Saudi Arabia, the world’s largest crude exporter, cut pricing for March sales of its light crude oil grades to Asia, according to a person familiar with the decision.

State-owned Saudi Arabian Oil Co. lowered its official selling price for Arab Light crude to Asia by 20 cents a barrel to $1 a barrel less than the regional benchmark, according to the person, who asked not to be identified because the information isn’t public. The company, known as Saudi Aramco, was expected to widen the Arab Light grade’s discount by 40 cents a barrel to $1.20 a barrel less than the benchmark for buyers in Asia, according to the median estimate in a Bloomberg survey of seven refiners and traders in that region.

Saudi Arabia led a 2014 decision by the Organization of Petroleum Exporting Countries to maintain output amid oversupply in an effort to defend market share and drive out higher-cost producers. The country’s average production in 2015 of 10.2 million barrels a day accounted for more than 10 percent of global oil supply, according to the International Energy Agency.

Benchmark Brent crude dropped 35 percent last year and another 6.8 percent in January. Saudi Aramco officials have said prices will rise by the end of this year as demand grows.

“The gap between supply and demand has started shrinking,” Aramco Chief Executive Officer Amin Nasser said at a Jan. 26 conference in Riyadh. “We will see some adjustment, but it will happen toward the end of this year.”

Aramco cut the premium for Arab Extra Light crude to Asia by 40 cents a barrel to $1.30 a barrel more than the benchmark, according to the person. The company narrowed the discount for March sales of its Medium and Heavy grades to Asia, the person said.

Saudi Arabia boosted output to a record 10.48 million barrels a day in June, according to the International Energy Agency, and pumped 10.2 million a day last month, data compiled by Bloomberg show. OPEC, of which Saudi Arabia is the largest producer, abandoned its oil-production target in December.

Middle Eastern producers are competing increasingly with cargoes from Latin America, North Africa and Russia for buyers in Asia, its largest market. Producers in the Persian Gulf region sell mostly under long-term contracts to refiners. Most of the Gulf’s state oil companies price their crude at a premium or discount to a benchmark. For Asia the benchmark is the average of Oman and Dubai oil grades.

http://www.bloomberg.com/news/articles/2016-02-04/saudi-aramco-said-to-cut-march-light-crude-oil-pricing-to-asia

Iran has been discussing possible oil sales to top Russian crude oil producer Rosneft, Kremlin-controlled RIA news agency cited Ali Akbar Velayati, top adviser to Iran's Supreme Leader Ayatollah Ali Khamenei, as saying in Moscow on Thursday.

http://www.reuters.com/article/russia-iran-oil-idUSR4N15H00B

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Newly licensed Chinese oil importers are taking advantage of low crude prices and healthy domestic product margins, snapping up hundreds of thousands of barrels a day of a global surplus but also adding to China's swelling fuel exports.

Armed with quotas that could make up a fifth of total Chinese crude imports this year, the independent refiners, nicknamed "teapots", are seeking barrels from Asia, the Middle East, Europe and South America, and are prepared to pay top premiums to secure deliveries out to April.

Despite the troubles of a private refiner that failed to secure financing for two import cargoes in December, there has been little let up from the new pool of buyers. Last year, the independents, alongside Beijing's stockpiling programme, helped grow China's crude imports by 8.8 percent, or 543,000 barrels per day (bpd).

"As long as oil remains under $40, margins will be supportive of crude buying," said Michal Meidan of consultancy Energy Aspects.

"But even if margins start to get squeezed a little, they will still import and seek tax breaks from local officials."

After Beijing started granting quotas in July 2015, independents bought close to 8 million tonnes of crude between September and December, a rough rate of 500,000 bpd over the four months, according to estimates by Thomson Reuters Oil Research and Forecasts and an executive at one teapot refiner.

With over 1 million bpd in quotas finally approved so far, teapots are set to step up purchases further this year, as most won permits only towards the end of 2015 or in early 2016.

Sources at the independents said they are testing out a variety of grades for their plants, which typically have small capacities and basic crude distillation equipment that most easily handle light, sweet oils.

China's total crude imports this month may reach 7.68 million bpd, near a record hit in December and marking another challenge to the United States as the world's top crude buyer, according to Thomson Reuters Oil Research and Forecasts.

The teapots' preference for smaller-sized cargoes due to port constraints helped push Russia up China's supplier list to the No.2 spot after Saudi Arabia, with Russian volumes surpassing those of the Saudis for four months in 2015.

The independents' demand for ESPO blend crude, the key Russian grade for Asia, has pushed up its premium for cargoes loading in March to the highest since May 2014.

The teapots' buying was supported by Beijing's recent move to freeze domestic pump prices when benchmark crude prices go under $40, effectively locking in processing margins as Brent and U.S. oil hold near 12-year lows.

To capture healthy margins and replenish inventories ahead of the Lunar New Year break that starts on Feb. 8, teapots have cranked up output to near full-tilt, according to sources at three plants based in eastern Shandong province.

Until the middle of last year, many struggled to operate even at 30-40 percent of capacity due to poor margins and their inability to import crude.

Cargoes have been booked through April loadings, the sources said, with the high number of enquires likely extending far into the second quarter.

Still, with fuel stocks rising and factory activity contracting in the world's second-largest economy, weak domestic demand - especially for diesel - may force companies to export more and eventually cap crude throughput.

http://www.reuters.com/article/china-crudeoil-imports-idUSL3N15D4MP

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ConocoPhillips (COP.N) further cut its capital budget for 2016 and slashed its quarterly dividend as a relentless fall in crude oil prices takes a toll on the largest U.S. independent oil and gas company.

Shares of ConocoPhillips, which also reported a bigger-than-expected quarterly loss, were down 4 percent at $37 in light premarket trading.

Global crude oil prices have dropped about 70 percent from their 2014 high of over $100 barrel, eroding profitability at nearly all oil producers.

Exxon Mobil Corp (XOM.N), the world's largest publicly traded oil company, reported its smallest quarterly profit in more than a decade on Tuesday.

With oil prices now hovering at about $30 barrel, producers are slashing investments in new wells and projects, triggering another large wave of spending cuts.

ConocoPhillips on Thursday lowered its 2016 capital expenditure target by 17 percent to $6.4 billion, and its operating cost forecast by 9 percent to $7 billion.

The cut comes less than two months after the company outlined its spending plans for the year.

ConocoPhillips also slashed its quarterly dividend to 25 cents per share from 74 cents per share.

The company's net loss widened to $3.5 billion, or $2.78 per share, in the fourth quarter ended Dec.31, from $39 million, or 3 cents per share, a year earlier.

Excluding impairment and other items, loss was 90 cents per share, bigger than the average analyst estimate of 65 cents, according to Thomson Reuters I/B/E/S.

http://www.reuters.com/article/us-conocophillips-results-idUSKCN0VD1II

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Oil tycoon T. Boone Pickens, who made and lost fortunes targeting some of the largest U.S. crude explorers over the past 40 years, has cashed out.

Pickens has sold all his oil holdings and is waiting for the best moment to get back in, he said Thursday in an interview on “Bloomberg Go.”

http://www.bloomberg.com/news/articles/2016-02-04/oil-tycoon-pickens-cashes-out-on-oil-awaits-time-to-get-back

This week also saw another unexpected event in the offshore sector — halfway around the world in South America.

That came in Uruguay. Where major European producer Statoil announced a surprise farm-in on one of the world’s up-and-coming exploration areas.

Statoil said Monday that it will acquire a 15 percent interest in block 14, majority-owned by Total in the offshore of Uruguay, just south of Brazil (map below).

Statoil is acquiring a 15 percent interest in block 14, offshore Uruguay

This is an interesting deal, given that most major E&Ps are cutting back spending on new projects right now. Showing that Statoil must see something it finds very attractive here — especially given this is a major stepout from the company’s core operating area of the North Sea.

The current market turmoil has created a once in a generation opportunity for savvy energy investors.
Whilst the mainstream media prints scare stories of oil prices falling through the floor smart investors are setting up their next winning oil plays.

That something could be results from 3D seismic surveys recently completed by Total over block 14. Which are perhaps showing some sizeable leads on drilling targets here.

The other partner currently involved in the block is ExxonMobil — showing that a range of majors are converging in this part of the world.

The prize here could be something similar to recent offshore mega-discoveries in Brazil, given that the Uruguay blocks are located just south of those basins. With Uruguay perhaps being a more attractive way into such plays at the moment, after scandals and corruption have swept over the Brazilian petroleum sector the last few months.

The first drilling at block 14 is expected within a few months, meaning we won’t have to wait long to see what the potential might be here. Watch for results from this emerging district.

http://oilprice.com/Energy/Crude-Oil/Oil-Majors-Converging-Here-Could-Mean-A-New-Hotspot.html

Shell has announced it is postponing a final decision on the Shell-led LNG Canada export project in Kitimat due to slumping profits.

Shell reported on Thursday a 44 per cent drop in profit in the final three months of last year, forcing a reevaluation of spending decisions.

“Operating costs and capital investment [across Shell] have been reduced by a total of $12.5bn as compared to 2014, and we expect further reductions in 2016,” CEO Ben van Beurden said in a statement.

The project received environmental approval from the federal and provincial governments last June, although the approval came with a number of conditions.

Shell owns a 50 per cent stake in the LNG Canada project and could have started construction by 2021 or 2022.

LNG Canada expected 7,500 workers would be employed during peak construction at the Kitimat site and an estimated $8 billion would be spent on goods and services within Canada, including $3 billion in B.C.

The other shares are held by Japanese trading company Mitsubishi, South Korean incumbent KOGAS and China state-run Petrochina.

President Obama plans to seek a $10-a-barrel oil tax to overhaul the nation’s transportation system toward reducing carbon emissions.

In a statement from the White House Thursday, the administration expressed plans to spend more than $300 billion over the next decade, expanding rail and mass transit networks, modernizing freight transportation and expanding research into self-driving cars.

“Our nation’s transportation system was built around President Eisenhower’s vision of interstate highways connecting 20th century America” the White House said. “This new approach to investment and funding is one that places a priority on reducing greenhouse gases, while working to develop a more integrated, sophisticated, and sustainable transportation sector.”

Full details of the proposal are expected to be laid out when the White House releases its budget next Tuesday.

Already the administration is attempting to sell the proposal as one that will not only cut carbon emissions but make the nation’s transportation system more efficient.

Obama is likely to face a defiant Republican majority in Congress, which has consistently pushed back against his climate change initiatives.

U.S. Rep. Pete Olson, R-Sugar Land, tweeted Thursday afternoon, “Disgusted that @POTUS wants to slam consumers — and Houston’s economy — with an extreme oil tax. This idea is DOA.”

http://fuelfix.com/blog/2016/02/04/obama-seeks-10-per-barrel-oil-tax-to-fund-clean-transport/#35236101=0

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The U.S. Gulf Coast is bloated with record crude inventories, and signs of tightening storage are starting to show in Louisiana.

A futures contract reflecting the cost of storage at the Louisiana Offshore Oil Port climbed to a record 90 cents a barrel this week on the New York Mercantile Exchange. The contract, which began trading 10 months ago, has more than doubled in the past two weeks and now exceeds typical long-term costs in the Gulf.

Stockpiles in PADD 3, the Gulf Coast region, reached 252.9 million barrels last week, the most since the Energy Information Administration began releasing the data weekly in 1990. The region’s working storage capacity, which doesn’t include oil in pipelines or field storage, is 302.3 million.

The Gulf Coast is getting oil from land and sea. Imports have averaged 3.18 million barrels a day for 10 weeks, the most since July. Near-full inventory levels in Cushing, Oklahoma, have also pushed oil south to Texas and Louisiana.

One sign of the tightening is in the 10-month-old LOOP sour crude storage futures contract. After reaching a record 90 cents Monday, it settled at 88 cents Thursday. Typical long-term storage goes for 65 cents in the Gulf and 35 cents in Cushing, said Vikas Dwivedi, an oil and gas economist at Macquarie Capital in Houston. CME Group Inc. raised the margin for the contract Thursday to $440 from $385.

“Total storage is going to build worldwide for at least the first half of 2016,” Dwivedi said in a phone interview. “That would apply disproportionately to the U.S. Gulf because it’s an area commercially focused on storage.”

The LOOP contract is also getting a boost from a widening contango for Mars Blend, in which the crude gets more expensive in later delivery months, Dan Brusstar, senior director of energy research for CME Group Inc., said in a phone interview. The profit from buying prompt Mars crude and storing it for later resale has risen to $1.36 a barrel from 84 cents in January, CME data show.

In Houston there’s also "a tight storage landscape," said Kelly Kimberly, a spokeswoman for Fairway Energy Partners, which is adding 11 million barrels in the first phase of a project there. "Essentially, all existing tanks in the Houston market area are fully contracted."

PADD 3 isn’t likely to run out of space, Auers said. Consumption will pick up as the U.S. winter ends and refiners will process more crude. The region’s refineries boosted their crude runs for the first time in five weeks last week, the EIA said, gaining 80,000 barrels a day to 7.86 million.

http://www.bloomberg.com/news/articles/2016-02-04/gulf-coast-crude-tanks-filling-up-as-stockpiles-climb-to-record

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Occidental Petroleum Corp said its 2016 capital budget was expected to be not more than $3 billion, nearly half its 2015 levels, and reported a bigger-than-expected loss for the fourth quarter.

However, the company expects to grow oil and gas production by 2-4 percent this year from ongoing operations due to a fall in drilling and completion costs.

Total operating costs declined by nearly $2 per barrel to $11.57 in 2015, Occidental said.

Production in the fourth quarter surged 12.6 percent to 671,000 barrels of oil equivalent per day (boepd) from a year earlier, with the company's domestic production increase coming mainly from its Permian shale fields.

Occidental's net loss widened to $5.18 billion, or $6.78 per share, in the quarter ended Dec. 31, from $3.41 billion, or $4.41 per share, a year earlier.

The company reported a core loss of 17 cents per share, bigger than the average analyst estimate of 12 cents, according to Thomson Reuters I/B/E/S.

Revenue more than halved to $2.84 billion.

http://www.reuters.com/article/us-occidental-results-idUSKCN0VD1IS

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Hess Corporation today announced the pricing of its previously announced concurrent underwritten public offerings of 25,000,000 shares of its common stock at a price of $39.00 per share, and 10,000,000 depositary shares, each of which represents a 1/20th interest in a share of its 8.00% Series A Mandatory Convertible Preferred Stock (the “Convertible Preferred Stock”). In addition, the underwriters in each respective offering have been granted a 30-day option to purchase up to 3,750,000 additional shares of common stock and up to 1,500,000 additional depositary shares.

The net proceeds from the common stock offering and the depositary shares offering will be approximately $945.8 million and $485.3 million, respectively, in each case after deducting underwriting discounts and commissions and before estimated offering expenses payable by Hess.

Hess plans to use the net proceeds from these offerings to strengthen the Company’s balance sheet and for general corporate purposes including funding its longer term capital needs and the cost of the capped call transactions described below. The concurrent offerings are expected to close on February 10, 2016, subject to customary closing conditions.

Goldman, Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC are acting as book-running managers for the concurrent offerings.

In connection with the pricing of the depositary shares, Hess entered into privately negotiated capped call transactions with one or more of the underwriters or their affiliates (the “option counterparties”). The capped call transactions are expected generally to reduce the potential dilution to Hess’ common stock upon conversion of the Convertible Preferred Stock, with such reduction subject to a cap. The cap price of the capped call transactions will initially be $53.6250 per share of Hess’ common stock, representing a premium of 37.5% above the public offering price of Hess' common stock in the concurrent common stock offering, and is subject to certain adjustments under the terms of the capped call transactions. If the underwriters of the depositary shares offering exercise their over-allotment option, Hess intends to enter into additional capped call transactions with the option counterparties.

In connection with establishing their initial hedge of the capped call transactions, the option counterparties or their respective affiliates expect to enter into various derivative transactions with respect to Hess’ common stock concurrently with, or shortly after, the pricing of the depositary shares. These activities could increase (or reduce the size of any decrease in) the market price of Hess’ common stock or the depositary shares at that time.

In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding derivative transactions with respect to Hess’ common stock and/or by purchasing or selling shares of Hess’ common stock or other securities of Hess in secondary market transactions following the pricing of the depositary shares and prior to the mandatory conversion date of the Convertible Preferred Stock.

http://www.businesswire.com/news/home/20160204006724/en/Hess-Corporation-Prices-Concurrent-Offerings-Common-Stock

Oil and natural gas explorer Linn Energy LLC, whose stock has fallen 96 percent in two years, is exploring “strategic alternatives” to strengthen its balance sheet while dealing with the worst crude market downturn in 30 years.

Linn recently borrowed about $919 million, exhausting the amount available to it under a $3.6 billion credit facility loan, the Houston-based company said in a statement Thursday. Its Berry Petroleum Co. LLC unit is also fully using its $900 million credit facility.

The company’s reviewing its options to ensure “adequate financial flexibility to manage through prolonged commodity price headwinds,” it said in the statement.

The collapse in oil prices has forced energy companies to slash more than $100 billion in spending globally and eliminate more than 250,000 jobs last year. More cuts are expected in 2016 with crude futures down 35 percent in the past year.

Linn has hired Lazard as its financial adviser and Kirkland & Ellis LLP for legal advice on the review, according to the statement.

http://www.bloomberg.com/news/articles/2016-02-04/linn-energy-to-explore-strategic-alternatives-to-boost-finances