World oil

Saudi Fire News Oil-Price Swing Shows Supply Vulnerable as Sanctions Loom

Bloomberg, 3 March, 2012

Oil’s 4.8-percent price swing yesterday on reports of a fire in Saudi Arabia, the world’s biggest crude exporter, show the market’s vulnerability to supply disruptions as sanctions hamper sales from Iran.

Brent crude rallied to as much as $128.40 a barrel late yesterday, the highest since July 2008, after Twitter messages, internet blogs and an Iranian state-run news channel reported that an explosion destroyed a pipeline in eastern Saudi Arabia, near the Ras Tanura refinery. The kingdom’s Interior Ministry later denied any sabotage to its oil facilities, and prices declined, sinking further today to as low as $123.90 on the ICE Futures Europe exchange in London.

The reaction highlighted “the reduced ability of the market to absorb supply shocks or mere headlines of supply shocks, given the limited spare capacity and inventory buffers,” Amrita Sen, an analyst at Barclays Plc in London said in a note to investors today.

Crude prices have risen 16 percent this year as the European Union imposes an oil embargo on Iran, which the International Energy Agency said may affect daily supply of 600,000 to 1 million barrels. OPEC has an “effective” spare oil production capacity of 2.82 million barrels a day, of which 72 percent is in Saudi Arabia, the IEA said in a Feb. 10 report. The figure excludes Iraq, Nigeria, Venezuela and Libya.

Brent traded between $122.49 and $128.40 yesterday, a 4.8 percent swing, and was at $124.10 at 3:02 p.m. in London today.

“Brent is back under $125 at the time of writing, but we’ve had a good demonstration of how nervous the market is at the moment, and how quick shorts will be to cover,” Philip Wiper, an analyst at London broker PVM Oil Associates Ltd., said in an e-mailed report.

Abqaiq Memory

Concern about Saudi supply has previously caused jitters in the market. On Feb. 24, 2006, Brent crude rose as much as $2.33 a barrel or 3.9 percent to $62.87 a barrel after Saudi Arabian forces repelled a suicide attack on the Abqaiq processing center, which handled about 6 million barrels a day. Abqaiq sends oil by pipeline to Ras Tanura on the Persian Gulf coast.

The oil-export terminal in Ras Tanura was operating normally today, according to Gulf Agency Co., a port agent.

“There is absolutely no disruption whatsoever to oil supply, ports, refineries, anything,” Dan Hjalmarsson, a vice president responsible for the Middle East region at GAC. He spoke from Dubai after checking with the general manager in Saudi Arabia. “It’s business as usual.”

Phonecalls to the Saudi Ports Authority office in Riyadh and to the Ras Tanura Port today, a weekend, were unanswered.

No Sabotage

Saudi Arabia experienced no sabotage at its oil facilities in the Qatif area, Major General Mansour Al-Turki, a spokesman for the Interior Ministry, said late yesterday by phone.

A fire occurred in an industrial area in the town of Safwa in the Shiite-dominated Qatif area near Ras Tanura, a person with knowledge of the situation said late yesterday. The blaze didn’t damage the refinery or any pipeline in the area, said two people with knowledge of the situation who declined to be identified.

Prices rallied yesterday on the basis of internet reports and after Iran’s Press TV reported that an explosion destroyed oil pipelines in eastern Saudi Arabia. Today, the same news agency reported mass participation in Iranian parliamentary elections. Saudi Arabia and Iran are the two biggest producers in the Organization of Petroleum Exporting Countries and regional political rivals.

Sri Lanka, dependent on Iran for more than 90 percent of its oil requirements, was today the latest country to say it will turn to other suppliers amid escalating sanctions.

“After the imposition of sanctions by the U.S. and EU on Iran, we are exploring the possibility of increasing imports from Aramco,” Oil Minister Susil Premajayantha said in a telephone interview from Colombo, referring to Saudi Arabia’s state-run oil company. “We have already written to them.”

Brent back near $124 on supply concerns over Iran

* India's MRPL plans to cut big cuts to Iranian oil imports

* China sets 2012 growth target at 7.5 pct

* Saudi Arabia ups price of Arab Light crude to Asia clients

Reuters,

5 March, 2012

SINGAPORE, March 5 (Reuters) - Brent crude climbed back near $124 on Monday, rebounding from a drop of 2 percent the previous session as another refiner announced cuts to Iranian imports, feeding fears of a supply crunch as the West presses ahead with sanctions on Tehran.

Relief that China's 2012 growth target came in as expected at 7.5 percent reassured investors that the country would continue to propel steady demand for oil, while a delay of up to four more days in restarting Enbridge Inc's oil pipeline system in the U.S. Midwest also provided support.

As sanctions against the world's fifth largest oil exporter Iran over its nuclear programme make trade in its oil more difficult, its biggest customers including China, Japan and India are reducing imports from Tehran, even as Middle East supply risks remain.

The latest company to do so is India's Mangalore Refinery and Petrochemicals Ltd (MRPL) which plans to cut its yearly Iranian oil import deal by as much as 44 percent to 80,000 barrels per day in 2012/2013.

Tetsu Emori, a fund manager with Astramax Co. in Tokyo said tensions over Iran could cause a potential supply crunch.

"There's no other alternative to Iranian oil except for Saudi oil and they have already increased exports last month," he said, adding that global oil consumption is increasing on the back of growing demand for oil in Asia.

Saudi Arabia's current spare capacity is 2.5 million bpd while production is now at 9.8 million bpd, the country's deputy oil minister Abdul Aziz Bin Salman bin Abdulaziz has said.

In a possible response to additional demand, Saudi Arabia has raised the price of its flagship Arab Light crude oil for customers in Asia, who buy more than half of its crude exports, by $1.25 a barrel for April.

Front-month Brent rose 30 cents to $123.95 a barrel by 0332 GMT. Brent fell 2 percent on Friday after Saudi Arabia denied a media report of an explosion at a Saudi oil pipeline that had helped Brent crude prices shoot up $5 to $126.20, their highest level since 2008.

U.S. April crude on Monday rose 30 cents to $107.00 a barrel after settling $2.14 lower at $106.70.

For the weekahead, CPI data out of China and U.S. jobs data, both due on Friday, are focal points for the market.

"Investors will get their direction from data expected out of the U.S. and China, and there needs to be some form of confirmation that an economic recovery is taking place," said Ben Le Brun, a Sydney-based markets analyst at OptionsXpress.

The latest data out of China showed that its services sector ran at its fastest pace in four months in February -- contrary to an official report on Saturday that signalled that the sector was shrinking.

The private-sector HSBC China Services PMI, which provides a snapshot of conditions in businesses from restaurants to banks, climbed to a seasonally adjusted 53.9 in February from 52.5 in January, well above the 50 mark that demarcates expansion and contraction.

It was, however, well below its long-term trend despite an uptick in new business growth to an eight-month high