Iran has managed to pump more of its oil back into Asia and Europe than it originally promised, surprising skeptics and laying the groundwork for a Mideast market-share clash — or a truce.

Iran’s crude exports climbed to 2.35 million barrels a day in April, according to consulting firm Genscape, more oil than U.S. drillers pump in South Texas’ Eagle Ford Shale and North Dakota’s Bakken Shale put together.

The sharp increase of 660,000 barrels a day compared to March — and 1.2 million barrels a day since January — puts Iran above its planned export target just three months after western powers lifted strict economic sanctions against Iran.

“Iran has been waiting for this moment for years and they made the best of it,” said Amir Bornaee, an analyst at Genscape who tracks oil vessels.

Many analysts had said Iran would fall short of its goal because its oil fields fell into disrepair in the three years that the West had sanctioned Iran’s oil exports.

Some attribute the recent rise in Iran’s exports to a collection of vessels kept near the country’s coastline, but Bornaee says many of those tankers are still there, storing oil.

Still, it is not clear how much of Iran’s oil came from the more than 30 million barrels it had stored onshore, and how much came from its oil fields.

Iranian officials have been courting western oil companies and amending drilling contracts in a push to attract investments in its fields, so it’s possible Iran is selling its stored oil in an effort to reach its export goal quickly.

That way, Iranian officials could be ready to call a truce in the ongoing market-share war by the time the Organization of Petroleum Exporting Countries meets in early June.

“There’s a lot of posturing going on ahead of the OPEC meeting,” said Andy Lipow, president of Lipow Oil Associates in Houston.

OPEC, Russia and others failed to reach an agreement last month to cap their production levels when Saudi Arabia balked at Iran’s refusal to join the freeze.

One reason Iran’s surge in crude exports hasn’t sent oil prices down is because other countries like Canada, Nigeria and Libya have recently suffered production outages.

The International Energy Agency on Thursday said Nigeria’s output has fallen to a two-decade low amid attacks on its energy infrastructure, and Canada has shut in 1.2 million barrels a day of production amid devastating wildfires, though the outage is expected to be temporary.

Global oil demand is growing faster than anticipated at 1.4 million barrels a day, and production outside of OPEC is expected to fall 800,000 barrels a day, the IEA said, in a sign there are many market forces offsetting Iran’s return to the oil market.

According to Genscape, Saudi Arabia lowered its oil exports by 700,000 barrels a day last month to 6.9 million, its first decline in exports this year. But Saudi officials have recently signaled the world’s largest oil-producing nation is gearing up to ramp up its output.

“Until everyone freezes (oil production), these two countries (Iran and Saudi Arabia) aren’t likely going to slow down,” Bornaee said.

http://fuelfix.com/blog/2016/05/12/iran-oil-export-surge-adds-another-bakken-to-the-global-glut/

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The 13 nations of the Organization of Petroleum Exporting Countries pumped 32.44 million barrels a day in April, slightly less than will be required in the the third quarter. Production rose as gains in Iran and Iraq compensated for losses in Nigeria and Kuwait. Investment by the global oil industry through 2018 will slump to less than half the amount spent from 2012 to 2014 following the collapse in prices, OPEC said.

Oil prices have rebounded more than 75 percent from the lows reached in February as U.S. shale production falters, signaling that Saudi Arabia’s strategy to re-balance oversupplied world markets is taking effect. OPEC, which failed to complete an accord with non-members last month on capping output, has no current plans to revive supply limits when ministers meet on June 2, six delegates said on May 4.

“It is widely recognized that an adequate return on investment is needed to maintain production levels, as well as to allow for the growth,” the group’s Vienna-based research department said in the monthly report. “A return to balance is a shared interest among consumers and producers alike.”

While the group’s supply has typically exceeded the required amount in recent months, April output is about 380,000 barrels a day below the 32.8 million that OPEC estimates will be needed in the third quarter. That potential shortfall is a further indication the organization’s policy is working.

Global oil demand will increase by 1.2 million barrels a day, or 1.3 percent, this year to 94.18 million a day, according to the report. Supplies from outside the group will shrink by 740,000 barrels a day to 56.4 million.

http://www.bloomberg.com/news/articles/2016-05-13/opec-keeps-oil-market-outlook-unchanged-before-june-meeting

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China's independent refiners have switched to buying more oil from Africa and Latin America instead of large volumes of Russia's ESPO crude as they have struggled to cope with the excess light fuels that come with processing the grade.

The change in preference shows the transient nature of crude purchases from the new Chinese buyers, also known as teapots, who are still trying out different crude grades to identify suitable types for their refineries.

The teapots' tapering demand for the Russian grade pushed spot premiums for June-loading cargoes to as low as $2 a barrel from as high as $5.60 a barrel for April loaders, catching some traders who sell to teapots off guard.

Lured by the short shipping distance and six-year low crude prices, teapots paid strong premiums to secure Russian ESPO oil in the first quarter.

Spurred by the strong teapot demand, Russia overtook Saudi Arabia as the biggest crude exporter to China for four months in late 2015 and again in March.

Nearly half of the Russian ESPO exports landed at the port of Shandong, where most of the teapots are located, each month between February and April, data from Reuters Trade Flows showed.

But Shandong's imports may fall in the coming months as some refiners found the crude too light, several trade sources said. High crude inventories and large supplies waiting to offload at congested ports also reduced teapots' appetite for ESPO, they said.

"ESPO produces too much naphtha. The oil wasn't economical to us as the ship size was too small and premium was high," a trader from one of the teapot refiners said.

The independent refiners, which had relied on residual fuel as a feedstock before Beijing opened up crude imports last year, were mostly designed to maximise production of middle distillates such as diesel and jet fuel instead of light products like naphtha and gasoline.

ESPO has an API gravity of 35.57 degrees, much lighter than Oman oil, a favourite among teapots. Refiners would typically draw about 20 percent of naphtha from a barrel of ESPO after processing versus about 15 percent from an Oman barrel.

The naphtha cannot be processed further at teapots' facilities, four sources said. A consumption tax of 40 yuan ($6.16) per tonne for selling the naphtha as a petrochemical feedstock has deterred the teapots from selling the fuel, sources said.

Still, the teapots' ESPO demand may improve as several of them are building new units to further process the naphtha, including the largest, Shandong Dongming Petrochemical, the sources said.

Dongming will complete a 24,000 barrels-per-day reformer at its Lianyungang refinery in eastern Jiangsu province by the end of 2016 that will process the naphtha to produce aromatics for gasoline blending or domestic sales, sources close to the matter said. Qirun Chemical Industries Co will also bring online a new reformer next year, a company official said.

In the meantime, teapots are seeking alternatives, with West African crude arrivals to Shandong rising 35 percent in April from December and deliveries from South America increasing 50 percent over the same time frame, Reuters Trade Flows data showed.

http://www.reuters.com/article/russia-china-oil-idUSL3N17W3NJ

Asia's refined product markets are being swamped by a wave of gasoline as a long-lasting crude oil glut spills into the one fuel market refiners had hoped would save them, ruining margins and dragging down share prices across the region.

Singapore's benchmark gasoline margins - long the bright spot for Asia's oil processors amid rock-bottom profits earned on diesel, jet and shipping fuel - have more than halved since the beginning of 2016, when they were near at least a seven-year high for first-quarter values. 

With gasoline's slump, overall refining margins in Singapore have dropped nearly 60 percent since the beginning of the year, buckling under the weight of the fuel products pumped out of oil plants as refiners feasted on crude prices that were as low as three-quarters of their mid-2014 levels.

Besides dragging down crude refiners' share prices, this drop in margins could also undercut global oil prices that have struggled up from 12-year lows hit early this year, and refiners say the situation will not improve anytime soon.

"We don't expect 2016 refining margins to improve. In fact, the situation could worsen from second-half of 2016 as the peak maintenance season in Asia will be over," said KY Lin, spokesman for Formosa Petrochemical Corp, meaning that more fuel would hit the market once shutdown refineries restart.

In a sign of just how bloated the market has become, Singapore's light distillate stocks, which includes gasoline, hit nearly 16 million barrels late last month, the highest on record, according to government figures. The stocks have dropped back since, but there's still enough gasoline in the tanks to fill up almost 50 million average-sized vehicles.

Lin said some of the main contributors to the gasoline glut have been private Chinese refiners, known as "teapots", that have started exporting their surplus petrol, overwhelming demand.

The collapsing margins are a sharp reversal from expectations of a few months ago. Just in February South Korea's SK Innovation, a major Asian refiner, said its margins would remain strong as demand for gasoline and naphtha offset weaker markets for other fuels.

Formosa Petrochemical operates a 540,000 barrels per day (bpd) refinery in Mailiao, Taiwan, the island's largest and one of the 10 biggest in Asia. Formosa produces about 3 million barrels of gasoline a month, over half of which it usually exports.

http://www.reuters.com/article/oil-refinery-glut-idUSL3N18A3HL

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China processed record crude on a daily basis in April as the nation’s independent plants boosted operations amid a surge in oil imports.

Crude refining in the world’s second-largest oil consumer increased 2.4 percent from a year earlier to 44.75 million metric tons last month, or about 10.93 million barrels a day, according to data released by the National Bureau of Statistics on Saturday. That’s up 1.2 percent from the previous record of 10.8 million barrels a day in December.

Independent refineries, known as teapots, have been increasing runs after they were allowed to import crude oil. The utilization rate at the plants in eastern Shandong province increased to 53 percent of capacity as of April 29, according to industry website Oilchem.net. That’s the highest since at least August 2011, when Bloomberg started compiling the data.

“Teapot refineries have raised operation rates significantly this year,” Amy Sun, an analyst with ICIS China, a Shanghai-based commodity researcher, said by phone. “This has resulted in much higher oil processing than we expected in recent months.”

China’s inbound oil shipments in April rose 3.2 percent from the previous month to 7.96 million barrels a day and near the February high. Crude imports through Shandong’s Qingdao port surged to a record in March and accounted for about 30 percent of the country’s total.

China’s crude output fell 5.6 percent from a year earlier to 16.59 million tons (4.05 million barrels a day), Saturday’s data showed. Natural gas production climbed 5.6 percent to 10.6 billion cubic meters and coal output declined 11 percent to 268 million tons.

http://www.bloomberg.com/news/articles/2016-05-14/china-processes-record-crude-on-boost-from-independent-refiners

The world’s biggest oil companies are borrowing record amounts of money to cope with a slump in crude prices. Luckily, there’s rarely been a better time to go on a debt binge.

Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp., Total SA, BP Plc and Eni SpA have together sold the equivalent of $37 billion of bonds this year, about double the amount issued in the period before oil prices plunged, according to data compiled by Bloomberg. While this is stretching their balance sheets and even resulting in credit-rating downgrades, the lowest debt costs in a year are softening the blow.

“They’re making hay while the sun shines,” benefiting from improved investor sentiment as oil prices have recovered, said Alex Griffiths, a London-based managing director at Fitch Ratings Inc. “Treasurers are making use of good market conditions to maintain liquidity buffers.”

Even though oil has increased from the lows of January as a global surplus diminished, prices are still less than half their level two years ago. The world’s biggest companies have sought to keep investors happy through the downturn by maintaining dividend payouts and investing for the future at the same time. With profit and revenue sharply down, the only way to do that is borrow more money.

Debt markets are opening up for companies worldwide as central banks in the U.S. and Europe keep benchmark borrowing rates low. Investors currently demand a return of 3.09 percent to hold dollar-denominated debt of companies with an investment-grade rating, the lowest level in a year, according to data from Bank of America Merrill Lynch. For euro securities, they seek 1.01 percent, close to the record low of 0.93 percent in March 2015, the data show.

At the same time, the premiums for credit default swaps for the biggest U.S. and European oil companies, which investors use to protect against defaults, have dropped from the highest level in at least five years.

“The majors still have strong balance sheets to raise debt at competitive rates so they can manage their capital agenda, for example, to maintain dividends and strategic capital investments,” said Jon Clark, leader for oil and gas transaction-advisory services in Europe, the Middle East and Africa at Ernst & Young LLP. “It’s also a good opportunity to refinance more expensive debt.”

Oil’s slide has forced companies to cut billions of dollars of spending, delay or cancel projects and renegotiate contracts, yet they continue to make dividends their top priority. Shell hasn’t cut its payments to investors since at least the Second World War. Exxon even increased its payout a day after losing its coveted AAA credit rating last month.

http://www.bloomberg.com/news/articles/2016-05-13/big-oil-gobbles-up-record-levels-of-debt-as-borrowing-costs-fall

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Oil and gas producer InterOil Corp's former chief executive, Phil Mulacek, and other shareholders nominated five independent directors to the company's board.

The shareholders, who collectively own about 7.6 percent of InterOil, said in a statement "the incumbent board has presided over a massive destruction of shareholder value."

Up to Thursday's close, the company's shares had fallen more than 38 percent in the last 12 months.

InterOil on Friday reported a smaller net loss for the first quarter ended March 31, helped by lower exploration and finance costs.

http://www.reuters.com/article/us-interoil-board-idUSKCN0Y41HV

An executive at Japan's top LPG supplier Astomos Energy said Friday the company's VLGC will be the first commercial tanker to transit the expanded Panama Canal June 27, for a delivery to Japan, marking the start of regular commercial operations through the new locks.

Speaking to reporters, Kaname Ichima, managing director and COO of Astomos' international business division said the company had not yet picked a VLGC from its fleet for the maiden expanded Panama Canal transit but had two possible candidates.

To date, Astomos Energy, 51%-owned by Japanese refiner Idemitsu Kosan and 49% by Mitsubishi, currently has 21 VLGCs in its fleet -- six that it owns and 15 on time charter.

Of these nine VLGCs -- three new tankers and six converted vessels -- are equipped to transit the expanded Panama Canal, according to a company official.

For Astomos, using the expanded Panama Canal would be its "strategic" option not only to diversify its supply sources but also to reduce its dependency on supplies from the Middle East, using US cargoes from its supply portfolio, Ichima said.

Over 2014-21, Astomos has term contracts to procure a total of 5.8 million mt of US LPG, all of which are propane. The company is now looking at a possibility of buying US butane in the future, he said.

But Ichima said the company would need to clear "such issues as specifications" before sealing any deals to buy US butane, of which the company is looking at supplying to Southeast Asia.

With steady demand for US propane in Japan, Astomos intends to supply its US propane cargoes to the country via transiting the expanded Panama Canal, Ichima said.

Astosmos reiterated Friday that it still aims to expand its total purchase and trade LPG volumes to 12 million by 2017. This will be up from its planned volumes of around 10.5 million mt in 2016, steady from 2015.

To expand its total LPG handling volumes, Astomos intends to expand its sales to Vietnam, Thailand and Indonesia, as well as looking at how it can cultivate its demand in China and India indirectly through its partners, Ichima said.

Of its planned 10.5 million mt purchase and supply plan in 2016, Astomos intends to supply about 3.2 million mt of LPG to Asia, the company said.

In Japan, Astomos sold a total of 3.653 million mt of LPG in its fiscal year ended December 31, up 3.7% from a year ago, led by increased sales to households, industries, city gas and cars, the company said Friday.

Astomos' domestic LPG sales for petrochemicals use and for power generation, however, dropped 18% and 34% respectively to 134,000 mt and 147,000 mt in 2015, the company said.

http://www.platts.com/latest-news/shipping/tokyo/astomos-vlgc-to-be-first-commercial-tanker-to-26443524

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Fifteen New York towns that are upset at Democratic Gov. Andrew Cuomo’s decision to ban fracking have threatened to secede from the state and join neighboring Pennsylvania, where fracking is allowed.

The towns, all members of the Upstate New York Towns Association, have expressed interest in secession, Conklin Town Supervisor Jim Finch told The Huffington Post. The association is compiling a report to assess the feasibility of joining Pennsylvania.

“We’re in the Southern Tier of New York,” Finch said, referring to localities in Broome, Tioga, Sullivan and Delaware counties. “There are no jobs. The economy is terrible. There’s nothing going on.”

He decried Cuomo’s recent decision not to bring a casino to the region, and noted that Conklin and the 14 other towns in the Southern Tier sit on the Marcellus Shale, which is rich in natural gas. Permitting drilling in the region would provide an avenue for new jobs and a way to raise money for local schools and governments, as it has across the border in Pennsylvania, Finch said.

Leaving New York and joining the Keystone State, he added, would also mean lower taxes for businesses and lower insurance payments.

Finch conceded that secession is “far-fetched” — it would require the approval of the New York legislature, the Pennsylvania legislature and the federal government — but said raising the idea helps highlight the region’s discontent with New York’s government, and Cuomo in particular.

Oil prices have rallied lately, but not enough to convince U.S. oil producers that hard times may be over soon.

That’s evident in shale regions like North Dakota that have driven a resurgence in U.S. oil and natural gas production over the last few years.

Lynn Helms, the director of the North Dakota Department of Mineral Resources, told reporters the other day that producers won’t begin to ramp up activity until they see oil prices holding steady at more than $40 a barrel for 90 days or so.

http://www.usatoday.com/story/money/columnist/2016/05/15/oil-industry-problems-prospects-keenly-felt-n-dakota/84336332/

Oil producers are taking advantage of the rebound in crude markets to lock in protection against another slump.

They increased their bets on falling prices to the highest level in 4 1/2 years as U.S. inventories of stored oil remained near an 87-year high, while a natural disaster in Canada and militant attacks in Africa curtailed output. Negative sentiment among the group expanded for a third consecutive week, the longest streak since February.

Energy companies from EOG Resources Corp. to Chesapeake Energy Corp. used financial instruments such as futures, swaps and collars to guard against another fall in prices. West Texas Intermediate oil, the benchmark U.S. crude, has gained more than 75 percent since hitting a 12-year low in mid-February.

“They’ve been getting more and more active in hedging ever since the first initial jump,” said John Kilduff, a partner at Again Capital LLC in New York. Oil producers “appear to be drawn to this market as everyone tries to stay alive through the downturn,” he said.

Producers and merchants increased their short position in WTI by 3.8 percent for the week ended May 10 to the highest since September 2011, according to data from the Commodity Futures Trading Commission.

In western Canada, raging forest fires closed in on Alberta’s vast oil sands, prompting tens of thousands of residents to flee and interrupted shipments of the thinning agent used to help move the extra-heavy crude produced there through pipelines.

http://www.bloomberg.com/news/articles/2016-05-15/oil-drillers-betting-three-month-crude-rally-is-nearing-the-end

Oil and gas producer Exco Resources Inc said on Friday it formed a special committee to evaluate strategic alternatives, including in-court or out-of-court restructuring.

Exco joins dozens of U.S. shale companies forced to restructure debt after a near-60 percent slump in oil prices since mid-2014 eroded cash flows.

The Dallas-based company had long-term debt of $1.32 billion as of March 31, according to a regulatory filing.

The Special Committee will also evaluate options such as divestitures and restructuring of its gathering, transportation and certain other contracts, the company said.

Exco has retained Akin Gump Strauss Hauer & Feld LLP as its legal adviser.

http://www.reuters.com/article/exco-resources-strategicalternatives-idUSL3N18A48C