Look Out Below :Oil prices hit 11-year low as global supply balloons ( Reuters plus Bloomberg charts) )

LONDON (Reuters) – Brent crude oil prices hit their lowest in more than 11 years on Monday, driven down by a relentless rise in global supply that looks set to outpace demand again next year.

Oil production is running close to record highs and, with more barrels poised to enter the market from nations such as Iran, the United States and Libya, the price of crude is set for its largest monthly percentage decline in seven years.

Brent futures (LCOc1) fell by as much as 2 percent to a low of $36.05 a barrel on Monday, their weakest since July 2004, and were down 49 cents at $36.39 by 1332 GMT.

While consumers have enjoyed lower fuel prices, the world’s richest oil exporters have been forced to revalue their currencies, sell off assets and even issue debt for the first time in years as they struggle to repair their finances.

OPEC, led by Saudi Arabia, will stick with its year-old policy of compensating for lower prices with higher production, and shows no signs of wavering, even though lower prices are painful to its poorer members.

The price of oil has halved over the past year, dealing a blow to economies of oil producers such as Nigeria, which faces its worst crisis in years, and Venezuela, which has been plunged into deep recession.

Even wealthy Gulf Arab states have been hit. Last week Saudi Arabia, Kuwait and Bahrain raised interest rates as they scrambled to protect their currencies.

NO LIGHT AT THE END OF THE TUNNEL

“With OPEC not in any mood to cut production … it does mean you are not going to get any rebalancing any time soon,” Energy Aspects chief oil analyst Amrita Sen said.

“Having said that, long term of course, the lower prices are today, the rebalancing will become even stronger and steeper, because of the capex (oil groups’ capital expenditure) cutbacks … but you’re not going to see that until end-2016.”

Reflecting the determination among the biggest producers to woo buyers at any cost, Russia now pumps oil at a post-Soviet high of more than 10 million barrels per day (bpd), while OPEC output is close to record levels above 31.5 million bpd.

Oil market liquidity usually evaporates ahead of the holiday period, meaning that intra-day price moves can become exaggerated.

On average, in the last 15 years, December is the month with least trading volume, which tends to be just 85 percent of that in May, the month which sees most volume change hands.

Brent crude prices have dropped by nearly 19 percent this month, their steepest fall since the collapse of failed U.S. bank Lehman Brothers in October 2008.

U.S. crude futures (CLc1) were down 26 cents at $34.47 a barrel, their lowest since 2009.

“Really, I wouldn’t like to be in the shoes of an oil exporter getting into 2016. It’s not exactly looking as if there is light at the end of the tunnel any time soon,” Saxo Bank senior manager Ole Hansen said.

Investment bank Goldman Sachs (GS.N) believes it could take a drop to as little as $20 a barrel for supply to adjust to demand.

Thanks to the shale revolution, the U.S. has been pumping a lot of oil on the cheap, helping to drive down prices to six-year lows and to fill up storage tanks. Indeed, we’re running out of places to put it.

LOOK OUT BELOW

The U.S. has 490 million barrels of oil in storage, enough to keep the country running smoothly for nearly a month, without any added oil production or imports. That inventory doesn’t include the government’s own Strategic Petroleum Reserve, to be used in the now highly unlikely event of an oil shortage. Nor does it include oil waiting at sea for higher prices. The lower 48 states also boast about 4 trillion cubic feet of natural gas in storage — a far bigger cushion than Americans have needed so far during a very warm winter.

For their part, OECD countries (including the U.S.) have nearly 3 billion barrels of oil in storage — or enough to keep factories lit and houses heated in those countries for two months, cumulatively, without added production or imports.

The glut is going to continue worldwide unless some major producers stop pumping. OPEC announced recently that it was abandoning output limits.

So what happens when there’s too much oil to store? Producers will try to rid themselves of it by cutting prices. In that scenario, the price would plummet so far that some producers would shutter their wells altogether — which is, perhaps, the only way that the oil glut will ease.

Our Services

In search of tailor-made solutions

Our core business lies in the fields of formation/administration of global corporations , trusts,foundations , asset safeguarding and sucession arrangements

We compile legally protected and tax optimising concepts and find the optimal solution for you.

We offer extensive services and contacts in the following fields:

  • Company , trusts ,foundations – incorporation and jurisdiction selection
  • Asset safeguarding
  • Tax optimisation
  • Managment consulting
    Bank introductions

Email : info@jackbassteam.com   ( all emailed answered within 24 hours)

  OR

Call Jack direct at 604-858-3302  Pacific Time

10:00 – 4:00 Monday to friday

There is never a cost or obligation for this inquiry.

Video:

Video

JB offshore.mp4  The First Rule Is Safety

About Jack A. Bass Business Development Services

photo

Jack A. Bass and Associates

Advertisements

Oil Guru Who Called 2014 Rout Sees $ 70 Oil in 2016

  • PIRA sees demand growth at 1.7 million barrels a day in 2016
  • Production from non-OPEC nations including U.S. seen declining

OPEC will probably hold production steady at its meeting next month as the gap between supply and demand for oil closes, according to the analyst who correctly predicted last year’s rout in prices.

“I don’t think they have to do anything,” Gary Ross, founder and chairman of PIRA Energy Group, said in an interview in Singapore on Monday, referring to the Organization of Petroleum Exporting Countries. Global consumption of crude will continue to grow while output from non-OPEC countries will decline next year, helping to bring the market toward equilibrium, he said.

Oil tumbled more than 48 percent last year as U.S. stockpiles and production expanded, creating a global oversupply that the International Energy Agency estimates will persist until at least the middle of 2016. OPEC’s strategy to defend market share has exacerbated the glut as the group, which kept its production target unchanged at 30 million barrels a day at the last meeting in June, exceeded the quota for the past 17 months.

“There has to be a tightening of balances,” said Ross, who last year turned bearish on oil before prices shrank by almost half. While OPEC volumes have increased, both demand and production from outside the group have responded to low prices, he said.

Brent crude for December delivery was unchanged at $49.56 a barrel on the London-based ICE Futures Europe exchange at 12:50 p.m. Singapore time. Prices have decreased 14 percent this year.

$70 Brent

PIRA forecasts demand for crude to grow 1.7 million barrels a day in 2016, compared with 1.9 million a day this year. Output outside OPEC is expected to decline next year by “several hundred thousands of barrels a day,” Ross said. Among the 12 members of OPEC, production is predicted to increase only in Iran and Iraq.

“Total non-OPEC crude and condensate production is forecast to fall below last
year’s levels,” said Ross, predicting that Brent may rise to $70 by the end of 2016. “Supply growth is limited to OPEC, which grows just 500,000 to 600,000 barrels a day.” On average, Iran’s output will rise 300,000 barrels a day and Iraq’s will increase 240,000 barrels a day, compared with a year earlier, he estimated.

OPEC, which supplies about 40 percent of the world’s oil, is scheduled to gather in Vienna on Dec. 4, when Iran will officially notify the group of its plans to boost production by 500,000 barrels a day as soon as international sanctions against the Persian Gulf state are lifted, Oil Minister Bijan Namdar Zanganeh said in an interview with Mehr news agency.

 

Russian Crude Output Hits Post-Soviet Record

Russian oil production broke a post-Soviet record in October for the fourth time this year as earlier investments boosted output and producers prove resilient to lower crude prices.

Production of crude and gas condensate, which is similar to a light oil, averaged 10.776 million barrels a day during the month, according to data from the Energy Ministry’s CDU-TEK unit. That is an increase of 1.3 percent from a year earlier and up 0.3 percent from the previous month.

“Russian oil production is still reflecting oil prices above $100 a barrel due to long lead times in the investment cycle,” Alexander Nazarov, an oil and gas analyst at Gazprombank JSC, said by e-mail from Moscow. “The reason behind growth this year dates back to 2010-2014, when a number of projects were financed.”

Output has kept growing even as the Organization of Petroleum Exporting Countries chose to defend market share rather than cut output amid a supply glut last year, a decision that sent prices tumbling. Gazprom Neft PJSC and Novatek OJSC are ramping up output at one of the country’s biggest new projects. Russia’s tax policies insulate the industry from swings in oil prices, with the state bearing most of the risk and reward.

The ruble’s slump over the past year, which has tracked weaker crude prices, has made oilfield services, including drilling, cheaper and supported operating margins, Nazarov said.

Russian crude exports rose to 5.42 million barrels a day in October, a 10 percent gain from the previous year and up 1.7 percent from the previous month.

Oil 5 Talking Points – All Point to Lower for Longer ?

 

Oil’s bounce back from the summer’s lows has the look of a bottoming in crude prices, but some strategists say the shakeout is not over.

“I’m pretty sure we’re going to see a new low. The probabilities are that we see a new low or two or three,” said Jack Bass. Our 2015 results for managed accounts all did well by avoiding oil and natural gas and that continues to be our bias.

The negative factors that have pounded oil prices continue to hang over the market, and the world is still facing oversupply of about 2 million barrels a day. Strategists say the chief wild card that could send oil to new lows is Iran — and uncertainty about when and how fast it can bring crude back to the market.

This past summer, West Texas Intermediate crude futures touched a low near $38 in late August before moving back to $50 per barrel on Oct. 9. Since then, oil has traded in the upper $40s, giving the impression the worst lows of the bear market in crude are over. Brent, the international benchmark, hit a low at around $42 per barrel in August and temporarily rose above $54 in October.

“There was a bout of short covering, and oil was pumped up on geopolitical fears about Russia’s foray into Syria, but the fundamentals never changed. Production is still high all around the world, and the glut is getting worse, especially for diesel fuels,” said John Kilduff of Again Capital.

1. Iran as a catalyst

Major producers continue to pump at high levels, and demand continues to lag. U.S. shale producers have more resilience than expected, and the U.S. is still producing about 9 million barrels a day.

But it’s Iran’s oil production that some analysts say the market may not be pricing correctly. They also say Iran may be making blustery assertions about its oil production that it will not be able to meet.

The U.S. and five other nations agreed in July to lift sanctions against Iran in return for curbs on its nuclear program, and this past Sunday the agreement was formalized based on Iran’s meeting its commitments to the deal.

An Iranian official this week said the country has already secured buyers from Europe and Asia for more than 500,000 barrels a day in new exports once sanctions are lifted. The final assessment by the International Atomic Energy Agency is expected to be completed by Dec. 15.

“If they put that marginal barrel onto the market, there’s going to be a price impact from it. The Saudis have taken a lot of their market share from Europe in the last couple of years,” said Michael Cohen, head of energy commodities research at Barclays. “It’s going to be a fine balance. I wouldn’t be surprised at the end of 2016 if we look back at the end of the last year and be surprised that they put only 400,000 to 500,000 barrels back on the market, not 800,000 to 900,000 barrels.”

Iran has been producing about 2.8 million barrels a day, from a high of 4.2 million barrels, according to Andrew Lipow of Lipow Oil Associates. “It would surprise me to see 500,000 a day come out onto the market within a couple of months,” he said. “The market takes what they say with a grain of salt. We do know that they are going to be exporting the first minute they can.”

It could be the start of Iran’s oil returning to market that sends oil prices back to the lows, said Citigroup’s Morse. He said the oil market could hit bottom late this year or in the first quarter, but he does not expect Tehran to be able to quickly push the volume of new oil that it is promising.

“These shut-in wells have been building pressure. They can surge production beyond what is sustainable, and if they want to show the world they are there, which is highly likely, that is possible,” he said. Morse said he expects Iran could produce 300,000 to 500,000 barrels a day more within a half year of sanctions being lifted.

Iran also has about 40 million barrels of condensates in floating storage. “I just think the market has underestimated how much oil could come back on the market immediately upon having sanctions released,” Lipow said.

2. Inventories bulging

A second thorny issue for the market is buildup of inventories. Last week U.S. government data showed a surge in crude stocks of 7.6 million barrels of oil, but it is also the buildup of refined products that analysts are watching.

Barclays, in a report, said that global refinery runs grew faster than demand by about 57 percent during the second and third quarter. That created a buildup, pushing refined products into storage in offshore tankers.

Refining capacity has been added around the globe. Saudi Arabia, for instance, shipped less crude in August but more refined oil products. According to JODI data, Saudi Arabia exported 1.3 million barrels a day of refined product, compared to 1.1 million barrels the month earlier.

The U.S. has also increased refined-product exports as well and is a net exporter of about 2 million barrels a day. Barclays expects the rate of build in refined products to slow.

“Fundamentally speaking, we remain in an oversupply situation, and refining margins are weak and likely to get weaker, especially in distillates, and the stocks remain at high levels,” said Cohen. “So any sustained price move tot he upside is going to be met by with skepticism by the market and that’s why we continue to maintain our range bound price forecast at least until the third quarter of next year.”

3. U.S. shale gale

A third bearish factor for oil has been, and continues to be, the resilience of the U.S. oil industry. Saudi Arabia and OPEC vowed last fall to continue producing and to allow the market to set prices in an oversupplied world, a factor they were hoping would curb non-OPEC production.

But U.S. production, despite shut-in rigs, has not fallen that much. Analysts had been expecting some companies to lose some funding in bank redeterminations this month, but it seems the industry is doing better than expected, and the impact is relatively minor.

“We think for WTI there’s downside risk for the first quarter based on the fact we think U.S. production may not roll over like people think,” said Cohen. “We need to see prices go lower as a disincentive.”

Analysts now expect the companies facing lending reviews to have a difficult time in the spring after more months of low oil prices. The U.S. industry is made up of so many companies drilling so many unconventional wells that the trigger of falling prices is not an automatic one, since producers are profitable at all different levels.

“High-yield companies are well-hedged through the first quarter, and then their hedges go off, and it’s not clear they have the cash flow to keep drilling,” said Morse.

Cohen said the pressure from a long period of low prices will pinch companies. “U.S. production is likely to be lower,” he said, adding the hit to shale producers will be worse next year after several more quarters. “It will be worse, not just for those that have their borrowing base redetermined.”

4. Biggest producers producing

Russia and Saudi Arabia are the world’s biggest oil producers, and both of them have taken a full-throttle approach to lower prices in an effort to gain or hold share.

Saudi Arabia led OPEC in its plan to use market pricing as a weapon to slow overproduction. When OPEC meets in early December, analysts see little chance of a change in policy.

In fact, rhetoric around that meeting could add downward pressure on prices.

“The Saudis have been adding more to inventories. I don’t really see them backing down from the 10 million-barrels-a-day production level. They continue to be open to a cut if other producers are willing to cut first,” said Cohen. “They’ve taken a very tit-for-tat approach. They want to see a plan and a credible plan before doing anything.”

The strain of low prices is wearing on both Russia and Saudi Arabia. “They (Saudi) can shield the blow by issuing more debt, which they have done,” Cohen said. “The amount of debt they are issuing this year is basically the equivalent of a $10 bump in oil prices.”

Morse said the producers will not be able to sustain production in a low-price environment forever. “Definitely at some point, in the winter of 2016/2017, it looks like the world moves into a net inventory drawdown, helped by U.S. shale, helped by production in Mexico, the North Sea, Oman, Russia … all showing decline rates instead of staying stable,” he said.

5. World demand

Oversupply hit the world market at the same time demand from the emerging world and China was dampened. China reported GDP of 6.9 percent for the third quarter just below last quarter’s 7 percent pace, but worries about Chinese growth and demand have pressured prices.

The World Bank this week said it expects oil prices to remain weak through next year, and it cut its expectations for crude. The World Bank’s quarterly commodity sector report pared its average oil price forecast to $52 per barrel this year from an earlier estimate of $57. It sees an average price of just $51 in 2016.

The Bank said Iran’s return to the market will dent oil prices, but it also noted weak global growth.

“All main-commodity price indices are expected to decline in 2015, mainly owing to ample supply and, in the case of industrial commodities, slowing demand in China and emerging markets,” the Bank said.

Besides overproduction, high inventories and weak demand, Morse said another factor that could weigh on prices are the speculative investors who could slam the oil price once Iran brings oil back onto the market.

He said WTI could average $40 per barrel in the fourth and first quarters, and Brent could average about $44. Barclays expects Brent to average $53 per barrel in the fourth quarter and $63 in 2016 after a recovery in prices in the second half.

 

November 2014 – How Did We Do On Our Stock Market Forecast ?

JACK A. BASS MANAGED ACCOUNTS – YEAR END UPDATE AND FORECAST  As written – November 2014 – 40 % cash position You Can Judge : Our 2014 Year End Review and Forecast Gold and Precious Metals The largest gains for our … Continue reading

Posted in Asset Protection, Best Tax Haven, Gold, Jack A. Bass Managed Accounts, Jack A.Bass, Offshore Incorporation, Offshore Investing, Portfolio Management, Tax Havens, Tax Jurisdiction, tax secrecy, Tax strategy,Trusts, Wealth Advisor, Wealth management | Tagged , , | Leave a comment | Edit

 

Iran – Oil sanctions to be lifted in late 2015 or early 2016 – Adding 2 Million Barrels A Day

Iran has said it will offer about 50 energy projects to investors and plans to boost output by about 2 million barrels a day once the deal is in place.

Sanctions against Iran probably will be lifted within the first three months of 2016, after the International Atomic Energy Agency has confirmed the nation has curtailed its nuclear work, diplomats said last month. Once the restrictions are removed, relief is expected to fuel economic growth by lowering barriers to Iran’s oil exports and ending the isolation of its banks.

Iranian Oil

Iran has said it will offer about 50 energy projects to investors and plans to boost output by about 2 million barrels a day once the deal is in place. The Persian Gulf nation, with the world’s fourth-largest oil reserves, pumped 2.8 million barrels a day last month, according to data compiled by Bloomberg.

One nation, Japan, plans to triple its imports of Iranian crude once sanctions are lifted, the Iranian Oil Ministry’s Shana news agency said on Saturday, citing Seyed Mohsen Ghamsari, director of international affairs at National Iranian Oil Co. Japan will increase purchases to 350,000 barrels a day from 110,000 barrels, the agency said.

The U.S. waivers will result in the lifting of sanctions that now restrict or penalize non-U.S. companies for engaging in various economic activities, including buying Iranian oil and dealing with many Iranian banks, the U.S. officials said.

Narrow Categories

But for U.S. companies, sanctions will be eased only for certain narrow categories, the officials said. They said these include the export of civilian passenger aircraft, the import of spare aircraft parts and handicrafts from Iran, and some activities that subsidiaries of U.S. companies can conduct overseas.

In addition, Obama told reporters on Friday that sanctions “related to ballistic missiles, human-rights violations, terrorism — those, we will continue to enforce.”

In another sign of progress, IAEA monitors last week ended their 12-year investigation into the possible military dimensions of Iran’s nuclear past. Inspectors now have until Dec. 15 to draft and present a final assessment of their inquiry.

Iran’s nuclear work has been the focus of international scrutiny since February 2003, when Iranian officials told inspectors visiting Tehran of their plans to begin enriching uranium on an industrial scale. Subsequent discoveries that Iran had secretly procured nuclear materials and technologies led to years of mistrust. In May 2008 and again inNovember 2011, the IAEA publicly disclosed its suspicions about Iran’s activities.

Iran has consistently denied ever seeking a nuclear weapon.

Timeline to lifting sanctions:

  • Sunday — “Adoption Day” for July accord signed with world powers. Parties to the agreement begin meeting their commitments.
  • Nov. 30 — Iran prepares to end testing of advanced centrifuge cascades and store machines under IAEA seal.
  • Dec. 15 — IAEA to present its assessment of Iran’s past nuclear activities, which board will use “with a view to closing the issue.”
  • Late 2015-early 2016 — Oil sanctions to be lifted on “Implementation Day.” U.S. officials have suggested it will take at least two months from “Adoption Day” to reach this point.

    Saudi Arabia, the world’s largest oil exporter, is storing record amounts of crude in its quest to maintain market share as it cut shipments.

    Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative. Exports dropped to 7 million barrels a day from 7.28 million.

    “The fall in Saudi crude exports reflects the market reality,” Mohammed Ramady, an independent London-based analyst, said Sunday by phone. “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.”

    Crude inventories have been at record highs since May, a month before Saudi Arabia’s production hit an all-time high of 10.56 million barrels a day. The nation has led the Organization of Petroleum Exporting Countries in boosting production to defend market share, abandoning its previous role of cutting output to boost prices.

Reduce your taxes by going offshore Read more at http://www.youroffshoremoney.com

Credit Suisse: Oil Has Stabilized Because Saudis Got What They Wanted

 

Forget wealth effect. The global equity market can’t have a smooth bull run if oil prices are tanking.

This is because commodity-related capital expenditure accounts for around 30% of total capex globally, so even though consumers may benefit from cheaper oil, companies are hit first.Credit Suisse estimates that the fall in commodities capex has taken at least 0.8% off the U.S. economic growth in the first half this year and 1% off global growth over the last year.

But the worst is over, according to analyst Andrew Garthwaite and team. They listed three reasons: 1. demand for oil has stabilized; 2. non-OPEC production has peaked; 3. Saudi Arabia has achieved its goal of deterring new entrants.

Since Saudi Arabia is the wild card, Credit Suisse analysts took pains to explain their position:

We believe that the key variable is Saudi Arabia. If it were not for Saudi Arabia, then we fear that oil would have to behave like other commodities and if there is excess supply fall to levels where a third of production is below the cash cost and, given the likely fall in commodity currencies, this in turn would lead to a much lower oil price (maybe down to $30/barrel).

This leads to the question ‘Can Saudi Arabia support the oil market?’. We think the answer is yes. They control the vast majority of spare capacityaccording to our oil team and 13% of output.

Their clear aim was to restore market share against non-OPEC and avoid being a swing producer (and thus not repeat the 1980 to 1985 experience, when their oil production fell by 70% as they sought to defend the oil price) and also limit the growth in alternative energies. The key is clearly at what point they have achieved their objective. The issue is nearly always the same – costs fall much more quickly than expected, partly because commodity currencies fall and partly because of cost deflation.

Moody’s highlight that the breakeven for median shale is around $51pb. Thus it may be the case that around the current oil price, Saudi Arabia believe they have achieved their objective of pricing out new shale projects.

Additionally the reduction in the oil price has come at a cost, with the budget deficit estimated to be 20% of GDP in 2015 (IMF Article IV – Saudi Arabia). While government debt to GDP is very low at c1%, we view the recent selling of Sama reserves and the first sovereign bond issue since 2007 as signs that there is some degree of stress.

Brent crude jumped another 2.2% to trade at $49.58 recently after a 5% rally overnight.

Oil stocks rallied. CNOOC (883.Hong Kong/CEO) advanced 12.1%, China Oilfield Services(2883.Hong Kong) gained 9.5%, PetroChina (857.Hong Kong/PTR) was up 7.8%. Sinopec(386.Hong Kong/SHI) jumped 6.8%. The Hang Seng China Enterprises Index advanced 4%. Overnight, the United States Oil Fund (USO) rose 4.9%.

Oil jumps $2, breaking range as supply seen ebbing

 

NEW YORK (Reuters) – Oil prices jumped more than $2 a barrel on Tuesday, breaking out of a month-long trading range on a mix of technical buying and industry talk as well as U.S. government data suggesting the global supply glut could be ebbing.

Global benchmark Brent crude (LCOc1) rallied for a third straight day and settled above $50 a barrel for the first time in a month. This convinced some dealers that there was little chance prices would slide back to the 6-1/2-year lows touched in August.

Early gains were fueled by a U.S. government forecast for tighter oil supplies next year, and indications that Russia, Saudi Arabia and other big producers might pursue further talks to support the market. The rally accelerated above $50 on chart-based buying and a weakening dollar.

Brent settled up $2.67, or 5.4 percent, at $51.92 a barrel, breaking out of the $47 to $50 band it had traded since early September. Its session peak, a penny shy of $52, was the highest since Sept. 3, and took three-day gains to more than 7 percent.

West Texas Intermediate (WTI), the U.S. crude benchmark (CLc1), settled up $2.27, or 4.9 percent, at $48.53.

“We have reduced the probability of a return to the $37 to $38 area per nearby WTI,” said Jim Ritterbusch of oil consultancy Ritterbusch & Associates in Chicago. “We will maintain a longstanding view that price declines below this support level are virtually off of the table.”

Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, concurred, saying: “Steeper U.S. production declines over the near term have created a bid for oil prices.”

Even so, analysts told a Reuters survey that U.S. crude stockpiles likely rose last week for a second straight week as more refineries went into maintenance works. [EIA/S]

The American Petroleum Institute industry group will issue at 4:30 p.m. (2030 GMT) preliminary data on U.S. crude inventories for last week, before official numbers on Wednesday from the Energy Information Administration (EIA).

Global oil demand will grow by the most in six years in 2016 while non-OPEC supply stalls, the EIA said in its monthly report on Tuesday that suggested a surplus of crude is easing more quickly than expected.

Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, the EIA said in its Short-Term Energy Outlook. Demand is expected to rise 270,000 bpd to 95.2 million barrels, up 0.3 percent from September’s forecast.

Oil executives at an industry conference in London, meanwhile, warned of a “dramatic” decline in U.S. output that could lead to a price spike if fuel demand escalates. Mark Papa, former head of U.S. shale producer EOG Resources, told the “Oil and Money” conference that U.S. production growth would tail off this month and start to decline early next year.

Russia’s energy minister said Russia and Saudi Arabia discussed the oil market in a meeting last week and would continue to consult each other.

OPEC Secretary-General Abdullah al-Badri said at a conference in London that OPEC and non-OPEC members should work together to reduce the global supply glut.

Iran’s crude sales were on track to hit seven-month lows as its main Asian customers bought less.

Suncor launches hostile offer to buy Canadian Oil Sands

 

 

Canada’s biggest energy company is promising Canadian Oil Sands shareholders higher dividends as it seeks to take advantage of plunging crude prices to add production in Alberta.

CALGARY — Suncor Energy is looking to add another big chunk to its vast oilsands holdings — and take advantage of a prolonged rout in crude prices — with an unsolicited takeover bid for Canadian Oil Sands Ltd., the largest partner in the Syncrude mine north of Fort McMurray, Alta.

Analysts warn that the world could be one geopolitical event away from an oil price spike as the global safety cushion for production disruptions sinks to historic lows.

Suncor said Monday it’s offering $4.3 billion in its own shares and would take on about $2.3 billion of debt owed by Canadian Oil Sands, making the total transaction worth $6.6 billion.

Suncor says the offer would give shareholders of Canadian Oil Sands a stake in Canada’s largest integrated energy company, which includes the Petro-Canada chain of fuel stations as well as its own oil and gas production and refining operations.

The offer value is also 43 per cent above the market value for Canadian Oil Sands, based on closing prices at the Toronto Stock Exchange on Friday.

Canadian Oil Sands stock shot up nearly 50 per cent amid speculation that a rival offer may emerge while Suncor shares dipped slightly in early trading.

Suncor said its offer will be open until Dec. 4, although it could be withdrawn or the deadline could be extended.

“We believe this is a financially compelling opportunity for COS shareholders,” Steve Williams, Suncor’s president and chief executive officer, said in a statement.

“We’re offering a significant premium to COS’ current market price and also providing exposure to a meaningful dividend increase. We’re confident in the value this Offer provides to COS shareholders.”

Fort Hills

Fort HillsSuncor Fort Hills oil sands mining project is located in Alberta’s Athabasca region, 90 kilometres north of Fort McMurray.

The offer hasn’t been accepted by the Canadian Oil Sands board.

On a conference call, Williams said Suncor made a few overtures to its target in the spring, but was rebuffed.

Crude oil prices have declined by 17 per cent since then, now sitting well below US$50 a barrel. The share price value of Canadian Oil Sands has been dragged down with it, Williams noted.

“There is now a broad consensus among analysts and industry experts that we are in a structurally ’lower for longer’ oil price world,” said Williams.

“We remain convinced there are significant benefits to a transaction for all interested parties. However, given the deterioration of market conditions and the more pessimistic prevailing view on an oil price recovery, we believe the value of COS has declined since the previous offer was made.”

Suncor went shopping during the last major crude downturn in 2009, absorbing Petro-Canada in a blockbuster deal.

Canadian Oil Sands is a widely held company, with no shareholder owning more than six per cent of the common shares according to public data compiled by Thomson Reuters. Its largest shareholders are institutional investors.

Canadian Oil Sands has a 37 per cent stake in the Syncrude oil sands operation and Suncor owns 12 per cent. Othar Syncrude partners are: Imperial Oil with 25 per cent, Sinopec (nine per cent), Nexen (seven per cent), Murphy Oil and Mocal Energy (five per cent each.)

According to Thomson Reuters data, TD Asset Management is the largest shareholder in Canadian Oil Sands, with about five per cent of COS common stock. Other investors include funds managed by Franklin, Deutsch Asset & Wealth, CIBC, Blackrock and Vanguard.

Suncor is offering one-quarter of a Suncor share per COS share. In the first minutes of trading Monday, Suncor shares were down 87 cents at $34.50, making its offer worth nearly $8.63 at the time. COS shares were trading at $9.10.

 

Protect Your Assets From A divorce or creditor lawsuit  https://taxhavenguru.wordpress.com/