Inventory Data Send Oil Futures to Highest Level in Nearly Two Weeks

Oil futures shot to their highest price in almost two weeks Wednesday, after a closely watched report said gasoline demand rose to its highest level in more than five months.

The weekly report from the Energy Information Administration also showed oil stockpiles last week rose less than expected, while gasoline inventories fell sharply.

Light, sweet crude for June delivery settled up $2.25, or 2.5%, to $91.43 a barrel on the New York Mercantile Exchange, its highest finish since April 11. Brent crude on the ICE futures exchange rose $1.42, or 1.4%, to $101.73 a barrel, its highest settle since April 12.

The EIA said gasoline demand rose 4.4% to 8.75 million barrels a day last week, the highest level since November. Demand was 3% above the year-earlier level, marking the first year-over-year increase in demand since March 8.

"We're in positive territory" year over year, said Gareth Lewis-Davies, analyst at BNP Paribas. "This is not typical of what we've seen."

Traders found a number of other bullish cues in the EIA report. Oil inventories last week rose 900,000 barrels, less than the increase of 1.2 million barrels forecast in a Dow Jones Newswires survey of analysts. Gasoline stockpiles tumbled 3.9 million barrels last week, the EIA reported, while stockpiles of distillates, including heating oil and diesel, rose 100,000 barrels. Refinery utilization fell 2.8 percentage points to 83.5% of capacity.

Analysts had expected gasoline stocks to fall 400,000 barrels, while distillate stocks were projected to rise 300,000 barrels. Refiners were expected to boost operations by 0.3 percentage point.

The reading on gasoline demand was significant because demand for the fuel has been slack in recent years, as high unemployment has kept drivers off the road and efficiency of new cars and trucks continues to rise.

Analysts expect gasoline demand to continue rising in the coming months as the summer driving season kicks in. That should trigger an increased need of crude oil from refiners. European refiners are also expected to exit a period of prolonged maintenance in the coming weeks that could contribute to demand.

U.S. oil inventories remain close to their highest level in 23 years, helped in large part by booming production.

After Wednesday's move, Nymex crude-oil futures are off just 0.4% for the year to date. Brent, the global benchmark, is down 8.4% over the same period.

Front-month May reformulated gasoline blendstock, or RBOB, settled 2.84 cents, or 1%, higher at $2.7474 a gallon. May heating oil settled 2.96 cents, or 1.1%, higher at $2.8413 a gallon.

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TAQA Gets Approval for Cladhan Development

TAQA Bratani reported late Wednesday that it has received approval from the UK government for its development plan for the Cladhan field in the North Sea.

The initial phase of development of the field – which is located on Blocks 210/29a and 210/30a in the northern North Sea – will consist of two producer wells and one injection well.  Cladhan is expected to produce over 17,000 barrels of oil equivalent per day initially with first oil expected in the first quarter of 2015. Production will be tied back to TAQA's Tern Alpha platform which lies some 11 miles northeast of the Cladhan field.

TAQA Bratani Managing Director Leo Koot commented in a company statement:

"The Cladhan development is the third field that TAQA has developed and the largest project to date. Developing Cladhan as a tie back to Tern supports TAQA's strategy to invest in our infrastructure as we recognise the crucial part it plays in allowing us to maximise recovery from the northern North Sea."

TAQA current has a 40.1-percent stake in the Cladhan field but an agreement to acquire further equity in the field from Sterling Resources could see its interest increase to 52.7 percent.

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TAQA Gets Approval for Cladhan Development

TAQA Bratani reported late Wednesday that it has received approval from the UK government for its development plan for the Cladhan field in the North Sea.

The initial phase of development of the field – which is located on Blocks 210/29a and 210/30a in the northern North Sea – will consist of two producer wells and one injection well.  Cladhan is expected to produce over 17,000 barrels of oil equivalent per day initially with first oil expected in the first quarter of 2015. Production will be tied back to TAQA's Tern Alpha platform which lies some 11 miles northeast of the Cladhan field.

TAQA Bratani Managing Director Leo Koot commented in a company statement:

"The Cladhan development is the third field that TAQA has developed and the largest project to date. Developing Cladhan as a tie back to Tern supports TAQA's strategy to invest in our infrastructure as we recognise the crucial part it plays in allowing us to maximise recovery from the northern North Sea."

TAQA current has a 40.1-percent stake in the Cladhan field but an agreement to acquire further equity in the field from Sterling Resources could see its interest increase to 52.7 percent.

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Total Confirms Output Targets, Sees Further Growth After 2017

SHETLAND, Scotland - French company Total SA still expects its oil and gas output to grow 3% on average on an annual basis between 2011 and 2015, and then sees accelerated growth after 2017 as new projects come on stream, the head of the exploration and production division Yves-Louis Darricarrere said, ahead of the group's release of its first-quarter earnings later this week.

By 2017, the group expects to have increased its production capacity potential to 3 million barrels of oil equivalent per day, from currently around 2.3 mboe/d, Mr. Darricarrere said during a press presentation there Monday.

The group is strongly competing with peers to find more oil and gas as energy demand keeps growing in emerging markets and while most conventional hydrocarbon reservoirs around the world are believed now to be depleting. Total has engaged in a strategic change and has become more aggressive in terms of exploration, allowing it to recently make substantial discoveries, notably in risky areas also called "frontier basins," such as the rough seas of West Shetlands and the Barents Sea, at the most northern tip of Europe.

Total even sees its output growth accelerating after 2017, as "already 90% of the 2017 potential is either in production or in development," Mr. Darricarrere said.

"We're seeing the results of our revitalized exploration strategy. Accepting to take more risks and looking for larger projects are our new focuses," Mr. Darricarrere said, adding the group's potential resources has doubled in the last three years to six billion barrels of oil equivalent.

In the North Sea alone, the group plans to invest as much as $20 billion over the five coming years, he said.

The strategy has allowed Total's production decline rate to remain steady, at around 3%, he said.

"We're able to control the decline, but this is because attention has been brought to existing fields and all our projects must be on time... Any delay of a project is a destruction of growth," he added.

Total has currently 15 projects under development, four of which are located in the North Sea and the Barents Sea. Mr. Darricarrere said "these projects, for the time being, are on time" and should add around 175,000 boe/d to Total's production.

The group will release its first-quarter earnings on Friday at 0600 GMT. Analysts polled by Dow Jones Newswires expect Total's first-quarter output to have dropped 2.1% from a year earlier to 2.323 mboe/d from 2.372 mboe/d.

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BOEM to Offer Over 21 Million Acres in Western Gulf Lease Sale

The Bureau of Ocean Energy Management (BOEM) will offer over 21 million acres offshore Texas for exploration and production in Lease Sale 233 in August.

The acreage, which includes 3,953 blocks located 9 to 250 miles offshore in water depths ranging from 16 to over 10,975 feet (5 to 3,346 meters), will include all available unleased areas in the western Gulf planning area.

The proposed sale is the third offshore auction under the current Outer Continental Shelf Oil and Gas Leasing Program for 2012 to 2017. The first sale under the plan, Western Gulf Lease Sale 229, was held in November 2012 and netted nearly $134 million in high bids. The second sale, Central Gulf Lease Sale 227, was held last month, and attracted over $1.2 billion in high bids.

BOEM estimates the sale could generate production of 116 to 200 million barrels of oil and 538 to 938 billion cubic feet of natural gas.

The proposed economic terms for the sale will not include the provision for deep gas royalty relief under the Energy Policy Act of 2005 (EPAct), which will end May 3. However, ultra-deep gas royalty relief required under the EPAct will still be available, BOEM said in a statement.

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Kashagan Start-up Date Key for ENI in 2013

Success for Italian major ENI in 2013 will depend on how soon the company can start up its Kashagan field, offshore Kazakhstan, according to a Jefferies International research report.

Following ENI's first quarter results, oil sector analysts at Jefferies' London office stated in their report Thursday: "Eni's recent history is rapidly obliterating the excellent year it has in 2012, when the Mozambique exploration successes drove it to the best share price performance of the global majors."

ENI revealed in its first quarter results, released Wednesday afternoon (London time), a 36-percent fall in its 1Q 2013 operating profit as oil and natural gas production fell 4.9 percent to 1.6 million barrels of oil equivalent per day.

Jefferies' analysts noted that ENI is suffering from several one-off production interruptions – in Nigeria, Libya and the UK – that "are leaving it much to do if it is to produce volume growth in 2013" and that "a lot depends on the start up date of Kashagan".

Kashagan, located in Kazakhstan's zone of the Caspian Sea, is a major oilfield estimated to contain recoverable reserves of up to 13 billion barrels. ENI plans a field development aimed at initially producing between seven and nine billion barrels, which can be extended through partial gas reinjection to extract the entire 13 billion barrels.

First oil from the field had originally been forecast for December 2012, but recent media reports suggest that production start-up could occur as late as September 2013. The company itself now expects start-up to occur around the mid-year stage, according to a statement made Wednesday by Claudio Descalzi, ENI's head of exploration and production.

A former engineer, Jon is an award-winning editor who has covered the technology, engineering and energy sectors since the mid-1990s. Email Jon at jmainwaring@rigzone.com.

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ConocoPhillips First-Quarter Profit Off 27% on Spinoff, Divestitures

ConocoPhillips' first-quarter earnings fell 27% after the exploration and production company reported lower revenue amid the spinoff of its refining and marketing arm in 2012 and as the year-earlier period benefited from $950 million in asset sale gains.

ConocoPhillips reported a profit of $2.14 billion, or $1.73 a share, down from $2.94 billion, or $2.27 a share, a year earlier. The year-earlier period included a $712 million income contribution from ConocoPhillips former refining and marketing arm, which was spun off as Phillips 66 nearly a year ago as part of the multiyear revamp aimed at improving the company's finances.

Excluding asset write-downs, asset-sale gains, spinoff-related expenses and other items, adjusted earnings from continuing operations were up at $1.42 from $1.38. Revenue decreased 8.9% to $14.65 billion.

Analysts polled by Thomson Reuters had most recently projected earnings of $1.41 on revenue of $13.57 billion.

The newly independent exploration and production company is in the midst of a three-year repositioning in which the oil major has shed billions of dollars in assets and is planning to divest itself of more operations as it seeks to focus on fast-growing shale plays in the U.S.

Average daily production fell 1.6% amid the asset sales and the company warned that it will likely fall further in the second quarter.

ConocoPhillips executives had said at the end of the 2012 fourth quarter that 2013 would be a low point for the company's production, as it aims to refocus its efforts on North America while shedding other international assets.

But the company reported that in the Eagle Ford, Bakken and Permian basins, unconventional U.S. reservoirs that ConocoPhillips expects to be drivers of its future growth, combined production climbed 42%.

Simmons and Co. analysts said the ConocoPhillips exceeded expectations with low corporate charges and "well-behaved" productions.

"Overall, results were better than we had expected, and in-line to better than the street had expected as well," they wrote.

Chairman and Chief Executive Ryan Lance said the company is on track to grow production and improve margins this year, pointing to discoveries in the Gulf of Mexico last quarter.

"Our base business is operating to plan, our development programs and major projects are performing as expected and we are on track to deliver production and margin improvements this year," he said.

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