China Calls for Warning System

China Calls for Warning System to Ensure Oil Supplies
By Xiao Yu
Nov. 25 (Bloomberg)

China urged local governments to set up an early warning system to ensure sufficient oil supplies at filling stations, which face shortages across the nation, the state-run Xinhua News Agency reported.

The Ministry of Commerce ordered local authorities to monitor oil supplies and work out measures to cope with emergency shortages, Xinhua said yesterday. The report didn't elaborate on requirements for the warning system.

Demand for crude oil in China has exceeded output as some refineries cut production because of soaring costs and government-capped fuel prices. The nation's crude oil imports also fell to the lowest in eight months in October as prices climbed to records.

``China's fuel shortage will continue unless the government improves its pricing mechanism and raises domestic fuel prices,'' said Wu Jun, a Shanghai-based analyst with China International Futures (Shanghai) Co. in a telephone interview today.

Premier Wen Jiabao last week said he would ask refiners to expand capacity to turn crude oil into fuels to run cars and factories. Some of the nation's refineries aren't running at their maximum operating rates, Wen said Nov. 21 in Singapore, where he attended the East Asia Summit.

``Refiners lack incentives to produce more after crude oil prices rose to a record. Domestic fuel prices are lower than international prices'' because the government determines prices, China International's Wu said.

Fuel Supplies

China's government has urged refiners including China Petroleum & Chemical Corp., known as Sinopec, to ensure fuel supplies are sufficient, Xinhua reported. Many regions still face ``tight diesel supplies,'' Xinhua said, citing a notice from the Commerce Ministry.

China increased fuel prices by as much as 10 percent from Nov. 1 in what the government said was an ``urgent step'' to help the nation's oil refiners cover rising costs.

``The increase of fuel prices is far from sufficient to cover the cost of rising crude oil,'' Wu of China International said today. ``Some refiners may take advantage of the fuel shortage to press the government for a fundamental change of its pricing mechanism.''

Oil Rises to Record $94.74

Oil Rises to Record $94.74 as U.S. Supplies Fall to 2-Year Low
By Mark Shenk
Oct. 31 (Bloomberg)

Crude oil rose to a record $94.74 barrel in New York after an Energy Department report showed that U.S. inventories fell to a two-year low. Today's 4.6 percent gain was the biggest since Jan. 30.

Stockpiles dropped 3.89 million barrels to 312.7 million barrels last week, the department said. It was the lowest since October 2005. A 400,000 barrel gain was expected, according to a Bloomberg News survey. Supplies at Cushing, Oklahoma, the delivery point for New York futures, fell 17 percent.

``We've lost a lot of oil at a time when we should be building supply for winter,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``Nearly all the analysts expected inventories to rise, making this an extremely bullish number.''

Crude oil for December delivery rose $4.15 to settle at $94.53 barrel at 2:50 p.m. on the New York Mercantile Exchange. Futures touched $94.74 the highest since trading began in 1983. The exchange reported a high of $94.80 during the session and subsequently canceled the trade.

Oil rose 16 percent in October, the biggest one-month gain since September 2004. Prices are up 61 percent from a year ago.

The futures plunged 3.4 percent yesterday after Goldman Sachs Group Inc., which said in July oil may reach $95 a barrel, told clients it was ``time to take profits.''

``The DOE report was the catalyst for this breakout,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``Prices are also up because of the falling dollar and strong GDP number, which is a sign that demand will pick up. Economic growth both here and abroad are leaving us vulnerable to the myriad of supply threats out there.''

Economic Growth

Economic growth in the U.S. unexpectedly accelerated in the third quarter as increases in exports, consumer spending and investment made up for another plunge in home construction, a government report today showed. Gross domestic product grew at an annual rate of 3.9 percent in the quarter, the most since the first three months of 2006.

Oil inventories at Cushing, where West Texas Intermediate and other sweet, or low-sulfur, grades of oil are delivered for the futures market, dropped to 15.1 million barrels, the lowest since October 2005. Today's decline was the biggest since November 2004, Energy Department data show.

``There is no reason I can think of for a refiner to buy a single barrel to put a barrel in inventories,'' said Tim Evans, an analyst with Citigroup Global Markets Inc. in New York. ``Crude oil is expensive, refinery margins are weak, product inventories are rising anyway and backwardation makes it very dangerous to hold into oil.''

Backwardation

New York crude oil futures closest to delivery are more expensive than the prices for contracts for later delivery, a condition known as backwardation. During the first half of the year the market was in contango, where oil for future delivery is higher than near-month prices. Contango trading encourages companies to increase stockpiles.

``The bottom line is that there isn't enough sweet crude to meet demand,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``We've almost erased yesterday's correction and may get another leg up if the Fed makes an interest rate cut.''

The Federal Reserve today announced a quarter-point interest rate reduction to bolster economic growth. Crude-oil surged and the dollar plunged after the Federal Reserve cut its benchmark interest rate by half a percentage point on Sept. 18, more than economists had predicted.

Weak Dollar

``When the dollar is weak, a lot of overseas investors seek a safe haven in commodities, such as gold and oil,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``Falling interest rates also have bullish implications for demand because it may boost economic growth. A weak dollar also cushions European consumers somewhat against higher prices.''

Brent crude oil for December settlement rose $3.19, or 3.7 percent, to $90.63 a barrel on the London-based ICE Futures Europe exchange, a record close. Brent reached $90.94 a barrel during today's session, a record intraday price.

The Organization of Petroleum Exporting Countries agreed last month to raise output by 500,000 barrels a day starting tomorrow to help ease prices that threaten economic growth. The move failed and prices have jumped 17 percent since the Sept. 11 announcement of the increase.

``Global demand for oil largely exceeds the production of non-OPEC countries and the difference is not matched by OPEC, so there is tension on the market,'' said Harry Tchilinguirian, an analyst at BNP Paribas in London. ``Oil-consuming countries will certainly be putting pressure on OPEC to increase output, but in the short term we don't anticipate a production increase above 500,000 barrels a day.''

Goldman closes out long positions

Goldman Says `Take Profits' After Crude Hits Record
By Mathew Carr and Margot Habiby
Oct. 30 (Bloomberg)

Goldman Sachs Group Inc., the bank that said in July oil may reach $95 a barrel, told clients it was ``time to take profits'' after crude rose to a record $93.80 in New York yesterday.

``We are now more cautious on the near-term upside potential for oil prices,'' analysts including Jeffrey Currie in London said in the bank's Energy Weekly today. ``We are not trying to call a top here, just take profits.''

Goldman said it was closing its long positions in New York oil futures. Oil has gained 51 percent this year as hedge funds and other large speculators increased bets on rising prices. Net-long positions in New York crude futures in the week ended Aug. 3 jumped to the highest in more than a decade.

Goldman predicted in March 2005 that oil would enter a ``super spike'' period, fueled by rising demand, and could reach $105 a barrel in the next several years.

Crude oil for December delivery fell $3.15, or 3.4 percent, to settle at $90.38 a barrel on the New York Mercantile Exchange. The price for March delivery was at $87.99 a barrel and at $82.92 for December next year.

``The downside risks we have embedded in our end of first quarter 2008 oil price target of $80 a barrel are beginning to gain momentum,'' Goldman said in the report. ``These include increasing exports, a slowing U.S. economy, an adequate level of heating oil inventories.''

Cold Weather Factor

Goldman's recommendation ``might be a bit early,'' especially if colder weather boosts demand during the next two months, said Francisco Blanch, a London-based analyst at Merrill Lynch & Co. Blanch predicts oil will average $80 a barrel for the three months through December, and that prices are more likely to reach $100 soon than $60.

Twenty-one, or 49 percent, of 43 analysts surveyed by Bloomberg News last week said oil prices will fall through Nov. 2, the least bearish response since Sept. 7. Eighteen, or 42 percent, said prices will rise, the most bullish response since the week ended July 6. Four forecast little change. The previous week, 69 percent of respondents said oil would fall.

``I think you'll get some more oil into the U.S.,'' Blanch said today by phone. ``It will take another few months to get it up and running.''

An increase in crude supplies will partly come from the Greater Plutonio oil field in Angola and the Genghis Khan field in the U.S. Gulf of Mexico, which both started this month and will likely ramp up production during the next few weeks, Goldman said.

Freight Rates

``The strength in freight rates from West Africa to the U.S. Gulf Coast suggests that U.S. refineries may be preparing to receive more of the new Angolan low-sulfur medium grade Plutonio,'' Goldman said.

Lehman Brothers Holdings Inc. forecast a ``sharp price fall'' by late winter in a report released today. The Lehman analysts, led by New York-based Edward Morse, said there's a 50 percent chance that Nymex futures will exceed $96.50 a barrel before the December contract expires.

Lehman raised its fourth-quarter forecast for Brent oil by $10 to $85 and said it expects Nymex oil to average about $2.50 a barrel higher than that.

``Our view is that we don't think prices are sustainable where they are,'' Michael Waldron, an energy markets research analyst in New York and one of the authors of the Lehman report, said in a telephone interview earlier today.

OPEC Objectives

OPEC, whose members produce more than 40 percent of the world's oil, said current crude prices don't reflect the group's objectives.

The Organization of Petroleum Exporting Countries has a ``duty'' to supply the world with oil at stable prices, Mohamed al-Hamli, the group's president, said today at an oil conference in London. If the market needs more oil, OPEC will supply it using spare capacity of 3.5 million barrels a day, he said.

OPEC ``recognizes it has a responsibility'' to ensure ``stable'' prices for producers and consumers, he said. Al-Hamli said he doesn't expect oil to reach $100 a barrel in the near future.

Oil Futures Market Is Better Predictor Than Analysts

Oil Futures Market Is Better Predictor Than Analysts
By Bill Murray
Oct. 9 (Bloomberg)

The crude futures markets in London and New York have been more accurate predictors of oil prices than market analysts during the past eight years, Deutsche Bank AG said.

The average forecasting error by the crude futures market since 1999 has been 17 percent, compared with 31 percent by a group of more than 30 oil analysts surveyed by Reuters, senior analysts Michael Lewis and Adam Sieminski said in a note to clients published Oct. 5.

``The hidden truth behind analyst oil price forecasts is that they have more to do with the current spot oil price than prospective oil market fundamentals,'' they wrote. ``We find that for the past nine years the analyst community has consistently under-estimated the oil price.''

In the 1990s, crude traded between $15 and $25 a barrel 85 percent of the time. In the present decade, it has averaged $42 a barrel with greater price volatility, the report said.

Oil prices have quadrupled since January 2002 as surging demand, led by China and the U.S., has left a narrower margin of spare capacity to tap during supply disruptions.

Hurricanes in the U.S. Gulf of Mexico in 2005 and cuts in production from the Organization of Petroleum Exporting Countries helped spur oil prices, which reached a record $83.90 on Sept. 20 this year.

Crude oil for November delivery was up $1.53 at $80.55 a barrel in trading on the New York Mercantile Exchange at 4:06 p.m. London time. Brent crude oil for November was at $77.41 a barrel, up 83 cents, on the London-based ICE Futures Europe exchange.

Brent at $87.80

If the average absolute forecasting error of analysts persists through next year, that would imply Brent crude oil prices in 2008 will actually average $87.80 a barrel, the report said.

The average absolute futures market forecasting error would price Brent at $88.20 a barrel in 2008.

Deutsche Bank itself said oil may fall below $70 a barrel by the end of the quarter as demand for gasoline in the U.S. weakens along with the economy. Oil prices will average $60 a barrel in 2010, the Frankfurt-based bank said.

While oil prices probably won't fall during the fourth quarter as much as they did last year during the same period, fading geopolitical risks, OPEC production growth and economic weakness in the U.S. mean prices are still likely to decline, Deutsche Bank said.

Fuel Consumption

``Futures are saying that in two years prices will be in the low $70s,'' Siemenski said in an interview. ``In addition to the fundamentals of crude, demand has been eroded. Demand has been flat in the U.S. for the past two months.''

U.S. fuel consumption in the four weeks ended Sept. 28 averaged 20.45 million barrels a day, down 0.3 percent from the same period a year earlier, according to the Energy Department.

The Paris-based International Energy Agency, an adviser to 26 industrialized countries, reduced its forecast for global oil demand last month on lower estimates for U.S. economic growth.

Does the Middle East Matter?

Does the Middle East Matter?
By Peter Glover
Energy Tribune
Sep. 19, 2007

The May and June issues of the British magazine Prospect hosted a fascinating spat over the strategic importance of the Middle East. In May, “The Middle of Nowhere” by Edward Luttwak, a senior advisor at the Center for Strategic and International Studies in Washington, D.C., made the case that “despite its oil this backward region is less relevant than ever, and it would be better for everyone if the rest of the world learned to ignore it.” Strong stuff.

Enter David Strahan, author of The Last Oil Shock, with a June letter demolishing Luttwak’s critical claim that the importance of Middle East oil is declining, summed up in his pithy counter-assertion, “It’s the oil, stupid.” We agree with Strahan’s conclusion, but with two amendments. Not only does Middle East energy still matter, it will soon matter increasingly – and…it’s the oil and gas, stupid.

As Strahan says, many of Luttwak’s political points “ring horribly true.” Luttwak attacks the oft-repeated fallacy that solving the Israeli-Palestinian conflict is the key to resolving Arab/Muslim-Western tensions. Luttwak also uses statistics to bolster his point that the region is “remarkably unproductive” with a correspondingly low per capita income as a result: “Despite its oil wealth, the entire Middle East generated under 4 percent of global GDP in 2006 – less than Germany.” But it is in his assertion that the region’s relevance is diminishing because “global dependence on Middle Eastern oil is declining,” and the assumption that the region’s energy reserves are unimportant, that Luttwak ultimately gets it badly wrong.

Strahan rightly points out, “Luttwak claims the Middle East is irrelevant because it produces little but petroleum. Hasn’t he heard that oil provides 95 percent of all transport energy and that spikes in oil price have precipitated every major recession in the last 30 years?”

Luttwak comments: “The region produces under 30 percent of the world’s crude oil compared to almost 40 percent in 1974-75. In 2005, 17 percent of American oil imports came from the Gulf, compared to 28 percent in 1975.” True enough. But as Strahan counters, “This is unlikely to last. Non-OPEC production will peak by 2010 or soon after. According to the International Energy Agency, the U.S. Department of Energy, Exxon Mobil, Shell and PFC Energy…OPEC will soon have to provide a much bigger proportion of global supply – almost 50 percent by 2030 according to the IEA – mostly from the Middle East.” However, Strahan acknowledges: “There are well-justified fears that OPEC output will also peak within the next decade…so dragging global oil production into terminal decline. Since OPEC controls 75 percent of known reserves – overwhelmingly concentrated in the Middle East – this can only make the region more critical, not less.” While ET concurs that the region’s importance is growing, we do not agree with Strahan’s overly alarmist view of what he terms the “imminent extinction of Petroleum Man,” central to his thesis in his book, The Last Oil Shock. (A timely, though poorly written, corrective to Strahan’s peak oil theory can be found in the recent The Battle for the Barrels by Duncan Clarke, Profile Books.)

Where Is Oil Headed?

Where Is Oil Headed? A Contrarian Says $45 [Pt.I]

Where Is Oil Headed? A Contrarian Says $45 [Pt.II]

OPEC Says $80 Oil Won't

OPEC Says $80 Oil Won't Last Due to `Fundamentals'
Sept. 14 (Bloomberg)
By Fred Pals

OPEC, whose members produce more than 40 percent of the world's oil, said crude at $80 a barrel won't last because ``fundamentals'' don't support the price.

``I don't think the price will stay at $80,'' Secretary General Abdalla el-Badri said today at a press conference in Vienna. ``The fundamentals don't support that.'' The price of $80 a barrel is ``too high,'' he added.

The Organization of Petroleum Exporting Countries unexpectedly agreed to increase oil production by 500,000 barrels a day at a ministerial meeting in Vienna on Sept. 11. The increase, which will be added to the current 26.7 million-barrel-a-day output of 10 OPEC members, starts Nov. 1.

Oil prices gained after OPEC's decision to raise supply, when the U.S. Energy Department reported the country's stockpiles of crude fell more than expected last week. That suggested the increase may not be enough to meet demand as winter approaches in the Northern Hemisphere. Hurricane threats and an attack on Mexican pipelines have also driven up oil prices over the past few days.

Crude oil for October delivery traded down 18 cents at $79.96 a barrel at 9:06 a.m. local time on the New York Mercantile Exchange. The contract rose above $80 a barrel yesterday for the first time, touching $80.20.

December Meeting

El-Badri declined to comment on whether OPEC would discuss raising output again at its December meeting if crude prices remained near their current levels. ``Of course, we will discuss supply, demand and inventories, as usual,'' he said.

OPEC is not pursuing any specific price target or range, El- Badri said. ``It has been a long time ago since we've had a range,'' he said. OPEC having a specific target is ``rubbish.''

Angola, the African nation which joined OPEC on Jan. 1 this year as its 12th member, is expected to have a production quota next year, and El-Badri said he hopes to announce that level at OPEC's December meeting. He declined to comment on whether Angola would get a quota as soon as it reached production of 2 million barrels a day.

Exxon Mobil Corp., BP Plc and other international oil companies see Angola as a growth area. They're finding it harder to expand oil and gas production in other resource-rich countries such as Russia and Venezuela.

The Energy Report

The Energy Report
Phil Flynn
September 13, 2007

Oil at 80. Are the stars out tonight? I can’t tell if it’s cloudy or bright and that may depend on whether or not you're long oil. The bullish stars came into perfect alignment in an explosive trading session that sent oil out of this world. Oil surged to an all time not inflation adjusted high of $80.00 a barrel in a day that saw all the energy products soar.

Oil seemed on a mission to fulfill some technical destiny of $80.00 a barrel. It was a price level that was denied this summer as logistical issues kept oil undervalued for most of the summer. But sometimes things are written in the stars and the just wont be denied. It would be easy to point to yesterday’s wildly bullish inventory report as the main reason for the oil market's star search but in reality that was only a small part of the overall story. The market got just about anything a bull could want and perhaps even more.

Even before yesterday's inventory report the market had a strong upward bias. Oil had closed the day before at a record high as it laughed in the face of the OPEC production increase. Why did they raise production? Because OPEC cares. What they care about is a bit uncertain but they say they care all the same. Abdullah el-Badri, OPEC’s Secretary General, said that, “our message to consumers is that we are concerned and we care, and that is why we are raising production". Can you feel the love. Ah gee. OPEC cares about me! I feel special. And of course with OPEC - as always - the devil is in the details. And what you can sure about is what OPEC really cares about is covering their behind.

OPEC raised production because mainly they fear the backlash if the world goes into a recession. The IEA and the market have been sending signals to the cartel all summer that more oil was needed but they failed to act. Now OPEC has made a valiant effort by raising their quota from 25.845 million barrels a day to 27.2 million barrels a day which means that OPEC according to their math would be adding 500,000 barrels of oil. That’s not paper barrels but real oil for real men.

Yet because OPEC leaked its intentions early there was no surprise and the market discounted the oil as just replacing oil that was lost during the last two hurricanes. OPEC is proving once again that as a cartel they are very good at getting the price of oil from falling but they are always behind the curve and fail to stop prices from rising. Sometimes it is an issue of not having enough spare production capacity but many times it is because they are quick to cut but slow to raise production.

So then it was onto the weekly supply report from the Department of Energy. Would it give the bulls more reasons to buy! Well, before the stocks report even came out, natural gas bulls were already buying! This time it was because of the weather. A tropical wave that turned into a tropical storm Humberto caused havoc in the Gulf. The Houston shipping channel would close and there was talk that perhaps some oil rigs might be evacuated. Some weather experts fear that this active storm season will continue to cause more havoc and we may have to get prepared for one storm after another.

Then came the weekly inventory report. It was like a bullish dream. Crude supplies plunge 7.1 million barrels more than twice the average estimate. And that was and in all major categories. But even without the bullish report the mood for oil is bullish; decidedly bullish. The psychology after the OPEC announcement and the subsequent rally was a clear sign that the energy markets are poised to move higher.

Crude is convinced that a Fed rate cut is in store for next week and that should help keep the demand for oil much stronger than feared. The market is also showing that funds are getting an appetite for risk once again. Funds that fled from record long positions because they feared the housing slowdown perhaps are jumping back in. Even those without sub prime exposure fled from risk. Now they are coming back, a strong sign of confidence in our economic future.

Yes the backwardation being at near record levels could signal some slowing demand in the future but it also could signal a lessening of refiners worrying about geo-political risk. Let’s face it, with dealt with a lot of talk of the terror premium and war cutting off supply. Take yesterday, there was talk of the US making war plans against Iran and hardly anyone in the oil patch was talking about it.

Even talk about how Russian President Vladimir Putin rearranging the Russian Democracy in his own KGB image had little effect. No one in oil cared yet.

And we had a fire in Prudhoe Bay Alaska and cut production at a BP plant. We have refineries shutting down due to losing power in Texas we have it all. Aned this all means the bears are dancing in the streets.

Venezuelan Oil Output

OPEC Seeks to Bridge Gulf Over Venezuelan Oil Output
by Adam Smallman, Dow Jones Newswires
FWN Financial News 9/13/2007
URL: http://www.rigzone.com/news/article.asp?a_id=50129
VIENNA, Sep 13, 2007

Staff from the Organization of Petroleum Exporting Countries have met with officials from member country Venezuela in a bid to bridge the gulf between the country's stated official oil production level and estimates a third lower by news agencies and institutions, a gap that some say has undermined the credibility of the Latin American nation's oil policies.

Fuad Al-Zayer, who leads OPEC's data services department, said Thursday that he and his colleagues were working closely with Venezuelan officials to narrow the differences to the point where OPEC no longer has to use secondary sources, such as energy information provided by Platts, a unit of McGraw-Hill Co. (MHP), or the Paris-based energy watchdog the International Energy Agency.

Dow Jones Newswires is also a provider of estimated oil output by OPEC member countries.

"We are there to provide them with facilities, to show them how they can coincide with what the secondary sources are saying," al-Zayer said after a press conference on OPEC energy data.

"But there is a gap between the two. We are hoping that they gap will become closer."

Venezuela has longed claimed its oil output is far higher than secondary sources suggest, with the official number around 3.2 million barrels a day, against estimates by Dow Jones Newswires, Platts and the IEA of around 2.4 million barrels a day.

Some analysts attribute the difference to the government of President Hugo Chavez covering up sharp oil production losses experienced in the wake of a clear-out of veteran staff from the state-run Petroleos de Venezuela S.A., or PdVSA, following a crippling strike in December 2002 that lasted two months.

The government subsequently said output levels rebounded to pre-strike levels of around 3.1 million barrels a day.

Some analysts have linked the stated production level to Venezuela's reluctance to lose its influence inside OPEC, which has output targets in place for 10 of its 12 members, including Venezuela.

Al-Zayer said Venezuela's production of heavy, tar-like crude oil may have colored the picture of its actual output.

"We know Venezuelan officials are meeting with Platts and the IEA to show them what's happening," al-Zayer said.

"Some of the problems are that heavy oil is produced in Venezuela and maybe some of the agencies don't count it. So we are trying to iron out this."

However, the International Energy Agency, as an example, clearly breaks out production of Venezuela's Orinoco-derived heavy crude, which it said in Wednesday's monthly oil market report contributed 475,000 barrels a day to Venezuela's output of 2.34 million barrels a day.

OPEC is incorporating secondary-sourced data in its estimates as "that is what the market believes in these days and eventually we hope that we won't do that in the future," Al-Zayer said.

Oil Rises to Record $80.18

Oil Rises to Record $80.18 on Larger-Than-Expected Supply Drop
By Mark Shenk
Sept. 12 (Bloomberg)

Crude oil rose to a record $80.18 a barrel in New York after supplies dropped the most this year.

U.S. oil inventories fell a greater-than-expected 7.01 million barrels to 322.6 million last week, the Energy Department said today. Prices also rose after OPEC said yesterday it would increase production by 500,000 barrels a day, less than is needed to meet a seasonal rise in demand.

``We've shrugged off OPEC's offer of 500,000 barrels,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``There's a tropical storm in the Gulf and inventories posted a huge decline.''

Crude oil for October delivery rose $1.68, or 2.2 percent, to settle at $79.91 a barrel at 2:54 p.m. on the New York Mercantile Exchange, a record close. Futures also touched the highest intraday price since trading began in 1983. The previous record of $78.77 was reached on Aug. 1.

The average cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, or $84.73 in today's dollars, according to the Energy Department. Prices rose from 1979 through 1981 after Iran cut oil exports.

Brent crude oil for October settlement rose $1.30, or 1.7 percent, to $77.68 a barrel on the London-based ICE Futures Europe exchange, the highest since Aug. 7, 2006.

A 2.7 million barrel drop in oil supplies was expected, according to the median of responses by 17 analysts surveyed by Bloomberg News before today's report.

``Seven million barrels is an awful lot of oil to lose in one week,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``There's a feeling that OPEC waited too long to make this move.''

Two Tropical Depressions

Oil also rose after the National Hurricane Center said Tropical Storm Humberto formed off the coast of Texas in the northwestern Gulf of Mexico. Tropical storms or hurricanes spur prices higher because they can threaten offshore production.

Some manufacturers and utilities can switch between oil- based fuels and natural gas depending on costs.

``There's a huge amount of hedge fund money moving into the long side of the crude-oil market,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``The global supply balance will be tight as we go into the fourth quarter. There's already a lot of concern about low stocks.''

Oil prices have risen 31 percent this year as hedge funds and other speculators purchased futures because of surging energy demand. Long positions are bets that prices will rise.

OPEC Production

OPEC will target crude production of 27.2 million barrels a day after abandoning its former quotas. The 500,000 barrel-a-day increase will be on top of actual output, according to Kuwait's acting oil minister, Mohammed Abdullah al-Aleem.

``Too much attention was paid to what the Iranians, Venezuelans and Nigerians said before the meeting,'' said Brad Samples, commodity analyst for Summit Energy Services Inc. in Louisville, Kentucky. ``The Saudis and other Gulf producers are the swing producers, the only members with spare capacity, and have the greatest influence. The Saudis had been silent.''

Before the decision, OPEC members including Venezuela, Algeria, Iran and Libya had said the world was adequately supplied with oil. Western officials, including the head of the International Energy Agency and U.S. Energy Secretary Samuel Bodman, lobbied for increased output.

November Maintenance

The United Arab Emirates is expected to cut crude oil production in November by as much as 600,000 barrels a day because of maintenance, reducing output by about one quarter, the IEA said.

``The supply and demand is pretty OK,'' Royal Dutch Shell Plc Chief Executive Officer Jeroen van der Veer said at a briefing with reporters in Calgary today. ``What we do have is a lot of psychology in the price. We have to expect volatility in the oil price due to this psychological component.''

The IEA, an adviser to 26 industrialized nations, said global oil demand will rise 1.4 percent to 85.9 million barrels a day this year, in a monthly report. Consumption will increase 2.1 million barrels a day in 2008.

`Big Question'

``The IEA report is still bullish, even with the downward revisions,'' Mueller said. ``They are still looking for pretty strong gains in demand. It doesn't appear that they are too worried about the subprime crisis hurting demand.''

The agency reduced its demand forecast for this year by 90,000 barrels a day and by 160,000 barrels a day in 2008 from last month's forecast.

``There's still a big question of how the credit crunch will ultimately affect demand,'' said Eugene X. Hodge, a managing director at John Hancock Financial Services Inc. in Boston, who manages a $4.3 billion oil and gas company bond portfolio. ``It's too early to know what will happen.''

Platts: OPEC Output Dips in August

Platts: OPEC Output Dips in August
Platts 9/7/2007
URL: http://www.rigzone.com/news/article.asp?a_id=49966

OPEC crude production fell by 40,000 barrels per day (b/d) in August, to 30.46 million b/d from 30.5 million b/d in July, mainly because of lower exports from Iraq, a Platts survey showed September 7.

The ten members bound by production agreements, however, boosted output by 80,000 b/d, to 26.79 million b/d in August from 26.71 million b/d in July, the survey showed.

OPEC ministers meet in Vienna on September 11 to review the current agreement, which sets target output at 25.8 million b/d. Several ministers have said in the runup to the meeting that they do not see any need for the group to raise this target.

Actual OPEC-10 production has been steadily creeping up over the summer, however, and is now about a million barrels per day above the 25.8 million b/d target.

John Kingston, Global Director of Oil at Platts, said, "OPEC faces a real dilemma at its upcoming meeting. On the one hand, prices have climbed back up toward the $75 level, and the supply/demand balance projects a tight market in coming months, which might encourage OPEC to raise production. But when the organization looks at Friday's U.S. employment figures, and considers the ramifications of the US subprime mess, it will be concerned that a significant slowdown in demand could be around the corner. With that in mind, it is difficult to see a scenario in which it will vote to raise output, given that based on our survey, production is rising slightly regardless."

Apart from a small dip in Iranian production, the only significant decline came from Iraq. Iraqi exports had been boosted in July by the first liftings from Turkish Mediterranean port Ceyhan since January. There were no exports from Ceyhan in August, leaving Iraq to rely solely on its southern terminals. State oil marketer SOMO will sell 5 million barrels from Ceyhan in September, however, having built up stocks at the port.

Iraq, struggling to rebuild its oil industry after years of United Nations sanctions and a US-led war in 2003, does not participate in OPEC output pacts. Angola, which became a member in January this year, has yet to join the quota system.

Table in original article

OPEC Output -840,000 B/D on Year

OPEC Output -840,000 B/D on Year, Inline vs. Past Wks
by Spencer Swartz
Aug 23, 2007

LONDON - Seaborne OPEC oil shipments are expected to jump by 610,000 barrels a day in the four weeks to Sept. 8 from the previous one-month period as some of the producer group's Middle East members respond to market calls for more crude, U.K. tanker tracker Oil Movements said Thursday.

The rise, the third in as many weeks, was also pinned to a weaker comparison in the month-ago period, when OPEC shipments were unseasonably low, said Roy Mason, head of the consultancy.

Shipments by Organization of Petroleum Exporting Countries are seen rising to a total of 24.2 million barrels a day versus 23.59 million barrels a day in the four weeks to Aug. 11, he said.

Mason said the last time OPEC shipments were at the current expected levels was in late April when they came in at 24.3 million barrels a day.

He maintained though that he didn't expect OPEC shipments to continue ramping up in the weeks ahead as milder autumn weather arrives in U.S. and European markets.

"We're now moving into the beginning of the period when refineries go into maintenance which normally means demand for crude goes down," he said.

Mason made a negligible reduction of 30,000 barrels a day to last week's data.

Sailings from key OPEC Middle East countries are forecast to increase by 540,000 barrels a day to 17.35 million barrels a day in the four weeks to Sept. 8 relative to the previous one-month period of 16.81 million barrels a day.

OPEC is currently pumping about 840,000 barrels a day fewer than at this time last year, Mason said, inline with the past couple of weeks, although well below about a month ago when OPEC had even more barrels out of the market at about 1.2 million barrels a day year-on-year.

OPEC is scheduled to meet in Vienna on Sept. 11 and indications from some OPEC ministers and officials are that the 12-nation group is likely to keep its production targets unchanged and not increase output, as the International Energy Agency has urged, due to concerns about high U.S. oil inventories and uncertainties over the fallout on energy demand caused by U.S. credit woes.

Oil Movements forecasts OPEC exports based on spot and term chartering of crude from OPEC member countries. Production from OPEC's 12 members meets around 40% of the 86 million barrels consumed globally each day.

Oil Falls

Oil Falls on Concern U.S. Economy Will Slow, Reducing Demand
By Robert Tuttle
Aug. 6 (Bloomberg)

Crude oil fell more than 3 percent in New York, the most in almost four months, on concern the U.S. economy will slow, reducing demand at a time of rising fuel supplies.

Oil prices have dropped 7.5 percent from the record $78.77 reached on Aug. 1 amid declines in U.S. stocks and signs losses in the mortgage market may slow the economy. In July, the nation's employment grew at the slowest pace since February. OPEC production, source of about 40 percent of world supplies, rose last month to its highest since September 2004.

``The equity markets around the world are not that robust right now,'' said Dominick Chirichella, an analyst at Energy Management Inc. in New York. ``That is getting people concerned about demand growth tailing off'' for oil.

Crude oil for September delivery declined $2.60, or 3.4 percent, to $72.88 a barrel at 1:16 p.m. on the New York Mercantile Exchange, the biggest drop since April 9. Prices are down 2.4 percent from a year ago.

Default rates for subprime mortgages in bonds are at a 10- year high. U.S. non-farm payrolls increased 92,000 last month, less than the 127,000 forecast in a Bloomberg News survey of 85 economists.

``You can't really remove what is going on with oil with what's going on with the economy,'' said Brad Samples, commodity analyst for Summit Energy Services Inc. in Louisville, Kentucky. ``People's discretionary spending is going to be cut and that's going to cut out excess driving, it's going to cut out trucks driving goods to stores.''

Brent crude oil for September settlement dropped $2.55, or 3.4 percent, to $72.20 a barrel on the ICE Futures exchange in London.

OPEC Production

Oil demand may decline as OPEC output rises. Production by the group climbed last month by the most since September 2004, a Bloomberg News Survey showed.

The 10 members of the Organization of Petroleum Exporting Countries with production quotas increased output by 85,000 barrels a day to 26.595 million barrels a day, according to a Bloomberg News survey.

The 10 countries, in an effort to maintain prices, pledged to trim 1.7 million barrels a day in two rounds of cuts, one that started Nov. 1 and another that took effect Feb. 1. The 10 members pumped 27.5 million barrels a day in October.

OPEC's basket price, a weighted average of 11 blends produced by the member nations, fell 16 cents to $72.01 a barrel on Aug. 3.

OPEC ministers are scheduled to hold their next conference on Sept. 11 in Vienna. The group is unlikely to increase crude oil production before its scheduled meeting, Algerian Energy Minister Chakib Khelil said, as cited by Kuwait News Agency yesterday.

Iraqi Output

Iraqi output rose 310,000 barrels to an average 2.235 million barrels a day last month, the highest since October 2004, the survey showed. Nigerian production climbed 150,000 barrels to an average 2.2 million barrels a day last month, the highest since February. Civil strife has reduced oil production in both countries in recent years.

``We can't necessarily rely on that flow from Iraq or that flow from Nigeria continuing on that kind of a volume,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. The increase indicates ``insurgents in both places stopped shooting at pipelines and a little more flowed.''

Oil prices have dropped 8.5 percent in euros in the past year, risen 1.4 percent in Japanese yen and fallen 8 percent in British pounds.

Falling oil prices have pushed gasoline futures to a four- month low. The prices for September delivery fell 5.38 cents, or 2.7 percent, to $1.9752 a gallon in New York, the lowest since March 23.

The national average pump price for regular gasoline fell 0.5 cent to $2.838 a gallon, according to AAA, the nation's largest motoring club. Oil accounts for about half the pump price of gasoline.

OPEC oil output to rise in July

OPEC oil output to rise in July:
Petrologistics
Jul 25, 2007

OPEC oil output is expected to rise this month due to higher supply from members including Nigeria, Iraq and Angola, a consultant said on Wednesday.

OPEC's 10 members subject to output limits, all except Iraq and Angola, are expected to pump 26.9 million bpd, up from 26.8 million bpd in June, said Conrad Gerber, head of Petrologistics, which tracks tanker shipments.

The estimate, while showing rising supply in some OPEC countries, indicates top world exporter Saudi Arabia is keeping a cap on output in spite of a jump in oil prices towards a record high above $78 a barrel.

"There's no major opening of the taps," Gerber said. "They fear that if they opened the taps, prices would slide."

Nigeria is raising supply in July by about 100,000 bpd to 2.12 million bpd, Gerber said. The increase reflects fewer disruptions to the country's oil industry from militant attacks in the Niger Delta.

Iranian oil output is also on the increase -- climbing by 50,000 bpd to 3.95 million bpd, according to the Geneva-based company.

Overall supply from the 12-member Organization of the Petroleum Exporting Countries is set to rise 300,000 bpd to 30.7 million bpd, Petrologistics said, as Iraq and Angola pump more.

Iraqi output is on course to reach 2.08 million bpd, up from 1.94 million bpd in June, because the country is exporting some Kirkuk crude from its northern fields.

Storage tanks at the Turkish port of Ceyhan receive sporadic deliveries of Kirkuk by pipeline from Iraq's northern oilfields. Iraq sold 3 million barrels for shipment in July, the first such sale since January.

Angolan output, rising steadily as new fields off the country's coast come on stream, is on course to climb by 30,000 bpd to 1.69 million bpd in July.

By contrast, output in Saudi Arabia, OPEC's largest producer, is expected to hold steady at 8.6 million bpd, Petrologistics said.

OPEC, source of more than a third of the world's oil, agreed to curb supply by 1.7 million bpd, or about six percent, last year in two steps. The second stage took effect from February 1.

Despite July's rise from the 10 members party to the output curbs, output remains lower than when OPEC started cutting production in November. OPEC said the 10 were pumping 27.5 million bpd before the cutbacks began.

The exporter group is next scheduled to met in September to decide production policy.

The Dhando Investor

The Dhandho Investor : The Low - Risk Value Method to High Returns
by Mohnish Pabrai

This book is a bit pricey for its length and content, but it contains an extremely interesting case study on Knightsbridge (VLCCF) and Frontline (FRO) in 2002. Short enough to read over a cup of coffee in your local Barnes and Noble. Highly recommended. It's too bad this account wasn't available in 2001.

Link to Amazon for Dhando Investor

Phil Flynn - The Energy Report

Today's Wall Street Journal is writing on a report commissioned by Samuel Bodman and the Department of Energy and put together by the National Petroleum Council . The report has concluded that world oil and gasoline supplies from conventional sources are unlikely to keep up with rising global demand over the next 25 years. The Wall Street Journal says that the conclusions appear to be the first explicit concession by the petroleum industry that it can’t meet burgeoning global demand for oil, which may increase as much as 120 million barrels a day by 2030 from about 84 million barrels a day currently according to some projections. The report is called "Facing the Hard Truths About Energy” and long term oil bears will also have to face hard truths.

But so too will the anti-oil Democratic Congress that wants to tax our country and oil companies while they sell off our nations energy security. As they handicap our energy industries ability to do business we are losing out on the global race to secure oil supply.

Do you think I am kidding you? Already Petro China's oil output has risen by 3.7% surpassing growth at Exxon Mobil and Royal Dutch Shell. The anti-oil populism that the Democratic Congress has embraced in light of the growing competition for world wide supply is dangerous at best and criminal at worst.

Crude Oil Rises to 11-Month High

Crude Oil Rises to 11-Month High as North Sea Production Drops
By Mark Shenk
July 13 (Bloomberg)

Crude oil rose to an 11-month high in New York and London after a pipeline shutdown and maintenance work reduced North Sea Brent oil production.

Chevron Corp. and ConocoPhillips said they lost output from North Sea fields that produce oil and gas after BP Plc closed the pipeline. BG Group Plc said its Armada oil field in the North Sea has been shut for maintenance since June. The International Energy Agency said in a report today that global oil demand will rise 2.5 percent next year.

``Obviously, Brent is the leader,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``It looks like 150,000 barrels a day are being lost because of the pipeline problems in the North Sea, which is giving Brent a boost.''

Crude oil for August delivery rose $1.43, or 2 percent, to settle at $73.93 a barrel at 2:50 p.m. on the New York Mercantile Exchange. It was the highest close since Aug. 11 and the biggest one-day gain since June 14. Oil rose 1.5 percent this week.

New York crude is down 3.6 percent from a year ago, when prices were approaching a record $78.40 a barrel reached July 14, 2006, on concern fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.

``This is largely a technical move,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``We're headed for the $75 to $77.50 area where there is a lot of resistance. If we can breach that level there will be an assault on the old high of $78.40.''

Brent Crude Oil

Brent crude oil for August settlement increased $1.17, or 1.5 percent, to close at $77.57 barrel on the London-based ICE Futures exchange. It was the highest settlement price since Aug. 7, when prices closed at a record $78.30.

World oil demand will rise 1.8 percent this year, according to the IEA. Demand next year will be led by accelerating consumption growth in China and the Middle East. The agency lowered its 2007 demand estimate by 100,000 barrels a day since its previous report a month ago. The Paris-based agency is an energy adviser to 26 industrialized countries.

``The IEA is looking for strong growth next year,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``They revised some recent demand estimates lower but not by enough to excite anyone.''

Iranian Inspection

Iran will allow United Nations inspectors to visit a reactor under construction that could produce plutonium, the UN's International Atomic Energy Agency said today. The agreement came during discussions this week in Tehran between Ali Larijani, the country's security chief, and Olli Heinonen, the nuclear agency's deputy director-general.

Iran, which holds the world's second-largest oil and natural gas reserves, says it wants to enrich uranium for use in nuclear power plants to produce electricity. The U.S. says Iran seeks instead to develop an atomic bomb. The dispute has bolstered oil prices since January 2006 because of concern that oil shipments from the country might be cut.

``Iran has recently been off the radar but if the inspections go well we may see prices retreat below $70,'' Lynch said.

Crude oil prices have also risen on concern that shipments from Nigeria and Iraq have been disrupted because of attacks on facilities. Venezuelan production has slipped as the country nationalized heavy oil production ventures this year.

``I am surprised by today's movement because today's news from Iran is the most positive we've seen in years,'' Beutel said. ``The situation in Nigeria is still a major concern, the Venezuelan saga continues and now there's even trouble in Ecuador.''

IEA Report on CNBC

Here is a discussion of IEA's July 2007 Medium Term Oil Market Report forecasting out 5 years to 2012.

http://www.cnbc.com/id/15840232?video=418682388


Here is the report itself (80 pages)
http://online.wsj.com/public/resources/documents/iea20070707.pdf

Energy guru: $4 per gallon gas still likely

Energy guru: $4 per gallon gas still likely
Morris Beschloss
Special to The Desert Sun
July 5, 2007

...
An exclusive interview with one of America's leading energy gurus, Phil Flynn, in Chicago last week disclosed the hard facts U.S. oil producers and consumers will be facing this year.
Flynn is vice president of marketing for Alaron, a major energy trading firm.

He has become the "go-to man" on many major networks, including CNBC, MSNBC, Fox and CNN, and the Wall Street Journal and New York Times. I had the privilege of serving with him on an economics TV panel in Chicago prior to settling in the desert permanently a few years ago.

Flynn has been remarkably accurate in forecasting the pricing movements of crude oil and gasoline in the past few years and the reason for their volatility.

His predictions have been so uncanny that he has been approached by major publishers to write a book on the world's worsening energy crisis.

In our dialogue, Flynn blamed the ongoing gasoline and crude oil availability pressure on the following major factors:

U.S. refinery shortages and maintenance problems, which are due to get worse as the year progresses.

OPEC's desire to restrict shipments on what they know is a vanishing resource. The Middle East oil monopoly also is adamant in squeezing the top prices out of its oil availability, realizing that alternative energy sources eventually will cut into crude oil demand.

Saudi Arabia, the only remaining "swing" producer, conceivably could be losing production in one or more of its five major oil fields at this time.


Although crude oil touched $70 per barrel late last week, Flynn believes it should be priced even higher since West Texas Intermediate, which is quoted on the New York Mercantile Exchange, has faced increasing refining blockage. The refinery bottlenecks have caused a crude inventory backup in Cushing, Okla., the nation's main storage area.

As refinery capacity utilization is climbing to the 90 percent plus level, U.S. crude prices will rise to the mid $70 range, while London-traded Brent crude will lag by $2 to $4, the reverse of today's circumstances.

Because the latter is more difficult to refine due to its OPEC-based heavy sulfur content, it will revert back to its historically cheaper price structures.

Flynn attributes California's high prices at the pump to the state's multi-faceted blends, the state's inability to import from elsewhere and the unexpected consumer demand increase this year.

He cites the recent $4 per gallon prices in Chicago to the production breakdown of the major Whiting, Ind., refinery, and the confiscatory Illinois state taxes.

He invites consumers to check the high taxes that federal and state governments charge in these areas to ascertain what gas at the pump really costs.

Flynn believes that the present ethanol approach is an unmitigated disaster.

"Without the 51 cent subsidy," he exclaims, "this unproven energy alternative would be out of business."

Flynn considers Congress' anti-gouging legislation political grandstanding.

Although no apologist for the Big Five multinationals, he believes these major global oil and natural gas producers are beset by government restrictions, political propaganda and an inability to project their strategies through effective communications.

Flynn believes that these international monoliths are less likely to expand refining capacity as government is calling for less gasoline through mandated ethanol blends in future years.

He believes the world's geopolitical situation is getting increasingly dangerous, as the natural resource heavy nations are gaining the upper hand.

Flynn cites Vladimir Putin's Russia, Hugo Chavez's Venezuela and Mahmoud Ahmadinejad's Iran as the new "axis of oil and natural gas evil."

This is not only due to OPEC's price rigging but the loss of technological skills as engineers, geologists and other experts flee these increasingly authoritarian countries.

Even though major new oil fields are being located, Flynn says, the costs of extraction are so prohibitive that countries like Mexico financially are not capable of exploiting them.

By precluding foreign investment in their energy industry, these countries are shutting out the necessary expertise and financing.

Putting his superior forecasting record on the line, Flynn believes that crude oil will reach $75 per barrel this summer and break last year's $78 record if the hurricane season becomes increasingly active.

He adds that "if the geopolitical situation deteriorates," the $85 per barrel mark is a distinct possibility later this year.

With crude oil comprising at least 50 percent of gasoline costs, $4 per gallon at the pump won't be far behind.

"And if the ethanol scam reaches anywhere near its destructive possibilities, look for gasoline to become increasingly expensive," he adds.

When asked what all this would mean to corn-based products in America, Flynn stipulated that such inflationary impact on consumer products would be harshly felt as the year progresses.

With worldwide demand of oil at an all-time high of 86 million barrels a day, according to the International Energy Agency, Flynn concludes that the supply/demand squeeze practically will eliminate the thin margin between production and usage that now exists.

Fraudulent Claims of Impending Shortages

NYMEX Oil Complex Settles Higher Despite Bearish EIA Data
July 05, 2007
By John Troland, Tom Waterman

Houston, TX - The NYMEX oil complex finished the day higher despite EIA inventory data for the week ended June 29 indicating inventories of the three major NYMEX energy components were sharply higher than the previous report.

Crude oil stocks were up a surprising 3.1 million barrels with gasoline and distillate stocks higher by 1.8 and 1.2 million barrels respectively. We cannot believe anyone would suggest the data was anything but bearish, yet those claiming prices are too low due to imbalances in supply and demand proved us wrong. It is obvious that those wanting higher prices are not looking at fundamentals but are again raising unfounded concerns that soaring demand is outpacing supplies.

The cheerleaders continue to talk about gasoline and how "dangerously low" inventories are. Well, the summer driving season is here and there are no lines, no outages, no indication of potential outages, or any other reason to think for a moment that gasoline is tight. In fact, the latest EIA report brings gasoline inventories up to 22 days of supply for the first time since the end of March. And inventories are still building at a time when stocks are usually drifting lower.

One of the reasons for the early jump in values this morning was that attacks have begun again in Nigeria, after the government had negotiated a truce between itself and militant factions. To suggest that old story is having an impact on world oil supplies, which we hear are "abundant," is strictly self-serving rhetoric in the absence of any real supply issues.

As we have written for months, while Nigeria is having problems in the Niger Delta, production remains close to its OPEC quota and is expected to remain that way well into the future. Those wanting higher prices act like we are about to run out, again ignoring the fact that we have 354 million barrels of crude in primary storage with a mere 690 million barrels stored in government salt domes. The fraudulent claims of impending shortages are used for one reason -- to make more money and nothing else.

Today's trading session, once again, defies a logical explanation other than those wanting higher prices have the money to be successful despite fundamentals that suggest refiners will keep supplies of finished products adequate for the foreseeable future. [...]

http://www.oilintel.com/newshome.cfm?news_id=2744&action=showstory

Asian Aframax Rate Drops First Time in 6 Days

Asian Aframax Tanker Shipping Rate Drops First Time in Six Days
By Katherine Espina
June 27 (Bloomberg)

The cost of shipping 80,000 metric tons of oil on Asian routes dropped the first time in six days as most bookings for early July have been concluded. Further declines may be limited as freights for the rest of the month are fixed.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait dropped 0.13 percent to Worldscale 154.42 yesterday, according to the London-based Baltic Exchange. Last week, it rose the most since March 30.

Asian freight rates for shipping oil on Aframax tankers increased 6 percent last week as charterers hired vessels to load fuel, brokers including London-based Galbraith's Ltd. said. Some owners of Aframax vessels expect rates to rise after vessel requirements for early next month have been fixed, Kats Nishikawa at shipbroker Matsui & Co. in Tokyo said.

``A number of fixtures have been concluded throughout the week and there are still plenty lined up,'' said Galbraith's in its report for the week ended June 22. ``This firmer trend looks set to continue next week.''

This week, four Aframax tankers are expected to arrive in Singapore and three more in the first week of July, according to AISLive on Bloomberg.

The Baltic Dirty Tanker Index, which tracks 12 routes, has fallen 21 percent this year. It fell 1.1 percent to 1041 yesterday, the second day the measure fell. The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait-to-Singapore route stood at $2.01 yesterday, unchanged for a second day, according to Bloomberg data.

Indonesia, Japan Route

The Aframax tanker rate on the Indonesia-to-Japan route was steady at Worldscale 157.50 on June 22, the daily cost for the past 17 days, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, little changed in the past three weeks, according to Bloomberg data.

The costs of shipping gasoline and other so-called clean petroleum products to Asia were mostly lower yesterday, according to the Baltic Exchange.

Shipping rate for 55,000 tons of products on the route to Japan from the Middle East dropped 0.9 percent to a four-month low of Worldscale 155.77, based on data from the Baltic Exchange. The rate has fallen 22 percent in the past 21 days.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for a 12th day. The rate dropped 3.2 percent to Worldscale 124.17, the biggest drop since Jan. 23, Baltic Exchange data showed. The cost of shipping on the route fell 5 percent last week, the most in 11 weeks.

The rate of shipping 30,000 tons of oil products from Singapore to Japan rose 0.3 percent to Worldscale 198.96 yesterday, a second day of gains. It has slumped 33 percent this year.

I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

Peak Oil Crisis - Tom Whipple

Peak oil crisis: approaching the cliff
by Tom Whipple
June 21, 2007

Last weekend across southern South Dakota the pumps went dry. Gas terminals from Sioux Falls to Yankton to Sioux City were empty. “There is simply not enough fuel coming down the pipeline into the delivery system” said a BP station owner. Eventually the tankers were sent to Nebraska to find gas. A minor glitch in the distribution? Possibly, but more likely a harbinger of more serious problems to come.

Meanwhile, I would like to tell you that Congress, which has been debating energy bills for the last two weeks, is getting ready to pass legislation that will make our lives easier during the troubled years ahead. Sadly, I cannot. From their public pronouncements and posturing, it is unlikely more than a dozen members of Congress have the slightest idea of what 2007 energy legislation should be trying to accomplish in an urgent manner.

Many of the just-barely-in-the-majority Democrats, especially in the Senate, are on the right track, with proposals to improve average gasoline consumption, and to increase the use of renewable energy. Scattered here and there are conservation measures and R&D money for more efficient something or others, but from the perspective of imminent oil depletion, the proposals are too little, too late. Setting efficiency goals for 10 or 15 years from now is absurd when the problems to solve may be upon us in 15 or 20 months, or, if the real alarmists are right, in 15 or 20 weeks.

However inadequate the Democrats’ proposals may be, they pale in comparison to the absurdity of the opposition to energy legislation forming on Capitol Hill. Detroit, in conspiracy with the coal and electric industries, is mounting a full court press to see that little gets through this Congress to upset the status quo – mild efficiency standards, no greenhouse gas regulation, no renewable energy mandates. From the opposition’s point of view, if Congress wants to do anything, then it might be OK for them to bankroll the R&D so we can convert good old American coal into our gasoline; don’t even think about taxing energy, but a few more subsidies might be nice.

With crucial Senate votes scheduled for later this week, it is still too early to judge what the final legislation will look like, but it is starting to look as if we are going to arrive at the precipice of oil depletion without Congress having done much of anything to mitigate the situation. The American automobile industry is clearly on its way to committing suicide; the coal industry does not seem to realize its days are numbered; and the electric industry seems to have no notion that, within a lifetime, fossil fuels and perhaps even some forms of nuclear energy are going to have to be replaced.

As a civilization, we are all to blame. Most Americans are showing little inclination to cut back on driving. In study after study we tell interviewers we are willing to spend our last nickel, mortgage the farm, and deprive our grandchildren before we will give up driving. We are all heading towards the cliff together.

Not much happened in the last week to tell us just how close we are to the cliff. There is a general strike going on in Nigeria that so far does not seem to be affecting oil production. Nigerian strikes are usually settled quickly, but there is a new president in charge so there could be surprises in store. In the Niger Delta, the insurgency bubbles along, despite the nominal ceasefire, with still more oil being shut-in by the insurgents during the past week.

From the perspective of oil production, Iraq continues to hold its own. OPEC is still refusing to consider production increases and the Chinese imports of crude oil continue to increase.

This week’s U.S. oil status report was a strange one. U.S. refinery utilization plunged to what should be an abysmally low 87.6 percent, but at the same time the refineries managed to produce the same amount of gasoline as the week before. Unless there is something wrong with the numbers, this confirms that improvements made to our refineries in recent years are now allowing them to squeeze considerably more gasoline out of each barrel of crude -- a definite plus. Imports increased a bit, resulting in U.S. gasoline stockpiles growing by 1.8 million barrels last week. There are still major shortages along the East Coast and the summer driving season is almost here. There seem to be some unusually large anomalies in this week’s report, however, so there may be revisions ahead.

In general, the gasoline stockpiles situation now can be categorized as serious rather than dire. We seem to be getting the gasoline we need without our refineries working too well and so far we seem to be able to find enough gasoline to import. From here through Labor Day it depends on how much we all drive and of course the hurricanes. None are yet in sight.

End

http://www.fcnp.com/index.php?option=com_content&task=view&id=1438&Itemid=35

http://www.energybulletin.net/31199.html

Asian Aframax Ship Rate Gains

Asian Aframax Ship Rate Gains May Be Limited on Rising Supply
By Katherine Espina
June 21 (Bloomberg)

Gains in the cost of shipping 80,000 metric tons of oil on Asian routes may be curbed in the next several days as the supply of tankers increases, brokers including Matsui & Co. said.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait climbed for a second day, gaining 1.7 percent to 148.27 yesterday, according to the London-based Baltic Exchange. Shipment cost on the route fell 1.2 percent in the week ended June 15, the first decline in three weeks.

``There will be many vessels available in the Singapore area in the early part of July so the market may stay the same or even move lower,'' Kats Nishikawa, general manager at the chartering team of Matsui & Co. in Tokyo, said by phone. ``Unless we see more activity in the Singapore area, the market may be softer.''

This month, there are 12 Aframax tankers sailing to Singapore, according to AISLive on Bloomberg. The cost of shipping crude on Aframax vessels to Asian routes has declined 7.4 percent this year as capacity expanded.

The Baltic Dirty Tanker Index, which tracks 12 routes, has fallen 19 percent this year. The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait-to-Singapore route stood at $1.97 as of June 20, unchanged for the previous 19 days, according to Bloomberg data.

Japan Bound

The Aframax tanker rate on the Indonesia-to-Japan route was steady at Worldscale 157.50, the daily cost for the past 12 days, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, steady for the past two weeks, according to Bloomberg data.

The cost of shipping gasoline and other so-called clean petroleum products to Asia declined yesterday, according to the Baltic Exchange.

The cost of shipping 30,000 tons of oil products from Singapore to Japan fell 0.6 percent to Worldscale 200.42 yesterday, the lowest in eight weeks. It has slumped 20 percent the past four weeks, based on data from the Baltic Exchange.

Shipping costs for 55,000 tons of products on the route to Japan from the Middle East dropped 2.2 percent to Worldscale 161.92, the lowest since Feb. 15. The rate has fallen 17 straight days.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for an eighth day. The rate dropped 1.5 percent to Worldscale 131.46 yesterday, the lowest in four months, Baltic Exchange data showed. The cost of shipping on the route fell 3.2 percent last week, the second weekly decline.

Caribbean Tanker Rates Fall

Caribbean Tanker Rates Fall as Oil Supplies Jump, Plants Slow
By Todd Zeranski
June 20 (Bloomberg)

Rates to ship crude oil from the Caribbean basin fell as a U.S. Energy Department report indicated oil stockpiles increased and refinery utilization rates fell.

Two Aframax tankers, which each can transport about 600,000 barrels of oil, were hired today for an average rate in the industry standard Worldscale 145, according to a daily report from Houston-based shipbroker Lone Star, R.S. Platou.

Valero Energy Corp. contracted one tanker to ferry crude between St. Eustatius and the U.S. East Coast, and Royal Dutch Shell Plc contracted a ship to transport oil from the east coast of Mexico to the U.S. Gulf Coast, according to Lone Star.

Demand in the region is hampered by low refinery operating rates. Refineries operated at 87.6 percent of capacity last week, the lowest since the week ended March 30, according to the department. It was the lowest utilization rate for the period in 16 years.

Crude-oil inventories surged 6.9 million barrels to 349.3 million in the week ended June 15, the report showed. It was the biggest one-week gain since the week ended March 19, 2004.

Worldscale 145 is equivalent to about $20,280 per day after expenses such as fuel and port fees, according to New York-based- broker Poten & Partners.

General Maritime Corp., the second-largest U.S. tanker owner, has a break-even rate of about $12,000 a day. The New York-based company operates many of its vessels in the Caribbean.

Overseas Shipholding Group is the biggest U.S.-based oil- tanker owners.

Gonu leaves $3.8bn cloud over Oman

Gonu leaves $3.8bn cloud over Oman
by Dylan Bowman
17 June 2007
ArabianBusiness.com

Cyclone Gonu has cost Oman's economy almost $4 billion, according to initial government estimates.

An official source at the Ministry of National Economy said reconstruction could cost the country between $3.24 billion and $3.89 billion, and that the ministry is currently working with various governmental authorities to repair infrastructure damaged or destroyed by the cyclone, WAM reported today.

Cyclone Gonu wreaked havoc on the country earlier this month, battering its coast for three days and killing around 50 people.

The cyclone halted Oman’s oil and gas exports and damaged main roads and bridges connecting the eastern provinces with the capital Muscat, and caused floods and landslides across all regions.

In Muscat's centre, streets were turned into turbulent rivers, trees uprooted and power lines cut. Cars were left piled on top of each other, stuck in rubble and mud.

The country also suffered from power outages for days after the storm left its coast
and moved up to southern Iran.

At its peak, Gonu was measured as a maximum-force Category Five hurricane.

Oman's weather centre, which has been keeping records since 1890, says Gonu could have been the strongest storm to reach the coast since 1977.

Counterinsurgency Warfare (part two)

The same kind of politics are now in evidence in Afghanistan and Iraq, including the ineffectual enshrinement of Islam in the new Iraqi constitution, and the emergence of clerical warlords who are as ready to use violence as Cardinal Ruffo was. Since the 2003 invasion, both Shiite and Sunni clerics have been repeating over and over again that the Americans and their “Christian” allies have come to Iraq to destroy Islam in its cultural heartland and to steal the country’s oil. The clerics dismiss all talk of democracy and human rights by the invaders as mere hypocrisy — with the exception of women’s rights, which the clerics say are only propagandized to persuade Iraqi daughters and wives to dishonor their families by imitating the shameless nakedness and impertinence of Western women.

The vast majority of Afghans and Iraqis naturally believe their religious leaders. The alternative would be to believe what for them is entirely unbelievable: that foreigners are unselfishly expending blood and treasure in order to help them. They themselves would never invade a foreign country except to plunder it, the way Iraq invaded Kuwait, thus having made Saddam Hussein genuinely popular for a time when troops brought back their loot. As many opinion polls and countless incidents demonstrate, the Americans and their allies are widely considered to be the worst of invaders, who came to rob Muslim Iraqis not only of their territory and oil but also of their religion and even their family honor. Many Muslims around the world believe as much, even in Turkey, whose most successful recent film depicted an American Jewish military doctor who was operating on Iraqis not to save their lives but to remove their kidneys, which of course he was sending back to the U.S. for transplantation and his personal profit (he was Jewish after all). It is the same in Afghanistan, where the American-imposed quota of women parliamentarians has caused widespread resentment, not least because most Afghans are scandalized by the spectacle of a woman contradicting a man in public — as in, for example, televised parliamentary debates.

In other words, “Integrating Civil and Military Activities” to improve local conditions need not gain public support. And even if it did, it does not automatically follow that such support would be decisive, or even important.

http://www.harpers.org/archive/2007/02/0081384 Edward Luttwak

Asian Aframax Rates May Extend Decline a Second Week

Asian Aframax Rates May Extend Decline a 2nd Week
By Katherine Espina
June 19 (Bloomberg)

The cost of shipping 80,000 metric tons of oil on Asian routes, which fell 1.2 percent last week, may extend its decline until charterers book their cargoes for July.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait declined 0.13 percent to 144.81 yesterday, according to the London-based Baltic Exchange.

Rates to ship crude on Aframax vessels to Asian routes last week dropped the first time in three weeks as capacity expanded. The cost of hiring Aframax tankers may rise or hold steady when more vessels are hired to load cargoes for July, shipbrokers including London-based Galbraith's Ltd. said.

There are 12 Aframax tankers sailing to Singapore this month and none for July yet, according to AISLive on Bloomberg.

Saudi Arabia, the world's biggest oil producer, Iran, and the United Arab Emirates this week may release port-loading schedules for July crude shipments, stoking demand for supertankers.

That may lead to increased demand in the following weeks for Aframax vessels, which are predominantly deployed on short-haul routes or intra-regional trade and in harbors too small to accommodate supertankers.

The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait to Singapore route stood at $1.97 as of June 18, unchanged for the previous 17 days, according to Bloomberg data.

Japan Bound

The Aframax tanker rate on the Indonesia to Japan route was steady at Worldscale 157.50, the daily cost for the last two weeks, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, steady from the last two weeks, according to Bloomberg data.

The cost of shipping gasoline and other so-called clean petroleum products to Asia declined on June 18, according to the Baltic Exchange.

The cost of shipping 30,000 tons of oil products from Singapore to Japan fell 1.03 percent to Worldscale 202.88 yesterday, the lowest in almost eight weeks. It has slumped 20 percent the last four weeks, based on data from the Baltic Exchange.

Shipping costs for 55,000 tons of products on the route to Japan from the Middle East dropped 0.4 percent to Worldscale 168.46, the lowest in about four months. The rate fell 15 percent in the past four weeks.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for a sixth day. The rate dropped 1.07 percent to Worldscale 135.42 yesterday, the lowest in about six weeks, Baltic Exchange data showed. The cost of shipping on the route fell 3.2 percent last week, the second weekly decline.

The Theory of Counterinsurgency Warfare

Luttwak

THE THEORY OF COUNTERINSURGENCY WARFARE

Two distinguished American generals of exceptional intelligence, James N. Mattis of the Marine Corps and David H. Petraeus of the Army, each now responsible for the training and doctrine policy of his own service, have recently circulated the text of a new “counterinsurgency” field manual, FM 3-24 DRAFT, which they propose for official use. Its doctrines emerge from the chapter titles. After a first chapter of definitions (which any military manual must have, because the battlefield is no place for semantic debate) we come to the first substantive chapter, “Unity of Effort: Integrating Civil and Military Activities,” in which the authors duly recognize and strongly emphasize the essentially political nature of the struggle against insurgents. That is hardly an original discovery, as the two generals and their staffs would be the first to recognize, yet it is still necessary to affirm what should be obvious, because amid the frustrations of fighting a mostly invisible enemy, it is hard to resist the tempting delusion that some clever new tactics, or even some clever new technology, can defeat the insurgents.

http://www.harpers.org/archive/2007/02/0081384

OPEC Quotas May Bring In-Fighting in September

May 22, 2007
By John Troland, Tom Waterman

Houston, TX - At the September 2007 OPEC meeting there may be trouble brewing if expectations that Angola, the newest member of OPEC, is assigned a quota. With Angolan crude output on the rise from recent estimates of about 1.5 mbpd to more than 2.0 mbpd in the not too distant future, there will probably be requests from other OPEC producers of sweet crude such as Algeria, Libya and most importantly Nigeria, to increase their quota allotments. Currently Nigeria's quota is 2.044 mbpd with full production potential nearly 1.0 mbpd above that level, assuming militant actions in the Niger Delta were to cease.

Nigeria has for some time been a price hawk although at current levels, seem less concerned about its quota allotment than in past years. The government also appears less concerned about the lost production. We suspect that the central government, at the moment, is not overly concerned with the militant actions as it does keep prices at artificial levels. Market bulls are quick to point to lost production in Nigeria as a major factor, when other hype fails. They can point to Nigerian output of about 1.0 mbpd lost to ongoing strife in the country. But as we stated in an earlier article, the additional 1.0 mbpd would put Nigeria way over its quota.

As history has proven, OPEC members have little problem with each other when prices are high and moving higher, but when prices begin to fall, the cheating expands as member countries try to maintain a similar revenue flow. We suggest that this scenario is closer to happening than some analysts predict. Both Angola and Nigeria will continue to seek higher and higher quotas going forward. This puts the onus on major OPEC producers such as Saudi Arabia, Iran and others who continue to enjoy much larger quotas. Will the Saudis, in particular, be willing to cut back its quota enough to support high prices? An even bigger question is will other OPEC members show restraint in curbing production to quota levels?

The problems arise as Algeria, Angola, Libya and Nigeria do not have quotas proportionate to output. As we suggested earlier, OPEC history will repeat itself at some point in the not too distant future if the above mentioned countries are successful in getting higher quotas.

Our position is they will revert to cheating, which logic dictates they are probably engaged in right now. This will eventually lead to the same problem we had last summer as the crude oil market was flooded. With the possible exception of Saudi Arabia and perhaps Kuwait, the rest of OPEC countries are cheating now if they have the capacity to overproduce. We are approaching the saturation level where crude oil is ample and if the situation persists, the fight will be on for the last buyer of crude oil.

While tanker charters and other market barometers often measure crude shipments, they do not measure the amount of crude oil available. Countries will store excess production and hope to sell it at elevated levels somewhere down the road. OPEC never does well in a down market. This is why there is nothing but silence from the cartel recently. They do not wish to upset the apple cart. Just as the majors in the U.S. are really not to blame for the current market prices, they are enjoying the profit margins, and are really not interested in seeing a change from the status quo. Every oil company executive knows that speculation is driving this market, but they won't say it publicly, even as many face hearings in Washington on the subject of gasoline prices. Right now, the volatility favors the oil companies, so don't expect any complaining.

Ever wonder why we have not run out of gasoline? There are no lines at retail outlets anywhere in the country at the present time. Neither do we hear about signs posted saying "We're Out of Gas!" The hype just keeps things moving up.

Cost of Gonu Rebuild in Millions

ArabianBusiness.com
by Conrad Egbert
16 June 2007

The cost of reconstructing Oman after last week's Cyclone Gonu is set to run into millions of dollars.

According to a developer operating in the country, most of the damage was done to roads and infrastructure, along with building projects under construction.

"The damage has been quite extensive to the infrastructure with widespread destruction of roads and bridges that could cost hundreds of millions of dollars, but the authorities are working round the clock to try and get things back to normal," said Amer Al Fadhil, vice president - external affairs, The Wave, Muscat - one of the largest waterfront developments in Oman.

"Oman is focusing on three aspects at the moment. The first priority is relief operations to those who need it, with The Wave also sending out basic necessities across Muscat. The second is the clean-up, while the third is, of course, the reconstruction."

Roads and bridges have suffered extensive damage and the city has turned into a mini-lake due to water logging in many areas.

Muscat's terrain is mountainous with wadis (dried up river beds), which are used as residential and commercial space. Due to these low-lying areas, rain and seawater brought in by the storm caused severe flooding of the wadis, resulting in parts of roads and bridges being swept away as well as buildings being submerged.

"Most of the damage has been to the infrastructure," said David Skinner, regional manager, Carillion Alawi, Oman.

"A section of a road outside the Seeb Airport that is being constructed by us was washed out but we started repairs on the morning after the storm [Thursday 7 June] and worked round the clock to get it functional by 5am on Saturday [9 June]."

The most affected areas have been Al Hubra, Qurum and Amerat, which has been totally cut off due to the collapse of its only highway connection.

Other roads that have been affected are Al Khodh and Southern Marbela, while storm waters that tore through a wadi ripped open the Qurum high road to Darsait.

A McDonald's restaurant on the edge of Wadi Aday in Qurum was almost completely submerged by the flood waters along with Qurum Park, a popular recreational area near the shore.

Muscat Municipality chairman, Abdullah Bin Abbas, said that the city has been devastated due to the cyclone but will soon be back on track.

"We are doing our best to restore city life back to pre-Gonu days," he said.

UAE to up oil output 30%

by Dylan Bowman
14 June 2007
ArabianBusiness.com

The UAE is looking at upping its oil output 30% in the next two years, the country’s minister of energy said on Wednesday. Mohammad Bin Dha'en Al Hamili said during a press conference the country was considering raising production from 2.7 million barrel per day (BPD) to 3.5 million barrel per day by 2009. The minister, who is also the current president of OPEC, said both the UAE and OPEC are worried about oil price stability, but that there are enough oil supplies.

He attributed the rise in prices to political tension in some production areas, market speculations and refining bottleneck in some producing countries. Al Hamili called for more communication between oil producing nations and consumer countries in order to create greater stability within the market and wider global economy.

Persian Gulf Tanker Rates May Extend Decline

Persian Gulf Oil-Tanker Rates May Extend Decline on Ship Supply
By Grant Smith
June 13 (Bloomberg)

The cost of shipping Middle East crude oil to Asia, which rose for the first time in 18 days yesterday, may extend this month's 10 percent decline because of excess supplies.

A surplus of spare supertankers has accumulated after routine maintenance among Chinese refiners in May damped oil imports. There are almost as many ships available for the first two weeks of July as will be needed for the entire month, according to an e-mailed report today from Paris-based shipbrokers Barry Rogliano Salles.

``Rates are taking a small step forward but are still under pressure, with plenty of tonnage available for the remainder of June and into early July,'' Nikolaos Varvaropoulos of Optima Shipbrokers said in an e-mail from Athens.

Freight rates for very large crude carriers, or VLCCs, on the benchmark route to Japan, rose 0.1 percent yesterday to 69.14 Worldscale points. Rates have lost 22 percent in the past four weeks, according to the London-based Baltic Exchange.

Rates temporarily halted their slide yesterday as owners refused to offer further discounts on the vessels they hire, Halvor Ellefesen of shipbrokers SeaLeague AS said in an e-mail.

China's crude oil imports rose at the slowest pace in four months in May, customs figures released in Beijing yesterday showed. The imports rose 4.7 percent to about 3.1 million barrels a day. There are 91 supertankers free to July 13, compared with 103 cargoes that typically load in the Persian Gulf each month, Barry Rogliano said.

Break Even

Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

At 69.14 Worldscale points, owners of modern VLCCs can earn about $41,337 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.

Frontline Ltd., the world's biggest oil-tanker company by capacity, said May 30 that it needs $29,500 a day to break even on each of its VLCCs.

Cargo Ship sinks at Bandar Abbas

LONDON, June 10 (IranMania)

Following devastating tropical storm, Cyclone Gonu, which hit Persian Gulf region a cargo ship sank in the coastal waters of Haghani jetty in Bandar Abbas on Wednesday, it was announced, IRNA reported.

Speaking to IRNA, Colonel Asghar Ghotbzadeh said the ship had already been seized by coastal guards for illegal transport of crude oil.

Following the incident, all crew on board were evacuated and are all in good health conditions, he said.