Headlines
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Gold stays around 950 $/oz
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Bank holidays let LME closed on Monday
Brent and Distillates
On Monday the dive in China's stock market raised new concerns about the country's slackening appetite for energy and raw materials and returned crude to 70$/b level.
The International Energy Agency projects that Chinese oil demand growth of 320 kb/d, i.e. 4%, in 2010 will contribute nearly a quarter of the expected rebound in global consumption.
Bulging global oil inventories remain a major concern for OPEC member states, even as signs of a possible the global economic recovery grow, and will likely be a topic when the group meets next week in Vienna, Iran's OPEC governor said on Monday.
The U.S. climate bill would cost Valero, the country's largest oil refiner, more annually than it has ever made in a year, forcing it to warn consumers at filling stations that fuel prices will rise, the company's top government affairs official said.
Repeated delays in the bidding for rights to exploit the Venezuelan Orinoco Belt – which was postponed for a third time at the end of last month – reflect investor concerns about political risk, enormous financing costs and the profitability of the projects. Lower oil prices and a stuttering global economy only add to the problem. Chinese, Russian, Indian and Brazilian state oil companies are competing together with oil majors for access to the Orinoco’s Carabobo block, which could require collective investment of between 30 - 50 bln.$ potentially producing up to 1.2mln.b/d.
But in spite of the first opportunity to invest in Venezuela’s vast oil reserves in more than a decade, enthusiasm has been tempered by a long list of concerns.
At the top were fears about the unpredictability of President H. Chávez as he prefers his socialist revolution. Also tax rates for oil companies have been increased four times since 2004, while PDVSA, the Venezuelan state oil company, has been negligent at paying dividends to partners in joint ventures. Another serious obstacle relates to the tough conditions in international credit markets. In spite of companies being allowed at most a 40 % share in each of the projects up for auction, with PDVSA maintaining 60%, they are being asked to pay 100 % of the financing.
Small oil companies say they are likely to increase exploration onshore in Britain, spurred on by low capital expenditure and lifting costs, as well as by a government tax cut. In April, Britain cut the tax rate to 30% from 50% on small oil fields, estimating it could unlock about 400 mln.b of North Sea oil plus an unspecified amount onshore with a view to securing reliable energy supplies.
Exxon Mobil has restarted crude oil production from the Cepu block in Central Java with output at around 1.5 kb/d, a company official said on Tuesday. Indonesia, which has turned into a net importer of crude oil in recent years, is counting on the field in Central Java to help make up for flagging output from its ageing fields.
