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CRUDE OIL INVENTORY/’000 bbls (Week Ended 9/28/12)

Current: 364,698
Actual Build/(Withdrawal): (482)
Economist Average Estimate: 1,486
Previous: 365,180

Click here for the chart with five year averages.

CRUDE OIL IN THE MEDIA

*Presidential debate could shed light on energy issues – Politico

Wednesday’s presidential debate offers one of the final chances to pin down the candidates on the energy issues that have loomed so large in this campaign — from gasoline prices and green jobs to the Keystone XL pipeline and Solyndra. On some of the biggest issues, President Barack Obama and Mitt Romney have been content to evade the specifics.Obama, for example, has never offered a detailed response to more than 18 months of Republican attacks about how his administration handled the failed $535 million Solyndra loan guarantee — aside from his defense that all decisions were based on the “merits.” And Romney has left plenty of wiggle room in his shifting stances through the years on what, if anything, the government should do about global warming or incentives for renewable energy. Debate moderator Jim Lehrer could also explore the wide gulfs between the nominees’ competing energy visions — Obama’s emphasis on green jobs and his call for repealing oil industry tax breaks versus Romney’s promises to dramatically expand oil drilling and repeal Environmental Protection Agency regulations. – Read More

*Petrobras close to sale of $6 billion Gulf of Mexico assets: Report – Economic Times

Brazil’s state-owned energy giant Petrobas is close to selling most of its assets in the Gulf of Mexico worth up to $6 billion to reduce debt, the company’s chief executive told the Financial Times on Wednesday.  Chief executive Maria das Gracas Foster said that company planned to complete the sale by early next year of up to $6 billion (4.6 billion euros) of its $8 billion exploration assets in the Gulf of Mexico, as the company enacts a cost-cutting programme and seeks to raise $14.5 billion via asset sales. – Read More

*Opening Atlantic Ocean to offshore drilling likely – News Observer

After decades of inactivity, drilling off North Carolina’s coast seems more likely than at any time since state authorities blocked an effort by Mobil Oil to drill off the coast of Hatteras in 1990. Both presidential contenders are pursuing policies – offshore leases and seismic testing – that could move the nation closer toward eventual offshore energy exploration if significant energy reserves are discovered. Opponents of offshore drilling are treating both candidates’ strategies as threats. “There’s been no slowdown on offshore drilling,” said Michael Jasny, director of the marine mammal program at the Natural Resources Defense Council. “Ultimately this is a political issue. It’s vital that folks understand the impacts of offshore oil on their livelihood.” – Read More

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*Bombs Dumped in Gulf of Mexico Threaten Oil Rigs – Oil Price

After World War II, the U.S. government dumped millions of kilograms of unexploded bombs into the Gulf of Mexico. This is no secret; many governments dumped their unexploded ordnance into oceans and lakes from 1946 up until the 1970s, when it was made illegal under international treaty. Now that technology has advanced enough for oil companies to drill deep sea wells in the Gulf of Mexico, those forgotten payloads have become a real hazard. The U.S. designated certain areas around its coast for the safe dumping of explosives, nerve gas, and mustard gas. The problem is that the records of where these munitions were dumped are incomplete, and many experts believe that a lot of cargo was dumped outside of the designated areas. Now, decades later, no one has any idea of where the bombs are, exactly how many were dumped, or if they still pose a threat to humans or marine life. – Read More

*Oil regulator expects ND ‘discounts’ to abate – Houston Chronicle

North Dakota’s top oil regulator says he’s expecting “discounts” on the state’s crude to ease as some pipeline projects are finished. Lynn Helms says North Dakota crude oil also could be in demand to make jet fuel for Delta Air Lines. North Dakota oil producers are paid less for their crude because shipping is more expensive. But Helms says pipeline changes will make the difference smaller. He says they’ll make it easier for North Dakota crude oil to flow to refineries in Texas and the Gulf Coast. Delta is also starting up a refinery in Pennsylvania to make jet fuel. The airline is exploring getting North Dakota crude, because it’s cheaper than oil from Britain’s North Sea. Helms says North Dakota oil could be shipped to Pennsylvania by rail. – Read More

*Oil Falls First Time in Four Days on Gasoline – Bloomberg

Oil fell for the first time in four days as gasoline dropped on expectations that a supply shortage in New York Harbor will ease. Crude futures decreased 0.6 percent as gasoline fell for the first time in six days, paring last week’s 14 percent gain. Oil supplies probably climbed for the third time in four weeks, a Bloomberg survey showed before a government report tomorrow. Oil and gasoline accelerated their decline in the last 15 minutes of floor trading as volume jumped. “Gasoline had a huge run last week, but it’s starting to come off and it’s putting pressure on crude,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “We are going to have some inventory build tomorrow” in crude. Crude for November delivery slipped 59 cents to settle at $91.89 a barrel on the New York Mercantile Exchange. Prices are down 7 percent this year. – Read More

*Oil patch startups speed date investors – Houston Chronicle

Every 15 minutes, a new pitch began. “For any given strength, we’re lighter,” Chris Coker told the audience. “For any given weight, we’re stronger.” No one in this crowd had to be told that Coker’s product, ceramic proppant, is a man-made substitute for the sand commonly used in hydraulic fracturing. Other speakers at Tuesday’s Emerging Technology Forum boosted their companies’ approach to microseismic monitoring, digital rock imaging and other oil field activities, a sign that high-tech and venture capital have moved beyond the coasts. “Traditional venture capital has been Silicon Valley and New England,” said Trond Unneland, vice president of Chevron Technology Ventures. “But in the oil sector, I think you have to add Houston.” Coker’s company, Oxane Materials, spun out of a lab at Rice University and now produces the proppant at a facility in Arkansas. He and representatives from 15 other companies spoke at the Emerging Technology Forum in Chevron’s downtown offices. Chevron is one of the founding members of the Oiltech Investment Network, formed in 2010 to connect energy companies with new technologies. – Read More

*Angola New Oil Law Taking Force May Boost Liquidity – Bloomberg

An oil law in Angola, Africa’s second-biggest crude producer, that enters into force today may increase domestic banks’ liquidity and strengthen the currency, the Economist Intelligence Unit said. The legislation, which requires foreign oil companies to pay suppliers from accounts with local banks, may funnel $10 billion a year through Angola’s economy and support the value of the kwanza while risking higher prices if lending increases, according to the London-based EIU. It may also delay projects. “There is also a risk that payment delays could lead to a reduction in short-term oil production,” the EIU wrote in a note to clients Sept. 24. Oil producers such as Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), BP Plc (BP/) and Total SA (FP) operate in the southern African nation, which pumped about 1.7 million barrels of oil a day in September, second in Africa to Nigeria, according to data compiled by Bloomberg. Its crude accounted for 2.9 percent of U.S. imports in May and 16 percent of China’s in July, data compiled by Bloomberg showed. The total liquidity will be “a huge number” because the law requires taxes on oil revenue to be paid through local banks, a figure that amounted to $12.6 billion last year, Joao Fonseca, executive director at Banco Angolano de Investimentos in Luanda, said by phone on Sept 28. Payments to suppliers and salaries would add to it, he said. – Read More

*U.S. importing more OPEC crude oil – UPI

The United States imported more oil from OPEC producers in the first six months of 2012 than for the same period last year, the U.S. Energy Department said. The Energy Department’s Energy Information Administration reported the United States imported about 5 million barrels of oil from members of the Organization of Petroleum Exporting Countries on average during the first six months of 2012. Saudi Arabia and Nigeria exported more oil to the United States than any of the other OPEC members, with a six-month average of 1.08 million and 1.02 million bpd, respectively. For the same period last year, OPEC exported 4.9 million bpd to the United States. – Read More

*OPEC oil output hits lowest since January: survey – Reuters

OPEC crude oil output has fallen in September because of reduced exports from Angola and Nigeria, a Reuters survey showed on Friday, and as Iranian output slipped back to its lowest in more than two decades. The drop in output from the Organization of the Petroleum Exporting Countries may worry consumer countries, already concerned that oil prices near $112 a barrel for Brent crude are weighing on economic growth. Supply from the 12-member OPEC has averaged 31.09 million barrels per day (bpd), down from 31.53 million bpd in August, the Reuters survey of sources at oil companies, OPEC officials and analysts found. The total is the lowest since January 2012 when the group pumped 30.95 million bpd, according to Reuters surveys. Still, production remains just over 1 million bpd more than OPEC’s output target of 30 million bpd. – Read More

*Sanctions on Iran: Is there a limit to their effect on Iran’s oil production? – CS Monitor

Iranian Oil Minister Rostam Qasemi said neither crude oil sales nor production is impacted by sanctions imposed by Western governments. The U.S. and European governments during the summer targeted the country’s energy sector as punishment for transparency issues with nuclear research. This week’s annual meeting for the U.N. General Assembly brought Iran’s behavior in the global community to the center stage given nuclear concerns and Tehran’s allegiance to the Syrian government. Nevertheless, U.S. Secretary of State Hillary Clinton had provided leeway to some key U.S. allies. Despite a damning assessment from the International Atomic Energy Agency, Clinton said some countries would be shielded from sanctions for making “significant” cuts in crude oil purchases from Iran. The Iranian oil sector may be lagging because of declining revenue needed to keep the domestic sector afloat.  The country was hit with economic sanctions during the summer amid growing concerns over its nuclear ambitions and OPEC figures show a general decline in crude oil production from the Islamic republic. U.S. energy statistics, meanwhile, predict Iran’s crude oil production should fall more than 20 percent compared to last year’s figures. From the Iranian perspective, however, all is well for No. 3 among OPEC nations. – Read More

RESEARCH COMMENTARY

*Macquarie (10.3.12)

Global Oil Complex & Macro View

Oil prices fell in choppy, light trading on Tuesday, pressured by the outlook for weak economic growth and petroleum demand, even as the risk of potential crude supply disruptions limited losses. Simmering tensions in the Middle East kept losses in check, however, with investors increasingly convinced that a dispute over Iran’s nuclear program will drag on. November Brent closed the day down by $0.62 to settle at $111.57 a barrel. November WTI closed the day down by $0.59 to settle at $91.89 a barrel.

Bearish news out of Asia is driving the market this morning. China announced overnight that purchasing managers index for non-manufacturing industries expanded at the weakest pace since at least March 2011. China’s services PMI slid to 53.7 in September from 56.3 in August. Crude prices are lower after the API announced yesterday that inventories rose 462,000 barrels last week in the longest run of gains since May. The DOE will release its inventory report at 10.30 am EST this morning. Expectations are for a 1.5 million bbl build in crude inventories while distillate and gasoline inventories drop by 400K and 500K respectively. Brent is down over $2.0 in the front now while November WTI is $1.45 per bbl lower despite bullish ADP numbers. Intraday, Brent looks supported at the $109.25 level as a double-top has formed around $113.40, while WIT would see support around $88.95 per barrel if it breaks the 1000 DMA near $90.0 per bbl.

*Tudor Pickering Holt & Co. (10.2.12)

Venezuela election watch (Brent $112/bbl) – Last week before the presidential election (on Sunday).  In the left corner, an ailing president that’s been both a target of an unsuccessful coup and has led one himself.  With reports that demonstrators were shot from a vehicle owned by PDVSA, it’s hard to assume Venezuela elections are entirely risk free.  While production has declined in recent years (2,497 kbd, -2% y/y) and local demand has grown (735 kbd, +3% y/y), Venezuela remains an important net exporter (1,792 kbd), and local elections are worth keeping on the radar screen.

*Raymond James Equity Research (last week 9.26.12)

This petroleum inventories update was moderately bullish, as the headline draws were largely a function of lower imports. Crude, gasoline and distillate stocks all fell in contrast to consensus expectations for builds. Combining the “Big Three”, inventories fell 3.4 MMBbls, compared to the consensus forecast for an increase of 2.9 MMBbls. Overall, total petroleum inventories (including jet fuel, residuals, and unfinished oils) fell by 0.2 MMBbls to 849.8 MMBbls.

The “Big Three” petroleum inventories presented an unexpected draw this week, with a 2.4 MMBbls fall in crude leading the way. Gasoline and distillate draws added 1 MMBbls to the total draw. Petroleum imports were the main reason for the crude draw, falling by 2.3 MMBbls/d from last week to 7.6 MMBbls/d, the lowest weekly total since December. Petroleum demand edged down 0.1% this week after last week’s 1.9% increase. Refinery utilization declined slightly to 87.4%. Cushing inventories were down 0.1 MMBbls w/w, but are still 12.8 MMBbls higher than year-ago levels. Total days of supply remained flat at 46.4 days and are now 0.6 days above year-ago levels.

Against a volatile macroeconomic backdrop, intense concerns about Europe, as well as a U.S. and Chinese slowdown, have placed downward pressure on oil prices since the spring, albeit with a fairly strong bounce over the past three months amid market hopes for increased stimulus as well as growing Middle-East instability. The quantitative easing announcements earlier this month have fed the market’s revived sense of optimism, but nonetheless, we envision a worsening picture for oil fundamentals heading into 2013. Demand is broadly down in the U.S. and Europe, and slowing in China. On the supply side, non-OPEC supply is trending up, as robust growth in the U.S. more than offsets declines in many other geographies. Although OPEC (particularly Saudi) output is likely to be curtailed over time in the context of weak global demand and rising North American supply, this is unlikely to fully realign the global supply imbalance. Of course, the wildcard remains the possibility of geopolitical supply disruptions, including, but not limited to, the Iranian nuclear issue. Otherwise, heading into 2013, the supply/demand balance gets meaningfully looser, and with that in mind our 2013 oil price forecast remains significantly below consensus. For 4Q12, we project $90/Bbl WTI and $107/Bbl Brent. For 2013, we project $65/Bbl WTI and $80/Bbl Brent.

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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.