Iran issues oil warning as UAE says production can rise

Global Stock Markets

Iran issued a new warning over Mideast oil supplies as the United Arab Emirates said on Tuesday it could increase its own production, the latest remarks to follow President Donald Trump's demand for lower global energy prices. 

The comments by Iranian President Hassan Rouhani and the unexpected announcement by the UAE's oil-rich capital Abu Dhabi came as US benchmark crude traded around $75 a barrel.

A recent decision by the Organization of the Petroleum Exporting Countries to increase the cartel's own production by 1 million barrels a day has yet to tamp down prices. That's led to higher prices at gasoline pumps in the United States as it heads toward midterm elections for Congress.

Speaking to Iranian expatriates Monday night in Switzerland, where he was on an official visit, Rouhani took aim at America.

The US pulled out of the Iran nuclear deal in May and initially said it wanted allies to stop buying Iranian crude entirely. The State Department said Monday it would examine waivers on a "case-by-case basis'' as it re-imposes sanctions.

Rouhani did not elaborate, but Iran long has asserted it could shut down the Strait of Hormuz, the narrow body of water that separates the Persian Gulf from the wider world. A third of all oil traded by sea passes through the strait and the US Navy regularly has direct, tense encounters with Iran's paramilitary Revolutionary Guard there.

The US Navy's 5th Fleet, which patrols the region, has said it has not seen any ``unsafe and unprofessional'' actions by Iranian naval forces in the Persian Gulf since August 2017. It did not immediately respond to a request for comment Tuesday over Rouhani's remarks.

Separately, Iran's interior minister Abdolreza Rahmani Fazli warned Tuesday that ``if we close our eyes for 24 hours, 1 million refugees will go toward Europe through our Western borders'' via Turkey. Some 5,000 tons of narcotics also could be smuggled to the West, he added, according to the semi-official .

Iran lies on a major trafficking route between Afghanistan and Europe, as well as the Persian Gulf states. Large drug seizures are common across the region.

Meanwhile, the state-run Abu Dhabi National Oil Co. issued a surprise statement Tuesday saying it has an oil production capacity of 3.3 million barrels per day. It added that it ``remains on track to increase its production capacity to 3.5 million (barrels per day) by the end of 2018.''

The company also said it ``has the ability to increase oil production by several hundred thousand barrels of oil per day, should this be required to help alleviate any potential supply shortage in the market.''

The oil company previously announced in November it had plans to expand its capacity to 3.5 million barrels of oil per day. It produced some 2.8 million barrels of oil per day in May, according to the most recent figures released by OPEC.

Stock watch

Sundance Energy

Sundance Energy shares are trading at a deep discount according to Morgans, who have given the oil and gas company an "add" recommendation. Sundance is completing a large acquisition at the Eagle Ford play in North America. The company is raising US$260 million in equity to fund the US$221m acquisition of 8760 hectares, with the extra money raised helping to strengthen its balance sheet. If the deal is successful, Sundance will become one of the largest oil producers listed on the ASX, according to Morgans, which has set the company's target price at 21¢ versus the current price of 5.8¢. "If successful in ramping-up production, SEA will emerge as one of the largest oil producers on the ASX, at a time when the market is positively re-rating the sector," the broker said.

US Dollar

Worries about escalating trade tensions between the US and China continue to support the US dollar. The dollar is also being supported by evidence of rising inflation pressures in the "prices paid" sub-component of The Institute of Supply Management manufacturing index, which rose to a seven-year high in March. A recent unemployment report in US on Friday pointed to an above average increase in non-farm payrolls, and business and consumer surveys are suggesting that earning growth is skewed upwards. If this upside risk materialises, it will also bode well for the US dollar in the near term.

Mining companies

Mining companies were among the best performers on the market on Tuesday. Gold prices climbed 1.3 per cent on Monday, the biggest one day percentage rise in a week and helping Resolute Mining, Evolution Mining and Independence Group all pushing firmly higher. Nickel and copper producers were also among the market's best performers. Newcrest Mining recorded a strong opening following news that its Cadia mine had recommended processing over the Easter weekend. Operations at the mine were halted after a wall collapse at its northern tailings dam. Processing at the mine is still running at a limited capacity due to infrastructure limitations to its southern tailings facility.

Oil rises on lower U.S. drilling activity, but rising Russia output weighs

Oil Stock Markets

Oil prices rose on Monday, lifted by a drop in drilling activity in the United States as well as by expectations that Washington could re-introduce sanctions against Iran. 

U.S. WTI crude futures were at $65.20 barrel at 0657 GMT, up 26 cents, or 0.4 percent, from their previous settlement.

Brent crude futures were at $69.78 per barrel, up 44 cents, or 0.6 percent.

Shanghai September crude futures were at 416.7 yuan ($66.39) per barrel, up 1.1 percent.

Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA in Singapore, said oil markets remained nervous about “whether or not the U.S. administration will scrap or maintain the fragile nuclear deal with Iran”.

Drillers there cut seven oil rigs in the week to March 29, bringing the total count down to 797, General Electric Co’s Baker Hughes energy services firm said in its closely followed report last Thursday. It was the first time in three weeks that the rig-count fell.

A surge in drilling since 2016 has pushed up U.S. crude production to 10.43 million barrels per day (bpd), taking it past top exporter Saudi Arabia.

Oil prices have generally been supported by supply restraint led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which started in 2017 in order to rein in oversupply and prop up prices.

Despite this, Russian oil output rose in March to 10.97 million bpd in March, up from 10.95 million bpd in February, Energy Ministry data showed on Monday, putting Russia ahead of the U.S. as the world’s biggest crude producer.

Output in Iraq, OPEC’s second-biggest producer, has also been above the agreement, at around 5 million bpd in early 2018, versus the 4.4 million bpd stipulated in the deal.

The Iraqi cabinet on Sunday approved a plan to raise the nation’s crude oil output capacity to 6.5 million bpd by 2022.

Also potentially weighing on markets are the rising trade tensions between the U.S. and China.

China slapped tariffs of up to 25 percent on 128 U.S. products including frozen pork, as well as wine and certain fruits and nuts, in response to U.S. duties on imports of aluminum and steel, the country’s finance ministry said on Sunday night.

Trading volumes on Monday are likely to be low as many countries, especially in Europe, will still be on Easter holiday.

Oil eases back from 2018 highs above $70 a barrel

Oil Stock Markets

Oil fell on Wednesday as investors took profit on a rally the previous day to this year’s highs after a report showed a surprisingly large increase in U.S. crude inventories.

May Brent crude futures LCOc1, which expire on Thursday, were at $69.70 per barrel, down 41 cents on the day by 0917 GMT, while June futures LCOc2 were down 44 cents at $69.02.

WTI futures CLc1 were down 60 cents at $64.65 a barrel.

Traders said most pressure ensued after the American Petroleum Institute (API) on Tuesday reported a surprise 5.3 million barrels rise in crude stocks in the week to March 23, against expectations for a decline of to 430.6 million barrels.

The oil price has risen in seven out of the last 9 months and has increased by more than 4 percent this year, making this the third consecutive quarter of gains, which is the longest stretch since late 2010.

“This was exacerbated by an appreciating U.S. dollar and an unexpected 5.3 million barrel rise in US crude oil stocks last week, as reported by the API after close of trading yesterday.”
Official U.S. inventory data will be published by the Energy Information Administration (EIA) late on Wednesday.

Robert Carnell, chief economist and head of research at Dutch bank ING in Asia told the  Global Markets Forum on Wednesday that “more supply coming from the U.S.” would also likely weigh on oil prices.

U.S. oil production has risen by nearly 25 percent in the last two years to over 10 million barrels per day, C-OUT-T-EIA, taking it past top exporter Saudi Arabia and within reach of the biggest producer, Russia, which pumps around 11 million bpd
.
Wednesday’s price falls came despite Saudi Arabia saying it was working with Russia on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.

Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering greatly extending a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices, with a partnership to manage supplies potentially growing “to a 10-to-20-year agreement.”
In Asia, Shanghai crude oil futures posted high volumes and volatile trade on their third day of trading.

Spot Shanghai crude futures ISCc1 were down 3.75 percent on Wednesday, to 410.4 yuan ($65.37) per barrel by 0700 GMT.

($1 = 6.2782 Chinese yuan renminbi)

Oil edges up on Middle East tension, global market recovery

Oil Stock Markets

Oil prices edged up on Tuesday, supported by concerns that tensions in the Middle East could lead to supply disruptions. 

Hopes that behind-the-scenes talks between the United States and China will prevent a looming trade war between the world’s two biggest economies also supported global markets, including crude oil futures. 

U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $65.69 a barrel at 0602 GMT, up 14 cents, or 0.2 percent, from their previous close. 

Brent crude futures LCOc1 were at $70.20 per barrel, up 8 cents, or 0.1 percent.

Iraq, the second biggest producer within the Organization of the Petroleum Exporting Countries (OPEC) said on Monday that it also supports the producer cartel’s agreement to cut oil output. 

OPEC, together with a group of non-OPEC producers led by Russia, started withholding production in 2017 in order to prop up prices. The deal to cut is scheduled to last through 2018, and there has been recent support by OPEC’s de-facto leader Saudi Arabia to extend the cuts into 2019.

However, some traders cautioned that such a moved faced opposition. 

U.S. crude production - thanks largely to shale, or tight oil drilling - has already jumped by almost a quarter since mid-2016, to 10.4 million barrels per day (bpd) C-OUT-T-EIA, taking it past top exporter Saudi Arabia and within reach of top producer Russia, which pumps around 11 million bpd. 

“For oil, we expect the supply deficit of the past couple of quarters to give way to a surplus, driven largely by strong growth in U.S. tight oil supply,” Britain’s Barclays bank said on Tuesday.

In Asia, Shanghai crude oil futures saw their second day of trading <0#ISC:>, repeating Monday’s high volumes. 

Shanghai crude ISCU8 fell 1.9 percent to 425.7 yuan ($67.93) per barrel by 0602 GMT from the previous settlement of 433.8 yuan ($69.31). 

In dollar-terms, Chinese crude prices are trading between Brent and WTI.

Some traders that the influx of foreign oil money into Shanghai crude futures also contributed to the rise in the yuan to a 7-week high on Tuesday against the dollar CNY=PBOC.

Oil futures dipped as U.S. trade dispute with China looms

Oil Stock Markets

Brent and WTI crude oil futures dipped on Monday as concerns of a looming trade dispute between the United States and China weighed on global markets. 

In Asia, Shanghai crude oil futures debuted strongly, both in terms of volume and prices, with front-month contracts soaring as much as 6 percent ISCc1 as investors bought into the world’s newest financial oil trading instrument. 

Looming over oil markets, however, was the possibility of a full-blown trade war between the United States and China battered Asian shares CSI300 .N225 on Monday. The falls came after U.S. President Donald Trump last week signed a memorandum that could impose tariffs on up to $60 billion of imports from China. 

This weighed on crude oil futures as well. U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $65.49 a barrel at 0543 GMT, down 39 cents, or 0.6 percent, from their previous close.

Brent crude futures LCOc1 were at $70.18 per barrel, down 27 cents, or 0.4 percent. 

Crude was also weighed by a rise in the number of U.S. rigs drilling for oil to a three-year high of 804, implying further rises in production C-OUT-T-EIA, which has already jumped by a quarter since mid-2016 to 10.4 million barrels per day (bpd)

Financial oil markets have long been dominated by Europe’s Brent and America’s WTI.

Asia, despite being the world’s biggest and fastest growing oil consumer, has so far not had a benchmark. 

That possibly changed on Monday, as China saw the launch of Shanghai crude oil futures <0#ISC:>.

Few analysts doubt that Asia is overdue a financial oil price benchmark, and that China with its vast consumer and production base is a prime location for it.

Despite this, there were concerns over regulatory interference, as seen in other Chinese commodities like iron ore and coal.

That concern did not scare off global commodity trading giant Glencore (GLEN.L), which according to Chinese brokerage Xinhu Futures carried out the first trade on the Shanghai crude oil futures.

Oil prices fall as Trump adviser's exit stokes trade war fears

Oil Stock Markets

Oil prices fell on Wednesday, pulled down by weaker stock markets after a key advocate for free trade in the U.S. government resigned, stoking concerns Washington will go ahead with import tariffs and risk a trade war. 

Soaring U.S. crude oil production and rising inventories also dragged on crude prices.

Gary Cohn, economic adviser to U.S. President Donald Trump, seen as a bulwark against protectionist forces within the government, triggering a more than 1 percent fall in S&P 500 futures in early Wednesday trade. 

Crude oil followed suit, with Brent futures down 51 cents, or 0.8 percent, from their previous close at $65.28 per barrel at 0414 GMT. 

U.S. West Texas Intermediate (WTI) crude futures were at $62.13 a barrel, down 47 cents, or 0.75 percent. 

A voice for Wall Street in the White House, Cohn’s move to resign came after he lost a fight over Trump’s plans for hefty steel and aluminum import tariffs. 

Major powers, including the European Union and China, have warned that such tariffs could lead to retaliatory action and trigger a global trade war, which could grind to a halt economic growth and, by extension, oil consumption. 

Traders said oil prices were also weighed down by a reported rise in U.S. crude oil inventories. 

Crude inventories rose by 5.661 million barrels in the week to 426.880 million barrels, data from the American Petroleum Institute showed on Tuesday. 

Official data by the U.S. Energy Information Administration (EIA) is due on Wednesday. 

Overall, oil supplies are ample despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold output in order to prop up prices. 

The EIA on Tuesday made its latest in a series of upward revisions for U.S. crude oil production, which it now expects to rise by more than 120,000 barrels per day (bpd) to 11.17 million bpd by the fourth quarter of 2018. 

That would take the United States past Russia to become the world’s biggest oil producer. 

The U.S. already passed top exporter Saudi Arabia late last year. 

For 2019, the EIA forecast a crude production increase of 570,000 bpd to 11.27 million bpd.

Canada’s First Nations are boosting profits in oil sector

Oil Stock Markets

Canada’s First Nations are boosting investments and leveraging their clout with regulators to gain stakes in oil and gas projects as they seek greater returns on energy produced or transported across their territory. 

Aboriginal groups in Canada have traditionally played a more passive role in the energy industry, collecting royalties from oil and gas output.

That model is changing as some indigenous groups buy oil wells and negotiate ownership stakes in proposed pipelines and storage projects. 

First Nations, also called bands, play a pivotal role in Canada’s oil industry because governments and companies have a legal duty to consult and accommodate them before proceeding with resource projects affecting their territories. 

Some aboriginal groups have used that leverage to stop or delay oil projects, as when Enbridge Inc’s proposed Northern Gateway pipeline was rejected by Prime Minister Justin Trudeau in 2016 after bands raised environmental concerns. 

Other indigenous groups, however, are increasingly using the same power to negotiate ownership stakes in projects. 

A bigger financial role for First Nations in the sector could help unlock oil and gas reserves in Canada, the world’s fifth largest producer, that might otherwise stay in the ground because of objections from environmental or aboriginal rights groups. 

Their experience parallels that of Native American tribes, who are also deeply split on whether and how to develop the vast resources on tribal lands. 

Indigenous Canadians make up about 5 percent of the nation’s population and face higher levels of poverty and violence, giving bands a powerful incentive to maximize energy revenues to raise living standards. 

Aboriginal groups have a legal say in projects on their lands, which are held in trust by the Canadian government for band members, and also those that might impact them indirectly. 

First Nations’ support gives energy firms better odds of overcoming any concerns from other aboriginal groups. 

Ottawa on Feb. 8 unveiled draft legislation for resource projects that places greater emphasis on considering their impact on aboriginal communities. 

Under the rules for assessing major projects, to take effect next year, such concerns will be heard by the new Canadian Energy Regulator and Impact Assessment Agency of Canada. 

 

BUYING AND FINANCING  

 

Examples of First Nations taking bigger roles in energy projects are mounting. 

RBC Capital Markets’ North American head of project finance Mark Saar said the bank is seeing more pipeline and storage companies seeking financial partnerships with aboriginals. 

RBC in December completed a C$545 million bond issue for the Fort McKay and Mikisew Cree bands - the largest ever private investment by a First Nation - allowing them to buy a 49 percent stake in a Suncor Energy storage facility. 

Bridging Finance last year financed an unnamed First Nation’s C$11 million purchase of stakes in producing oil wells and is working on four more similar deals, Sharpe said. 

Investment bank AltaCorp Capital is raising funds for a C$16 billion ($12.85 billion) oil pipeline, proposed to run from Alberta to the northern British Columbia coast. 

The project has modest financial backing from one of Canada’s richest families, the Aquilini Group, and support from 35 First Nations to use their land. 

In exchange for allowing that access, the bands will own at least 35 percent of the pipeline and a corresponding share of the profits. 

If built, Eagle Spirit would be a crucial second outlet to the Pacific Ocean for crude from the oil sands, which currently sells at a steep discount because of transportation constraints. 

Eagle Spirit Energy Holdings’ proposed oil pipeline has strong interest from energy companies and investors, said Eagle Spirit president and chairman Calvin Helin, who is aboriginal. 

The firm’s main roadblock is a proposed government moratorium against oil tankers along the ecologically sensitive northern B.C. coast. 

Two other private investor groups, A2A and G7G - with the political support of some First Nations - are proposing to build railways running from Alberta’s oil sands to Alaska, avoiding the coastline of British Columbia because of the pipeline opposition there. 

Matt Vickers, head of G7G, declined to detail the investors’ financial arrangements with the bands.

New railways could provide an alternative to Kinder Morgan Canada’s Trans Mountain pipeline expansion from Alberta to British Columbia, which has been delayed by one year due to the environmental concerns of the B.C. government, some aboriginals and municipalities.

 

‘A REAL AWAKENING’  

 

When Chief Isaac Laboucan-Avirom became leader of Alberta’s Woodland Cree Nation in 2013, he was struck by the contrast between his band’s precarious finances and the hydrocarbon wealth surrounding its territory. 

Three years later, Laboucan-Avirom signed an agreement allowing Baytex Energy Corp to drill in exchange for modest royalties and jobs. 

Now, the Woodland Cree are granting permission for Eagle Spirit pipeline to use its land - in exchange for an undisclosed ownership stake.

Such opportunities have won over some groups trying to balance economic prosperity with environmental protection.

Oil prices steady, Investors shied away from riskier assets

Oil Stock Markets

Oil prices were little changed on Thursday after falling in the previous two sessions as investors shied away from riskier assets amid volatile equity markets and the U.S. dollar gained, limiting overall interest in commodities. 

Both global benchmark oil futures fell sharply on Wednesday after crude and gasoline inventories in the United States rose unexpectedly. 

U.S. West Texas Intermediate crude for April delivery CLc1 was up 8 cents at $61.72 a barrel by 0403 GMT after settling down 2.2 percent in the previous session. 

Brent crude LCOc1 for May delivery, the new front-month contract, was down 3 cents at $64.70. The April contract expired on Wednesday down 1.3 percent. 

Both benchmark contracts fell nearly 5 percent in February, the first monthly decline in six months. 

Some industry sources said Wednesday’s decline was also due to profit-taking by market participants at the end of the month after oil hit a three-week high earlier this week. 

The U.S. dollar index .DXY, which measures the greenback against six major currencies, increased for a second day on Wednesday and was slightly higher on Thursday. 

A stronger U.S. dollar limits demand for dollar-denominated commodities such as oil since investors paying in other currencies must pay a higher price. 

U.S. crude inventories rose by 3 million barrels last week, compared with analyst expectations for a build of 2.1 million barrels, weekly data by the Energy Information Administration (EIA) showed. 

Gasoline stocks also rose by 2.5 million barrels against expectations for a 190,000-barrel drop, which pushed gasoline futures sharply lower. 

Distillate stockpiles, which include diesel and heating oil, fell by 1 million barrels, versus expectations for a 709,000-barrel drop. 

Soaring U.S. crude production has also kept a lid on oil prices this year, even though producers, led by the Organization of the Petroleum Exporting Countries and Russia, have reduced output. 

U.S. crude oil production rose to a record 10.057 million barrels per day (bpd) in November and retreated slightly in December to 9.949 million bpd, the EIA said on Wednesday. 

OPEC, meanwhile, is doing its part to keep a lid on prices. 

The group’s oil output fell in February to a 10-month low as the United Arab Emirates joined other Gulf members in over-delivering on the reduction pact, a Reuters survey found on Wednesday. 

Oil prices may find some support as the U.S. is considering oil-related sanctions on OPEC member Venezuela to pressure its socialist President Nicolas Maduro, a U.S. official said on Wednesday. 

The sanctions could target a military-run oil services company and restrict insurance coverage for Venezuelan oil shipments ahead of the country’s elections on April 22.

Oil prices extended gainsin in nearly three weeks

Oil Stock Markets

Oil prices extended gains to hit their highest level in nearly three weeks on Monday, supported by comments from Saudi Arabia that it would continue to curb exports in line with the OPEC-led effort to cut global supplies. 

U.S. West Texas Intermediate crude for April delivery CLc1 was up 20 cents, or 0.3 percent, at $63.75 a barrel by 0342 GMT after rising 3 percent last week. 

London Brent crude LCOc1 gained 12 cents, or 0.2 percent, to $67.43, after climbing nearly 4 percent last week. 

Both benchmarks earlier hit their highest since Feb. 7. 

Prices were supported after Saudi Arabian oil minister Khalid al-Falih on Saturday said the country’s crude production in January-March would be well below output caps, with exports averaging below 7 million barrels per day (bpd). 

Saudi Arabia hopes OPEC and its allies will be able to relax production curbs next year and create a permanent framework to stabilise oil markets after the current supply cut deal ends this year, Falih added. 

U.S. energy companies last week added one oil rig, the fifth weekly increase in a row, bringing the total count up to 799, the highest level since April 2015, Baker Hughes energy services firm said on Friday. 

Hedge funds and money managers upped their bullish wagers on U.S. crude oil for the first time in four weeks, data showed on Friday. 

A powerful 7.5-magnitude earthquake struck Papua New Guinea’s Southern Highlands province early on Monday, the U.S. Geological Survey (USGS) said, prompting oil and gas companies to immediately suspend operations in the energy-rich interior. 

Meanwhile, Libya’s National Oil Corp said on Saturday it had declared force majeure on the 70,000 bpd El Feel oilfield after a protest by guards closed the field.

Oil weighed by U.S. crude exports; lower crude stocks prevent bigger fall

Oil Stock markets

Oil prices dipped on Friday as high U.S. crude exports outweighed lower crude inventories in the world’s biggest consumer of the fuel. 

U.S. West Texas Intermediate (WTI) crude futures were at $62.73 a barrel at 0449 GMT, down 4 cents from their last settlement.

Brent crude futures were down 6 cents at $66.33 a barrel. 

Traders said crude was weighed down by demand entering seasonal lows as the northern hemisphere comes out of winter and by high U.S. exports. 

U.S. crude exports jumped to just above 2 million barrels per day (bpd) last week, data from the Energy Information Administration (EIA) showed on Thursday, close to a record high of 2.1 million hit in October. 

That helped pull down net imports to the lowest level on record of below 5 million bpd. 

U.S. crude oil production was virtually unchanged last week at 10.27 million bpd, close to levels of top producer Russia and more than OPEC-kingpin Saudi Arabia pumps. 

Prices were prevented from falling further by a decline in U.S. crude inventories, traders said. 

U.S. crude oil stockpiles fell by 1.6 million barrels in the week to Feb. 16, to 420.48 million barrels, the EIA showed. 

The forward price curves for Brent <0#LCO:> and WTI <0#CL:> are in a shape known as backwardation in which prices for immediate delivery are more expensive than those for later sale, making it uneconomical for traders to buy and store oil. 

Globally, oil markets remain well supported due to demand-growth coinciding with production restraint led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia.