Fw: Venezuela OPEC crude cuts US/China 189MBD – non-event?

[Charles RandallParticipant]

Venezuela Cuts Oil Sales to U.S., China to Comply With OPEC

By Matthew Walter and Steven Bodzin
Jan. 8, 2009 (Bloomberg) — Venezuela reduced oil exports to the U.S., China and Europe as part of an OPEC output cut designed to bolster prices. Crude sales to the U.S. were lowered by 166,000 barrels a day, sales to China reduced by 18,000 barrels a day, and to Europe by 5,000 barrels a day, the country’s Energy and Oil Ministry said in a statement. The largest cut, of 90,000 barrels, is to Louisiana’s Chalmette refinery that is owned by Petroleos de Venezuela SA and Exxon Mobil Corp.
“With these decisions, Venezuela reaffirms its commitment and strict adherence to the decisions taken by OPEC in defense of stability in the global oil market,” the ministry said.
All of the latest cuts come from joint ventures between Petroleos de Venezuela and foreign oil companies. The partners in the ventures are BP Plc, Chevron Corp., China National Petroleum Corp., Total SA, StatoilHydro ASA, Petroleo Brasileiro SA, and Repsol YPF SA, the ministry said.
Royal Dutch Shell Plc and Harvest Natural Resources Inc. are in joint ventures that were on an earlier list of those that would have to cut output and didn’t end up on the final list.
Venezuela, the biggest oil exporter in the Americas, is making the reductions as part of an agreement to cut 189,000 barrels under a deal reached Dec. 17 in Algeria to arrest a slide in prices. Oil futures have climbed 7 percent since the decision to cut output after falling by more than $100 a barrel in the prior five months.
The South American country has agreed to reduce its oil output by a total of 364,000 barrels a day. That number reflects three separate Organization of Petroleum Exporting Countries production cuts since September, the Energy and Oil Ministry said.
To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net. Last Updated: January 7, 2009 21:40 EST

 
 

[Charles RandallParticipant]

Here is update on PDVSA OPEC crude cuts – essentially a non-event or alignment with what has already happened since XOM Chalmette wasn’t taking in the PDVSA crude anyway (see prior post on PDVSA fighting for Operating control to force crude back into JV plant during $12B dispute with XOM over Upgrader asset siezure).
 
Also China has already backed off demand on crude imports from PDVSA more than the token 18MBD mentioned here and same goes for EU. (Meanwhile the MidEast crude producers are still loading VLCC ships to use as floating storage.)
Regards

[Charles RandallParticipant]

Oil Traders Seek Another 10 Tankers for Storage, Frontline Says

By Alaric Nightingale
     Jan. 7, 2009 (Bloomberg) — Frontline Ltd., the worlds biggest
owner of supertankers, said oil traders want to charter as many
as 10 vessels to stockpile crude to take advantage of higher
prices later in the year.
     About 25 supertankers were already hired for storage and
there are enquiries for 5 to 10 more, Jens Martin Jensen,
Singapore-based interim chief executive officer of the companys
management unit, said by phone today.
     The traders would buy crude now and sell it for delivery
later, profiting from a futures market situation called contango
where prices are higher as the year progresses. The vessels could
handle as much as 20 million barrels, or about what is produced
by OPEC member Algeria in 15 days. They would add to as much as
50 million barrels already hoarded at sea, for a combined amount
equal to almost five days of European Union demand.
     Ive never before seen storage demand on this scale,
said Didier Labat, a Paris-based shipbroker at Barry Rogliano
Salles who has worked in tanker markets for about 20 years.
     Commodities prices fell the most in five decades last year,
with crude dropping more than $100 from the peak of $147.27 a
barrel in July, as simultaneous recessions hit the U.S., Europe
and Japan. Oil demand in 2008 fell for the first time since 1983,
according to the Paris-based International Energy Agency.
     Thirty-five supertankers represent about 7 percent of the
global fleet of very large crude carriers, according to data from
London-based Drewry Shipping Consultants Ltd. Storing oil in
tankers may buoy rental rates that fell by a record 78 percent
last year as slower economic growth sapped demand for energy.

                          Financing Costs

     Traders are seeking to lease ships for three to nine months,
Jensen said. Crude oil for December delivery traded at $61.90 a
barrel as of 10:49 a.m. in London, $13.66 more than the February
contract. Oil companies and traders may be able to profit from
storing the oil, assuming shipping, insurance and financing costs
are covered.
     A supertanker would cost about 90 cents a barrel a month for
storage depending on the length of the rental, according to data
last month from shipbroker Galbraiths Ltd.
     Iran, the second-largest member of the Organization of
Petroleum Exporting Countries after Saudi Arabia, idled as many
as 15 of its biggest ships in May to store crude oil. That
contributed to three consecutive months of higher rental rates
for ships.
     The cost of delivering Middle East oil to Asia, the worlds
busiest route for supertankers, rose yesterday for the first time
since Dec. 5, according to the Baltic Exchange in London.
     Forward freight agreements advanced. The derivatives are
used by traders to bet on the future price of hauling Saudi
Arabian cargoes to Japan, an industry benchmark.

                        Derivatives Advance

     The contracts traded at about 46 Worldscale points for the
fourth quarter, according to prices from Oslo-based broker Imarex
ASA as of 10:34 a.m. London time. They closed at 45 yesterday.
     Worldscale points are a percentage of a nominal rate for
more than 320,000 specific routes. They give owners and oil
companies a starting point for negotiating hire rates without
having to calculate the value of each deal from scratch.
     Frontline, based in Bermuda, has advanced 13 percent in Oslo
trading this year. The five-member Bloomberg Tanker Index has
gained 12 percent.
     EU oil consumption averaged 14.86 million barrels a day in
2007, according to data from BP Plc.

[Charles RandallParticipant]

Here is update on VLCC’s I mentioned as being used as floating storage not only by Iraq in mid 2008 and now Saudi’s/MidEast but being joined now by other Crude traders – who are all betting on contango / higher crude prices over the Dec $61/Bbl purchase value.
 
The immediate result is that nearly 35 supertankers already loaded/loading represent nearly 7-10% of Global fleet and has been spiking freight rates at time when they should be falling due to over-surplus of empty ships not moving product anywhere. 
 
I wish someone would put spike on these guys doing this sort of speculation – but since they are going to be using hedged physical barrels they won’t have lot exposure (depending on what future value they locked hedge to) and the resulting spike from freight will help offset some demurrage expense and give them the ability to immediately take advantage in price & demand spike in the market. Their surprise might come from the fact that with big downturn in economy – if crude/product demand doesnt change for peak period between Feb-Jun 2009 time frame it isn’t going to happen unless it is driven by war, weather or regional crisis of supply (i.e. other than fundamental demand driven). I am going to be hoping none of the above happens and we are in position to watch these guys all get flushed away from their crude speculation so they will stop trying to screw with real market.
 
You should advise your company crude traders they need lock down some forward freight rates before these idiots make it lot worse on everyone (I am thinking of big 2008 log-jam/bulk freight price spike that resulted from bulk panamex vessels locked around Australia trying to get to load coal exports for nearly 1-3 months). 
 
Regards 

[Author]

Posts