U.S. "ZERO" IMPACT
Oil held losses after falling from the highest price in a week amid speculation that a U.S. deal to end a 40-year ban on crude exports will fail to alleviate the nation's supply glut.
Futures were down 0.7 percent in New York after earlier declining as much as 1.7 percent. Congressional leaders agreed on a fiscal plan that would avert a government shutdown and lift restrictions on shipping domestic crude overseas, House Speaker Paul Ryan told fellow Republicans during a closed-door meeting. Any change in U.S. oil policy will have "zero" impact on the market because the country remains an importer, OPEC Secretary-General Abdalla El-Badri said Tuesday.
Oil is trading near levels last seen during the global financial crisis after the Organization of Petroleum Exporting Countries effectively abandoned production limits to defend market share. While the U.S. repealing restrictions on crude exports could allow unfettered access to supplies, prices aren't competitive enough to attract foreign buyers, according to Energy Aspects Ltd. The nation's stockpiles are still more than 120 million barrels above the five-year seasonal average.
"The deal to lift the crude ban is a significant change in U.S. policy, but in terms of the near-term impact on prices, we expect that to be blotchy and sentiment-driven," Virendra Chauhan at Energy Aspects, a U.K. consultant, said by phone in Singapore. "The incentive for international buyers to rush to the U.S. to pick up crude is quite limited at the moment."
WTI for January delivery dropped as much as 62 cents to $36.73 a barrel on the New York Mercantile Exchange and was at $37.09 at 1:18 p.m. in Singapore. The contract climbed $1.04 to $37.35 on Tuesday. The volume of all futures traded was about 24 percent above the 100-day average. Prices are down 30 percent this year, set for a second annual loss.
Brent for February settlement slid as much as 35 cents, or 0.9 percent, to $38.38 a barrel on the London-based ICE Futures Europe exchange. The January contract, which expires Wednesday, was 19 cents lower at $38.26.
The U.S. restricted crude exports during the energy shortages of the 1970s. Producers including Continental Resources Inc., Pioneer Natural Resources Co. and ConocoPhillips have been pressing for an end to rules that block the export of most raw, unprocessed oil while not limiting overseas sales of refined products such as gasoline and diesel.
After days of bipartisan negotiations, the House and Senate on Tuesday evening reached a deal on tax and spending plans that included an end to the oil-trade limits, according to Representative Reid Ribble, a Wisconsin Republican. Representative John Kline, a Minnesota Republican, said after meeting with fellow party members that the House plans to vote Thursday. The ban will be lifted if Congress approves the deal and President Barack Obama adds his signature.
The attractiveness of U.S. exports to foreign buyers depends on the price difference between domestic and overseas crude, in particular the spread between WTI and Brent. The U.S. benchmark grade closed Tuesday at $1.10 a barrel below the European marker, the smallest discount since January. It was as wide as $27.88 in 2011.
While lifting the ban would limit the size of the discount, WTI would have to be at least $4 a barrel below Brent for exports to work, depending on the cost of shipping, Energy Aspects analysts wrote in a note on Friday.
"If you look at where the WTI-Brent spread is today, it's already close to transportation cost," Chauhan said.
U.S. crude inventories gained by 2.3 million barrels in the week ended Dec. 11, the American Petroleum Institute data was said to have reported Tuesday. Stockpiles probably decreased by 1.5 million, according to the median estimate in a Bloomberg survey of 11 analysts before Energy Information Administration data Wednesday.
"If U.S. supplies expanded, it can be a strong bearish factor because seasonally it's the time for stockpiles to shrink," said Hong Sung Ki, a commodities analyst at Samsung Futures Inc. in Seoul.
Oil prices also retreated as on signs Iran may be moving closer to boosting crude sales as United Nations nuclear monitors ended their 12-year probe of the country's research into atomic-weapon technologies.
The International Atomic Energy Agency's 35-member board of governors in Vienna closed the investigation Tuesday without a vote following four hours of debate. It reported Dec. 2 that Iranian scientists had experimented with nuclear-bomb technologies without ever taking the final steps needed to produce a weapon.
There's "absolutely no chance" Iran will delay its plan to increase crude exports, Amir Hossein Zamaninia, the deputy oil minister for international and commerce affairs, said Dec. 13.
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BLOOMBERG - As Saudi Arabia led OPEC’s output cuts this year to shrink a global glut, it’s lost out on market share in the world’s biggest energy consumer. Russia in September retained the top Chinese supplier spot for the seventh straight month, while the kingdom was third.
PLATTS - The quality of Russia's key Urals crude exports towards Europe will continue to fall next year as more of the country's low-sulfur oil flows are diverted eastward to China, Russian national oil pipeline operator Transneft warned.
FT - OCI — the world’s third-largest polysilicon maker by capacity and South Korea’s biggest — this month reported a 3,373 per cent increase in operating profit to Won78.7bn ($72m) for the July-September quarter, its best performance in five years. Rival Hanwha Chemical saw third-quarter net profit jump 25 per cent to a record Won252bn.
U.S. Rig Count is up 330 rigs from last year's count of 593, with oil rigs up 273, gas rigs up 58, and miscellaneous rigs down 1 to 0. Canada Rig Count is up 41 rigs from last year's count of 174, with oil rigs up 13, gas rigs up 30, and miscellaneous rigs down 2 to 2.