Oil Market Update (April 30, 2013)

- April 30th, 2013

A brief overview of oil price developments, supply and demand and significant market movers.

Brent crude oil slipped on Monday as questionable growth outlooks for the world’s biggest oil consumers — the United States, Europe and China — resulted in a consolidation of the commodities markets.

Oil rallied from nine-month lows last week on expectations that stronger global economic activity would encourage fuel consumption, but disappointing data capped any notable recovery. The US Department of Commerce reported that the country’s economy grew at an annual rate of 2.5 percent in the first quarter, below expectations of 3 percent.

Brent gained 37 cents, rising to $103.53 per barrel by Monday afternoon, while West Texas Intermediate for June delivery was up 98 cents, at $93.98 a barrel, after sliding below $86 mid-month from almost $98 at the beginning of April.

In the week ahead, traders will likely be focusing on last week’s data, which relates to US nonfarm payrolls, to gauge the strength of the economic recovery. Oil traders have long taken cues from the monthly jobs report, the most closely followed indicator of US employment, as it offers insight into the economic health of the world’s largest crude oil consumer.

Market players will also be looking to this week’s upcoming Federal Reserve policy statement for further hints regarding the future of the central bank’s monetary easing program.

Company news

Suriname’s state oil company, Staatsolie, and Malaysia’s PETRONAS signed a production-sharing contract for an offshore bloc approximately 130 kilometers off the coast of the South American nation. Staatsolie said Petronas will invest $25 million into exploring Block 52, drill at least one exploratory well and conduct a 3D seismic survey. Further, Petronas’ costs will be reimbursed if a commercial discovery is developed. In that case, Staatsolie will have the option of participating with a 20-percent stake.

Petroleo Brasileiro (NYSE:PBR), the sixth-largest oil company by market value, beat analysts’ estimates in the first quarter after it increased fuel production and curbed imports. Earnings before interest, taxes, depreciation and amortization fell 2 percent on year, to 8.1 billion, the Brazilian state-run company said.

The company’s press release adds that fuel imports fell 7 percent on year, to 376,000 barrels a day, after refinery output rose 10 percent, to 2.1 million barrels a day. Compared to a year earlier, oil and natural gas output fell 5 percent in the first quarter, to 2.55 million barrels a day, after the company shut production platforms for maintenance.

Total (NYSE:TOT) said the $13 billion worth of asset sales that it has carried out to date as part of a divestment plan could translate into higher dividends.

“The asset sale program is going better than expected and this will give us additional flexibility to increase the return to shareholders and fund an intensive capex phase,” Chief Financial Officer Patrick de la Chevardiere said last week on a conference call after the company reported its first quarter earnings.

Total has pledged to sell $15 to $20 billion of its assets between 2012 and 2014 to raise cash for exploration and production. “Proceeds from asset sales could leave room to increase the dividend,” said de la Chevardiere.

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