SECTOR COMMENTARY

The energy sector finished the day lower, led by the E&Ps and services, after oil prices declined following the interest rate cut by the European Central Bank to a record low and commentary that “downside risks to the euro-area economic outlook have materialized.” While the interest rate cut is a positive for oil, the upside in commodities was offset by the stronger dollar. Additionally, the U.S. weekly crude inventories data indicated a sharp decline due to import disruptions following Tropical Storm Debby. Integrateds declined the least.

WTI crude declined $0.44 or 0.50% to $87.22. Brent crude held strong above $100 as Statoil, Norway’s largest producer, was getting ready to shut output due to strikes. The company announced that the impact to production will be around 1.2 million bpd. The planned lockout of oil workers in Norway will halt the nation’s entire offshore production, which totals about 2 million bpd of oil equivalent, Bard Pedersen, a spokesman for Statoil said today.

The U.S. Department of Energy announced that crude stock inventory declined 4.3 million barrels, the biggest decrease since December, versus estimates for a 1.9 million barrels drop, impacted mainly by Tropical Storm Debby; however, stronger demand boosted refiners operating rates.

Natural gas gained as hot weather continued to support prices, with the front-month contract closing at $2.945, up $0.046 or 1.59%. Tomorrow, the EIA is expected to report that working gas in storage increased in the range of 37 to 55 bcf as of Friday, June 29th, 2012 from the previous level of 3.063 tcf.

U.S. INTEGRATEDS

(Late Tuesday) Reuters - Venezuelan state oil company PDVSA said on Tuesday it plans to shut the Petropiar heavy crude upgrader for 46 days to expand capacity to 210,000 barrels per day (bpd) from 180,000 bpd and to carry out planned maintenance. Petropiar is a joint venture between state oil company PDVSA and U.S. oil company Chevron. Venezuela's four upgraders convert tar-like crude from the OPEC nation's Orinoco belt into lighter, more valuable oil.

Reuters - Exxon Mobil Corp reported a snag in the number 2 amine treater at its 560,640 barrel-per-day (bpd) refinery in Baytown, Texas, according to a filing with the U.S. National Response Center.

INTERNATIONAL INTEGRATEDS

Reuters - A brief compressor malfunction at BP Plc's 253,000 barrel per day (bpd) Los Angeles-area refinery in Carson, California, had no significant impact on operations at the refinery on Tuesday, sources familiar with refinery operations said.

(Wednesday) Reuters - BP Plc's 253,000-barrels-per-day Los Angeles-area refinery in Carson, California restored a compressor to operation after it failed on Tuesday, according to a notice the plant filed with California pollution regulators.

Reuters - Russian oil company LUKOIL announced plans to build a 500 km pipeline from a nearby provincial refinery to Moscow in the second big capital project unveiled in recent weeks as companies focus on supplying motor fuels to the capital.

Reuters - Chemicals maker BASF said a Brazilian court suspended a ruling for BASF and oil major Royal Dutch Shell to pay 1.06 billion Brazilian reals ($525.23 million) into compensation fund for former employees at a pesticides plant.

Press Release - Statoil is preparing to shut down production on the Norwegian continental shelf (NCS) following a notice of lockout. The Norwegian Oil Industry Association (OLF) announced today that a lockout will be imposed on all members of Industry Energy (Industri Energi), the Organisation of Energy Personnel (SAFE) and the Norwegian Organisation of Managers and Executives (Lederne) who are covered by the offshore pay agreements. The announced lockout will take effect on Monday 9 July at 24:00 hrs. and will halt all production on the NCS.

Reuters - Total reported excess emissions from sulfur recovery units 1 and 3 and unit 836 at its 232,000-barrels-per-day Port Arthur refinery in Texas, according to a filing with state pollution regulators.

(Wednesday) Reuters - Total announces that its affiliate Total E&P Norge has participated in a significant gas and condensate discovery in the King Lear prospect on Production Licenses 146 & 333 in the Southern sector of the Norwegian North Sea (Statoil 77,8%, operator; Total 22,2%). The King Lear 2/4-21 well has encountered volumes estimated at between 70 and 200 million barrels of oil equivalent. The King Lear well was drilled in a water depth of 67 metres to a vertical depth of 5,344 metres below sea level.

CANADIAN INTEGRATEDS

(Wednesday) Press Release - Cenovus Energy Inc. announced a $1.5 million donation to the Calgary Stampede Foundation to create Western Heritage Trail in the Stampede’s new Riverfront Park. Proposed Riverfront Park at the Calgary Stampede grounds. Western Heritage Trail will be part of a year-round public space on the east side of Stampede Park, winding along the eastern banks of the Elbow River and connecting to Calgary’s pathway system. The 310-metre trail is being designed as an open-air museum, highlighting Calgary’s history as part of Riverfront Park’s overall focus on western heritage and the environment. The trail will include interpretive signage and six culturally relevant sculptures. Two of the sculptures will welcome visitors at the 12th Avenue S.E. entrance, with four more along the five-metre wide trail to complete the learning experience.

U.S. E&PS

(Late Tuesday) Press Release - ConocoPhillips announced the sanction of development of a second 4.5 million tonnes per annum (MTPA) production train for its Australia Pacific LNG coal seam gas (CSG) to liquefied natural gas (LNG) project in Queensland, Australia.

CANADIAN E&PS

Press Release – Compton Petroleum Corp reports $17.0 million asset sale for debt repayment. About 5,600 gross acres of cardium formation mineral rights at the corporation's niton property will be sold. In total, 21,280 gross acres will be sold, which represents 16% of co's total 132,180 gross acres in the area. Proceeds to be used to repay a portion of $30 million drawn over available amount of $110 million credit facility. Compton petroleum-properties to be sold produced approximately 450 boe/d on an average combined basis over the past three months.

(Late Tuesday) Press Release - Southern Pacific is pleased to announce that steam began circulating through the steam assisted gravity drainage ("SAGD") wellbores at the STP-McKay Thermal Project on July 1. First steam is not only an important milestone in the McKay project development, it is an historic event for Southern Pacific as it represents the completion of the construction, commissioning and start-up of the Company's first major project undertaking. Steam will now be circulated through the SAGD wellbores for a period of three to four months, after which bitumen production is scheduled to begin.

OIL SERVICES

(Late Monday) Reuters - Standard & Poor's Ratings Services today said it raised its senior unsecured debt ratings on Midland, Texas-based oil fields services company Basic Energy Services senior unsecured notes to 'B+' (the same level as the corporate credit rating) from 'B'. We simultaneously revised the recovery rating on these issues to '4', indicating our expectation of average (30% to 50%) recovery in the event of a payment default, from '5'.

REFINERS

Reuters - CVR Energy reported ongoing release of hydrogen due to maintenance at its 70,000 barrel-per-day refinery in Wynnewood, Oklahoma, according to a notice filed with the U.S. National Response Center.

Reuters - Marathon Petroleum Corp reported a release of 150 pounds of xylene at its 76,000 barrel-per-day (bpd) Texas City, Texas, refinery, according to a filing with the U.S. National Response Center.

(Late Tuesday) Reuters - Marathon Petroleum Corp, the largest Midwest refiner by capacity, will restart units at its 206,000 barrel-per-day refinery in Robinson, Illinois in mid-July after completing planned maintenance work, the company said in a filing with the government.

(Late Tuesday) Reuters - Marathon Petroleum Corp anticipates an increase in operating costs for the second quarter of 2012 compared to its prior guidance. Says impacted units at the Robinson facility are now expected to return to service by mid July 2012. Q2 crude throughput volume will average about 90,000 Bpd less across six refinery system than prior forecast. Sees Q2 total throughput volume to average about 60,000 barrels per day less than previous forecast. Sees direct operating costs in refining & marketing segment gross margin to be about $5.45 per barrel.

(Late Tuesday) Reuters - Phillips 66 warned of planned flaring at its 139,000-barrels-per-day Los Angeles-Wilmington, California, and refinery on July 7, a filing with state pollution regulators showed.

Reuters - Valero Energy Corp said there was no material impact to production after a sulfur recovery unit (SRU) tripped offline at its 156,000 barrel per day McKee refinery in Sunray, Texas. Valero said on Wednesday it was repairing a sulfur recovery system after a malfunction on Monday, according to a filing with the U.S. National Response Center.

(Wednesday) Reuters - Valero Energy Corp.'s 156,000 barrel per day McKee refinery in Sunray, Texas, was repairing its sulfur recovery system after a malfunction on Monday, according to a notice the refinery filed with the U.S. National Response Center.

MLPS

Press Release - DCP Midstream Partners, LP announced it has completed the previously announced $63 million acquisition of the Crossroads system from Penn Virginia Resource Partners, L.P. The Crossroads system acquisition, which is subject to certain customary purchase price adjustments, was financed at closing through borrowings under the Partnership’s credit facility.

(Late Tuesday) Press Release - Energy Transfer Partners, L.P. announced that its previously announced public offering of 15,525,000 common units representing limited partner interests at $44.57 per common unit, which includes 2,025,000 common units purchased pursuant to the full exercise of the underwriters’ option to purchase additional common units, has closed. Net proceeds from the offering will be used by ETP to repay amounts outstanding under its amended and restated revolving credit facility, to fund capital expenditures related to pipeline construction projects and for general partnership purposes.

MARKET COMMENTARY

Stocks ended a quiet session with mostly modest losses as moves by central banks around the world to loosen monetary policy did not overcome fears that tomorrow's June jobs report would show another month of stagnant growth.

TOP NEWS

China, Europe and Britain loosened monetary policy in the space of less than an hour, signalling a growing level of alarm about the world economy, although suggestions of coordinated action were played down.

U.S private employers stepped up hiring in June and the number of Americans filing new claims for jobless benefits last week fell by the most in two months, hopeful signs for the struggling labor market.

Stubbornly high unemployment and anxiety about the economy took a toll on top U.S. retailers' sales in June, raising concerns that shoppers are penny-pinching ahead of the back-to-school season.