Oil fell again on Monday, extending the previous session's drop as bearish sentiment over gasoline markets in U.S. continued to dominate investors' concerns. In May, the market was pricing in that there would be a gasoline shortage but the latest data is obviously showing that it was wrong. More attacks on oil installations in Nigeria and the political unrest in Iran have failed to anchor prices.
Last week U.S. lawmakers introduced a bill ordering the Energy Department to sell 70 mln.b of light sweet crude oil from the Strategic Petroleum Reserve to restrain rising oil prices. The legislation would require the department to replace the barrels of oil with heavy crude oil, which is cheaper. The process would have to be completed within five years.
The latest Platts' survey on Chinese demand is the most bullish change in the supply/demand balance that has appeared in several months. The report shows that China consumed 33.23 mln.t of oil in May, up a strong 6% from the same month in 2008. That's the second month in a row that the country showed a y/y increase. It should be noted that this time last year the Chinese were laying in tremendously high stocks of diesel to get ready for the Olympics, making the gain even more notable. On the contrary Chinese crude output fell more than 1% y/y.
OPEC president said last week the group will not need to cut production further in 2009 if oil prices remain at current levels and that a price of 70 to 75 $/b is positive for the global economy. Angolan Oil Minister said, however, that oil price fundamentals were still not strong enough to justify the recent rise in prices as stocks were enough to cover 63 days of forward demand.
According to Financial Times PetroChina, Asia's largest oil and gas company, is discussing an investment in the Ineos refinery at Grangemouth in Scotland. A purchase by PetroChina would be its first move into refining in Europe after last month agreed to buy nearly half of Singapore Petroleum Company, which owns one of the island-state's largest refineries.
Mexican oil production fell to its lowest level under normal conditions since January 1993 in May as output at the giant Cantarell field continued to slide, state oil company Pemex said. Mexico produced 2.609 mln.b/d in May, a decline of 182 kb/d from a year ago.
Russia's LUKOIL will buy a stake in a Dutch refinery from France's Total, gaining a foothold in northwest Europe and blocking a bid by the largest U.S refiner, Valero, to enter the region. Friday's deal coincided with a state visit to the Netherlands by Russian President D. Medvedev.
