Tag Archives: Refined Products

Oil clambers larger as OPEC, allies transfer nearer to deeper

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SINGAPORE (Reuters) – Oil costs jumped 1.5% on Wednesday on hopes that main producers have made progress in direction of sealing an settlement to implement deeper output cuts aimed toward offsetting the droop in demand brought on by the worldwide coronavirus outbreak.

FILE PHOTO: Pump jacks function at sundown in Midland, Texas, U.S., February 11, 2019. REUTERS/Nick Oxford

Brent crude LCOc1 rose by 78 cents, or 1.50%, to $52.64 a barrel at 0502 GMT, after settling down four cents within the earlier session. U.S. West Texas Intermediate (WTI) futures CLc1 rose by 72 cents, or 1.53%, to $47.90 a barrel, up for a 3rd session.

A panel of the Group of Petroleum Exporting International locations (OPEC) and its allies, a grouping often known as OPEC+, advisable reducing oil output by an additional 1 million barrels per day (bpd) on Tuesday. The advice might imply that Russia and Saudi Arabia, the 2 greatest producers within the OPEC+ group, are near a deal to assist costs.

That will be along with 2.1 million bpd in present output cuts that embody a 1.7 million bpd in curbs by OPEC+ and different voluntary reductions by Saudi Arabia, the world’s greatest exporter. The group is ready to fulfill formally in Vienna on March 5-6.

“That is no time for warning for OPEC+. Second-quarter oversupply wanted some heavy lifting from the group to offset even earlier than the COVID-19 (coronavirus illness) outbreak, however now it’s a should,” Barclays analysts mentioned in a analysis notice.

Brent and WTI have every fallen about 27% from their 2020-peak reached in January.

The anticipated 1 million bpd extra minimize by OPEC+ would nonetheless fall effectively in need of the newly elevated 2.1 million bpd anticipated world demand loss within the first half alone, Goldman Sachs analysts (GS.N) wrote in a analysis notice.

U.S. crude oil inventories rose in the newest week, whereas gasoline and distillate shares fell, knowledge from trade group the American Petroleum Institute confirmed on Tuesday.

Crude inventories rose by 1.7 million barrels within the week to Feb. 28 to 446.6 million barrels, in contrast with analysts’ expectations for a construct of two.6 million barrels.

Goldman has once more minimize its Brent value forecast to $45 a barrel in April, whereas anticipating Brent regularly recovering to $60 a barrel by year-end.

Morgan Stanley on Tuesday additionally minimize its second-quarter 2020 Brent value forecast to $55 per barrel and its WTI outlook to $50 on expectations that China’s 2020 oil demand development can be near zero and that demand elsewhere might weaken due to the virus.

Elsewhere, the U.S. Federal Reserve minimize rates of interest on Tuesday in a bid to protect the world’s largest economic system from the influence of the coronavirus.

“(The) Fed’s emergency fee minimize underscores fragility of financial fundamentals, and this urges OPEC+ to expedite a deeper output minimize to shore up vitality costs,” mentioned Margaret Yang, market analyst at CMC Markets.

Yang mentioned from a technical evaluation perspective, Brent has discovered sturdy assist at round $50-52, whereas quick resistance will be discovered at $54.70.

Reporting by Shu Zhang; Modifying by Christian Schmollinger and Kenneth Maxwell

Our Requirements:The Thomson Reuters Belief Rules.

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Oil rises to three-month excessive on upbeat information, Center East rigidity

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LONDON (Reuters) – Oil costs rose to three-month highs on Monday, underpinned by optimism over an anticipated China-U.S. commerce deal and upbeat industrial information, whereas merchants saved an in depth watch on the Center East following U.S. air strikes in Iraq and Syria.

FILE PHOTO: An oil pump is seen simply after sundown outdoors Saint-Fiacre, close to Paris, France September 17, 2019. REUTERS/Christian Hartmann

Brent crude futures LCOc1 had been up 0.9% at $68.75 a barrel, up 59 cents. The worldwide benchmark has risen round 27% in 2019.

West Texas Intermediate (WTI) crude futures CLc1 rose 22 cents or 0.2% to $61.94 a barrel by 0940 GMT. The U.S. benchmark is up about 36% to date this yr.

“Oil costs have reached their highest stage for the reason that Saudi oilfield assault in mid-September”, stated market analyst Margaret Yang of CMC Markets.

Regardless of a the comparatively low value positive factors regardless of an array of bullish elements, Yang added: “Merchants are additionally cautious about profit-taking prospects.”

Tensions within the Center East have flared up as america carried out air strikes on Sunday towards the Kataib Hezbollah militia group, whereas protesters in Iraq on Saturday briefly compelled the closure of its southern Nassiriya oilfield.

In the meantime, Libyan state oil agency NOC stated it’s contemplating the closure of its western Zawiya port and evacuating workers from the refinery because of clashes close by.

Oil costs had been additionally supported by declining U.S. crude shares, which fell by 5.5 million barrels within the week to Dec. 20, far exceeding a 1.7-million-barrel drop forecast in a Reuters ballot.

In China, manufacturing unit exercise had probably expanded once more in December on stronger exterior demand and an infrastructure push at dwelling though the tempo of progress is about to ease as markets await extra certainty on a U.S.-China commerce truce, a Reuters ballot confirmed.

China’s Commerce Ministry stated it’s in shut contact with america on the signing of a long-awaited commerce deal.

The 2 international locations on Dec. 13 introduced a “Part one” settlement that reduces some U.S. tariffs in alternate for what U.S. officers stated can be a giant bounce in Chinese language purchases of American farm merchandise and different items.

Some analysts, nevertheless, cited ample international crude shares as a serious impediment in 2020 to efforts to rein in output by the Group of the Petroleum Exporting International locations and its allies like Russia.

“At the same time as OPEC and its non-OPEC companions endeavor to make further provide cuts in Q1 2020, we’re not satisfied this will likely be enough to avert giant international stock,” stated Harry Tchilinguirian, international oil strategist at BNP Paribas.

“We stay of the opinion that oil fundamentals proceed to current draw back threat.”

Extra reporting by Seng Li Peng, modifying by Louise Heavens

Our Requirements:The Thomson Reuters Belief Ideas.

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Oil falls however costs nonetheless elevated after assaults on Saudi amenities

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TOKYO (Reuters) – Oil fell greater than 1% on Tuesday because the market held on tenterhooks over the specter of a army response to assaults on Saudi Arabian crude oil amenities that lower the dominion’s output in half and despatched costs hovering by essentially the most in many years.

Oil pump jacks work at sundown close to Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz

The Saturday assault heightened uncertainty in a market that had turn out to be comparatively subdued in latest months as a result of slowing international progress because the U.S.-China commerce battle rages. Saudi Arabia is the world’s prime oil exporter and has been the provider of final resort for many years.

Brent crude was down 73 cents, or 1.1%, at $68.29 a barrel by 0405 GMT, and West Texas Intermediate was down 87 cents, or 1.4%, at $62.03 a barrel.

Costs surged almost 20% in intraday buying and selling on Monday in response to the assaults, the most important leap in virtually 30 years, earlier than closing round 15% increased. Equities and different markets had been additionally pressured on Tuesday.

(graphic : Saudi Arabia crude oil exports by prime locations – right here)

(graphic: World oil costs pull again however stay jittery – right here)

“The query is how lengthy it takes for the provision to get again on-line,” mentioned Esty Dwek, head of world market technique at Natixis Funding Managers.

“Nonetheless, the (geopolitical) threat premium … which has been mainly ignored by markets in favor of progress worries in latest months, is prone to be priced in going ahead,” she mentioned.

A gauge of oil-market volatility on Monday rose to the very best stage since December of final 12 months, and buying and selling exercise confirmed buyers count on increased costs in coming months.

Japan mentioned on Tuesday it will take into account a coordinated launch of oil reserves if obligatory.

U.S. President Donald Trump mentioned on Monday it appeared like Iran was behind assaults on the Saudi oil amenities however confused he didn’t need to go to battle. Tehran has rejected the costs that it was behind the drone strikes.

Relations between the US and Iran have deteriorated since Trump pulled out of the Iran nuclear accord final 12 months and reimposed sanctions on its oil exports.

Washington additionally desires to strain Tehran to finish its help of regional proxy forces, together with in Yemen the place Saudi forces have been combating Iran-backed Houthis for 4 years.

“With the U.S. ‘locked and loaded’ awaiting indicators from Saudi Arabia that Iran was concerned, tensions within the Center East may worsen earlier than they get higher. Underneath these circumstances, the value of oil may stay elevated for a while but,” Metropolis Index analyst Fiona Cincotta mentioned.

“Nonetheless, let’s not additionally neglect that the demand image isn’t nice proper now, which can dampen the oil value shortly. Most not too long ago China’s industrial manufacturing figures dissatisfied in a single day,” Cincotta mentioned.

The assault on state-owned producer Saudi Aramco’s crude-processing amenities at Abqaiq and Khurais lower its output by 5.7 million barrels a day and threw into query its skill to take care of oil exports.

The corporate has not given a selected timeline for the resumption of full output.

Reporting by Aaron Sheldrick; Modifying by Stephen Coates and Tom Hogue

Our Requirements:The Thomson Reuters Belief Rules.

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Oil surges after assault on Saudi oil amenities shuts in 5% of worldwide provide

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SINGAPORE (Reuters) – Oil costs surged on Monday, with Brent crude posting its largest intra-day proportion acquire because the Gulf Warfare in 1991, after an assault on Saudi Arabian oil amenities on Saturday shut over 5% of worldwide provide.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s authentic 1859 nicely that launched the trendy petroleum business on the Drake Nicely Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Picture

However costs got here off their peaks after U.S. President Donald Trump licensed the usage of the nation’s emergency stockpile to make sure secure provide.

Brent crude futures, the worldwide benchmark, rose by as a lot as 19.5% to $71.95 per barrel, the most important intra-day leap since Jan. 14, 1991. By 0633 GMT, the front-month contract was at $66.31, up $6.09, or 10.1%, from its earlier shut.

U.S. West Texas Intermediate (WTI) futures climbed by as a lot as 15.5% to $63.34, the most important intra-day proportion acquire since June 22, 1998. The front-month contract was at $59.80, up $4.95, or 9%.

Saudi Arabia is the world’s largest oil exporter and the assault on state-owned producer Saudi Aramco’s crude processing amenities at Abqaiq and Khurais has lower output by 5.7 million barrels per day. The corporate has not given a timeline for the resumption of full output.

A supply near the matter informed Reuters the return to full oil capability might take “weeks, not days.”

“We predict the assaults could be a get up name for traders, who’ve failed to cost in threat inside the value of crude. Though international provide will contract within the close to time period, america has the flexibility to provide this contraction,” mentioned Hue Body, managing director at Body Funds in Sydney.

Nations that are main importers of Saudi crude, reminiscent of India, China and Indonesia, would be the most weak to the oil provide disruption, Body mentioned.

Saudi Arabia’s oil exports will proceed as regular this week as the dominion faucets into shares from its giant storage amenities, an business supply briefed on the developments informed Reuters on Sunday.

“The assaults on essential Saudi oil infrastructure over the weekend are unlikely to cut back the dominion’s oil exports dramatically and the markets will doubtless look past short-term supply-demand dislocations,” Barclays mentioned on Monday.

“Nonetheless, a re-pricing of supply-side tail dangers will doubtless present a extra sustained increase to grease costs.”

President Trump mentioned he authorized the discharge of oil from the U.S. Strategic Petroleum Reserve (SPR) if wanted in a amount to be decided.

Trump additionally mentioned america was “locked and loaded” for a possible response to the assault on Saudi Arabia’s oil amenities.

In the meantime, South Korea mentioned on Monday that it will think about releasing oil from its strategic oil reserves if circumstances round crude oil imports worsen within the wake of Saturday’s assault on Saudi Arabia’s oil amenities.

The assault on vegetation within the heartland of Saudi Arabia’s oil business, together with the world’s largest petroleum-processing facility at Abqaiq, got here from the path of Iran, and cruise missiles could have been used, in accordance with a senior U.S. official.

(International oil costs spike over 10% after assaults on Saudi Arabia oil amenities: right here)

(Saudi Arabia crude exports to Asia vs remainder of the world: right here)

RISK PREMIUM

“Rising fears of a provide squeeze and heightened geopolitical tensions within the Center East will add a threat premium for oil costs,” mentioned Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures.

“Oil markets although adequately provided over well-stocked international inventories will stay fragile as market deliberate looming supply-side uncertainties. A protracted provide outage and heightened militaristic tensions (Center East) will hold merchants fixated on rising market dangers within the present time period.”

Saudi Arabia is ready to turn into a major purchaser of refined merchandise after the assaults, consultancy Vitality Points mentioned in a be aware.

Saudi Aramco will doubtless purchase important portions of gasoline, diesel and presumably gasoline oil whereas reducing liquefied petroleum fuel exports.

U.S. gasoline futures rose as a lot 12.9%, whereas U.S. heating oil futures rose by as a lot as 10.8%. China’s Shanghai crude oil futures rose to its buying and selling restrict, gaining 8% on the open.

In the meantime, Saudi Aramco has informed one Indian refinery there will probably be no quick affect on oil provides as it can ship crude from different sources and has sufficient stock, a supply with the refinery mentioned.

Different Asian consumers reminiscent of Thailand have additionally mentioned the assault would haven’t any quick affect on oil imports.

Reporting by Koustav Samanta in Singapore, Jane Chung in Seoul and Devika Krishna Kumar in New York; Modifying by Jacqueline Wong, Christian Schmollinger & Kim Coghill

Our Requirements:The Thomson Reuters Belief Rules.

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Oil surges as Saudi assault focuses market on provide dangers

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SEOUL (Reuters) – Oil costs surged on Monday, with Brent crude posting its greatest intra-day share achieve for the reason that begin of the Gulf Warfare in 1991, after an assault on Saudi Arabian oil services on Saturday shut within the equal of 5% of worldwide provide.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s unique 1859 nicely that launched the trendy petroleum business on the Drake Effectively Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Picture

Benchmark Brent crude futures rose by as a lot as 19.5% to $71.95 per barrel, the most important intra-day soar since Jan. 14, 1991. The front-month contract was at $66.20 per barrel, up $5.98, or 9.9%, from their earlier shut, at by 0343 GMT.

U.S. West Texas Intermediate (WTI) futures climbed by as a lot as 15.5% to $63.34 a barrel, the most important intra-day share achieve since June 22, 1998. The front-month contract was at $59.73 a barrel, up $4.88, or 8.9%, at 0343 GMT.

Saudi Arabia is the world’s greatest oil exporter and the assault on the state-owned producer Saudi Aramco’s processing services at Abqaiq and Khurais has lower output by 5.7 million barrels per day. The corporate has not given a timeline for the resumption of full output.

A supply near the matter informed Reuters the return to full oil capability might take “weeks, not days.”

Saudi Arabia’s oil exports will proceed as regular this week as the dominion faucets into shares from its massive storage services, an business supply briefed on the developments informed Reuters on Sunday.

“How the USA and Saudi Arabia take care of the scenario will probably be intently watched,” mentioned Margaret Yang, market analyst at CMC Markets in Singapore.

“If greater oil costs are right here to remain, Asia’s oil reliant economies comparable to China, Japan, India, South Korea and the Philippines will begin to really feel the ache as greater vitality and uncooked materials costs add on the price burden,” Yang added.

U.S. President Donald Trump mentioned he accepted the discharge of oil from the U.S. Strategic Petroleum Reserve (SPR) if wanted in a amount to be decided because of the assault.

The assault on crops within the heartland of Saudi Arabia’s oil business, together with the world’s greatest petroleum-processing facility at Abqaiq, got here from the path of Iran, and cruise missiles could have been used, in keeping with a senior U.S. official. Preliminary stories indicated the assault got here from Yemen.

Trump additionally mentioned the USA was “locked and loaded” for a possible response to the assault on Saudi Arabia’s oil services.

RISK PREMIUM

ANZ Analysis mentioned in a notice that the market would value in “a large world geopolitical threat premium”.

“Any expectation that the market had in regards to the U.S. easing sanctions on Iran following President Trump’s dismissal of John Bolton will shortly dissipate. This could see Brent crude check the $70 per barrel mark within the quick time period,” ANZ Analysis mentioned.

Saudi Arabia is ready to develop into a big purchaser of refined merchandise after the assaults, consultancy Power Facets mentioned in a notice.

Saudi Aramco will seemingly purchase important portions of gasoline, diesel and probably gasoline oil whereas slicing liquefied petroleum gasoline exports.

U.S. gasoline futures rose as a lot 12.9%, whereas U.S. heating oil futures rose by as a lot as 10.8%. China’s Shanghai crude oil futures rose to its buying and selling restrict, gaining 8% on the open.

In the meantime, Saudi Aramco has informed one Indian refinery there will probably be no fast impression on oil provides as it’ll ship crude from different sources and has sufficient stock, a supply with the refinery mentioned.

Different Asian patrons comparable to Thailand have additionally mentioned the assault would haven’t any fast impression on oil imports.

Reporting by Jane Chung in Seoul and Devika Krishna Kumar in New York; Modifying by Jacqueline Wong and Christian Schmollinger

Our Requirements:The Thomson Reuters Belief Ideas.

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Oil costs soar 10% after assault on Saudi services hits world provide

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SEOUL/NEW YORK (Reuters) – Oil costs retreated on Monday after hitting their highest since Could on the open, on fears over provide disruptions following an assault on Saudi Arabia’s oil services on Saturday that reduce greater than 5% of worldwide oil provide.

FILE PHOTO: Oil pours out of a spout from Edwin Drake’s unique 1859 properly that launched the fashionable petroleum business on the Drake Properly Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Photograph

Worldwide benchmark Brent crude futures rose $7.06 a barrel or 11.7% from their New York shut on Friday to face at $67.28 per barrel by 0108 GMT, after hovering greater than 19% to a session excessive of $71.95 per barrel on the opening.

U.S. West Texas Intermediate (WTI) futures climbed $5.76 a barrel or 10.5% to $60.60 a barrel, after leaping greater than 15% to a session excessive of $63.34 a barrel.

Costs eased off their peaks after U.S. President Donald Trump stated he accepted the discharge of oil from the U.S. Strategic Petroleum Reserve (SPR) if wanted in a amount to be decided because of the assault on Saudi Arabia’s services.

State oil big Saudi Aramco stated the assault reduce output by 5.7 million barrels per day, at a time when Aramco is making an attempt to prepared itself for what is predicted to be the world’s largest share sale.

Aramco gave no timeline for output resumption. A supply near the matter advised Reuters the return to full oil capability might take “weeks, not days.”

Saudi Arabia’s oil exports will proceed as regular this week as the dominion faucets into shares from its massive storage services, an business supply briefed on the developments advised Reuters on Sunday.

“The surge in costs is the pure knee jerk response however the path forward and skill to maintain at elevated ranges stays depending on the length of the outage, the flexibility to fulfill export commitments by means of home drawdowns, demand elasticity at larger costs in addition to authorities and company coverage,” stated Michael Tran, managing director of vitality technique at RBC Capital Markets in New York.

The assault on vegetation within the heartland of Saudi Arabia’s oil business, together with the world’s greatest petroleum-processing facility, got here from the path of Iran, and cruise missiles could have been used, based on a senior U.S. official.

Trump additionally stated the US was “locked and loaded” for a possible response to the assault on Saudi Arabia’s oil services.

RISK PREMIUM

Within the wake of the assault on Saudi Arabia’s key oil services, S&P World Platts stated considerations about provide safety within the Center East have elevated and the danger premium within the world crude market is predicted to rise.

ANZ Analysis additionally stated in a word that the market would worth in “a large world geopolitical threat premium”.

“Any expectation that the market had concerning the U.S. easing sanctions on Iran following President Trump’s dismissal of John Bolton will shortly dissipate. This could see Brent crude take a look at the $70 per barrel mark within the brief time period,” ANZ Analysis stated.

Saudi Arabia is ready to develop into a major purchaser of refined merchandise after assaults on Saturday, consultancy Vitality Facets stated in a word.

Saudi Aramco will probably purchase important portions of gasoline, diesel and probably gas oil whereas chopping liquefied petroleum fuel exports.

U.S. gasoline futures jumped 11%, whereas U.S. heating oil futures rose about 6.5% on the open.

In the meantime, Saudi Aramco has advised one Indian refinery there shall be no fast impression on oil provides as it is going to ship crude from different sources and has sufficient stock, a supply with the refinery stated.

Different Asian consumers akin to Thailand have additionally stated the assault would haven’t any fast impression on oil imports.

Reporting by Jane Chung in Seoul and Devika Krishna Kumar in New York; Enhancing by Peter Cooney and Jacqueline Wong

Our Requirements:The Thomson Reuters Belief Rules.

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Oil costs surge 15% after assault on Saudi facility hits world provide

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FILE PHOTO: Oil pours out of a spout from Edwin Drake’s authentic 1859 effectively that launched the trendy petroleum business on the Drake Properly Museum and Park in Titusville, Pennsylvania U.S., October 5, 2017. REUTERS/Brendan McDermid/File Picture

NEW YORK (Reuters) – Oil costs surged greater than 15% on the open on Sunday after an assault on Saudi Arabia’s oil services on Saturday that knocked out greater than 5% of worldwide oil provide.

Brent crude futures jumped greater than 19% to a session excessive of $71.95 a barrel on the opening, whereas U.S. crude futures surged greater than 15% to a session excessive of $63.34 a barrel.

State oil large Saudi Aramco mentioned the assault minimize output by 5.7 million barrels per day, at a time when Aramco is making an attempt to prepared itself for what is predicted to be the world’s largest share sale.

Aramco gave no timeline for output resumption. A supply near the matter instructed Reuters the return to full oil capability might take “weeks, not days.”

Reporting by Devika Krishna Kumar in New York; Modifying by Peter Cooney

Our Requirements:The Thomson Reuters Belief Ideas.

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Oil steady in volatile trade amid uncertainty on supply cuts, U.S.-China tariffs

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NEW YORK (Reuters) – Oil prices were steady in volatile trading on Monday as major producers Saudi Arabia and Russia had yet to agree on extending an output-cutting deal and U.S.-China trade tensions continued to threaten demand for crude.

FILE PHOTO: A view shows a well head and a drilling rig in the Yarakta Oil Field, owned by Irkutsk Oil Company (INK), in Irkutsk Region, Russia March 11, 2019. REUTERS/Vasily Fedosenko/File Photo

Brent crude futures rose 2 cents to $63.31 a barrel by 11:02 a.m. EDT (1529 GMT). U.S. West Texas Intermediate (WTI) crude gained 23 cents to $54.22 a barrel.

Saudi Energy Minister Khalid al-Falih said that Russia was the only oil exporter still undecided on the need to extend the output deal agreed by top producers.

The Organization of the Petroleum Exporting Countries and some non-members, including Russia, have withheld supplies since the start of the year to prop up prices. The deal is due to expire this month.

Yet, Russian energy minister Alexander Novak said there is a still a risk that oil producers pump out too much crude and prices fall sharply. Novak said he could not rule out a drop in oil prices to $30 per barrel if the global deal was not extended.

“Indeed, there are big risks of over-production. But on the whole … we need to analyze deeper and look at how the events will develop in June in order to take a balanced decision at the joint OPEC+ meeting in July.”

Many oil exporting countries have confirmed they are prepared to hold a policy meeting with OPEC in Vienna over July 2-4, instead of the scheduled date later this month, Novak said.

On the demand side, analysts remained concerned about a slowing global economy due to the United States’ trade war with China.

U.S. President Donald Trump said additional tariffs on Chinese goods were ready to kick in after the G20 summit this month if no trade deal is reached with China.

China’s foreign ministry said that China is open for more trade talks with Washington but has nothing to announce about a possible meeting.

China’s crude oil imports slipped to around 40.23 million tonnes in May, from an all-time high of 43.73 million tonnes in April, customs data showed, due to a drop in Iranian imports caused by U.S. sanctions and refinery maintenance.

“As U.S.-China tariff concerns heighten, we see more downward adjustments to world oil demand both across this year and next in providing a limiter on occasional price advances,” Jim Ritterbusch of Ritterbusch and Associates said in a note.

Barclays bank, in a note, said its economists had revised down their GDP growth outlook for the United States, China, India and Brazil – countries that account for more than three-quarters of their oil demand growth assumptions for this year.

“The revisions imply a 300,000 barrel per day reduction in our current global oil demand outlook of 1.3 million barrels per day year-on-year for this year,” the British bank said.

Additional reporting by Noah Browning in London and Henning Gloystein in Singapore; Editing by Marguerita Choy and Kirsten Donovan

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From Paris to Omaha: How Occidental CEO out-maneuvered Chevron in Anadarko bid

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NEW YORK (Reuters) – Occidental Petroleum chief executive Vicki Hollub was caught off guard when U.S. oil giant Chevron swooped in last month with a $33 billion offer to buy Anadarko Petroleum, the oil and gas exploration and production firm she had been wooing for nearly two years.

FILE PHOTO: Vicki Hollub, President and CEO of Occidental Petroleum, speaks at the 2019 Milken Institute Global Conference in Beverly Hills, California, U.S., April 29, 2019. REUTERS/Lucy Nicholson/File Photo

Chevron, nearly five times larger than Occidental, appeared to have out-maneuvered its smaller rival. But on Sunday Hollub showed the fight was not over. After a whirlwind few days to raise more cash, Hollub offered a sweetened deal. By Thursday, Chevron had bowed out.

In edging out Chevron, Hollub leaned on global relationships and knowledge forged from 35 years in the oil industry, according to about a dozen people familiar with the talks leading up to the company’s latest offer.

Occidental had struggled to win over Anadarko because its first public $38 billion offer of 50 percent cash and 50 percent stock, as well as previous offers made privately, required the approval of Occidental shareholders, and Anadarko was not convinced they would go for the deal, two sources familiar with the discussions told Reuters.

Hollub knew she needed to substantially increase the cash offer – thereby making shareholder approval unnecessary – and moved swiftly to secure it, the sources said.

She was in Paris on April 26, just two weeks after Chevron’s announcement, and struck an $8.8 billion deal with French major Total SA to sell Anadarko assets her company didn’t yet own.

Two days later she was in Omaha, Nebraska, securing $10 billion in financing from billionaire investor Warren Buffett’s Berkshire Hathaway Inc, who typically does not partner with companies pursuing unsolicited takeovers.

Occidental declined to make Hollub available for an interview for this story. The company’s shares are down 9 percent since making their offer public in late April.

The combined company would establish Occidental as the largest operator in the Permian basin in west Texas and New Mexico, the heart of the U.S. shale revolution, where a boom in production has propelled the United States into becoming the world’s largest oil producer.

It would make Occidental the third-largest U.S. oil company with a market value of about $80 billion, dwarfed only by global giants Exxon Mobil and Chevron.

“She’s doing the boldest M&A thing that’s happened since the ‘80s,” said Amy Myers Jaffe, energy consultant and senior fellow at the Council on Foreign Relations. “You’re having an atypical M&A battle in a very competitive space where (usually) the bigger you are, the more you’re going to win.”

Hollub’s challenge has stunned an industry where the last attempt to break up an agreed-upon deal between two U.S. oil companies was in 1984 when Texaco challenged Pennzoil’s acquisition of Getty Oil.

It has also angered some Occidental investors who say Hollub is overstretching the company’s balance sheet in an ill-advised quest for size in a volatile industry.

“Our concern is the willingness of the management team at Occidental to cut very favorable deals against the interests of shareholders on a longer-term basis,” said John Linehan, portfolio manager at T. Rowe Price.

T. Rowe, the sixth-largest holder of Occidental shares, announced it would vote against the board of directors on the annual shareholder meeting Friday. But such a move may be mostly symbolic.

An Occidental spokesman declined to comment on the concerns but pointed to Hollub’s defense of her strategy that it was better to raise cash than issue new debt.

Hollub’s background in the technical aspects of oil production contrasts with her predecessor, a banker and known dealmaker. She has been described as down to earth by former and current employees, differing from flamboyant energy CEOs.

LONGTIME DISCUSSIONS

Buying Anadarko was seen as the best way for Occidental to gain more acreage in the Permian shale basin, where it markets nearly a quarter of all barrels produced in the region.

When Chevron announced a deal on April 12 to buy Anadarko, Hollub gathered the merger team. They were shocked that Anadarko had accepted a bid that was $11 per share below what Occidental had privately offered, three of the people familiar with the discussions said.

“She thought, we’re in it to win it. Let’s make our offer public so their shareholders know what they passed up,” one of the sources said.

In a letter to Anadarko’s board of directors on April 24, Occidental said they “were surprised and disappointed” that Anadarko had not agreed to their previous two offers in April.

Anadarko executives, however, remained concerned that Occidental shareholders could scuttle the deal, leaving them without a buyer, two sources familiar with the situation said. The board of directors wanted to stick with Chevron.

Just two days after sending the letter, Hollub was in Paris meeting with Total CEO Patrick Pouyanne to discuss Anadarko’s African assets, according to two sources familiar with the discussions.

The two already had a relationship stemming from the Dolphin Gas Project, a Middle East cross-border gas initiative where both companies have an equal share. Total had made it known to her that they coveted Anadarko’s properties, including a liquefied natural gas project in Mozambique.

“Vicki wanted to show that she could quickly put the cash on the table. In less than 10 days she had the cash ready,” a Paris-based source said.

Omaha, Nebraska was next. Buffett is known for moving quickly when a deal piques his interest, but he tends to avoid getting involved in hostile takeover bids.

The meeting was set up by BofA CEO Brian Moynihan, whose bank was helping to provide financing for the Anadarko deal. Hollub later said Buffett was “warm and wonderful” in their meeting, a source familiar with the discussions said.

Buffett, cash flush and on the hunt for new deals, agreed to provide $10 billion in financing in return for an 8 percent premium, a concern for dividend-focused shareholders who believe the terms are too pricey.

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The two deals enabled Hollub to submit a revised offer on Sunday, increasing the cash component from 50 percent to 78 percent.

On Thursday, Chevron said it would collect its $1 billion termination fee and walk away from the negotiations.

(For a graphic on ‘Oxy-Anadarko would be third largest U.S. oil company’ click tmsnrt.rs/2VSZ3hY)

Reporting By Devika Krishna Kumar and Jessica Resnick Ault; additional reporting by David Gaffen, Bate Felix, David J. French, Jennifer Hiller, Jennifer Ablan; Writing by David Gaffen; Editing by Ross Colvin

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