NYC-based PIRA Energy Group reports that WTI strengthened in June while other midcontinent differentials weaken. In the U.S., crude stock drew while products built. In Japan, crude stocks built. Specifically, PIRA’s analysis of the oil market fundamentals has revealed the following:
WTI Strengthens in June, Other Midcontinent Differentials Weaken
With crude bottlenecks redeveloping in Canada and West Texas, differentials generally weakened in June. Rising production, refinery maintenance, and pipeline delays are contributing to relative weakness in Midcontinent markets – except for Cushing, where inventories continue to fall.
DOE Data Shows Crude Stock Draw, Product Build
Overall commercial inventories increased this past week with product inventory increase outpacing a crude stock decline. Last year saw a very large inventory decline for this particular week and, as a result, the inventory comparison to last year swung to positive, albeit just by 1.0 million barrels, for the first time this year.
Japanese Crude Stocks Build
Crude runs were little changed, but a higher import rate built stocks 3.9 MMBbls. Finished product stocks built slightly, but gasoline stocks drew to a record low. Refining margins are good. Gasoline cracks gained on the week, while other cracks eased slightly. The impact of typhoon Neoguri will be seen in the data for next week with refinery and berthing operations curtailed for a time.
LPG Scorecard
U.S. LPG prices have remained remarkably strong despite the large fall in crude oil prices. WTI and Brent crude oil have fallen 5% and 6% over the past two weeks. Mt Belvieu Propane is only 1% lower over the same period despite record increases in inventories and a surplus stock level to the year prior. Increased export capacity and a bumper corn crop (crop drying demand) are supportive for propane prices. Butane prices were flat over the same period and thus butane’s price ratio to WTI strengthened considerably, by 2.7% to 52.8% of WTI, the strongest vs. US benchmark crude since April. Winter gasoline blending season is only a few months away – the high demand period for butane. Ethane prices were the exception – outpacing natural gas' 6% decline by falling 10% in two weeks to 25.9¢/gal, the lowest level since November of last year.
U.S. Ethanol Prices and Manufacturing Margins Advance
The second half of 2014 began with ethanol prices rising in most of the country and corn costs plunging. As a result, manufacturing margins increased for the first time in five weeks.
Ethanol Production Declines
U.S. ethanol output declined to a six-week low 927 MB/D during the holiday-shortened week ending July 4, down from 953 MB/D in the preceding week. Inventories increased by 82 thousand barrels to 18.3 million, inching closer to the annual high of 18.4 million.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA’s current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
Paragon Offshore Limited (to be converted to Paragon Offshore plc) ("Paragon"), in preparation for its previously announced spin-off from Noble Corporation (NYSE: NE) ("Noble"), announces that, subject to market and other conditions, it intends to offer for sale $1.185 billion in aggregate principal amount of senior unsecured notes due 2022 and 2024 in a private offering that is exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), to eligible purchasers.
Paragon intends to use the net proceeds from the offering to repay a portion of the promissory notes that it expects to issue to Noble as partial consideration for the transfer to Paragon of Noble's standard specification drilling business in connection with the spin-off.
The notes and the related guarantees will be offered only to qualified institutional buyers in reliance on the exemption from registration set forth in Rule 144A under the Securities Act, and outside the United States, to non-U.S. persons in reliance on the exemption from registration set forth in Regulation S under the Securities Act. The notes and the related guarantees have not been registered under the Securities Act or the securities laws of any state or other jurisdiction, and may not be offered or sold in the United States without registration or an applicable exemption from the registration requirements of the Securities Act and applicable state securities or blue sky laws.
This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities, nor shall there be any sale of the notes or related guarantees in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such states.
About Paragon Offshore
Paragon Offshore is currently an indirect, wholly owned subsidiary of Noble Corporation. Paragon is a pure-play global provider of standard specification offshore drilling rigs. Paragon's drilling fleet consists solely of standard specification rigs and includes 34 jackups and eight floaters (five drillships and three semisubmersibles). Paragon's primary business is to contract its rigs, related equipment and work crews to conduct oil and gas drilling and workover operations for its exploration and production customers on a dayrate basis around the world. Paragon's principal executive offices are located in Houston, Texas.
Aberdeen-headquartered Brazilian market specialist EntradaB2B has joined forces with CFG Bridge to facilitate farm-in opportunities for UK companies seeking access to the exciting Brazilian oil sector.
CFG Bridge, based in Rio de Janeiro, Bogota and London, can access a number of farm-in opportunities in both the onshore and offshore sectors in Brazil and Colombia through an extensive contact network built up after many years involvement in the Oil &Gas industry.
Daniela Figueiredo, Director of CFG Bridge, commented "This is a very exciting time for Brazilian oil and gas operations. The high number of prospects identified in recent years through successful E&A drilling points to the potential for early production revenue for overseas investors interested in farm-in opportunities."
"We are delighted to partner with CFG Bridge in this exciting venture", said Jim Cargill, Entrada B2B's local Director, "and look forward to assisting UK companies develop their interests in Brazil."
The Brazilian oil and gas sector has been marked by major finds over the last 20 years with UK companies like BG establishing substantial positions alongside local operators. A number of International Oil Companies (IOCs) are already producing oil in Brazil with many others holding acreage.
EntradaB2B.com
Calibre International and Lonsal Representações, a Brazilian company, operate under the “Entrada” banner to help British and Brazilian firms partner on projects in Brazil's booming oil & gas sector.
The full formal name of the jointly held local Brazilian company is “Entrada Consultoria Em Vendas E Marketing E Legalizacao De Estrangeiro Limitada” and trades under the names “Entrada do Brasil” and “EntradaB2B.com”.
Entrada has offices in both Aberdeen and Rio de Janeiro and is able to offer comprehensive assistance to UK service companies wishing to enter a growing market.
EntradaB2B.com features a free database of Brazilian and UK companies willing to offer their resources, exchange skills, expertise and technology to make the most of opportunities in the burgeoning energy market. The new website aims to provide clients with a ‘one stop shop’ of information and services. This is being continually developed with additional information and services.
It already features an Advice Centre, which includes briefings on legal issues from the leading Scottish law firm Brodies and financial and taxation issues from the independent chartered accountant Campbell Dallas and its Brazilian partner UHY Moreira.
CFG Bridge
CFG Bridge Ltd. is a Member of the Brazilian Chamber of Commerce, the ONIP Brazilian Organization of the Petroleum Industry (ONIP), and the Program for the Mobilization of the National Industry of Oil and Gas (PROMINP). It was created in January 2013 by the Executive Luiz Octavio de Azevedo Costa and the Deputy Manager Daniela Figueiredo, who were the Heads of the International Business Development team of PETROBRAS in London. In April 2013, Marco Hupe joined the Executive Board and also as a Partner.
With operations in Colombia, Brazil and Argentina (expanding to Peru and Mexico), and offering services that deliver business expansion in Latin America, CFG Bridge works alongside European and Latin American companies seeking market penetration and local partners. CFG Bridge’s services range from sales representation to business modelling to total set-up. These services also include the support of a world-class law firm, a specialist in oil and gas with a global reach .
CFG Bridge Ltd. also has an influential array of Associates, experts with solid experience in different aspects of the market, especially in the different sectors of the Oil and Gas Industry.
NYC-based PIRA Energy Group believes that Brent crude prices will move higher after some first half July weakness. In the U.S., there was a crude stock draw and product stock build. In Japan, crude runs begin to rise and stocks draw. Specifically, PIRA's analysis of the oil market fundamentals has revealed the following:
European Oil Market Forecast
Brent crude prices will move higher after some first half July weakness with tighter global crude markets and reduced OPEC spare capacity even as Saudi Arabia makes up for lower Iraqi exports. Urals differentials will firm over the next two months. Gasoline cracks still have a bit of strength for now, but with ample inventories they will narrow next month and especially in September. Distillate inventories, while currently rising, remain low and will tighten in the Atlantic Basin in the third quarter, driving diesel cracks higher.
Crude Stock Draw and Product Stock Build Results in Flat Commercial Stock Profile
With a 14.7 million barrel commercial stocks draw this week last year, it was inevitable that the year-over-year stock deficit would narrow. Last year's commercial draw consisted of a 10.3 million barrel draw in crude, a 5.9 million barrel draw in the four major refined products, and a 1.6 million barrel build in other product stocks. Consequently, even though crude stocks drew last week, crude stocks flipped from a deficit to a surplus versus last year.
Japanese Crude Runs Begin to Rise, Stocks Draw
Crude runs have begun moving higher as turnarounds begin to wind down. Crude stocks drew marginally as imports remained low. Finished product stocks also drew slightly. While refining margins remain soft, they improved slightly due to improved light product cracks overcoming a weaker fuel oil crack.
LPG Scorecard
U.S. stocks of LPG continue to rebuild from low levels at record rates. NGL production rates soared to a record high in April, with significantly more growth expected this year. New fractionation capacity and export infrastructure is being rapidly deployed to meet surging oil production. Propane in Europe and Asia is well supplied, with seasonally low demand inhibiting further price strength. Butane markets are tighter and discounts to naphtha in both regions have the product favored for petrochemical feedstocks use.
U.S. Ethanol Prices Declined During June
Ethanol prices fell during most of June as output reached a record high, stocks built to a yearly peak, and corn costs were the lowest since February. Prices showed some strength late in June as production declined when problems with railcar delays returned.
Ethanol Output Increases
U.S. ethanol production rebounded to 953 MB/D the week ending June 27, up from 938 MB/D during the preceding week. Though last week's output was significantly less than the record 972 MB/D two weeks earlier, it was still the second highest since December 2011.
The information above is part of PIRA Energy Group's weekly Energy Market Recap, which alerts readers to PIRA's current analysis of energy markets around the world as well as the key economic and political factors driving those markets.
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