Oil futures top $80/bbl

Sam Fletcher
OGJ Senior Writer

After failing to sustain pushes above $80/bbl in four previous sessions, April crude closed at $80.87/bbl Mar. 3, up $1.19 for the day in the highest closing for a front-month contract in 7 weeks in the New York market as the euro strengthened against the US dollar. The contract held above $80/bbl as energy prices fell Mar. 4, then climbed $1.29 to $81.50/bbl Mar. 5 as crude and petroleum products wiped out those losses.

“The oil price was driven up by improved investor confidence in global equity markets, in large part due to Greece revealing further plans to slash its public debt and an oversubscribed bond auction,” said analysts at the Centre of Global Energy Studies (CGES), London. “There are added signs that the US economy is improving—US personal consumption figures rose 0.5% in January, unemployment is falling, and middle distillate stocks, a key barometer of trade activity, are in decline.”

Still, CGES and other analysts said they see little evidence of substantial improvement in oil market fundamentals. “Tanker data from mid-February onwards suggest that Asian lifters could be trimming their crude imports, for instance,” CGES analysts said. “Refiners in the Organization for Economic Cooperation and Development are entering a maintenance period and though this ought to push oil product margins up, it could also limit crude demand and cause inventories to grow once again.”

Last year CGES was of the view “that until middle distillate stock cover fell it would be difficult to believe the US was providing any real support for rising oil prices,” analysts said. “However, it seems that at the very end of 2009 this long-awaited decline actually began. While this was due initially to the exceptionally cold weather, and now may be in large part the result of refineries entering their maintenance period, thus producing fewer oil products, it must also be because of increased economic activity. This would provide some support for prices, though not…above $80/bbl. The next few months, with the arrival of seasonally warmer weather, will provide more of an insight into whether this improvement is fleeting or the beginning of something more lasting.”

Any oil price over $80/bbl “is not sustainable for long, especially when seen through the prism of existing long-term sovereign debt concerns,” CGES analysts said. Other analysts share that skepticism. Olivier Jakob at Swiss-based Petromatrix said, “The oil commodities are not only starting to enter the price zone where consumer demand will be tested, but the rest of the energy complex has also not risen in sync; hence there should be some increased substitution competition working against oil molecules.”

The Chilean effect
The 8.8-magnitude earthquake that rocked Chile Feb. 27 shut down the country’s 100,000 b/d Aconcagua and 114,000 b/d Bio Bio refineries. As a result, Jakob observed, “Chile will provide some incremental demand for distillates but at the same time it is ‘force majeure’ on its imports of crude oil, and those displaced cargoes of crude will work their way to the US Gulf [Coast].”

Chile would displace crude cargoes to the US and would get in return some distillate cargoes, Jakob said at the time. “Given that the US refinery system is still operating below normal capacity, this displacement should not translate in a structural supply issue. Crude oil futures are well supported, but the physical crude has to price itself in the US Gulf at deeper discounts to the futures to find any demand either from refinery processing or for storage,” he said.

“With relatively weak cash differentials on crude oil and the futures product cracks off to the races, we would expect to see some incremental refinery production in the coming weeks,” Jakob said. “Given that crude oil stocks in the US Gulf have been building 26 million bbl since mid-December and are now 2 million bbl above the levels of last year and 20 million bbl above the levels of 2008 the US Gulf refineries are well prepared to accommodate higher processing rates. On the other hand if demand for petroleum products does not follow the trend of the Dow Jones [Industrial Average], then the risk is clearly that crude oil stocks will only transform themselves into higher product stocks and induce another cycle of lower refinery margins.”

In other news, China Petroleum & Chemical Corp. (Sinopec), China’s largest producer and supplier of oil and petrochemical products, reportedly is introducing this month a special $19/tonne export subsidy on oil products to help its refineries clear up unwanted stocks of oil products.

(Online Mar. 8, 2010; author’s e-mail: samf@ogjonline.com)

Related Articles

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

OxyChem-Mexichem JV lets contract for ethylene storage

06/30/2015 Ingleside Ethylene LLC, a 50-50 joint venture of Occidental Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has let a contract to CB&am...

RIL’s Jamnagar refinery due maintenance

06/29/2015 Reliance Industries Ltd. (RIL), Mumbai, is planning to shut down a crude unit for scheduled maintenance at its 1.24 million-b/d Jamnagar refining a...

OGJ Newsletter


BP: US surpassing Saudis in oil output among world's 'tectonic' energy shifts in 2014

06/29/2015 An eventful 2014 in the world oil and gas markets was headlined by the US overtaking Saudi Arabia as the world's biggest oil producer and surpassin...

Gazprom Neft lets contract for Moscow refinery

06/29/2015 Russia's JSC Gazprom Neft has let a contract to Tecnimont SPA, a subsidiary of Maire Tecnimont SPA, Milan, for engineering, procurement, and constr...

Marathon commissions unit at Kentucky refinery

06/29/2015 Marathon Petroleum Corp. (MPC) has commissioned a 35,000-b/d condensate splitting unit at its 242,000-b/d Catlettsburg, Ky., refinery to boost the ...

Iraq lets contract for Karbala refinery

06/25/2015 Iraq’s State Co. for Oil Projects (SCOP), through a contractor, has let a contract to Nexans, Paris, to provide the low-voltage cable system for th...

Lukoil commissions unit at Volgograd refinery

06/25/2015 OAO Lukoil has commissioned a primary crude distillation unit at its 11 million-tonne/year Volgograd refinery in southern Russia as part of a progr...
White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Better Data, Better Analytics, Better Decisions

When Tue, Oct 27, 2015

The Oil & Gas industry has large amounts of data stored in multiple systems which are purpose built for certain tasks. However, good decisions require insights based upon the data in all of these systems. These systems in turn do not talk to each other. So the process of analyzing data, gaining insights, and making decisions is a slow one and often a flawed one. Good decisions require accurate analytics and accurate analytics require superior/sustainable data quality and governance. This webinar focuses on:

  • The importance of data quality and governance
  • How technological advances are making data quality and governance sustainable in order to get the accurate analytics to make solid decisions.

Please join us for this webcast sponsored by Seven Lakes Technologies and Noah Consulting.


Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected