1. Art and Diseño

INSIDE U.S. OIL
Thursday, January 29, 2015
Futures (Front Month)
NYMEX light crude
Close
Net Change Pct Change U.S. Cash Crude
$44.45
-$1.78
4.00
NYMEX RBOB gasoline
$1.35
-$0.01
0.38
NYMEX heating oil
$1.63
-$0.03
1.90
$48.47
-$1.13
2.33
$478.50
$3.25
0.68
Brent/WTI spread
-$4.02
-$0.65
16.17
Reuters 321 Crack Spread
$16.64
$1.15
6.91
ICE Brent crude
ICE gas oil
Price
Net Change Differential Diff Change
Light Louisiana Sweet
$45.50
-$1.86
2.20
$0.68
Poseidon
$40.15
-$2.06
2.75
$0.88
Thunder Horse
$43.05
-$2.29
0.25
$0.75
U.S. Cash Crude Products
(Values in Cents/Gal)
NYH Prompt Heating oil
NYH RBOB
USG ULSD
USG Prompt Gasoline
Price
156.72
131.77
153.22
135.77
Net Change Differential Diff Change
-1.65
-0.73
-2.65
-0.48
-6.00
-2.75
-9.50
-1.50
1.00
0.25
0.00
2.75
CHART OF THE DAY
JOHN KEMP ON MARKETS
Click on the chart for full-size image
COLUMN– California gasoline sales point to growing oil demand
Motorists in California purchased more gasoline in October 2014 than
any corresponding month since 2007, according to state tax records,
confirming the renewed growth in U.S. fuel demand.
John Kemp is a Reuters market analyst. The views expressed are his own.
Click here to read the rest of his column
TODAY’S MARKETS
MARKET NEWS
 Shell cuts spending by $15 bln as lower oil price takes
toll
 China to raise commercial oil storage more than 10 pct
in 2015 -sources
 U.S. oil stocks hit record high as supply glut fills tanks
OIL: Brent crude oil futures held above $48 a barrel as investor inflows
offset data showing that U.S. crude stocks had hit a record high. "It's a
tug of war between the non-supportive fundamentals and investor flows
- investors are more concerned about missing a potential bounce," said
Ole Hansen, senior commodity strategist at Saxo Bank. "But there is
nothing bullish to be found in those numbers. The break will be to the
downside."
FOREX: The U.S. dollar inched higher against the yen and was steady
to the euro after a Federal Reserve statement which, with some caveats, was read as keeping the bank on track to raise interest rates later
this year. "For us, its the growth and yield differentials that are most
important," said Ian Stannard, head of European FX strategy with Morgan Stanley in London.
 Eni aims to shed Saipem debt by selling part of its stake
- CEO
 Glencore considers closing S.Africa coal mines, laying
off workers
 North Dakota: Oil producers aim to cut radioactive waste
bills
 Oil booked for sea storage seen at least 50 million barrels
 Japan's JX plans Feb crude refining down 4 pct y/y
REFINERY NEWS
GLOBAL MARKETS: Stocks fell in Europe and Asia and the dollar
strengthened after the Federal Reserve took an upbeat view of the
world's largest economy and signalled it was on track to raise interest
rates this year. "The bullish tone by the Fed on the economy caught
investors off-guard," said John Plassard, senior equity sales trader at
Mirabaud Securities in Geneva.
U.S. EVENTS TO WATCH TODAY (EST)
 U.S. WEEKLY JOBLESS CLAIMS (0830)
 U.S.PENDING HOME SALES DEC (1000)
 Coker shut for repairs at Motiva Port Arthur refinery sources
 FCCU still shut at Marathon Galveston bay refinery in
Texas -sources
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE
INSIDE U.S. OIL
January 29, 2015
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE (0830 GMT)
ICE BRENT FUTURES FORWARD
ICE Brent Fut. Fwd Curve
DUBAI SWAPS FORWARD CURVE
1M - 1Y 1M
Yield
59.23
Dubai Swaps Fwd Curve
1M - 1Y 1M
Yield
55.45
55.00
56.00
50.00
52.00
45.00
.12
.12
1M 2M
3M
4M
5M
6M
7M
8M
9M 10M
1Y 1M
1M 2M
FO180 FOB CARGO SG FWD CURVE
FO180 FOB Cargo SG Fwd Curve
3M
4M
5M
6M
7M
8M
9M 10M
1Y 1M
FO3.5% BARGES ARA FORWARD CURVE
9M - 9M
Yield
FO3.5% Barges ARA Fwd Curve
1M - 1Y 1M
Yield
305.00
300.00
276.50
270.00
260.00
290.00
250.00
240.00
280.00
.12
.12
9M
1M 2M
FO380 FOB CARGO SG FORWARD CURVE
FO380 FOB Cargo SG Fwd Curve
3M
4M
5M
6M
7M
8M
9M 10M
NAPHTHA CFR JAPAN FORWARD CURVE
Naphtha CFR Japan Fwd Curve
2M - 11M
Yield
299.50
300.00
9M - 9M
Yield
468.25
460.00
290.00
450.00
280.00
440.00
430.00
.12
270.00
.12
2M
3M
4M
8M
1Y 1M
9M
9M 10M 11M
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INSIDE U.S. OIL
January 29, 2015
OIL ANALYTICS: ASIA SWAPS FORWARD CURVE (0830 GMT)
NAPHTHA CIF NWE FORWARD CURVE
Naphtha CIF NWE Fwd Curve
NAPHTHA FOB SG FWD CURVE
1M - 1Y 1M
Yield
444.50
440.00
Naphtha FOB SG Fwd Curve
49.00
49.65
48.00
430.00
420.00
47.00
410.00
46.00
.12
.12
1M 2M
3M 4M
5M
6M
7M 8M
9M 10M
1Y 1M
2M
ICE GO FUT. FWD CURVE
ICE GO Fut. Fwd Curve
GO FOB CARGO SG FORWARD CURVE
9M - 9M
Yield
533.00
520.00
GO FOB Cargo SG Fwd Curve
2M - 2M
Yield
68.25
66.00
500.00
63.00
480.00
.12
.12
9M
2M
JET FUEL FOB CARGO SG FWD
Jet Fuel FOB Cargo SG Fwd Curve
2M - 2M
Yield
1M - 1M
Yield
69.44
68.00
66.00
64.00
.12
1M
3
INSIDE U.S. OIL
January 29, 2015
MARKET NEWS
Shell cuts spending by $15 bln as lower oil price takes toll
China to raise commercial oil storage more than 10 pct in
2015 -sources
Royal Dutch Shell shares fell on Thursday after the oil company
missed profit expectations and announced a three-year, $15
billion cut in spending reflecting a steep fall in oil prices.
Chief Executive Ben van Beurden however warned against an
over reaction to the 60 percent drop in oil prices since June,
while keeping dividends unchanged to soothe investors.
"We are taking a prudent approach here and we must be careful
not to over-react to the recent fall in oil prices," van Beurden
said.
Shell shares were down 3.7 percent at 0826 GMT after the company's fourth-quarter 2014 adjusted net income of $3.3 billion
missed market expectations by more than 20 percent.
"It was a big miss in upstream," said Raymond James analyst
Bertran Hodee.
The $15 billion spending cut, which will involve canceling and
deferring projects through 2017, which would represent a 14
percent cut per year from 2014 capital investment of $35 billion.
Storage companies in China are set to boost commercial oil
tank capacity by more than a tenth this year, just in time to cash
in on speculative demand to stock up on cheap crude, a survey
of storage and trading executives shows. The volume of at least
42 million barrels of crude represents about one week of
China's net crude oil imports, and purchases to fill the tanks
could offer support global oil prices that have more than halved
since last summer to drop below $50 a barrel as Saudi-led
OPEC faces off with U.S. shale producers.
Traders and producers are seeking to stash crude to sell
months down the line on expectations that prices will possibly
recover towards late 2015. Up to 30 tankers have been booked
for such a purpose, Reuters has reported. Storage operators
looking to meet this demand include Dutch tank and terminal
specialist Vopak, Hong Kong-listed Brightoil Petroleum and little
-known private companies CEFC China Energy and Zhejiang
Tianlu Energy Group.
U.S. oil stocks hit record high as supply glut fills tanks
Eni aims to shed Saipem debt by selling part of its stakeCEO
U.S. crude oil inventories surged to their highest on record last
week, a third consecutive weekly jump as a global crude glut fills
up storage tanks, government data showed on Wednesday,
while gasoline and distillate inventories fell.
Crude inventories rose by 8.9 million barrels during the week,
according to the Energy Information Administration (EIA). Analysts had expected an increase of 4.1 million barrels. The bulk of
the rise, 5.5 million barrels, occurred in the Gulf Coast PADD 3
region. The build was somewhat less than the nearly 13 millionbarrel increase reported late on Tuesday by the American Petroleum Institute (API).
Still, it follows two weeks of strong increases and left U.S. stockpiles at 406.7 million barrels, the highest level since the EIA
began keeping records in 1982.
"While expectations for an incredibly large crude oil inventory
build were set high, the report did not disappoint in its mostly
bearish tilt," said John Kilduff, partner at Again Capital LLC in
New York.
Eni is not interested in selling its entire stake in oil contractor
Saipem but wants to get the subsidiary's debt off its books, Eni's
CEO said on Wednesday. Eni, which owns 43 percent of
Saipem, has previously said the oil service group is not core to
its business and will be sold. At current market prices, Eni's
stake in Saipem would fetch around $1.8 billion. Eni, the only
big oil company with an oil service arm, is keen to get Saipem's
5 billion euros of debt off its balance sheet to help to underpin
its finances in response to lower oil prices. The sale, part of a
plan to shed 11 billion euros ($12.50 billion) of assets, was put
on hold in December when Saipem shares fell sharply after the
loss of a major contract with Russian energy giant Gazprom.
North Dakota: Oil producers aim to cut radioactive waste
bills
North Dakota's oil industry is pushing to change the state's radioactive waste disposal laws as part of a broad effort to conserve cash as oil prices tumble. The waste, which becomes
slightly radioactive as part of the hydraulic fracturing process
that churns up isotopes locked underground, must be trucked
out of state. That's because rules prohibit North Dakota landfills
from accepting anything but miniscule amounts of radiation. The
most common form of radioactive waste is a filter sock, a mesh
tube resembling a sandbag through which fracking water is
pumped before it's injected back into the earth. Tank and pipeline sludge are also radioactive. It's not clear how much of this
waste is generated, as North Dakota officials only began requiring tracking last year; final 2014 reports aren't due until next
month. Some put the number at 70 tons per day; others say 27
tons. Given that, estimates on potential savings aren't precise.
But the oil industry says allowing North Dakota's landfills to accept more radioactive material could save at least $10,000 in
transportation costs per truckload. worth of radioactive waste
each year - a conservative estimate, state officials say - that
translates to an annual savings of about $120 million statewide.
Glencore considers closing S.Africa coal mines, laying off
workers
Global miner Glencore, the world's largest exporter of thermal
coal, is considering closing some of its South African coal mines
and laying off workers due to deteriorating market conditions
and falling prices. Analysts believe the move would not be
enough to combat a global coal supply glut but could herald the
beginning of a production response to low prices.
The potential closures at Optimum Coal Mines would cut production of thermal coal by at least 5 million tonnes per year and
would put 1,070 jobs at risk, the company said in a statement.
Optimum produces about 10 million tonnes of coal annually, half
of which is sold to power utility Eskom while the rest is exported.
European coal futures hit a nine-year low this week, extending a
steady decline as demand has failed to keep pace with supply
growth in the past few years and, more recently, imports into top
consumer China's have slowed following the introduction of
trade targets.
4
INSIDE U.S. OIL
January 29, 2015
MARKET NEWS (Continued)
Oil booked for sea storage seen at least 50 million barrels
Japan's JX plans Feb crude refining down 4 pct y/y
Oil booked by traders for storage at sea has reached at least 50
million barrels, industry sources said on Wednesday.
In the past few weeks, trading firms including Trafigura, Vitol,
Gunvor, Koch and energy company Shell have booked oil tankers for floating storage for up to 12 months.
The more than 50 percent fall in spot prices since June enables
traders to make money by storing the crude for delivery months
down the line, when prices are expected to recover.
Michael Jolliffe, co-founder and vice chairman of tanker group
TEN Ltd, said the volume of floating storage was “about 50 million” barrels at the moment.
Petter Haugen, shipping analyst with DNB Markets, said separately 30 VLCC supertankers – each capable of storing a maximum of 2 million barrels – had been chartered to store an estimated 60 million barrels of oil.
Japan's top oil refiner JX Nippon Oil & Energy Corp said on
Thursday it would refine 4 percent less crude oil for domestic
consumption in February than the same month a year earlier,
with milder winter weather curbing demand.
The planned refining volume of 1.15 million barrels per day
(5.10 million kilolitres) is the lowest for the month of February
since JX Holdings was created in April 2010, a company
spokeswoman said.
Its January crude refining for domestic consumption was estimated at 1.13 million bpd (5.58 million kl), down 5 percent from
the year-earlier period and unchanged from its original plan.
The company said it imported about 1.26 million barrels of middle distillate this month, mostly from South Korea.
JX permanently shut its 180,000-bpd Muroran refinery on March
31 to comply with a government requirement to boost efficiency,
and its refining capacity has been reduced by 12 percent to 1.43
million bpd.
REFINERY NEWS
Coker shut for repairs at Motiva Port Arthur refinery sources
FCCU still shut at Marathon Galveston bay refinery in
Texas -sources
Motiva Enterprises is repairing piping on a 95,000 barrel-per-day
(bpd) coking unit at its 600,250 bpd Port Arthur, Texas, refinery
while production is reduced due to planned work on other units,
sources familiar with plant operations said on Wednesday.
The coking unit, called Delayed Coking Unit 2, increases the
amount of refinable material from a barrel of oil and converts
residual crude into petroleum coke, a coal substitute. It was shut
last week and is expected to be out of production for a total of
four weeks, the sources said.
Production at the Port Arthur refinery has been reduced while
the 92,000 bpd gasoline-producing fluidic catalytic cracking unit,
49,000 bpd reformer, 18,000 bpd alkylation unit, and a sulfur
recovery unit are shut for planned work, according to the
sources.
A 60,000 barrel-per-day (bpd) gasoline-producing fluidic catalytic cracking unit remains shut on Tuesday at Marathon Petroleum Corp's 451,00- bpd Galveston Bay Refinery in Texas City,
Texas, said sources familiar with plant operations.
The FCCU, which is the smaller of two at the refinery, was shut
on Jan. 13 to repair a malfunction.
A Marathon spokesman declined to discuss operation at the
Galveston Bay refinery on Tuesday.
5
INSIDE U.S. OIL
January 29, 2015
BEYOND THE HEADLINES
and available only with long delays. Consumption statistics are
particularly poor in terms of both accuracy and timeliness.
As usual, the best data comes from the United States, where
the Energy Information Administration (EIA) publishes weekly,
monthly and annual estimates on the amount of “petroleum
products supplied" to the domestic market.
But product supplied is calculated as a residual from other data
on domestic production, imports, exports and stock changes, so
it is sensitive to errors in recording or estimating the other items.
In particular, exports are estimated in the short term, so errors
in estimating exports flow through directly into equal and opposite errors in calculating product supplied.
The one point at which accurate and comprehensive data is
available is when motor fuel is sold and excise taxes are paid.
Federal and state governments impose excise taxes on every
gallon of gasoline and diesel sold, and publish data on “taxable
sales”.
For example, California collects federal fuel tax of 18.4 cents on
every gallon of gasoline sold as well as a state fuel tax of 36
cents per gallon.
States report taxable sales to the Federal Highway Administration each month so the U.S. Department of Transportation can
attribute revenues and distribute spending from the highway
trust fund among the states.
Unfortunately, the latest nationwide data relates to August 2014.
Five months out of date, it is much too old to be useful in analysing short-term consumption trends.
But some states release their own data on taxable sales much
faster. California fuel sales data is available for October, only
three months old.
The state’s motor vehicle fuel tax is levied on gasoline upon
distribution, importation or sale in the state, and there are fewer
than 300 registered tax-paying entities, so the statistics are simple, comprehensive and clean.
California motor vehicle fuel tax raised $5.2 billion for the State
Transportation Fund in the 2012-13 fiscal year to construct and
maintain public roads and mass transit systems.
California is the largest motor fuel market in the country, ahead
of Texas, Florida, New York and Illinois. The state accounted for
11 percent of nationwide gasoline sales in 2013, according to
the EIA, or almost 39 million gallons per day.
State gasoline sales can serve as a useful indicator for national
trends, and they show gasoline demand is now growing rapidly.
COLUMN-California gasoline sales point to growing oil demand
By John Kemp
Motorists in California purchased more gasoline in October 2014
than any corresponding month since 2007, according to state
tax records, confirming the renewed growth in U.S. fuel demand.
State gasoline consumption was 2.3 percent higher than in the
same month in 2013 and 4.1 percent higher than in 2012, according to the California Board of Equalization, which collects
motor vehicle fuel tax in the state.
Sales have been growing since June 2013 and the trend is expected to accelerate as motorists respond to the halving of fuel
prices by purchasing larger vehicles and driving more.
Lower crude oil prices will gradually rebalance the market by
slowing crude production growth and encouraging more use of
refined fuels.
GASOLINE SALES UP
California’s gasoline sales have been rising for more than a year
but the rate of increase accelerated in September and October
2014, coinciding with the sharp drop in pump prices.
In October, California gasoline sales hit 1.272 billion gallons, up
from 1.242 billion gallons in October 2013 (http://
link.reuters.com/vav83w).
To switch units to something more familiar in the oil market, the
extra 30 million gallons of gasoline sold in October 2014 was
equivalent to an increase of 23,000 barrels per day (bpd).
Multiplying up to national level, gasoline sales were more than
200,000 bpd higher across the United States in October 2014
compared with the same month a year earlier.
If oil prices remain at their current level, and gasoline consumption continues to grow at recent rates, demand could easily rise
by another 200,000 to 500,000 bpd in 2015.
Assuming national crude oil production is flat in 2015, increased
gasoline consumption from the United States alone could
tighten the global oil market by between a quarter and a half a
million barrels per day by the end of 2015.
By itself that would not be enough to rebalance the oil market.
But if U.S. diesel consumption also continues to rise, and increased fuel use is mirrored in Europe and China, thanks to
lower prices, global oil consumption could easily rise by 1 million
barrels per day by the end of the year.
The International Energy Agency, using a more sophisticated
model, predicts global oil demand will hit 94.4 million bpd in the
fourth quarter of 2015, up almost exactly 1 million bpd from 93.4
million in the fourth quarter of 2014.
FUEL CONSUMPTION DATA
The problem with monitoring the oil market is the paucity of realtime data on either supply or demand. Data is mostly incomplete
(John Kemp is a Reuters market analyst. The views expressed
are his own)
6
INSIDE U.S. OIL
January 29, 2015
ANALYTIC CHARTS
Daily NYMEX Crude - 30 Min
Daily ICE Brent Crude - 30 Min
Daily ICE Gas Oil - 30 Min
Daily NYMEX RBOB Gasoline - 30 Min
Daily ICE Heating Oil - 30 Min
Daily NYMEX Heating Oil - 30 Min
(Inside U.S. Oil is compiled by Renuka Vijay Kumar in Bangalore)
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