Glencore Plc’s Ivan Glasenberg has lamented the difficulty of reading China’s commodity demand. The nation’s oil traders aren’t helping.

State-run China National United Oil Corp., a unit of the country’s biggest energy company, bought 36 million barrels of Middle Eastcrude last month as part of a pricing process in Singapore used to determine commodity benchmarks around the world. While thepurchases by the trader known as Chinaoil were unprecedented, what’s more unusual is that the seller of most of those cargoes was another government-owned trading company called Unipec.

“It’s unsettling and confusing for other players, and defies market logic,” Victor Shum, vice president at IHS Inc., an Englewood, Colorado-based industry consultant, said by phone from Singapore.

The record buying in Singapore was part of the market-on-close price assessment process run by Platts, a unit of McGraw Hill Financial Inc., where bids, offers and deals are reported by traders through e-mails, instant messages and phone conversations in a fixed period each day. These are used to create end-of-day price assessments for various commodities and form benchmarks for transactions globally.

“Chinaoil and Unipec each have their own trading book and strategy,” Ehsan Ul-Haq, a senior market consultant at KBC Advanced Technologies, said by phone from London. “The Chinese government will not hinder free trading.”

The trading activity in Singapore sent prices of contracts used to hedge against Middle east benchmark Dubai crude cargoes loading in October above those for shipments sailing a month later, according to IHS’ Shum. This market structure called backwardation typically signals that demand is outpacing supply.

Meanwhile, other benchmarks including Brent are reflecting the current global glut because they’re in contango, where near-term supplies cost less than later deliveries. This disparity between the Middle East grade and the rest of the market makes it difficult to assess oil demand, according to Shum.

“It’s very odd that these two companies are up against each other, pushing front-month Dubai inter-month spreads into backwardation when other benchmarks like Brent are in contango,” said Shum.

Chinaoil purchased 72 crude cargoes for loading in October as part of the Platts pricing process last month, most of which were sold by Unipec, a unit of China Petroleum & Chemical Corp., or Sinopec, Asia’s biggest oil refiner. Swiss trader Mercuria Energy Group Ltd. was the only other buyer in August with 6 lots, according to data compiled by Bloomberg.

http://www.bloomberg.com/news/articles/2015-09-01/a-corner-of-the-oil-market-shows-why-it-s-so-tough-to-read-china

Russian oil firms are increasing their rouble profits and raising production as a weak currency protects their business, which has turned into one of the world's most profitable.

Russia has kept its production, which includes gas condensate, near post-Soviet highs as its producers benefit from getting the bulk of their export revenues in dollars while most of their expenditure is in the domestic currency.

On Friday, Bashneft, a medium-sized Russian oil producer, posted a 13 percent increase in second quarter net profit to 17.9 billion roubles ($272.7 million), following strong results by Gazprom Neft earlier this month.

Bashneft, Russia's fastest growing oil firm by output, saw its average oil production at 387,500 barrels per day (bpd) in the second quarter, up from 350,900 bpd the same period a year ago.

Gazprom Neft, the oil arm of state gas producer Gazprom , had earlier reported a 47 percent increase in the second quarter net profit, also on the weak rouble, and its output jumped 25 percent.

Net profit at Surgut was flat in the first half of the year at 135 billion roubles.

"In our global energy universe, the Russian oils screen (rank) strongly versus global peers on most metrics: highest free cash flow yields, dividend yields, lowest leverage, and lowest sensitivity to changes in oil prices," Goldman Sachs said in a report earlier this month.

Goldman added that current valuations offer an attractive entry point into the sector, upgrading Bashneft, Gazprom Neft and Rosneft to 'buy' and forecasting Russian oil output to grow by 1.1 percent this year.

- See more at: http://www.rigzone.com/news/oil_gas/a/140340/Russias_Bashneft_2Q_Net_Profit_Up_13_YOY?rss=true#sthash.YI73pYd2.dpuf

OAO Rosneft, Russia’s largest oil producer, said second-quarter profit fell less than analysts expected as a weaker ruble helped counter a slump in crude prices.

Net income declined to 134 billion rubles ($2 billion) from 171 billion rubles a year earlier, the Moscow-based company said Monday in a statement on its website. That beat the 95.5 billion-ruble estimate of five analysts surveyed by Bloomberg. Revenue dropped 8.6 percent to 1.31 trillion rubles.

Brent crude has fallen more than 50 percent in the past year after the Organization of Petroleum Exporting Countries chose to defend market share over supporting prices amid a production glut. Russian oil producers have benefited from lower service costs as crude, the country’s biggest export, weakens the ruble.

“Strong results,” Kirill Tachennikov, an oil analyst at BCS Financial Group, said by e-mail from Moscow. Spending cuts in dollar terms and a weaker ruble helped Rosneft to produce $3.6 billion in free cash flow, he said.

Capital spending in rubles rose almost 14 percent to 269 billion rubles in the first half, Rosneft said.

Rosneft increased drilling in the first half of the year as crude output fell 1.1 percent. Production at its largest unit, Yuganskneftegas, rebounded in the second quarter, but was still down 3.4 percent in the first half.

Natural gas output climbed 16 percent to 1.05 million barrels of oil equivalent a day, pushing total oil and gas production to an average 5.175 million barrels a day in the first half.

Net debt fell 7.9 percent in the second quarter to $39.9 billion, according to the statement. Rosneft reimbursed $1.3 billion worth of advance payments for supplies, which it accounts for separately from debt, in the first six months of the year.

http://www.bloomberg.com/news/articles/2015-08-31/rosneft-second-quarter-profit-falls-22-after-crude-prices-slump

Eni's "supergiant" gas find off the coast of Egypt bolsters its top-flight exploration credentials and gives the Italian energy group access to easy reserves that fit its strategy of seeking growth without sacrificing dividends.

Eni said on Sunday that its discovery ranked as the largest known gas field in the Mediterranean, covering an area of about 100 square kilometres (39 square miles) and containing a potential 30 trillion cubic feet (tcf) of gas.

Eni, already Africa's biggest oil and gas explorer, was the first oil major to cut its dividend after a plunge in global oil prices. It is looking to reduce its stake in its Mozambique gas discovery and does not rule out doing the same for its latest find, dubbed Zohr.

"It's an open door to give value and solidity to Eni's balance sheet," CEO Claudio Descalzi said of a potential Zohr stake sale in an interview published on Monday by Italian newspaper La Repubblica.

"But it will not be a necessary outcome. There is much less to spend than in Mozambique and the new gas is aimed at the local domestic market, with prices disconnected from those of oil, which today are at six-year lows."

In July Egypt raised the price it pays Eni for the natural gas it produces, part of its initiative to encourage investment in the energy-hungry country.

The company's initial investment in Zohr will be about $3.5 billion, an Egypt official said, though the country's state gas company said that the total could stretch to twice that figure.

"With the full completion of development for the field, investments will (reach) $7 billion," the head of EGAS, Khaled Abdel Badie, told Reuters on Monday.

The good quality of gas discovered at Zohr and the field's proximity to the shore and existing pipeline infrastructure makes it relatively easy and cheap to develop, especially compared with the more remote discoveries off Mozambique, which had to be developed from scratch.

The new African find could also help to meet Egypt's gas needs for decades and pose a challenge to other projects in Egypt, Israel and Cyprus. Falling production and rising gas demand has forced Egypt to become a net importer in recent years.

Key Israeli energy stocks Delek Group, Delek Drilling, Avner Oil, Ratio and Isramco Negev lost 4.5 billion shekels ($1.14 billion) off their combined market capitalisation on Monday.

http://www.reuters.com/article/2015/08/31/eni-gas-idUSL5N1163EP20150831

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Asian liquefied natural gas (LNG) prices could fall a further 25 percent in coming months as new supply, falling demand and weaker oil prices put it on par with iron ore and coal as the worst performing commodity of recent years.

Asia's LNG market has already fared worse than slumping oil markets, with spot prices LNG-AS down 60 percent since 2014 to $8 per million British thermal units (mmBtu), ending half a decade of high prices.

While crude demand remains strong, research group Energy Aspects estimates Asian LNG imports fell 8.5 percent in the first half of 2015 from the same time last year, as the region's economies slow.

Add to the mix El Nino, which usually means milder winters in northern Asia, and a unique cocktail for falling prices may appear.

"The traditional power houses in north Asia are all showing signs of (demand) weakness at a point when there is lots of supply coming on to the market," said Neil Beveridge of Bernstein Research.

China's LNG imports have slumped from double digit growth in recent years to a three percent fall in the first half of 2015 from a year earlier.

For Japan, the world's top LNG importer, the restart of its nuclear power plants is eating away at LNG's market share in an environment of generally falling energy demand.

Imports into South Korea have also fallen due to a slowing economy and rising nuclear power output.

The slowing demand comes just as output soars. Following $200 billion of investments into LNG projects, Australia's exports are soaring, tripling its capacity to 86 million tonnes before 2020, which would make it the world's biggest LNG exporter ahead of Qatar.

Australia's soaring output comes at the same time as the United States starts exporting for the first time towards the end of this year.

A 25 percent fall in oil prices since June is adding to LNG weakness.

"The latest leg down in oil prices is in the process of feeding through into gas prices," consultancy Timera Energy said, as oil-indexation in LNG contracts meant crude movements would be priced into LNG with several months delay.

http://www.reuters.com/article/2015/08/31/asia-lng-prices-idUSL5N11303420150831

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Fluxys-operated Zeebrugge LNG terminal is scheduled to receive its second cargo of the chilled gas in September from Qatar.

The 159,983 cbm Yari LNG carrier set off from Qatar’s Ras Laffan on August 27. As shipping data shows the vessel is scheduled to dock at the LNG terminal’s jetty on September 11.

The Zeebrugge LNG terminal has an annual throughput capacity of nine billion cubic meters of natural gas importing the liquefied natural gas mainly from Qatar. It can receive 110 carriers per year and serves as a gateway to supply LNG into Northwestern Europe.

The terminal consists of 4 LNG tanks totaling 380,00 cbm, a truck loading station, an existing jetty with one more jetty under construction and due to be completed this year.

https://twitter.com/LNGWN

LNG carrier Echigo Maru, which was set to deliver a cargo from Indonesia's Bontang facility to Japan's Kyushu Electric, is heading south after idling around Japan as the utility has limited tank space to receive the cargo, market sources said Monday.

The vessel loaded the cargo from Bontang, Indonesia, on August 15 and had Oita, Kyushu, as its final destination. It sailed up the Sea of Japan coast and was now near Taiwan, Platts ship-tracking software cFlow showed Monday.

The LNG cargo it is carrying was due to arrive at Kyushu Electric's Oita terminal on September 14, cFlow showed. But the cargo will likely be diverted to another destination, pending permission from Bontang, a source said.

Kyushu Electric's 890 MW Sendai No 1 nuclear power unit has restarted and the output capacity reached 100% Monday, the company said earlier.

Power demand in Japan has been also falling.

Kyushu Electric said last week that its overall power sales fell 2.6% year on year to 6.53 billion kWh in July due partly to cooler temperatures depressing demand for air-conditioning.

The Sendai reactor connected to the electricity grid on August 14, making it Japan's first unit to come back online under stricter safety standards implemented by the country's Nuclear Regulation Authority following the Fukushima I accident in March 2011.

http://www.platts.com/latest-news/natural-gas/tokyo/lng-carrier-echigo-maru-heads-south-as-kyushu-21046241

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The federal government believes daily U.S. crude production fell to 9.3 million barrels in June, down by 100,000 barrels in the prior month, as low oil prices continue to discourage drilling.

The Energy Information Administration said Monday its monthly report on domestic oil supplies, slated to be released in full soon, will use a new approach to collecting production data. Instead of relying largely on state agencies to provide data, it has begun to survey oil companies that drill in 15 states including Texas and the Gulf of Mexico. It’s an effort to improve the accuracy of its monthly estimates of the nation’s oil output.

This has led it to revise its monthly production data for January through May downward by at least 40,000 barrels a day and up to 130,000 barrels a day, with the biggest declines coming from Texas. There was also an uptick in production from the Gulf of Mexico.

Texas’ daily oil production, the EIA said, were revised downward by 100,000 barrels to 150,000 for the first five months of the year. Producers in the Gulf put out 10,000 to 50,000 barrels a day more than the EIA had previously estimated from January to May. The overall average for the year came in at 9.4 million barrels a day.

The agency said it based its previous estimates on tax information and state agencies but “given the timetable for EIA’s data products, much of that information is lagged and incomplete at the time of publication.”

Surging domestic crude production from shale formations in Texas and North Dakota played a big role in the oil-market crash over the past year, but in recent weeks, economic weakness in China and increasing oil supplies from Saudi Arabia and Iraq have overshadowed U.S. crude production as narratives in the market.

The Organization of Petroleum Exporting Countries have put out 1.5 million barrels a day of additional crude into the market, according to Houston investment banking firm Simmons & Co. International, making any production declines in the United States largely negligible. But “we maintain U.S. oil supply still matters in the equation,” analysts at Houston investment banking firm Tudor, Pickering, Holt & Co. wrote in a note to clients Monday.

The EIA said its new oil-company surveys will account for more than 90 percent of U.S. output. Outside of the surveys it collects in 15 energy-producing states, it brings in data from the other 35 states as well through its old methodology.

http://fuelfix.com/blog/2015/08/31/eia-revises-us-oil-production-estimates-lower-june-output-sank/?utm_source=twitterfeed&utm_medium=twitter#30727101=0

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Brazil's state-led oil company Petrobras said late Monday that it would raise the wholesale price of liquefied petroleum gas (LPG) by 15 percent effective Tuesday, the first price adjustment for the essential cooking gas in 13 years.

Earlier on Monday Reuters reported that Petrobras had informed distributors of the gas-price increase, which is effective for delivery at the refinery gate at 0:00 a.m. (0300 GMT) Tuesday.

The move is part of efforts by Petroleo Brasileiro SA , as Petrobras is formally known, to reduce losses on fuel sales, a Petrobras source said, requesting anonymity because of a lack of authorization to speak to the press.

The increase also comes as Brazil's government struggles to cut spending, hold down inflation and restart an economy hamstrung by a plunge in world commodity prices and a corruption scandal that has partly paralyzed its oil industry and major construction firms.

"With retail prices uncontrolled, the market will have freedom to fix them and the increase at the refinery will increase pressure on the cost of LPG for consumers," Sindigas, a national association of LPG distributors, said in a statement.

The gas, sold in standard and ubiquitous steel bottles holding up to 13 kilograms of LPG, is essential for cooking and heating for millions in Brazil without access to piped natural gas or steady electricity supplies.

Because of its importance to many lower-income families and relatively large position in Brazil's benchmark consumer price index, the price of LPG for residential consumers has long been controlled by the government.

It is one of three fuels, along with gasoline and diesel, that Petrobras has long been forced to partly subsidize, causing losses for its refining division.

With Petrobras' refineries only able to supply 60 percent to 65 percent of the domestic needs for the fuel, which is essential to tens of millions of Brazilians, Petrobras must import much of Brazil's LPG at a loss.

The Petrobras source said the impact on consumers will be minimal, resulting in a final retail increase in the cost of gas of 3 percent to 4 percent, or about 2 reais (55 cents).

http://www.reuters.com/article/2015/09/01/brazil-petrobras-lpg-rise-idUSL1N11705920150901

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U.S. energy firms added one oil rig this week, the sixth consecutive week of increases even as U.S. oil prices flirted with 6-1/2-year lows, signaling further pressure on a market awash with crude.

Reflecting plans announced in May and June, when U.S. crude futures averaged $60 a barrel, drillers added one oil rig in the week ending on Aug. 28, bringing the total count up to 675, the highest since early May, oil services company Baker Hughes Inc said on Friday in its closely followed report.

"It's getting real close to the end of the increases, given the drop in oil," Phil Flynn, an analyst with the Price Futures Group, said. "I would not bet that the increases will last."

After slashing their rigs by up to 60 percent in the first half of this year, some companies decided to begin drilling more in the second quarter as oil prices stabilized at around $60 a barrel.

U.S. oil prices were headed for their first positive week since mid-June, rallying from multi-year lows of below $40 hit earlier in the week.

U.S. crude oil futures have fallen by as much as 21 percent in the past month and were down this week by as much as 37 percent from their six-month high of $61.43 in early June.

U.S. crude futures fell from over $107 in June 2014 to near $42 in March due to oversupply worries and uninspiring demand growth.

In response to that 60 percent price collapse, U.S. drillers eliminated thousands of jobs and idled 60 percent of the record high 1,609 oil rigs that were active in October.

http://www.reuters.com/article/2015/08/28/energy-oil-rigs-baker-hughes-idUSL1N1131FR20150828

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Alberta's oil and gas royalty framework will remain in place until the end of 2016, Energy Minister Marg McCuaig-Boyd said on Friday, as she gave details on a review of the scheme for the province's new left-leaning New Democrat government.

McCuaig-Boyd said royalty rates paid by oil and gas companies will not change until 2017, which will help companies budget for the important winter drilling season.

The review, an election campaign promise, has unsettled oil and gas industry representatives who warn it could lead to higher costs and job losses in Canada's energy heartland. The New Democrat government says it is needed to give Albertans a fair value for the resources.

"For 16 months companies and investors can operate with certainty, knowing there will be no changes in the royalty framework. If and when changes are made, any incremental revenues will go to the (province's) heritage fund," she told a news conference.

The government also announced that Leona Hanson, mayor of the town of Beaverlodge in northern Alberta, Peter Tertzakian, chief energy economist at energy-focused private equity company ARC Financial Corp, and Annette Trimbee, president and vice-chancellor of the University of Winnipeg and former senior Alberta bureaucrat, would join the panel leading the review.

Alberta appointed Dave Mowat, the chief executive of the provincially owned financial services agency ATB Financial, in June to lead the review and report to government by January.

McCuaig-Boyd said panel members needed to be "tough" in order to deliver effective solutions that do not stand in the way of a recovery during an economic downturn, but provide the full value of the resource during boom periods.

Oil and gas companies in Alberta, home to vast oil sands deposits and the largest source of U.S. crude oil imports, have laid off thousands of workers in recent months due to slumping global prices.

Canada's biggest oil and gas industry lobby group, the Canadian Association of Petroleum Producers, estimates recent government moves to increase carbon levies and corporate income tax rates would increase costs by about C$800 million ($618.33 million) over the next two years. Tim McMillan, the association president, said in an interview that the government should pursue policies that encourage more investment and development in Alberta.

Alberta's royalty rates can now vary between 5 and 40 percent depending on factors that include type of development, oil prices, crude volumes, well depths and speed of cost recovery.

http://www.reuters.com/article/2015/08/28/alberta-royalty-idUSL1N1131H320150828

In its most significant energy investment in two years, Berkshire has amassed a $4.5 billion stake in Phillips 66, making it the biggest shareholder in the largest U.S. oil refiner. Berkshire owns almost 58 million shares in Phillips 66, more than 10 percent of the total outstanding, up from the 7.5 million it reported at the end of the first quarter, according to a regulatory filing issued late Friday by the Omaha, Nebraska-based company.

Phillips 66 climbed 2 percent to $78.78 at 10:25 a.m. in New York, the best-performing energy company on the Standard & Poor’s 500 Index Monday. The bet on fuel processing is a wager that an unexpected and significant rally by refiners during the shale boom will continue as low oil prices spur demand for gasoline, diesel and other petroleum products produced by the so-called downstream sector. Since oil fell by half last year, gasoline demand in the U.S. has surged to an 8-year high, as drivers see per-gallon prices fall below $3 and take to the road.

“As oil prices have dropped, it’s obvious to people in the business that refiner stocks are your best bet,” Carl Larry, head of oil and natural gas for Frost & Sullivan LP, said by phone from Houston. “When people say the oil industry is failing -- well, upstream might be, but downstream has never been better.”

An index of four refiners on the Standard & Poor’s 500 is up 12 percent this year through Friday, compared with the larger energy index, which is down 18 percent. Phillips 66 closed at $77.23 on Friday in New York, up 7.7 percent this year. The increase at Phillips 66 has trailed the results of some other U.S. refiners -- Valero Energy Corp. has gained 19 percent this year and Tesoro Corp. has climbed 26 percent. Marathon Petroleum Corp. is up 4.6 percent for the year.

http://www.bloomberg.com/news/articles/2015-08-30/berkshire-wagers-that-americans-are-still-thirsty-for-gasoline

Canadian Oil Sands, the main owner of the giant Syncrude oil sands project, has halted production after the fire that damaged equipment at its synthetic crude oil processing facility in northern Alberta.

The company said the fire, which happened early Saturday and was extinguished without any injuries, affected pipes connected to a water treatment unit at Syncrude’s heavy oil upgrader on the site of its Mildred Lake oil sands surface mine. The cause of the blaze remains under investigation.

The operation is a 326,000 barrel-per-day mining and upgrading project, where oil sands bitumen is upgraded into refinery-ready synthetic crude.



Canadian Oil Sands holds a 37% stake in Syncrude Canada and six other companies own the rest, including Suncor Energy Inc, Imperial Oil Ltd, Nippon Oil subsidiary Mocal Energy Ltd, Murphy Oil Corp, China’s Sinopec, and CNOOC subsidiary Nexen.

Aside from plunging crude-oil prices, Canadian Oil Sands is facing a number of other challenges. It recently swung to a loss and was affected by unplanned equipment outages and Moody’s Investors Service’s decision to cut its credit rating last week.

http://www.mining.com/fire-damages-canadian-syncrude-equipment-forces-firm-to-halt-production/

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