Brent Crude Dips After Platts Changes Formula

US benchmark crude contracts fell on concerns that the economic recovery in the US is slowing, while Brent crude was on the rise in London as the outlook for the European debt crisis brightened. However, the trends changed late in the week as Brent fell after Platts decided to change the way it calculates the benchmark price. Oil futures on the New York Mercantile Exchange (NYMEX) were hit by a slew of downbeat US data that came out late in the week. Thursday’s employment report from the US Labor Department revealed s surprise increase in US jobless claims to 428,000 last week.

Manufacturing data that was released on the same day also disappointed, showing a decline in the Empire State index from minus-7.7 in August to minus-8.8 in September, while the Philly Fed rose 13.2 to minus-17.5 in September, but still missed expectations. In the meantime, Brent contracts were on the rise, enjoying support from reassuring statements from European politicians that Greece will not quit the euro zone and the EU will go as far as necessary to prevent it from going into a default.

Demand for Brent was also supported by lingering concerns over supplies from the North Sea following a series of delays over the past few weeks. However, Brent futures fell sharply late on Friday after Platts, the energy information arm of McGraw Hill, said it will change the Brent crude pricing formula sooner than expected. The changes to the benchmark that is used to price two third of the world’s oil will come into effect in January 2012 instead of the first quarter of 2013 as was planned before.

Platts has decided to change the pricing benchmark due to a reduction in Brent crude supplies in recent years, which has made it easier for traders to manipulate the market. The Brent crude prices will now be assessed based on contracts signed over a 16 day period instead of the previous 12 day span. “Recent events in the market, including disruptions to the Forties pipeline system and shortfalls in cargo deliveries, show clearly that timely action is needed to maintain the strength of the physical benchmark,” said vice president of editorial at Platts Dan Tanz.


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China's Oil Demand Rises on Year On Year Basis

China's apparent oil demand in September rose 5.1% year on year to 35.53 million metric tons (mt) or an average of 8.68 million b/d, according to Platts' analysis of data from the People's Republic of China. However, September demand is almost unchanged from August's 35.54-million-mt level. Meanwhile, China's apparent oil demand in the first nine months of the year totaled 317.7 million mt or an average of 8.52 million b/d, up 10.25% from the same period of 2009, according to Platts' data.

Chinese refiners processed a total 34.91 million mt or an average 8.53 million b/d of crude in September. This is up 6.35% from a year ago, but just 0.52% higher than August, according to data released by the country's National Bureau of Statistics on Oct. 21. The refiners' collective crude throughput from January to September was 310.74 million mt, 13.48% higher from a year ago. Chinese crude imports in September hit a new historic high of 23.29 million mt, or around 5.7 million b/d.

"The crude available to China in September, including domestic production and net imports, was 40.09 million mt, but the throughput was only 34.91 million mt. So a little over 5 million mt of crude presumably went into storage, the highest in a month so far this year," said Vandana Hari, Asia editorial director at Platts. "At the same time, China's monthly refined product imports continued to come off June's high of 3.64 million mt, while the country stepped up product exports last month. The flattening of implied oil demand in September could be a precursor to an easing of the country's runaway oil demand growth rate for the remainder of 2010."

Courtesy of Rigzone.Com



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EIA Cuts OPEC Oil Earnings Forecast $21 Billion in 2010, $16 in 2011

The US Energy Information Administration has slashed its forecast of oil producer club OPEC's oil export earnings by $21 billion this year and by $16 billion in 2011. The agency now sees OPEC earning $731 billion in 2010 compared with its previous forecast of $752 billion a month ago. For 2011, it is forecasting that OPEC will earn $805 billion compared with the $821 billion projected a month ago.

The EIA, statistics arm of the Department of Energy, bases its forecasts on price and production projections from its monthly Short Term Energy Outlook. The agency forecast on Wednesday in its latest STEO that the price of US West Texas Intermediate crude would average $77.37/barrel in 2010 and $82/b in 2011. In its previous Outlook, released in August, the EIA projected an average WTI price of $79.13/b in 2010 and $83.50/b in 2011.

At the same time, the EIA lowered its forecasts of OPEC crude production in both 2010 and 2011. It sees the 12 member group producing 29.37 million b/d this year, 110,000 b/d less than previously forecast, and 29.89 million b/d in 2011, 140,000 b/d less than previously forecast.
The EIA estimated OPEC's 2009 earnings at $571 billion. OPEC's Vienna secretariat said in its annual statistical bulletin in July that the group collectively earned $575.3 billion from crude exports in 2009, down 43% from $1.002 trillion in 2008.

From Platts .Com

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AP: Crude Oil Reserves Expected to Grow

The government is expected to report Wednesday a 1.1 million barrel increase in commercial crude oil supplies for the week ended Aug. 20, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Information Administration releases its weekly report at 10:30 a.m. EDT.

Platts said analysts predicted gasoline stockpiles will shrink by 875,000 barrels, distillate stocks, including diesel and heating oil, will increase by 950,000 barrels and refinery utilization will dip by 0.5 percentage point to 89.5 percent.

A reading above or below estimates can influence market trading.

For the week that ended Aug. 13, the department said crude supplies shrank by 800,000 barrels to 354.2 million barrels; gasoline inventories were nearly unchanged at 223.3 million barrels and inventories of distillate fuel rose by 1.1 million barrels to 174.2 million barrels.


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U.S. Crude Oil Production Poised for Biggest Jump Since 1970

United States crude oil production for 2009 is on target to have its biggest one year jump since 1970, according to a Platts analysis of industry data. With U.S. oil production averaging 5.268 million barrels per day (b/d) through October, the gain in U.S. output will be the most since the country produced 9.637 million b/d in 1970, which turned out to be the peak year of U.S. crude output, according to Platts' analysis of data published by the U.S. Energy Information Administration (EIA). If that 5.268 million b/d figure holds through December, this year would show a 6.4% boost from the 4.95 million b/d average of 2008 and rank as the best U.S. oil production year since 2004, when output averaged 5.419 million b/d.

For comparison, in the 40 years since U.S. oil production peaked annual output has jumped only eight times. Seven of those increases were minimal; only in 1978 was there a jump of significant magnitude, an increase of 5.6%, to 8.7 million b/d. Last year's hurricane curtailments distorted the production numbers somewhat for the 2008 comparison, given that 183,000 b/d of Gulf of Mexico output was still offline at the end of that year. However, 2009 is still expected to post increases of 3% and 4% from the relatively storm free years of 2006 and 2007, respectively.

Projections from the U.S. Minerals Management Service (MMS) indicate that the primary driver for this year's U.S. oil production resurgence is actually just getting started. That driver is the Gulf of Mexico, where operators have begun launching a group of new fields, fulfilling what has been a decade long focus on unlocking the promise of deepwater exploration there.....Read the entire article.

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Saudi Aramco Says WTI ‘Disconnected’ From Its Customer Markets

Saudi Aramco is abandoning the West Texas Intermediate benchmark to price oil for sale to U.S. consumers because it is “disconnected” from the company’s customers, Chief Executive Officer Khalid Al-Falih said. The state owned oil company said on Oct. 29 it will start using the Argus Sour Crude Index published by Argus Media Ltd, from next year. Sour refers to the oil’s sulfur content.

“WTI has really become disconnected with the market where we sell and what we sell -- we sell sour crude, heavier sour crude in the U.S. Gulf coast, that is where most of our barrels in North America go,” al-Falih told reporters today in Rabigh, near the Red Sea town of Jeddah in Saudi Arabia. Aramco has priced its U.S. deliveries against WTI, a light, sweet crude delivered at Cushing, Oklahoma, since 1994. The price is determined by oil futures traded on the New York Mercantile Exchange and published by Platts, the energy- information division of McGraw Hill Cos.....Read the entire article.