More price records, OPEC produces more and Iraq exports less

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Oil prices surged to new highs as Norwegian oil workers threatened to strike. WTI futures settled at a record $60.54/bbl on 27th June while, on the same day, heating oil broke through all previous records on Nymex to reach $1.6761/gall. August IPE Brent remained just below the $60 mark, but the October and November contracts both closed above $60/bbl for the first time, with November the higher of the two at $60.58/bbl. These new price levels proved unsustainable as many traders cashed-in their profits to close-out the second quarter. The record prices appeared not to indicate any actual shortage of crude oil. US imports touched 10.97 mn bpd in the week-ending 24th June: the second-highest on record. As if accepting this as proof that it was producing sufficient crude oil, OPEC shelved plans to discuss a possible 0.5 mn bpd increase in quotas to 28.5 mn bpd. The cartel had earlier decided that it would raise its output ceiling from 27.5 mn bpd to 28.0 mn bpd with effect from 1st July, at its meeting in Vienna on 15th June.     

OPEC cuts production, Iraq cuts exports and China seeks more oil

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC ministers agreed to cut crude oil production by 1 mn bpd from 1st January, whilst leaving the group's production ceiling unchanged at 27 mn bpd. Cuts were allocated amongst the seven countries deemed to be overproducing the most ( see Global Energy Review , OPEC, Latest Developments). OPEC's President, Purnomo Yusgiantoro, said OPEC's oil price target should be raised to at least $30 to reflect current dollar weakness. Freight rates fell sharply in the wake of OPEC's decision on output. VLCC rates between the Persian Gulf and Asia went down immediately by 25% and lost a further 60% by the end of the year. Saudi Arabia agreed to cuts of 500,000 bpd. The kingdom meanwhile has added 800,000 bpd to its production capacity with the formal opening of the Qatif and Abu Safah fields, bringing total capacity to 11 mn bpd. The Saudi government stepped up security following renewed threats by al-Qaeda to attack oil installations there. Two car bombs later exploded in Riyadh. In a radical departure from normal trading practice, Saudi Arabia said it would explore the idea of selling oil under long term contracts on a take-or-pay basis. Such arrangements are common in the natural gas industry but rare in the case of oil.     

Cuts from OPEC, violence in Iraq, more biofuel

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC's ministers, meeting in Doha on 19th October, decided to cut their production by 1.2 mn bpd from 1st November. The reduction is based on an output total of 27.5 mn bpd, which represents the production of the ten quota-observing countries in the weeks immediately preceding the Doha meeting. The Kuwaiti Oil Minister subsequently observed that the OPEC-10 were unlikely to be at their 26.3 mn bpd target before the second half of November. Venezuela said its 138,000 bpd cut would be concentrated on foreign joint-ventures operating in the Orinoco heavy oil belt. Crude oil prices fell in the wake of OPEC's announcement, prompting the Saudis to speculate that the group might cut production by a further 500,000 bpd at its meeting in the Nigerian capital, Abuja, on 14th December.     

No OPEC increase, Iraqi output up and Mexican exports down

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Oil prices fell back early in December as fears grew that high prices were about to push the US and other markets into recession. Brent fell back below $90/bbl ( see 'Oil Price Review') but the fall proved only temporary and prices began to rise sharply towards the end of the year. OPEC ministers did nothing to ease market fears when, at their meeting on 5th December in Abu Dhabi, they decided to leave the organization's output ceiling unchanged at 27,253,000 bpd. The ministers rejected calls from consuming countries to produce more oil, declaring in their communiqué that the market was "well-supplied", with stocks at "comfortable levels". The high level of prices was blamed on what the communiqué called "speculative activity" by financial funds and others. Angola and Ecuador were brought into the production-sharing system, being given output quotas respectively of 1.9 mn bpd and 520,000 bpd.     

Violence in Iraq and Nigeria, OPEC cuts output, admits Angola

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq ended 2006 with its crude oil exports at zero, its oil industry in need of "urgent attention", according to a report delivered to the US President and Congress, and its domestic security situation spiralling out of control. The execution of former President Saddam Hussain on 30th December failed to pacify the country, as the government appears to have hoped, as more than 2,000 Iraqi civilians died during the month of December and US military casualties passed the 3,000 mark. Crude oil exports ceased as bad weather closed the Persian Gulf terminals of Basrah and Khor al-Amaya. Exports via Ceyhan were already at a standstill, following recent attacks on the pipeline from Kirkuk. The country's main refinery, at Baiji was closed for part of December following threats to workers there and an attack on its main supply pipeline from Kirkuk. The government tried to relieve the resulting shortage of refined products by arranging to import some 6,300 bpd of fuel from Iran. The black-market prices of some refined products were reported by the Arabic newspaper, al-Hayat to have reached record levels. The Oil Ministry estimated that Iraq's oil exports were 1.6 mn bpd during 2006. Iraq has agreed to supply Jordan with 10,000 bpd of crude oil at a discount of around $18/bbl.     

Still more records, Iraqi violence and Caspian exports

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Oil prices set further records at the start of May before falling back. December WTI hit an all-time high of $78.00/bbl on Nymex on 3rd May. IPE November Brent went up to a record $76.45/bbl. Both contracts eventually settled lower and prices in general weakened before staging a minor rally at the end of the month. Other price records were broken early in the month. In Asia, the Indonesian marker grade, Minas, was recorded at $74.04/bbl on 2nd May, whilst Malaysia's Tapis went above $76.70/bbl. Strong Asian demand also boosted the prices of West African crudes. The markets appeared to be reacting to growing tensions in Iraq, Iran and Nigeria. These considerations returned to haunt the markets later in the month. All crude oil loadings at Iraq's Persian Gulf marine terminal were suspended following a fire, though the main Gulf terminal at Basrah continued to operate. The Ceyhan terminal remained out of action. Tensions between the US and Iran over the latter's nuclear programme gave rise to fears of an embargo on Iranian oil exports. Several foreign oil workers were kidnapped following an armed attack on oil installations in Nigeria. OPEC ministers kept their production ceiling unchanged at 28 mn bpd at a meeting in Caracas.     

Bombs, hurricanes and more chaos in Iraq

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
The oil market's roller-coaster continued into July with rising prices for US gasoline ahead of the 4th July holiday and a jump in prices for WTI on fears of hurricane damage to US Gulf production. August Nymex gasoline settled at a record $1.8056/gall on the 7th July as figures were released showing US demand at record weekly levels. On the same date, a series of fatal terrorist bomb attacks in London propelled IPE Brent to its highest-ever level of $60.70/bbl whilst, in Asia, Dubai traded at an all-time high of $55.80/bbl. The market's strength rapidly proved to be evanescent. Within hours of the London bombings, Brent had given up $5.00/bbl. Crude oil and gasoline prices eased in subsequent days and middle distillate lost some of its recent strength relative to gasoline as US stock figures showed a steady improvement in inventory levels. Volatility returned towards the end of the month on worries about gasoline shortages in both the US and Europe and more price records fell on 1st August on news of the death of King Fahd of Saudi Arabia. WTI gained $1.00 on the day, settling at a record $61.57/bbl on Nymex, having been even higher during the day's trading, at $62.30/bbl. On the IPE in London, Brent rose to its highest-ever intra-day level of $60.98/bbl, before settling slightly lower. Some product prices also went into previously uncharted territory: notably jet fuel in North West Europe, which went above $600/t.     

OPEC abandons quotas, more violence in Nigeria and British give away gas

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
OPEC ministers meeting in Vienna on 11th September agreed to leave the production ceiling unchanged at 28 mn bpd. The cartel, however, is to move away from formal quotas to a system of adjusting total production to world demand. The change recognizes the fact that many OPEC countries cannot produce their full quota allowances. The new policy is described by OPEC as trying "to ensure that supply and demand (remain) in balance with prices at reasonable levels". "Reasonable levels" were not defined in the communiqué, but most ministers agreed they should be in the region to $60-65/bbl. The oil markets were sceptical and prices fell below $60, reaching a seven-month low at the start of October. Nigeria announced a production cut of 120,000 bpd, though this may be a recognition of the difficulty of producing oil there at present. During September, the country was plagued by further violence in the Niger Delta, including attacks on oil workers, kidnappings and sabotage to oil installations. Oil workers went on strike for two days, threatening further walk-outs. By late September, nearly 875,000 bpd of production was estimated shut-in as a result of the current unrest. Shell said it had suspended plans to repair damaged facilities in the Niger Delta because of the continuing high level of violence.     

Another hurricane, high prices and more chaos in Iraq

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Another hurricane, this time called Rita, battered the US Gulf Coast, sending oil prices up worldwide, though not to the heights seen when its predecessor, Katrina, arrived. As before, a large swathe of US refinery capacity was temporarily put out of action: this time mainly in Texas. For around a week in late September, when Rita arrived, nearly 4.1 mn bpd of crude distillation capacity was taken off-line. At the same time, some 0.9 mn bpd was still unusable as a result of the depredations of Katrina in late August, leaving the US briefly minus nearly one third of its refinery capacity. The situation improved as some capacity was brought slowly back on-line, but by the beginning of October around 3.0 mn bpd was still not back in operation. The main price effects of Katrina were on gasoline, prompting demands in the Congress and elsewhere for investigations into overcharging by refiners and retailers ( see 'Focus'). A record weekly increase in the first week of September propelled the average price of regular gasoline across the US to $3.07/gall. Rita's principal effect was on heating oil, which went up in the last week of September by nearly 20% to $2.51/gall in the US Gulf. US crude oil prices remained below their immediate post-Katrina record highs ( see 'The Month in Brief', September 2005 ) despite the loss of the entire 1.5 mn bpd production in the Gulf of Mexico following Rita's arrival.     

Explosions in Iraq, UK and Nigeria and more new refineries elsewhere

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Iraq's latest round of elections, on 15th December, returned mainly Shi'ite parties, to protests from Sunnis and some secular parties. The country continued to suffer from high levels of violence. Oil installations were bombed, and road-tanker drivers were attacked in what was clearly a move designed to stop the delivery of refined products to Baghdad. The oil minister, Ibrahim Bahr al-Ulum, resigned in protest against a government decision to increase Iraq's heavily subsidized fuel prices. He has been temporarily replaced by the Deputy Prime Minister, Ahmad Chalabi. Opposition to the price rises led to a 10-day strike at Iraq's main refinery at Baiji. Operations continued to be adversely affected after the strike because of sabotage to the 200,000 bpd pipeline bringing crude oil to Baiji from Kirkuk. Sabotage to a pipeline serving the Daura refinery cut production there, and severe gasoline shortages were reported across the Baghdad region. The export pipeline from Kirkuk to Ceyhan was reopened after being idle for most of 2005, but throughputs are nowhere near capacity levels. Exports of crude oil from Basrah were disrupted by power cuts and bad weather.     

Hurricane in US, chaos in Iraq and even more price records

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
A hurricane named Katrina devastated oil installations along the US Gulf Coast as well as the city of New Orleans, sending oil prices to new record levels. Nearly 1.4 mn bpd of offshore oil production was shut-in, along with 8.3 bn cfd of the Gulf's natural gas. More production was closed down onshore along with nearly 2.4 mn bpd of refining capacity. Crude and product prices shot up worldwide. The 30th August saw October WTI close at a record $69.81/bbl, having traded earlier in the day up to $70.85/bbl. On 31st August, Nymex gasoline closed at a new high of $2.6145/gall as the Gulf Coast's refineries remained off-line. Gulf spot prices rose above $3/gall. The following day, October heating oil set a new record by closing at $2.1985/gall. Records fell outside the US, with Tapis at $70.97 on 31st August. The previous day saw IPE October Brent settle at a record $67.57, whilst the November and December contracts both saw trades above $69.00/bbl. Natural gas prices also moved into record territory in the US, topping $12 per mn BTU on Nymex during the morning of 30th August.     

THE MONTH IN BRIEF: Crude oil prices plunge,OPEC takes a back seat,and Kurds agree export deal with Iraq

This section summarizes downstream developments of the previous month. Exploration & Production are covered in “Upstream Review.”     

Iraq goes to polls, China seeks more oil and UK worries about petrol

This section summarizes downstream developments of the previous month. Exploration & Production are covered in 'Upstream Review'.
Following a month in which US and British forces suffered their heaviest daily casualties, the Iraqi people voted in large numbers for a new national assembly ( see 'Focus'). Violence, however, continued after the election and oil installations were reported damaged, including a pipeline linking the Kirkuk oil field to the Baiji refinery and a further line between Baiji and the refinery at Daurah. The export line connecting Kirkuk to the Turkish Mediterranean port of Ceyhan was also hit. Sabotage to electricity installations affected oil pumping stations in the south of the country cutting production and forcing the Iraqis to announce a 10% cut in contract volumes of Basrah Light until the middle of the year. An official investigation into the UN-administered Oil-for-Food Programme concluded that the man in charge, Benon Sevan "repeatedly solicited" oil for a company called Africa Middle East Petroleum. A further report into other allegations of corruption in connection with the programme, which supervised export sales of Iraqi petroleum from 1993 to 2003, is due later this year. Relief at the apparent success of the Iraqi election caused crude oil prices to fall by about $3 a barrel. OPEC ministers did their bit for oil prices by agreeing not to cut output at their meeting on 30th January. Quotas remain unchanged at 27 mn bpd. The organization's target price band of $22-28 a barrel, however, has been suspended. A new one will be discussed in March. Kuwait announced it was to increase security at its oil installations following an attack by armed men in an area close to the emirate's largest refinery, at Mina al-Ahmadi.