By Kishori Krishnan Exclusive To Crude Investing News

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The price of oil is now linked to rises in the market

Crude prices in Asia slipped Friday on a stronger U.S. dollar and as traders sold off bets to lock in profits, but the overall rally is expected to continue on hopes that data on the global economy will stay bullish.  ”Crude prices are down, but after we wake up tomorrow morning, they may hit $73 a barrel,” said Ken Hasegawa, commodity derivative sales manager at Newedge Japan in Tokyo. “It’s climbing endlessly.”

On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $72.34 a barrel, down 34 cents in the Globex electronic session. July Brent crude on London’s ICE Futures exchange fell 34 cents to $71.45 a barrel.

Crude prices hit a fresh seven-month high Thursday on a weaker U.S. currency and after the International Energy Agency forecast stronger global oil demand. But the dollar rose later in Asia against the euro, pound and yen, making investments in commodities such as oil less attractive.

However, analysts at the Schork Report said that some of the momentum gained in the past week has been due to a false perception, Figures released Wednesday by the U.S. Energy Information Administration showed a stronger decline in crude stockpiles, but also that “the nearby fundamental picture failed to improve last week,” the analysts wrote in a note to subscribers. “Nevertheless, the Nymex contract rallied anyway as Wall Street loves this market, warts and all.”

Although the trading momentum favors crude getting stronger, oil markets are “ripe for a correction,” said Victor Shum, energy analyst for Purvin & Gertz in Singapore. “The bulls are so in charge of the market that any tiny bit of good news is turning into a reason or excuse to drive it higher.”

New market

Petroleo Brasileiro SA, (PBR) Brazil’s state-controlled oil company, said it wants to rival the trading operations of BP Plc and Exxon Mobil Corp. as rising crude output prompts the company to seek new markets for its products.

Petrobras, as the company is known, will have about 2 million barrels a day of crude and refined products more to trade by 2020 as output gains from offshore fields and new refineries begin producing diesel for export, Paulo Roberto da Costa, the company’s refining chief, said in an interview. The company also wants to boost international trading unrelated to its own oil needs, following the model of BP, he said.

“When I visited BP a few years ago I was impressed by how they produced about 3 million barrels a day but traded about 6 million barrels,” Da Costa said June 8. “More and more we’re involved in permanent offshore trading, the way BP works, buying a cargo in one country and selling it to another.”

Petrobras has traders and commercial representatives in Rio de Janeiro, Houston, London and Beijing, Da Costa said. He also pointed to Irving, Texas-based Exxon’s international trading business as one Petrobras would be interested in emulating.

Vietnam crude

Vietnam will halt term exports of its flagship Bach Ho crude next quarter as it diverts supplies to its first major refinery, further tightening the Asia-Pacific market, sources with lifters said on Friday. Besides term barrels, state oil marketer PV Oil has also sharply reduced spot volumes of Bach Ho, pushing up differentials of other Vietnamese as well as similar alternative regional and African light sweet grades.

Output of Bach Ho, which used to be a major regional export grade, is declining and most existing supplies will be channelled to the 140,000 barrels per day (bpd) Dung Quat plant, Vietnamese officials have said.

Vietnam, Southeast Asia’s third-largest crude oil producer after Indonesia and Malaysia, now exports just 40,000 bpd of Bach Ho this year, down from 155,000 bpd in 2008 and 240,000 bpd when it was at its peak, after the field started operations in 1980′s.

“They’re saying the supplies will stop, starting July,” a source with a term lifter said. PV Oil had alerted its customers when it renewed term contracts in February for Bach Ho supplies to be lifted between April and September that it may reduce short-term exports in the third quarter.

PV Oil has sold just 250,000-300,000 barrels of May Bach Ho crude via spot tender since signing term contracts for the second and third quarters. The company offered between 400,000 and 1.15 million barrels of Bach Ho via spot tenders every month from August to December 2008.

Sour crude

Heavy-sour crudes are likely to remain unusually costly compared to light-sweet varieties for years, potentially hurting U.S. refiners like Frontier Corp. (FTO.N) and Valero Energy (VLO.N) that invested heavily in heavy-sour refining, Credit Suisse analysts said on Thursday.

Higher global refinery demand for heavy crudes and a likely boost in Saudi Arabia’s production of lighter oil mean prices for heavy and sour crudes – normally cheaper to purchase but costlier to refine – should remain strong through 2010 or longer, Credit Suisse said in a report.

Since 2000, heavy crude has been cheaper than light varieties by an average of around $10 a barrel, while sour crude has traded at an average discount of $3 a barrel to sweet crudes, the report said.

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