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U.S. Oil Prices Soar

Oil futures soared Friday as surging markets for refined gasoline and diesel helped drive crude higher, with traders looking past a fall in U.S. drilling activity that was more modest than expected. The benchmark U.S. oil contract gained $1.59 or 3.3% to settle at $49.76 a barrel on the New York Mercantile Exchange. The global Brent contract rose $2.53 or 4.2% to settle at $62.58 a barrel. Oil-field services company Baker Hughes Inc. said its count of rigs drilling for oil in the U.S. fell by 33 this week to 986, slipping below 1,000 for the first time since June 2011. Though that number is down 31% from a year ago, the weekly decline fell short of what analysts said would be necessary to have a substantial effect. Research consultancy Ritterbusch and Associates said the weekly count would have to fall by at least 50 to affect the market. […]

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Oil set for biggest monthly rise in 6 years

A CNPC "nodding donkey" oil pump pumps oil at sunset in an oilfield outside Daqing, Heilongjiang province, China, on July 13, 2006. PetroChina Co., the nation’s largest oil producer, fell in Hong Kong trading after Warren Buffett’sBerkshire Hathaway Inc. reduced its stake. Photographer: Lucas Schifres/Bloomberg News. Brent crude futures were primed for their biggest monthly rise since May 2009 on the back of upbeat demand coinciding with supply disruptions in big oil producing countries. ICE April Brent rose $2.53 to settle at $62.58 a barrel on Friday. More On this topic IN Commodities After seven months of losses, the international crude marker was up 18 per cent in February – the highest monthly rise in almost six years. Its US counterpart, Nymex April West Texas Intermediate, rose $1.59 to $49.76 a barrel. It also notched its first monthly gain since June with a 3 per cent rise. Lower prices […]

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Oil May Fall Again Says Analyst Who Predicted ’09 Rebound

A pumpjack operates in the foreground of a crude oil drilling rig outside Williston, North Dakota. The price of oil collapsed about 60 percent from June to January as the Organization of Petroleum Exporting Countries maintained production and the U.S. pumped at the fastest pace in three decades. Photographer: Daniel Acker/Bloomberg (Bloomberg) — Oil prices could drop again later this year as a supply glut persists, according to Jason Kenney, a Banco Santander SA analyst who accurately predicted a rebound in prices after the 2008 slump. The current oil shock caused by the boom in U.S. shale production is reminiscent of the mid-1980s, when development of fields in the North Sea and the Gulf of Mexico caused a supply glut, Kenney, the head of European oil and gas equity research at the Spanish bank, said by phone from Edinburgh Thursday. It differs from the 2008 collapse, which was caused […]

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Natural Gas Bounces After Prior-Day Selloff

By Christian Berthelsen Natural-gas prices bounced off a two-week low on Friday as updated weather forecasts called for a colder-than-expected blast over much of the middle of the U.S. next week. The front-month April contract for natural gas rose 3.7 cents or 1.4% to settle at $2.7340 a million British thermal units on the New York Mercantile Exchange. Prices in the market had fallen more than 8% in the past week as withdrawals from gas in storage to meet heating demand fell less than expected. U.S. natural-gas stockpiles fell by 219 billion cubic feet in the week ended Feb. 20, the U.S. Energy Information Administration said Thursday, compared with the 241-bcf draw that was predicted in a survey of analysts and traders by The Wall Street Journal. Though a late-winter blast of cold air is driving demand, it has been more than made up for by surging gas production, […]

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Airstrikes, Oil Prices Hit Islamic State’s Funding

ENLARGE An aircraft of the United Arab Emirates takes off from a base in Jordan on Feb. 15 before raids against Islamic State positions. Airstrikes have managed to disrupt the militant group’s ability to deliver oil to the black market. Photo: Agence France-Presse/Getty Images PARIS—Airstrikes against Islamic State militants and falling oil prices have hurt the group’s ability to fund operations across Iraq and Syria, according to an international agency that fights terror financing. In a report issued Friday, the Paris-based Financial Action Task Force, or FATF, said U.S.-led airstrikes targeting refineries and transport convoys have managed to disrupt Islamic State’s ability to deliver oil to the black market. Islamic State’s “ability to efficiently extract, refine and sell petroleum and petroleum products from the territory in which it operates has significantly diminished,” the report said. Bank looting, kidnapping and ransom have helped offset the loss of oil revenue, FATF […]

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Iraq Takes Second Spot Among China Oil Sellers as Russia Cedes

(Bloomberg) — Iraq overtook Angola and Russia to become China’s second-largest oil supplier in January as imports from the Middle Eastern country rose to a record. Inbound shipments from Iraq jumped 44 percent to 3.4 million metric tons, or 803,000 barrels a day, data from the Beijing-based General Administration of Customs showed Friday. That’s the highest in records going back to May 2008, and made the nation the largest supplier after Saudi Arabia, according to data compiled by Bloomberg. China is benefiting from record discounts offered by crude producers as they compete for market share amid a global oversupply. Oil demand in the world’s largest energy user is forecast to be steady, and additional purchases from one country will be at the expense of another, said Gao Jian, an analyst at consultancy SCI International in Shandong, China. “China’s strategy is simply to buy oil from wherever it’s available and […]

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Pemex Negotiates Lower Rig Rates as Crude Collapse Hurts Profit

(Bloomberg) — Petroleos Mexicanos is negotiating reduced rig rates with all of its providers after the state-owned oil producer posted a ninth straight quarterly loss on slumping crude prices. Pemex is in talks with oil service and jack-up rig providers to reduce daily rates after the board approved cutting more than $4 billion from its 2015 budget last week. The Mexico City-based company will seek cuts that will probably be less than the 35 percent to 40 percent reductions recommended by consulting firm IHS Inc., said Pemex’s exploration and production director. “We have talked with service companies and agreed that actions need to be taken in order to reduce the effect of the impact of the oil price reductions,” E&P Head Gustavo Hernandez said Friday on an earnings conference call. Pemex is analyzing a series of actions to reduce spending after reporting a quarterly net loss of $7.75 billion […]

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IMF: Venezuela’s oil economy in dire straits

Sign up for our daily Energy Newsletter Venezuelan economic among the region’s worst hit by the slump in crude oil prices, the International Monetary Fund says. UPI/Gary I Rothstein WASHINGTON, Feb. 27 (UPI) — Venezuela stands out in terms of regional economies affected most by the weak crude oil market, a research note from the International Monetary Fund said. The price for Brent crude oil, the global benchmark, is up about 20 percent since the beginning of February, but nearly 40 percent below June 2014 levels. The IMF said the low price of crude oil is a net benefit to countries that rely on importers as the savings spills over to consumer pocketbooks. For net exporters, the weak market is creating fiscal pressures . "One country that stands out is Venezuela, which had been experiencing severe economic imbalances before oil prices began to fall and now finds itself in […]

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Pakistan gets ADB loan for LNG port facility

Sign up for our daily Energy Newsletter Asian Development Bank extends loan to Pakistan to help build LNG facility near Karachi. UPI/Stephen Shaver MANILA, Feb. 27 (UPI) — The Asian Development Bank said Friday it was supporting efforts to help Pakistan build its first liquefied natural gas terminal with a $30 million loan. Pakistani company Engro Corp. will get funding from the ADB to build the regasification terminal at a port near Karachi. The plant will be able to convert as much as 3 million tons of LNG per year to gas for use in state power plants. ADB investment specialist Mohammed Azim Hashimi said the loan would help Pakistan build a cleaner, more efficient and more diverse power sector . "Pakistan urgently needs to utilize its existing power generation capacity fully, while reducing its reliance on costly imported diesel fuel for electricity generation," he said in a statement. […]

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U.S. Oil Rig Count Declines for 12th Straight Week

Oil Declines Below 60USD A Barrel (Bloomberg) — U.S. oil explorers idled rigs for the 12th straight week, extending the steepest dropoff in drilling on record as crude prices headed for a second week of losses. Rigs targeting oil in the U.S. fell by 33 to 986, dropping below 1,000 for the first time since June 2011, Baker Hughes Inc. said on its website Friday. Those seeking gas dropped by nine to 280, the Houston-based field services company said. The total U.S. count declined by 43 to 1,267, including a miscellaneous rig. The U.S. has lost more than a third of its oil rigs over four months in an unprecedented retrenchment in drilling that threatens to bring the nation’s shale boom to a halt as early as this year. Collapsing oil prices have already wiped out thousands of U.S. jobs and dried up more than $86 billion in capital […]

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U.S. Oil Rigs Get Hammered for the 12th Week

Photographer: Brittany Sowacke U.S. oil rigs declined for the 12th straight week despite still-rising levels of production. Drillers idled 33 oil rigs (excluding gas rigs), dropping the number to 986, Baker Hughes reported on Friday. The rig count is down 39 percent since October, an unprecedented retreat. The median forecast from a Bloomberg survey of 38   # RigCountGuesses  on Twitter was for a decline of 35.  The Baker Hughes rig count has been around since 1944, but only since the price crash last year has it has emerged as a  widely popular , though controversial , signal for U.S. oil watchers. Rigs are used to explore for new deposits and to drill new wells. The theory goes that when oil rigs decline, fewer wells are drilled, less new oil is discovered, and oil production slows. That would be good news for investors hoping for a rise in crude prices after the oil crash.  But production isn’t […]

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Exxon Settles New Jersey Lawsuit Over Refinery Pollution

(Bloomberg) — Exxon Mobil Corp.p. has reached an agreement with New Jersey Governor Chris Christie’s environmental regulators to settle litigation about pollution released over decades by an oil refinery and petrochemical plant. Lawyers for Exxon and the New Jersey Department of Environmental Protection told a judge in a Feb. 20 letter they agreed to settle the decade-old litigation. The New York Times first reported the settlement, saying Exxon will pay $250 million, without identifying its sources. The state initially sought $8.9 billion, the paper reported. A consent decree outlining the agreement must be approved by a state judge, and isn’t yet publicly available, according to the letter. The settlement followed an eight-month trial last year on damages to the state for its loss of natural resources. Exxon and the state asked the judge hearing the case in Burlington County to hold off on a decision while they negotiated a […]

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California Energy Chief Calls Brown’s Fuel Target a ‘Moon Shot’

(Bloomberg) — California Governor Jerry Brown’s plan to cut the state’s use of petroleum for transportation in half by 2030 will be “tough” to reach, the chair of the state’s energy policy and planning agency said on Friday. “The governor certainly envisioned this much more as a moon shot type of goal,” Robert Weisenmiller, chair of the California Energy Commission, said during an interview in Berkeley. “He didn’t set any of these as the no-brainer easy goals. If anything, the question is which is the toughest.” California has been setting the pace for U.S. policy on climate change and greenhouse gases. In January, Brown outlined environmental goals aimed at reducing carbon emissions in the next 15 years, including cutting petroleum use in cars and trucks by 50 percent, doubling the efficiency of existing buildings and increasing from one-third to 50 percent the electricity delivered from renewable sources. The transportation […]

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US fuel oil demand hits record low 257,000 b/d in 2014, down 50% from 2009: EIA

Houston (Platts)–27Feb2015/332 pm EST/2032 GMT US residual fuel oil demand in 2014 was a record low 257,000 b/d, down by half from 2009 and further evidence the product’s utility is waning, Energy Information Administration data showed Friday. The US EIA published a host of detailed figures for December that also provide a full calendar-year 2014 look at domestic supply and demand trends. It was another down year for fuel oil, which has set the consumption bar lower for nine consecutive years. The 2014 figure was no exception, even with increased demand from the electric sector during a brutal first quarter winter in the Northeast. "That included some big utility buying in January-February-March and October-November," an East Coast broker said of 2014’s record low. "I’m not sure we see anything like that this year." With domestic demand all but disappearing, the US has solidified itself as a net export of […]

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U.S. Growth Poised to Pick Up

ENLARGE The U.S. economy returned to its sluggish trajectory late last year, though underlying signs of strength suggest growth will pick up in 2015. Gross domestic product, the broadest measure of goods and services produced across the economy, expanded at a 2.2% annual rate in the fourth quarter, the Commerce Department said Friday, weaker than an earlier 2.6% estimate.The latest figures show the 5% pace in the third quarter and 4.6% in the second quarter were unsustainable. For 2014 as a whole, GDP expanded 2.4%, slightly better than the average 2.2% growth of 2010-13. By comparison, the economy grew an average 3.4% a year during the 1990s. Still, Friday’s report showed that consumer spending, which accounts for about two-thirds of output in the U.S., matched its fastest pace since early 2006 during the fourth quarter. Personal consumption expenditures advanced 4.2%. Consumers have been the brightest spot in recent months. […]

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Kremlin: Ukraine has natural gas until Tuesday

Sign up for our daily Energy Newsletter Gas tap for Ukraine may close without additional payments, Russia’s energy minister says. (UPI Photo/Sergey Starostenko) MOSCOW, Feb. 27 (UPI) — The natural gas spigot could be closed for Ukraine as early as Tuesday unless it pays for more deliveries in advance, Russia’s energy minister said Friday. Russian energy company Gazprom confirmed it received $15 million from its Ukrainian counterpart, Naftogaz, which ensures gas deliveries until Tuesday . "They can also pay for Tuesday – it depends on them now," Energy Minister Alexander Novak said. "If they want gas, they have to pay." Gazprom in the winters of 2006, 2009 and 2014 cut gas deliveries through Ukraine briefly in response to contractual disputes with Kiev. That left downstream consumers in Europe short on natural gas supplies. The latest payment row coincides with ongoing skirmishes between pro-Russian rebels in eastern Ukraine and government […]

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West coast refinery issues spill over to pump

Refinery issues, including fire at California plant, spilling over to consumer gasoline prices. UPI/Shutterstock/Kodda Sign up for our daily Energy Newsletter WASHINGTON, Feb. 27 (UPI) — Maintenance at U.S. refineries should leave some markets short on gasoline supplies, with West Coast markets suffering most, the Energy Department said. The Energy Information Administration, the statistical arm of the Energy Department, issued an update on the impact of planned maintenance at U.S. refineries. Beginning in February, most refineries undergo regular maintenance as they switch from producing a winter blend of gasoline to a summer blend that requires additional measures to prevent vaporization. For West Coast markets, EIA said planned maintenance is "light," though a Feb. 18 fire at an Exxon Mobil refinery in Torrance, Calif., could have a "significant impact" on gasoline production in the region. "It is too soon to assess what that impact might be," EIA said in a […]

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U.S. economy slows in fourth quarter, but growth outlook still favorable

WASHINGTON (Reuters) – U.S. economic growth braked more sharply than initially thought in the fourth quarter amid a slow pace of stock accumulation by businesses and a wider trade deficit, but the underlying fundamentals remained solid. Gross domestic product expanded at a 2.2 percent annual pace, revised down from the 2.6 percent pace estimated last month, the Commerce Department said on Friday. The economy grew at a 5 percent rate in the third quarter. With consumer spending accelerating at its quickest pace since the first quarter of 2006 and sturdy gains in other measures of domestic demand, the slowdown in growth is likely to be temporary. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised down by one-tenth of a percentage point to a 4.2 percent pace in the fourth quarter, still the fastest since the first quarter of 2006. A tightening […]

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The European Commission Unveils Its Energy Union Plan

EU Commissioner of Climate Action and Energy Miguel Arias Canete (R) and EU Commissioner for Energy Union Maros Sefcovic (L) speak at EU headquarters in Brussels on Feb. 25.(JOHN THYS/AFP/Getty Images) Summary Europe may be on its way to finding long-term relief from dependence on Russian energy. The European Commission on Feb. 25 released its Energy Union Package of proposals designed to continue developing the bloc’s energy market and energy security. The proposals, meant to establish a European Energy Union, are more a continuation of EU energy policies than a radical departure from them. The proposals will not substantially decrease the energy supplies flowing from Russia to Europe, but they will continue to erode Moscow’s ability to dictate prices in European markets — a tool Russia often uses to achieve political ends. Some of the broader initiatives, such as the greater harmonization of energy markets, will conflict with some […]

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Russia Seeks to Dip Deeper Into Wealth Fund to Cover Deficit

(Bloomberg) — Russia’s Finance Ministry is seeking permission to use more money from one of the country’s two sovereign wealth funds as a deteriorating economy and last year’s drop in oil prices dry up budget revenue. The ministry in Moscow wants to use 3.1 trillion rubles ($50 billion) to 3.6 trillion rubles of the 5.9 trillion-ruble Reserve Fund, First Deputy Finance Minister Tatiana Nesterenko said in a statement on Friday. The government was previously able to use 500 billion rubles to cover the budget gap. The deficit may be 3.7 percent of economic output this year, the widest since 2010, she said. Russia is on the brink of recession as the price of oil, which together with natural gas accounts for about half of state revenue, fell to the lowest since 2009. The effect was compounded by sanctions the U.S. and its allies imposed after President Vladimir Putin annexed […]

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Oil Rebounds Ahead U.S. Rig-Count, China Factory Data

By Eric Yep Crude-oil futures rose in Asian trade Friday ahead U.S. rig-count data due later in the trading day, and Chinese official manufacturing numbers expected over the weekend. On the New York Mercantile Exchange, light, sweet crude futures for delivery in April traded at $49.10 a barrel at 0508 GMT, up $0.93 in the Globex electronic session. April Brent crude on London’s ICE Futures exchange rose $0.99 to $61.04 a barrel. Oil bounced back after dropping sharply in the last trading session with Brent crude better supported than Nymex West Texas Intermediate, but prices are likely to remain volatile in the near-term. The premium of Brent crude to Nymex WTI crude remains wide at almost $12 a barrel, its widest in more than a year. This week’s U.S. rig-count data will be released by oil-field-services firm Baker Hughes Inc. later Friday. "It is pretty obvious that a fall […]

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Oil Storage Sinks as Price Bobs

ENLARGE An oil tanker berths at a storage terminal on Jurong Island in Singapore on March 1, 2012. Photo: Bloomberg News SINGAPORE—Fewer oil tankers are being used to store crude than traders and shipbrokers had expected at the start of the year, as a recent run-up in oil prices upended a popular trading strategy. “There were around 25 to 30 large tankers taken last month, but only around 10 of these are being used for oil storage now,” a Singapore-based shipbroker said, citing industry data. Many market watchers had expected big commodity-trading firms to capitalize on the price gap between different oil-futures contracts by buying physical barrels, storing them on ships and locking in profits by selling futures contracts for delivery further out in the future. When the price of Brent crude, the global benchmark, sank below $50 a barrel in mid-January, its price for delivery in January 2016 […]

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NYMEX April crude futures drop $3 to $47.99/b

New York (Platts)–26Feb2015/401 pm EST/2101 GMT NYMEX April crude closed lower Thursday as growing US crude stockpiles highlighted the oil market’s surplus, dragging the front-month contract further below ICE Brent. In the last 30 minutes before the market’s close, NYMEX April crude dropped $3 to $47.99/b, before settling $2.82 lower at $48.17/b. In refined product action, NYMEX March ULSD closed 3.22 cents higher at $2.1358/gal. NYMEX March RBOB ended down 1.11 cents at $1.7076/gal. Front-month NYMEX crude came under selling pressure Thursday in the aftermath of Wednesday’s US crude inventory report, which showed stockpiles rising 8.4 million barrels last week, analysts said. Stocks at Cushing, Oklahoma — delivery point for the NYMEX futures contract — increased 2.4 million barrels last week. "The huge oversupply in the US, especially in the Gulf Coast and Cushing, is depressing WTI values," Energy Aspects oil analyst Dominick Haywood said. The front-month ICE Brent-WTI […]

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NYMEX April gas settles 16.5 cents lower at $2.697/MMBtu

Houston (Platts)–26Feb2015/317 pm EST/2017 GMT NYMEX April natural gas futures settled 16.5 cents lower at $2.697/MMBtu Thursday on a bearish gas storage report from the US Energy Information Administration. The EIA Thursday reported a withdrawal of 219 Bcf, less than the market consensus of 239-243 Bcf in a Platts survey of analysts. "It was a bullish number, it’s just that expectations were for something significantly higher," Tradition Energy analyst Gene McGillian said. "It means the market is going to have to contend with production numbers running 6 Bcf/day above last year." EIA, in the corresponding week last year, reported a 117-Bcf withdrawal. The five-year average for the corresponding week was a 131-Bcf pull. "The announcement failed to meet expectations of 241 Bcf, and our modeling indicated that it was the most oversupplied weekly storage report since September," Aaron Calder, an analyst with Gelber & Associates, said. "This number implies […]

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Oil’s Big Swings Are the New Normal

ENLARGE A few years ago, Goldman Sachs analysts talked of a ‘Groundhog Day’ loop for oil. The market is far more volatile now. Photo: Bloomberg News Volatility is roiling the oil market, luring traders in search of quick profits but discouraging longer-term investors who had grown accustomed to more muted swings. Crude prices tumbled Thursday to their lowest levels in nearly a month after data released Wednesday showed inventories continuing to swell. Volatility has surged in recent months following a bruising selloff that cut global benchmark prices by 60% from June through January. That was followed by a jump of more than 30% in the first two weeks of this month. It is a sharp turnaround for a market that was relatively dull until a year ago, with Brent crude, the global oil benchmark, trading at more than $100 a barrel on average for three years in a row, […]

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KRG tanker unloads in Israel after abandoning US delivery

The view from the deck of the United Kalavryta, in this undated photo on the website of owner Marine Management Services M.C. The oil tanker at the center of a lawsuit over Kurdistan’s autonomous exports appears to have unloaded at the port of Ashkelon, having abandoned its quest to deliver crude to the U.S.The United Kalavryta, carrying more than 1 million barrels of oil produced and exported by the Kurdistan Regional Government (KRG), sailed away from Texas in late January.It arrived at the Israeli port of Asheklon, where several other KRG-chartered tankers have unloaded their cargoes, and was last seen by …

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Nigeria: Missing u.S.$20 Billion – Okonjo-Iweala Gets One Week Ultimatum to Submit Forensic Audit

Miffed by the uncounted $20 billion, the House of Representatives has Wednesday issued a one week ultimatum to the Minister of Finance and Coordinating Minister of the economy Ngozi Okonjo-Iweala to submit the report of the forensic audit. The mandate followed a resolution, passed last week by the House at plenary which directed its Committee on Public Accounts, otherwise called PAC, to investigate the matter. Chairman of the committee, Hon. Solomon Adeola Olamilekan (APC, Lagos) while briefing Journalists on the matter stated that the report "must include the Initial Draft Report, the Executive Summary and Management/Internal Control Letters." Olamilekan noted that the "condensed version" of the report released to the public through a press conference addressed by the Auditor-General of the Federation with the highlight that Nigeria National Petroleum Corporation (NNPC) should remit a minimum of $1.48 billion to the Federation Account had rather prompted the demand for complete […]

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EU Foreign-Policy Chief Sees Progress on Iran Nuclear Talks

ENLARGE European Union Foreign Policy Chief Federica Mogherini, seen at a meeting of EU defense ministers in Riga, Latvia, on Feb. 18, on Thursday said a nuclear deal with Iran is close. Photo: Reuters BRUSSELS—Nuclear talks between Iran and six major powers are getting close to agreement after more than a decade of diplomacy, the European Union’s foreign-policy chief Federica Mogherini said in an interview with The Wall Street Journal on Thursday. Senior U.S. officials on Monday said there was progress during weekend discussions as Iran and the six powers—the U.S., France, Germany, the U.K., Russia and China—seek to agree on the framework of a final agreement by the end of March. The deadline for the full, detailed agreement is June 30. U.S. Secretary of State John Kerry said this week that the six powers should know soon whether a deal was attainable. However, officials have warned that significant […]

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IEA Sees Oil Market Rebalancing in Months as Demand Rises

(Bloomberg) — The oil market will rebalance in the next several months as a price collapse boosts consumption and curbs supplies, the International Energy Agency said, a day after Saudi Arabia’s oil minister told reporters demand is rising. An oil price as low as $45 a barrel is unsustainable, Fatih Birol, the chief economist for the Paris-based adviser to 29 nations, said at a conference in London Thursday. Investment cuts in the U.S., Russia and Brazil will curtail output growth, bringing supply and demand back in line, he said. “As a result of lower prices, there will be downward pressure on production,” Birol said, adding that the market will rebalance in the coming months or quarters. “As a result of lower prices, there will upward pressure on demand.” Oil slumped by almost half in 2014 as the Organization of Petroleum Exporting Countries maintained output amid the fastest U.S. production […]

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Major Firms Are Saying the Stage Is Set for Another Crisis in the Bond Market

An accident could be on its way. Silver coins are melted in order to be re-used again at the Mexican Mint, or Casa de Moneda, in San Luis Potosi, Mexico, on Thursday, Feb. 5, 2015. Companies in Mexico are on pace to sell the most peso-denominated debt in 14 years as they capitalize on a tumble in benchmark borrowing costs. (Bloomberg) — The stage is set for another financial crisis to unravel years of relative calm in debt markets. At least that’s how firms from UBS Group AG to Invesco Ltd. see it. Here’s why: Prices in the world’s biggest bond market are swinging and the plunge in oil is sinking the economies of nations from Venezuela to Nigeria. To top all that off, the fundamental structure of the bond market has changed in a way that makes it difficult for regulators to gauge exactly where risks are building. […]

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Supply Minus Demand, Explained

I recently posted a graph on supply versus demand balances.  This has drawn significant interest, as it stands in stark contrast to the forecasts of all the agencies, OPEC, and the major forecasting firms. In this post, I will discuss the underpinnings. Demand World Oil Demand (All Petroleum Liquids) Source: Respective monthly reports of the agencies The major agencies, the US Energy Information Administration (EIA) and the European International Energy Agency (IEA), as well as OPEC, expect demand to increase moderately in 2015, up 1.0 to 1.6 mbpd (million barrels per day), with an average gain of  1.2 mbpd.  This represents a middling year, better than 2014, but certainly unexceptional in recent times.  Given that oil prices have fallen by more than half, the agencies must consider price elasticity of demand to be something close to zero.  According to these views, cheap oil does not make people buy more of it. This was […]

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Saudi Aramco cancels rig contract

Sign up for our daily Energy Newsletter Saudi Aramco suspends rig contract with U.S. company Hercules Offshore. (UPI/Shutterstock/James Jones Jr.) HOUSTON, Feb. 26 (UPI) — U.S. rig company Hercules Offshore said Thursday one of its drilling contracts with the main oil company in Saudi Arabia was terminated. Saudi Aramco cancelled a contract to lease the Hercules 261 rig, effective March 27. The company said it’s been in talks with the Saudi oil company to reduce the day rates for two other rigs, Hercules 262 and Hercules 266. "The company has not received a notice of termination from Saudi Aramco with respect to these rigs," Hercules said in a statement. Hercules 261 is listed in the company’s fleet status update as having a day-rate around $135,000. Rigs 262 and 266 have a combined average day rate of around $118,000. There was no update on the status of rig contracts with […]

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Oil sector successful, Iran says

Sign up for our daily Energy Newsletter Secretary of State John Kerry testifies during a House Foreign Affairs Committee hearing on progress made with Iranian nuclear negotiations. Photo by UPI/Kevin Dietsch TEHRAN, Feb. 26 (UPI) — Most sectors of the Iranian economy are performing well, with the oil sector in particular performing as expected, the country’s deputy oil minister said. Iranian budgetary planners said they’re taking the steps necessary to reduce the leverage of oil revenue in the nation’s economy. Deputy Oil Minister Mansour Moazzami told the Oil Ministry’s official news website, Shana, "positive" developments were emerging in most sectors of the Iranian economy. "Our ministry successfully fulfilled its tasks related to increasing production capacity of oil and gas and could provide feedstock and fuel needs of large industries of the country without interruption," he said in an interview published Wednesday. Iranian President Hassan Rouhani this week claimed an […]

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Algeria: Sonatrach – Three Oil Fields Discovered Since Early 2015

Oran — Three oil fields were discovered by the national hydrocarbon group Sonatrach since the beginning of 2015, said Wednesday in Oran Chief Executive Officer of the oil company Said Sahnoun. "Sonatrach discovered for the year 2015, on its own account, three oil fields of extremely important quality," Sahnoun told APS on the sidelines of the festivities commemorating the 40th anniversary of the nationalization of hydrocarbons, hosted by the petrochemical zone of Arzew. The first oil discovery was made in the region of Touggourt while the second in Ghardaia. The third gas field was discovered in El Bayadh, said the official. These discoveries are being assessed by Sonatrach, followed by an appraisal programme that will start very shortly, added the source. Sahnoun said that the flows are "extremely encouraging ," adding that they range between 3,000 and 4,000 barrels/day.

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TEPCO Admits Delaying Report Of Major Radiation Leak Into The Pacific Ocean For 10 Months

TEPCO Admits Delaying Report Of Major Radiation Leak Into The Pacific Ocean For 10 Months thumbnail While faith in Japanese ‘economics’ is starting to falter (borne out by the split in the BoJ and endless macro data disappointments) , trust in TEPCO and its governmental operators must be about to hit a new record low. Having promised and given up on the ice-wall strategy to stop radioactive water leaking into the ocean, Bloomberg reports TEPCO officials have admitted that it’s investigating the cause of a spike in radiation levels (23,000 becquerels/liter vs the legal limit of 90) in drainage water that it believes subsequently leaked into the Pacific ocean from the wrecked Fukushima nuclear power plant. The bigger problem, as NBC reports, TEPCO failed to report the leak for 10 months! The radioactivity increase was ‘reported’ on Sunday, the company said in an e-mail yesterday, and as Bloomberg reports […]

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Venezuela Is Running Out of Toilet Paper

Photo by Federico Parra/AFP/Getty Images An employee waits to unload valuable merchandise while people line up outside a supermarket in Caracas on Jan. 20, 2015. Cash-strapped Venezuela, which has the second-largest oil reserves in the world, after Saudi Arabia, and relies on oil for 95 percent of its export revenue, has been hit particularly hard by plummeting global prices. Still, it’s hard not to read a commodity-sharing deal proposed by nearby Trinidad and Tobago’s prime minister as anything but humiliating.  Joshua Keating Joshua Keating is a staff writer at Slate focusing on international affairs.  At a news conference Tuesday, Prime Minister Kamla Persad-Bissessar suggested that her government would “purchase goods identified by the Government of Venezuela from T&T’s manufacturers, such as tissue paper, gasoline, and parts for machinery,” and trade them for Venezuelan oil. It’s not clear if the Venezuelans are open to the deal, but they certainly need […]

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China’s Coal Consumption and Output Fell Last Year

ENLARGE Workers unload coal at a processing station in Tangxian, China. Waning demand in China is pushing down global coal prices. Photo: Associated Press BEIJING—China’s coal consumption and production fell last year for the first time in 14 years as a slowing economy and cleaner energy policies help Beijing wean the world’s largest energy consumer off coal dependence. Data released by the government Thursday show China is using more crude oil and natural gas. Coal output last year fell 2.5% to 3.87 billion metric tons compared with a year before, while coal consumption fell 2.9% in the period, according to the National Bureau of Statistics. The decrease puts China at or nearer an inflection point known as “peak coal”—the long-term decline in consumption of the mineral after decades of heavy use. The shift is already having knock-on effects with coal prices world-wide falling to six-year lows and many Chinese […]

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Offshore Driller Ensco To Shut Down Rig, Slashes Dividend

Feb 26 (Reuters) – Offshore driller Ensco Plc said it would shut down an ultra-deepwater rig as demand dwindles due to a slump in crude prices, a day after it slashed its quarterly dividend by 80 percent. The company’s shares fell nearly 8 percent to their lowest in six years. Ensco reported a fourth-quarter loss on Wednesday, compared with year-ago profit, hurt mainly by a $3 billion goodwill impairment charge. Rival Transocean Ltd also said on Wednesday it wrote down the value of its contract drilling business by $992 million in the December quarter, and has no goodwill remaining on its balance sheet. Ensco will shut down or cold stack a rig by mid 2015, Chief Executive Carl Trowell said on a conference call with analysts on Thursday. The move will cost the company about $12 million over the first and second quarters. Ensco, which is looking to sell […]

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Transocean Takes $992M Charge On Drilling Business As Oil Slumps

Feb 26 (Reuters) – Offshore rig provider Transocean Ltd wrote down the value of its contract drilling business by $992 million in the fourth quarter as demand slumped due to a steep fall in oil prices. As a result of the impairment charge, Transocean has no goodwill remaining on its balance sheet, the company said in a statement late on Wednesday. Demand for offshore rigs has weakened as oil producers scale back drilling and slash spending due to a near-50 percent fall in oil prices since June. Transocean reported net loss of $739 million, or $2.04 per share, attributable to controlling interest for the fourth quarter ended Dec. 31 compared with a profit of $233 million, or 64 cents per share, a year earlier. Moody’s Investors Service cut its rating on Transocean’s $9.09 billion debt to junk on Wednesday. (Reporting by Swetha Gopinath in Bengaluru; Editing by Kirti Pandey) […]

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As Cushing fills, traders eye Houston to play the storage game

NEW YORK (Reuters) – As rapidly rising oil stockpiles near the limits of storage tanks in Cushing, Oklahoma, traders are quickly turning their sights south to the U.S. Gulf Coast, where capacity is more plentiful but profits more elusive. The Gulf Coast region boasts nearly 210 million barrels of capacity on oil tank farms, more than a half of the nation’s total, according to U.S. data from September. There’s another 75 million barrels in refinery sites, and analysts estimate a further 45 million connected to pipelines. As of last week, only 214 million barrels were stockpiled on the Gulf Coast, just tiny bit below last May’s record-high levels, data show. With little sign of a global glut letting up soon, oil traders are scrambling to secure short- or medium-term leases to stockpile deeply discounted prompt crude, with the hope of selling it for some $12 a barrel more in […]

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Are oil producers running out of closet space?

Oil supply running ahead of demand hasn’t just pressured prices, it’s also filling up storage space, potentially pushing crude toward another leg down. “We’re going to see pretty fast inventory builds over the next few weeks,” Francisco Blanch, head of commodity research at Bank of America-Merrill Lynch, told CNBC Wednesday, noting that global supply is running around 1.4 million barrels a day above demand. “If you run out of space, prices tend to react a lot more violently to adjust that supply and demand imbalance and that’s what we expect over the next few weeks,” he said, forecasting both WTI and Brent will fall toward $30 a barrel. Prices settled at $50.99 and $61.97, respectively, on Wednesday. He cited fresh American Petroleum Institute (API) data which showed U.S. crude inventories climbed by a larger-than-expected 8.9 million barrels in the week ended Feb. 20, for a total of around 437 […]

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Refinery Outages: First Half 2015

Previous Issues Fall 2014 (November 2014) First Half of 2014 (February 2014) March 2011 through June 2011 (April 2011) October 2010 through January 2011(November 2010) This report examines refinery outages planned for the first half of 2015 and the potential implications for available refinery capacity, petroleum product markets and supply of gasoline, diesel fuel, and heating oil. The U.S. Energy Information Administration (EIA) believes that dissemination of such analyses can be beneficial to market participants that may otherwise be unable to access such information. This issue of the report focuses on how planned refinery outages may affect the adequacy of regional distillate fuel and gasoline supplies, as defined by Petroleum Administration for Defense District (PADD) areas. The report analyzes the availability of refinery capacity to produce diesel fuel and heating oil (distillate) and gasoline, focusing on two refinery units, the atmospheric crude distillation unit (CDU) and the fluid catalytic […]

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Whiting Shares Tumble On Plans To Keep Fracking Despite Cheap Oil

WILLISTON, N.D., Feb 26 (Reuters) – North Dakota’s largest oil producer, Whiting Petroleum Corp, struck a confident tone for 2015 on Thursday, saying it will hydraulically fracture all wells it drills even as peers scale back, but its bold tactic prompted a sharp drop in its share price. Executives said they were sure that the company can still make a profit with oil prices around $50 per barrel. Whiting shares dropped three percent as details of the plan were announced on a conference call Thursday morning and were down more than 8 percent in afternoon trading. Though the company has cut capex in half for 2015, some analysts said a deeper reduction is needed. The Denver-based company plans to drill and frack 265 wells this year, mostly in North Dakota but also in Colorado’s Niobrara shale formation. The number is at least 15 percent lower from 2014, though final […]

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SandRidge Energy Cuts 2015 Capex By 56%

Feb 26 (Reuters) – Oil and natural gas company SandRidge Energy Inc set a capital budget of $700 million for 2015, 56 percent lower than a year earlier, as the company responds to a slump in crude oil prices. The company said it would reduce its rig count to 7 by mid-year from 32 at the start of 2015, joining a slew of oil producers who have said they would use fewer rigs this year. Net income rose to $314.1 million, or 48 cents per share, in the fourth quarter ended Dec. 31, from $73.4 million, or 6 cents per share, a year earlier. Revenue fell more than 25 percent to $346.9 million. (Reporting by Anannya Pramanick in Bengaluru; Editing by Sriraj Kalluvila) WHAT DO YOU THINK?

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Exxon Says Spending To Fall 11% This Year To $34B

ExxonMobil says spending will decline about 11% this year to around $34 billion due to plunging oil prices, according to a regulatory filing this week. HOUSTON, Feb 26 (Reuters) – Exxon Mobil Corp said spending will decline about 11 percent this year to around $34 billion due to plunging oil prices, according to a regulatory filing this week. Smaller oil and gas companies have been making cuts to capital expenditures that generally range from 20 percent to 50 percent in response to a more than 50 percent drop in crude oil prices from June. Spending cuts at the largest global oil companies such as Exxon have not been as drastic. Another supermajor, Chevron Corp , said its capital spending would fall 13 percent this year. "Major oil companies are much less reactionary because they have a longer-term view on price," Denham Capital Technical Director Samantha Holroyd, told a forum […]

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Top oil drillers face years of pain, get a grip on cost

OSLO (Reuters) – The world’s biggest offshore drillers reported plunging earnings and orders on Thursday but managed to get a grip on costs to improve their chances of riding out a sectoral crisis that could last several more years. Transocean made a net loss in the fourth quarter while rival Seadrill’s bottom line nearly halved as both wrote down the value of their business and earned lower revenue after charter rates plunged. Still, their underlying operations were better than the market had forecast and both managed to reduce their near-term spending commitments for new vessels, giving them cash for the lean years. Rig firms that drill for oil companies have been hit as lower oil prices prompt firms to curb exploration. There is also an abundance of capacity as new vessels ordered during the boom times are being delivered. Rigs firm are also squeezed by a corruption scandal at […]

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KKR’s Struggling Energy Firm Weighs Debt Options

Energy producer Samson Resources Corp., owned by private-equity firm KKR & Co., is working with restructuring advisers, as a sharp decline in oil and gas prices complicates its efforts to stem losses and keep current on its multibillion-dollar debt load. The Tulsa, Okla., company is working with law firm Kirkland & Ellis LLP’s restructuring practice and Blackstone Group LP’s restructuring advisory group on options for dealing with its $3.8 billion in long-term debt, according to people familiar with the matter. Companies hire restructuring advisers to explore options to raise capital, sell assets or cut debt through out-of-court restructurings or bankruptcy filings. It isn’t clear what options Samson is considering, though the company has previously said it is looking to sell some oil and gas fields. KKR led a $7.2 billion buyout of Samson in 2011, as the shale-drilling boom was ramping up. The company took on $3.6 billion in […]

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Green energy auction sets stage for cheaper solar and wind power

Close to 30 UK green energy schemes have been awarded a subsidy pot worth nearly £4bn in a government auction that has set the stage for a big fall in solar electricity prices and much cheaper wind power. Two small winning solar panel projects have said they can produce electricity for nearly 60 per cent less than the maximum price the government had agreed to pay for that type of electricity and almost the same as current wholesale power prices. More On this topic IN UK Politics & Policy Prices for two large offshore wind farms off the coast of East Anglia and the Scottish Borders have come in as much as 18 per cent cheaper, though each scheme is still likely to receive nearly double the prevailing wholesale price. The auction, which is likely to set new ground rules for the way renewable energy is funded across Europe, […]

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