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Tuesday March 7, 2017 March 7, 2017 Surprise Price Cut Shows Saudis Foiling Sweet U.S. Oil By Serene Cheong and Sharon Cho The oil is light, sweet and tempting, with a lot of it made in the U.S. Saudi Arabia’s trying to keep it away from the biggest crude buyers. The Middle East producer cut the pricing for some of its April oil sales to Asia, surprising customers who were expecting an increase that was signaled by the structure of the market. That shows it’s trying to lure buyers toward its lighter and less sulfurous crude varieties at a time when similar-quality grades are rushing to the region from the Americas, Europe and Africa. ‘Sweet’ crudes with less sulfur are typically costlier than dirtier ‘sour’ oils because they can be more easily processed into valuable products such as gasoline. With its latest pricing, the premium of one of Saudi Arabia’s lightest grades to its heaviest has shrunk to the smallest since July 2015. This is the producer’s latest effort to defend sales in Asia — a region that’s already largely spared from its output curbs — as Middle East prices strengthen and make supply from elsewhere relatively cheaper. “This came as a complete surprise to the market,” said , Tushar Tarun Bansal director at industry consultant in Singapore, referring to the Saudi Ivy Global Energy pricing cut. “This is a signal from the Saudis that they are serious about market share and pricing crude competitively, and would even be open to changing the methodology if the need arises.” The world’s biggest crude exporter cut the official selling price for its Arab Light crude to Asia by 30 cents to 15 cents a barrel below the regional benchmark for April. Refiners and traders had expected state-run to set pricing at 30 cents Saudi Arabian Oil Co. more than the marker. It was the first time in at least a year that the grade was set at a discount when buyers were predicting a premium, data compiled by Bloomberg show. Full on web. story Company Watch Today: IHS Markit's CERAWeek conference, Houston. Day two of five 12:00 p.m.: EIA releases Short-Term 4:30 p.m.: API U.S. oil inventory report All times eastern Events "We are witnessing the start of a second wave of U.S. supply growth." , IEA's executive director, Fatih Birol speaking to Bloomberg News in an interview in Houston on March 6 Quote of the Day OPEC Said to Break Bread With Shale in Rare Show of Detente In Houston, over dinner, the head of OPEC and leaders of some of America’s top shale producers shared a table for a rare off-the- record chat. What to Read Today's Oil News Oil Demand Growth Set to Rise by 1.2 Mln Barrels/Day — IEA Oil demand growth will rise, on average, by 1.2 million barrels a day each year to 2022, according to the . India is forecast to overtake China as the main driver of demand growth, IEA IEA said in a report published March 6. “While there has been much discussion and debate about a peak in oil demand, we see no such peak in sight," , executive director, said Fatih Birol in the report. "Thus, we will need to see more upstream oil investment and we will need to see it soon.” — Christopher Sell Note: Oil and gas integrateds producing more than 1 million barrels a day of crude, according to Bloomberg Intelligence. Company data as of 10:35 am London time. U.S. company data as of previous day's close.

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Tuesday

March 7, 2017

  March 7, 2017

 

Surprise Price Cut Shows Saudis Foiling Sweet U.S. OilBy Serene Cheong and Sharon Cho    The oil is light, sweet and tempting, with a lot of it made in the U.S. Saudi Arabia’s trying to keep it away from the biggest crude buyers.

The Middle East producer cut the pricing for some of its April oil sales to Asia, surprising customers who were expecting an increase that was signaled by the structure of the market. That shows it’s trying to lure buyers toward its lighter and less sulfurous crude varieties at a time when similar-quality grades are rushing to the region from the Americas, Europe and Africa.

‘Sweet’ crudes with less sulfur are typically costlier than dirtier ‘sour’ oils because they can be more easily processed into valuable products such as gasoline. With its latest pricing, the premium of one of Saudi Arabia’s lightest grades to its heaviest has shrunk to the smallest since July 2015. This is the producer’s latest effort to defend sales in Asia — a region that’s already largely spared from its output curbs — as Middle East prices strengthen and make supply from elsewhere relatively cheaper.

“This came as a complete surprise to the market,” said , Tushar Tarun Bansaldirector at industry consultant in Singapore, referring to the Saudi Ivy Global Energypricing cut. “This is a signal from the Saudis that they are serious about market share and pricing crude competitively, and would even be open to changing the methodology if the need arises.”

The world’s biggest crude exporter cut the official selling price for its Arab Light crude to Asia by 30 cents to 15 cents a barrel below the regional benchmark for April. Refiners and traders had expected state-run to set pricing at 30 cents Saudi Arabian Oil Co. more than the marker. It was the first time in at least a year that the grade was set at a discount when buyers were predicting a premium, data compiled by Bloomberg show. Full on web. story

Company Watch

Today: IHS Markit's CERAWeek conference, Houston. Day two of five12:00 p.m.: EIA releases Short-Term 4:30 p.m.: API U.S. oil inventory report

All times eastern

Events

"We are witnessing the start of a second wave of U.S. supply growth."

– , IEA's executive director, Fatih Birol

speaking to Bloomberg News in an interview

in Houston on March 6

Quote of the Day

OPEC Said to Break Bread With Shale in Rare Show of Detente In Houston, over dinner, the head of OPEC and leaders of some of America’s top shale producers shared a table for a rare off-the-record chat.

What to Read

Today's Oil News

Oil Demand Growth Set to Rise by 1.2 Mln Barrels/Day — IEA

Oil demand growth will rise, on average, by 1.2 million barrels a day each year to 2022, according to the . India is forecast to overtake China as the main driver of demand growth, IEAIEA said in a report published March 6. “While there has been much discussion and debate about a peak in oil demand, we see no such peak in sight," , executive director, said Fatih Birolin the report. "Thus, we will need to see more upstream oil investment and we will need to see it soon.” 

— Christopher Sell

Note: Oil and gas integrateds producing more than 1 million barrels a day of crude, according to Bloomberg Intelligence. Company data as of 10:35 am London time. U.S. company data as of previous day's close.     

  Oil Buyer's Guide 2  March 7, 2017

 

Today's Oil News

SupplyOil traded near $53 a barrel as Iraq

said it was ready to cut production in the second half of this year if OPEC decides to extend a policy limiting output in an attempt to balance a global oversupply. Futures rose 0.4 percent in New York were little changed after falling 0.2 percent March 6. Oil companies are reviving investment after a two-year rout as supply reductions boost prices, the IEA said. Full on Terminal.story

Iraq and Angola signaled a willingness to extend the group’s production curbs into the second half of the year as the global rally in prices shows signs of stalling. “We are satisfied somewhat, but we are looking forward for improvement in the price," Iraq Oil Minister Jabbar Al-Luaibi said in an interview at the CERAWeek oil-industry conference in Houston on March 6. Asked if OPEC should extend its agreement on output cuts beyond the first half of this year, Al-Luaibi said, “It’s likely we need to." Iraq has “fully" complied with the reductions agreed to last year, he added. Full on story Terminal.

Iran’s crude-oil exports touched 3 million barrels a day for the first time since the 1979 Islamic Revolution. That level, lasting just one day, was reached in the current Iranian month that began Feb. 19, Oil Minister Bijan Namdar Zanganeh said, according to state news agency IRNA. Since restrictions ended in January 2016. Iran’s crude exports have averaged

2.45 million barrels a day since Feb. 19, Bloomberg tanker-tracking data show. Full on Terminal.story

The operator of Ghana’s sole oil of a refinery said the planned capacity

proposed second plant could be doubled as the West African nation targets exports to neighboring countries. Tema Oil Refinery will complete studies next year to build a 200,000 barrel-a-day plant in the port city, 30 kilometers (19 miles) east of the capital, Accra, Managing Director Isaac Osei said in an interview. Output at the existing 45,000 barrel-a-day plant has been slashed by an explosion at its crude distillation unit in January. Full on Terminal.story

Libyan oil output rose to 673,200 , from 663,000 barrels a day today

barrels a day on March 6, according to a National Oil Corp. board member. The increase came from from fields operated by Agoco, Jadalla Alaokali said by phone. Full on Terminal.story

The Dakota Access Pipeline could see oil by the week of March 13, according to a court filing by developers on March 6. Full on Terminal. story

South Korea's purchases of Iranian South Pars condensate rose about 800 percent year on year in 2016 to 69.96 million barrels, according to Bloomberg calculations based on Korea National Oil data. Full on Terminal.story

Saudi Arabian Oil Co. will pay Royal Dutch Shell $2.2 billion including debt to finalize the breakup of a 19-year refining partnership known as Motiva Enterprises. Saudi Aramco’s Saudi Refining unit will take full ownership of the Motiva Enterprises name and legal entity, including the largest refinery in the U.S. at Port Arthur in Texas, and 24 distribution terminals, according to a joint statement dated March 6. Shell will take sole ownership of the Norco and Convent refineries in Louisiana and 11 distribution terminals, according to the statement. Full on Terminal.story

Demand

Companies

OPEC will increase its production capacity by about twice as much as previously thought, led by expansion in Iran and Iraq, the IEA said. OPEC will raise output capacity by 1.95 million barrels a day from 2016 to 2022, with a third of the gains concentrated in Iraq, the IEA said. Last year, the Paris-based agency predicted growth of 800,000 barrels a day from 2015 to 2021. Full

on Terminal.story

U.K. oil and gas production will continue to grow through 2018, putting it on course for the longest expansion in almost two decades, amid project startups and productivity gains, an industry lobby said. “Production has now been rising since 2015, bucking a 15-year trend of decline, and should continue to rise over the next two years,” Oil & Gas U.K. said in a statement today. Output in the U.K. Continental Shelf rose to 1.73 million barrels of oil equivalent a day last year and will peak at between 1.8 million and 1.9 million barrels in 2018, the group said. Full on Terminal.story

Macroeconomic and policy headwinds will pressure Chinese crude demand in the short term despite plans to improve import and distribution infrastructure, BMI Research said in a March 6 note. Full

on Terminal.story

Philadelphia Energy Solutions' Point Breeze refinery section is operating its alkylation unit normally following unplanned repairs, a person familiar with operations said. Full storyon Terminal.

Tesoro's Carson refinery in Southern California had unplanned flaring that was not connected to a breakdown, according to a state filing. Full on Terminal.story

Market Calls

Refinery Outages

Early Insight

  Oil Buyer's Guide 3  March 7, 2017

Waterborne U.S. Imports in the Week Ended March 2, AHOY<GO>

kb/dCrude

OilFinished Motor

GasolineMogas Blending

Comp.Total Motor

GasolineEthanol

Jet Fuel

Distillate Fuel Oil

Residual Fuel Oil

Unfinished Oils

Total Crude and Products*

PADD I 724.3 34.2 180.2 214.4 0.0 18.3 108.8 124.2 66.3 1256.2

PADD III 3114.1 46.2 7.1 53.2 17.9 4.5 0.0 311.0 236.4 3719.2

PADD V 975.0 12.4 0.0 12.4 0.0 89.9 43.2 96.5 115.8 1333.0

Sum 4813.4 92.8 187.3 280.1 17.9 112.7 152.0 531.8 418.5 6308.4Source: Bloomberg LP

Change from Prior Week AHOY<GO>

kb/dCrude

OilFinished Motor

GasolineMogas Blending

Comp.Total Motor

GasolineEthanol

Jet Fuel

Distillate Fuel Oil

Residual Fuel Oil

Unfinished Oils

Total Crude and Products*

PADD I 476.8 -60.3 -284.2 -344.5 0.0 0.0 3.1 -59.8 -42.6 33.0

PADD III -426.6 0.0 -58.9 -58.9 17.9 4.5 -1.1 -129.1 17.5 -593.7

PADD V 353.9 -0.4 -5.3 -5.7 0.0 19.8 40.9 -103.8 60.8 365.9

Sum 404.1 -60.8 -348.4 -409.2 17.9 24.2 42.9 -292.7 35.8 -194.8Source: Bloomberg LP *Total does not include ethanol. Tables compiled by Michael Carone, Bloomberg LP

 

Early Insight

U.S. Waterborne Crude Imports Rose by 404,100 Barrels a DayBy Christopher SellPreliminary U.S. waterborne crude imports rose by 404,100 barrels a day to 4.81 million barrels a day in the week ended March 2, according to customs data compiled by Bloomberg. The East and West Coasts saw an increase of 476,800 barrels a day and 353,900 barrels a day, respectively. The Gulf Coast declined by 426,600 barrels a day to 3.11 million barrels a day. Total crude and product imports fell 194,800 barrels a day to 6.31 million barrels a day.

Cushing Stockpiles Increased 750,000 Barrels Last Week: Bloomberg EstimateBy Christopher SellCushing stockpiles at the Cushing, Oklahoma, storage hub are projected to have increased by 750,000 barrels in the week ended March 3, according to a Bloomberg estimate.

This would bring crude stocks at the hub to 64.28 million barrels. Currently, stockpiles are at 63.53 million barrels.

Click here to learn more on the methodology.

 

Tanker Tracker

Net Flows Monitored by Genscape

  Oil Buyer's Guide 4  March 7, 2017

Tanker Tracker

U.S. Crude and Product Shipments Rose 10 Percent Last WeekBy Christopher SellCrude and refined product shipments from the U.S. Gulf rose to 4.01 million metric tonnes on 98 ships in the week ended March 2. That's up 10 percent from the previous week's 3.65 million metric tonnes on 86 ships, according to data compiled by Bloomberg. IHS Shipments to the rest of the U.S. and Canada fell to 809,674 metric tonnes from 1.059 million metric tonnes the previous week. This was offset by increases in shipments to Northwest Europe, which rose to 526,037 metric tonnes from 198,245 metric tonnes the previous week, and Mexico, which rose to 607,820 metric tonnes. 

Fuel Exports From U.S. Gulf Total 4.01 Million Metric Tonnes

Supply

  Oil Buyer's Guide 5  March 7, 2017

Supply

NYH Gasoline Stockpiles Fall From Record HighBy Christopher SellGasoline stocks in New York Harbor fell by about 1.5 million barrels to 19.6 million barrels between Feb. 10 and Feb. 24, receding from a record high, according to a report. GenscapeInventories are expected to continue to decline due to an increase in road trips during the spring months and spring refinery maintenance, it said.

Gasoline demand is mostly seasonal, as motorists typically drive less in the winter than in the summer months. A historical analysis of Genscape’s three-year NYH storage coverage showed that NYH gasoline inventories typically increase through the winter and peak in February before destocking. Stocks rose about 5 million barrels between Dec. 9, 2016, and Feb. 10, according to Genscape’s Oil Storage Anayst Andrew

.TaylorHigher seasonal demand in the spring

often corresponds with the narrowing, and eventual reversal, of the contango

 structure in the NYMEX RBOB futurescontract spreads, which leads market participants to sell barrels that they had been stockpiling in storage, Taylor said.

Spring refinery maintenance was also a likely contributor to the recent stock draws

in NYH. The crude distillation unit at Phillips 66’s 238,000 barrel-a-day Bayway, New Jersey, refinery was shut on Feb. 7 for planned maintenance, reducing gasoline supply to the area, according to the report.

  

Benchmarks

NYH Gasoline Stocks Stood at 19.6 Million Barrels on Feb. 24

  Oil Buyer's Guide 6  March 7, 2017

 

Benchmarks

For live spot prices, click or run on Bloomberg. For crack here BOIL<GO>

spreads, click or run here CRKS<GO>

Futures Based Swaps

PERIOD WTI BRNT WTI/BRNT NYULSD NYULSD/WTI

Bal Mo 53.63 56.23 -2.6 161.48 14.2

APR 17 54.04 56.47 -2.43 162.49 14.21

MAY 17 54.39 56.65 -2.25 163.51 14.29

JUN 17 54.68 56.78 -2.09 164.6 14.45

Bal Qt 53.63 56.23 -2.6 161.48 14.2

Q2 17 54.37 56.63 -2.26 163.53 14.31

Q3 17 54.94 56.84 -1.89 166.98 15.18

Q4 17 55.04 56.73 -1.68 169.91 16.32

Bal Yr 54.67 56.68 -2.01 166.28 15.16

Cal 18 54.8 56.12 -1.32 169.3 16.3

Cal 19 54.34 55.42 -1.08 170.72 17.36

PERIOD NYULSD/BR NYRB NYRB/WTI NYRBBR RBHO

Bal Mo 11.6 169.32 17.48 14.88 7.81

APR 17 11.78 171.89 18.15 15.72 9.38

MAY 17 12.03 172.9 18.22 15.97 9.36

JUN 17 12.35 172.61 17.8 15.71 7.99

Bal Qt 11.6 169.32 17.48 14.88 7.81

Q2 17 12.06 172.47 18.06 15.8 8.91

Q3 17 13.3 165.61 14.6 12.71 -1.39

Q4 17 14.63 151.61 8.62 6.94 -18.32

Bal Yr 13.16 163.84 14.13 12.12 -2.46

Cal 18 14.98 159.96 12.37 11.05 -9.37

Cal 19 16.28 156.95 11.58 10.5 -13.77Source: Bloomberg

For live swap prices, click or run on Bloomberghere CFVL<GO>

Spot prices as of end of previous day. Futures as of 7:30 a.m.  

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