Better Fill up today

[frawin]

Deepwater Oil Production Growth May Stagnate on Low Prices


By Dinakar Sethuraman and Ann Koh

April 28 (Bloomberg) -- Crude oil output growth from deepwater areas may stagnate because current oil prices make it unprofitable to tap new deposits and large discoveries dwindle, a consultant said.

"The pace of growth will slow and then become flat for the next few years," Michael Rodgers, a partner at PFC Energy, said in an interview at the Offshore Vessels conference in Singapore yesterday. "There were not a whole lot of large commercial discoveries in the last couple of years."

Production from deepwater blocks grew 67 percent a year between 2005 and 2008 following discoveries off Angola and Nigeria. That beat a growth of 1.3 percent in total crude oil output during the same period.

Global deepwater oil production may peak at 7.5 million barrels a day in 2013, Rodgers said.

Oilfield service providers including Schlumberger Ltd. and Transocean Ltd. and rig builders in South Korea and Singapore are counting on deepwater projects to drive earnings growth. Demand for deepwater drilling equipment, led by Brazil and India, continues to grow at a slower pace amid the global recession and lower crude oil prices, said Transocean, the world's largest offshore oil driller, on April 22.

"Falling investment in commercial deepwater development will require fewer deepwater platforms in the next five years compared to the last five years," Rodgers said. Production of oil from the deep seas accounted for 8 percent of global crude produced last year.

Large Discoveries

Output in deepwater areas, or those at water depths of more than 1,000 feet (305 meters), soared in the past five years as companies discovered large deposits in Angola, Nigeria and the Gulf of Mexico, Rodgers said.

The majority of deepwater areas have reached "maturity" and current projects are facing delays, he said.

Oil and gas explorers are postponing or scrapping deepwater projects, potentially reducing crude supplies by as much as 2.4 million barrels a day in 2011, Morgan Stanley said in a report in March. Oil prices in New York have declined more than 66 percent from a record $147.27 a barrel in July last year.

Out of a sample of 46 deepwater projects in places including Brazil, Africa, Norway, Asia and the Gulf of Mexico, about 27 may have an internal rate of return of less than 15 percent, the minimum required for international oil companies to invest in deepwater developments, according to Rodgers.

Oil must reach $50 a barrel for some developments to achieve more than 15 percent in returns, he said.

No new contracts have been awarded since August 2008 when Morgan Stanley estimated that companies needed 139 new production platforms to develop fields in deep seas. Since then, 11 orders have been canceled and 46 delayed by an average 15 months, according to last month's Morgan Stanley report.

Worldwide spending on oil and gas exploration may drop 12 percent in 2009 to $400 billion, according to a report in December by Barclays Capital Research.

[frawin]

Oil Falls a Second Day on Concern Swine Flu Will Curtail Travel
By Grant Smith and Christian Schmollinger

April 28 (Bloomberg) -- Crude oil fell for a second day, dropping below $50 a barrel, on concern that the swine-flu outbreak will curtail travel and delay a recovery from the global recession.

Oil, gold and copper declined as the World Health Organization raised its global pandemic alert to the highest since the warning system was adopted in 2005, saying the disease is not containable. A report tomorrow will probably show U.S. crude supplies rose last week by 1.8 million barrels from their highest since September 1990, according to a Bloomberg survey.

"Risk aversion has kicked in amid fears over the outbreak of swine flu," said Andrey Kryuchenkov, an analyst at VTB Capital in London. "The sell-off will probably calm down as we get closer to the inventory data, but the data will likely be bearish and add a little more pressure."

Crude oil for June delivery fell as much as $1.59, or 3.2 percent, to $48.55 a barrel in electronic trading on the New York Mercantile Exchange. It was at $48.88 a barrel at 11:25 a.m. London time. Prices are up 9.4 percent this year.

Other commodities dropped on concern that the swine flu outbreak will exacerbate the economic slowdown. Copper fell, touching a two-week low.

Copper for three-month delivery on the London Metal Exchange lost as much as 4.2 percent to $4,163 a metric ton. Gold bullion for immediate delivery lost as much as 1.6 percent to $891.95 an ounce.

Rough Skies for Airlines

Airline stocks tumbled worldwide. U.S. carriers reported some cases of suspected flu-like symptoms to health authorities, the Air Transport Association trade group said. The U.S. Centers for Disease Control and Prevention recommended that nonessential travel to Mexico be avoided.

Airline travel in Asia fell after the outbreak of Severe Acute Respiratory Syndrome in 2003.

"There's a risk that the flu scare will hit international aviation travel, which would have a negative impact on demand for jet fuel," said Eugen Weinberg, analyst at Commerzbank AG in Frankfurt. "Oil prices should continue to fluctuate around the $50 level, with short-term risks being skewed to the downside."

The dollar increased against the euro for the first time in a week on speculation the European Central Bank will lower interest rates at its meeting next month. The U.S. currency traded at $1.3038 to the euro today after moving 1.6 percent higher yesterday, limiting the appeal of dollar-priced commodities such as crude oil as an alternative investment.

Brent crude for June settlement fell as much as $1.44, or 2.9 percent, to $48.88 a barrel on London's ICE Futures Europe exchange.

[frawin]

Crude Oil Rises as Dollar Decline Boosts Appeal of Commodities


By Grant Smith and Christian Schmollinger

April 29 (Bloomberg) -- Crude oil rose, reversing earlier losses, as the dollar fell against the euro, increasing the appeal of commodities as an investment to hedge against inflation.

The euro extended this week's gain versus the dollar before a U.S. report that economists said will show the world's largest economy shrank at a slower rate last quarter, spurring demand for higher-yielding assets. OPEC member nations are deepening their output cuts to support prices. An Energy Department report today will probably show U.S. stockpiles gained.

"Oil is holding around $50 despite expectations for another crude stock build today," said Christopher Bellew, senior broker at Bache Commodities Ltd. "The weaker dollar must help a bit, but I suspect that people are filling inventories because of the low cost of borrowing."

Crude oil for June delivery rose as much as $1.04, or 2.1 percent, $50.96 a barrel in electronic trading on the New York Mercantile Exchange. It traded at $50.89 at 11:01 a.m. London time. The contract earlier fell as much as 80 cents, or 1.6 percent, to $49.12 a barrel. Prices are up 14 percent this year.

An Energy Department report later today will probably show that U.S. crude oil stockpiles rose by 1.8 million barrels last week, according to the median of 14 analyst responses in a Bloomberg News survey. Supplies climbed to 370.6 million barrels in the week ended April 17, the highest since September 1990.

The API report, released after the end of floor trading yesterday, showed supplies rose to 374.8 million last week.

OPEC Cuts

Gasoline stockpiles increased 200,000 barrels from 217.3 million the prior week, according to the Bloomberg survey. Inventories of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 142.3 million.

Brent crude for June settlement was at $50.71 a barrel, up 72 cents, at 10:21 a.m. London time on London's ICE Futures Europe exchange. The contract earlier fell as much as 74 cents, or 1.5 percent, to $49.25 a barrel.

Members of the Organization of Petroleum Exporting Countries are still trying to support prices through their output reductions. The group agreed to slash production by 4.2 million barrels a day from September levels.

Abu Dhabi National Oil Co., based in the United Arab Emirates, told refiners in Asia yesterday that it was cutting June supplies for its Murban, Lower Zakum and Umm Shaif grades by 18 percent, more than the 15 percent in May. Their Upper Zakum type would be slashed by 16 percent, up from 10 percent.

The dollar weakened 1 percent to $1.3236 per euro, bolstering the appeal of commodities priced in the U.S. currency that can be used to hedge against inflation.

[Dee Gee]

It surprises me that the dollar is not going down faster because of all the money that is being printed by U.S.

[frawin]

Dale, the big reason is that our trade deficit has gone down big time, both for goods and services imported and the main reason is the import price and volume of crude has dropped.

[frawin]

Summary of Weekly Petroleum Data for the Week Ending April 24, 2009

U.S. crude oil refinery inputs averaged about 14.3 million barrels per day
during the week ending April 24, down 182 thousand barrels per day from the
previous week's average. Refineries operated at 82.7 percent of their operable
capacity last week. Gasoline production decreased last week, averaging
8.8 million barrels per day. Distillate fuel production increased last week,
averaging nearly 4.2 million barrels per day.

U.S. crude oil imports averaged about 9.8 million barrels per day last week,
down 31 thousand barrels per day from the previous week. Over the last four
weeks, crude oil imports have averaged 9.6 million barrels per day, 246 thousand
barrels per day below the same four-week period last year. Total motor gasoline
imports (including both finished gasoline and gasoline blending components)
last week averaged 841 thousand barrels per day. Distillate fuel imports
averaged 123 thousand barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) increased by 4.1 million barrels from the previous week.
At 374.7 million barrels, U.S. crude oil inventories are above the upper
boundary of the average range for this time of year. Total motor gasoline
inventories decreased by 4.7 million barrels last week, and are in the upper
half of the average range. Finished gasoline inventories fell last week and
gasoline blending components inventories decreased during this same time.
Distillate fuel inventories increased by 1.8 million barrels, and are above the
upper boundary of the average range for this time of year. Propane/propylene
inventories increased by 1.7 million barrels last week and are above the upper
limit of the average range. Total commercial petroleum inventories increased by
5.5 million barrels last week, and are above the upper limit of the average
range for this time of year.

Total products supplied over the last four-week period has averaged 18.4 million
barrels per day, down by 6.8 percent compared to the similar period last year.
Over the last four weeks, motor gasoline demand has averaged 9.1 million barrels
per day, down by 0.5 percent from the same period last year. Distillate fuel
demand has averaged about 3.7 million barrels per day over the last four weeks,
down by 10.5 percent from the same period last year. Jet fuel demand is 11.8
percent lower over the last four weeks compared to the same four-week period
last year.

[frawin]

Dale, the big reason is that our trade deficit has gone down big time, both for goods and services imported and the main reason is the import price and volume of crude has dropped.

Dale, probably another big reason is that every country is running their printing presses. I haven't looked at all of the exchange rates recently but my guess they all are fluctuating considerably.

[frawin]

Oil Rises, Set for Monthly Gain, as Recovery Optimism Grows


By Alexander Kwiatkowski

April 30 (Bloomberg) -- Crude oil rose, set for a third monthly gain, as a surge in equity markets increased optimism that the global economy and fuel demand will recover soon.

Oil advanced as stock markets gained on better-than- expected earnings and speculation that the worst of the global recession may be over. The U.S. dollar rose for a third day against the euro, making commodities more attractive to investors as a hedge against inflation.

"The dollar is sharply lower and equities are still rallying on improving sentiment," said Andrey Kryuchenkov, an analyst at VTB Capital in London. "Oil is tracking the gains in the broader market."

Crude oil for June delivery rose as much as 97 cents, or 1.9 percent, to $51.94 a barrel. The contract traded at $51.72 at 11:10 a.m. London time in electronic trading on the New York Mercantile Exchange. Prices have gained 4.4 percent this month and 16 percent this year.

Stocks rallied around the world as earnings at companies from Credit Suisse Group AG to Siemens AG beat analysts' estimates and investors speculated the global economy may be recovering from recession.

The Dow Jones Stoxx 600 Index added 2 percent to 201.24 at 10:55 a.m. in London, extending its gain since March 31 to 14 percent, the biggest monthly rally on record. Futures on the Standard & Poor's 500 Index gained 2.2 percent.

The dollar fell 0.2 percent to $1.3292 per euro today from $1.3271 yesterday.

Economic Rebound

Crude oil in New York has traded between $43.83 and $53.90 this month as inventories climbed and equities rebounded on speculation the economy will recover later this year.

Brent crude for June settlement climbed as much as 52 cents, or 1 percent, to $51.30 a barrel on London's ICE Futures Europe.

A rise in U.S. crude oil stockpiles to the highest since September 1990, reported by the Energy Department yesterday, failed to bring oil prices lower. Crude stockpiles jumped 4.1 million barrels in the week ended April to 374.6 million barrels, the department said.

Oil prices were "unimpressed," by the U.S. stockpile data, according to Eugen Weinberg, senior analyst at Commerzbank AG in Frankfurt. "Upbeat equity market sentiment and a weak U.S. dollar had a much larger impact on the oil price."

The gain in crude stockpiles left supplies 15 percent greater than the five-year average for the period. Stockpiles were forecast to increase by 1.8 million barrels, according to the median response of 14 analysts surveyed.

U.S. gasoline stockpiles dropped as refiners cut back their output. Motor fuel supplies declined 4.7 million barrels to 212.6 million last week, the biggest reduction since September, the Energy Department said. Stockpiles were forecast to climb by 200,000 barrels, according to a Bloomberg News survey.

Refineries operated at 82.7 percent of capacity, down 0.8 percentage point from the prior week. Analysts forecast that operating rates would climb 0.2 percentage point.

Total daily fuel demand in the U.S. averaged 18.4 million barrels in the four weeks ended April 24, down 6.8 percent from a year earlier, the department said. Consumption of gasoline was down 0.5 percent and distillate use was 11 percent lower.



.

[frawin]

Crude Oil Falls on Speculation Price Gains Have Been Excessive


By Alexander Kwiatkowski

May 1 (Bloomberg) -- Crude fell for the first time in three days in New York on speculation that prices have risen too far, too fast as stockpiles grow.

Oil completed its third monthly gain yesterday, tracking equity markets, on optimism that the global economy will recover from a recession this year. Still, stockpiles in the U.S. remain at the highest level since 1990 and as much as 100 million barrels of oil are being held at sea.

"We have an inventory overhang which is quite impressive and an incredible build of oil at sea," said Harry Tchilinguirian, senior oil market analyst at BNP Paribas SA in London. "We may have a correction from here."

Crude oil for June delivery fell as much as 69 cents, or 1.4 percent, to $50.43 a barrel in electronic trading on the New York Mercantile Exchange. The contract traded at $50.92 at 12:44 p.m. London time.

In New York trading yesterday, crude oil rose 15 cents to settle at $51.12 a barrel. Prices gained 2.9 percent in April and are up 15 percent this year.

Crude-oil supplies rose 4.05 million barrels to 374.7 million barrels last week, according to an Energy Department report earlier this week. The gain left inventories at the highest level since 1990 and 15 percent above the five-year average for the period.

"There has been a pull back from yesterday since, fundamentally, for oil nothing has changed," said Andrey Kryuchenkov, an analyst at VTB Capital in London. "Refinery rates are very weak in the U.S. while stockpiles show no easing."

Tanker Storage

Since at least November, oil companies such as Royal Dutch Shell Plc and BP Plc have sought to profit from storing oil on tankers, benefiting from so-called contango, where crude for longer-dated contracts is more expensive than near-term supply.

Traders are storing 100 million barrels of oil at sea, enough to supply Europe for five days, Frontline Ltd., the world's largest supertanker operator, said April 23.

Brent crude for June settlement fell as much as 84 cents, or 1.7 percent, to $49.46 on London's ICE Futures Europe exchange. The contract was at $50.26 a barrel at 12:44 p.m. local time.

Analysts surveyed by Bloomberg News were split over crude oil prices next week as surging U.S. inventories coincide with signals that the global recession will end later this year.

Eleven of 31 analysts, or 35 percent, said futures will increase through May 8. Another 11 respondents forecast that oil will decline. Nine expect prices to be little changed. Last week, 46 percent said prices would fall.

[frawin]

Natural Gas Drops as Report Shows Sluggish Demand in Recession


April 30 (Bloomberg) -- Natural gas futures fell in New York, capping the 10th consecutive monthly decline, after a government report showed sluggish demand for the fuel during the economic slowdown.

U.S. inventories gained 82 billion cubic feet in the week ended April 24 to 1.823 trillion cubic feet, the Energy Department said. Analysts expected a gain of 81 billion. Supplies were 23 percent higher than the five-year average, unchanged from last week. The five-year average change is an increase of 69 billion.

"Until demand recovers, it's going to be difficult to look for any meaningful reversal in this market," said George Ellis, a director in the energy derivatives group at BMO Capital Markets in New York. "Demand destruction has just been tremendous. The price trend is still down."

Natural gas for June delivery fell 3 cents, or 0.9 percent, to settle at $3.373 per million British thermal units at 3:01 p.m. on the New York Mercantile Exchange. Gas dropped 11 percent this month and is down 40 percent this year.

Analyst estimates for the stockpile report ranged between gains of 70 billion and 92 billion cubic feet.

Gas consumption by factories may drop 7.4 percent this year as the recession cuts demand, the Energy Department said in a report on April 14.

Gross domestic product dropped at a 6.1 percent annual pace in the first quarter after contracting at a 6.3 percent rate in the last three months of 2008, the Commerce Department said yesterday in Washington.

July High

Natural gas futures have declined 75 percent since reaching a 2008 high of $13.694 per million Btu as the recession intensified in the U.S. The price plunge forced oil and gas companies to scale back drilling and production.

A decline in rigs looking for natural gas in the U.S. hasn't translated yet into lower supplies because wells drilled in recent years are more productive than in the past, Ellis said.

The number of gas rigs operating in the U.S. has dropped 54 percent since September as prices collapsed, data published by Baker Hughes Inc. showed.

Gas rigs fell by 18, or 2.4 percent, to 742 last week, the lowest level since the week ended Feb. 7, 2003. The count is down from a peak of 1,606 on Sept. 12.

"The optics of bumping up on a triple-digit injection in April is just not helping the cause for gas," Cameron Horwitz, an analyst at SunTrust Robinson Humphrey Inc. in Houston, said before the supply report. "We've been watching the rig count fall off a cliff and waiting to experience a supply decline and that just hasn't come."

Falling Demand

Gas production in the first two months of 2009 was 2.1 percent higher than for the same period a year earlier, the Energy Department said in a report released yesterday. Total U.S. consumption was down 4.7 percent.

Industrial use fell 169 billion cubic feet, or 13 percent, to 1.098 trillion cubic feet for January and February from a year earlier, according to the department.

"Stocks continue to build and the bottom line in this market is that it's very weak," said Peter Beutel, president of Cameron Hanover Inc., an energy consulting company in New Canaan, Connecticut. "It's very hard to construct a bullish scenario."