By Kishori Krishnan Exclusive To Crude Investing News
Saudi Arabia, the world’s top crude exporter, will keep curbs on contracted volumes of crude oil in August largely unchanged from July levels to two north Asian term buyers.
State oil firm Saudi Aramco will supply crude at 8 to 9 per cent below contracted volumes in August, unchanged from July, to one buyer, while it will cut supplies to a second north Asian term buyer by around 8 per cent in August, after curbs of 9-10 per cent in July, the sources said.
Two other north Asian term buyers were also notified about allocations, with one refiner that lifts small volumes getting more crude supplies while another refiner, with a larger term contract, said he would receive less for August.
The kingdom has kept supply cuts to Asia largely steady for the last three months, on par with the Organization of the Petroleum Exporting Countries’ (OPEC) decision to keep production steady at their meeting in May, after agreeing to cut 4.2 million barrels per day (bpd) of oil output since last September.
Oil supply from the OPEC rose in June, as higher output from several members of the group offset cutbacks in Nigeria caused by militant attacks on the oil industry.
Saudi Arabia, which has been cutting supply to Asia since December, was seen pumping 8.02 million bpd in June, up 40,000 bpd from May, but still under its targeted output of 8.05 million bpd.
China tales
In China, leading refiners are to raise their crude oil processing in July to fresh highs from record levels in June, encouraged by the recent fuel price hikes and rising sales amid increasing signs of economic recovery. “This is already the best time compared with the past year and you have no reason not to move up operations,” said an official with a refinery in eastern China, requesting anonymity.
Twelve major plants accounting for more than a third of China’s capacity, most of them on the eastern and southern seaboards, will process 2.67 million bpd of crude oil in July, up more than 1 per cent from the 2.64 million bpd in June, a Reuters poll had showed.
The increase would come mainly because Dalian, PetroChina’s largest refinery, began raising runs since last month and Fujian, a joint venture between Sinopec , Exxon Mobil (XOM.N) and Saudi Aramco, began churning out fuels from a new facility after starting trial runs from May.
Previously, Dalian’s crude processing volumes only surpassed 300,000 bpd in October and November last year, despite claims before the Beijing summer Olympics to have become China’s largest plant with capacity of 410,000 bpd.
Only Sinopec’s Jinling refinery plans a moderate cut in crude throughput in July because of maintenance of some secondary facilities.
Price rise
Speculation is rife and speculators are under scrutiny. The price of crude oil has been exceptionally volatile in the last year. It has nearly doubled since January, topping $70 per barrel in June, even though the global economy and demand for oil remains sluggish.
Politicians are beginning to fear a repeat of the summer of 2008, when the price hit $140 per barrel, sending petrol prices skyrocketing in the United States, sparking a serious energy crisis in many developing countries and sending economies reeling.
But the blame for the price increase has shifted. While oil producers in the Middle East have been criticized in the past for keeping supplies down, attention has now turned to the complex world of finance.
The United States and Europe have signaled possible crackdowns on oil speculators – the investors who trade daily in the fuel. They argue that the sharp price changes are not borne out by the small shifts in supply or demand for oil.
Authorities believe speculators may be pushing the price higher for their own gains. Crude oil futures, traded on the New York Mercantile Exchange, are at the centre of the dispute.
The Commodity Futures Trading Commission, a US regulatory agency, said this week it is considering tougher regulations on energy markets. That could mean limits on how much traders can bet at any given time.
`’Governments can no longer stand idle,” French President Nicolas Sarkozy and British Prime Minister Gordon Brown wrote in an editorial published Wednesday in The Wall Street Journal. The oil price was `’seemingly defying the accepted rules of economics.”
The CME Group, which owns the New York Mercantile Exchange, argued in a report earlier this year, that limiting trader volume will have little effect.
`’There’s really no substantial evidence that index trader or money manager participation causes increased volatility,” said Dave Lehman, director for commodity research at CME Group.
To add to the melee, a rogue trader is suspected of running up Pound 6 million crude oil loss at the London office of PVM Oil Associates, the world’s biggest broker of over-the-counter oil derivatives.
