Oil rises on Libya force majeure, but demand slowdown holds back market
Oil prices climbed on Tuesday after Libya declared force majeure on some of its supplies, although an overall rise in OPEC output and an emerging slowdown in demand held back markets. Brent crude oil futures were at $77.71 per barrel at 0217 GMT, up 41 cents, or 0.5 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were up 57 cents, or 0.8 percent, at $74.51. “The Libyan power struggle between the Tripoli-based National Oil Corp that is internationally recognised and controls the export sales and the NOC-East group based in Benghazi that currently has physical control of the infrastructure … wipes out the planned increase from the OPEC+ coalition,” said Stephen Innes, Head of Trading for Asia-Pacific at futures brokerage OANDA in Singapore. OPEC’s June output was 32.32 million barrels per day (bpd), a Reuters survey showed on Monday, up 320,000 bpd from May. The June total is the highest since January 2018. Libya’s National Oil Corporation (NOC) declared force majeure on loadings from Zueitina and Hariga ports on Monday, resulting in total production losses of 850,000 bpd due to the closure of eastern fields and ports. Traders have also been watching U.S. oil production , which has surged by 30 percent over the last two years to 10.9 million bpd, absorbing some of the recent disruptions. Overall, however, analysts said OPEC’s production policy as well as unplanned supply disruptions were currently the main price drivers. “In the near-term, the level of OPEC production – deployment of spare capacity by Saudi Arabia, Iraq, UAE, Kuwait (and ex-OPEC by Russia), and involuntary disruptions in Libya, Venezuela, Iran – are more important drivers of crude prices,” Goldman Sachs said in a note published late on Monday. DEMAND SLOWDOWN What has become a concern, at least for producers, is a slowdown in demand which may end years of consecutive records. “U.S. petroleum demand growth slowed significantly to 385,000 bpd year-on-year in April, compared with a growth of more than 730,000 bpd year-on-year in Q1,” Barclays bank said, adding that this was mostly due to higher fuel prices. In Asia, the world’s top oil consuming region, seaborne oil imports have been falling since May, as higher costs turned off consumers and as the escalating trade dispute between the United States and China starts to impact the economy. “There are … signs that growth in China has slowed in recent months, particularly infrastructure spending by local governments. I would assume that infrastructure investment is quite energy intensive, so perhaps that had a knock-on effect to oil demand,” said Frederic Neumann, Co-Head of Asian Economic Research at HSBC in Hong Kong. “At this stage, however, it appears more that growth in Asia is softening, rather than decelerating sharply,” he added. Lane Taylor Authentic Jersey
Taiwan agrees preliminary LNG purchase deal with U.S. producer
Taiwan’s CPC Corp on Monday announced a preliminary deal to buy liquefied natural gas (LNG) from U.S. producer Cheniere Energy for 25-years, according to a statement. CPC, a major importer of LNG, signed a Heads of Agreement to purchase 2 million tonnes of LNG annually from Cheniere, which is gearing up to start exports from its second U.S. export plant at Corpus Christi, Texas. Cheniere started exporting LNG from its Sabine Pass plant in Louisiana in 2016. Authentic Jersey
Argentina to free retail fuel prices in August
Argentina will allow fuel retailers to freely set pump prices starting in August, according to an Energy Ministry official familiar with the plan, a move that could encourage badly needed investment in the nation’s oil patch but risks worsening sky-high inflation and angering consumers. Separately, the ministry is looking to set up an auction process for the natural-gas market that it hopes will lower prices, according to the official, who was not authorized to speak publicly. The actions signal that President Mauricio Macri is moving ahead with free-market reforms to attract private investment to develop the nation’s abundant shale oil reserves, even as rising global oil prices and a precipitous weakening of the nation’s currency have led to pressure for more interventionist government policies. The moves will also bring relief to the oil sector. Price controls have squeezed refiners’ margins, prompting one refinery to suspend operations. Macri’s pro-business government freed fuel prices last year, part of its efforts to unwind state controls on Argentina’s economy. But his administration reversed course in May due to a rapid decline in the peso. The sudden depreciation rattled markets and prompted Argentina to turn to the International Monetary Fund (IMF) for emergency financing. In May, the government reached a deal for a two-month freeze on pump prices with the three largest oil companies operating in Argentina: state-owned YPF, Shell, and BP’s Pan American Energy. It later set the price of domestic crude at $68, about $10 below the global Brent crude price, to mitigate the impact of freezing fuel prices on refiners’ margins. By freeing pump prices, the government is betting that gas stations will limit price hikes to avoid losing customers, the official said, and that by freeing crude prices it would encourage more investment in domestic drilling, part of a long-term strategy to wean Argentina from petroleum imports. “Price controls do not help with anything,” the official said. The government and the oil companies agreed to loosen the freeze June 1, allowing for hikes of 5 percent in June and 3 percent in July. Macri’s administration had kept the industry guessing as to what it might do in August. Th earlier increases were unsatisfactory to oil industry players, three of whom complained privately to Reuters that the modest bumps did not come close to covering their increased costs. Last month, global trader Trafigura announced it was suspending activities at its 30,500 barrel-per-day refinery in the port city of Bahia Blanca due to the “mismatch between fuel prices and production and import costs.” An oil industry executive who spoke with Reuters recently expressed frustration with the bind. “The adjustment that needs to be done is not 3 percent, it is 45 percent,” said the person, who requested anonymity to speak freely. VACA MUERTA RAMP-UP An end to retail price caps would likely infuriate Argentine consumers, who are already incensed at the government for the drop in the peso and inflation that is running at a 26.3 percent annual clip. But Macri’s government has prioritized reviving the energy sector to shake Argentina’s dependence on imported oil and gas, and to put an end to market-distorting subsidies. Argentina possesses the world’s second-largest reserves of shale natural gas and ranks No. 4 in reserves of shale oil, mostly in the Vaca Muerta fields in Patagonia. But it faces stiff competition to attract the billions in private investment needed to develop these resources. Oil production is languishing at multi-decade lows. The picture is brighter with natural gas. Rising output in Vaca Muerta helped boost the country’s production by 3.4 percent in the first quarter of 2018 compared with the same period last year, according to government data. “We are beginning to have an abundance of gas in Argentina,” the Energy Ministry official said. As a result, the ministry will create an auction process for wholesale customers to bid on the open market for their natural gas supplies during the low-demand summer months, the official said. The plan is to phase out the current fixed-contract system in a move the government hopes will lower prices. The auctions could start in September or October, and could account for as much as 70 percent of wholesale supply by March or April of 2019, the official said. Argentina is also expected to begin gas exports to Chile in the fourth quarter of this year, another result of rising Vaca Muerta output. Argentina will still need to import liquefied natural gas (LNG) to meet demand in winter months. Maxime Lagace Authentic Jersey
Petrol, diesel prices to rise sharply again as crude rates flare up
Domestic fuel prices are set to rise sharply again after falling or staying stable for a month as international rates have jumped and the rupee weakened. State-owned oil companies have kept rates of petrol and diesel unchanged for six days although global crude oil prices have increased about $3 a barrel during this period. Since June 21, crude oil has gained more than $6 to reach $79.5 a barrel as the United States is seeking stronger compliance of its sanctions against Iran that traders fear could substantially reduce oil supply from the market. The decision of a cartel of key oil-producing countries to raise output by a million barrels per day is seen as insufficient to meet the rising demand, and has aided the recent surge in prices. Crude oil prices have stayed high this year owing to factors such as robust demand, an artificial supply restriction by key oil-producing countries led by Saudi Arabia and Russia, and a sharp drop in Venezuela’s output. A weaker rupee, along with zooming oil prices, has begun to hurt Indian economy and consumers. The rupee last week fell to a record low of more than 69 to a dollar. India’s import bill is set to balloon as the country imports nearly 83% of its crude oil requirement. Since June 26, the price of petrol has been constant at Rs 75.55 and that of diesel at Rs 67.38 a litre in Delhi. Similarly, in Mumbai, the petrol price has been unchanged at Rs 82.94 and that of diesel at Rs 71.49 per litre. State-owned oil companies determine local prices of petrol and diesel using international fuel rates and the currency movements. International prices of petrol and diesel follow the crude oil trajectory, albeit with some lag. The price of petrol in Delhi has fallen Rs 2.88 per litre since May 29. The price of diesel is down Rs 1.93 per litre since May 29, after which prices started declining. Indian Oil Corporation’s website, a key source of pricing information for petrol and diesel prices, has changed the way it publishes fuel prices, making it slightly difficult for people to know fuel rates. It has also stopped publishing historical price data for all previous years. Dontari Poe Authentic Jersey
Vedanta chairman’s family trust agrees to buy rest of company
Vedanta Resources Plc said on Monday chairman Anil Agarwal’s family trust has agreed to buy the rest of Vedanta in a deal that values the mining conglomerate at 2.3 billion pounds ($3.03 billion). An independent committee, formed to review and evaluate the proposal, has indicated to Volcan Investments that it supports the offer and intends to recommend a firm offer to Vedanta’s shareholders. Volcan currently holds about 66.53 per cent of Vedanta. The offer of 825 pence per share represents a 27.6 per cent premium to London-listed Vedanta’s close on Friday of 646.8 pence. In addition to the offer price, shareholders will also be entitled to receive a previously announced dividend of 41 cents per Vedanta share, the company said, adding that this would boost the offer price to 856 pence per share. Indian industrialist Agarwal said last year he does not intend to keep Vedanta in family hands and would withdraw from the group in the next few years. Agarwal is also Anglo American’s biggest shareholder with a nearly 20 per cent stake through Volcan. Agarwal earlier this year played down speculation that he is seeking a tie-up with Anglo. Vedanta has come under increased scrutiny in India since police opened fire on protesters, killing 13, at a demonstration against a copper smelter in May. The smelter has since been shut down. Tedric Thompson Authentic Jersey
Will getting petrol & diesel under GST lower prices and the options before the government
Petrol and diesel continue to be outside the ambit of GST and the general view is that getting it under the new indirect tax regime can significantly reduce prices. However, MS Mani, Partner, Deloitte India, believes that it may not be as straight forward as that. “Unlike what people might think petroleum products don’t mean diesel and petrol only. It also includes natural gas and aviation turbine fuel, among other things. Each of these products is not taxed at the same rate, either by the Centre or states,” he says. Petroleum products attract an excise duty which is a central tax, and also state specific tax. The Centre taxes petrol, diesel differently from the way it taxes aviation and natural gas. Each state levies a different tax rate. For example, Maharashtra has the highest rate of tax on petrol and diesel in India “When GST was introduced, GST Council felt at point of time, perhaps rightly so, that petroleum products can be taken up in stage two. This was also done to remove the apprehension of the states that feared a significant revenue loss. There was no empirical data to suggest what could be the GST collection. So it wasn’t possible for the government to do any kind of extrapolation to say that under GST, this is the revenue which this particular state would get.And therefore it was felt necessary to run GST with products other than petroleum, and then take it up as a later stage,” he added. Technically there is no link between the international prices of crude and the need for GST on petroleum products. These are two different issues and price of crude also depends to a large extent also on the commercial agreements we have with oil producing nations. “One is a commercial issue, the other is a tax policy issue. But, due to whatever reasons it has been combined,” says Mani. However, as the government explores putting petroleum products under GST, there are a few options that the Finance Ministry can follow: 1. To have Central Excise Duty replaced by GST at the initial phase and include state tax in the next phase. 2. Similarly, products like natural gas and ATF can come under GST. So natural gas and aviation gas can come under GST fold followed by petrol and diesel. Most of the states, tax natural gas at the same rate, so the variation in rates in not too much. But when it comes to petrol and diesel, the variation is huge among states. And therefore many may not want it to be taxed at the initial phase. “Every meeting of the GST Council in the last six months has been unanimous. On this aspect when it comes to inclusion of petroleum products, it would be commendable to see all the states acting in tandem,” says Mani. Gale Sayers Authentic Jersey
Importing LNG to Australia’s southeast faces cost hurdles – government
Plans to import liquefied natural gas (LNG) to Australia, the world’s second-largest LNG exporter, could help cap soaring local gas prices, although the economics might not work, the Australian government said on Monday. Over the past two years, four projects to import LNG have been proposed following the opening of three new LNG export plants on the east coast that have sucked gas out of the southeastern market and nearly tripled wholesale gas prices. The Australian energy market operator recently wound back a forecast for a near-term deficit, saying it no longer expects a gas shortfall in southeastern Australia before 2030 thanks to expected new production and government pressure on LNG exporters to boost local supply. But LNG import plans are advancing and could still be justified as gas produced in Queensland state is expensive, piping it to the south where the gas is needed is costly, and LNG from the Asian spot market could be cheaper, the Department of Industry said in a report released on Monday. “While there are challenges to LNG imports into Australia’s east coast gas market, there are also reasons to think that proposals for an import terminal may go ahead,” it said in its quarterly Resources and Energy report. The report said the main challenges will be to find cheap LNG beyond 2022, when demand is expected to start outstripping supply, and to line up enough gas demand to underpin import projects. The report found that U.S. gas at around current prices could be delivered to Asia for $8.00 per MMbtu, or A$10.10 per gigajoule (GJ), roughly in line with current gas prices for industrial users. However, regasification, including capital costs, would add between A$1.30-A$2.60 per GJ to the cost. The country’s no.2 energy retailer AGL Energy has the most advanced plans, having secured a jetty to park a floating storage and regasification unit (FSRU). It aims to start importing by 2021. ExxonMobil Corp, the dominant supplier into the southeast market, recently confirmed it is considering importing LNG, while a consortium involving Japan’s JERA is looking to start imports from 2020. Glenn Anderson Authentic Jersey
Rig firm Fred. Olsen Energy fails to win waiver extension
The creditors of Oslo-listed Fred. Olsen Energy did not agree to extend a waiver to some of the company’s financial covenants that expired on Saturday, the Norwegian drilling rig contractor said. The company had previously warned that it may require new equity and potential impairment of its bank and bond loans to achieve a long-term solution of its financial situation. The company had $759 million outstanding under the bank loan, and a bond loan worth 1 billion crowns ($122.30 million) maturing in Feb. 2019 at the end of 2017. During the first quarter, the company paid a scheduled repayment of about $95.5 million under the bank facility, and received a waiver, which expired on June 30. Its financial covenants will be tested on July 20. Fred. Olsen Energy said it would continue operations as normal while continuing talks with stakeholders, creditors and their advisors to find solutions to improve its financial situation. The company has seven drilling rigs, of which one was employed under the contract with BP. Charlie McAvoy Authentic Jersey
Saudi economy starts to recover, set to accelerate as oil output rises
Saudi Arabia’s economy began to recover in the first quarter of 2018 after shrinking for the first time in eight years during 2017, official data showed on Sunday, and the recovery looks set to accelerate in coming months with a rise in oil production. Gross domestic product, adjusted for inflation, grew 1.2 percent from a year earlier in the first three months of 2018, the government’s statistics agency said. GDP had dropped from a year earlier in every quarter of 2017 as a global price-supporting agreement among oil exporting countries caused Saudi Arabia to cut back its crude output. For the whole of 2017, GDP shrank 0.7 percent. The impact of the oil deal faded at the start of 2018 after Saudi Arabia completed the required cuts. This allowed the oil sector, which comprises over 40 percent of the economy, to grow 0.6 percent from a year ago in the first quarter — a big contrast to its 4.3 percent decline in the last quarter of 2017. In the next several months, Saudi oil production is set to expand. Global producers agreed last month to boost output by a combined 700,000 to 1 million barrels per day, and as the world’s biggest crude exporter, Riyadh may account for the lion’s share of the increase. U.S. President Donald Trump said in a tweet on Saturday that Saudi Arabia’s King Salman had agreed to boost output by as much as 2 million bpd to offset anticipated losses in production by Iran, which faces U.S. sanctions, and Venezuela. Analysts think such a big jump is very unlikely. But Monica Malik, chief economist at Abu Dhabi Commercial Bank, said she was conservatively assuming a rise in average Saudi output of 500,000 bpd in the second half of 2018, which would be a year-on-year increase of about 5 percent. Supply disruptions elsewhere in the world could cause Riyadh to lift output even more, Malik added, predicting overall Saudi GDP growth of 2.1 percent this year, led by the oil sector. Many non-oil businesses in Saudi Arabia are struggling under the weight of austerity steps designed to cut the government’s big budget deficit. A 5 percent value-added tax was imposed at the start of 2018 and domestic fuel prices were increased. As a result, Malik predicted only modest non-oil GDP growth of 1.8 percent this year, up from 1.0 percent in 2017. “To some degree we’re likely to return to Saudi Arabia’s old model of growth this year, with rising oil exports feeding through into the rest of the economy,” she said. “Structural reforms to create other sources of growth may have an impact in coming years, but don’t look like they’ll be in time to have an effect this year.” The non-oil sector grew just 1.6 percent from a year ago in the first quarter of 2018, only slightly faster than 1.3 percent in the previous quarter. Within that category the private sector, which authorities hope will create new jobs to bring down an unemployment rate of nearly 13 percent among Saudi citizens, inched up just 1.1 percent, faster than 0.4 percent in last year’s fourth quarter. The construction industry shrank 2.4 percent from a year ago in the first quarter, showing builders continued to struggle with state spending curbs and corporate caution that have reduced the number of big new projects in the past few years. The wholesale and retail sectors plus restaurants and hotels shrank 0.5 percent, suggesting Saudi consumers curbed their non-essential spending because of the new tax. An exodus of hundreds of thousands of foreign workers from Saudi Arabia due to the weak economy is also hurting consumer demand. Jay Ajayi Authentic Jersey
Trump Says Saudi King Agreed To Raise Oil Output By Up To 2 Million Barrels
U.S. President Donald Trump said on Saturday that Saudi Arabia’s King Salman had agreed to his request to increase oil production “maybe up to 2,000,000 barrels,” an extraordinary amount not confirmed by the kingdom and which would push the OPEC leader to a level of production never tested before. In an early morning tweet, Trump said Saudi Arabia’s expanded production would help offset a decline in supply from Iran, after the United States pulled out of the Iran nuclear deal in May and moved to reimpose oil sanctions. “Just spoke to King Salman of Saudi Arabia and explained to him that, because of the turmoil & disfunction in Iran and Venezuela, I am asking that Saudi Arabia increase oil production, maybe up to 2,000,000 barrels, to make up the difference … Prices to high! He has agreed!” Trump tweeted. Vincent Rey Jersey