Oil prices have fallen around $5/bbl, since my suggestion last week that a 'New oil price fall was a matter of 'when', not 'if''. It thus seems increasingly likely they are resuming their fall back towards $30/bbl, as we discussed in last week's pH Report webinar.

Financial players clearly misread the market when they assumed earlier this year that prices would 'inevitably' move higher, and now we will all suffer for their mistake, as markets continue their Great Unwinding.

The funds first began to believe in higher prices after the SuperBowl coup back in January, when prices jumped 20% in 2 days. This pushed prices up in very thin trading. But financial players clearly didn't understand this was just a very clever trading move, and instead decided that it marked the repeat of the Q1 2009 rally. As the chart shows:

Prices then had bottomed below $40/bbl, but moved into recovery as central banks began stimulus efforts
Fortunes were made as prices moved up to $125/bbl, due to the scale of the liquidity provided
And clearly many players thought they saw a similar pattern developing in Q1 this year
As a result, they are storing oil in tanks all over the world, as well as in floating storage

But this is not 2009 all over again. Central banks are most unlikely to add another $35tn of stimulus to that already supplied. Instead, we are seeing the Great Unwinding of all this stimulus, as China heads in a New Normal direction, and the Eurozone countries start to realise Greece's debt will never be repaid.

The fundamentals of supply/demand are, of course, of no interest to the commodity funds. As discussed last week, they currently have $69bn to invest in the futures - and $69bn can buy a lot commodities such as oil at today's lower prices.

The result is that we now have record inventory levels in the US and Europe, plus near-record levels of floating storage. Equally important for Asian markets is that China is probably close to ending its buying to build its strategic oil reserve to cover 100 days of demand.

Obviously prices will bounce around from day-to-day and week-to-week. But barring geo-political upset, it is very hard to see why they should not continue their fall, now they have begun to slide again.

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry.

http://www.oilvoice.com/n/Oil-markets-begin-to-slide-as-Great-Unwinding-resumes/faae1cfd292f.aspx

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Attached Files

Libya has lifted force majeure at the major Ras Lanuf oil terminal, though restarting exports would take at least two days depending on available crude, a spokesman for the National Oil Corporation said on Tuesday.

Restarting Ras Lanuf would be a major boost for Libya’s crippled oil industry. The terminal, along with another major eastern oil port Es Sider, has been under force majeure since December last year due to fighting between rival factions,

“The NOC lifted the force majeure on Ras Lanuf yesterday. The port will be ready to restart exporting, but this depends on the amount of available oil and the working fields linked to the port,” NOC spokesman Mohamed Harari told Reuters.

He said he did not expect any exports for at least the next two days.

https://www.energyvoice.com/oilandgas/81583/libya-lifts-force-majeure-at-ras-lanuf-oil-terminal/

United Arab Emirates (UAE) crude oil exports are expected to fall in the fourth quarter of 2015 as the Gulf OPEC member upgrades its Ruwais refinery and processes more oil to feed rising domestic demand, industry and trading sources said.

The UAE's Ruwais refinery expansion, which more than doubles the plant's capacity from 415,000 barrels per day (bpd), was completed late last year and is expected to hit full capacity before the end of the year, traders say.

The plant will boost the UAE's total refining capacity to more than 1 million bpd, which will help supply the local market and increase the country's oil products exports.

The added refining capacity, however, will eat into crude available for exports, Gulf-based oil and trading sources said.

One source familiar with the matter said the fourth-quarter fall in crude exports from state-run Abu Dhabi National Oil Company could be as much as 200,000-250,000 bpd.

The cuts would not affect the long-term contracts ADNOC has with its clients, but it would limit its short-term deals, the source said. "These (short-term) volumes would go to the local market," the source said.

Some reductions in exports have already been seen since ADNOC began commissioning work at Ruwais, but the diversions to the refinery have been somewhat muted by a late-2014 increase in the output of ADNOC's flagship crude by 200,000 bpd to 1.6 million bpd, according to a buyer of Abu Dhabi crude.

Also, a portion of the refinery's throughput is made up of the ultra light oil known as condensate, which is not included in the UAE's crude output and export figures.

http://www.reuters.com/article/2015/07/07/adnoc-crude-exports-idUSL8N0ZM15I20150707

NYC-based PIRA Energy Group believes that the U.S. as LNG supplier on a large scale is the new era in the global gas industry.

An initial Asian spot deal for $7.20/MMBtu sourced from Australia is actually a harbinger of a new era in global gas: that of the U.S. as LNG supplier on a large scale. It also strongly suggests that some good deals are available in Australia on FOB cargos to keep the trains operating at a higher capacity, PIRA said in its weekly report.

In the United States, the release of the EIA’s April Monthly came with a wealth of new supply data as the agency expanded coverage to include monthly production statistics from 10 additional states. The data were retroactive through the first quarter of 2015.

The third quarter is, by far and away, the lowest period for gas demand during the calendar year in Europe, says PIRA.

While the year-on-year growth in gas demand seen in the first half of the year will continue in the third quarter, the volume of growth in absolute terms will be so small as to be hardly noticeable in the gas balances. The third quarter is often useful for understanding the outlook for underlying gas demand growth, as the role of weather is severely diminished in most cases.

The recent heat wave will offer some support to gas demand, as it has already been seen in France, but the focus is on 3Q as a period when more about underlying gas demand in sectors such as industry is revealed.

The conclusion is that some recovery is occurring in places like Spain and the U.K., but efficiency gains in gas consumption and renewables substitution in emerging lower carbon markets continue to stymie growth in most other places.

http://www.lngworldnews.com/pira-us-lng-exports-to-mark-new-era/

Chevron's $54 billion Gorgon LNG project - the world's most expensive - may be forced to dump chunks of its early production onto an already saturated global spot market, as some Japanese clients warn they are unlikely to take up test shipments.

This would be another blow for a project hit by billions of dollars in cost overruns and underscores the difficulties for a raft of Australian liquefied natural gas developments facing subdued demand and competition from U.S. shale gas.

After nearly five years of construction, test exports of LNG from Gorgon's 15.6 million-tonnes-a-year (mtpa) plant off western Australia are due to begin late this year and last until April 2016, when commercial deliveries will likely start.

Japanese buyers holding long-term supply contracts have in the past eagerly sought early cargoes, but some could pass on the test shipments with long-term prices well above spot prices languishing at four-year lows.

"At this point there is no plan," a spokesman at Tokyo Gas said, when asked whether it planned to take the first of the test, or commissioning, cargoes.

The firm has a contract to take 1.1 mtpa from the project.

A senior official from another Japanese client also said it was unlikely to buy these cargoes.

"If there's spot supply that's cheaper than Chevron's offer price, then we'll not take from Chevron," said the official, who declined to be identified.

Chevron will already have to sell some LNG on the spot market after securing 25-year sales deals for under 70 percent of its share of Gorgon LNG, according to company data, less than the 85 percent a project backer would normally seek to guarantee returns.

The U.S. firm, which has a 47.3 percent stake in Gorgon, has also signed a five-year deal with South Korea's SK LNG Trading to supply 0.83 mtpa starting from 2017.

Japanese buyers will take nearly a third of Gorgon's output once commercial sales start, but if test shipments are not taken up then up to 2.4 million tonnes of LNG could hit spot markets leading up to April, Reuters calculations based on company data showed.

While firms with long-term contracts would normally be obliged to take gas during the test phase, an industry source briefed by a buyer said Japanese clients had built in the right to pass when negotiating their contracts.

Aside from Tokyo Gas, other Japanese buyers of Gorgon include Chubu Electric Power and Osaka Gas, which also have small equity stakes in the project, and Kyushu Electric Power and JX Nippon Oil.

Whether or not they take commissioning cargoes will largely depend on how competitively priced they are versus spot.

Chevron tied long-term contract sales of Gorgon supply to oil prices at an estimated 14.85 percent, or "slope", of a barrel of Brent crude, with a small $0.50-$1.00 premium.

That translates into an LNG price of $10.10 per million British thermal units (mmBtu) at current Brent prices, compared with spot LNG currently at $7.20 per mmBtu.

Should oil rise towards year-end, as some analysts expect, the gap between Gorgon LNG supplies and spot prices could be stretched further.

An Osaka Gas spokesman said no arrangements had been made for taking the first of the commissioning cargoes, though it was possible it could take some before the end of March.

Chubu Electric and Kyushu Electric said the timing of the first delivery of gas was undecided, while JX Nippon declined to comment.

Chevron could offer purchasers compensation to encourage them to take test shipments, a source familiar with the industry said.

http://www.reuters.com/article/2015/07/07/chevron-lng-gorgon-idUSL3N0Z535220150707

China's retail fuel prices will be cut slightly starting from Wednesday, reflecting a glut of supply in the market.

The National Development and Reform Commission, the nation's top economic planner, said that retail prices of gasoline would fall by 95 yuan ($15.35) per metric ton, or 0.07 yuan a liter, while diesel prices will go down by 90 yuan per ton, or 0.08 yuan a liter.

After the reduction, the benchmark price of 90-octane grade gasoline will be 6.09 yuan a liter.

Domestic retail fuel prices have seen five hikes and five cuts so far this year. The gasoline price has increased by 365 yuan per ton while the price of diesel is up by 295 yuan per ton.

Influenced by Greece's rejection of debt bailout terms, the US crude price benchmark West Texas Intermediate fell 7.73 percent, or $4.40, on Monday to $52.53 a barrel, the biggest drop since Feb 4 and the lowest price per barrel since April 13.

Li Yan, a crude oil analyst at consultancy Shandong Longzhong Information Technology Co, said several factors may further drag down the crude price in addition to Greek crisis.

"Crude output from the United States and the Organization of Petroleum Exporting Countries continue to increase, which will pump into an oversupplied global market," he said.

He expects retail prices to falls again at the next adjustment date, scheduled for July 21.

According to the consultancy, average running capacity at China's refineries was 81.72 percent during the first half, a 1.39 point decline compared with the same period last year, reflecting a weak downstream demand.

"The number of China's autos has been increasing, resulting in a stable demand for gasoline, but diesel demand is slowing because of a weak economy, especially in the logistics sector," Li said.

http://en.chinamining.com.cn/News/2015-07-08/1436319530d72819.html

Operational Highlights

Grew Q2 (April 1-June 30, 2015) average oil production to 27,025 barrels of oil per day compared to production guidance of 26,500 bopd and an increase from the prior period production of 26,729 bopd;

Commenced production at the Rumba exploration discovery from the Mirador Formation on June 20, 2015 (Block LLA-26, 100% WI). The Rumba-1 well is producing at an initial restricted rate of approximately 1,000 bopd of 19 API oil with a water cut of less than 1%;

Drilled Rumba-2, an appraisal follow-up to Rumba-1 on June 19, 2015. Rumba-2 was programmed to evaluate the Mirador formation approximately 1 kilometer north-east of Rumba-1. Initial interpretation suggests that the primary objective Mirador formation appears to be connected and higher to Rumba-1. The drilling rig has initiated completion operations on Rumba-2 and we plan to use the current drilling rig to drill at least one additional well on the existing pad;

Abandoned drilling of the exploration Bazar-1 (Block LLA-26, 100% WI) due to mechanical problems in the Leon/C1 formations. Using the same drilling pad as Rumba-1, Bazar-1 targeted the Une Formation with a planned horizontal departure of 2.2 kilometers and a wellbore deviation in excess of 60 degrees. Parex has applied to have Bazar-1 classified as the second and final current phase commitment well on Block LLA-26. The Company has re-designed a new drilling program to target the deeper Une Formation and expects to drill the Bazar-2 exploration well prior to year-end 2015;

Drilled and abandoned the Zorro Rojo (LLA-20, WI 100%) exploration commitment well. Parex has fulfilled all outstanding work program commitments on Block LLA-20;

Capachos production contract has been awarded to Ecopetrol S.A. by the National Hydrocarbon Authority, fulfilling a key condition of Parex' farm-in agreement. Subject to regulatory approval, Parex will have 50% working interest and operatorship on the Capachos Block and will pay 100% of the cost of drilling two development wells. The Company is now initiating community dialogue and civil construction with the first well expected to spud in Q4 2015;

Sanctioned Adalia field (LLA-30, 100% WI) secondary recovery project with water-flood injections commencing in Q4 2015;

Accelerated 2015 exploration program. Three drilling rigs are currently working on three blocks: LLA-32 (mobilizing), LLA-34 (drilling Chachalaca-1) and LLA-26 (completing Rumba-2);

Approved a 405 square kilometer 3D seismic program for Lower Magdalena Basin Block VIM-1 (100% WI).

The work program is to begin in Q4 2015 and is expected to define the 2016 drillable prospects. Accelerating the 3D seismic program into 2015 allows Parex to acquire seismic information at approximately a 50% lower cost on a per unit basis than in 2014.

http://www.oilvoice.com/n/Parex-Resources-provides-operational-update-Q2-production-exceeds-27000-bopd-and-expansion-of-Rumba-oil-discovery/8f66edcd40b7.aspx?utm_source=dlvr.it&utm_medium=twitter

The U.S. government on Tuesday modestly raised its 2015 and 2016 U.S. crude oil production forecasts while lowering its price outlook.

In its short term energy outlook, the U.S. Energy Information Administration raised its 2015 U.S. crude oil production growth forecast to 750,000 barrels per day (bpd) from 720,000 bpd.

The EIA forecast 2016 production will fall by 150,000 bpd, slightly less than its previous forecast of a 160,000 bpd decline.

The energy agency also lowered its forecasts for U.S. and global crude oil prices for 2016.

The average 2016 price for West Texas Intermediate crude , the U.S. benchmark, was forecast at $62.04 per barrel, a 5.4 percent drop from the previous monthly EIA forecast. The global benchmark Brent was forecast to average $67.04 per barrel, a 4.9 percent drop from the previous monthly EIA forecast.

http://www.reuters.com/article/2015/07/07/eia-oil-outlook-idUSL1N0ZN19B20150707

Overnight hope has faded and WTI crude prices have retumbled as Iran deal expectations rebuild and China economic collapse fears grow. The last few days have seen crude break crucial support levels and tumble to 3 month lows, down over 12% - the biggest losing streak since November. Credit risk for HY energy names is resurgent, crushing the mal-investment dream in a double-whammy for the industry as cost of capital rises and incomes shrink. As Crude re-tumbles...So credit risk surges...



Following recent regulatory pressure to reduce exposure to E&P loans, one wonders who will catch this falling knife.

http://www.zerohedge.com/news/2015-07-07/energy-credit-risk-re-surges-wti-crude-extends-losses-worst-november

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April was a significant month for the U.S. fuel mix. As SNL Energy points out, it marked the first month – ever – that the United States generated more power from natural gas than coal. Driven by low gas prices and a slew of carbon regulations taking coal plants offline, coal's year-over-year April production declined 18.9%, very similar to gas'  20.6% increase.

Nuclear generation saw a 6% boost, while solar thermal and photovoltaic rose more than 57%.

The federal government's Clean Power Plan, which aims to reduce greenhouse gas emissions by 30% by 2030, is predicted to take some 90 GW of coal-fired production offline — more than twice the amount expected by 2040 without the new regulations, according to the EIA. The U.S. Environmental Protection Agency's Mercury and Air Toxics Standards, despite beingremanded by the U.S. Supreme Court last month, has already been responsible for a slew of retirements, and has been estimated to account for about 40 GW of the 90 slated to retire by 2040.

While gas has been the beneficiary of late, rising from 76,728 GWh generated in April of last year, solar energy is seeing the largest percentage gains. The U.S. April solar output rose from 1,633 GWh in 2014 to 2,567 GWh this year.

Total renewable generation, on an annual basis, has risen from about 358,000 GWh in 2005 to 540,000 GWh last year.

http://www.utilitydive.com/news/in-first-natural-gas-outpaces-coal-for-us-electricity-generation/401839/