Vulnerability of global oil supply

Collapse Net reports unconfirmed oil company activity on the ground after yesterdat’s explosion.

As Collapse proceeds I am sure that what comes out of governments and corporations will become further and further detached from reality

Saudi Arabia Fire News Oil-Price Swing Shows Global Supply Vulnerability

Bloomberg, 

3 February, 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.”

It would seem that all the market needs is a denial from the Saudis rather than proof.

In any case as a commentator said the Saudi Shi’ites who have their own grievances and live in the oil-producing area of Saudi Arabia could present a danger to Saudi oil production.

Even if they did not succeed in blowing up a oil facility they DID light fires in the proximity.

The bit about Iran 'struggling to sell crude' is a bit of propaganda - to sell to whom, Europe?

Oil retreats after surge on Saudi supply scare

NEW YORK (Reuters) - Oil prices fell 2 percent on Friday after Saudi Arabia eased investor concerns about a reported pipeline explosion that had pushed Brent to the highest level since 2008.

Both Brent and U.S. crude retreated and ended with weekly losses after Brent futures jumped above $128 a barrel to levels last seen in July 2008 in post-settlement trade on Thursday, reacting to an Iranian media report of a pipeline fire in Saudi Arabia.

The surge in prices Thursday was short-lived and Saudi Arabia said on Friday that there had been no attack in the kingdom.

"There were no acts of sabotage in the kingdom yesterday," Interior Ministry spokesman Mansour al-Turki told Reuters. He did not elaborate.

Brent April crude fell $2.55 to settle at $123.65 a barrel, having traded as low as $123.12, testing below its 10-day moving average of $123.22.

Brent fell 2 percent for the week after five straight weekly gains.

U.S. April crude fell $2.14 to settle at $106.70 a barrel, dropping as low as $105.80 and pushing below the 10-day moving average of $107.04 after reaching $110.55 during the previous day's surge.

For the week, U.S. crude fell 2.8 percent, snapping a string of three higher weekly finishes.

Brent's premium to U.S. crude narrowed, ending at $16.95 a barrel based on settlements.

Total Brent crude trading volume edged 1 percent above the 30-day average, while U.S. turnover was 14 percent under its 30-day average with two hours of post-settlement trading remaining.

"Although the oil complex is responding to some softening in the euro and the equities ... the main source of selling has been a disgorgement of risk premium following yesterday's frenzied price advance (on) reports of Saudi pipeline explosions," Jim Ritterbusch, president at Ritterbusch & Associates, said in a research note.

The dollar index strengthened as the euro slipped against the U.S. currency, putting pressure on oil and dollar-denominated copper.

The fear premium associated with tensions over Iran's nuclear program and a possible military response by Israel has kept oil prices elevated, along with production losses from South Sudan, Yemen, Syria and the North Sea.

Positive manufacturing data out of China, signs of improved economic growth in the United States and a liquidity infusion by the European Central Bank lent support to oil this week.

IRAN STRUGGLING TO SELL CRUDE

Iran, OPEC's second biggest producer, has struggled to sell its crude in the face of tightening U.S. sanctions and a European Union embargo that kicks in on July 1.

Iranians voted on Friday in a parliamentary election likely to reinforce Supreme Leader Ayatollah Ali Khamenei's power over rival hardliners led by President Mahmoud Ahmadinejad.

U.S. President Barack Obama and Israeli Prime Minister Benjamin Netanyahu are set to meet Monday in Washington as U.S.-led international sanctions begin to take a toll on Iran. Netanyahu on Friday dismissed the idea of renewed international negotiations with Iran.

Some Japanese refiners are set to demand a force majeure clause when they start negotiations for term contracts to avoid difficulties if they are unable to pay Iran or lift Iranian oil due to lack of insurance cover for tankers under European Union sanctions, industry sources said.

India's largest shipping company was forced to cancel an Iranian crude oil shipment last month because its European insurers refused to provide coverage for the vessel, industry sources said