Hedge funds and other money managers have amassed a near-record number of bullish bets on increasing oil prices, helping push the main international benchmark well above $40 per barrel.

By the close of business on March 22, money managers held a net long position equivalent to almost 579 million barrels in the three largest crude oil futures and options contracts .

Hedge funds have more than doubled their net long position from just 242 million barrels at the end of last year, according to an analysis of data published by regulators and exchanges.

The net long position has passed the previous peak of 572 million barrels, set in May 2015, and is closing in on the record of 626 million, set in June 2014, when Islamic State fighters were racing across northern Iraq.

Hedge funds have established a record net long position in Brent crude futures and options traded on ICE Futures Europe equivalent to 364 million barrels of oil (tmsnrt.rs/1WU25t8).

At the same time, hedge fund managers have largely closed out their previous record short position in U.S. oil futures and options and started to accumulate long positions instead.

Combined WTI short positions on the New York Mercantile Exchange and ICE Futures Europe have been cut from 261 million barrels at the start of February to 112 million barrels.

The net long position in WTI has surged from just 60 million barrels in early February to 215 million barrels on March 22 (tmsnrt.rs/1WU2dsx).

The accumulation of a near-record net long position has coincided with a sharp rise in oil prices, with U.S. crude up from $26 per barrel to more than $41, and Brent up from $30 to $42.

The closing out of the previous record short position in U.S. crude futures and options has been accompanied by a predictable short-covering rally.

There has been a close correspondence between hedge fund positions and the movement of oil prices since early 2014 (tmsnrt.rs/1WU2Kuy).

Just as record shorting of U.S. crude futures and options helped push oil prices to multi-year lows below $30 per barrel in January and February, so the unwinding of those positions has sent prices sharply higher.

This is the third time that hedge funds have established a large short position and then unwound it since the start of 2015 and each cycle has ended with a sharp short-covering rally (tmsnrt.rs/1LWsXbs).

But the current short-covering rally now appears over with hedge funds now fully exited from the record short position established since October 2015.

With the hedge funds switched from a record short position to a near-record long one, the balance of risks in the market has shifted to the downside.

http://www.reuters.com/article/oil-hedgefunds-kemp-idUSL5N1712FK

---

Attached Files

Rosneft is set to lower oil output, Russian Natural Resources Minister Sergei Donskoi said on Tuesday, ahead of a meeting of leading global oil producers in Doha on April 17 to discuss an output freeze to support weak oil prices.

Russia, Saudi Arabia, Qatar and Venezuela are keen to prop up falling oil prices, which have fallen almost two thirds from a peak in June 2014. These countries have said they are ready to freeze production at January levels if other producers do the same.

Qatar has invited all OPEC members and other major producers to attend the Doha talks next month on a deal to freeze output.

Asked to comment on how a global oil production freeze would impact Russia, Donskoi said Russia's energy firms had adjusted their production plans: "Rosneft, as it told (us), is planning to lower (output)".

Rosneft, Russia's biggest oil producer, has been producing at the pace of around 3.8 million barrels per day (bpd), more than a third of Russia's total 10.88 million bpd, one of the world's highest.

Earlier this month, industry sources told Reuters that the company floated the idea of a domestic production cut to balance the global market and as it faces a natural decline this year.

Donskoi said Lukoil, which is not state-owned, did not plan to decrease production as yet. The minister also said he hoped that state-controlled Rosneft would resume drilling for oil in the Arctic next year after having no plans to do that this year.

Rosneft suspended Arctic drilling in 2014 after its partner ExxonMobil withdrew from the Kara Sea project because of Western sanctions imposed on Moscow over its role in the conflict in eastern Ukraine.

http://www.reuters.com/article/russia-oil-rosneft-idUSL5N171358

---

Attached Files

Iran will attend talks with fellow OPEC members and Russia in Qatar next month without joining their proposal to freeze crude oil production, according to a person familiar with the nation’s policy.

Oil Minister Bijan Namdar Zanganeh will attend the discussions in Doha on April 17, said the person, who asked not to be identified as the talks are private. Iran will maintain its policy of regaining market share lost during years of sanctions so won’t accept limits on its output, the person said. Most OPEC members, including Saudi Arabia, have said they will go to the meeting.

“By attending the freeze meeting, and yet still being able to say they managed to escape the freeze, Iran earns some brownie points with its domestic audience,” said Olivier Jakob, managing director at consultant Petromatrix GmbH in Zug, Switzerland.

The proposal to cap production will help global markets gradually re-balance as rising demand whittles away a surplus, according to Saudi Arabia’s Oil Minister Ali al-Naimi. Brent crude, the international benchmark, has risen about 40 percent from 12-year low of $27.10 a barrel in January. Zanganeh dismissed any freeze agreement that would apply to Iran as “ridiculous” because the nation aims to revive production after nuclear sanctions were lifted in January.

With Iran’s attendance, that means all 13 members of the Organization of Petroleum Exporting Countries except Libya are scheduled to take part.

http://www.bloomberg.com/news/articles/2016-03-29/iran-said-to-attend-april-doha-talks-without-joining-oil-freeze-imdh4c85

Kuwait agreed with Saudi Arabia to resume production at an offshore oil field shared by the two OPEC members, the official Kuwaiti news agency reported, without giving a specific time for the restart.

The two countries are preparing to start maintenance at Khafji, Kuwait News Agency reported, citing the nation’s acting oil minister, Anas al-Saleh, speaking in parliament. Production will start initially in “small quantities, which would be increased taking into consideration environmental concerns” before returning to normal levels, according to KUNA. Production at Khafji halted in October 2014 because of environmental concerns.

The plan to restart Khafji comes as Saudi Arabia and Kuwait are set to attend a meeting of OPEC members and other producers in Doha, Qatar, next month to discuss a proposed freeze in output. The participants including Russia are seeking to prop up prices that have slumped since mid-2014.

“I’m skeptical until I see some confirmation from the Saudi side or some signs that work is being done at the field,” said Robin Mills, chief executive officer at Qamar Energy in Dubai. The plan to restart Khafji won’t affect the Doha meeting because production probably won’t have started in major quantities by then, Mills said.

Production in the shared area between Kuwait and Saudi Arabia, known as the Neutral Zone, reached 600,000 barrels a day in 2011, including output from Khafji and the onshore Wafra field, according to data compiled by Bloomberg Intelligence. The Khafji shutdown led to a loss of 300,000 barrels of daily output, Prince Abdulaziz bin Salman, Saudi Arabia deputy oil minister, said last year.

http://www.bloomberg.com/news/articles/2016-03-29/kuwait-agrees-with-saudis-to-resume-oil-output-at-shared-field

---

Attached Files

Total has tripled the power of its Pangea supercomputer, making it one of the world's most powerful and helping the French oil and gas company to speed up exploration studies and cut costs amid low oil prices.

The computing power of the Pangea has been increased to 6.7 petaflops from 2.3 previously, Total said on Tuesday, the equivalent of around 80,000 laptops combined and making it the most powerful in the oil and gas sector.

A prolonged fall in oil prices since mid-2014 has pushed companies in the sector to look for new ways to cut costs and make savings as they reduce investments.

"This power will help us to improve our performance and to reduce our costs," said Arnaud Breuillac, Total's exploration and production president. "In the era of big data, state-of-the-art data-intensive computing is a competitive advantage."

Total did not say how much the upgrade cost, nor how much it expected to save.

The supercomputer at Total's research centre in the southwestern French city of Pau was designed by California-based Silicon Graphics International.

According to www.top500.org, which ranks supercomputers twice a year, Tianhe-2 in the National Super Computer Center in Guangzhou, China, is the world's most powerful at over 33 petaflops.

http://www.reuters.com/article/total-supercomputer-idUSL5N1712OH

Colombia's state oil company Ecopetrol will seek $2 billion in damages from contractor Chicago Bridge & Iron Company for additional costs during the renovation of Colombia's Reficar refinery, Ecopetrol said late on Monday.

Ecopetrol has said bad management at CB&I increased spending on the project by $4 billion, double the original $3.99 billion price tag. Ecopetrol said it filed the suit against CB&I before the International Chamber of Commerce.

CB&I was not immediately available for comment by telephone.

The Reficar refinery, part of Ecopetrol's operations near the northern coast of Colombia, reopened late last year after a multi-billion overhaul meant to more than double capacity to 165,000 barrels per day.

http://www.reuters.com/article/ecopetrol-colombia-refinery-idUSL2N1710DL

China Petroleum & Chemical Corp. earnings beat analyst estimates as profit from turning crude oil into fuels offset the plunge in energy prices and more than $1 billion in writedowns by Asia’s biggest refiner.

Net income last year fell 30 percent to 32.4 billion yuan ($5 billion) from 46.5 billion yuan, according to a statement to the Shanghai stock exchange. That compares with a 29.97 billion yuan mean of 19 analyst estimates compiled by Bloomberg. The company reported impairments of 8.8 billion yuan. Sales dropped 29 percent to 2.02 trillion yuan.

“It’s got a defensive downstream business model, so the company actually benefited from the decline of oil prices,” Gordon Kwan, head of Asia oil and gas research at Nomura Holdings Inc. in Hong Hong, said by phone. “If you compare earnings with PetroChina and Cnooc, Sinopec has done the best and will remain to be the most defensive oil stock.”

While the collapse in prices has hammered producers -- the global benchmark Brent dropped to an average of about $54 a barrel last year from $99 the year before -- refiners have benefited as cheaper crude boosted profit margins. India’s Reliance Industries Ltd.’s earnings surged to the highest in eight years in the quarter ended December as lower feedstock costs supported gasoline and diesel margins.

Refining, Chemicals Gains

Operating income from refining at the Beijing-based company, known as Sinopec, rose to 20.96 billion yuan, flipping from a loss of 1.95 billion yuan the previous year. Chemicals gained 19.68 billion yuan from a loss of 2.18 billion yuan. Petroleum exploration and production lost 17.42 billion yuan, from a 47.06 billion yuan gain the year before.

Refining helped cushion Sinopec from the profit tumbles felt by its state-owned rivals, PetroChina Co. and Cnooc Ltd., which both saw net income drop by at least 66 percent. The company slipped 1.5 percent to close at HK$4.72 in Hong Kong before the earnings were released, compared with a 0.1 percent gain in the city’s Hang Seng Index.

Sinopec reported in January that oil and gas output fell for the first time in 16 years as a slump in domestic crude production outweighed record volumes of natural gas. The company is reducing costs by closing high-cost oilfields. Sinopec Shengli Oilfield, a production arm, shut down four oilfields for the first time in the unit’s 50-year history to cut losses amid the price plunge.

Sinopec and its state-owned parent China Petrochemical Corp. faced “unprecedented pressure” on operations from falling oil prices, the company said in November. The company’s refining margin may receive a boost this year after China effectively created a price floor saying in January it wouldn’t adjust retail fuel prices as long as crude is below $40 a barrel.

http://www.bloomberg.com/news/articles/2016-03-29/sinopec-profit-exceeds-estimates-as-refining-buffers-oil-plunge

Chinese state giant Sinopec has cut back on its capital expenditure plans for this year as it braces itself for lower crude production, while chasing increased gas flows.

http://www.upstreamonline.com/incoming/1428058/sinopec-cuts-capex-amid-profit-drop?utm_source=twitterfeed&utm_medium=twitter

---

Attached Files

Russia's Gazprom on Tuesday offered E.ON a price cut on its long-term gas supplies, ending years of unsuccessful talks and allowing the German utility to raise its outlook for the current year.

European gas firms such as E.ON are being squeezed as they buy gas under long-term deals with Gazprom linked to the price of oil while having to sell it to customers at lower retail prices linked to the freely traded spot market.

While plunging oil prices, down by nearly two-thirds since mid-2014, have eased the burden on utilities, Russian gas supplies still tend to fetch a premium over European hubs - a situation that buyers are keen to resolve given the pressure on earnings from competing renewables in their domestic markets.

The deal, which resolves arbitration proceedings between E.ON and Gazprom, will lead to a positive one-off effect of about 380 million euros ($425 million) on E.ON's core earnings (EBITDA) in the first quarter of 2016.

"With this agreement the prices are adjusted on the basis of our current market conditions," E.ON said in a statement on Tuesday, adding its generation and energy trading unit Uniper had derisked its long-term gas supply contracts for the upcoming years.

Germany, Europe's biggest gas market, is heavily reliant on supplies from Russia, which accounted for about 40 percent of German natural gas imports last year, while E.ON itself gets roughly a third of its gas needs from Gazprom.

As a result of the agreement, E.ON now expects EBITDA of between 6.4 billion euros and 6.9 billion euros this year, compared with a previous target range of 6.0 billion to 6.5 billion euros announced earlier this month.

Underlying net income, the source of E.ON's dividend, will reach between 1.5 billion and 1.9 billion euros, up from 1.2 billion to 1.6 billion.

Shares in E.ON turned positive on the news and closed up 0.3 percent.

E.ON has been active in Russia for decades, owning 9.9 gigawatts (GW) of electrical power-generating capacity and employing more than 5,000 staff in the country. The weak rouble led E.ON's core earnings in Russia to decline by 30 percent last year.

http://www.reuters.com/article/e-on-gazprom-gas-idUSL5N1713QG

---

Attached Files

TECHNOLOGY doesn't stand still. That's the whole point about technology as any oil, gas or chemicals engineer will tell you.

The above chart is a fantastic example of this. It shows how the efficiency of US oil rigs, thanks to improvements in the fracking process, has improved by leaps and bounds from 2012 onwards.

The chart also tells you something else equally important: US inventories have risen to ever-greater record highs as fracking techniques have improved.

The good news is that many analysts predicted improvements in fracking technology, and thus have assumed lower production costs. But the bad news starts with the fact that most analysts have hugely underestimated the speed of innovation.

The even bleaker news is a widespread misunderstanding of how businesses have always worked in times of financial distress, which is just one of the reasons for the build-up in inventories:

Why shut down altogether and have no chance of paying anything back on your debt? This just doesn't make sense - and has never been how the corporate world has worked.
Any company in any sector will instead continue to run their assets as its lack of cash-flow rather than debt that often kills companies.
And, anyway, banks can always be persuaded to write off debt. They often have little choice, as if they foreclosed on a company they might not get even one cent back.

Combine this with the giant leaps in fracking technology and you have some of the important context you need to understand today's chart.

What happens next? Production costs will keep coming down, and assets on the ground that might eventually go bankrupt will remain exactly that - assets on the ground. A private equity company might, say, come a long, buy up a shale oil asset debt free and then run it as hard as possible, as the private equity company will only have to cover variable costs.

There is also my long-standing argument that one of the few genuine bright spots in the US economy is shale oil - and, of course, shale gas as well. In a deflationary world, politicians on both sides of the US divide will be keen to provide every incentive possible that encourages greater oil and gas production. A good example of this was the recent decision to lift the ban on US oil exports.

http://www.oilvoice.com/n/US-Shale-Oil-Was-Never-Going-To-Stand-Still/0e3494fe52fc.aspx

---

Attached Files

The indefatigable Cabot Oil & Gas continues to improve efficiency, increase production and lower costs–all at the same time.

Last week Cabot presented at the Soctia Howard Weil Energy Conference in New Orleans. What did Cabot have to say? They plan to complete 40 wells in the Marcellus this year and grow production slightly–up to 7% in 2016 over 2015.

We also learn that the length of Cabot’s horizontal wells–their “laterals”–are getting longer, an average 7,000 feet long in 2016 vs. 5,900 feet in 2015.

Perhaps most astonishing is that the average Cabot well is expected to see an average EUR (estimated ultimate recovery) of 27 billion cubic feet. How much is that? That’s enough natural gas that, if used to generate electricity, would power 656,000 homes for a whole year. From one well!

Think about 40 new such wells going online this year. Collectively those 40 wells will end up providing enough energy for 26 million homes. Coming from one small county in northeastern PA.

That is the awesome miracle of fracking for Marcellus Shale gas…

http://marcellusdrilling.com/2016/03/go-big-or-go-home-cabot-og-wells-average-eur-of-27-bcf/?utm_source=dlvr.it&utm_medium=twitter

Presentation

http://www.cabotog.com/wp-content/uploads/2016/03/Scotia-Howard-Weil.pdf

TransCanada Corp. raised C$4.42 billion ($3.37 billion) in the largest share sale in Canadian history, according to people familiar with the offering, sending energy financings in the country to the best start in at least two decades.

TransCanada’s sale to help fund its acquisition of Columbia Pipeline Group Inc. eclipsed Barrick Gold Corp.’s C$4.33 billion issue in September 2009, according to data compiled by Bloomberg.

TransCanada said it agreed to sell 92 million subscription receipts for C$45.75 each to a group of banks led by Royal Bank of Canada’s RBC Capital Markets and Toronto-Dominion Bank’s TD Securities. The banks, which resell those securities, had an option to buy an extra 4.6 million subscription receipts, or 5 percent of the offering, which lifted proceeds to C$4.42 billion.

Mark Cooper, a TransCanada spokesman, declined to comment on the size of the share sale.

Liquid Securities

The sale lifts announced equity financing in Canada’s energy industry to C$8.59 billion this year, up 66 percent from a year ago and the best start to the year since at least 1994, the data show. Energy firms have been pursuing financing to fund takeovers and capital expenditure plans as the price of crude rallies from the worst downturn in a generation. Investors are only too willing to lap up shares.

“Investor demand has been very strong on recent transactions," Kirby Gavelin, RBC’s head of equity capital markets, said in a phone interview. “They’ve been large transactions so certainly there’s a focus on large market cap, liquid securities, which attracts a broad range of global investors."

In addition to TransCanada, other offerings included a C$2.3 billion sale by Enbridge Inc., and C$300 million offerings from Pembina Pipeline Corp. and Seven Generations Energy Ltd. Energy companies accounted for two thirds of the C$13.1 billion raised from stock sales in the country, Bloomberg data show.

A turnaround in oil prices and lower volatility in the public markets are helping drive share sales. U.S. crude rose about 46 percent to $38.18 a barrel at 1:26 p.m. in New York on Tuesday from its lowest settlement of $26.21 on Feb. 11, marking a bounce in a price slump that has exceeded 21 months.

http://www.bloomberg.com/news/articles/2016-03-29/transcanada-said-to-raise-c-4-42-billion-in-record-canada-sale