Gusher: Crude slump will stoke European oil and gas M&A : Rouhani says countries that planned to decrease oil prices will regret decision

Iran's Rouhani says countries behind oil price drop will suffer Tue, Jan 13 05:28 AM EST image By Michelle Moghtader DUBAI (Reuters) - Iranian President Hassan Rouhani said on Tuesday that countries behind the fall in global oil prices would regret their decision and warned that Saudi Arabia and Kuwait would suffer alongside Iran from the price drop. "Those that have planned to decrease the prices against other countries will regret this decision," Rouhani said in a speech broadcast on state television as oil plunged to near six year lows on international market "If Iran suffers from the drop in oil prices, know that other oil-producing countries such as Saudi Arabia and Kuwait will suffer more than Iran," he added. Oil prices have fallen 60 percent from their June 2014 peaks, driven down by rising production, particularly of U.S. shale oil, and weaker-than-expected demand in Europe and Asia. Earlier this month, Iran described Saudi Arabia's inaction in the face of the six-month price slide as a strategic mistake, but hoped that the kingdom, Tehran's main rival in the Gulf, would respond. On Tuesday, Rouhani singled out Kuwait and Saudi Arabia's budget dependency on oil exports. Data showed that 80 percent of Saudi Arabia's budget is based on oil sales, while in Kuwait the figure stands at 95 percent, he said in a speech in the city of Bushehr. In 2013, oil accounted for roughly 90 percent of Saudi Arabia's overall budget income and Kuwait at 92 percent, according to Reuters' calculations based on official data. On the other hand, only one-third of Iran's budget is based on oil sales, with an estimated 60 percent of the country's exports tied to oil, Rouhani said. Due to Western sanctions on Iran over its nuclear program, Iran's oil exports have dropped from 2.5 million barrels a day in 2011 to about 1 million barrels per day on average, according to the U.S. Energy Information Administration (EIA). Iran had adjusted to the drop in exports due to higher oil prices, but that buffer no longer remains today. The United Arab Emirates energy minister repeated on Tuesday that the Organization of the Petroleum Exporting Countries (OPEC) would not cut output to support prices. Saudi Arabia and other wealthy Gulf Arab countries have accumulated hundreds of billions of dollars of reserves due to high oil prices over the years. Saudi authorities appear confident they can ride out the market slide, with state spending set to hit a record this year. (Additionaly reporting by Martin Dokoupil, Editing by Yara Bayoumy and Crispian Balmer) ==== Iran's Rouhani says countries that planned to decrease oil prices will regret decision - @Reuters (Reuters) - Oil prices continued their rout on Tuesday with Brent crude and U.S. WTI both falling to their lowest in almost six years as a big OPEC producer stood by the group's decision not to cut output to tackle a glut in the market. Oil prices have fallen 60 percent from their 2014 peaks hit in June in a rout that has seen a collapse of more than 36 percent in the past seven weeks. February Brent crude fell almost 5 percent to a low of $45.23 a barrel by 0730 GMT, the lowest since March 2009. U.S. crude for February was trading at $44.44 a barrel, its weakest since April 2009. The price fall is a result of rising output, especially of U.S. shale oil. At the same time, producers from the Organization of the Petroleum Exporting Countries (OPEC) have not cut output, instead offering discounts to customers in an attempt to defend market share. The United Arab Emirates' oil minister, Suhail bin Mohammed al-Mazroui, said on Tuesday that OPEC's decision in November not to cut output had been right. He also said that U.S. shale oil was an important part of global oil supplies. "Shale oil producers are very important for the market supply and we all need them to stay," he said, adding that the market would stabilize at a level at which conventional producers can sell profitably, "whether $60 or $70 or $80". Adding to the glut are slowing Asian economies, which now face deflationary pressures. "Even without the full effect of the recent collapse in energy prices, GDP deflator in the region (Asia) ... is estimated to have slipped. We believe that weaker aggregate demand is at the heart of this generalized deflationary pressure," U.S. bank Morgan Stanley said on Tuesday. The downward pressure on prices is so big that even record Chinese crude imports for December - above 7 million barrels a day for the first time as the world's No.2 oil consumer took advantage of low prices to build up reserves - could not lift the market for long. Meanwhile, banks have slashed their oil price outlook, with analysts at Goldman Sachs cutting their average forecast for Brent in 2015 to $50.40 a barrel from $83.75. (Editing by Joseph Radford, Himani Sarkar and Alan Raybould) ====== OPEC price war in Asia intensifies as oil falls below $50 Reuters EDITION:U.S. BY FLORENCE TAN AND HENNING GLOYSTEIN SINGAPORE Mon Jan 12, 2015 2:54pm EST Shaybah oilfield complex is seen at night in the Rub' al-Khali desert, Saudi Arabia, November 14, 2007. REUTERS/ Ali Jarekji CREDIT: REUTERS/ ALI JAREKJI RELATED NEWS Slump in oil weighs on equities in volatile session Oil dives anew, falling 5 percent on Goldman downgrade, outages U.S. oil tanks barely one-third full beckon crude contango play CORRECTED-Global oil prices extend falls; two large U.S. refineries hit by fires MIDEAST STOCKS - Factors to watch - Jan 12 ANALYSIS & OPINION Is the gold to oil ratio a sign of trouble? Retail Therapy Amid Oil’s Decline (Reuters) - Even as Saudi Arabia and its Gulf OPEC allies appear united in their refusal to cut output to boost global oil prices, they are becoming locked in an increasingly fierce battle to secure market share in Asia. Oil prices have slumped below $50 a barrel, the weakest since 2009, triggering a price war between producers to secure customers in Asia. And the price outlook remains grim with Goldman Sachs slashing its three-month benchmark crude forecasts to just above $40. The United Arab Emirates (UAE) last week joined Kuwait and Iraq in pricing crude they sell to Asia below that of OPEC's top producer Saudi Arabia. The discounts show how Gulf members, who account for more than half of OPEC output, are prepared to take on each other to retain market share and, in so doing, put more pressure on global oil prices. "It's a fight for the market," said Tushar Bansal of consultancy FGE, who says Gulf producers such as the UAE are prepared to stomach lower prices to hold their market share. The UAE's Abu Dhabi National Oil Company (ADNOC) set the official selling price (OSP) for flagship grade Murban in December at a discount to similar quality Saudi's Arab Extra Light for the ninth month in a row, data from Reuters and trade sources showed last week. This was despite Saudi Arabia raising its prices to customers in Asia after sharp reductions in previous months. ADNOC had felt it had to reduce prices to ensure its crude remained attractive to Asian refiners, a source familiar with their strategy said. GOLDMAN LOWERS PRICE FORECAST Goldman Sachs has lowered its average 2015 price forecast for benchmark Brent and WTI futures to $50.40 and $47.15 per barrel, respectively. The U.S. bank cut its three-month price forecast for Brent to $42 from $80 and U.S. crude to $41, down from $70, adding it would need to stay near $40 for most of the first half of 2015 before it would hold up shale oil investments. "To keep all capital sidelined and curtail investment in shale until the market has rebalanced, we believe prices need to stay lower for longer," its analysts said in a report. As well as targeting North American shale, oil ministers from OPEC, including the UAE, have called for exporters, such as Russia, to cut output to lift prices. Russia, in turn, wants OPEC and Saudi Arabia in particular to cut production first. Over the past decade, UAE's Murban OSP has been on average 15 cents a barrel higher than Saudi's Extra Light OSP, but the relationship between the grades switched since April last year, the data showed. In September, Murban was priced at the widest discount to Extra Light in over a decade at $2.28. Another Abu Dhabi grade, Upper Zakum, also flipped into a discount against Saudi's Arab Medium in December, even though Upper Zakum has been priced at an average premium of $1.11 a barrel above the Saudi grade in the last decade. ADNOC sets its prices two months behind those of Saudi, Kuwait and Iraq, which gives the UAE's main producer more time to react to market changes. The UAE, OPEC's fifth largest producer, has been expanding its output and remains on track to boost production capacity to 3.5 million barrels per day by 2017, up from about 2.8 million bpd, its oil minister said in remarks published last week. The UAE's price cuts have spurred demand for Abu Dhabi grades in the spot market, with Taiwanese refiner CPC Corp buying volumes of Murban crude at the start of the year. But Bansal of consultancy FGE warned that to restore market balance output cuts will have to come from OPEC and non-OPEC producers. "If no one blinks, then prices will continue to drop." (Editing by Ed Davies) Tweet this Link this Share this Digg this Email Print Reprints Sponsored Links by Taboola From The Web NEVER Do This Exercise (accelerates aging) MAX Workouts Fitness Guide Military Armored Vehicle Taxi Hits the Mark Yahoo7 via Reuters DevOps Engineer? What Is That Supposed To Mean? Cloudyn Blog 10 Pics of Jennifer Lawrence Before She Was Famous! Trending.Report The Idea of Sea Water Desalination SanDiego6 These 31 Builders Made Mistakes That Will Leave You BAFFLED. Ridiculously Hilarious. ViralNova Having Diabetes Is Not A Life Sentence. 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Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests. NYSE and AMEX quotes delayed by at least 20 minutes. Nasdaq delayed by at least 15 minutes. For a complete list of exchanges and delays, please click here. Oil needs to stay at $40 to curb US shale boom – Goldman Sachs Published time: January 12, 2015 11:36 Get short URL David McNew/Getty Images/AFP Crisis, Energy, Oil, Shale Oil prices hit new lows on Monday as Goldman Sachs halved its forecast for 2015 to $42 a barrel. The bank says low prices could curtail a number of shale projects, mostly in the US, cutting oversupply, and contributing to further price stabilization. Goldman reduced its six month WTI predictions to $39 a barrel from $75, and for 12 months to $65 from $80 , while its estimate for Brent for the six month period were cut to $43 from $85, and for 12 months from $90 to $75, according to the report. The bank suggests reserves will increase in the second half of the year, as the market can run a surplus longer than previously thought due to excess storage, said Goldman analysts to Bloomberg. The bank believes oil at $40 should help cut excess supply, primarily in the US that has been pumping oil at a record pace, largely due to the Eagle Ford shale formation in Texas, and the Bakken field in North Dakota. “To keep all capital sidelined and curtail investment in shale until the market has re-balanced, we believe prices need to stay lower for longer,” Goldman said in a report. “The search for a new equilibrium in oil markets continues.” On Sunday, WBH Energy LP, a private Texas-based drilling group, became the first shale company to file for bankruptcy protection saying their bank was no longer willing to advance money. The company estimates its debt at between $10-50 million. READ MORE: $200 bn in debt looms over American oil and gas The global oil price decline continued after OPEC decided not to cut oil output in November believing the market will stabilize itself. READ MORE: Oil slumps into tailspin as OPEC leaves output unchanged On Sunday, Venezuela and Saudi Arabia agreed to intensify cooperation in restoring the global oil market, said Venezuelan Finance Minister Rodolfo Marco Torres following a meeting between Venezuelan President Nicolas Maduro and Saudi Arabia's Minister of Petroleum and Mineral Resources Ali Al-Naimi. "An excellent meeting with important results. We agreed to work to restore the market and oil prices," Torres said on his Twitter account. Although the countries seem to have realized the importance of bringing together their efforts, Saudi billionaire businessman Prince Al-Waleed bin Talal believes no attempts will be made to bring the oil price back to $100. “If some supply is taken off the market, and there's some growth in demand, prices may go up. But I'm sure we're never going to see $100 anymore. I said a year ago, the price of oil above $100 is artificial. It's not correct,” he told USA Today. Overall, oil prices have fallen more than 50 percent since July 2014. ==============

U.S. President Barack Obama’s administration on Dec. 30 announced a policy change that allows condensate, a lightly treated form of crude oil, to be exported from the United States. While the move marks a slight relaxation of the 40-year ban on oil exports, the ban remains intact for almost all domestically produced crude.

The average U.S. retail price of conventional gasoline reached $2.30 per gallon for the week ending Dec. 29 – the lowest since May 2009 – according to the U.S. Energy Information Administration.

The sharp drop in the price of Brent might make it harder to get deals done in the short term. But if the downturn persists, financial distress will put some small players in play. Larger, more defensive mergers, designed to create value by sharing costs, are also possible. Oil glut cracks foundation of U.S. export ban Cheap gasoline could make lawmakers consider loosening the 40-year-old prohibition on crude exports. Plentiful oil may also force a rethink of ethanol and natural gas policies. Help for domestic producers smarting from low prices could even bring a rare show of Washington unity.

The global glut of oil could lubricate the Washington machine enough to bring a rare show of unity. Cheap gasoline and plentiful crude could make lawmakers consider loosening the 40-year-old prohibition on exports and maybe rethink ethanol and natural gas policies.

The slide in global oil prices has Americans enjoying the lowest retail gasoline prices since 2009, even as the United States imports less crude because of booming domestic shale production. The biggest knock-on change for the new Republican-controlled Congress in 2015 would be ending the decades-old ban on petroleum exports. President Barack Obama’s administration just tweaked the rules by allowing condensate, a lightly treated oil, to be sold abroad.

Lawmakers could go much further. Unleashing U.S. crude on global markets, where similar oil sells at a premium, could even soften global prices further – helping all kinds of oil users – while scoring somewhat higher prices for domestic producers. Markets aren’t usually so compliant, but talk of that kind of win-win outcome might tempt Washington’s politicians.

Meanwhile, lower crude prices also bring back the prospect of competition for other fuels like natural gas, which has enjoyed a huge price advantage for several years. Tougher rivalry may translate into less exploration and fewer jobs. That in turn could encourage policymakers to rethink more stringent environment-saving rules for fracking. Requirements surrounding the amount of ethanol added to gasoline could also come under the microscope.

Cheap oil may, however, gunk up the legislative gears in some ways. It could make the political-football Keystone XL pipeline even less likely to be approved, with the transport of Canada’s relatively pricey oil-sands products arguably less important.

Then there’s tax reform. Obama and other Democrats often complain about the tax advantages handed to profitable big oil companies. As the energy giants make less money and become less flush – ConocoPhillips, for example, recently announced a 20 percent cut in its capital-spending budget for 2015 – those criticisms lose power.

The most sensible measure on which U.S. lawmakers could expend political capital would be to stop banning oil exports. But sliding crude prices could unite opposing politicians in less desirable endeavors, like perpetuating or adding to the welter of tax concessions companies turn to their advantage.

Welter=1. A confused mass; a jumble: a welter of papers and magazines. 2. Confusion; turmoil.

There was $383 billion worth of oil and gas sector M&A in the 2014 year to Dec. 11. Yet Europe has largely missed out on the gusher: about three-quarters of the targets have been in North America, according to Thomson Reuters data. Shale has played a big role. In 2015, oil and gas bankers in Europe will get a bigger slice of the action.

The sharp drop in the price of Brent, to around $60 a barrel, will make it harder to get deals done in the short term. It makes everyone more cautious. Buyers worry prices could fall further, while the seller’s instinct is to hold out for a recovery. The last big oil price fall at the end of 2008 was too short-lived to push a big M&A wave.

But if the current oil price persists, financial stress could make small players vulnerable. Net debt at explorers including Afren, EnQuest, Premier Oil and Tullow Oil could all reach three times EBITDA, or more, if oil remains at $60 through 2015, estimates Barclays.

Cash-rich Repsol already took the plunge with a $13 billion bid for Canada’s indebted Talisman. Chinese companies, active players in the past, have a lot on their plate with big capital commitments but buyout groups have raised billions of dollars to invest, including in energy infrastructure assets.

All-stock defensive mergers of the type seen in the late 1990s are possible too. This has already started on a small scale with Ophir’s all-share takeover of Salamander. The industry has a cost problem which cannot be met forever by shrinking capex and selling assets. BP’s former Chairman John Browne wrote in his memoirs that a merger with Shell, pondered while he was at the helm, might have delivered $9 billion in annual synergies.

BP faces big liabilities in the Gulf of Mexico and volatility in Russia. BG has long been a target and the new CEO starts in March. It’s not clear Shell, the wallflower in the 1990s, would make a move. Exxon and other U.S. majors might be tempted. Either way, chances are Big Oil will get even bigger next year.

This view is a Breakingviews prediction for 2015. Click here to see more predictions.  

=============== UPDATE 3-Ophir Energy offers to buy Salamander in SE Asia push Fri, Nov 21 08:01 AM EST * Offers 0.5719 Ophir shares for every Salamander share * Offer values Salamander at about 267 mln stg at Thursday's close * Ophir shares fall as much as 7.1 pct; Salamander up 5.8 pct (Adds analyst comment, background) By Abhiram Nandakumar Nov 21 (Reuters) - British oil and gas explorer Ophir Energy Plc offered to buy Salamander Energy Plc for 267 million pounds ($419 million) to expand in southeast Asia. Ophir could be getting a bargain, analysts said, after a possible rival in the bidding process walked away. But shareholders might be less happy about taking on Salamander's $250 million debt, as well as the all-stock nature of the deal. "We expect arbitrage between the two to weigh heavily on Ophir's share price," Societe Generale analysts said in a note. Salamander's shares rose as much as 5.8 percent to 96.0 pence. Ophir's stock fell as much as 7.1 percent to 167.4 pence, also hit by disappointing drill results in Tanzania. The recent drop in oil prices has renewed appetite for deals, posing a dilemma for oil companies keen to pick up bargains but under pressure to cut costs. A consortium led by Spain's Compania Espanola de Petroleos (CEPSA) had been considering making an offer of 121 pence in cash and one contingent value right of up to 24 pence per share for Salamander. CEPSA said on Monday the consortium had decided not to proceed - leaving the way clear for Ophir. BMO Capital Markets analyst David Round said the offer was "slightly disappointing". While making strategic sense for both companies, he said it fell "a long way short of previous expressions of interest". Ophir's offer of 0.5719 shares for every Salamander share values Salamander at 266.9 million pounds, based on Ophir's closing price of 180.1 pence on Thursday. Salamander has 259.13 million shares outstanding, according to Thomson Reuters data. The acquisition would give Ophir an oilfield already in production off Thailand's coast and a gas development in Indonesia. The offer is conditional on Salamander cancelling its deal with Malaysia's Sona Petroleum Bhd to sell 40 percent of two oil and gas blocks in the Gulf of Thailand. Though almost all of Ophir's assets are scattered throughout African waters, the company has recently acquired acreage in Myanmar and Indonesia. "They have to inject some sort of fresh momentum into what is a lacklustre story," FirstEnergy Capital analyst Gerry Donnelly said. "Africa itself, for Ophir, is getting just too expensive." (1 US dollar = 0.6377 British pound) (Additional reporting by Ron Bousso in London; Editing by Robin Paxton) ======================= Oil uncertainty remains high, even as calm returns to stocks Tue, Dec 23 16:54 PM EST By Saqib Iqbal Ahmed NEW YORK, Dec 23 (Reuters) - A divergence between the expected volatility in the stock market and the oil market is now the widest since December 2008 but some market watchers do not see this as a sign that price swings may increase in the stock market. The CBOE Volatility Index, the so called "fear gauge" of the stock market, has swung around a fair bit since touching a two-year high of 31.06 in mid-October but has crept back in recent days and on Tuesday fell to as low as 14.32, close to the lowest it has been this year. Volatility in oil has increased and the CBOE implied volatility index for oil was at 53.72 on Tuesday, close to the highest it has been in over three years. The gulf between the two is unusual, leading some commenters to suggest that stocks may follow oil volatility higher, but such a comparison is difficult to make. Looking at the longer-term realized volatility in stocks and crude oil, there have been a number of times when the two have been completely unrelated, BGC Partners Inc equity derivatives strategist Jared Woodard said. The broader stock market is currently reflecting a much lower amount of risk in the next 30 days than the risk in oil, said Ophir Gottlieb, chief executive of Los Angeles-based Capital Market Laboratories. "The divergence between the two indicates monumental uncertainty in oil prices in the short-term," Gottlieb said. Booming oil production in North America and OPEC refusing to cut output have sent both U.S. crude and international oil prices sliding in recent months. The falling oil prices did affect the VIX, but with the market factoring in the lower oil prices the VIX has rebounded, said J.J. Kinahan, chief market strategist at retail brokerage TD Ameritrade Holding Corp. "It was just a repricing of stocks with the market saying, 'We had stocks priced for $70 oil. Now we have to price stocks for $55 oil,'" Kinahan said. (Reporting by Saqib Iqbal Ahmed; Editing by Lisa Shumaker) =======================