Russian Resillience

According to this article on Real Clear Energy, Russia may be touring the world preaching production freeze now, but its Freeze, Baby, Freeze stance is the result of recent conversion — as this chart from the Wall Street Journal shows.

Less than a month ago, the Journal reports, “the drilling rigs of oil giant OAO Lukoil [were] helping raise Russia’s oil output to its highest levels since the breakup of the Soviet Union…”

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Tankers: First Suezmax chartered to load Iranian crude oil post sanctions

According to this article on Singapore (Platts)–2 Feb 2016 806 am EST/1306 GMT, Litasco, the trading arm of Russia’s Lukoil, is set to ship the first Suezmax-sized cargo out of Iran after international sanctions were lifted three weeks ago, market sources said Tuesday.

Litasco has placed the Distya Akula on subjects for a Kharg Island to Constantza voyage, loading 130,000 mt of crude over February 5-10, market sources said.

Further details couldn’t immediately be confirmed and Litasco declined to comment on the matter.

The 1995-built India-flagged Distya Akulawas, formerly the Front Glory, was last tracked in the Persian Gulf heading towards Al Basrah on January 31, according to cFlow, Platts trade flow software.

This fixture was to replace the Eurospirit, which was first heard booked by Litasco on January 26, said ship brokers.

The next Suezmax loading out of Kharg Island was heard to be done by Spanish refiner Cepsa, market sources said.

The sources added that Cepsa would use a Suezmax tanker in its own fleet, the Monte Toledo, to lift 130,000 mt of crude from Kharg Island to Spain.

Cepsa couldn’t immediately be reached for comment.

Currently, the Monte Toledo is in the Mediterranean en route to Port Said, showed cFlow.

–Wanda Wang, wanda.wang@platts.com
–Edited by James Leech, james.leech@platts.com

Here is a way to follow the tanker’s (the Distya Akula) actual movements.

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French Oil Giant Total Beats Shell, BP In Race To Enter Iran

According to Gillian Rich of Investor’s Business Daily, Iran is open for business, and France’s Total (TOT) reportedly was one of the first Western companies ready to resume relations with Tehran after economic sanctions were lifted.

The oil giant will sign a deal to buy 150,000-200,000 barrels of oil a day from Iran, according to Total CEO Patrick Pouyanne in a Wall Street Journal report.

The deal comes as Iranian President Hassan Rouhani and Oil Minister Bijan Zanganeh travel to Paris to make deals in the aerospace and auto industries.

On Thursday, Iran Air signed an agreement with Airbus (EADSY) to buy 73 widebody aircraft and 45 single-aisle jets.

Total’s U.S.-listed shares closed up 1.8% in the stock market today, as oil prices continued to rally. U.S. shares of Airbus rose 1.3%.

Royal Dutch Shell (RDSA) has also said it is ready to get into the Iranian market. Last week, BP (BP) CEO Bob Dudley told the BBC that while the company was looking at opportunities in Iran, he was still concerned about rushing in, as some U.S. sanctions remain in place.

Shell shares rose 3.7%, and BP shares climbed 3.9%.

Earlier this week, Saipem, an Italian oil service provider, signed deals National Iranian Gas Co. and Parsian Oil & Gas Development Co.

Meanwhile, oilfield service provider Schlumberger (SLB) is also getting ready to re-enter the Iranian market. According to a Wall Street Journal report earlier this month, the company is looking to buy back its former subsidiary in Iran.

Schlumberger shares jumped 6%.

Iran has said it could boost its crude exports by 500,000 barrels a day. But Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries, is unlikely to cut back production to make room for Tehran’s crude, meaning the global oil glut could worsen.

However, Russia’s energy ministry said Wednesday a deal to cut production with OPEC was discussed with Russian oil firms. Earlier, Saudi Arabia had said it wouldn’t cut production without a reduction from other major players like Russia. On Thursday, several OPEC officials told Bloomberg no meeting with Russia was planned.

Western corporations are eager to tap Iran’s relatively young, well-educated and tech-savvy consumers. Apple (AAPL), General Electric (GE) and Boeing (BA) are also preparing to enter or expand in Iran’s market.

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World consordium

Just the mention of Russia’s oil minister, Nikolai Tokarev, wanting to speak with OPEC sent oil on a short upward spike. In the long run, the only way to curtail the continuing drop in oil prices may be for both the US and Russia to join. That, however, may take an “act of congress”. Eventually, all oil producers may have to join and this may be the best for all concerned. Just a thought.

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Why Pep Boys?

Wow. With all the talk of electric cars, hydrogen fuel cells, drones, hybrids, and generally going green, Carl Icahn has out bid Bridgestone in a bidding war (none the less) for the automotive aftermarket behemoth, Pep Boys. (800 stores!) He even said he would beat any bid by .50.share, and will pay a huge fee, ($39.5 million breakup to terminate the initial deal officially), to close the transaction. So, with all this news about crashing oil prices, stock market crashes, and green tech bulls, what does he see? Are all the car manufacturers switching over to electric so there will only be aftermarket parts? What does he see?

Apparently, Bridgestone was after their tire business and some say that Icahn will sell this part of the business to Bridgestone after the deal closes, next year. If gas prices catch up with oil, and oil stays down, it may be time to start shorting those green stocks. Also, it may to time to look at some of Pep Boys competitors.

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Reports

Summary of Weekly Petroleum Data for the Week Ending December 25 , 2015

Energy Briefing: Global Crude Oil Demand & Supply

WEEKLY REFINING INDICATORS REPORT: WEEK ENDING 12/25/2015

Planning and Integration of Refinery and Petrochemical Operations

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Point Richmond

I live in Point Richmond. It’s a fascinating little place with a lot of history and characters. It also is in the shadows of the Chevron Refinery and is part of the reason I have become so enthralled with the oil industry. It is literally in my back yard.

It made national news a couple of years ago when a fire there sent hundred to the hosptital. But, the relationship with oil goes much further back. For example, I live next to “The Plundge”, the states largest Natatorium (indoor swimming pool). It’s there because Nicholl was digging for oil, and found water instead. Then, he turned it into a pool. John D. Rockefeller came here.

According to this article in Richmond Pulse, in 1901, that John D. Rockefeller brought Standard Oil to Richmond. Rockefeller’s company was already embroiled in controversy, over accusations that it had monopolized the oil industry in violation of the Sherman Antitrust Act. The refinery in Richmond was just one of thousands operated by Standard Oil across the country.

The Standard Oil refinery began producing oil on the Fourth of July, 1902. The refinery grew steadily, eventually occupying nearly 1,800 acres of land and becoming the largest employer for the area. The presence and revenue from Standard Oil and the Santa Fe Railroad ushered in additional industries along Richmond’s shoreline.

The huge amount of revenue being generated by the city’s new industries necessitated a functional city government, and entrepreneurs and landholders led efforts to establish a political leadership in Richmond. Their actions led to the creation of business associations and a government body that acted in conjunction with corporations to lure more industries. In less than ten years after its incorporation, Richmond’s population grew from 2,000 in 1905 to around 10,000 in 1912. The quick growth infused the city with confidence. Richmond city and business leaders declared themselves “The Pittsburgh of the West,” and U.S involvement in World War I propelled the refinery to produce more fuel products than ever before.

Yet Richmond had yet to become the modern city it is today. The city’s population was comprised of mostly longtime California residents and a smaller number of European immigrants who came to work in the industries. But as the number of jobs grew, so did the number of minority groups: African Americans, Japanese, Italians, Chinese and Mexicans. These ethnic groups occupied the lower rungs of industrial job ladder, often living in unsanitary and unincorporated areas of Richmond. However, race relations in pre-World War II Richmond were placid. Minorities were able to enjoy a life in Richmond, as long as they respected the racial and ethnic hierarchies.

The World War II mobilization effort was yet another boon for the Richmond economy. Jobs in Richmond’s shipyards attracted thousands of newcomers, many whom were part of a Southern migration to the West Coast. Richmond’s population soared from 23,000 in 1940 to an overwhelming 100,000 in 1944. Newcomers also secured jobs at the refinery, helping Standard Oil meet the wartime demand for oil. The company was even honored by the U.S. government for its role in the military effort. When their interests were aligned, both Richmond and Standard Oil thrived. The Kaiser Shipyards may have overtaken Standard Oil as the city’s biggest employer, but the nation’s thirst for oil and the company’s monopolization of the industry would help it survive and prosper, long after the war ended.

Yet it was after World War II, when Standard Oil became Chevron, that tension between the company and city residents began to grow. Chevron was Richmond’s largest employer in the post-war era. Innovations like the development of gasoline additives to keep carburetors clean in 1954, kept the company profitable. Meanwhile, most of the migrant African Americans and ethnic minorities who had come to Richmond for wartime jobs stayed, but were relegated to living in segregated public housing projects and neighborhoods with high unemployment numbers. Losses experienced by other industries, white re-location and disinvestment in the central city all had a negative impact on the African American and minority communities now living downtown.

De-regulation and unfettered privatization was the trend in the decades to come. Like many other industrial cities, Richmond experienced gradual disinvestment and overall job loss, while Chevron itself enjoyed unprecedented success. Downtown Richmond was now dependent on the success of small businesses, while Hilltop Mall and other shopping centers detracted from downtown’s economic power.

By the 1980’s, Richmond was mirroring another national trend. High rates of drug abuse, in the form of crack cocaine, emerged in the city’s poor minority neighborhoods, further crippling those populations. In contrast, the 80’s represented the pinnacle of Chevron’s success. By then, the refinery had expanded operations into processing high sulfur crudes, building storage tanks for marine cargos and developing refining processes to increase its lubricating oil stock. At this time Chevron also introduced Techron, the first additive developed for vehicles running on unleaded gasoline. The diverging economic trajectories of Chevron and Richmond set the stage for larger contestations in the 1990’s.

Responding to growing economic inequity and environmental injustice, local Richmond activists began to publicly challenge Chevron, beginning a discourse that continues to this day. According tot the West County Toxics Coalition, between 1989 and 1995, there were 304 accidents at the Chevron refinery including fires, spills, leaks, flaring and toxic gas releases. Pressure from environmental groups occasionally forced Chevron to acknowledge their mishandling of the refinery, in one instance after an explosion on March 25, 1999 that sent hundreds to the hospital.

So, as you can see, there is a great deal of oil related history right in my back yard. Now we have many industry consultants and contractors that stay here, and many veterans of the oil industry. It is a very unique place with a very unique culture. I hope you can come visit our little enclave and enjoy its many amenities.

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