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BP‘s news this morning is coming fast and furious. First, the FT reports that BP is set to announce departure of CEO Hayward.  The Times is saying that BP is considering sale of all or part of its interest in profitable Russian joint venture, TNK-BP. Although Reuters re-affirmed the company’s commitment to the JV.  Finally, BP is back working on Drill Relief in Gulf of Mexico following the passing of bad weather.

HSBC & Total are partnering in energy trading to give the well established bank access to over the counter energy trading capability. HSBC will retain relationships with its clients and the associated counterparty risk. The bank will focus on deal origination and credit risk management, while Totsa will focus on oil trading. (WSJ​.com)

After being rebuffed from using the UAE Dirham for oil trade, Iran is in talks with China with regard to using the Chinese Yuan to settle oil transactions. Recently, China allowed the sale of Yuan-denominated financial products in Hong KOng and giving companies greater access to Yuan funds which is seen as gradual opening of China’s capital account to the world. China Daily : Iran explore using yuan to settle trade: rpt.

(Argus) — Tight supply in the North Sea has helped invert the front of the forward curve, with prompt prices above forward for the first time in over two years. The global recession reduced demand, leaving the market oversupplied and in contango — with prompt crude at a discount to supply further forward. Fluctuations in the depth of the contango have followed a concertina pattern, in which tightening spreads create an incentive for selling excess stocks, and then widening spreads encourage accumulation. The concertina may have played its last note, as the market returns towards a state of balance.

Ice front-month Brent futures expired on 15 July at a premium to the second-month settlement on that day, for the first time since March 2008. The corresponding front-month 21-day North Sea forward contract settled at a premium to the second month in July for the first time since the end of May 2008.

Key North Sea grade Forties, which usually sets the North Sea Dated benchmark, is likely to be in short supply until mid-August, owing to a broken valve at the Unity Riser platform, through which two-thirds of the blend passes. The platform is scheduled for maintenance in the first week of August. It will remain partly operational, but two cargoes scheduled for July have been cancelled and nine cargoes in the August programme — which has already been cut by scheduled maintenance — have now been deferred by up to three days.

At the same time as supply is affected by maintenance, refiner demand for crude is likely to be higher as throughputs in Europe increase from recessionary lows. The market is better supplied in the second half of August, as reflected in the contracts for difference (CFD) market, which is in backwardation to mid-August and contango thereafter.

The contango along the WTI curve is tightening at the same time, suggesting that the cause is wider than local factors such as field maintenance. The discount of Nymex front-month WTI to the fourth month was less than $1/bl on 20 July, for the first time since October 2008. The WTI curve has not been in backwardation since the market turmoil of September-October 2008 dragged forward prices lower more quickly than prompt. But the prevailing contango is under threat, as US crude stocks fell towards five-year averages in late June and early July, and as Opec output dipped in June. But onshore and offshore stocks remain above historical averages, preventing a rapid switch to backwardation.

No Hot Air reports that another LNG project has been abandoned in the US.  The project was backed by Goldman Sachs.

China Daily reports that China will begin its domestic carbon trading program during its five year plan period (2011-2015) to help meet its carbon intensity targets.  Carbon trading in pipeline.

A good article in Seeking Alpha why Exxon is good value. With price target of $ 86, a 3% reliable yield, double digit earning growth and diverse source of reserve (Imperial Oil – Canada (tar sand), LNG in Qatar, unconventional gas with its XTO acquisition) makes Exxon lower risk play on future of Oil.  Its Return on equity is 21% and uses its free cash flow of $ 27.7 billion to buy back $ 3 billion of outstanding shares every quarter (reduced shares outstanding by 26% from 2005-2009) while at the same time increasing dividends by 57%.

Finally, Exxon’s P/E multiple is trading at historical lows over past decade.

The rise of investment commodity ETF’s (Exchange traded Funds) to record $ 277 billion has dangerous risks according to article in bloomberg. Contango market conditions of many commodities (where the spot price is lower than future prices) push commodity ETF performnace down as investment mangers are forced to re-purchase new contracts at higher prices before old contracts become physically deliverable. Traders knowing of this roll-over, take advantage of this programmed trading.  Bloomberg.

Naphtha Cracks to Persian Gulf benchmark crude Dubai widened by 73 cents to – $ 6.66 a barrel amid buildup in stockpiles and concerns of slowing growth in China. (Bloomberg)

Following this years 19% Europe to US Shipping costs, cost of shipping gasoline to US from Europe may fall according to Bloomberg due to high gasoline stockpile in US.

With heated discussions around deep water drilling following the BP oil spill, RIGZONE points that the Middle East remains highest proven oil reserves.  Although the percentage has declined in past two decades, as of last year, the Middle East held 56.6% (753.7 billion barrels of oil) of world’s total oil reserves from 65.7 % in 1989.

Platts repots that Nigeria’s crude to US is on increase recording an average of 945,000 bpd in Q1 of 2010 compared to 606,000 bpd in same quarter last year.  The increase is attributed to sustained period of peace in delta region and as a result reduction of volatility of Nigerians oil supply.

The EIA estimate Nigeria’s oil output at 2.03 million bpd in first quarter of 2010, same level achieved in 2008.

Nevertheless, it is still to be seen whether this is just a staged recovery from the lows.

International Oil Companies (IOCs) are pushing ahead with their plans in Iraq that will kick-start Iraqi oil production. BP & CNPC have reiterated their plans to increase production from Rumaila oil field by 100,000 bpd by beginning of next year. Other companies such as ENI are awarding drilling contracts and Lukoil have stated that the company will invest close to $ 5 billion in giant West Qurna oil field. (WSJ)

Argus reports that refining margins in Europe is improving :

Total’s second-quarter European Refining Margin Indicator (ERMI) rose 83pc from a year earlier and 6pc against the previous quarter to $31.20/t. Margins have continued their upwards trend since plunging to $11.70/t in last year’s fourth quarter. The ERMI rose 152pc to $29.50/t in the first quarter of 2010 against 2009′s final quarter.

US West Coast refining margins are also improving with Chevron and BP reporting 25% and 146% increase respectively in 2Q of 2010 compared to first quarter.

The downstream recovery may well tail off as the global economic recovery slows in the second half of the year. “Downside risks have risen sharply amid renewed financial turbulence”, the IMF said.

The National reports that recent increases in price of Diesel (up by 12%) and Petrol (up by 14%) is attributed to higher refining cost at ADNOC.  Fuel prices in the UAE have increased by 27% in total.