A strong Dubai price has again put top oil exporter Saudi Arabia in a dilemma over whether to raise the prices of crude it sells to Asia to match the benchmark’s strength, or to cut to stay competitive in an oversupplied market.

Record purchases of October-loading crude by Chinaoil during a mechanism that sets the price of Middle East crude in Asia strengthened the benchmark, even as other grades are being pressed lower by a global glut.

Saudi Arabia is due to release October crude prices later this week, setting the trend for Iranian, Kuwaiti and Iraqi crude bound for Asia.

“The Dubai market is acting very erratic and it’s been moving in such a way that’s not reflecting underlying fundamentals,” a source with a Gulf oil producer said.

“Producers are walking on a thin line, but they can change and might need to lower or soften the price a little bit.”

If state oil giant Saudi Aramco keeps to its monthly price formula, the official selling price (OSP) for Arab Light should edge up in October from a month ago, a survey of five refiners showed.

Still, it may opt to cut prices to defend its market share in Asia, traders said.

“I don’t think Saudi will raise Arab Light price,” a trader with a North Asian refiner said. “They may cut prices to stay competitive.”

Saudi Aramco has deviated from its pricing methodology before. Last month, it increased September prices by less than forecast as it defends market share in Asia.

The October OSP for Arab Extra Light should also get a boost if Saudi follows its formula, but any price hike may make the grade less competitive to Abu Dhabi’s Murban crude, a trader said.

Heavier Saudi grades – Arab Medium and Heavy – are expected to post price cuts in October on weaker fuel oil cracks, traders said.

The OSP for Arab Medium may fall by up to 50 cents, traders said, but its price cut could deepen if Saudi Arabia followed last month’s spot market.

Similar crude Banoco Arab Medium was traded at discounts of up to $1 a barrel last month against its OSP.

https://www.energyvoice.com/marketinfo/86479/saudi-arabia-in-dilemma-over-asia-crude-oil-prices-next-month/

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Russia will not deliberately cut oil production to prop up prices, however its output may decline if prices remain low, local news agencies quoted Deputy Prime Minister Arkady Dvorkovich as saying on Tuesday.

He also said that Russia was ready to discuss measures aimed at oil price stabilisation with the Organization of the Petroleum Exporting Countries (OPEC) and other key producers, TASS news agency reported.

"It's quite possible that if oil prices remain at the low levels for long, oil production could decline, as had been the case before. Anyway, we don't expect any significant cuts," Dvorkovich said according to TASS.

Oil prices almost halved from last year mainly due to oversupply.

OPEC kingpin Saudi Arabia, in a strategy designed to squeeze out rivals, such as U.S. shale oil firms, has been reluctant to cut oil output in order to support prices.

Russian President Vladimir Putin and his Venezuelan counterpart Nicolas Maduro will discuss "possible mutual steps" to stabilise global oil prices when both visit China this week.

OPEC and Russia, one of the world's biggest oil producers, have held regular meetings but have not agreed on any coordinated action to prop up falling prices.

Dvorkovich reiterated that it would be technically difficult to restore oil production in Russia if output is cut artificially.

Russia has been pumping oil at a post-Soviet high of more than 10.7 million barrels per day and expects to maintain high levels of output next year.

http://www.reuters.com/article/2015/09/01/russia-oil-opec-idUSL5N1171X520150901

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Russia's Aug #crudeoil exports outside the Commonwealth of Independent States jump 11% on year to 4.214 mil b/...Platts Oil

An OPEC publication written by the exporter group's public relations team helped oil prices jump and prompted speculation over a possible shift in output policy - to the bafflement of some OPEC insiders.

The commentary on Monday in the OPEC Bulletin, a magazine issued by OPEC's Vienna headquarters, said downward pressure on prices due to higher production "remains a cause for concern" and OPEC "stands ready to talk to all other producers".

While the 799-word article helped add another 8 percent to oil's three-day surge, by Tuesday it seemed clear there was no sign of a significant shift in OPEC policy or any indication of a fresh push to shore up markets, analysts and OPEC insiders said.

A Gulf delegate said the Bulletin reflected genuine concern in the Organization of the Petroleum Exporting Countries about falling prices but it did not signal a policy shift or pending production cut.

"I see it as a message sent to the market that we are willing to talk to non-OPEC, we are concerned about prices and we are not closing our eyes to what's going on ."

Another OPEC insider said: "I found it surprising," referring to the jump in prices on Monday. "The Bulletin wasn't saying anything new."

The Bulletin, a glossy magazine, is written by OPEC's PR department based in Vienna and lists 12 editorial staff. It is reviewed by senior officials at the OPEC secretariat before publication.

In the magazine, the following disclaimer appears under the heading "editorial policy": "The contents do not necessarily reflect the official views of OPEC nor its member countries."

While the Bulletin has included similar commentaries on the market before - in April it criticised unidentified non-member countries for not cooperating in propping up prices - it does not tend to move oil prices.

Traders are wondering whether OPEC and its de-facto leader Saudi Arabia will stick with the policy adopted in 2014 of defending market share, even after the slide in oil prices to their lowest in more than six years last month.

While Saudi Arabia has not commented publicly, some had seen the Bulletin as indicating a shift.

"Yesterday the market got somewhat excited by the editorial of the OPEC Bulletin," said Olivier Jakob, oil analyst at Petromatrix. "This was read by some market participants as making a first overture for a change of policy."

http://www.reuters.com/article/2015/09/01/opec-oil-idUSL5N11737620150901

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Second quarter production in Ohio’s Utica Shale was record-breaking, according to The Columbus Dispatch.

During the three month period, 5.6 million barrels of oil and 222 billion cubic feet of natural gas were produced. These numbers are up from 4.4 million barrels of oil and 184 billion cubic feet of natural gas produced during the first quarter of 2015.

The recent Ohio Department of Natural Resources report shows that the state’s top oil wells are located in Guernsey County and the top gas wells are located in Belmont County.

http://shalegasreporter.com/news/ohios-utica-shale-record-breaking-second-quarter/57362.html

China may launch a global crude oil futures contract as early as October to compete with the existing London Brent and the U.S. WTI benchmarks, three sources said, as it pushes ahead with reforms to open up its oil markets.

The long-awaited crude contract would better reflect China's growing importance in setting crude prices, as well as boost the use of the yuan in which it will be traded, although volatile global trading conditions and China's recent interference in stock markets have raised some concerns.

The Shanghai International Energy Exchange, also known as INE, circulated a draft of the futures contract to market participants last month, saying the launch could happen as early as October, the sources who saw the draft, told Reuters.

China, the world's second-biggest oil consumer, has already begun to loosen its grip on the physical oil sector this year by granting quotas for imported crude to privately-owned refiners for the first time, surprising market participants with the speed of reform.

"The development of a futures market is closely linked to the physical market," INE said in a statement issued to Reuters in response to questions about the new contract.

"The more physical players participate, the better the liquidity of the futures market will be."

The launch of Shanghai crude futures won state approval last year and would be the first Chinese contract that allows direct participation by international investors.

A Shanghai-based contract will compete in the crude futures market, which is worth of trillions of dollars and is dominated by two contracts, London's Brent, seen as the global benchmark, and WTI, the key U.S. price.

Oil traders said Chinese crude futures would eventually compete against Brent, which is priced off small and declining oil fields in the British North Sea, and can be affected by factors with no relationship to Asia.

INE said that it aimed to have overseas investors, oil companies, and financial institutions participating in its crude futures trading.

"If China's crude futures don't immediately attract enough liquidity and markets are still as volatile as now, then traders could get really burned and would quickly stop trading Chinese crude futures," said one oil trader, who would likely start dealing Chinese crude futures.

Recent market interference was also a concern, although he noted China's iron ore and coal futures markets were running smoothly despite similar price routs to oil.

For futures to work, traders need a widely traded physical market from which prices for futures contracts can be derived.

Granting independent refiners access to oil imports will put pressure on China's three state-owned oil majors, PetroChina, Sinopec and China National Offshore Oil Corp (CNOOC), which already face headwinds from collapsing oil prices, a stock market rout and corruption charges.

"These changes are coming much faster than we anticipated," said an official with one of the big three state-owned energy companies. "Reforming and opening up the oil market is the new fashion in Beijing."

The government has so far granted a total of seven independent refiners quotas for 715,800 bpd of imported crude, roughly 11 percent of the total crude imports, and more are likely to follow.

http://www.reuters.com/article/2015/09/02/china-oil-market-reform-idUSL3N10V1IB20150902

China signs off on $5 bln loan to boost Venezuela oil output -Maduro

Venezuela and China have signed a deal for a $5 billion loan designed to increase the OPEC country's oil production, Venezuelan President Nicolas Maduro said.

Maduro, speaking from China in a show broadcast on Venezuelan state television on Tuesday night, said the loan was destined "to increase oil production in a gradual way in coming months," without providing further details.

A source at Venezuelan state-run oil company PDVSA told Reuters in March that China was set to extend a "special" $5 billion loan that would likely stipulate hiring Chinese companies to boost output in the company's mature oil fields.

Venezuela has borrowed $50 billion from China through an oil-for-loans agreement created by late socialist leader Hugo Chavez in 2007, which has helped Chinese companies expand into Venezuelan markets amid chronic shortages of consumer goods there.

That financing has been especially crucial for Caracas since last year's oil market rout, which aggravated the country's severe economic crisis.

Eulogio del Pino, the oil minister and president of PDVSA , and Finance Minister Rodolfo Marco Torres were among key Venezuelan figures present at the president's "In Contact with Maduro" show, which broadcast this week from Beijing.

Speaking in front of a huge portrait of Chavez, Maduro also said that Venezuela currently sends around 700,000 barrels-per-day of oil to the Asian giant.

During the show, which usually lasts for hours and often includes live music and folkloric dance, Maduro lauded traditional Chinese medicine and art.

http://www.reuters.com/article/2015/09/02/venezuela-china-oil-idUSL1N11801K20150902

Slumping oil prices are spurring 4,000-mile (6,400-kilometer) diversions of tankers filled with diesel and jet fuel as the price of ship fuel plunges, opening up trading opportunities.

At least five tankers will deliver refined products to European ports in August and September, sailing around South Africa rather than using the normal shortcut through Egypt’s Suez Canal, ship tracking data show. The falling cost of fuel oil, used to power ships, has made longer voyages viable at a time when there are advantages for traders to keep cargoes at sea. Long-distance shipments between continents have increased this year, according to Torm A/S, world’s second-biggest publicly traded product-tanker owner.

Plunging oil opens up new trades as product tankers take the long route to Europe

Brent crude futures plunged about 50 percent since August last year as OPEC nations kept pumping more than the market needs. Across oil markets, the rout triggered what traders call contango, a price pattern that lessens the need for speedy oil deliveries because future fuel prices are higher than immediate ones.

“There’s massive demand to move oil products over very long distances,” Erik Nikolai Stavseth, a shipping analyst at Arctic Securities ASA in Oslo, said by phone Aug. 27. “These shipments tell me that there are very good times ahead for product-tanker owners,” he said, referring to ships that carry refined fuels like gasoline and diesel.

Rates for hauling these fuels are surging. The sort of long-range tankers being used to sail around Africa will earn $28,375 a day this year, according to a survey of shipping specialists compiled by Bloomberg. That’s the most since at least 2010 and 19 percent more than anticipated at the end of last year.

http://www.bloomberg.com/news/articles/2015-09-01/fuel-ships-take-4-000-mile-africa-detour-as-oil-prices-plunge

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Cheniere cleared to export more LNG from Corpus Christi

The United States Department of Energy issued an order authorizing Cheniere to export LNG from its stage 3 project (Trains 4 and 5) of the Corpus Christi liquefaction facility, to be located in San Patricio and Nueces Counties, Texas.

Cheniere has been authorized to export equivalent to approximately 514 Bcf/yr of natural gas for a 20-year term, according to the order.

Cheniere’s Corpus Christi liquefaction project is currently under construction and presently consists of Trains 1-3, three LNG storage tanks, two marine berths, and associated facilities.

Under the Stage 3 expansion project, Cheniere intends to add two 5 mtpa liquefaction trains, as well as a fourth LNG tank, to expand the Corpus Christi project.

Cheniere anticipates that construction of the Stage 3 project will commence by 2017, with exports commencing as early as 2021.

http://www.lngworldnews.com/cheniere-cleared-to-export-more-lng-from-corpus-christi/

Canada's Penn West Petroleum Ltd cut its 2015 capital budget and said it would suspend its dividend and reduce its workforce by 35 percent, helping it save about C$140 million ($106 million) as it copes with the slump in crude oil prices.

The oil and gas producer also said it would lower its well drilling and operating costs, and that its board had voluntarily cut the annual retainers payable to non-management directors to help shore up finances.

The company is the latest oil and gas producer to cut capital spending plans and find ways to lower costs as they struggle to cope with slumping crude prices, which have more than halved since June last year.

Lower costs had helped Penn West report a smaller-than-expected loss in the second quarter.

The company, which has been selling assets to reduce debt, will continue to look for more opportunities to reduce capital spending this year, it said in a statement on Tuesday.

Penn West, which has reserves in Alberta, British Columbia, and Saskatchewan, Manitoba and the Northwest Territories, lowered its 2015 capital spending forecast by 13 percent to C$500 million.

The revised forecast is 40 percent lower than the company's initial estimate of C$840 million set in November. Since then Penn West had cut its forecast twice, in December and in July.

Penn West said it would lay off about 400 employees and contractors, with most of the job cuts at its head office in Calgary, Alberta. It had about 1,120 employees as of Dec. 31.

The company said it expects to save about C$45 million per year due to the reductions, for which it will record a charge in the current quarter.

Penn West had in March slashed its quarterly dividend to 1 Canadian cent per share from 14 Canadian cents. It said on Tuesday that it expects to save about C$20 million by suspending the payout altogether from the quarter starting October.

The company said its board had voluntarily lowered the annual retainers for non-management directors. The chairman's retainer will be halved, while the retainers for the remaining non-management directors will be reduced by 40 percent.

Penn West said it had cut its absolute operating costs by more than 20 percent over the last 18 to 24 months. It expects to cut costs a further 10 percent and lower well costs by 10 percent.

The company cut its 2015 production forecast to 86,000 to 90,000 barrels of oil per day (boepd) from 90,000 to 100,000 boepd.

http://www.reuters.com/article/2015/09/01/penn-west-employment-idUSL4N1173VU20150901

ConocoPhillips has delivered first oil at its Surmont 2 in-situ oil sands facility in Canada, the company said Tuesday.

Construction of the Surmont 2 facility, the largest single-phase steam-assisted gravity drainage (SAGD) project ever undertaken, began in 2010.

Earlier this year, ConocoPhillips announced first steam, the initial step towardsproduction. Since that milestone, steam has successfully heated the reservoir to a point where the well pairs can be converted to a SAGD configuration and allows the oil to flow. Production was declared once the inspected product was successfully routed to sales tanks.

Production will ramp-up through 2017, adding approximately 118,000 bopd gross capacity. Total gross capacity for Surmont 1 and 2 is expected to reach 150,000 bopd.

“The oil sands are an important part of our portfolio,” said Ryan Lance, chairman and CEO. “We’re pleased to see a project of this magnitude move from the capital phase to theproduction phase, knowing that it will produce for decades to come.”

The Surmont project is located in the Athabasca Region of northeastern Alberta, Canada, approximately 35 miles southeast of Fort McMurray. Surmont is operated by ConocoPhillips under a 50/50 joint venture agreement with Total E&P Canada.

http://www.worldoil.com/news/2015/9/01/conocophillips-reports-first-oil-at-surmont-2-oil-sands-facility

Husky said it has started steam operations at the second of two processing plants at its Sunrise project, a joint venture with BP Plc that will reach full capacity of 60,000 bpd by the end of 2016.

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Nexen Energy, the Canadian subsidiary of Chinese state-owned CNOOC Ltd, is shutting down its Long Lake oil sands operations in northern Alberta in response to an emergency regulatory order, a company spokeswoman said on Tuesday.

Nexen estimated the shutdown process would take up to two weeks as it suspends pipeline operations and attempts to demonstrate to the Alberta Energy regulator that its pipelines are safe.

The provincial regulator ordered Nexen to shut in 95 pipelines at the Long Lake facility last Friday as part of an investigation into one of the largest-ever oil-related pipeline spills on North American soil, discovered in July.

The incident dealt another blow to Canada's oil sands industry in northern Alberta, which is under fire from environmental groups for its carbon-intensive production process.

Long Lake was producing about 50,000 bpd of bitumen before the spill, which is upgraded on site into refinery-ready synthetic crude. The upgrader also processes raw bitumen from other oil sands projects.

Nexen declined to comment on Tuesday about the impact on production, adding that it does not typically disclose production information on an individual asset basis. Nexen spokeswoman Diane Kossman said the suspension order was not expected to have any material impact on CNOOC's operations or financial conditions.

Synthetic crude prices rallied hard on Monday after news of the Long Lake shutdown. A separate production outage at the Syncrude oil sands project sent traders scrambling to secure supply, and extended those gains on Tuesday.

The order came three days after Nexen gave the regulator an internal company audit that revealed it was breaking some pipeline safety rules related to maintenance.

"We're managing the risks associated with safely shutting down this complex and integrated facility," Kossman said in a statement.

Last week's order suspended 15 pipeline licences for 95 pipelines that carry a range of products including crude oil, natural gas, salt water, fresh water and emulsion, the regulator said. It is also requiring Nexen to demonstrate that its pipelines can be operated safely.

Nexen apologized for the spill in July, explaining that it would likely take months to find the root cause of the leak, which released more than 31,500 barrels of emulsion, a mixture of bitumen, water and sand.

The regulator said it would not lift the suspension order until the company demonstrates that it can operate its pipelines safely.

http://www.reuters.com/article/2015/09/01/nexen-pipeline-spill-idUSL1N1172BY20150901

W&T Offshore, Inc. today announced that it has entered into a definitive agreement with Ajax Resources, LLC for the sale of all of its interest in its Yellow Rose field in the Permian Basin.  Gross pre-tax proceeds from the transaction are expected to be approximately $376,100,000, subject to customary closing adjustments.  W&T also reserved a one to four percent sliding scale overriding royalty interest in the field. The transaction is expected to close during the third quarter of 2015, with an effective date of January 1, 2015.

W&T's interest in its Yellow Rose field includes approximately 25,800 net acres in Andrews, Martin, Gaines, and Dawson counties in West Texas.  For the month of July 2015, net production from the Yellow Rose field averaged approximately 3,000 barrels of oil equivalent ("Boe") per day.

We will use the proceeds from the transaction to pay down the outstanding balance under our secured revolving credit facility and provide additional liquidity for future operations and acquisitions.

Tracy W. Krohn, W&T Offshore's Chairman and Chief Executive Officer, stated, "We are pleased to be monetizing our highly valued Permian Basin acreage. This sale will allow us to strengthen our balance sheet and improve our financial flexibility to pursue the acquisition of Gulf of Mexico assets while valuations are favorable.  We believe that current conditions are good for W&T to identify quality offshore producing assets that offer upside exploration and development opportunity. "

http://www.prnewswire.com/news-releases/wt-offshore-announces-sale-of-its-yellow-rose-field-in-the-permian-basin-of-west-texas-300135746.html