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NewBase 20 January 2015 - Issue No. 522 Khaled Al Awadi

NewBase For discussion or further details on the news below you may contact us on +971504822502 , Dubai , UAE

UAE:Oil price drop a chance to revisit fuel subsidies,say official Gulf News + NewBase

Falling oil prices are an opportunity to revisit fossil fuel subsidies that cost the world $550 billion (Dh2,020 billion) in 2013, which can otherwise be used to transform economies by creating jobs, the Abu Dhabi Sustainability Week heard on Monday.

The global energy landscape has evolved to prevent oil price fluctuations from affecting the deployment of clean energy, an official said at the opening ceremony of the global events including the World Future Energy Summit 2015.

The weeklong event that started on Saturday was formally inaugurated on Monday in the presence of His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.

General Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, who also attended the opening ceremony, awarded the winners of the prestigious Zayed Future Energy Prize.




Egyptian President Abdul Fattah Al Sissi received the first honorary award of the Prize for his commitment to clean energy. Al Gore, former US vice-president and chairman of the Climate Reality Project, received the Lifetime Achievement Award for his contributions towards clean energy and sustainability.

Egyptian President Al Sissi who addressed the ceremony vowed to make Egypt an economic hub and promised to bring in comprehensive reforms in the subsidies in the next five years to get the country’s economy back on track.

“We will expand our reliance on renewable energy to 20 per cent 2020. There are successful wind and solar energy projects in Egypt. We are taking on one of the most ambitious projects in the region — to install 4,300 megawatts of solar and wind power plants in Egypt over the next three years,” he said.

Al Sissi said the country is developing a unified investment road map and would be highlighted during an economic forum in Sharm Al Shaikh in March. “Egypt seeks to develop an energy strategy. We seek to realise reforms and diversification of traditional energy used in power plants.”

On issues confronting the Arab world, he said Arab nations have to be careful. “You have to take care of your nations and countries. We are destroying ourselves. The largest [group of] refugees in the world are Arabs,” Al Sissi said.

Speaking at the ceremony, Sultan Ahmad Al Jaber, UAE Minister of State and Chairman of Masdar, said that with oil prices at a five-year low there is an opportunity to revisit fossil fuel subsidies, especially in countries where subsidies have become a heavy financial burden for their economic development.

In 2013, fossil fuel subsidies cost countries $550 billion dollars (Dh2 billion), he said.

“[This is] money that can otherwise be redirected to improve energy systems and transform economies by creating jobs, stimulating economic growth and educating future generations,” Al Jaber said.

The world’s interconnected energy landscape had “evolved beyond the point where oil price fluctuations result in reduced deployment of clean energies”.“We have seen investments in clean energy rise by 16 per cent to $310 billion (Dh1,138 billion). And installations of solar and wind increase by 26 per cent to 100 gigawatt”

Al Jaber said this growth has been driven by the sharp decline in costs and the steady rise in technology efficiency. Gore, while receiving the award, said he was impressed with the UAE’s efforts, including its solar energy projects and developments at Masdar.

“Now is a moment of danger and inspiration. We have everything we need [to limit climate change], except political will. But political will itself is a renewable resource,” he added.

International Water Summit and EcoWaste, a conference on waste management, which begin on Tuesday are also part of Abu Dhabi Sustainability Week.




Egypt to stay on track with energy strategy The National LeAnne Graves

Egypt’s president Abdel Fattah El Sisi said that the country would continue with an ambitious energy strategy including wind and solar to help accelerate payment of debts to foreign oil and gas firms and meet rising domestic power demand.

In the opening address of the World Future Energy Summit (WFES) in Abu Dhabi yesterday, Mr El Sisi said Egypt would add exploration wells, expand refineries and maintain its renewable energy 2020 vision.

About 4,300 megawatts of renewable energy projects are set to come online over the next five years to help diversify Egypt’s power mix and plans related to renewables made before the 2011 revolution are still on track, Mr El Sisi said.

“We are limited in traditional forms of energy so we have to explore renewables,” Mr El Sisi said. “The strategy also includes turning Egypt into a hub for energy trade to make use of its geographic location that sits in the middle of major energy producers and consumers.”

He called on the private sector to help provide the huge investment required. he country’s plans include boosting clean energy sources to 20 per cent of the total by 2020, up from 12 per cent. That amounts to 12,000 megawatts of capacity. The plan also covers use of coal and nuclear energy, Mr El Sisi said.

Egypt has 82 million people, with natural gas and diesel used to power homes and industry. The El Sisi-led government in September introduced a solar feed-in tariff (FiT), a financial mechanism to help certain technologies become more cost-competitive. The new solar FiT is set at 14 US cents per kilowatt hour (kWh) on projects ranging from 20 to 50MW.




Solar energy will comprise 2300MW of Egypt’s future renewables output — the remainder is wind — and the process to select pre-qualified companies is already under way. “It is ambitious. They made a quick decision,” said Laurent Longuet, managing director of SunPower Middle East, which is one of the firms interested in landing a renewables project in Egypt.

Other companies lining up include Abu Dhabi’s Masdar and Acwa Power from Saudi Arabia. The Acwa Power chief executive Paddy Padmanthan said that it was currently looking at utility scale projects and was in discussions with several companies.

“We think Egypt is an important market and we’ve always been very interested in it,” he said.

Egypt has placed a limit on projects, so companies are only able to grab — at most — 50MW each. Mr Longuet said reaching financial close for projects of that size typically takes at least six months.

The Egyptian government is trying to increase the country’s power generation capacity after facing the worst energy crisis in its history. “We seek to reform and diversify our sources of energy by adopting policies on rationalisation and overcome gap between needs and supplies,” Mr El Sisi said.

Last year the country’s power sector accounted for 68.7 per cent of natural gas consumption, an increase from 59.6 per cent in 2013, according to the Egyptian state-run Information and Decision Support Centre.

The government spent 45 billion Egyptian pounds (Dh23.04bn) on energy subsidies in the first six months of the fiscal year that began in July. The subsidies have helped turn Egypt from a net energy exporter into a net importer over the past few years. Fuel subsidies were scaled back in July to ease the burden on a swelling budget deficit, raising prices of mainstream fuel products by up to 78 per cent.

Egypt has an estimated refining capacity of 704,000 barrels per day, according to the US energy information administration. The North African country is expected to add 96,000 bpd this year as a new refinery comes online.

Sharjah-based Dana Gas is planning a new drilling programme in Egypt to get under way this quarter including 20 new development wells over the next seven years. Dana Gas is owed around $160 million in overdue payments from the Egyptian government for energy products..




Saudi Arabia's nuclear, renewable energy plans pushed back By Reuters + NewBase

Saudi Arabia's plans to build nuclear and solar energy projects will take about eight years longer to complete than originally intended, the head of the government body in charge of overseeing the projects said on Monday.

In 2012, the world's top oil exporter said it would install 17 gigawatts of nuclear power by 2032 as well as around 41 GW of solar capacity. Currently it has no nuclear power plants.

"The plan started by looking at 20 years down the road, with the year 2032 as the major milestone for long-term planning," Hashim Yamani, president of the King Abdullah City for Atomic and Renewable Energy, said at an energy conference in Abu Dhabi.

"Recently, however, we have revised the outlook together with our stakeholders to focus on 2040 as the major milestone for long-term energy planning in Saudi Arabia."

Yamani did not give a reason for the delay, or say when the first nuclear and solar plants would be operational. Although Saudi Arabia has ample financial resources to build the projects, it faces technical challenges, limited supplies of water for use in the plants, and potential bureaucratic obstacles.

Power demand in the desert kingdom is growing 8 percent annually, forcing state-run Saudi Electricity Co, the Gulf's largest utility company, to spend billions of dollars on projects to add capacity.

Nuclear and solar power stations would reduce the diversion of Saudi Arabia's oil output for use in domestic power generation, leaving more available for export. Yamani said that despite a government initiative calling for energy efficiency, Saudi

Arabia's peak electricity demand was expected to exceed 120 GW by 2032.




Total focuses on cutting costs as oil prices plunge + NewBase

Energy company Total said it is trying to cut costs in the wake of drop in global oil prices and execute the projects in an efficient way. The company’s president for the Middle East and North Africa region Stephane Michel said they started reducing expenses even before the prices went down and are continuing with it.

“We are trying to save on drilling rigs, on service rates and are renegotiating with the contractors to lower the costs,” said Michel while speaking to Gulf News at the World Future Energy Summit in Abu Dhabi.

He said none of their projects are affected due to the fall in prices. “Ongoing projects are continuing. You can’t stop in the middle of the construction. We are trying to do the projects in an efficient way due to low oil prices.”

Oil prices have been going down for the past seven months due to oversupply and weak demand on the global market. The Organisation of the Petroleum Exporting Countries (Opec), which met in Vienna in November, refused to cut production triggering a further plunge in prices.

When asked about whether the company has any plans to cut jobs due to current fall in oil prices, he said they are not planning to reduce their workforce. On the Abu Dhabi oil concession, Michel said it was important for the company.

“We worked for seventy years in the emirates and are definitely committed for the next. We are part of the tenders and we are waiting for the decision.” Abu Dhabi’s Supreme Petroleum Council, the Gulf State’s top oil sector decision maker, is presently evaluating bids from Western and Asian majors seeking to gain access to the onshore concession of Abu Dhabi Company for Onshore Oil Operations, which expired in early 2014.

The UAE energy minister Suhail Mohammad Al Mazroui recently said the current slide in oil prices will not have any impact on oil concession talks. Total is also working on a project in collaboration with Masdar to map the complex behaviour of the region’s carbonate reserves.

The company is a partner with Masdar in Shams 1 in Abu Dhabi’s Western Region, the largest concentrated solar power plant in the Middle East and North Africa. Michel said they are always considering new projects and are doing a lot of exploration in Oman, Cyprus, Qatar and North Africa.




India:Oilex receives approval for Cambay field gas sales Oilex – Press release

Oilex has announced that it has received endorsement from the relevant authorities of the Government of India for the sale of gas from the Cambay field, specifically from theCambay-77H well. This latest endorsement by the government follows the announcements made by the Company on 15 July 2014 and 5 December 2014, in which it was reported that Oilex was authorised to sell gas fromCambay-73 and Bhandut-3 respectively.

The announcement represents another important milestone for increasing production from the field and supplying gas to the local market, where users are currently paying a premium to Brent and WTI on an energy equivalent basis. The Cambay Joint Venture will now establish the appropriate production facilities for Cambay-77H and initially connect Cambay-77H to a low pressure pipeline grid to service the local area. An approval to sell gas from Cambay77H and Cambay-73 removes part of the contingency in the assessment of recoverable quantities of gas as Reserves. Netherland Sewell and Associates Inc. (NSAI) prepared the Independent Resource Assessment contained in the Oilex announcement dated 11 October 2011. NSAI confirmed Contingent Resources within the Cambay Contract Area of:

Oilex has now engaged NSAI to prepare an updated Independent Resource Assessment based on the additional production and other acquired data. This update may result in some Contingent Resources being classified as Reserves.

Cambay-77H is the first horizontal multistage frac’d well to be successfully production tested in India. The production test results were announced by the Company on 8 December 2014 and are interpreted to demonstrate that commercial development of the Cambay Field is feasible. The test results and data from Cambay-77H have been incorporated into a comprehensive model and the initial modelling results demonstrate strong well economics - as announced on 12 December 2014. These well economics continue to be encouraging despite the sharp drop in oil prices since that date. Oilex is now working towards putting three wells in two separate fields into production, during H1 2015. Oilex will recommence gas production in the Cambay Field for the first time since the early 1990’s. Production from these wells will be a substantial step towards cash positive operations in India for the Company as a result of the strong gas demand and associated robust gas price structure. The outlook for the Indian economy remains positive as the cost of imported energy reduces, stimulating further growth.




UK: Statoil awards FSU contract for the Mariner field UK to OSM Offshore Aberdeen. Source: OSM

TheMariner oil field lies within part-block 9/11aof the United Kingdom Continental Shelf. The contract with Statoil includes building supervision in Korea, pre-operation activities, transit from

Korea to site, and full management services on site. The contract, which commences on 1st of February, is a long-term contract with a fixed duration of five (5) years with further option periods of three (3) x two (2) years.

OSM Offshore Aberdeen considers this contract to be a great win after a comptetive bid in Statoil's tender process in the UK, demonstrating the company's experience, competence and quality. 'We saw a considerable interest for this contract from a broad range

of qualified bidders,' says Johan A. Johansen, Vice President Operations on Mariner for Statoil UK. 'We are very satisfied with the agreement now entered into with OSM, ensuring us a competent service provider and long-term quality services at competitive terms. This contract award is underpinning our goals for competitive unit production costs on the Mariner field,' Johansen says. OSM Offshore AS was also awarded the contract for Mariners's sister vessel Heidrun FSU in October 2013. 'Being awarded this new contract is a geat recognition of our competence,' says Managing Director, Mr. Eivind Nordal. OSM has also been responsible for the drawing review projects for both units.

OSM considers the UK offshore market to be attractive, and will keep investing in the UK and Aberdeen area. 'This contract allows us to leverage on the vast offshore expertise this area has to offer. It is important for us to utilize the experience and competence that we can find locally, and combine this with the OSM know-how, explains Nordal. We have already attained a broad experience with FSU units, having operated many years with several units in this segment. Statoil is one of the world’s leading oil and energy companies and I am delighted that they have recognized OSM’s capabilities and expertise in FSU operations. I look forward to long co-operation with Statoil set on UK soil,' says Nordal.

OSM has a long track record in the UK, having operated several flotels on UK Continental Shelf from 1980 to early 2000’s (via Rasmussen Maritime Services AS, which was acquired by OSM in 2003). OSM was responsible for full management for several of these, and have also been Duty Holder and responsible for Safety Case, giving the company extensive knowledge and insight into UK legislation and regulations.




Oil Price Drop Special Coverage

Saudi economy can withstand low oil prices for 8 years SG/Agencies + NewBase

Saudi Arabia can cope with low oil prices for "at least eight years", Saudi Arabia's minister of petroleum's former senior adviser has told the BBC. Mohammed Al-Sabban said the Kingdom’s

policy was to defend its current market share by enduring low prices.

"You need to allow prices to go as low as possible in order to see those marginal producers move out of the market," he said. Sabban advised the ministry for 27 years, leaving last year. “Saudi Arabia can sustain these low oil prices for at least eight years. First, we have huge financial reserves of about SR3 trillion (£527 billion). Second, Saudi Arabia is embarking now on rationalizing its expenditure, trying to take all the fat out of the budget,” Sabban told the BBC’s World Business Report. Without cuts in spending on infrastructure, sports stadiums and

new cities, Saudi Arabia can withstand low oil prices for at least four years, he said, suggesting that lower oil prices could have long-term benefits for Saudia Arabia. Saudi Arabia has refused to cut production despite a more than 50 percent fall in the price of oil since last summer. “To shorten the cycle, you need to allow prices to go as low as possible to see those marginal producers move out of the market on the one hand, and also if there is any increase in demand that will be welcomed.” His comments were a further signal that Saudi Arabia was prepared to use its financial strength to ride out depressed oil prices. The price of crude oil has more than halved since June 2014 because demand has weakened, particularly from China, while the US shale boom has increased global production. World oil prices fell Monday, dented by high global crude inventories, in subdued deals amid a public holiday in the United States, dealers said. In early afternoon London deals, Brent North Sea crude for delivery in March fell 48 cents to trade at $49.69 per barrel. US benchmark West Texas Intermediate for February shed 52 cents to $48.17 a barrel. Trading was expected to remain quiet amid the Martin Luther King Jr holiday in the United States on Monday. "Crude oil prices continue to remain under pressure, starting the week on the negative side amid persistent concerns regarding high levels of crude oil inventories along with a slowdown of global oil demand growth," said Sucden analyst Myrto Sokou.




"As the US equity and bond markets are closed for the Martin Luther King holiday, trading volumes might remain thin during today's session." Crude futures had rebounded on Friday after the International Energy Agency declared there were signs "the tide will turn" in the battered market following recent multiyear lows. Phillip Futures analysts said in a market commentary: "Although it may seem like prices are reversing already, fundamentals have not changed. "Oversupply and weak demand is still prevalent in the market and, thus, (we) would not expect prices to rally just yet." Oil prices have more than halved since June, crashing on worries over global oversupply and weak demand in a stuttering world economy. The fall was exacerbated at the end of November when the Organization of the Petroleum Exporting Countries (OPEC) said it would maintain output levels, despite the already low price and ample supplies. Brent last week collapsed to $45.19, the lowest level since March 2009. Brent crude slipped back below the $50 a barrel mark on Monday, falling 1.8 percent to $49.29, as traders expected gloomy economic growth figures from China on Tuesday and a bond-buying program by the European Central Bank on Thursday aimed at stimulating the eurozone economy.

UAE: Falling oil prices will not impact clean energy — AFP + NewBase

The United Arab Emirates on Monday downplayed fears that the fall in oil prices could negatively impact the development of renewable energy projects. "Our interconnected energy landscape has evolved beyond the point where the price of oil determines the fate of clean energy," said Minister of State Sultan Al-Jaber who is also chairman of Masdar, Abu Dhabi's renewable energy company. Oil prices have fallen by almost 60 percent since June, crashing on worries over global oversupply and weak demand in a faltering world economy. Participants at the International Renewable Energy Agency (IRENA) conference in Abu Dhabi on Saturday had voiced concerns that the trend could spell doom for plans to shift to clean energy. Speaking at the World Future Energy Summit opening ceremony in Abu Dhabi, Jaber said that globally, investments in clean energy have increased by 16 percent during the past 12 months amounting to $310 billion. Meanwhile, production capacity of wind turbines and solar energy panels increased by 26 percent during the same period, producing 100,000 megawatts.




Renewable energy has shifted "from an expensive alternative to a competitive technology," said Jaber. "This growth has been driven by the sharp decline in cost and steady rise in technology efficiency."

The Emirati official called for seizing the opportunity of falling oil prices to cut fuel subsidies that, according to him, cost the world $550 billion in 2013. Renewable energy, which relies on solar, wind and other sources, is essential for meeting global CO2 emission targets. The energy summit that opened on Monday is part of a series of events organized under the banner of Abu Dhabi Sustainability Week, including also an International Water Summit. In March last year, Abu Dhabi opened the world's largest operating plant of concentrated solar power, which has the capacity to provide electricity to 20,000 homes. On Sunday, the Abu Dhabi Fund for Development said it will provide $57 million worth of concessional loans for clean energy projects in five developing countries, including Iran.

Malaysia set to unveil new policy to manage oil slump Reuters + NewBase

Malaysian Prime Minister Najib Razak will announce policy changes, including likely budget revisions, today to help its oil exporting economy adjust to the impact of slumping global crude prices. Southeast Asia’s third-largest economy relies on oil and gas export revenues to maintain strong growth and control a mountain of debt, and the adverse turn in the crude market has put its current account balance under strain, and ruined budget projections. A 10% fall in the ringgit currency during the past four months reflects

investors’ mounting worries, as the government’s budget for 2015 was based on overoptimistic forecasts for oil prices and economic expansion.




Quoted by state-run Bernama news agency yesterday, Najib flagged the need for change to meet the more straitened times. “An accurate and wise approach is necessary to mitigate the effects of the oil price slump on economic growth, national revenue and the value of the ringgit,” Najib said. Bernama reported that he would announce “economic modifications and interventions” today. A government official told Reuters that Najib, who also runs the finance ministry, was also likely to announce a revised 2015 budget. The country’s 2015 budget, tabled in October 2014, was presented with the assumption that oil prices would have kept to $100 a barrel, whereas the price of Brent crude has fallen by more than half. Aside from the impact a plunging oil market, Malaysia is also feeling the chill from slowing economic growth in China, the second-largest export market. A budget revision could help assuage investors’ concerns, if it commits reducing its fiscal deficit by cutting spending to counter the loss of revenues from the commodities sector. Malaysia’s stock market fell 3.8% over the past year, taking its biggest hit in December when the decline in oil prices became more acute. Its government bond market could see further sell off as foreign investors hold 46% of the country’s bonds. The Malaysian ringgit was emerging Asia’s worst performing currency in 2014, and having lost 1.9% since the start of this year it still holds that unwanted ranking. The decline in oil prices has hit Malaysia’s state oil firm Petronas, which accounts for most of the government’s oil and gas revenue. The company warned in November that payments to the government in the form of dividends, tax and royalties could be 37% lower next year if oil stays around $75 a barrel. “Petronas will make capital expenditure deferments and reductions in operational expenditure in response to the recent steep 60% decline in oil prices,” it said in a statement on Sunday night. Analysts were uncertain how far Najib would change policies, but expected him to reaffirm commitment to bringing down the fiscal deficit. “It’s a tough balancing act but the preference would be to try to stick to their fiscal target as much as they can,” said Euben Paracuelles, economist at Nomura Holdings. Malaysia’s fiscal deficit target for 2015 is 3% of gross domestic product, reduced from a target of 3.5% for 2014. The government is likely to hold on to its 3% fiscal deficit target by using savings derived from the elimination of fuel subsidies and earnings gained from a consumer tax set to be introduced in April. The goods and services tax (GST), is set at 6% and is expected to bring in a revenue of 23bn ringgit this year. “This offers a buffer and flexibility for the non-essentials in terms of operating expenditure. It’s still possible for them to get 3%,” said Paracuelles, adding that the government risks a ratings downgrade if its fiscal deficit goes beyond 4%. Analysts believe the government needs to reduce its growth forecast, as an unrealistic assumption will lead a sharp rise in Malaysia’s debt to GDP ratio. The government has forecast a 5% to 6% growth for this year, whereas market forecasts are for around 4% growth. “Najib may hint that a five to six per cent growth may not be achievable in part of the global oil price plunge but it’s likely the official figure would only be released in March,” said Paracuelles.




Oil price plunge drags down Russia economy, says EBRD bank report AFP + NewBase

Russia’s battered economy will shrink by a far worse-than-expected 4.8% this year, as plunging oil prices add to fallout from the Ukraine crisis, the EBRD development bank forecast yesterday. The London-based European Bank for Reconstruction and Development (EBRD) sharply revised its September prediction for a 0.2% contraction for the economy of the key oil producer in 2015. “A sharp fall in the price of oil has piled pressure on an already fragile Russia, and is hitting growth in energy exporters and other emerging nations with close links to eastern Europe’s largest economy,” the EBRD said in its economic outlook for the bank’s investment zone.

Oil prices have slumped by almost 60% since June, hit hard by global oversupply, the strong dollar and weak crude demand arising from the stuttering world economy. Russia’s economy is also buckling under the weight of Western sanctions over the Kremlin’s actions in Ukraine - which remains plagued by unrest — and tit-for-tat sanctions imposed on the West in response. Russia has strongly denied sending weapons and troops into the war zone despite witness claims to the contrary. At the same time, Russia’s economy has been plagued by the tumbling value of its rouble currency, separate data showed yesterday. Net capital outflows from Russia more than doubled in 2014 to $151.5bn, prompted by the Ukraine crisis and the plunging value of the rouble, according to statistics from the central bank. Russia in 2013 had already seen its high level of capital flight, a recurring problem for the country, reach $61bn. The outflow was accelerated by the payment of debts owed abroad by Russian banks and companies, which have had their access to capital markets cut by sanctions. The EBRD added yesterday that Ukraine’s shattered economy is predicted to shrink 5.0% this year, down from September’s forecast for a contraction of 3.0%. That followed a 7.5% collapse in Gross Domestic Product in 2014. “The Ukrainian economy remains in a particularly precarious state,” the London-based institution said. “In addition to the impact of the conflict in the east of the country, there is currently uncertainty about the volume and timing of international financial assistance.” The EBRD, founded in 1991 to help ex-Soviet bloc countries such as Russia and Ukraine make




the transition to free-market economies and democracy, added however that some nations would win a boost from the tumbling cost of crude. The bank’s investment zone — comprising mainly former communist nations across central and eastern Europe but which now includes also Turkey and emerging economies in north Africa and the Middle East — was expected to contract by an overall 0.3% in 2015.

That was a major downgrade from the prior forecast for 1.7% expansion in the operating region that comprises more than 30 countries. “Even this forecast is subject to considerable risks,” cautioned Hans Peter Lankes, the EBRD’s acting chief economist. Those risks included the impact of any further large falls in the oil price, a further escalation in the Ukraine/Russia crisis, and any potential increase in uncertainty in the eurozone, according to Lankes. Plunging oil prices were however expected to boost countries in central and southeastern Europe and in the south and eastern Mediterranean region, offsetting weak demand arising from eurozone uncertainty, the bank added.

Hedge Funds Cut Oil Bets After Worst Drop Since 2008 Bloomberg + NewBase

Oil bulls finally caught a break as prices capped their first weekly advance since November. Hedge funds raised their net-long position in West Texas Intermediate crude by 12 percent in the week ended Jan. 13, U.S. Commodity Futures Trading Commission data show. Long wagers jumped the most since March 2011.

WTI climbed 6.1 percent in the three days following the report period, after dropping more than 50 percent since June. U.S. oil drillers took a record number of rigs out of service since Dec. 5, spurred on by OPEC’s decision to maintain output. Production growth will slow this year among countries outside of OPEC, the International Energy Agency said Jan. 16.

“People are willing to buy into the market at these price levels,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Jan. 16. “It suggests that they think that the odds of us going much lower are small.”




WTI fell $2.04, or 4.3 percent, to $45.89 a barrel on the New York Mercantile Exchange in the period covered by the CFTC report, dropping to $44.20 on Jan. 13, the lowest price since 2009. Futures rallied to $48.69 by Jan. 16, bringing the advance for the week to 0.7 percent. WTI traded at $48.20 at 10:31 a.m. London time.

Oil ETFs

Investors have put $1.11 billion into the four biggest oil exchange-traded products so far this month on top of $1.23 billion in December, the biggest monthly gain since 2010, according to data compiled by Bloomberg.

The IEA lowered its non-OPEC supply growth estimate by 350,000 barrels a day last week, the first cut since the 2015 forecast was introduced in July. That will lead to a “rebalancing” of oversupplied markets in the second half, reviving prices, the agency said.

The U.S. Energy Information Administration reduced its 2015 U.S. production outlook in a Jan. 13 report by 10,000 barrels a day to 9.31 million.

The drop in the U.S. oil rig count of 209 was the steepest six-week decline since Baker Hughes Inc. (BHI) began tracking the data in July 1987. The total tumbled 55 in the week ended Jan. 16 to 1,366.

“The rig count fell pretty dramatically and people were speculating that there could be more cutbacks in production,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone Jan. 16. “That was a momentum changer.”

OPEC Production

The Organization of Petroleum Exporting Countries kept its output above quota for a seventh month in December, according to data compiled by Bloomberg. The group, which pumps about 40 percent of the world’s oil, decided in a November meeting to maintain its production target, favoring market share over higher prices.

Goldman Sachs Group Inc. said last week that U.S. crude oil may fall below the bank’s six-month forecast of $39 and rallies may be thwarted by the speed at which any lost shale output can recover. WTI may fall to $32 by the end of this quarter, Francisco Blanch, an analyst with Bank of America in New York, said Jan. 15.

“You can always undershoot to the downside,” Jeff Currie, Goldman’s head of commodities research, said Jan. 14 in an interview on Bloomberg Television’s “Surveillance.”

CFTC Data

Net-long positions for WTI gained 24,637 to 224,032 futures and options in the week ended Jan. 13, according to the CFTC. Long positions jumped 38,569 to 311,973 and short bets climbed 13,932 to 87,941.

In other markets, bearish wagers on U.S. ultra low sulfur diesel increased 23 percent to 29,273 contracts as the fuel dropped 5.4 percent to $1.633 a gallon in the report week.

Net short wagers on U.S. natural gas gained 70 percent to 17,513. The measure includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry




Hub Swap Futures, Nymex ClearPort Henry Hub Penultimate Swaps and the ICE Futures U.S. Henry Hub contract. Nymex natural gas gained 0.2 percent to $2.943 per million British thermal units in the week covered by the report.

Bullish bets on gasoline fell 15 percent to 37,255. Futures slumped 6.3 percent to $1.2685 a gallon on Nymex in the reporting period.

Regular retail gasoline dropped 0.8 cent to an average of $2.068 a gallon Jan. 17, the lowest since May 2009, according to Heathrow, Florida-based AAA, the country’s largest motoring group.

“These are extraordinarily cheap price levels that attract people to bet on a rebound,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone Jan. 16. “The lower price is luring bargain hunters.”





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Khaled Malallah Al Awadi, Energy Consultant MS & BS Mechanical Engineering (HON), USA Emarat member since 1990 ASME member since 1995 Hawk Energy member 2010

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Khaled Al Awadi is a UAE National with a total of 25 years of experience in the Oil & Gas sector. Currently working as Technical Affairs Specialist for Emirates General Petroleum Corp. “Emarat“ with external voluntary Energy consultation for the GCC area via Hawk Energy Service as a UAE operations base , Most of the experience were spent as the Gas Operations Manager in Emarat , responsible for Emarat Gas Pipeline Network Facility & gas compressor stations . Through the years , he has developed great

experiences in the designing & constructing of gas pipelines, gas metering & regulating stations and in the engineering of supply routes. Many years were spent drafting, & compiling gas transportation , operation & maintenance agreements along with many MOUs for the local authorities. He has become a reference for many of the Oil & Gas Conferences held in the UAE and Energy program broadcasted internationally , via GCC leading satellite Channels.

NewBase : For discussion or further details on the news above you may contact us on +971504822502 , Dubai , UAE

NewBase 20 January 2015 K. Al Awadi





