Oil rises more than 2% on firm yuan, expectations of more OPEC cuts

MOSCOW (MRC) -- Oil jumped more than 2% on Thursday on expectations that falling prices could lead to production cuts, coupled with a steadying of the yuan currency after a week of turmoil spurred by an escalation in U.S.-China trade tensions, said Reuters.

Brent crude ended the session up USD1.15, or 2.1%, at USD57.38 a barrel, after hitting a session high of USD58.01. U.S. West Texas Intermediate (WTI) crude futures rose USD1.45, or 2.8%, to settle at USD52.54 a barrel after hitting a peak of USD52.98.

Prices rebounded after tumbling nearly 5% to their lowest since January on Wednesday after data showed an unexpected build in U.S. crude stockpiles after nearly two months of decline. Lending some support to prices on Thursday, inventories at Cushing, Oklahoma, the delivery point for WTI, fell about 2.9 million barrels in the week to Aug. 6, said traders, citing data from market intelligence firm Genscape.

China’s yuan strengthened against the dollar and its exports unexpectedly returned to growth in July on improved global demand despite U.S. trade pressure. The dollar fell 0.2% against the offshore yuan. “Today’s price rebound across the energy spectrum looks like a normal correction from a short-term oversold technical condition,” Jim Ritterbusch of Ritterbusch and Associates said in a note.

“While some Saudi overtures of additional output restraint, a softening U.S. dollar and lift in global risk appetite are facilitating today’s rally, we are not viewing this as the beginning of a sustainable advance by any measure."

Reports that Saudi Arabia, the world’s biggest oil exporter, had called other producers to discuss the slide in crude prices have helped supported the market, traders and analysts said. “Saudis are scrambling to send a signal that will stabilize oil markets ... With energy prices heading for the worst weekly close since December, we should not be surprised to hear more rumors that OPEC may be considering increased production cut efforts ahead of a key summit that is tentatively planned for the second week in Abu Dhabi,” said Edward Moya, senior market analyst at OANDA in New York.

Persistent worries about demand growth have weighed on global oil markets, particularly as the world’s two biggest economies are locked in a trade row. Crude oil shipments into China, the world’s largest importer, in July rose 14% from a year earlier as new refineries ramped up purchases. Fuel exports continued to climb as supply outstripped demand in the world’s second-largest oil consumer.

Saudi Arabia plans to keep its crude oil exports below 7 million barrels per day in August and September despite strong demand from customers, to help drain global oil inventories and bring the market back to balance, a Saudi oil official said.

Geopolitical tensions over the safety of oil tankers passing through the Persian Gulf remained unresolved as Iran refused to release a British-flagged tanker it seized last month.

The U.S. Maritime Administration said U.S.-flagged commercial vessels should send their transit plans for the Strait of Hormuz and Gulf waters to U.S. and British naval authorities, and that crews should not forcibly resist any Iranian boarding party.
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MOSCOW (MRC) - Nigeria’s state oil company plans to partner with a private refinery under construction on the shores of Lagos to turn the oil-producing country into a fuel supplier for the region, the new boss said in an interview, said Reuters.

The aim to ink a contract with the Dangote refinery, with a capacity of 650,000 barrels per day (bpd), is part of new Managing Director Mele Kolo Kyari’s blueprint for transforming the Nigerian National Petroleum Corporation (NNPC) into a world-class state oil company. The refinery, being built by billionaire Aliko Dangote, is set to be Africa’s largest.

Kyari, who also intends to push for more transparency, said NNPC wants to be a “supplier of first resort” for the Dangote refinery. “Ultimately, it will be a contract to supply crude,” he said.

In his first interview with the international media since taking office last month, Kyari said he would publish the full list of those holding the nation’s crude oil contracts and the firms who won deals to swap Nigeria’s crude oil for products, along with audited accounts of NNPC’s books.

He said the openness, and a plan to improve commercial terms for oil companies, would spur investment that has been throttled by uncertainty and opacity. The contract lists have not been published for years, and NNPC has been dogged for decades by a reputation for corruption.

“We are going to do everything possible to make that open, the businesses open, so that people can actually predict what we’re going to do next,” Kyari said, adding that this would help to attract investment.

He said the contracts for swapping fuel would be published by the end of next week, though “clarifications” were needed before the crude oil contracts could be published. Industry sources told Reuters that those two-year contracts, awarded earlier this year, included close to 100 names.

NNPC is also pressing ahead with plans to revamp its own ailing refineries – despite a nameplate capacity at Dangote refinery that is well above Nigeria’s consumption. “It’s worth it,” Kyari said of NNPC’s refinery overhauls, adding that Nigeria could become a fuel supplier to the entire region. “Africa needs refining capacity,” he said.

While he said they are considering both government and private funding, after the revamps, third parties would maintain and operate the state-owned refineries to ensure reliable production.

Italy’s Maire Tecnimont (MTCM.MI) is already working on the Port Harcourt plant, and Italian refiner ENI (ENI.MI) is an adviser. The refineries have processed oil only sporadically for years, leaving the nation to import virtually all its own fuel needs.

Kyari said that some ambitious proposals, including selling down government stakes in upstream oil and gas joint-venture agreements and changing the way it pays NNPC’s portion of the bills owed under those deals, were on hold for now.

The government still intends to sell its stakes to less than 40%, Kyari said, but he noted that there was currently no framework in place for the sales. NNPC is in talks with all operating partners to improve commercial terms, but he said the long-delayed legislation to overhaul the oil sector, known as the petroleum industries bill, needed to pass quickly to spur investment.

“There are investment decisions that cannot be made now because the investors are wary of the fiscal environment,” he said. The mammoth bill, covering everything from fiscal terms to Niger Delta community engagement, has been in the works for over a decade. But Kyari said the current government, with the legislature controlled by the party of President Muhammadu Buhari, could pass it.

"This time around, you have the best alignment,” he said. “And I’m sure getting it passed will not be difficult."
MRC

MOSCOW (MRC) -- SKC, a chemical manufacturing subsidiary of SK Group, has agreed with Petrochemical Industries Company (PIC) of Kuwait to set up a 1.45 trillion won chemical joint venture, said Businesskorea.

The deal will move SKC one step closer to reaching the goal of producing 1 million tons of propylene oxide (PO).

SKC decided on Aug. 7 to spin off its chemical business division and sell off a 49 percent stake in the new company to PIC for 536 billion won. On the same day, the agreement was signed by SKC president Lee Wan-jae and PIC president Mutlaq Rashid Al-Azmi in the presence of executives from both companies.

PIC is a wholly owned subsidiary of KPC, a state-run oil company of Kuwait which has been in the chemical business for more than 50 years and is making investment in a wide range of petrochemical businesses.

SKC's chemical division produces PO and propylene glycol (PG). It will own SKC's 45 percent stake in hydrogen peroxide manufacturer SKC Evonik Peroxide Korea (SEPK).

SKC has maintained a 100 percent plant utilization rate for over 10 years since it commercialized the world's first eco-friendly PO production method dubbed “HPPO.” SKC has been pushing to increase its PO production to 1 million tons per year by 2025.

The two companies estimated the corporate value of SKC's chemical division at about 1.45 trillion won. They aim to launch the joint venture in the first quarter of 2020 after completing necessary procedures.
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MOSCOW (MRC) -- India’s state-run Hindustan Petroleum Corp plans to shut some secondary units at its Mumbai and Vizag refineries in the current fiscal year in order to be able sell Euro-VI compliant fuel from April, its chairman M. K. Surana said, as per Finance.

The refiner plans to shut units that improve gasoline specs and a diesel hydro desulfurizer at its 166,000 barrels per day (bpd) Vizag refinery in southern India from early September to the end of October for upgrades, he said.

HPCL also plans to shut a gasoline desulfurizer at its 150,000 bpd Mumbai refinery in the western state of Maharashtra for 15-20 days in December, he added.

The refiner had shut a 70,000 bpd crude unit at the Mumbai refinery in April for 23 days, he said, adding the company has no further plans to shut crude units at its two refineries in 2019/20.
MRC

MOSCOW (MRC) -- U.S. crude oil stockpiles rose last week after nearly two months of declines as imports jumped to their highest since January, while gasoline and distillate inventories also grew as refiners ramped up production to their highest rate this year so far, the Energy Information Administration said, as per Finance.

Crude inventories rose 2.4 million barrels in the week to Aug. 2, compared with analysts’ expectations for a decrease of 2.8 million barrels. At 438.9 million barrels, U.S. crude oil inventories were about 2% above the five-year average for this time of year, the EIA said.

Net U.S. crude imports rose last week by 1.2 million barrels per day to 5.3 million bpd, their highest since January, as exports alone fell their lowest since October 2018 at 1.9 million bpd.

Crude production grew 100,000 bpd to 12.3 million bpd, just under its weekly record high at 12.4 million hit in May. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures fell 1.5 million barrels, EIA said.

The oil markets extended losses after the data. U.S. crude futures were down USD2.82, or 5.3%, at $50.76 a barrel at 11:39 a.m. EDT (1539 GMT), while Brent crude fell USD2.58, or 4.5% to $56.34 a barrel.

“The first build to oil inventories in eight weeks puts further downward pressure on prices amid an already strong sell-off,” said Matthew Smith, director of commodity research at ClipperData. "The big jump in refinery runs - to the highest point since the last week of 2018 - has not surprisingly translated into builds across the products, further greasing the wheels for today’s sell-off."

Refinery crude runs rose 786,000 bpd, EIA data showed. Refinery utilization rates rose by 3.4 percentage points to 96.4% of total capacity. Gasoline stocks rose 4.4 million barrels, compared with analysts’ expectations in a Reuters poll for a 722,000-barrel drop.

Distillate stockpiles, which include diesel and heating oil, rose 1.5 million barrels, versus expectations for a 482,000 barrels increase, the EIA data showed.
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