West Texas Intermediate gained for a second day after an Energy Information Administration report showed growth in U.S. inventories slowed. Brent climbed.
Stockpiles rose 2.06 million barrels in the seven days ended Oct. 24, following a combined increase of 21 million in the previous three weeks, the EIA said. Refineries reduced their operating rate by 0.1 percentage point. Brent reached a two-week high after OPEC’s Secretary-General said the recent plunge in prices doesn’t reflect the balance between supply and demand.
“Crude may be establishing a floor here on a short-term basis,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Refinery utilization rates are probably at their nadir. Inventories will stop building by a dramatic amount simply due to the fact that refineries will start consuming more.” WTI for December delivery rose 78 cents, or 1 percent, to end at $82.20 a barrel on the New York Mercantile Exchange. The volume of all futures was 9.4 percent below the 100-day average.
Brent for December settlement gained $1.09, or 1.3 percent, to $87.12 a barrel on the London-based ICE Futures Europe exchange, the highest close since Oct. 13. Volume was 8.6 percent below the 100-day average.
Fed Statement
Prices pared gains after the Federal Reserve confirmed it will end an asset-purchase program that has added $1.66 trillion to its balance sheet. The central bank will keep interest rates low for a “considerable time,” according to a statement released after a two-day policy meeting.
Crude stockpiles climbed to 379.7 million barrels last week, the EIA, the Energy Department’s statistical arm, said. The gain was smaller than the 3.65 million expected by analysts surveyed by Bloomberg. The utilization rate dropped to 86.6 percent from 86.7 percent. U.S. plants typically schedule maintenance for September and October.
“The pace of the builds is slowing,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. Most of the inventory increase came from the West Coast, known as PADD 5. Supplies there grew by 1.77 million, according to the EIA. Stockpiles in the Gulf Coast, or PADD 3, dropped 956,000 barrels. More than 50 percent of U.S. refinery capacity is located in the region.
Supplies at Cushing, Oklahoma, the delivery point for WTI futures, rose 776,000 barrels to 21.4 million. The hub is in PADD 2.
Gasoline, Diesel
The EIA also reported that gasoline inventories fell 1.24 million to 203.1 million and distillate fuel, including diesel and heating oil, dropped 5.29 million to 120.4 million. Analysts expected a decline of 900,000 for gasoline and 1.4 million barrels for distillate.
Gasoline futures gained 1.1 percent to $2.2207 a gallon on the Nymex. Ultra-low sulfur diesel rose 1.7 percent to $2.535. “You had a huge decline in distillate inventories,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Pretty soon you are going to see refineries ramping up operations.”
Both WTI and Brent collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil. Global supplies are rising as the U.S. pumps the most oil in almost three decades and Russia’s output nears a post-Soviet record.
OPEC Output
“We see that demand is still growing, that supply is also growing, but the magnitude in the increase in supply does not really reflect this 25 percent change in the market,” OPEC’s Abdalla El-Badri said in London today. “Unfortunately everybody is panicking.” As much as 50 percent of tight oil output will be “out of the market” at current prices, while the Organization of Petroleum Exporting Countries is not in a critical situation, El-Badri said.
OPEC is currently producing about 30 million barrels a day, according to El-Badri. The group, which next meets Nov. 27 in Vienna, will need to pump 29 million to 30 million barrels a day next year to meet demand, he said. “OPEC is trying to talk the market up a little bit,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
Algeria Bucks OPEC Discounts as Crude Goes to Venezuela
Algeria raised its oil price for November to the highest in five months after adding Venezuela, fellow OPEC member and holder of the world’s largest crude reserves, to the list of its mostly European customers.
The North African country will sell its Saharan Blend crude at a premium of 70 cents a barrel to Dated Brent, the benchmark for more than half of the world’s oil, according to a price list obtained by Bloomberg. That’s the highest level since June and an increase from 20 cents in October. The first supertanker of Algerian crude arrived in Venezuela on Oct. 25, according to ship tracking data. “It’s primarily due to its sales to Venezuela” that Algeria has been able to raise premiums, Amrita Sen, chief oil market analyst at Energy Aspects in London, said by e-mail yesterday. “Otherwise, demand for light crudes has been super weak.”
The Organization of Petroleum Exporting Countries’ biggest producers, including Saudi Arabia, Iraq and Iran, cut the official selling prices of their crude exports for November amid a glut of new supply from U.S. shale reservoirs and growing competition for market share in Asia.
West Texas Intermediate crude for December delivery rose as much as $1.30 to $82.72 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.24 at 3:01 p.m. London time. Brent added $1.18, or 1.4 percent, to $87.21 a barrel on the London-based ICE Futures Europe exchange.
Venezuela Blending
Venezuela is importing light oil to dilute its own heavy Orinoco crude and make it more attractive to refiners. The supertanker Carabobo loaded 2 million barrels of Saharan Blend crude in Algeria on Oct. 11 for delivery to the port of Jose in Venezuela, two people with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly, said on Oct. 15. The vessel arrived in Venezuela on Oct. 25, according to ship tracking data.
Petroleos de Venezuela SA booked a second tanker last week to load the same grade of Algerian crude, according to three shipping reports obtained by Bloomberg. Blending Venezuela’s heavy crude with imports of lighter oil, instead of using the refined product naphtha, delivers better returns, PDVSA, as the state-run company is known, said in a statement on Oct. 19.
PDVSA’s press office did not answer two calls from Bloomberg yesterday. Sonatrach, Algeria’s state oil and gas company, also did not respond to two calls, today and yesterday.
Nigeria Prices
Nigeria and Libya are the only other OPEC member to also raise official selling prices of crude amid higher seasonal demand from refiners in Europe. Africa’s largest oil producer raised the premiums of Qua Iboe and Bonny Light crudes to $1.20 a barrel over Dated Brent for November, from $1.10 in October, according to state-run Nigerian National Petroleum Co.
The West African nation may struggle to sell shipments at this level and may have to reduce premiums, Sen said. Nigeria has just finished finding buyers for the 68 cargoes on its November crude-loading program, a slower pace of sales than normal, two traders with knowledge of the matter, who asked not to be identified because they aren’t authorized to speak publicly, said yesterday.
Algeria, Nigeria and Libya are more competitive than OPEC’s Persian Gulf producers in markets around the Atlantic because their transportation costs are lower. Libya raised its Es-Sider crude to parity with Dated Brent for November, the highest since June 2013, according to a price list obtained by Bloomberg today. The crude was selling in October at a discount of $1.10 a barrel.
‘Critical Situation’
Iran will sell its oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia, OPEC’s biggest producer. Iraq will sell its Basrah Light crude to Asia at the biggest discount since January 2009.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The group is due to meet on Nov. 27 to assess market conditions and production levels. OPEC doesn’t think the decline in oil prices is putting the group in a “critical situation,” the organization’s Secretary-General Abdalla El-Badri said at a conference in London today. Current prices of about $85 a barrel will first affect producers from tight reservoirs because they have higher costs than OPEC countries pumping from conventional fields, he said.
China Silver Premium Grows on ‘Stereo’ Exports
Silver in China has been the most expensive relative to London in about three years as exporters stepped up overseas shipments to qualify for a tax rebate, draining inventories of the metal.
The CHART tracks the price difference between an ounce of silver in Shanghai and London, with the Chinese price hitting a 17 percent premium this month and last, according to Shanghai Gold Exchange data. The spread was higher only twice in the last six years. The lower panel shows that supply in warehouses monitored by the Shanghai Futures Exchange have dropped to 115 metric tons, down 80 percent from this year’s peak in February. The decline is due to exporters boosting shipments by classifying ingot as acoustic wire, said Liu Xu, a precious-metals analyst at Capital Futures Co. in Beijing.
“It’s an open secret in the local silver industry that a lot of exports have been thinly-veiled attempts to profit from tax rebates,” Liu said. “There isn’t that much demand overseas for acoustic wire for stereos. Yet a lot of shipments this year have been labeled as wire.”
Silver-made electrical conductors, such as acoustic wire, are a category of finished product entitling exporters to a 17 percent tax rebate, an incentive paid by the government to encourage domestic high-end manufacturing.
China was mainly a net exporter of silver until 2010, when it swung to a net importer amid increased demand for silver powder from the solar-power industry, according to Beijing Antaike Information Development Co. The government started phasing out tax rebates for raw silver shipments that year, the metals researcher said in a report published Oct. 20.
The government may soon close the loophole as the higher local premium has also spurred smuggling of the metal back into the country, according to Liu. Shenzhen’s customs office said on Oct. 15 that it confiscated 400 kilograms of silver ingots smuggled in from Hong Kong. No one answered two calls yesterday to the General Administration of Customs’ press office.
Russia Buys Most Gold for Reserves Since Financial Crisis of ’98
Russia boosted gold reserves by the most since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.
The country expanded its stockpile, the world’s fifth-biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves, which overtook those of Switzerland and China this year, almost tripled since the end of 2005 and are at the highest since at least 1993, the data show.
A weakening ruble in the face of currency interventions is stoking speculation the Bank of Russia will accelerate its switch to a free float. The country, which defaulted on $40 billion of local debt in August 1998, is draining reserves as tumbling oil prices and U.S. and European sanctions over President Vladimir Putin’s intervention in Ukraine worsen the ruble’s losses and dollar shortage. Gold prices slid the most in 15 months in September.
“From the perspective of a sovereign which is concerned about aspects of geopolitical risk, it makes sense that they would have a bias toward physical gold,” Brian Lucey, a finance professor at Trinity College Dublin and formerly an economist for the Central Bank of Ireland, said today by phone. With lower gold prices, Russia may have viewed it “as good a time as any to pick it up,” he said.
2011 Record
Gold for immediate delivery slipped 6.1 percent in London last month, the most since June 2013, and reached this year’s low on Oct. 6, according to Bloomberg generic pricing. It traded at $1,228.05 an ounce today, 36 percent below its 2011 record. Prices averaged $1,237.96 last month, valuing Russian additions at $1.48 billion.
The Bank of Russia spent $65 billion this year to slow the ruble’s decline as the crisis in Ukraine soured relations with the U.S. and Europe and spurred capital outflows. Currency reserves held by the world’s largest energy exporter fell $68 billion this year to $443.8 billion on Oct. 17.
Russian policy makers sold $200 billion in seven months to prop up the ruble after the collapse of Lehman Brothers Holdings Inc. six years ago, slashing reserves by almost 40 percent. They don’t want to “repeat the experience” and may move faster to a free float and inflation targeting, Credit Suisse Group AG said in an Oct. 15 research note.
Central banks are adding gold to reserves again after reducing holdings for about two decades from the late 1980s. Nations may add as much as 500 tons to holdings this year, after increases of 409 tons last year and 544 tons in 2012, the London-based World Gold Council said in August.
Russian Production
Russia mined 248.8 tons of gold last year, ranking third among global producers after China and Australia, according to GFMS, a research unit of Thomson Reuters Corp. Bloomberg LP competes with Thomson Reuters in selling financial and legal information and trading systems.
Gold accounts for about 10 percent of Russia’s total reserves, according to the council. That compares with about 70 percent for the U.S. and Germany, the biggest bullion holders, the data show. Italy and France have the next-largest reserves.
“In most countries, the ratio of gold holdings compared to foreign-exchange reserves is still relatively low, so there’s still room to buy more gold,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said today by phone. “Buying gold might be a protection against devaluing currencies.”
source: Bloomberg
Stockpiles rose 2.06 million barrels in the seven days ended Oct. 24, following a combined increase of 21 million in the previous three weeks, the EIA said. Refineries reduced their operating rate by 0.1 percentage point. Brent reached a two-week high after OPEC’s Secretary-General said the recent plunge in prices doesn’t reflect the balance between supply and demand.
“Crude may be establishing a floor here on a short-term basis,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Refinery utilization rates are probably at their nadir. Inventories will stop building by a dramatic amount simply due to the fact that refineries will start consuming more.” WTI for December delivery rose 78 cents, or 1 percent, to end at $82.20 a barrel on the New York Mercantile Exchange. The volume of all futures was 9.4 percent below the 100-day average.
Brent for December settlement gained $1.09, or 1.3 percent, to $87.12 a barrel on the London-based ICE Futures Europe exchange, the highest close since Oct. 13. Volume was 8.6 percent below the 100-day average.
Fed Statement
Prices pared gains after the Federal Reserve confirmed it will end an asset-purchase program that has added $1.66 trillion to its balance sheet. The central bank will keep interest rates low for a “considerable time,” according to a statement released after a two-day policy meeting.
Crude stockpiles climbed to 379.7 million barrels last week, the EIA, the Energy Department’s statistical arm, said. The gain was smaller than the 3.65 million expected by analysts surveyed by Bloomberg. The utilization rate dropped to 86.6 percent from 86.7 percent. U.S. plants typically schedule maintenance for September and October.
“The pace of the builds is slowing,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. Most of the inventory increase came from the West Coast, known as PADD 5. Supplies there grew by 1.77 million, according to the EIA. Stockpiles in the Gulf Coast, or PADD 3, dropped 956,000 barrels. More than 50 percent of U.S. refinery capacity is located in the region.
Supplies at Cushing, Oklahoma, the delivery point for WTI futures, rose 776,000 barrels to 21.4 million. The hub is in PADD 2.
Gasoline, Diesel
The EIA also reported that gasoline inventories fell 1.24 million to 203.1 million and distillate fuel, including diesel and heating oil, dropped 5.29 million to 120.4 million. Analysts expected a decline of 900,000 for gasoline and 1.4 million barrels for distillate.
Gasoline futures gained 1.1 percent to $2.2207 a gallon on the Nymex. Ultra-low sulfur diesel rose 1.7 percent to $2.535. “You had a huge decline in distillate inventories,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “Pretty soon you are going to see refineries ramping up operations.”
Both WTI and Brent collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil. Global supplies are rising as the U.S. pumps the most oil in almost three decades and Russia’s output nears a post-Soviet record.
OPEC Output
“We see that demand is still growing, that supply is also growing, but the magnitude in the increase in supply does not really reflect this 25 percent change in the market,” OPEC’s Abdalla El-Badri said in London today. “Unfortunately everybody is panicking.” As much as 50 percent of tight oil output will be “out of the market” at current prices, while the Organization of Petroleum Exporting Countries is not in a critical situation, El-Badri said.
OPEC is currently producing about 30 million barrels a day, according to El-Badri. The group, which next meets Nov. 27 in Vienna, will need to pump 29 million to 30 million barrels a day next year to meet demand, he said. “OPEC is trying to talk the market up a little bit,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
Algeria Bucks OPEC Discounts as Crude Goes to Venezuela
Algeria raised its oil price for November to the highest in five months after adding Venezuela, fellow OPEC member and holder of the world’s largest crude reserves, to the list of its mostly European customers.
The North African country will sell its Saharan Blend crude at a premium of 70 cents a barrel to Dated Brent, the benchmark for more than half of the world’s oil, according to a price list obtained by Bloomberg. That’s the highest level since June and an increase from 20 cents in October. The first supertanker of Algerian crude arrived in Venezuela on Oct. 25, according to ship tracking data. “It’s primarily due to its sales to Venezuela” that Algeria has been able to raise premiums, Amrita Sen, chief oil market analyst at Energy Aspects in London, said by e-mail yesterday. “Otherwise, demand for light crudes has been super weak.”
The Organization of Petroleum Exporting Countries’ biggest producers, including Saudi Arabia, Iraq and Iran, cut the official selling prices of their crude exports for November amid a glut of new supply from U.S. shale reservoirs and growing competition for market share in Asia.
West Texas Intermediate crude for December delivery rose as much as $1.30 to $82.72 a barrel in electronic trading on the New York Mercantile Exchange and was at $82.24 at 3:01 p.m. London time. Brent added $1.18, or 1.4 percent, to $87.21 a barrel on the London-based ICE Futures Europe exchange.
Venezuela Blending
Venezuela is importing light oil to dilute its own heavy Orinoco crude and make it more attractive to refiners. The supertanker Carabobo loaded 2 million barrels of Saharan Blend crude in Algeria on Oct. 11 for delivery to the port of Jose in Venezuela, two people with knowledge of the matter, who asked not to be identified because they weren’t authorized to speak publicly, said on Oct. 15. The vessel arrived in Venezuela on Oct. 25, according to ship tracking data.
Petroleos de Venezuela SA booked a second tanker last week to load the same grade of Algerian crude, according to three shipping reports obtained by Bloomberg. Blending Venezuela’s heavy crude with imports of lighter oil, instead of using the refined product naphtha, delivers better returns, PDVSA, as the state-run company is known, said in a statement on Oct. 19.
PDVSA’s press office did not answer two calls from Bloomberg yesterday. Sonatrach, Algeria’s state oil and gas company, also did not respond to two calls, today and yesterday.
Nigeria Prices
Nigeria and Libya are the only other OPEC member to also raise official selling prices of crude amid higher seasonal demand from refiners in Europe. Africa’s largest oil producer raised the premiums of Qua Iboe and Bonny Light crudes to $1.20 a barrel over Dated Brent for November, from $1.10 in October, according to state-run Nigerian National Petroleum Co.
The West African nation may struggle to sell shipments at this level and may have to reduce premiums, Sen said. Nigeria has just finished finding buyers for the 68 cargoes on its November crude-loading program, a slower pace of sales than normal, two traders with knowledge of the matter, who asked not to be identified because they aren’t authorized to speak publicly, said yesterday.
Algeria, Nigeria and Libya are more competitive than OPEC’s Persian Gulf producers in markets around the Atlantic because their transportation costs are lower. Libya raised its Es-Sider crude to parity with Dated Brent for November, the highest since June 2013, according to a price list obtained by Bloomberg today. The crude was selling in October at a discount of $1.10 a barrel.
‘Critical Situation’
Iran will sell its oil to Asia in November at the biggest discount in almost six years, matching cuts by Saudi Arabia, OPEC’s biggest producer. Iraq will sell its Basrah Light crude to Asia at the biggest discount since January 2009.
OPEC’s members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. The group is due to meet on Nov. 27 to assess market conditions and production levels. OPEC doesn’t think the decline in oil prices is putting the group in a “critical situation,” the organization’s Secretary-General Abdalla El-Badri said at a conference in London today. Current prices of about $85 a barrel will first affect producers from tight reservoirs because they have higher costs than OPEC countries pumping from conventional fields, he said.
China Silver Premium Grows on ‘Stereo’ Exports
Silver in China has been the most expensive relative to London in about three years as exporters stepped up overseas shipments to qualify for a tax rebate, draining inventories of the metal.
The CHART tracks the price difference between an ounce of silver in Shanghai and London, with the Chinese price hitting a 17 percent premium this month and last, according to Shanghai Gold Exchange data. The spread was higher only twice in the last six years. The lower panel shows that supply in warehouses monitored by the Shanghai Futures Exchange have dropped to 115 metric tons, down 80 percent from this year’s peak in February. The decline is due to exporters boosting shipments by classifying ingot as acoustic wire, said Liu Xu, a precious-metals analyst at Capital Futures Co. in Beijing.
“It’s an open secret in the local silver industry that a lot of exports have been thinly-veiled attempts to profit from tax rebates,” Liu said. “There isn’t that much demand overseas for acoustic wire for stereos. Yet a lot of shipments this year have been labeled as wire.”
Silver-made electrical conductors, such as acoustic wire, are a category of finished product entitling exporters to a 17 percent tax rebate, an incentive paid by the government to encourage domestic high-end manufacturing.
China was mainly a net exporter of silver until 2010, when it swung to a net importer amid increased demand for silver powder from the solar-power industry, according to Beijing Antaike Information Development Co. The government started phasing out tax rebates for raw silver shipments that year, the metals researcher said in a report published Oct. 20.
The government may soon close the loophole as the higher local premium has also spurred smuggling of the metal back into the country, according to Liu. Shenzhen’s customs office said on Oct. 15 that it confiscated 400 kilograms of silver ingots smuggled in from Hong Kong. No one answered two calls yesterday to the General Administration of Customs’ press office.
Russia Buys Most Gold for Reserves Since Financial Crisis of ’98
Russia boosted gold reserves by the most since defaulting on local debt in 1998, driving its bullion holdings to the largest in at least two decades.
The country expanded its stockpile, the world’s fifth-biggest, by 37.2 metric tons in September to 1,149.8 tons, according to data on the International Monetary Fund’s website. The increase, valued at about $1.5 billion, was the biggest since November 1998. Russian reserves, which overtook those of Switzerland and China this year, almost tripled since the end of 2005 and are at the highest since at least 1993, the data show.
A weakening ruble in the face of currency interventions is stoking speculation the Bank of Russia will accelerate its switch to a free float. The country, which defaulted on $40 billion of local debt in August 1998, is draining reserves as tumbling oil prices and U.S. and European sanctions over President Vladimir Putin’s intervention in Ukraine worsen the ruble’s losses and dollar shortage. Gold prices slid the most in 15 months in September.
“From the perspective of a sovereign which is concerned about aspects of geopolitical risk, it makes sense that they would have a bias toward physical gold,” Brian Lucey, a finance professor at Trinity College Dublin and formerly an economist for the Central Bank of Ireland, said today by phone. With lower gold prices, Russia may have viewed it “as good a time as any to pick it up,” he said.
2011 Record
Gold for immediate delivery slipped 6.1 percent in London last month, the most since June 2013, and reached this year’s low on Oct. 6, according to Bloomberg generic pricing. It traded at $1,228.05 an ounce today, 36 percent below its 2011 record. Prices averaged $1,237.96 last month, valuing Russian additions at $1.48 billion.
The Bank of Russia spent $65 billion this year to slow the ruble’s decline as the crisis in Ukraine soured relations with the U.S. and Europe and spurred capital outflows. Currency reserves held by the world’s largest energy exporter fell $68 billion this year to $443.8 billion on Oct. 17.
Russian policy makers sold $200 billion in seven months to prop up the ruble after the collapse of Lehman Brothers Holdings Inc. six years ago, slashing reserves by almost 40 percent. They don’t want to “repeat the experience” and may move faster to a free float and inflation targeting, Credit Suisse Group AG said in an Oct. 15 research note.
Central banks are adding gold to reserves again after reducing holdings for about two decades from the late 1980s. Nations may add as much as 500 tons to holdings this year, after increases of 409 tons last year and 544 tons in 2012, the London-based World Gold Council said in August.
Russian Production
Russia mined 248.8 tons of gold last year, ranking third among global producers after China and Australia, according to GFMS, a research unit of Thomson Reuters Corp. Bloomberg LP competes with Thomson Reuters in selling financial and legal information and trading systems.
Gold accounts for about 10 percent of Russia’s total reserves, according to the council. That compares with about 70 percent for the U.S. and Germany, the biggest bullion holders, the data show. Italy and France have the next-largest reserves.
“In most countries, the ratio of gold holdings compared to foreign-exchange reserves is still relatively low, so there’s still room to buy more gold,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said today by phone. “Buying gold might be a protection against devaluing currencies.”
source: Bloomberg