Investors are cautiously pulling money out of energy producers for the first time in eight months, taking short-term gains after oil rebounded from a six-year low.

More than $1.55 billion has been withdrawn this month from exchange-traded funds concentrated on energy stocks such as Exxon Mobil Corp. and Chevron Corp. It’s on pace for the first monthly setback for the group since investors began pouring into the sector in October with an eye toward profiting from an eventual recovery in prices.

“The thesis that oil is too cheap and it has to go higher maybe is not as compelling a case with oil at $60 as it was when it was at $42,”said Ryan Issakainen, a strategist at First Trust Advisors LP in Wheaton, Illinois.

Still, $5.4 billion remains of the new money invested in energy ETFs since the year began, suggesting that traders are trimming positions, not starting a rout. On May 1, energy ETF’s lost $475.8 million, days before U.S. crude closed at this year’s high of $60.93 a barrel on May 6, ending a 49-day rally from a six-year low of $43.46 on March 17.

Because ETFs own baskets of shares, they enable investors to place broad bets on the direction of markets at lower cost than buying and trading individual stocks. The price of crude determines the underlying value for most energy companies.

Investors withdrawals from energy ETFs so far this month include $806.8 million from the Energy Select SPDR Fund, the largest energy-stock ETF, which had swelled to a record $15 billion of market value May 1.

“The hot money, the money that’s looking for short term trades, may have taken some of those gains,” Issakainen said. “I don’t make much more of it than people making tactical moves.”

Although withdrawals from energy ETFs have slowed in the past week, they haven’t stopped. More than $400 million was taken out of the sector in each of the first two weeks of May. Withdrawals over the past seven days were about $338 million.

Crude may fall back further, said Chris Johnson, a strategist at Macquarie Capital (USA) Inc. in New York. “The fundamentals for quite some time haven’t supported the price rise we’ve seen,” he said. “Uptick in demand has clearly not been in line with supply.”

http://www.bloomberg.com/news/articles/2015-05-28/investors-pulling-energy-sector-bets-for-first-time-in-8-months

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The U.S. shale oil boom is turning global crude pricing on its head with the historical notion that light grades shall be priced at a premium to heavy ones quickly disappearing, according to predictions from producer group OPEC.

The trend will have big implications for global oil flows, reducing revenues of light-oil-producing nations such as Nigeria and refiners geared toward heavy crude processing, OPEC said in a draft long-term report, a copy of which was seen by Reuters.

"This supply glut, primarily of light sweet crudes, needs to ease sizably before the oil market steadies. Low oil prices are expected to force some of the costly light sweet crude oil to idle, but the displaced African light sweet crude is also forced to find an alternative market," OPEC said.

This could be a challenge if oil demand growth in Asia and Europe were to stay fragile, the cartel said.

The pressure on sour crudes is not as intense due to tightness, particularly in Europe, as a result of sanctions, war, diversions and other geopolitical issues, OPEC said.

"The war in Syria and the sanctions on Iranian exports to the West have limited availability of sour crudes to Europe for almost three years, causing the value of regional sour crudes to be oddly higher or at small discounts in relation to the sweet crudes," the report said.

It said turbulence in Iraqi production and exports from the country's north also contributed to the tightness in sour grades, as did Russia's decision to divert some of its exports to the Asia-Pacific at the expense of European markets.

More pressure on light sweet crudes is also coming from the fact that most new, sophisticated refining capacities around the world have been designed to process heavy crudes on expectations that light oil would remain scarce.

As a result, most refiners were unable to take advantage of cheaper-than-expected light grades due to limited light conversion refining capacity, particularly in the United States, the OPEC report said.

"It is also difficult to justify altering the configuration of deep conversion refineries after the huge investments that were put into their upgrading prior to the tight oil boom, when the sweet/sour spread was wide enough to justify building such heavy conversion units," it said.

It added that shale gas developments in North America were poised to bring vast quantities of low-priced ethane, which will increasingly displace naphtha and gasoil from global markets.

http://www.reuters.com/article/2015/05/28/opec-oil-quality-idUSL5N0YI32I20150528

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China's apparent oil demand* in April increased 5.4% from a year earlier to 42.89 million metric tons (mt), or an average 10.48 million barrels per day (b/d), according to a just-released Platts analysis of Chinese government data.

Apparent demand during the month was mainly supported by an increase in demand for light-end products such as gasoline.

China's refinery throughput in April averaged 10.54 million b/d, rising 6.9% from a year earlier, data from the country's National Bureau of Statistics showed May 13.

On the other hand, China was a net oil product exporter in April, with volumes totaling 240,000 mt, according to data released May 8 by the General Administration of Customs.

During the first four months of this year, China's total apparent oil demand also averaged 10.48 million b/d, an increase of 4.4% over the same period of 2014. This continued to be the fastest pace of year-to-date growth since 2011 and defied a relatively weak macroeconomic outlook.

'Apparent demand figures may be inflated compared with actual oil consumption because crucial data such as inventories are not taken into account,' said Platts senior writer for China, Song Yen Ling.

http://www.oilvoice.com/n/Platts-Report-China-Oil-Demand-Climbed-54-Year-over-Year-in-April/cc368b914fc4.aspx

Saudi Aramco may raise the number of its oil and gas drilling rigs to as high as 250 next year if oil prices continue to firm and as domestic demand for gas increases, industry sources said on Thursday.

Currently the national energy giant has 212 rigs of both types in operation and that could rise to between 220 and 250 if conditions permit, sources familiar with the plans said. "It all depends on the oil price of course," said one.

Brent oil is now around $62 a barrel, up from a low of $45 in January though still far from the $100 mark which Saudi officials said they favoured early last year. Saudi Arabia raised its crude production in April to a record high of 10.308 million barrels per day.

"They are looking for new rigs to replace the poorly performing rigs, and this will be to maintain potential now that demand is coming back - that is for the oil side," another source said.

"As for the gas side, they need to add more rigs to increase production, and they are looking for deep gas." Once Aramco starts looking for shale gas in the north, the number will be even higher, he added.

As a result of the decline in oil prices, Saudi Aramco managed to make big savings on drilling fees this year after asking for discounts from rig contractors and service companies.

http://www.reuters.com/article/2015/05/28/saudi-drilling-rigs-idUSL5N0YJ3GZ20150528

Seadrill has agreed with Saudi Aramcoto reduce its dayrate for four jackups over a period of one year.

Seadrill has a three-year firm contract from Aramco for the AOD rigs that is due to expire next year, although there is an option to extend until 2017.

During 1Q, Seadrill signed one new contract, with a duration of a year, with Coastal Energy for the jackup West Cressida, with potential revenue of $35 million

Currently the contractor has 15 rigs under construction, comprising four drillships, three semis and eight jackups. Total remaining yard instalments for these newbuilds are around $4.3 billion, with $1.1 billion already paid to the yards in pre-delivery instalments

Seadrill says the downturn in the offshore drilling market has continued so far this year and signs point to demand remaining significantly lower than in 2014.

The outlook for ultra-deepwater activity beyond 2015 is difficult to judge, it adds, with most oil companies not looking to add rig capacity at this point. Capacity utilization will likely dip further as the year progresses, leading to a significant number of ultra-deepwater rigs being stacked by the end of the year.

Currently the global order book for new ultra-deepwater rigs totals 89 units, of which 29 are Sete newbuilds. At the same time, however, around 70 units are coming off contracts, many of which are due for a 15 or 20- year classing between now and the end of 2017.

Over the longer term, Seadrill says it is difficult to picture a market that does not require deep and ultra-deepwater production to satisfy world hydrocarbon demand. During the current downturn, however, rig owners will likely continue to focus on cost-saving measures and operational performance will be a must as oil companies seek to renegotiate or cancel contracts.

Turning to the premium jackup sector, the contractor says shelf production remains an attractive, cost- effective source of production for oil companies.

Following the drop in dayrates, there may be increased activity in the near term for short-term contracts. However, an excess supply situation is emerging, with roughly 50 jackups set to enter service this year and 100 between now and 2017. As a result, pricing is likely to come under continued pressure.

Operators will continue to focus their activity on the most capable units, with stacking and scrapping of older jackups accelerating. There are currently around 240 units in the global fleet that are over 30 years old, and some will probably be retired if the downturn continues, Seadrill says.

http://www.offshore-mag.com/articles/2015/05/seadrill-more-ultra-deepwater-rigs-set-to-be-stacked.html

BP and The Kansai Electric Co., Inc. (Kansai Electric) today entered into a sales and purchase agreement for liquefied natural gas (LNG), and a cooperation agreement for the purpose of exploring opportunities for business collaboration.

Under the agreements, BP will provide Kansai Electric with up to 13 million tonnes of LNG over 23 years, from BP’s diverse portfolio of LNG sources. In addition, the agreements provide for Kansai Electric and BP to explore areas of cooperation across a wide range of LNG business activities such as LNG trading, and optimisation of LNG ship operations.

Paul Reed, Chief Executive of BP Integrated Supply and Trading, said, “BP highly appreciates the long-term relationship with Kansai Electric that has resulted in the conclusion of these new LNG sales and co-operation agreements. Building on a separate LNG sale and purchase agreement signed in 2013, this new LNG deal entails additional supply from BP’s portfolio. We are very pleased that Kansai Electric and BP have agreed this expanded LNG business and we look forward to working together to explore areas of further cooperation.”

The Kansai Electric Power Co., Inc. is Japan’s second largest electric utility, with 13 million customers and 22,000 employees. It was established in 1951.

BP is active in many of the major LNG producing regions as well as in the main LNG markets. It is involved in LNG projects in Australia, UAE, Indonesia, Egypt, Trinidad and Angola.

BP has a liquefaction tolling agreement for over 4.4 mtpa LNG capacity in train 2 of the Freeport LNG Project in Texas, USA (Freeport). The project is currently under construction with production from train 2 of Freeport expected to begin in 2019.

http://www.gasworld.com/bp-and-kansai-sign-lng-deal/2007484.article?utm_source=GasesSynopsis&utm_medium=twitter&utm_campaign=Feed%3A+gasworld+%28Gasworld+Industrial+Gas+-+Global+News%2C+Conferences+and+Business+Directory%29

Brazil's state-run oil company Petrobras canceled leases with Schahin Petroleo e Gas SA for five offshore oil drilling and production vessels after a cash crunch forced the ship leaser to remove the equipment from service for nearly a month, Schahin said on Thursday.

The decision, if upheld, will result in the loss of more than 1,000 related jobs, Schahin said, while creditors and investors stand to lose more than $4 billion. Schahin said it plans to sue Petrobras, as the oil company is known, to reinstate the contracts.

Petrobras has been trying to slash costs in the face of falling oil prices, soaring debt and record losses related to poor planing and the fallout from a giant price-fixing, bribery and political kickback scandal.

In the lower oil price environment, Petrobras, the world's most indebted oil company, and third most indebted non-financial company, faces a market with a growing number of unused vessels and falling day rates. Deepwater drillships that rented for $500,000 or $600,000 a day several years ago can now be leased for $400,000 or less, according to industry sources.

The five Schahin vessels are the drillships Cerrado Sertão and Lancer and the semi-submersible oil production platforms Amazônia and Pantanal. All had been on long-term leases.

Schahin said it was forced in early April to temporarily pull these vessels from service with Petrobras for nearly a month and move them to port after a lack of cash to pay debt led a creditor to seek the sale of assets. The creditor was leasing the Pantanal and Amazônia to Schahin.

In late April, after renegotiating a $1 billion reduction in debt Schahin informed Petrobras that the ships were ready for service. On May 21 Petrobras canceled the leases, Schahin said.

http://www.reuters.com/article/2015/05/28/brazil-petrobras-schahin-idUSL1N0YJ2O120150528

London-listed shares in oil and gas company Ithaca Energy fell by as much as 18 percent after the Calgary-based firm said it had received a legal claim regarding its Greater Stella Area oil field in the North Sea.

The company, which denied any wrongdoing, said a statement of claim had been lodged complaining it had misrepresented the schedule for completing modifications at a floating production facility.

Ithaca said in February that modifications to the "FPF-1" facility, being carried out by UK oil services firm Petrofac Ltd , would not be completed until 2016.

Ithaca noted that the statement of claim had come from a law firm that advertises itself as undertaking investor law suits.

Toronto-based law firm Morganti Legal said in March that it was investigating whether Ithaca's views about the completion date of FPF-1 were "overly optimistic".

Morganti and Petrofac were not immediately available for comment.

http://www.reuters.com/article/2015/05/28/ithaca-energy-claim-idUSL3N0YJ2UG20150528

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French gas and power group Engie hopes to make acquisitions in the oil and gas exploration and production industry in the coming months, an executive at the company formerly called GDF Suez said on Thursday.

"We want to have reserves of more than 1 billion barrels of oil equivalent," Engie head of international exploration and production Didier Holleaux told a seminar. "We have no timing for this target, but going above this level means acquisitions."

Engie had reserves equivalent to about 760 million barrels of oil at the end of 2014, equal to 13 years of production at last year's rate of 55.5 million barrels.

"We are looking at opportunities and we have good hopes of concluding some in the coming months," Holleaux said.

Asked about Engie's reported interest in Canadian oil group Talisman Energy early in 2014, Holleaux said the group had considered looking at a possible bid.

"We looked at it of course, but Talisman was too big ... We did not want to make a bid for the whole company as we had reservations about some of its assets," he said.

Asked whether Engie had considered buying Britain's BG Group , Holleaux said that BG had been a bit too big for Engie E&P (exploration and production), and even for Engie as a whole.

Holleaux also said that because of low oil prices, Engie planned a 25 to 30 percent cut in its exploration and production investment budget, which has stood at around 1 billion euros ($1.09 billion) a year in recent years.

He added that large ongoing projects such as Cygnus in Britain, Touat in Algeria and Jangkrik in Indonesia would continue as planned.

The company said in February that the budget of its E&P unit would fall by 400 million euros in the 2015-2016 period.

http://www.reuters.com/article/2015/05/28/engie-oil-idUSL5N0YJ2ZF20150528

Falcon Oil & Gas told investors that the start-up of a three-well drill programme in Australia’s Beetaloo shale basin is on track for mid-2015.

Tendering and contracting for the rig and key services are currently underway, and drilling locations have been identified.

The wells are designed to penetrate both oil andgas sections within the Beetaloo’s Middle Velkerri shale.

Falcon has a 30% stake in the project in which it is partnered by Australian firm Origin and Sasol.

Philip O’Quigley, Falcon’s chief executive, said: “Our initial three well, fully funded exploration drilling campaign in the Beetaloo basin, Australia is on track to commence shortly and we are working closely with our partners Origin and Sasol to complete preparations ahead of drilling this highly attractive basin."

O’Quigley also highlighted that there continue to be encouraging signs from the South African authorities in regards to shale exploration.

Falcon is staked as an early mover in the nascent sector, having previously secured rights to a significant footprint of prospective acreage in the country’s Karoo basin.

The South African Department of Mineral Resources is expected to begin issuing licences this year, O’Quigley said. And it is understood that Falcon’s application is currently being processed.

In this morning’s first quarter results statement, for the three months to March 31, the pre-revenue exploration companyreported a $237,000 loss. It ended the period in what it called a strong financial position, with US$11.5mln of cash and no debt.

Falcon said it maintains a focus on strict cost management and efficient operations.

http://www.proactiveinvestors.co.uk/companies/news/80850/falcon-oil-gas-looks-forward-to-start-of-beetaloo-shale-drilling-80850.html

U.S. crude oil refinery inputs averaged about 16.5 million barrels per day during the week ending May 22, 2015, 237,000 barrels per day more than the previous week’s average. Refineries operated at 93.6% of their operable capacity last week. Gasoline production increased last week, averaging about 10.2 million barrels per day. Distillate fuel production increased last week, averaging 4.9 million barrels per day.

U.S. crude oil imports averaged 6.7 million barrels per day last week, down by 503,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 6.8 million barrels per day, 3.4% below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 775,000 barrels per day. Distillate fuel imports averaged 248,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.8 million barrels from the previous week. At 479.4 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Total motor gasoline inventories decreased by 3.3 million barrels last week, but are near the upper limit of the average range. Finished gasoline inventories increased while blending components inventories decreased last week. Distillate fuel inventories increased by 1.1 million barrels last week but are in the lower half of the average range for this time of year. Propane/propylene inventories rose 2.2 million barrels last week and are well above the upper limit of the average range. Total commercial petroleum inventories increased by 2.2 million barrels last week.

Total products supplied over the last four-week period averaged about 19.8 million barrels per day, up by 3.5% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.2 million barrels per day, up by 1.6% from the same period last year. Distillate fuel product supplied averaged over 4.1 million barrels per day over the last four weeks, down by 0.4% from the same period last year. Jet fuel product supplied is up 5.0% compared to the same four-week period last year.

http://ir.eia.gov/wpsr/wpsrsummary.pdf

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Natural gas production in the Marcellus shale, which has grown over the past decade from next to nothing to the source of about a fifth of U.S. output, may decline for the first time if prices in the basin remain low for much longer, according to federal government data.

The U.S. Energy Information Administration says production in the fast-growing field in Pennsylvania and West Virginia is set to remain flat for the next few years before beginning a very slow decline primarily because of depressed gas prices.

Recent data supports signs of a slowdown. The number of rigs in the area has dwindled in recent months to its lowest since 2011, and drillers including Chesapeake Energy Corp and Cabot Oil & Gas Corp have temporarily shut in some production due to weak regional prices.

Those low prices are threatening the basin with its first annual decline in output since producers started using hydraulic fracturing and horizontal drilling to develop the formation.

But many private analysts say output from the Marcellus will continue to grow over the next several years as demand for gas increases and pipeline companies complete more projects to transport the fuel out of the region, boosting local prices that have fallen to their lowest in at least 14 years.

"We see some slow growth in the Marcellus each year out to 2020" because of new pipelines, said Keith Barnett, who heads fundamental analysis at Asset Risk Management LLC in Houston.

The EIA expects output to remain flat through 2018 before declining about 1 percent a year from 2019 to 2025, according to its 2015 Annual Energy Outlook.

"Relatively low gas prices, combined with low oil prices, have slowed drilling in the Marcellus so production from new wells is only offsetting the decline in old wells," said EIA lead upstream analyst Dana Van Wagener.

The EIA forecast prices in parts of the Marcellus would remain below $2 through 2016 and not exceed $4 until 2020.

The sheer size of the Marcellus makes its continued growth vital to the expected expansion of the U.S. gas market. The basin produces twice as much gas as the nation's second-biggest shale oil and gas play, the Eagle Ford in South Texas.

Prices this year at Dominion South E-DOMSP-IDX, an important Marcellus hub in southwestern Pennsylvania, have averaged $1.88 per million British thermal units on the IntercontinentalExchange, the lowest on record, according to Reuters data back to 2001.

"Some production declines this year are maintenance-related and should come back quickly, while others are economic," said Charles Nevle, vice president of energy data provider PointLogic in Houston.

http://www.reuters.com/article/2015/05/28/natgas-marcellus-production-idUSL1N0YA2LJ20150528

A unit of American Midstream Partners LP is holding a binding open season through June 22 for a new 50-mile oil pipe gathering/transportation system in McKenzie County in northwest North Dakota, the heart of the state's producing region.

American Midstream Bakken LLC plans to transport up to 40,000 b/d of crude oil for delivery to major intrastate and interstate pipeline systems beginning in June.

"The gathering system is essentially built but not operating," a spokesperson told NGI's Shale Daily on Wednesday. "We anticipate it will be operating in June."

The Denver-based company said the pipe initially would be able to transport up to 15,000 b/d with a maximum capacity of up to 40,000 b/d.

"During the binding open season, potential shippers have the opportunity to obtain crude oil transportation service on the Bakken system on a committed or uncommitted basis at various tier-based rates, according to volumes transported," the spokesperson said. "Parties interested in becoming committed shippers can do so by making long-term acreage or volumetric dedications for crude oil gathering and transportation service on the Bakken system."

The open season also offers potential shippers the option of delivering volumes into the American Midstream gathering system via truck.

http://www.naturalgasintel.com/articles/102460-proposed-bakken-oil-pipeline-testing-market-interest?utm_source=dlvr.it&utm_medium=twitter