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Thursday
March 16, 2017
March 16, 2017
China in Talks With Saudi Over Aramco IPOBy Bloomberg NewsChina is in talks with Saudi Arabia for its sovereign wealth fund and largest energy company to invest in the initial public offering of the Middle East nation’s state oil producer, according to people with knowledge of the matter.
The nation’s $814 billion would be the principle investor in China Investment Corp.the planned flotation by Saudi Arabian Oil Co., according to the people. China National
. may also invest in the IPO, they said. No formal agreement has been Petroleum Corpreached, according to the people.
Saudi King is visiting Beijing this week. Hong Kong is among Salman bin Abdulaziz markets including London, New York, Singapore and Tokyo that have been identified as possible venues for the sale of 5 percent of the company, which is valued between $400 billion and $2 trillion.
China, the world’s biggest energy user, is growing more reliant on overseas crude as its domestic reserves dwindle and economic growth spurs higher demand. President Xi Jinping said in a meeting with King Salman that the nations should step up energy cooperation, Xinhua News Agency reported today, adding that the countries signed $65 billion worth of memorandums of understanding during the visit.
“It is a win-win if China can take a sizable stake in the Aramco IPO,” said Gordon , head of Asia-Pacific oil and gas research at in Hong Kong. Kwan Nomura Holdings
“China needs to ensure oil supplies from Saudi Arabia, given the structural decline of the country’s aging mature fields. Saudi Arabia can ensure market share in China, which might want to insist Aramco be listed in Hong Kong instead of London or the U.S.”
Stockpile Watch
Today: PJK's weekly ARA crude stockpilesToday: U.A.E. Minister of Energy, and ADNOC CEO attending ministry round table briefings, Abu DhabiToday: Swedbank Energy Summit, Oslo. Speakers include CEOs from Statoil, Lundin Petroleum and Aker BP
Events
"Oil bulls will have breathed a collective sigh of relief yesterday as the stubborn climb of U.S. crude stockpiles into record territory came to an unexpected halt."
– Stephen Brennock, an analyst at PVM Oil
Associates
Quote of the Day
Wall Street Keeps Faith in Oil Recovery Even as Prices Drop
What to Read
Today's Oil News
What's the Point, OPEC?
Note: Chart normalized as of Oct. 31, 2016Between October 2016 — the month OPEC set its production targets — and March, Saudi Arabia has reduced output by 800,000 barrels a day in its bid to comply with agreed cuts, according to data compiled by Bloomberg. Over the same period, output in the U.S. has increased by more than 500,000 barrels a day, driven by a recovery in U.S. shale, according to the . "OPEC's production cut was not meant to provide support for U.S. shale producers, but EIAthat is just what it seems to have done," said . "Almost 65 Bloomberg Oil Strategist Julian Leepercent of the output Saudi Arabia sacrificed last month was taken by U.S. producers. That will rise to around 90 percent if February production figures are revised following official Saudi data showing it made a smaller cut than thought."
— Christopher Sell
U.S. crude stockpiles fell by 237,000 barrels in the week ended March 10, EIA data showed March 15. That's the first decrease in 2017, and coincided with a decline in U.S. imports from Saudi Arabia, Iraq and Kuwait.
Oil Buyer's Guide 2 March 16, 2017
Today's Oil News
SupplyOil extended gains above $49 a
barrel as U.S. government data showed an unexpected fall in crude stockpiles, the first decline this year. Futures rose as much as 1.6 percent in New York after advancing 2.4 percent on March 15, snapping a seven-session decline. Crude stockpiles dropped by 237,000 barrels last week, according to an EIA report. A Bloomberg survey had forecast a 10th weekly expansion. Read the full on Terminal.story
Iraq pumped 4.57 million barrels a day of oil in February and plans to boost output later in the year even as the OPEC member reaffirmed its commitment to the group’s decision to cut production to counter a global glut. The country plans to increase output to 5 million barrels a day by the end of 2017, Oil Minister Jabbar Al-Luaibi said March 15 at a news conference in the southern city of Basra. Iraq exported 3.87 million barrels a day from its southern and northern shipment hubs in February, the ministry’s spokesman, Asim Jihad, said in an emailed statement. Full on storyTerminal.
Saudi Arabia agreed to start again after a supplying fuels to Egypt
six-month halt, reviving a critical trade relationship for the North African country. The two nations are working together on a time-line for a resumption, Egypt’s oil ministry said in a statement March 15. Prior to the stoppage in October, Saudi Arabia shipped about 700,000 metric tons
a month in what is one of the region’s largest bilateral trade deals for the supply of fuels such as gasoline and diesel. Full
on Terminal.story
OPEC’s production cuts are finally being felt in the U.S., as crude imports from three of the group’s largest Middle Eastern producers fell last week. Imports from Saudi Arabia fell 28 percent to 1.08 million barrels a day last week, according to preliminary data from the Energy Information Administration. Deliveries from Iraq fell 57 percent, while Kuwait shipped 72 percent less than the week before. The steep declines from the Middle East helped drag down total U.S. Gulf imports to 2.69 million barrels a day, the lowest since the week of Sept. 2. Full
on Terminal.story
RBC sees oil prices rising to about $60 a barrel in the fourth quarter, analysts including Michael Tran said in a note today. “In the near term, pent-up producer hedging and a material amount of U.S. production waiting in the wings will likely provide a layer of resistance once prices return to the mid-$50/[barrel] range,” it said. Full on Terminal.story
OPEC compliance has been strong and loading data for March suggests the trend will continue as increased field maintenance curbs production and supports prices, Fitch’s BMI Research said in an emailed note dated March 15. Full on Terminal. story
Deutsche Bank expects OPEC cuts to be extended until the end of 2018, to prevent a build-up in inventories, the bank said in an emailed report. Full storyon Terminal.
Gazprom Neft has restarted a crude unit at its Moscow refinery ahead of schedule, an Energy Ministry report showed. The 76,000 barrel-a-day unit restarted on March 11. It was scheduled to restart on April 16. Full on storyTerminal.
Market Calls
Refinery Outages
Each week, Bloomberg Newsliveblogs the EIA U.S. oil inventorydata. Below are some of thehighlights from yesterday. Followalong next week at .TLIV <GO>
A final (and important) note. There is a huge "adjustment factor" applied by the EIA this week, which the "balancing item" swinging from+288,000 barrels a day to -475,000 barrels a day. Unclear where the missing barrels are, but obviously it means that something didn't really add when the EIA put together the figures. In the past, it usually reflected exports. But that has been better of late. Next couple of weeks should provide a better picture. It means the report should be treated with special caution.
— Javier Blas, Chief Energy Correspondent
On a preliminary count, U.S. crude imports from Saudi Arabia, Iraq and Kuwait dropped last week by a hefty 1.16 million barrels a day from the preceding week (offset in part by increases from countries including Mexico, Venezuela and Colombia). This is the first clear impact of the OPEC production cuts filtering into US crude tanker arrivals. If the trend is sustained (which I think it should be), U.S. crude stocks could decline from now on.
— Javier Blas, Chief Energy Correspondent
Gasoline demand on the four-week average rose for the sixth week in a row. It's well above the five-year seasonal average.
— Richard Stubbe, Energy Editor
What gasoline glut? One place in the U.S. is decidedly NOT swimming in motor fuels: the West Coast. Gasoline stocks dropped 1.643 million barrels last week and are below the seasonal five-year average.
— Laura Blewitt, Oil Trading Reporter
EIA Top Live Highlights
Supply
Oil Buyer's Guide 3 March 16, 2017
Supply
U.S. Crude Imports Fall, Drive First Stockpile Decline in 2017
U.S. crude oil imports fell by 745,000 barrels a day to 7.41 million in the week ended March 10, data released on EIA March 15 showed.
Imports were 8 percent less than last year's level. Daily crude flows from Canada, the largest U.S. supplier, decreased to 3.23 million barrels. Slowed tanker offloadings from OPEC members Saudi Arabia, Iraq and Kuwait accounted for a combined drop of nearly 1.2 million barrels a day.
Plummeting imports helped domestic inventories fall for the first time in 10 weeks, though stockpiles remain near record levels.
— Vincent G. Piazza & Daniel Krauser,
Bloomberg Intelligence
OPEC Compliance at 39% Is Worse Than What Market Bargained For
Full OPEC-group compliance, which was previously estimated at 70 percent in a Bloomberg survey, is likely to be just 39 percent, based on OPEC data.
OPEC disclosures are based on direct member communications, while estimates are based on Bloomberg proprietary research and by tracking port and shipping data.
OPEC's monthly report shows production in February probably fell by 514,000 barrels a day from its agreed reference production level.
— Kunal Agrawal, Bloomberg Intelligence
Benchmarks
Imports Fell About 745,000 Barrels/Day
OPEC Compliance Worse Than Market Expected
Oil Buyer's Guide 4 March 16, 2017
Benchmarks
For live spot prices, click or run on Bloomberg. For crack here BOIL<GO>
spreads, click or run here CRKS<GO>
Futures Based Swaps
PERIOD WTI BRNT WTI/BRNT NYULSD NYULSD/WTI
Bal Mo 49.55 52.24 -2.69 152.02 14.3
APR 17 49.86 52.4 -2.53 152.7 14.27
MAY 17 50.24 52.57 -2.32 153.46 14.21
JUN 17 50.56 52.69 -2.14 154.33 14.26
Bal Qt 49.55 52.24 -2.69 152.02 14.3
Q2 17 50.22 52.55 -2.33 153.49 14.25
Q3 17 50.85 52.82 -1.97 156.63 14.94
Q4 17 51.02 52.87 -1.85 159.64 16.03
Bal Yr 50.58 52.7 -2.12 156.13 14.99
Cal 18 50.85 52.6 -1.76 160.18 16.43
Cal 19 50.52 52.33 -1.81 162.72 17.83
PERIOD NYULSD/BR NYRB NYRB/WTI NYRBBR RBHO
Bal Mo 11.61 160.13 17.7 15.01 8.11
APR 17 11.73 162.04 18.19 15.66 9.34
MAY 17 11.89 162.77 18.12 15.8 9.32
JUN 17 12.12 162.4 17.65 15.51 8.06
Bal Qt 11.61 160.13 17.7 15.01 8.11
Q2 17 11.91 162.4 17.99 15.66 8.91
Q3 17 12.97 155.49 14.46 12.49 -1.15
Q4 17 14.18 141.97 8.61 6.76 -17.67
Bal Yr 12.88 153.97 14.09 11.97 -2.16
Cal 18 14.67 151.05 12.59 10.84 -9.13
Cal 19 16.02 147.86 11.59 9.78 -14.86Source: Bloomberg
For live swap prices, click or run on Bloomberghere CFVL<GO>
Spot prices as of end of previous day. Futures as of 7:30 a.m.
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