Iran Studies Plan To Cut Crude Output

The BBC is reporting Oil hits new high on Iran fears.

Oil prices have hit a record just shy of $127 a barrel after Iran said it was studying a plan to cut crude output. President Mahmoud Ahmadinejad said a proposal to reduce Iran's crude output was being reviewed by experts, Iran's Fars News Agency reported.

Analysts doubted whether Iran would actually cut output but the report sent jitters through oil trading floors.

"That sounds like it would get people excited," said Peter Beutel, president of Cameron Hanover.

Tanker Prices Soar

Flashback May 2

Super tanker prices are soaring as Iran Doubles Oil Stored in Tankers.

Iran, OPEC's second-largest oil producer, more than doubled the amount stored in tankers idling in the Persian Gulf, sending ship prices higher as demand for some of its crude fell, people familiar with the situation said.

The 10 tankers hold at least 20 million barrels of oil, equal to about 5 days of the country's output, said the people, who asked not to be identified because the information isn't public. Rates for tankers have more than tripled since April 8, based on data from the Baltic Exchange and ship-fuel prices.

Iran's use of ships for storage cut the supply of available supertankers, owned by companies including Hamilton, Bermuda- based Frontline Ltd. and Euronav NV, based in Antwerp, Belgium. The number of double-hull very large crude carriers, or VLCCs, available to rent within the next 30 days dropped to 28 from 56 a month ago, according to Paris-based broker Barry Rogliano Salles.

The benchmark tanker rental rate for voyages to Asia from the Middle East is $148,000 a day, compared with $44,300 on April 8, according to prices from the London-based Baltic Exchange and a formula from Oslo-based RS Platou Shipbrokers A/S.

Iran typically keeps two or three supertankers on standby to deliver crude, Per Mansson, a tanker broker at Nor Ocean Stockholm AB, said by phone. "There's a lack of on-land storage and this enables quick supply" to buyers in Europe and Asia, he said.

Refinery Maintenance Schedules

Morningstar has this Table Of Asia Refinery Maintenance Schedules to consider.

Asia Refinery Maintenance Schedule For 2008
Country    Company      Location   Unit(B/D)         Period/Duration

India      HPCL         Mumbai     whole refinery    Apr 21, 35 days
                              (110,000)
S Korea    Hyundai      Daesan     No.1 CDU          May 17-Jun 12
                              (110,000)
S Korea    SK Energy    Ulsan      No.5 CDU          May 19, 40 days
                              (260,000)
S Korea    SK Energy    Ulsan      No.1 CDU          Jun 10, 10 days
                              (60,000)
S Korea    SK Energy    Ulsan      No.4 CDU          Jun 10, a few days
                              (240,000)
Japan      Cosmo Oil    Chiba      No.2 CDU          Apr 25-Jun 30
                              (130,000)
Japan      Nippon Oil   Negishi    CDU               Early May, 34 days
                              (Part of 340,000)
Japan      Nippon Oil   Sendai     CDU               Late May, 38 days
                              (145,000)
Japan      Kyushu       Oita       CDU               A Month From Late May
                              (136,000)
Japan      Nansei       Nishihara  CDU               Late May to early Jun
                              (100,000)

The above is just a partial table of dates that are relevant now.

Congress urges Bush to halt oil reserve shipments

The Associated Press is reporting Congress urges Bush to halt oil reserve shipments.

Congress voted overwhelmingly Tuesday to challenge President Bush to temporarily halt the daily shipment of thousands of barrels of oil into the government's emergency reserve.

Bush has steadfastly refused to halt shipments of about 70,000 barrel barrels of oil a day into the Strategic Petroleum Reserve, a system of salt caverns on the Gulf coast. The reserve, created to respond to major oil supply disruptions, holds 701 million barrels and is at 97 percent of capacity.

The Senate voted 97-1 to suspend the shipments for the rest of the year. Hours later, the House followed suit, voting 385-25 to halt the deliveries. The votes don't compel Bush to act because the measures differ somewhat and would need to be reconciled before final congressional approval.

The Strategic Petroleum Reserve was created in the 1970s as a precaution against major interruptions of oil supplies. Today at 701 million barrels it has enough to replace two months of oil imports.

Earlier, the Senate rejected, 56-42, a broader Republican energy plan that called for opening the Arctic National Wildlife Refuge in Alaska and some offshore waters that are now off limits to oil development.

Strange Picture

If there is not much demand for heavy crude, why isn't the discount greater?
Why has Iran been storing oil in tankers instead of the ground by simply not pumping it?
Why do analysts doubt Iran will cut back if Iran has no above ground place to store oil?
Why the mad rush to fill the reserves when they are 97% full? Planning something?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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