Oil markets slid today, with WTI dropping to its lowest level in three weeks, as many investors believe that the recent run up in prices might have been a bit excessive.
Both benchmarks received pressure today as investors sold off from fear that a slower global economy could reduce oil demand, especially in China and the U.S.
Other investors are holding out, as they await news tomorrow from the Fed's two-day meeting for some guidance on when the central bank might begin to curb its current $85 billion per month bond-buying stimulus program.
Focus tomorrow will also lie on this weeks EIA Inventory Report for a view into U.S. oil demand, and the Commerce Department's report on second-quarter GDP, which many are expecting will show an expansion of only 1% annualized rate, compared to a 1.8% for the first quarter.
On Friday, the Labor Department will release non farm payroll numbers for July, which will give investors a look at the state of the U.S. jobs market and an idea of oil demand to follow.
Concern surrounding the U.S. economy are making many nervous about what demand might look like in the second half of this year.
WTI fell $1.47 to settle at $103.08/bbl today, while Brent only shed $0.54 to settle at$106.91/bbl. Bunker markets remained stable in the primary ports.
Forty-seven workers were evacuated from the jackup Hercules 265 (250’ MC) offshore Grand Isle, Louisiana following a blowout Tuesday, according to media reports.
Efforts to regain control of the A-3 natural gas well at South Timbalier Block 220 that experienced a blowout are underway, rig owner Hercules Offshore said in a press release Tuesday. The company also has notified all necessary governmental authorities of the incident.
The U.S. Coast Guard evacuated workers on two lifeboats from the platform, according to New Orleans TV station website WDSU.com. None of the workers sustained any injuries. The workers are being transported to a secure location, Hercules said in a statement. A Coast Guard cutter and two aircraft are headed out to the platform to conduct an overflight assessment, WDSU reported.
“Our first and foremost concern is for the safety of all personnel aboard our drilling rig and we have taken every necessary precaution to safely evacuate the rig,” said Hercules CEO and President John T. Rynd in a statement. “Furthermore, efforts are ongoing with our client, Walter Oil & Gas, to mobilize the necessary resources to regain control of the well and minimize any potential impact on the environment.”
Hercules Offshore jackup Hercules 265 has been drilling for Walter at South Timbalier Block 220 in 154 feet of water, according to Rigzone’s RigLogix database. The rig was scheduled to go into shipyard in mid-August following completion of its work with Walter.
Walter reported losing control of Well A-3 on an unmanned platform at South Timbalier Block 220, located 55 miles offshore Louisiana, while doing completion work on the sidetrack well to prepare the well for production, the Bureau of Safety and Environmental Enforcement (BSEE) reported Tuesday.
The well is flowing gas, and no oil is being released, BSEE said in a press release. BSEE inspectors conducting an overflight reported seeing a light sheen one-half miles by 50 feet in area which is dissipating almost immediately. BSEE inspectors will remain at a nearby platform to keep abreast of the situation.
“BSEE is closely monitoring Walter Oil & Gas’ mobilization of its response efforts to stop the flow of gas and secure the well,” BSEE noted.
The agency also is closely coordinating its response efforts with the Coast Guard and other federal agencies.
The owners of Rotterdam's Gate liquefied natural gas (LNG) terminal say interest in LNG bunkering is so strong it may merit opening a third jetty with a focus on small ships, industry news site Maritime Executive reports.
Some estimates suggest 30 percent of new vessels will run on LNG by 2020 and the fuel will make up 8 percent of global bunker demand by 2025.
"Given this growth potential of small-scale LNG and the interest we see, the two main shareholders of Gate are studying the possibility of developing a third jetty in the second half of 2015 specifically for small scale LNG," said a spokesman for the terminal.
A recent study by an industry group predicts that LNG bunkers will generate €2.7 billion($3.5 billion) for the Netherlands by 2030, with the number of inland navigation vessels running on the fuel rising from 2 to 50.
The Gate terminal is owned by Dutch companies Gasunie and Vopak.
The port officially began LNG bunkering for inland shipping at the start of this month, marking a first for Europe.
West Texas Intermediate traded near a three-day high on speculation U.S. crude inventories declined for a third week, signaling increased demand in the world’s biggest oil consumer.
Futures gained as much as 0.4 percent in New York after rising by a similar percentage yesterday. Stockpiles probably dropped by 1.88 million barrels to the lowest level in five months, according to a Bloomberg News survey before a report tomorrow from the Energy Information Administration, the Energy Department’s statistical arm. Refiners typically boost output in the summer to meet peak motor-fuel consumption. Gasoline prices at U.S. filling stations climbed this week by the most since February, EIA data showed.
Oil demand in the U.S. is “rather good, with refinery throughput quite impressive,” said Andrey Kryuchenkov, an analyst at VTB Capital in London. Refining runs are near highs for the year, he said. “Fuel demand has been on the mend.”
WTI for August delivery rose as much as 42 cents and was at $106.54 a barrel in electronic trading on the New York Mercantile Exchange as of 11:40 a.m. London time. The volume of all futures traded was 8 percent below the 100-day average. The contract gained 37 cents yesterday to $106.32, the highest close since July 10.
Brent for August settlement, which expires today, was up 41 cents at $109.50 a barrel on the London-based ICE Futures Europe exchange. The more active September future rose 36 cents to $108.44. The European benchmark grade was at a premium of $2.97 to WTI. The spread was $1.99 on July 10, the narrowest based on closing prices since November 2010.
Fuel SuppliesWTI surged to $107.45 a barrel in intraday trading on July 11, the highest price since March 2012, after EIA data showed U.S. crude stockpiles declined for a second week as refiners boosted processing. Supplies dropped 20.2 million barrels to 373.9 million in the 14 days ended July 5, the largest two-week decline since at least 1982.
U.S. motor-fuel demand typically rises from Memorial Day in the last weekend of May to Labor Day in early September, the nation’s peak vacation season.
Gasoline inventories fell by 1.7 million barrels last week, according to the median estimate of eight analysts surveyed by Bloomberg. Distillate supplies, including heating oil and diesel, probably gained by 1.5 million barrels.
Factory OutputThe American Petroleum Institute is scheduled to release separate inventory data today at 4:30 p.m. in Washington. The industry group collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the EIA for its weekly survey.
Regular, unleaded gasoline at U.S. filling stations climbed 14.7 cents from a week earlier to $3.639 a gallon, the highest price since June 10 and 32 percent above the five-year average, the EIA said on its website yesterday. This week’s gain was the biggest since Feb. 4.
U.S consumer prices increased 1.6 percent from a year earlier in June, after a 1.4 percent gain in May, according to the median estimate of economists surveyed by Bloomberg News before the Labor Department releases its figures today at 8:30 a.m. in Washington. That is below the Federal Reserve’s 2 percent goal.
The U.S. accounted for 21 percent of global oil consumption last year, compared with 11 percent for China, the second-largest consumer, the International Energy Agency said July 11 in its latest oil-market report.
Goldman Sachs Group Inc. said risks to Brent prices have shifted “to the upside” amid political threats to supply and production losses in the Organization of Petroleum Exporting Countries. Reduced output in Libya, Iraq and Nigeria have the potential to limit the availability of oil, according to an e-mailed report. The bank forecast Brent will trade at an average of $105 a barrel in the second half.
Some analysts are predicting Brent will hit $110/bbl this week.
Market analysts last week pointed to political issues in Egypt and fears of Middle East supply disruptions to explain an oil price rally that saw a 5 percent gain for Brent and a rise of 6.7 percent for U.S. crude futures, but as Brent heads towards $110/bbl this week, CNBC reports some market watchers are instead predicting a downward price correction.
"I expect that the run-up is almost over," said Mark Waggoner, President of Excel Futures, Inc. in Bend, Oregon.
"Look for WTI to break back below $100 next week. Demand is still not as high as it could be. The push to fill retail outlets should be done now (ahead of the high-demand U.S. summer driving season, which runs from runs from around late May to early September)."
And despite U.S. fuel stockpiles reported to be in seasonal decline, analysts say they are still above the upper limit of the average range for this time of year.
The good news for buyers of marine fuel in the primary bunkering ports is that, despite rising bunker prices during the week, the relative gains were not as much as those made by crude.
Prices for key grade 380 cSt bunker fuel in Singapore seem to have been particularly slow to respond, perhaps helped by fuel oil stocks that hit a 39-month high towards the end of last month.
Data from Ship & Bunker showed Friday's price for IFO380 at the port of $590.50 per metric tonne (pmt) was just $2.50 higher than the previous week, compared to week-on-week gains in Rotterdam and Houston of $12.50 and $10.50 respectively.
For the first six months of the year the product in Rotterdam has been, on average, priced around $20 pmt lower than Singapore, but on Friday that spread had narrowed to just $1.50 pmt lower.
Russia, the world’s biggest energy exporter, will probably boost duties on most oil shipments abroad by 2.8 percent on July 1 after Urals crude prices rose.
The standard export duty may increase to $369.20 a metric ton, or about $50.37 a barrel, from $359.30 a ton this month, according to Bloomberg calculations based on oil price data from the Finance Ministry.
The government is seeking ways to encourage producers to meet President Vladimir Putin’s goal of keeping output at more than 10 million barrels a day. Production was 10.48 million barrels a day in May, near a post-Soviet high, according to preliminary data from the Energy Ministry’s CDU-TEK unit. Oil and gas provide about half of Russia’s budget revenue.
The discounted rate on some eastern Siberian and Caspian Sea grades may rise to $172.90 a ton from $165.50 this month. The levy on extra-heavy crude, set at 10 percent of the standard duty, may climb to $36.90 in July.
Russia bases the export taxes on the average Urals blend price from the 15th day of one month to the 14th of the next. The benchmark export grade averaged about $102.64 a barrel during the most recent period, Alexander Sakovich, a Finance Ministry adviser, said today by phone. In the previous monitoring period, it averaged $100.39, according to the ministry.
The Economy Ministry will publish the levies on its website before they come into effect, according to Sakovich.
The duty for middle distillates, such as diesel, and heavy products, such as fuel oil, may rise to $243.60 a ton from $237.10. A gasoline tax, set at 90 percent of the crude oil duty since May 2011 to counter domestic shortages, may increase to $332.20 a ton in July from $323.30 this month.
The government may reduce the duty on liquefied petroleum gases such as butane and propane to $45.20 a ton next month, down from $72.20 in June.
The reporter on this story: Jake Rudnitsky
Editor responsible for this story: Stephen Voss :- http://www.bloomberg.com/news/2013-06-17/russia-s-oil-duty-set-to-increase-2-8-in-july-after-urals-rose.html
MOL Comfort, which last month suffered a crack amidships during inclement weather before breaking in two.
By Inside Opinion, Ship & Bunker's anonymous maritime expert
I was as surprised as the rest of you when I saw those dramatic pictures of a nearly new 8,000 TEU post-Panamax box ship in two halves off Yemen.
As with all of you I'm sure, I never expected the MOL Comfort to do that. We've seen instances of newish vessels cracking before (although rarely into two halves). We have been able to point the finger, maybe unfairly in some cases, at the bargain-basement yards where they were built with very limited quality control in terms of build but also in materials. We have also pointed the finger, much more fairly in my view, at the classification societies for certifying these below-standard ships in the first place and again, every time she has an inspection.
So I think the most surprising thing for me at least was that the MOL Comfort was built in Japan by Mitsubishi HI, which I am sure we can all agree is a yard and country that certainly does not immediately spring to mind when discussing shoddy workmanship and poor quality control.
That she was classed by NKK, one of the most stringent (and experienced) societies when it comes to these issues, merely makes the event all the more puzzling.
It shouldn't be happening.
Large, Cheap, Simple?
But then we've been saying this for years. It is tempting to imagine that the root cause at the base of all of this (and who knows what other ills beside, but those are for a different blog) lies with the simple need for lots of very large boxships as cheaply as possible. As we all know, the building process is very simple. Sections are prefabricated using plate steel cut and welded mainly by robots and assembed like a huge Lego set on the dock. In the quest for faster and more fuel efficient vessels, plate steel gets thinner and thinner, and the joints and frames get less and less substantial.
Are we seeing the point where such methods become insufficient as box ships get bigger and bigger?
8,000 TEU really is not that large by today's standards. I have no doubt the Japanese builders and the classification society will be carrying out a very stringent and far-reaching investigation to find out.
In poor weather with heavy swells, someone with time on a boxship bridge will tell you the fear of parametric rolling is often more in the front of the mind than midships cracking forces. The mantra is to keep the seas on the bow and where possible not to take them on the beam.
The aft section of the MOL Comfort sank last week.
We've all seen the YouTube videos of the long companionways headed forward bending alarmingly in heavy seas. But the vessels are designed to take these forces and more, in theory at least.
Might the Russian officers on the MOL Comfortbe guilty of "getthereitis"; pushing her a little too hard into big swells with a cargo stowed in such a way as to amplify the loading forces around the midships moment?
Might corrosion have played a part?
As with any major accident, particularly with air crashes, there is usually not one single factor, but many. The old analogy of the holes in the Swiss cheese lining up springs to mind. I have no doubt the Japanese will get to the bottom of it very quickly, and we'll know for sure soon enough.
I'm just very thankful that nobody died. It is good that classification societies with the whips of the P&I Clubs hard at their backs, will undoubtedly be undertaking a programme of some very serious inspections, in the hope that we can understand this incident better and hope to avoid it in future.