RIM Intelligence Co.

Dec Al Shaheen : QP to a European major at around Dubai quotes-$2.00 (600 kb), QP to a Korean refiner at below QP-$2.00 (600 kb), QP to a Chinese trader at an undisclosed price (1,200 kb), QP to a US major at an undisclosed price (1,200-1,800 kb)(Please see below market commentary)

Asia-Pacific crude (Oct 18)

Nov Walio : Between Chinese oil firms at around ICP+$1.00 (around 200 kb)

MARKET COMMENTARY

--TOKYO MARKET ROUNDUP, Oct 19, 2004

The front-month Nov crude futures contract traded on NYMEX Access on Oct 19 (2:00 PM Tokyo time) at $53.32/bbl, down 35cts/bbl from the close in New York on Oct 18. The front-month Nov gasoline traded at 134.55cts/gallon, down 0.49cts/bbl on the prior day, while Nov heating oil traded at 150.45cts/gallon, down 0.52cts/bbl from a day earlier.

"It is likely that selling for position adjustment would continue," a broker said with regard to Tuesday's Nov WTI crude futures contract. The broker pointed out that profit-taking gained momentum in floor trade the day before and ensued on Access. "In case the contract goes below support at $52.00/bbl, it can not be denied that it would be sold to $50.00/bbl at a stretch," the broker added.

The Dec/Jan Dubai spread narrowed 11cts/bbl to a minus 74cts/bbl from the close, while the Dec cash BFO and Dubai spread narrowed $1.90/bbl to $10.50/bbl. Dec paper Brent and Dubai spread (in EFS) also narrowed $1.75/bbl to $9.90/bbl. Nov Dubai crude swaps values were up 23cts/bbl at $38.78/bbl 2:00 PM in Tokyo.

--AG CRUDE

Dec Abu Dhabi crude turned bearish overall. Premiums for Dec Murban over ADNOC were down 55cts/bbl to $0.95-1.00/bbl from a day earlier. Those for Umm Shaif and Lower Zakum also shed 57cts/bbl and 50cts/bbl to $0.95-1.00/bbl and $1.05-1.10/bbl, respectively. The bearish trend reflected tepid demand from Japanese end-users, mainly from Nippon Oil Corp. NOC is known as a large-cap buyer of Umm Shaif and Lower Zakum so that a dip in demand from the company tends to turn both weak accordingly. So, a European major already saw it difficult to secure premiums way above $1.00/bbl to ADNOC.

These Japanese end-users, or refiners specifically to say, so far pushed for spot buying of Abu Dhabi crude to increase stocks for middle distillates such as kerosene. As kerosene stocks have since been on the increase and prices for Abu Dhabi grades surged recently, however, the Japanese made an about-face and became shy of seeking them. Several refiners, including NOC, reportedly said they would buy more Kuwait or Iranian crude through term contracts instead of Abu Dhabi crude. Data from the Petroleum Association of Japan showed that as of Oct 9 Japan's kerosene stocks stood at 4.201-mil kl, up 4.3% from levels for late Sep two years ago. The figure was about 17% below levels a year ago, when the SARS fear took its toll on demand for jet fuel.

Dec Oman was flat. Premiums stayed in the range of 48-53cts/bbl to MOG. Most spot avails were already done. On Monday, a European trader was reported to have sold 500,000bbl at a premium of 60cts/bbl to MOG. The information remained sketchy, however.

The outright price for Dec Oman crude on Oct 19 was in the range of $40.50-40.55/bbl, up 3cts/bbl versus the previous day. The price spread between the Dec Oman crude values and spot Oct Japan gasoline prices in the Tokyo area on Oct 18 was at $16.02/bbl, compared with the spread between the Sep Oman average and the Oct gasoline values at $19.99/bbl.

Royal/Dutch Shell and several refiners would soon start talks to renew term contracts for Oman loading through 2005. Royal/Dutch Shell is the biggest equity holder in Oman crude. The talks would kick off later this week at the earliest, when the major was to indicate an offer for 2005 Oman to its existing term buyers. The major already had talks with several existing buyers, including Unipec. The term price for Oman, effective through 2004, was at a premium of 8cts/bbl to MOG.

Likewise, traders and other majors would start talks over renewal of term contracts for Oman crude, effective through 2005. Among traders, bids and offers for Oman loading the first quarter of 2005 were exchanged at around 10cts/bbl and at around 20cts/bbl, respectively.

Meanwhile, several cargoes were done by a US major and others via a sell tender floated by Qatar Petroleum offering eight cargoes, or 4.8-mil bbl in total, of Dec Al Shaheen. The major bought two to three cargoes, while a Chinese trader bought two cargoes and a European major and a South Korean refiner one each. The awarded prices varied depending on the dates for loading the cargoes, but most were settled at discounts in the $1.80-2.40/bbl range to the Dubai quotes, according to a trader in Singapore.

In the trade for other Dec AG crude, spot avails were believed to be available for the afore-mentioned Abu Dhabi grads and light crude such as Qatar Land. The number of spot Qatar Land cargoes available was said to be just one. Meantime, medium-heavy crude such as Al Shaheen, Banoco Arab Medium, Dubai, Ratawi, Basrah Light, Qatar Marine still left barrels for spot sale.

--AFRICAN/EUROPEAN/RUSSIAN/AMERICANS CRUDE

Sakhalin Energy awarded a sell tender for Nov 25-Dec 15-lifting Vityaz to a US major. The major bought 700,000-750,000bbl via the tender. The major was poised to supply its affiliated Japanese refiner with the cargo. The exact price done for the cargo remained sketchy, but it was deemed that the price would have been at a premium above $8.00/bbl to the benchmark Oman. Though having quoted a bid to the tender at a premium of around $8.00/bbl, a Japanese refiner reportedly saw the attempt failed. It was ExxonMobil that was awarded the last sell tender for Vityaz at a premium of $7.20-7.30/bbl to the benchmark. Tendered then was for Nov loading.

--ASIA-PACIFIC CRUDE

The fixed price for Nov Minas was down $1.35/bbl at $51.55-51.65/bbl. Phibro was bidding on H1 Nov-lifting 200,000bbl at a level $3.00/bbl higher than Dec IPE Brent, up 20cts/bbl on the prior day. The US firm also bid 200,000bbl for H2 Nov loading at a level $2.80/bbl to the same benchmark.

Nov Minas premiums were up 10cts/bbl to the range of $1.00-1.10/bbl to the ICP benchmark. Phibro bid for 200,000bbl loading Nov 1-30 at a premium of $1.00/bbl to ICP. The company saw it possible the sales of the cargo to Japanese refiners, along with those in Hawaii and China.

Meantime, it became increasingly likely that Tokyo Electric Power Co would ask Japanese trading houses and refiners to secure more crude and fuel oil than originally expected for Oct. Several players, including Japanese trading houses, originally expected TEPCO to ask 200,000kl of crude and fuel oil combined for the month. The view emerged, however, that the volume that TEPCO would seek for Oct of crude and fuel oil combined would be way above 600,000kl. The power utility took in 611,700kl of crude and fuel oil combined for Sep, so more became convinced that the utility would seek a similar volume or more for Oct on a delay in restarting nuclear power plants it owned. TEPCO currently holds nine out of 17 nuclear reactors off line. While the No6 reactor at the Kashiwazaki-Kariwa Nuclear Power Station finished turnaround and restarted on Oct 12, the No5 reactor at the Fukushima Dai-ichi Nuclear Power Station halted for piping exchange on the same day at the request of Fukushima Prefecture.

Kansai Electric Power Co, meanwhile, halted six of its 11 nuclear power plants. KEPCO sent the No1 reactor at the Oi Nuclear Power Station in operation on Oct 15 after receiving formal approval from local authorities the previous day. As for the No1 and No2 reactors at the Mihama station, both found unscathed through inspections into the piping system, it seemed difficult to soon put both back on line, as Fukui Prefecture, where the station is located, remained shy of approving a restart on expert opinions asking for some measures to keep the facilities from aging.

The fixed price for Nov Duri was down $2.40/bbl at $37.00-37.10/bbl from the previous day. Itochu Corp offered 100,000-200,000bbl loading Nov 1-30 at a level $11.50/bbl lower than Dec IPE Brent, down 80cts/bbl form a day earlier.

Nov Bach Ho discounts were down 10cts/bbl to the range of 20-30cts/bbbl to OSP. Majors and a Chinese oil firm remained on the sidelines, seeing prices as hovering at inflated levels. The prices, which looked expensive to many, resulted from a surge in the fixed price for the benchmark Minas crude. A Japanese trading house left one cargo for spot sale.

In the trade for other Nov medium-heavy crude, a Chinese oil firm sold around 200,000bbl of Indonesian Walio to a fellow firm at home at a premium of around $1.00/bbl to ICP.

In the trade for light crude, the focus has shifted to Dec-loading. Dates for loading were settled for Dec-loading, especially those of Australia, so that Dec trade would kick off by the end of the week. Several buyers already began looking into positions of an Australian oil firm, which held cargoes of Cossack and NWSC available for spot sale.

As for Dec light grades, especially those rich in middle distillates, some deemed premiums for them would be at least on par with those for Nov-loading on the solid price movement for jet and gasoil and a relatively low availability of alternatives, including arbitrage cargoes from West Africa.

The Dec jet/Dubai swap in Singapore hovered at $24.80/bbl, while the gasoil/Dubai swap was at $20.50/bbl, both as of Monday. Over the past month, both jet and gas oil widened the spread with Dubai swap by $4.33/bbl and by 4.18/bbl, respectively. Softness in the price for Dubai caused by weaker fuel oil demand on one hand and continued strong demand for the middle distillates on the other contributed to widening the spreads.

--N.Y. MARKET ROUNDUP, Oct 18, 2004

Nov WTI plunged $1.26/bbl to $53.67/bbl on accelerated profit-taking by funds. The contract dipped to a low of $53.12/bbl at one time during the session. Refined products exhibited a similar move. The day's loss was due to OPEC's outlook of a decrease in global crude demand for next year, and a slight recovery in oil output in the oil-rich Gulf of Mexico region, among others. An OPEC spokesperson reportedly deemed crude prices would be downside sooner or later on a slower-than-expected global economic growth and a possible decline in demand from oil consuming countries due to the soaring oil price. Nov gasoline was down 5.90cts/gallon to 135.04cts/gallon, and Nov heating oil also down 3.94cts/gallon to 150.97cts/gallon. On Access, Nov crude traded at $53.28/bbl at 10:05 AM in Tokyo.

Market News

--Japan Kyushu EPC to restart Sendai No1 nuclear reactor Oct 19

Japanese power utility Kyushu Electric Co plans to reactivate the No1 890-MW reactor at its 1,780-MW Sendai nuclear power station on Oct 19 following the completion of a regular maintenance started Aug 13, a company spokesman said Monday. The reactor is scheduled to resume power generation on Oct 21, and gear up to normal operations in mid November after passing the final investigation by the Ministry of Economy, Trade and Industry. With the No1 reactor back on line, Kyushu EPC is operating all of its six nuclear reactors with a combined capacity of 5,258-MW. The firm is poised to shut down the No2 890-MW reactor at Sendai for a regular maintenance starting around Nov 20.

--Tokyo Gas Co to lower LPG use in town gas from latter half of 2005 on

Tokyo Gas Co. announced on Monday that it would lower the ratio of liquefied petroleum gas in use to generate town gas to deal with a recent surge in LPG prices. To initiate the plan, effective from the latter half of 2005, Tokyo Gas Co would reduce its standard calorific value for town gas from 11,000kcal/cubic meter, or 46.04655 mega J, to 10,750kcal/cubic meter, or 45 mega J. By doing so, the company said, it could also shed some off fees it currently charges gas users. Japan's foremost gas company has drawn on a cost-saving production method of raising calorific value by mixing high calorie liquefied petroleum gas with imported liquefied natural gas to produce town gas, which then is distributed to nearly 10-mil customers in greater Tokyo. However, the recent upsurge in LPG prices led the company to reduce the ratio of containing LPG in town gas to increase calories.

--S Korea crude throughput at 2.40-mil b/d, up 2.6% on week

Combined crude oil throughput in South Korea on Oct 19 was at 2.40-mil b/d, up 2.6% from a week before, according to a RIM survey of refiners' operating rates on Tuesday. South Korea has a total refining capacity of 2.44-mil b/d. Utilization of refining capacity was at 98.4%, up 2.4% points from a week earlier.

--Editorial and subscription inquiry: Tokyo-Tel: (81)3-3865-4221 Fax: (81)3-3865-4241 E-mail: info@rim-intelligence.co.jp Singapore--Tel: (65)-6899-6890 Fax: (65)-6899-6034 Seoul--Tel: (82)2-723-0717 Fax: (82)2-723-4563

**RIM Daily Reports are available via Internet**