March 3, 2010 at 2:12 am #2753
Saudi Arabia Raises Most April Oil Prices to U.S. (Update2)
By Anthony DiPaola
March 2, 2010 (Bloomberg) — Saudi Aramco, the world’s largest state-owned oil company, raised official selling prices for all crude grades, except heavy, for customers in the U.S. for April and lowered prices on all grades to Europe and most for Asia.
The company increased the formula price of its Arab Light crude to the U.S. the most, raising it by 15 cents a barrel, or 20 percent, to a 60-cent discount off the benchmark Argus Sour Crude Index, Aramco said today in an e-mailed statement. It boosted the premium for Extra Light crude to 95 cents above the benchmark, also a 15-cent change.
The formula price of Arab Medium crude to the U.S. rose 10 cents to $2.10 a barrel below the Argus index, while the Arab Heavy crude price fell 15 cents to a $3.30-a-barrel discount.
April marks the fourth month Aramco is pricing crude for the U.S. against the ASCI marker, an index of high-sulfur oil produced in the Gulf of Mexico. The benchmark replaces a West Texas Intermediate crude price published by Platts, the energy- information division of McGraw-Hill Cos. WTI oil, a lighter, more expensive crude grade, also trades as a futures contract on the New York Mercantile Exchange.
Saudi Arabia was the fourth-biggest crude exporter to the U.S. last year, falling from second place in 2008, according to Energy Information Administration data. Canada, Mexico and Venezuela all shipped more crude to the U.S., the data show.
Prices for Asia
Saudi Aramco lowered the price for all crude grades for April loading for buyers in Asia, except for Arab Super Light. The Super Light price climbed by 20 cents to a $1.10-a-barrel premium over the average of Oman and Dubai grades, the two Gulf benchmarks used by traders in Asia.
The company reduced the formula price for Northwest Europe and the Mediterranean for April liftings. Aramco cut Arab Heavy to Asia by about 50 percent to a $2.50 discount and lowered the same grade to Northwest Europe to a $4.25 discount.
Saudi Arabia, which has joint-venture refinery projects in China, is seeking to strengthen its role as a supplier to Asia as demand from the U.S. and Europe has slipped with the global financial crisis. The world’s biggest oil exporter agreed this week to raise crude supply to India to 40 million tons a year, or about 770,000 barrels a day, from 25.5 million tons a year, India’s Oil Ministry said.
The exporter has supplied full crude volumes to refiners in Asia since December. It lowered prices on most crude grades for shipment to Asia in February and March.
Saudi Arabia, the largest member of the Organization of Petroleum Exporting Countries and the group’s de-facto leader, has led production cuts announced in 2008 to support crude prices. OPEC next meets March 17 in Vienna to review output quotas and demand forecasts. The group is unlikely to change quotas at the meeting, oil ministers from member countries including Venezuela and Algeria said last month.
Saudi Arabia was one of five OPEC nations to increase crude production in February, according to Bloomberg estimates. The Persian Gulf state pumped 8.25 million barrels a day, 100,000 barrels a day more than in January and almost 200,000 more than its OPEC quota.
OPEC met in Angola on Dec. 22 and agreed to leave official production targets unchanged. Most members are exceeding their quotas to take advantage of prices that rallied 78 percent last year.
The following table gives the differentials of the four regions in relation to benchmark prices, the month-on-month change and the degrees of gravity as defined by the American Petroleum Institute. Prices are in U.S. dollars a barrel.
Variety API April March Change
Extra Light 38.5 +0.95 +0.80 +0.15
Arab Light 32.5 -0.60 -0.75 +0.15
Arab Medium 31 -2.10 -2.20 +0.10
Arab Heavy 27 -3.30 -3.15 -0.15
Prices for customers in the U.S. expressed as a differential
against Argus Sour Crude Index published by Argus Media Ltd.
Variety API April March Change
Super Light 50.6 +1.10 +0.90 +0.20
Extra Light 38.5 +0.55 +0.70 -0.15
Arab Light 32.5 -0.45 -0.15 -0.30
Arab Medium 31 -1.60 -0.95 -0.65
Arab Heavy 27 -2.50 -1.65 -0.85
Prices for Asian customers expressed as a differential against
the average of Oman and Dubai grades, the two Arabian Gulf
benchmarks used by Asian oil traders.
Variety API April March Change
Extra Light 38.5 -1.65 -1.00 -0.65
Arab Light 32.5 -2.30 -1.65 -0.65
Arab Medium 31 -3.70 -2.65 -1.05
Arab Heavy 27 -4.25 -3.10 -1.15
Variety API April March Change
Extra Light 38.5 -1.05 -0.75 -0.30
Arab Light 32.5 -2.65 -1.90 -0.75
Arab Medium 31 -4.15 -2.70 -1.45
Arab Heavy 27 -4.80 -3.25 -1.55
Prices for Northwest European and Mediterranean customers are expressed as a differential against the Brent weighted average posted by Intercontinental Exchange, free-on-board Ras Tanura.
To contact the reporter on this story: Anthony DiPaola in Dubai at firstname.lastname@example.org Last Updated: March 2, 2010 10:35 EST
March 4, 2010 at 6:30 pm #5746
Oil Surges to Seven-Week High as Refinery Operating Rates Gain
By Mark Shenk
March 3, 2010 (Bloomberg) — Oil rose to a seven-week high after a U.S. government report showed that refinery operating rates climbed to the highest level since October, bolstering demand.
Refinery utilization increased 0.7 percentage point to 81.9 percent in the week ended Feb. 26, the Energy Department said. Analysts surveyed by Bloomberg News forecast that there would be no change. Inventories of crude oil climbed 4.03 million barrels, more than three times what was estimated.
“Refinery run rates increased strongly, which should whittle down the huge oversupply of crude oil,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “This market just wants to go higher, even when there is bearish news.”
Crude oil for April delivery increased $1.19, or 1.5 percent, to $80.87 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 11. Futures are up 94 percent from a year earlier.
The gain in refinery operating rates has coincided with an increased profit margin, or crack spread, for refining crude. The margin for processing three barrels of oil into two of gasoline and one of heating oil has surged 46 percent this year to $11.27 a barrel, based on futures prices. It was the highest level since Aug. 19.
“Refiners will keep increasing runs because of the improving crack,” Brodrick said.
Total U.S. fuel demand, averaged over the past four weeks, was 19.3 million barrels, up 3 percent from a year earlier, the department said.
“We’re seeing a little demand improvement, which gives impetus to higher prices,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at MFC Global Investment Management in Boston.
Stockpiles of crude oil rose 1.2 percent to 341.6 million, the highest level since August, the report showed. It was the biggest gain since the week ended July 24.
An increase in oil supplies on the U.S. West Coast, a region classified by the department as PADD 5, was responsible for much of the nationwide gain, the report showed. Stockpiles there surged 2.31 million barrels to 51.2 million. The region’s distribution system is isolated from the rest of the country.
“The market may be ignoring the build because more than half of it occurred in PADD 5,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “We are trading on a lot of things other than the inventory data.”
Oil also advanced as the dollar weakened, increasing the investment appeal of commodities. The common currency rose after Greece approved an additional 4.8 billion euros ($6.6 billion) of deficit cuts. The dollar traded at $1.3702 per euro, down 0.6 percent from $1.3615 yesterday.
Regarding oil, “you are going to see it breaching $90 a barrel, up to $100 barrel; $147, $150 is out of the question in the near term,” Haag Sherman, who helps oversee $8 billion as chief investment officer of Houston-based Salient Partners, said on Bloomberg Television. “Energy and also precious metals have been a safe haven for people who are wary of the U.S. dollar.”
The Reuters/Jefferies CRB Index of 19 commodities climbed 0.9 percent to 277.71. Gold for April delivery rose $5.90, or 0.5 percent, to settle at $1,143.30 an ounce on the Comex division of the Nymex.
“We’re looking at support from the currency markets as the euro sees some short-term strength with the passing of the Greek budget,” said Harry Tchilinguirian, head of commodity derivatives at BNP Paribas SA in London.
“There continues to be optimism that economic growth will accelerate, and with it demand,” Hodge said.
Service industries in the U.S. accelerated in February more than anticipated, indicating the economic expansion may soon create jobs following the worst employment slump in the post- World War II era. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, rose to 53 in February from 50.5 the prior month.
A Saudi Arabian-flagged product tanker was captured by pirates in the Gulf of Aden on March 1, the European Union Naval Force said. The tanker, with a crew of 14, was heading for the Red Sea port of Jeddah, according to Commander John Harbour, a spokesman for EU Navfor in Northwood, England.
Shell’s Kokori oil flow station in Nigeria was attacked yesterday as militants renewed operations against the energy industry in the southern Delta region. The People’s Patriotic Revolutionary Force claimed responsibility for the assault in a statement, saying it had begun “fresh and final hostilities in the Niger Delta and beyond.”
Brent crude oil for April delivery climbed $1.07, or 1.4 percent, to $79.25 a barrel on the London-based ICE Futures Europe exchange, the highest settlement since Jan. 12.
Oil volume on the Nymex was 528,519 contracts as of 3:09 p.m. New York. Volume totaled 529,808 contracts yesterday, 10 percent less than the average of the past three months. Open interest was 1.3 million contracts.
—With assistance from Grant Smith in London and Betty Liu in Houston. Editors: Joe Link, Dan Stets
To contact the reporter on this story: Mark Shenk in New York at email@example.com. Last Updated: March 3, 2010 15:49 EST
March 4, 2010 at 6:31 pm #5745
Here is update by Bloomberg about the surge in Refinery operating rates …… think lot of reasons are way off however.
The extended cold weather drew down more heating diesel on East Coast and all the grounded airlines and connecting flights drove lot more people to driving where they could. This gave more room in inventories to top off product tanks prior to demand increases for pre-gasoline season …….. and some of players are also putting more product & crude ships on the water continuing speculation that prices will rise. It has even gone a step higher this year as some traders have figured out that the COT futures already have increase for April prices built in & if ship is on the water the forward futures hedge can become locked in with physical delivery.
The draw down on crude inventories makes room for temporary dropping the oversupply of crude but with Saudi’s increasing crude prices via the new Argus/Saudi Sour crude Index (especially to US) but allowing more delta between light & heavy is still dependent on US demand returning and jury is still out on this. Look for same futures play on crude (some oversupply is holdover of last attempts to prop up market prices or capture lower prices).
They talk about weakened US dollar – but that should increase prices on both crude & products and work against improving margins. Additionally the big impact Greece had on destabilizing & dropping Euro which was softened by the deficit cuts is just first wave of European impacts some larger members may soon have same issues if demand doesn’t improve this summer.
The statement that demand seems to be improving – is just wishful thinking at this point. The stock market averages more than 1 correction per 10 years (done some over last 100 years) and a correction of more than 10% is overdue in market that has seen a 65% improvement (largely unjustified and speculation driven given all ills in banking, real estate & mfg industries) and all the long term technical’s still show strong indication of another bottom forming correction needed to establish a base for true recover cycle to begin. Having this backdrop occur during the normal high demand cycle of refining cycle could be especially bad.
I am usually in support of recovery cycle speak but so far nothing has been done to cure all problems that caused the current financial collapse. The banking & investment industry regulation is so far just words & no actions with few arrest but lots of bailout support. No one seems to know who owns the more than $26 trillion of toxic assets / speculative derivatives that collapsed the biggest players that siphoned off $1 trillion of bailout funds (went mostly to EU banks holding investment to AIG, M Stanley, Lehman & others). The huge tax debt the US now owes has not been funded nor has the impact hit US country credit rating or value of US dollar (and the Chinese who fund US annual $500B to $1 T deficit are signed up for 110% of that impact since they peg their currency at fixed 10% less than US dollar ….. guess there is upside). Over speculated real estate like US California, Florida, Spain & other countries will not be returning to credit driven highs so lot last boom cycle drivers are going to be disconnected.
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