Nine months after sanctions on Iran were lifted, some of the world's biggest traders have yet to strike major oil deals with the OPEC member, stymied by Tehran's tough stance on marketing its crude and restrictions on dollar trades.

Top executives from Vitol, Glencore, Trafigura and Gunvor told the Reuters Commodities Summit this week that while they are keen for a slice of the business, hurdles remain.

"It's still very difficult," Ian Taylor, chief executive of commodity trading house Vitol, said.

He cited the lack of a usable dollar system to conduct transactions with the country, making transfers of the U.S. currency troublesome and hindering trading.

Taylor said that while Vitol had started to do some business with Iran, the competition was strong. "Everybody is looking at it as well."

Most Western sanctions against Iran were lifted on Jan. 17, but remaining U.S. restrictions stipulate that only non-U.S. banks can do dollar trades with Iran provided these do not pass via financial institutions in the United States.

Iran has already signed a raft of deals with international firms, some of which are dollar-based. But to date big banks have steered away from doing business involving the country, out of worries over inadvertently running afoul of U.S. authorities.

Concerns about the dollar were echoed by Gunvor Group Chief Executive Torbjorn Tornqvist and Trafigura Chief Financial Officer Christophe Salmon.

Limits on where crude can be sold remains a sticking point as it reduces a trader's ability to maximise profit margins, particularly in an oversupplied market.

"We shouldn't also forget that the Iranians ... when it comes to crude oil, are extremely skilful in their marketing," Tornqvist said.

"They need to know where it (crude) goes and to whom. And we see very little change: 'this is what we did before sanctions and this is what we'll continue to do after the sanctions'."

Iran, like Saudi Arabia, sets different monthly prices for each region and has traditionally dealt only with majors or pure refiners where supplying their own refineries remains the core business.

UNCERTAIN RETURNS

Trade houses have been largely confined to Iran's refined products market although Trafigura loaded a large cargo with Iranian crude in late June.

"Iran is a very promising country for many companies including ourselves. But so far what we have done since the sanctions were lifted, it's really small," Salmon said.

Trafigura loaded the Olympic Target tanker with 2 million barrels of Iranian Heavy crude in a bid to capture market share among China's independent refiners.

But the so-called teapot refineries were slow to buy the oil once it arrived in China. After arriving in the area around mid-July, it took the tanker a month and a half to start offloading, Reuters ship tracking data showed.

Global head of oil at Glencore, Alex Beard, said his firm had already had substantial dialogue with Iran, including "conversations with NIOC about prefinance and continue to talk to find the right terms and conditions for both sides".

http://www.reuters.com/article/commodities-summit-iran-idUSL8N1CI41O

Commercial-scale production at Kazakhstan’s giant Kashagan field in the Caspian Sea has started at a daily rate of 90,000 barrels, the country’s Energy Minister Qanat Bozumbaev said. The field is operated by a consortium including Exxon, Shell, Eni, Total, CNPC, and Japan’s Inpex, along with Kazakh state oil company Kazmunaygaz.

Kashagan, the biggest oil discovery in Kazakhstan in about four decades, holds an estimated 38 billion barrels of crude and a trillion cubic meters of natural gas. Of the oil reserves, 10 billion barrels are recoverable.

The field was first put into operation three years ago, but just a month later production was suspended because of a gas leak. An inspection revealed the whole 200-km stretch of pipelines set to transport oil and gas from Kashagan needed to be replaced because of micro-cracks, the result of high-sulfur associated gas running through them.

Kazakhstan is the largest oil producer in Central Asia and ranks 18th in the world, with annual production of 1.72 million barrels per day as of two years ago. This year, however, according to OPEC, production is set for a decline to 1.56 million bpd, from the 2015 daily average of 1.6 million barrels.

The revision comes after in August, Kazakhstan pumped around 1.27 million bpd, down 300,000 bpd from July on the back of scheduled maintenance at the TengizChevroil field, also in the Caspian.

Again according to OPEC, production at Kashagan should reach 370,000 bpd by June next year, and the country’s overall growth in oil production should average 220,000 bpd through the end of 2017.

Kazakhstan is not a member of OPEC, and as such is not taking part in the number-one news item in global energy these days: the freeze agreement that OPEC is discussing with Russia. It’s not as big of a producer as Russia is, but if output at Kashagan rises as OPEC expects, this will be an increase in global production that trumps the 160,000-bpd OPEC rise in August that curbed the upward movement in international oil benchmarks caused by the news about the freeze.

http://oilprice.com/Latest-Energy-News/World-News/Oil-Production-Starts-At-Giant-Kashagan-Field.html?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+oilpricecom+%28Oil+Price.com+Daily+News+Update%29

---

Attached Files

India says it has received a consignment of 2 million barrels of oil from Iran and that the volume has been used to partly fill half of the capacity of a strategic storage in the country’s south.

The consignment was imported by Mangalore Refinery and Petrochemicals Ltd (MRPL) through a very large crude carrier (VLCC).

A second consignment is to be procured by Bharat Petroleum Corp and is scheduled to arrive around October 25, the New Delhi-based Business Standard newspaper reported quoting sources with direct knowledge on the matter.

India will fill half of the storage with 6 million barrels of Iranian oil, the report added. New Delhi is engaged in talked with United Arab Emirates and Saudi Arabia for meeting the remaining demand, the daily added.

India, which is seeking to hedge against energy security risks as it imports about 80 percent of its oil needs, is building emergency storage in vast underground caverns at three locations in southern India to hold a total of 36.87 million barrels of crude, enough to cover almost two weeks of demand, the Business Standard added.

Other reports showed that India imported about 552,200 barrels per day (bpd) of oil from Iran in September.  The figure, Reuters reported, was down by 4.1 percent compared to August when imports from Tehran hit their highest in at least 15 years.

India's average Iranian oil imports in April-September, the first six months of India's financial year, rose nearly four-fifths to about 468,000 bpd.  Reuters said in a report that Iran’s share in India’s overall purchases during the period had jumped to 11 percent.  

http://www.presstv.ir/Detail/2016/10/12/488795/India-receives-major-Iran-oil-cargo

Asian LPG prices shot to a 10-month high of $379.50/mt late Thursday, waking up from a protracted slumber, as robust appetite from China to stockpile for winter and a high-priced deal by oil kingpin Saudi Aramco this week set the stage for firmer prices, market sources said Friday.

"There is strong demand since winter is coming," said a source with a Chinese company.

The price was last higher on January 4, the first trading day of the year, at $385/mt, data from S&P Global Platts showed.

Chinese buyers such as Ouhua Energy, Star Gas, Oriental Energy and Tianjin Bohai have bought end October to early November arrival cargoes of propane and butane since late September.

Exact price details were sketchy but traders said some clips were done at Far East Index plus $1-$3/mt on a delivered basis.

Tianjin Bohai earlier this week bought an early November-arrival cargo from Turkish trader Bayegan.

The cargo was heard to be an evenly-split 44,000 mt parcel. Price details were not available.

The physical CFR Singapore-Japan propane price climbed $3.50/mt day on day Thursday -- bucking a $1.07/b ($8.56/mt) slump in the crude complex -- to be assessed at $379.50/mt.

The front month contango structure in Far East Index swaps has largely flattened out, while the CP swap structure has flipped into backwardation.

The November/December Far East Index swap flattened out from a $3/mt contango Wednesday to parity Thursday, while the November/December CP swap flipped to a $1/mt backwardation from a $1/mt contango over the same period.

The front month structure weakened slightly Friday morning, with November/December FEI swaps at minus 50 cents/mt and November/December CP swaps at plus 50 cents/mt

Further forward, December/January FEI and CP spreads were both pegged at plus $3/mt Friday morning.

"Demand is coming from China," said a Singapore-based trader.

Japanese buyers, on the other hand, remained on the sidelines as stock levels were still healthy and deemed largely sufficient to tide over winter.

SAUDI DEAL LIFTS MARKET

The other factor that gave the market an uplift was news of a deal by Saudi Aramco, heard done Wednesday, at a strong level.

Saudi Aramco was heard to have sold a 44,000 mt cargo comprising 11,000 mt of propane and 33,000 mt of butane for early November loading at $376/mt for propane and $406/mt for butane.

The buyer was said to be either Kolmar or trading company SHV Energy. SHV specializes in LPG downstream marketing.

"The Saudi sale price seems high, but the market is moving up," said the Singapore-based trader.

Saudi Aramco's fixed price deal is equivalent to a $5-$10/mt premium to the November CP, a source said.

Premiums in the Middle East for FOB AG cargoes have climbed since September; Qatar's Tasweeq early last month sold an October-loading cargo at parity to the CP.

The recovery in LPG market sentiment is a departure from the sluggish mood that has dominated over the past two to three months, when the market was awash with supply from a flood of US exports due to the shale oil revolution, sources said.

http://www.platts.com/latest-news/oil/singapore/emerging-winter-demand-propels-asian-lpg-prices-27688152

US supermajor Chevron could this month start selling condensate produced at the its Gorgon liquefied natural gas plant in Australia, trade sources said on Thursday.

Chevron could market a 600,000 to 650,000-barrel cargo for loading in December, they said, although the company is still finalising some details.

The California-based oil giant did not immediately respond to requests for comment from Reuters.

It started operations at the Gorgon field in March, but was forced to shut briefly in July due to unexpected technical problems.

The introduction of the new condensate comes at a time when demand for the light oil is rising as two new splitters in South Korea and Qatar have started trial runs.

Gorgon condensate has an API gravity of about 52.9 degrees and a sulphur content of 0.0088%, the two sources said, declining to be identified as they were not authorised to speak with media.

Splitters process condensate to obtain mainly naphtha for petrochemical production.

http://www.upstreamonline.com/live/1446639/chevron-eyes-gorgon-condensate-sales-this-month?utm_source=twitterfeed&utm_medium=twitter

Igor Sechin, the chief executive of Russia's top oil producer Rosneft, said on Thursday he was confident the sale of a minority stake in the company would happen by the end of this year.

http://www.reuters.com/article/russia-oil-rosneft-stake-idUSL8N1CJ3ED

Israel and Turkey have discussed the possibility of building a natural gas pipeline between the two countries, Israel's energy minister said on Thursday, in the first Israeli ministerial visit to Turkey since ties were ruptured six years ago.

Israeli Energy Minister Yuval Steinitz agreed at a meeting in Istanbul with his Turkish counterpart Berat Albayrak to "establish immediately a dialogue between our two governments" to examine the project's feasibility, he told reporters.

"We discussed energy in general and particularly the issue of natural gas and the possibility of building a natural gas pipeline from Israel to Turkey in order to deliver natural gas to Turkey and to Europe," Steinitz said.

Relations between the two countries crumbled after Israeli marines stormed an aid ship in May 2010 to enforce a naval blockade of the Hamas-run Gaza Strip, killing 10 Turkish activists on board. Israel and Turkey announced in June that they would normalize ties.

http://www.reuters.com/article/us-turkey-israel-energy-idUSKCN12D126

Poland's drive to exploit shale gas has come to an end with state-run gas firm PGNiG and oil refiner PKN Orlen drawing a line under projects to find it.

The country's quest to explore for shale gas began five years ago, when the then prime minister Donald Tusk raised hopes with a forecast of it coming on stream in 2014.

This attracted global energy majors, including Chevron Corp, Exxon Mobil and Total, but one by one they pulled back after disappointing results and a slump in oil prices.

Polish state-run firms, including PGNiG and PKN Orlen were the last ones to work on the country's shale gas projects.

"The discussion and projects related to shale gas is a closed issue for us," Miroslaw Kochalski, deputy head of PKN Orlen told a news conference on Wednesday.

This was echoed by Piotr Wozniak, the chief executive office at PGNiG, who said:

"Shale gas has ended not that badly when it comes to the improved techniques of unconventional gas exploration. Shale gas as such has failed indeed."

http://uk.reuters.com/article/poland-gas-shale-idUKL8N1CI3PF

                                                                        Last week   Week before  Last year

Domestic Production '000................... 8,450             8,467            9,096
Alaska ................................................ 481                462                490
Lower 48 ......................................... 7,969             8,005            8,606

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

U.S. crude oil refinery inputs averaged about 15.6 million barrels per day during the week ending October 7, 2016, 480,000 barrels per day less than the previous week’s average. Refineries operated at 85.5% of their operable capacity last week. Gasoline production decreased last week, averaging over 9.9 million barrels per day. Distillate fuel production decreased last week, averaging 4.5 million barrels per day.

U.S. crude oil imports averaged about 7.9 million barrels per day last week, up by 151,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.9 million barrels per day, 8.9% above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 762,000 barrels per day. Distillate fuel imports averaged 95,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.9 million barrels from the previous week. At 474.0 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. Total motor gasoline inventories decreased by 1.9 million barrels last week, but are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.7 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 0.1 million barrels last week but are above the upper limit of the average range. Total commercial petroleum inventories decreased by 5.1 million barrels last week.

Total products supplied over the last four-week period averaged 20.0 million barrels per day, up by 2.4% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged 9.3 million barrels per day, up by 2.3% from the same period last year. Distillate fuel product supplied averaged over 3.8 million barrels per day over the last four weeks, down by 3.5% from the same period last year. Jet fuel product supplied is up 9.1% compared to the same four-week period last year.

Cushing down 1.4 mln bbls

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

---

Attached Files

Genscape 10/13 data shows largest wkly #crude inventory draw @ #Cushing in 7 yrs as of WE 10/11.

@genscape

North Dakota oil production dropped below one million barrels a day in August for the first time in more than two years as depressed prices forced explorers to cut back.

Production from the state’s portion of the Williston Basin fell to 981,000 barrels a day, the lowest since March 2014, according to a report by the North Dakota Pipeline Authority. The state’s crude output has shrunk from a peak of more than 1.23 million barrels a day in December of that year.

"It does send a signal to the world markets that U.S. producers are serious about reducing activity, reducing costs, reducing production and I think that should help support the recent price increase we saw," Lynn Helms, director of state’s Department of Mineral Resources, said in a call with reporters.

The collapse in oil prices from above $100 a barrel in 2014 prompted producers to curtail drilling in unprofitable areas. U.S. shale production could fall to about 4.4 million barrels a day in October, the EIA forecast last month. Lower output and last month’s OPEC decision to limit supply has helped oil rally above $50 a barrel this month from a 12-year low of about $26 in February.

Horizontal fracking of tight rocks in North Dakota’s Bakken region contributed to a renaissance in U.S. oil production this decade that turned the country into the world’s second-biggest oil producer for a time. North Dakota was the second-biggest oil-producing state in the U.S. in July, trailing only Texas, Energy Information Administration data show.

North Dakota’s output should “bottom out” at 900,000 barrels a day by the middle of next year, Helms said. At least two North Dakota operators restricted production in August, contributing to the drop, Helms said. North Dakota’s rig count stands at 33, after falling to 22 in May, Baker Hughes Inc. data show.

"North Dakota is hit harder than other places, but it’s not as if we’re falling off the cliff in terms of production," U.S. Energy Secretary Ernest Moniz said on Bloomberg TV.

http://www.bloomberg.com/news/articles/2016-10-13/north-dakota-is-pumping-oil-at-the-slowest-pace-in-two-years

Oil producer RSP Permian Inc (RSPP.N) said it would buy oil and gas company Silver Hill Energy Partners for about $2.4 billion to expand its assets in the Permian Basin in Texas.

RSP Permian is the latest company to bulk up in the Permian Basin, widely seen as the cheapest place to develop onshore fields in the United States.

Thursday's deal adds to more than $12 billion in transactions this year in the Permian Basin.

RSP Permian, with a majority of its acreage located in the core of the Midland Basin within the Permian Basin, said Silver Hill was based in the oil-weighted area of the Delaware Basin.

Reuters reported in August that Silver Hill was up for sale.

RSP Permian said on Thursday that it would pay $1.25 billion in cash and 31 million in shares for Silver Hill, owned by private equity firms Kayne Anderson Capital Advisors LP and Ridgemont Equity Partners.

RSP also said the purchase would be funded by an offering of 20 million shares.

Silver Hill Energy Partners comprises two entities, Silver Hill Energy Partners LLC and Silver Hill E&P II LLC. Their current net production is 15,000 barrels of oil equivalent per day (boe/d).

The deal for Silver Hill Energy Partners LLC is expected to close in November and the other entity in March.

RSP also increased its average daily production forecast in 2016 to 28,500-29,500 boe/d from 26,500-28,500 boe/d, largely attributing this to its existing wells' performance.

The short period of the newly acquired production would not meaningfully impact the forecast, the company said.

RBC Capital Markets is the lead M&A adviser to RSP and Barclays Capital the co-adviser. Vinson & Elkins L.L.P. served as legal counsel to RSP.

Jefferies LLC advised Silver Hill while Thompson & Knight LLP and DLA Piper LLP served as legal counsel.

RSP's shares were down 4.8 percent at $39.73 in extended trading.

http://www.reuters.com/article/us-silverhillenergy-m-a-rsp-permian-idUSKCN12D2XI

Marathon Petroleum, which purchased midstream company MarkWest Energy last year, continues to grow and expand–because of the Utica Shale. 

Marathon operates a refinery in Canton, OH that processes crude oil. Question: Did you know that 25% of the crude oil being processed at the Marathon refinery comes from the Utica Shale? 

No, we didn’t know that either! Marathon has made some big bets on the Utica. In fact, over the past two years, they’ve bet more than $1 billion on the Utica…

http://marcellusdrilling.com/2016/10/marathons-billion-dollar-bet-on-the-utica-shale/

For the purposes of this outlook, EIA considers the winter season to run from October through March. The average household winter heating fuel expenditures discussed in this supplement are a broad guide to changes compared with recent winters. Fuel expenditures for individual households are highly dependent on the size and energy efficiency of individual homes and their heating equipment, along with thermostat settings, local weather conditions, and market size (seeWinter Fuels Outlook table).

Temperatures this winter, based on the most recent forecast of heating degree days (from the National Oceanic and Atmospheric Administration (NOAA), are expected to be much colder than last winter east of the Rocky Mountains, with the Northeast and Midwest 17% colder and the South 18% colder. Despite the expectation of colder temperatures compared with last winter, temperatures in the eastern United States are expected to be about 3% warmer than the average of the five winters preceding last winter, as temperatures last winter were much warmer than normal in those areas. In the West, temperatures are forecast to be about 2% warmer than last winter. However, recent winters provide a reminder that weather can be unpredictable. In addition to the base case, the Winter Fuels Outlook includes forecasts for scenarios where heating degree days in all regions may be 10% higher (colder) or 10% lower (warmer) than forecast.

Full report: http://www.eia.gov/forecasts/steo/report/WinterFuels.cfm

---

Attached Files

Shares of Extraction Oil & Gas - the first producer to launch a US IPO this year - rose as much as 19.7% in their market debut as crude prices held above $50 per barrel.

http://www.upstreamonline.com/live/1446666/extraction-soars-in-ipo?utm_source=twitterfeed&utm_medium=twitter