Saturday, January 31, 2015

Oil surges 8 percent as U.S. rig count plunges, shorts scramble

(Reuters) - Oil prices roared back from six-year lows on Friday, rocketing more than 8 percent as a record weekly decline in U.S. oil drilling fueled a frenzy of short-covering.
In a rally that may spur speculation that a seven-month price collapse has ended, global benchmark Brent crude shot up to more than $53 per barrel, its highest in more than three weeks in its biggest one-day gain since 2009.
The late-session surge was primed by Baker Hughes data showing the number of rigs drilling for oil in the United States fell by 94 - or 7 percent - this week. Earlier gains were fueled by reports of Islamic State militants striking at Kurdish forces southwest of the oil-rich city of Kirkuk.
Brent LCOc1 settled up $3.86 at $52.99 a barrel, after running to as high as $53.08.
U.S. CLc1 oil futures finished up $3.71 at $48.24, soaring by nearly $3 in a final frenzied hour and ending a two-week stretch of relatively steady prices, the longest break since a seven-month rout kicked off last summer. On Thursday prices had touched a six-year low under $44 a barrel.
Poised for a bounce many thought was overdue, short traders raced to cover their positions on fears that the rout, sparked by massive U.S. shale crude supplies, was nearing its end.
"The rig count drop was a lot more than people expected and it really got the market going," said Phil Flynn, analyst at Price Futures Group in Chicago.
According to Baker Hughes, the decline in oil drilling rigs was the most since it began keeping records in 1987. With drillers having idled about 24 percent of their oil drilling rigs since the summer, some traders may be betting that an anticipated slowdown in U.S. oil production is nearer than expected.
Some are not convinced that the sell-off in oil is over. The rout began in June when Brent peaked at over $115 a barrel and accelerated in November after OPEC refused to cut its production.
"There was a lot of short-covering before the month end from people wanting to take profit from the $40-odd lows, so it's not surprising that we rallied," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York. But it will take a while for production to respond to lower drilling.
"This doesn't change the fundamental outlook in oil. We are still about 2 million barrels oversupplied."
Production from OPEC, or the Organization of the Petroleum Exporting Countries, rose in January to 30.37 million barrels per day (bpd), a Reuters poll showed, a sign that key members of the group were resolute about defending their market share.
A Reuters poll shows oil prices may post only a mild recovery in the second half of the year, with prices still averaging less in 2015 than during the global financial crisis. OILPOLL
Joseph Posillico, senior vice president of energy futures at Jefferies in New York, also warned of a short-term, short-covering rally that could be quickly reversed."This is just the market being the market and we could give these all back in the next few sessions."

Energy may see further weakness as key names report

(Reuters) - Stock prices in the U.S. energy sector have been under pressure in 2015, and there could be more bad news to come when several key players report their fourth-quarter results next week.
The group has been falling alongside crude oil prices, which are down about 60 percent since June. That drop has led to not only weaker shares - the S&P Energy index .SPNY is one of the worst-performing groups of 2015, and it was last year's worst - but also sharply lower earnings estimates for both the current quarter and the full year.
To be sure, some see long-term strength in the sector, and energy names are among the most undervalued in the S&P 500 per StarMine's measurement of intrinsic value, which looks at anticipated growth over the next decade.
But in the near-term, many analysts feel the earnings revisions have not been severe enough, and that the bar, while lower, is still too high for companies to clear. Further disappointments could lead to continued weakness in the group.
Energy company earnings are seen tumbling 25 percent in the fourth quarter, according to Thomson Reuters data, a bigger decline than the drop of 19.8 percent forecast at the start of the year. For the full year, earnings are seen down almost 45 percent, nearly twice the decline of 23.3 percent forecast on Jan. 1.
Nick Sargen, chief economist at Fort Washington Investment Advisors in Cincinnati, said it was common for earnings worries to be assuaged as companies beat the lowered expectations, "but this time, we're getting validation of those worries."
The weakness in oil contributed to Royal Dutch Shell (RDSa.L) missing profit forecasts by more than 20 percent this week. While some companies did top adjusted earnings forecasts, including ConocoPhillips (COP.N) and Occidental Petroleum (OXY.N), both companies slashed their 2015 exploration spending plans, a bearish signal about future growth prospects.
Heavy machinery maker Caterpillar Inc (CAT.N) also reported disappointing results this week, with oil's weakness weighing on its energy equipment division.
"In the past, we would have nervousness followed by a sigh of relief. This quarter I’m less sure we’ll get that sigh," said Sargen, who helps oversee about $48 billion in assets.
Oil's decline is seen as a positive for other sectors, and cheap gas prices contributed to strong recent readings of consumer sentiment. Since Jan. 1, earnings growth expectations for the S&P 500 overall have risen to 4.7 percent, from 4.2 percent.
The big name reporting next week is Exxon Mobil Corp (XOM.N). Since Jan. 21, seven of the 18 analysts with an earnings forecast for Exxon have revised estimates, according to StarMine, with forecasts dropping by an average of 5.5 percent. Two of three analysts with revenue outlooks have changed their views, with estimates falling 7.3 percent on average.
Anadarko Petroleum (APC.N), which also reports next week, has seen similar cuts to forecasts, with 23 of the 29 analysts with earnings expectations revising their views, for an average drop of 9.3 percent.
"Shell was the only company we expected to show profit growth this quarter, but it missed by quite a bit, which really raises concerns," said Brian Youngberg, senior energy analyst at Edward Jones in St. Louis. "I wouldn't be surprised if estimates kept coming down."

Friday, January 30, 2015

Indonesia Narrows Auto Output Gap With Thailand, Set to Take Regional Crown

Kuala Lumpur/Jakarta. Indonesia narrowed the gap in car output with Thailand, Southeast Asia’s automaking hub, to its smallest ever margin last year in percentage terms and is expected to overtake the Thai industry within a decade.

Indonesian auto production grew 7 percent in 2014 to 1.30 million vehicles while Thai output, hit by political turmoil, shrank 23 percent to 1.88 million.

That put Indonesian output at 69 percent of the Thai total, versus only 43 percent in 2012, according to data compiled by ASEAN Auto Federation, Indonesia’s industry association Gaikindo and Federation of Thai Industries.

Indonesia, Southeast Asia’s largest economy, has already surpassed Thailand as the region’s largest auto market, and prospects for reform and stability, bolstered under the three-month-old government of President Joko Widodo, have lured General Motors Co, Tata Motors Ltd and others to build plants there.

That will help to push Indonesia past Thailand in output in the next seven to 10 years, says Chukiat Wongtaveerat, consulting manager at Ipsos Business Consulting’s Bangkok Office.

For now, Thai auto production is expected to rebound: a spokesman for the Federation of Thai 
Industries’ Auto Industry Club told Reuters last week that output would climb 17 percent this year to 2.2 million vehicles. And Chukiat said Thailand would remain a major auto industry player well into the future with its well-developed supply chain.

“Even when Indonesia overtakes Thailand’s automotive production output, Thailand will still be a dominant player, with its component manufacturers providing many of the parts required by the assemblers in Indonesia,” Chukiat said.

“The challenge for Indonesia is to raise the quality of its product to be suitable for the global market, and to develop its domestic supply chain to match the quality of Thailand.” Additional reporting by Pairat Temphairojana in Bangkok.


BP to Hand Back Two Exploration Blocks to Indonesia on Risk Concerns

Jakarta. UK-listed energy giant BP has decided to relinquish two exploration blocks to Indonesia, after a survey of the blocks found them to be high risk, the company said on Friday.

“Following the result of the 3D seismic evaluation, earlier this quarter we have made the decision to relinquish both West Aru I and West Aru II blocks,” BP Indonesia head of country Dharmawan Samsu told Reuters via email.

“The evaluation suggests that these blocks are both technically very high risk and commercially very challenging.”

BP was awarded rights to explore the two blocks, in eastern Indonesia’s Maluku province, in November 2011, the company website says. The water depths in the two blocks range from 200 metres up to 2,500 metres, it says.


Adaro Posts Slower Growth in Coal Sales Volume, Production in 2014

Jakarta. Adaro Energy, one of the country’s largest coal miners, booked a slower growth in coal sales and production last year amidst a persistent decline in global coal prices.

In a statement filed at the Indonesian Stock Exchange (IDX) on Friday, the miner reported that sales rose 7 percent to 57.02 million metric tons of coal last year. It saw 10 percent growth in coal sales 2013.

“We sold 14.65 million tons of coal during the quarter to achieve 57.02 million tons of sales for the year as we continued to see good demand for our coal, particularly from Indonesia and India,” the head of investor relations at Adaro Energy, Cameron Tough, said in the statement.

About 22 percent of Adaro Energy’s coal was sold to customers in Indonesia, while 15 percent went to India. Buyers from Japan and China bought 12 percent and 10 percent, respectively.
Growth in coal production also lagged last year, mostly due to a 27 percent drop at Adaro’s mine in Wara, South Kalimantan.

Last year, Adaro Energy produced 56.21 million tons of coal, 8 percent more than in 2013. In comparison, production grew 11 percent in 2013 from 2012.

The listed company aims to produce up to 58 million tons of coal this year, or 3.6 percent higher than last year.

“Our focus in 2015 is to continue to look for cost reduction, maintain reliability of supply to our customers, and improve efficiency and productivity in each part of our coal supply chain,” Tough said.

He projected that purchases from India and Indonesia would continue to bolster growth in Adaro Energy this year, noting a  steady rise in demands in both countries.

“Indian coal imports are expected to continue to grow in 2015 due to lower than forecast domestic supply and continued demand growth,” he said.

The miner’s bullish outlook on future coal demand in Indonesia is also backed by the government’s plans to roll out new coal-powered power plants, according to Tough. The government has a goal to build up to 35,000 megawatts of power plants in the next five years.


OPEC oil output rises in January as key members stand firm: survey

(Reuters) - OPEC's oil supply has risen this month due to more Angolan exports and steady to higher output in Saudi Arabia and other Gulf producers, a Reuters survey showed, a sign key members are standing firm in refusing to prop up prices.
The Organization of the Petroleum Exporting Countries at a November meeting decided to focus on market share rather than cutting output, despite concerns from members such as Iran and Venezuela about falling oil revenue.
Supply from OPEC has averaged 30.37 million barrels per day (bpd) in January, up from a revised 30.24 million bpd in December, according to the survey based on shipping data and information from sources at oil companies, OPEC and consultants.
At the Nov. 27 meeting, OPEC retained its output target of 30 million bpd, sending oil prices to a four-year low close to $71 a barrel. Crude since fell to a near six-year low of $45.19 on Jan. 13 and was trading above $49 on Friday.
OPEC Secretary General Abdulla al-Badri, speaking in London on Monday, defended the no-cut strategy and said prices may have reached a floor, despite oversupply. Other OPEC delegates have since echoed this message.
"Prices are stabilizing," said a delegate from a Gulf producer. "But the world economy is not very strong and stocks are too high."
The largest boost this month has come from Angola, which pumped 1.80 million bpd and exported about 57 cargoes, up 160,000 bpd from December. Output would have been higher without some cargo delays, including of new crude Sangos.
OPEC's other West African producer, Nigeria, also managed to boost exports, the survey showed, although the increase was restrained by outages of the Forcados and Nembe Creek pipelines.
Smaller increases have come from Kuwait, Qatar and the United Arab Emirates.
Output in top OPEC exporter Saudi Arabia has been flat to slightly higher, sources said. Saudi Aramco Chief Executive Khalid al-Falih said on Tuesday production was currently at 9.8 million bpd, although it was unclear if that was the daily rate or the January average.
"Steady is what I'm seeing," said an industry source who tracks Saudi supply. "Exports are a bit lower and this is most likely offset by slightly higher refinery runs."
The largest reduction this month has come from Iraq, where southern oil exports slipped from December's record high and flows from northern Iraq also declined, according to loading data and an industry source.
Exports are likely to hit new records in coming months, technical problems and weather delays permitting. A loading program schedules record southern exports in February.
OPEC's other country with a notable decline in output this month is Libya, where ports and oilfields have been shut due to fighting and supply fell further in January to 350,000 bpd.
For a table on OPEC oil output, click on

Chevron's profit beats as chemical sales offset cheap oil

(Reuters) - Chevron Corp (CVX.N), the second-largest U.S. oil producer, reported a higher-than-expected quarterly profit on Friday as sales of chemicals, lubricants and other refined products helped offset plunging crude prices CLc1.
That drop in crude prices, about 60 percent since June, has eroded margins across the oil industry and forced scores of companies to slash spending budgets. Royal Dutch Shell(RDSa.L), a so-called international oil company like Chevron, said on Thursday it would cut its spending over the next three years by $15 billion.
Taking similar steps, Chevron executives slashed the company's 2015 capital budget by 13 percent to $35 billion.
"We enter 2015 with the financial strength to meet the challenges of a volatile crude price environment and with significant efforts under way to manage to a lower cost structure," Chief Executive Officer John Watson said in a statement.
Indeed, the strength of the company's downstream operation, which sells those refined products, proved to be the main bright spot for Chevron this quarter, with profit in the division spiking nearly fourfold.
Earnings in Chevron's upstream unit, which finds and produces oil and gas, dropped 45 percent.
In total, Chevron posted fourth-quarter net income of $3.47 billion, or $1.85 per share, compared with $4.93 billion, or $2.57 per share, a year earlier.
Analysts on average had expected earnings of $1.63 per share, according to Thomson Reuters I/B/E/S.
Foreign currency conversion charges dented earnings by $432 million, Chevron said.
Production between the quarters held steady at 2.58 million barrels of oil equivalent per day.
Shares of the San Ramon, California-based company fell about 1 percent to $102 in premarket trading on Friday.