The Oil Big Five: Some of the same, some of the new « The Barrel Blog

When we began the Oil Big Five posts, we had an idea of featuring brand-new items every single month. But that whole saying about people forgetting history being doomed to repeat it?

It came to mind this month when we were soliciting suggestions from our Platts oil editors and analysts for this month’s listing. Big issues don’t go away quickly, and in an industry as large and complicated as global oil, it’s doubly true.

That said, we do have several new issues on the list this month, as well as some follow-ups to previous topics. Be sure to comment here, on Facebook or on Twitter (use the hashtag #oilbig5), and we look forward to featuring your comments. Tell us what you’re thinking about, and here’s what we’re most focused on at the moment:

1. Libya’s return to production and exports

Our very first Oil Big Five listing included the topic of Libyan exports, and this time we’re looking at its crude production. Earlier this year, the country seemed on the path toward zero production, but in late August a spokesman for state-owned National Oil Corp. said production was reaching 630,000 b/d. Not all oil fields are back in operation yet, but the increases since July and the return of export terminals to state control could be a signal a turnaround. There is still considerable turmoil in the country, though, meaning the future of oil production there will remain an unanswered question for at least a while longer.

2. Oil basis WTI

August was not an easy month if you were long basis WTI, which opened the month around $100/b and closed near $93. The roughly 7% drop over the course of the month is significant—political turmoil from various parts of the globe (including Oil Big Five repeat offender Russia) and being right around the corner from maintenance season has put a lot of downward pressure on WTI. Despite the geopolitical climate, one analyst pointed out, there’s no supply disruption, just weak underlying fundamentals. Will maintenance season do anything to reverse the slide?

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3. The price of Dubai

The contango between first and third-month cash Dubai topped the $1/b mark this August, the first time since September 14, 2010, when it was at $1.25/b. On August 21, the contango was assessed at $1.21/b, up 29 cents/b on the day, widened as the sour Middle Eastern crude market followed structural weakness in the Brent market. Compounding that, Asian refiners have had lackluster demand for sour Middle Eastern crude due to other competing grades to pick from. And to add insult to injury, front-month cash Dubai had fallen 69 cents/b just a couple of days before, on August 19, dropping below the $100/b mark for the first time in 13 months and assessed at $99.80/b. What will September bring for the Dubai market?

4. Mexico: Ahead of schedule

Pemex is busy with Round Zero of its extensive energy industry reforms, and in mid-August the Mexican energy ministry awarded the state oil and gas monopoly most of the producing fields and exploration prospects it wanted before opening other fields to private enterprise. The announcement came a month earlier than expected, but President Ernesto Pena Niento said the timetable was sped up to more quickly provide results to citizens. Another news item out of Mexico in August: Pemex revised its annual production target for this year to its lowest level for three decades, down to 2.35 million b/d from 2.44 million b/d, and revised production data for the first half of the year due to miscalculations. And on August 29, Pemex announced its crude output target for 2015 will be 2.4 million b/d. We’re eager to see production numbers evolve, as well as the results of Round One in 2015, which will mark the first open upstream bidding round for licenses since the country’s nationalization of its oil industry in 1938.

5. US imports from Kurdistan

This is a sort of follow-up to last month’s United Kalavrvta topic (still floating in international waters off the coast of Texas, according to Platts vessel tracking software cFlow and shipping sources). In August, a US judge rejected the Iraqi central government’s claim to the ship’s cargo, and ruled the US does not have the jurisdiction to block the sale of Kurdish oil. In practical terms, it appears the US would not prevent any sale of Kurdish crude in the US. Now the question remains whether a US buyer will emerge, or if the cargo (or future cargoes of Kurdish crude) will end up at a US refinery. Anyone want to wager a guess?

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