capital commitment requirements and poor economic terms, leading many of the companies to scale back their investments. Of the oil and gas majors in our coverage, Gazprom, Total, ENI & BP are the most exposed to growth in Southern Iraq, whereas Genel, Petroceltic & Afren are the most levered to the Kurdistan Region.

Demand concerns keep global crude prices down

Crude prices fell on demand concerns after weak European economic data, political uncertainty in Italy and on looming US fiscal cuts. Brent-WTI spread remained stable even as increased refinery utilization kept US stock build up below expectations.

Majors posted Best WoW performance

The Euro Oils (DJ Stoxx Oil & Gas) finished the week (ending Mar 01) up 0.2% with Brent down 3.0% WoW. The Majors posted the best relative performance WoW (+0.9%). Services performed the worst (-3.2% WoW).

*Wells Fargo Securities (3.4.13)

State Department: Keystone XL Will Have No Significant Adverse Environmental Effects

Late on Friday (3/1) afternoon , the State Department released a 2,000 page report that indicates the Keystone XL pipeline is not a threat to environmental health. Although the State Department’s finding neither support nor oppose the project, we view it as a positive, particularly for Canadian oil sands producers, including DVN, who would benefit from higher Gulf Coast realizations. We note, however, that a final decision is still a ways off. The State Department will now open a 45-day comment period, which may lead to revisions before a final document is published and other federal agencies weigh in on whether the project is in the national interest (we’ve heard late summer is the likely target). From there, the Secretary of State will issue a recommendation to the President, who will ultimately decide the project’s fate. Environmentalists have already expressed their displeasure with the report, and we expect they will continue to pressure the Administration.

*Raymond James Equity Research

Energy Stat: Raising Our 2013 Oil Price Deck, Cutting 2014; Still Bearish

Yes, we are finally raising our out-of consensus, low oil price forecast for 2013. No, we are not capitulating on our bearish oil call. What has changed to encourage us to raise our 2013 oil price forecast? Not much on the fundamental front, other than Saudi has temporarily kicked the oil “can” down the road by unexpectedly taking about 1 million bbls/d of oil supply off the market. Remember that when we introduced our bearish 2013 oil price forecast in the middle of last year, our logic was that rising oil inventories would force global oil prices low enough to force Saudi (and/or OPEC) to cut production. At the time, we thought the oil price necessary to drive Saudi to cut would be closer to $85/Bbl Brent (and $65/Bbl WTI assuming a $20 differential). While our global oil supply/demand math has proven relatively correct, we were obviously not expecting Saudi to begin cutting production while Brent was still hovering above $110/Bbl. Because of these proactive Saudi cuts, we are raising our 2013 Brent forecast from $85 to $105/Bbl and our 2013 WTI forecast from $65 to $85/Bbl. Again, this does not mean that the global oil oversupply problem has been solved. In fact, our original over-capacity forecasts have remained remarkably consistent. Rather, it means that Saudi now seems willing to push out the timing of the glut – and, thus, the bottom for oil prices – into 2014. Accordingly, we are cutting our 2014 Brent oil price forecast from $95 to $85/Bbl and lowering our 2014 WTI price forecast from $80 to $70. We are keeping our long-term Brent forecast of $95 unchanged (with WTI at a $10 discount).

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable.  This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note.  This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results.  EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services.  In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies.  As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note.  The company or companies covered in this note did not review the note prior to publication.


Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.