NEWS / Foreign Exchange

Crude Market Update

• Natural Gas Inventories: 56 bcf exp.|| 55 bcf prior [10:30 et]
• Crude Inventories: -5.29M barrels vs. +963Ke [yesterday]
• Gasoline Inventories: -1.93 barrels vs. +475K [yesterday]
• Distillate Inventories: -1.85M barrels vs.+250Ke [yesterday]
• OPEC Secretary General: OPEC is not in any talks on a new oil output rise || There is no shortage of oil || Would worry if oil were at $90 for a long period of time || $90 oil is no bonanza for producers  || Speculators are taking advantage of geo-politics
• Royal Dutch Shell: Third quarter production 3.14M BOE/D vs. 3.25M BOE/D in the third quarter of 2006  [earnings report] [rdsa.uk]
• Royal Dutch Shell: Notes that 189K bpd of Nigerian oil output is still shut down || Maintenance at Bukom will be earlier due to a problem in October [post earnings release comments] [rdsa.uk]
• EU Almunia: High oil and commodity prices are hitting the economy
• Turkish President: Turkey is running out of patience and will not tolerate PKK attacks from Iraq [wires]
• Iraqi oil exports to exceed 1.8M bpd [SOMO Chief]
• Electricity de France sells 5 combined cycle pants and gas pipes in Mexico to Gas Natural for $1.45B [edf.fr] [gas.sp]
• PetroChina plans to boost oil refining capacity by 52% by 2010 in order to meet rising demand [857.hk]
• Cosmo Oil signs offshore exploration contract to explore in three offshore areas of Qatar [5007.jp]
• The Bush administration will announce a long-debated policy of new sanctions against Iran on Thursday, accusing the elite Quds division of the Revolutionary Guard Corps of supporting terrorism, administrations officials said Wednesday night. The administration also plans to accuse the entire Revolutionary Guard Corps of proliferating weapons of mass destruction, the officials said. Both designations will put into play unilateral sanctions intended to impede the Revolutionary Guard and those who do business with it. [New York Times]
• Russian energy giant Gazprom's top officials met with the chief of Japan's natural resources and fuel department to discuss gas supplies and the Sakhalin-2 project, Gazprom said late Wednesday. [Forbes] [gazp.ru]
• Gazprom expects gas prices for European customers to rise by 4 percent next year from the average forecast price for this year,[Vedomosti Business Daily] [gazp.ru]
• Leading energy users met officials from the Department for Business, Enterprise and Regulatory Reform yesterday to discuss supplies for the coming winter. The meeting took place as seven of Britain??™s sixteen nuclear reactors were out of action, raising concerns that energy supply could be tight again this winter. The Government promised to make more information on security of supply available in its Energy White Paper, published in May. Shadow Energy Minister Charles Henday said of the situation that ???Our energy security is one of the most important priorities for any government, but by failing to take the important decisions this Government is directly putting our future energy security at risk.??? [The Times]
• Why are commodities traders fixated on the dollar? Like other oil market puzzles, the answer may lie in Saudi Arabia. With a booming economy and inflation ticking higher, some speculators worry that Riyadh will de-peg its currency from the dollar. And they see such a step as having the effect of re-pricing oil in euros and yen.  That??™s because if Saudi Arabia de-pegs and does nothing else, it will be sitting on two rapidly depreciating assets: $20,000bn in oil reserves and $800bn in US dollar reserves.  But if it were to diversify its currency reserves or oil pricing regime, then it is almost certain that the dollar would weaken. As a result, oil prices in dollar terms would have to jump to keep oil demand growth from Asia in check. For speculators with this mindset, oil at almost any price looks cheap, especially when the market is pricing in another dollar-weakening Fed cut this month. [Financial Times]
• Saudi Aramco and Japan's Sumitomo are moving forward with studies on a more ambitious upgrade of the massive Petro-Rabigh refinery that could boost total investment to around $20 billion, industry sources said this week. The original upgrade to the 425,000 barrel per day domestic refinery, designed to turn it into an integrated refining and petrochemicals complex, is due on line by the third quarter of 2008. [International Oil Daily]
• Nigeria??™s pledge to review its relationship with major oil companies is likely to ring alarm bells among investors who fear soaring crude prices will tempt the government to demand a bigger profit share.  Rilwanu Lukman, chairman of Nigeria??™s oil and gas reform committee, said this week the government wanted to take a fresh look at agreements signed with energy companies as part of a wider reform of the sector. But analysts believe that ultimately companies may benefit, if the state devolves responsibility for funding investment in the sector.  [Financial Times]
• NHC: No tropical formations are seen over the next 48 hours