Archive for the ‘trading’ Category

New Frontiers: the race to get takeaway capacity out to the West Texas oil fields

In this week’s Oilgram News column “New Frontiers,” Bridget Hunsucker looks at how exploding production in the legacy fields of the Permian Basin is outstripping an aggressive program to add new takeaway capacity.

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Australia, the new land of opportunity for integrated oil traders

With the announcement by BP Australia last week that it is ceasing refining operations at its 102,000 b/d Bulwer Island oil refinery in the east coast city of Brisbane by mid-2015, integrated oil trading houses are likely to eye Australia as a land of opportunity.

The resource-rich country will lose nearly 50% of its refining capacity in the next two years, according to Platts data. The capacity is expected to fall by around 386,000 b/d during that period to around 455,000 b/d, with the industry crippled by high operating costs and poor refining margins.

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The changing world of energy commodity trading

The world of energy commodity trading has gone through a rather extensive reshuffling over the past few months. The key thing to note is that banks involved in energy have pulled back from the sector while merchant traders known largely for their secrecy are strengthening their position.

The most notable deal came last week when Swiss-based merchant firm Mercuria agreed to buy the entire physical commodity trading business of JPMorgan Chase for $3.5 billion. Mercuria, which is headquartered in Geneva and is predominantly a crude and refined products trading shop, has a team of approximately 1,200 people working in some 37 offices around the globe and has annual “turnover,” or essentially gross annual revenues of around $100 billion.

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SGX sees record number of iron ore derivatives traded

The precipitous plunge in spot iron ore prices early this week saw derivatives trading over the Singapore Exchange surge, data from the bourse showed.

SGX cleared around 3.6 million mt of swaps and futures Monday, and 180,000 mt of options, according to the exchange and London-based brokers.

This was the biggest trading day in the history of iron ore derivatives, surpassing the previous record, set June 5, 2013, by 5.2%, according to The Steel Index, a specialist pricing unit of Platts operating under its own methodology. Owned by Platts, TSI’s iron ore prices are used as settlement basis by SGX.

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Will LNG prices in Asia continue to be oil-linked?

The simple answer to that question is that there is no simple answer.

Historically, LNG prices were linked to oil because LNG was displacing oil and that practice continued until US LNG export projects were proposed. Buyers from the US export projects will get LNG based on Henry Hub gas prices because in most cases they will be responsible for buying US gas and transporting it by pipeline to their contracted export projects to be liquefied.

That access to those Henry Hub-priced supplies has spurred buyers to seek gas-indexed prices in their new purchase contracts, displacing traditional oil-indexed prices.

A number of buyers, especially in Japan, are pushing proposed British Columbia export projects to use the US benchmark Henry Hub gas price as the index for LNG.

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Backwardation, tightening inventories and higher prices ahead…one view of the future

Energy economist Phil Verleger has been waging a steady war against the argument that “too much” trading of energy futures contributes to higher prices.

To the contrary, as he has written many times, in the long run it will contribute to lower prices, and current government efforts to curb speculation by diminishing volume is laying the groundwork for a reduction in US output and higher prices down the road.

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Do you want to know an oil refinery secret? Look to Twitter

It’s hard to keep the cat in the bag when you’ve got a few hundred people pulling its tail.

Consider what goes on behind the fence at a refinery. Sure, there’s always flaring, and steam being released, and hard-hatted workers rushing to and fro.

But what’s really up? The companies would rather the public didn’t know the nitty-gritty, mainly for the cause of staying competitive in a business where regulation and a general downdraft in gasoline prices always put considerable pressure on the bottom line.

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A plan to abandon natural gas storage capacity fuels a bitter fight

Formal filings with the Federal Energy Regulatory Commission do not typically make for compelling theater, but a bitter dispute is unraveling within recent documents over a Texas gas storage facility’s unique plan to deal with low natural gas prices.

Last month, the operators of Tres Palacios Gas Storage in Texas asked FERC for permission to abandon roughly 60% of its working capacity from the three-cavern underground storage complex about 100 miles southwest of Houston.

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Belarus proves continuing headache in European refined products market

Belarus, with its two refineries, is far from being a giant in the overall European refined products market.

But a ban by the US government on trading with certain companies associated with the Belarussian regime has meant some Western oil majors have refrained from buying refined products from the country for several years now.

What proved a minor headache until recently has now turned into a rather bigger one as Belarus is due to export a lot more products — chiefly ultra low sulfur diesel — over the coming months.

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The case for exporting crude oil

Looking over the numbers, and knowing the way the North American oil market works, it’s becoming increasingly apparent to me that current US crude oil production cannot be sustained unless the Department of Commerce begins to permit exports beyond Canada.

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