OIL DEMAND UP
U.S. oil prices rose to a fresh six-month high in topsy-turvy action with traders divided about whether the oil market is balancing faster than expected or on its way to another major retreat.
A report from the International Energy Agency was the one clear new catalyst in the market Thursday, but even it drew mixed interpretations. The Paris-based agency said global oil stocks will experience a "dramatic reduction" in the second half of the year, but also warned that they will continue to increase in the first half of the year as Iran ramps up its production, adding to the nearly two years of oversupply.
Oil prices initially rose on the report as many saw it as an affirmation of the recent 76% rally in crude prices and the signs that oversupply is waning. But the market also spent a good chunk of U.S. trading hours in retreat with brokers saying some traders took profits from recent gains or sold expecting that oil's ascent to $50 a barrel will bring more producers selling into the market.
The crude markets ended higher for their third straight winning session. Light, sweet crude for June delivery settled up 47 cents at $46.70 a barrel on the New York Mercantile Exchange, the highest mark since November. Brent, the global benchmark, rose 48 cents, or 1%, to $48.08 a barrel on ICE Futures Europe.
Many traders already see the market in "rebalancing mode," said Dominick Chirichella, analyst at the Energy Management Institute. The IEA's report confirms that, and contradicts many bears who have predicted demand may not be strong enough to help absorb the oversupply, with strong demand gains in India, China and Russia, traders said. U.S. demand already set records in March.
"Demand is solid world-wide," said Tim Rudderow, president of Mount Lucas Management, which oversees $1.6 billion in assets. "Even in the U.S., we have given up on high-mileage [per gallon] cars and jumped back into our trucks and SUVs."
Production in most of the world continues to decline, the IEA said, led by falling output in the U.S. It added that recent outages in Nigeria, Ghana and Canada have exceeded 1.5 million barrels a day so far.
But it also said combined output of the Organization of the Petroleum Exporting Countries climbed in April to 32.76 million barrels a day, the highest since April 2008. The rise in Iran's oil production and exports after the lifting of international sanctions has been faster than expected, the agency added. Iran increased daily oil output by 300,000 barrels in April to 3.56 million barrels a day, a level last achieved in November 2011.
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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.