INSIDE OIL

Monday, December 23, 2013

Futures (Front month) NYMEX light crude NYMEX RBOB gasoline NYMEX heating oil ICE Brent crude ICE gas oil DME Oman crude NYMEX Natgas Price Net Change Pct change Asia Cash Prices Dubai Crude Tokyo Naphtha (Ts) Gasoline (92 RON) Diesel (0.5 pct) Jet-Kerosene Fuel Oil (180 cst) Fuel Oil (380 cst) Price Net Change Differential Diff Change

$99.32 $2.7831 $3.0781 $111.77 $945.25 $108.40 $4.418

$0.55 $0.0430 $0.0475 $1.48 $10.00 $0.87 -$0.042

0.6% 1.5% 1.5% 1.3% 1.1% 0.8% -1.0%

$106.55 $995.00 $115.95 $124.74 $126.56 $617.02 $610.21

$0.83 $6.50 $1.55 $0.47 $0.72 $5.11 $4.60

2.37 18.50 7.77 -0.25 0.55 0.50 0.19

-$1.31 $0.75 $0.80 $0.00 -$0.13 -$0.05 -$0.81

CHART OF THE DAY

Click on the chart for full-size image

TODAYS MARKETS
OIL: Oil prices rose and gasoline futures hit a three-month high, fueled by spread trading and supply concerns. "We have strong demand going into the holiday. Were expecting record holiday travel, so were going to use more gasoline," said Phil Flynn, an energy analyst at Price Futures Group in Chicago. FOREX: The U.S. dollar got off to a sluggish start in Asia, having slipped late last week as investors took some profits although analysts still expect its longer-term uptrend to stay intact. "Between now and the return of full liquidity, beware the high volatility often associated to low liquidity. Breakouts without the satisfying follow through are common in such conditions," said John Kicklighter, chief currency strategist at DailyFX.

MARKET NEWS
U.S. growth revised higher, economy on firmer footing Morgan Stanley sells oil trading business to Russia's
Rosneft

Big Oil sits out lobbying on Iran as U.S. Congress

stands firm

GLOBAL MARKETS: Asian markets inched cautiously higher encouraged by record highs for Wall Street, though anxiety over a credit squeeze in China has weighed on shares there while adding to pressure on emerging market currencies. "Asia remains best placed -- the reform effort in China and India is significant; and the smaller, more open economies will benefit disproportionately from strengthening demand in the U.S. and Europe," said Drausio Giacomelli in a note to clients.

Saudi oil minister says market fears oil shortages Egypt to pay $1 bln to foreign oil firms Monday- central
bank

EVENTS TO WATCH TODAY (GMT)

GERMANY IMPORT PRICES (0700) ITALY CONSUMER CONFIDENCE (0900) U.S. PERSONAL INCOME (1330) U.S. CHICAGO NATIONAL ACTIVITY INDEX (1330)

Norway's Aker Solutions wins key contract at giant

N.Sea field

Force should be used to reopen oil ports in Libya-oil

minister

Strike ends at Total refinery in western France

BEYOND THE HEADLINES

New US energy debate: keeping oil reserve "strategic"
CLICK HERE FOR TECHNICAL CHARTS

INSIDE OIL

December 23, 2013

MARKET NEWS
U.S. growth revised higher, economy on firmer footing WASHINGTON, Dec 20 (Reuters) - The U.S. economy grew at its fastest pace in almost two years in the third quarter, the government said on Friday as it revised its estimates of business and consumer spending higher. The upward revisions also extended to exports and suggested some underlying strength in the economy, even though growth in the quarter was largely driven by a buildup in inventories. The report was supportive of the Federal Reserve's decision this week to reduce by $10 billion from January the $85 billion it is pumping into the economy each month through bond purchases. Gross domestic product grew at a 4.1 percent annual rate instead of the 3.6 percent pace reported earlier this month, the Commerce Department said in its third estimate. That was the quickest pace since the fourth quarter of 2011 and an acceleration from the April-June quarter's 2.5 percent. Thirdquarter growth was first estimated at a 2.8 percent rate. Big Oil sits out lobbying on Iran as U.S. Congress stands firm WASHINGTON, Dec 22 (Reuters) - As debate rises in Washington over the first thaw in relations between Iran and the United States in decades, powerful oil companies are opting for an unusual tactic: silence. Oil companies such as Exxon Mobil Corp and ConocoPhillips could earn huge profits if the United States loosened economic sanctions on Iran, allowing access to its oil and natural gas fields, some of the world's largest and least costly to produce. But through September, at least, U.S. energy companies have largely opted to stand back even as Congress considers whether to further limit new oil exports from the Islamic republic. It is an unusual tack for an industry known for its strong Capitol Hill presence on every issue from taxes to pollution rules to international trade. But this particular issue may be too hot to touch. Egypt to pay $1 bln to foreign oil firms Monday- central bank CAIRO, Dec 22 (Reuters) - Egypt's central bank has delivered $1 billion to the Ministry of Petroleum to repay on Monday part of the state's debt to foreign oil companies, the central bank governor said on Sunday. Egypt pledged last week to pay $300 million of the money it owes to foreign oil companies in Egyptian pounds starting in December as part of a $1.5 billion repayment scheme designed to revive confidence in its economy after years of turmoil. The country has also said it would repay a further $3 billion of the $6.3 billion it says it owes foreign oil companies operating in the country in monthly instalments until 2017. Egypt wants to encourage foreign oil companies in the country to increase exploration and production in exchange for a more rapid repayment of the money it owes them. Morgan Stanley sells oil trading business to Russia's Rosneft LONDON/MOSCOW, Dec 20 (Reuters) - Morgan Stanley has sold the majority of its global physical oil trading operations to Russian state-run oil major Rosneft, becoming the latest Wall Street firm to dispose of a major part of its commodity business. The deal represents a bold move into the U.S. market by Russia's top oil producer, which is headed by Igor Sechin, a powerful ally of Russian President Vladimir Putin. The Russian state owns almost 70 percent of Rosneft. The deal includes more than 100 traders and shipping schedulers in London, New York and Singapore, over $1 billion worth of oil, and the bank's 49 percent stake in tanker company Heidmar. The terms of the deal were not disclosed. Morgan Stanley said it was not expected to have a significant impact on its financial results. Saudi oil minister says market fears oil shortages DOHA, Dec 21 (Reuters) - Worries about supplies have caused the oil market's pricing dynamics to shift in recent days, Saudi Arabia's oil minister said on Saturday. "Did you see what happened over the past three days? The market shifted from contango to backwardation, because people are expecting a shortage," Ali al-Naimi told reporters on the sidelines of an Organization of Arab Petroleum Exporting Countries (OAPEC) meeting in Doha. Backwardation means the cash or nearby delivery price of a commodity has risen above the price for forward delivery, which is usually higher. Contango means the forward prices are higher. The oil minister played down any suggestion the kingdom was ready to cut production to accommodate increased supply by other members of the Organization of Petroleum Exporting Countries. Norway's Aker Solutions wins key contract at giant N.Sea field OSLO, Dec 20 (Reuters) - Norway's Aker Solutions has won a crucial contract to provide engineering services, procurement and management assistance for the giant Johan Sverdrup oilfield in the North Sea, the firm said on Friday. The oilfield engineering company had previously said it was crucial to its fortunes to win the deal, which would involve working for up to 10 years on one of the biggest industrial schemes undertaken in the Nordic country. The first contract awarded as part of the deal is worth 650 million crowns ($105.54 million) and involves the supply of FEED, or front-end engineering and design, for Johan Sverdrup. Earlier, the partners in the oilfield, Statoil, Det Norske, Petoro, Lundin Petroleum and Maersk Oil said they were delaying by a year the development of the field, which could be the thirdbiggest oil find made off Norway. But the partners said they would still go ahead with awarding a FEED (Front End Engineering and Design) contract as "soon as possible" to ensure progress for the project.

INSIDE OIL

December 23, 2013

MARKET NEWS
Force should be used to reopen oil ports in Libya-oil minister DOHA, Dec 21 (Reuters) - Force should be used to reopen Libya's oil ports which were seized by a group demanding greater autonomy for the country's eastern part, Libya's oil minister said on Saturday. A mix of militias, tribesmen and political minorities demanding a greater share of Libya's oil wealth and more political power have shut most oil fields and ports, cutting oil output to around 250,000 barrels per day (bpd) from 1.4 million five months ago. "The ports have been closed for five months, in my opinion force should be used to reopen them," Abdelbari al-Arusi told reporters on the sidelines of an Organization of Arab Petroleum Exporting Countries (OAPEC) meeting in Doha. In October, Libya's government had promised oil sales would in future be properly accounted for, one of the demands of the group which has seized three eastern ports that previously accounted for around 600,000 bpd in exports. Strike ends at Total refinery in western France PARIS, Dec 22 (Reuters) - Workers voted to end a strike over pay at Total's Donges refinery in western France on Sunday, the oil company said, though industrial action continued at three other plants. The hardline CGT union led the walkout at the 230,000 barrelper-day (bpd) refinery near Nantes after rejecting an annual pay rise deal reached with moderate unions. "The strike action has ended at Donges," a Total spokeswoman said, without saying why the workers had taken that decision. Workers were reporting to their posts and "production units are in the process of ramping up", she added, declining to say how long they would take to restart. CGT union officials at Donges were not immediately available for comment. Production remained shut down at the three remaining plants the 339,000-bpd Gonfreville refinery in Normandy, the 155,000 bpd La Mede plant near Marseille and the 119,000 bpd Feyzin plant near Lyon in eastern France.

BEYOND THE HEADLINES

ANALYSIS-New US energy debate: keeping oil reserve "strategic" By Jonathan Leff and Timothy Gardner NEW YORK/WASHINGTON, Dec 22 (Reuters) - Even as a domestic energy boom shrinks U.S. dependence on imported crude to the lowest in decades, few question the need to maintain a government-controlled reserve of oil, a vital tool to guard against damaging global price spikes. Beyond its existence, almost everything is up for debate: the size, location, composition and usage of the 696-million-barrel Strategic Petroleum Reserve are under discussion among oil industry advisors and administration officials. Michelle Patron, who became senior energy advisor for President Barack Obama this year, had previously advocated repositioning the reserve to allow for exporting crude in the event of a global disruption. Such exports are now effectively prohibited by the 1975 U.S. law that created the SPR, but Patron argued for the change in a book published before she took office. Others suggest the reserve should include more refined fuels, and perhaps be shifted to the East Coast, a region still scarred by the gasoline shortages that emerged after Superstorm Sandy. Some say the reserve's make-up needs to be adjusted to reduce the over one-third share of light-sweet crude, the sort now saturating the Gulf Coast region due to unyielding production growth from the Eagle Ford shale. With overall U.S. domestic oil stockpiles swelling to their highest level ever relative to imports, the SPR joins a list of energy policy questions arising from the shale oil revolution. More pressing issues include the safety of hydraulic fracturing, the future of the Keystone oil pipeline and the whether surplus crude should be exported. "There are lots of issues in the energy space that...deserve some new analysis and examination in the context of what is now an energy world that looks nothing like the 1970s," Energy Secretary Ernest Moniz told reporters at the Platts Global Energy Outlook Forum in New York last week. He referred specifically to the SPR as one such example. "I think there certainly is a need for a reserve," he said, but added that there are issues related to "how the reserve is managed" that may need to be reexamined. U.S. oil imports are forecast to shrink to a low of just 25 percent of consumption by 2016, from more than 60 percent at a peak in 2005. But because oil prices are set globally, the increase in supply will do little to reduce America's exposure to world oil spikes. The White House, as a rule, does not discuss SPR policy. A senior administration official, when asked about potential changes in oil reserve policy, said there were many positive ramifications of the surge in domestic oil and gas production, but said he had no specific direction on the SPR to share. AN ABUNDANCE OF SECURITY The SPR is a child of the 1973 Arab oil embargo that shocked U.S. motorists with empty fuel pumps and high prices. The Energy Policy and Conservation Act of 1975 required the United States to have enough oil on hand to replace 90 days worth of imports. The reserve should be used only in the event of a "severe energy supply interruption". That orthodox interpretation has given way toward the idea of using the SPR to temper damaging price spikes, experts say, a shift most evident under Obama, who led the campaign to release global reserves in 2011. "The days when we were principally concerned with a physical loss of imports are very far behind us," said Richard Newell, a

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December 23, 2013

BEYOND THE HEADLINES

former administrator of the U.S. Energy Information Administration, now a professor at Duke University. "The way to think about the SPR and its use has much more to do with protecting the economy from the economic dislocation caused by significant global oil price shocks." Meanwhile, in recent years U.S. oil consumption has fallen and shale-led domestic output has risen to 25-year high, dramatically reducing U.S. dependence on imports. The volume of oil in the SPR has remained essentially unchanged. As of September, the United States had some 210 days worth of oil stockpiled in both private and government-controlled reserves, according to calculations by the International Energy Agency, the global watchdog that coordinates reserve policy. Four years ago, stockpiles were equal to 140 days of imports. The SPR alone holds 93 days' worth, according to U.S. data based on 2012 imports, down from highs of 118 days in 1985 -but still more than all but five other IEA members. In Europe, where many countries rely on commercial stocks, publicly held inventories total only 54 days of net imports, IEA data show. WRONG OIL IN THE WRONG PLACE? The Gulf Coast region, where half of all U.S. refiners and all four vast salt caverns that hold the U.S. SPR are located, is now saturated with light, low-sulfur "sweet" crude oil originating in the Texas Eagle Ford and North Dakota Bakken fields. Pipelines that were once geared toward shipping imported crude to the Midwest are instead pumping oil south from Canada. As a result, imports of that variety are shrinking rapidly, and may cease almost entirely by the end of next year. That has raised questions about retaining the 262 million barrels of sweet crude in those caverns, experts say. "Over time the balance should shift as our refinery mix changes," says David Goldwyn, who headed international energy affairs at the State Department until early 2011. In an era of tight budgets, liquidating those barrels, or swapping for cheaper, heavier crudes that are still being imported from Saudi Arabia and elsewhere, may have appeal. "The U.S. could sell 250 million barrels of that for about $25 billion without jeopardizing energy security," said Ed Morse, managing director of commodity research at Citi. A MORE REFINED RESERVE Last year's Superstorm Sandy also showed that emergency crude stored in Gulf caverns is not very helpful in getting motor fuel to a major coastal consuming region facing a logistical supply crisis. That has revived interest in the idea of a refined fuel reserve first raised after Hurricanes Katrina and Rita in 2005. In 2011, Sen. Edward Markey put forward a bill that would have swapped 30 million barrels of SPR crude for refined fuels instead -- an idea that remains popular, experts say. Bush administration officials considered building capacity to store refined fuels in a new Mississippi cavern that would have expanded the SPR's total capacity, says John Shages, who ran the SPR program at the Department of Energy until 2007 and is now a private consultant. The expansion never happened. Unlike crude, oil products must generally be stored in aboveground tanks and recycled frequently to avoid spoiling, a costly process likely out-sourced to commercial companies. SPR crude stored in the salt caverns costs just over 20 cents per barrel per year to maintain; by comparison the small Northeast Home Heating Oil Reserve cost some $4.80 a barrel, according to a Department of Energy estimate from 2009. A 'SHIFT' IN POLICY Patron, a former private oil analyst who now works at the White House's National Security Council, has advocated coordination on reserves with China and increasing cooperation with countries in the West. In a 2013 book "Energy and Security: Strategies for a World in Transition," Patron and Goldwyn recommended exporting SPR oil and weighing whether some emergency reserves should be relocated to the high-demand West and East Coasts to get oil to market more quickly when needed. Failure to act could trap oil in the United States and make prices more volatile, she wrote. The White House declined a request for an interview with Patron. For the moment, exports of domestic crude to countries other than Canada is effectively off-limits, although that decades-old policy is always coming under renewed scrutiny.

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December 23, 2013

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 Oil is compiled by Renuka Vijay Kumar in Bangalore) For questions and comments on Inside Oil newsletter, click here Your subscription: To find out more and register for our free commodities newsletters click here Privacy statement: To find out more about how we may collect, use and share your personal information please read our privacy statement here To unsubscribe to this newsletter, click here

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