It looks as if the first serious Atlantic hurricane of 2011 may be starting to form....which would be Hurricane Maria.

Currently only very early stages of formation and not even classed as a depression - but the starting point SW of Cape Verde Islands quite often spawns hurricanes/storms that track into the GoM (eg Hurricane Ivan in September 2004, which took two weeks to reach the Gulf coast after forming a tropical depression off Cape Verde). You can follow the forecast track of "Maria" from this site.....though the very early forecasts today are extremely vague and not worth looking at.

ee

The problem with the BBC is the staff appear to have a socialist agenda.

Whether this is true or not, and personally I think it's drivel, it has absolutely nothing to do with the example under discussion. EE's example doesn't in any way show a political bias amongst the Beeb's reporters, it just reflects the general low standard of journalism across the board and the endless concentration on a good soundbite story at the expense of worrying about trivia such as facts. That has nothing to do with the political viewpoint of the reporters or their editors - sadly it's a general issue for the media whatever the political viewpoint.

Peter

Just for the record (and apologies for the off-topic), complaining to the BBC is a waste of time.

Like many public organisations they have an "official" complaints process which is little more than a marketing exercise and appears to exist merely to provide a coat of whitewash.

I share the view that the BBC is leaning towards being a propaganda machine for a certain set of "accepted" political viewpoints - but I'm not sure what the answer is.

I suspect it needs to start with complaints directed to either one's MP (there is an easy online process for this at http://www.theyworkforyou.com/) or to Chris Patten himself.

ftf

PS - don't have an agenda here, but I share the frustration with the BBC's apparent reporting bias

I found a very interesting thread on Al Jazeera's Blog this evening, about Russia's and China's massive investments in Libya, and their prospects of recovering their money, following their refusal to support us and the Libyan people against that brutal tyrant, in the UN and elsewhere.

http://blogs.aljazeera.net/liveblog/Libya

I will post full details on my ideas and news thread.

MD

This should probably belong in the "pub" but ... The BBC have pretty much a monopoly on radio broadcasts, and 5 live is perhaps the least ugly girl in the room IMO.

One wonders at times why one pays one's license fee.

As for Steph McGovern, she is pretty cringe-worthy regarding the lack of financial/economic/business nous (but so are pretty much all of them). At least they *sometimes* get some fairly interesting interviewees! (such as the one ee mentioned above) but they normally quickly disappear, never to come back, when they fail to match the BBC's "world view".

I'm longing for the day when all car radios are linked to the interweb, where radio programming can be judged by the free market, and ex-monopoly programmes fail to draw the listeners. Though I suspect 5 live would still thrive for the sport more than for anything else!

I had a jolly good laugh today, listening to the business section on Radio Five Live Drive.

Drive's "business correspondent" Steph McGovern had clearly decided that the big story of the day was "the fall in oil prices following the news from Libya".......you can listen again to it here - it starts about 48 minutes in with Steph going into breathless excitement about how Libya production was going to recover from 50,000 bopd to the 1.6mn bopd it previously produced......and she batted straight into Neil Atkinson from Datamonitor, demanding to know "just how much the price of oil had fallen today and how significant it is".

Atkinson replied "about $1 per barrel - not very significant in the great scheme of things". You can tell from the tone of her voice that this wasn't the answer she wanted to hear......and it didn't get much better, as she tried to find a Plan B for the interview. She ended by asking Atkinson: "Do you think we're going to see any more fall in the price of oil then?" .....to which Atkinson replied "I don't think the price of oil is likely to fall again significantly in the near future" (big stress on the word "fall"! ;-))    Cue for a seriously disappointed-sounding Steph to wrap up her "big story" :-)

I'm guessing they won't be troubling Atkinson for an interview next time that Steph has decided what the big business news of the day  is going to be.......  :-)

ee

Done! New pub thread here: http://www.stockopedia.com/content/the-stockopedia-tavern-another-pint-please-59051/

Hmmmm.... came on here looking for some discussion on oil prices :0(

I actually think that the hedge funds are quite often the good guys - because they expose the truth in a tyranny of lies, mark to make believe (mark to model), moral hazard and Enron accounting. They keep corrupt corporations and banks "honest", and when the corporatocracy has reached the corrupt levels that it has today, they are the last line of defence in this regard.

No doubt they take things to extremes from time to time in order to make a buck, but I would rather they are there than not, and at the end of the day their presence in the market creates opportunities for others (remember Porsche/VW?)

Tom.

PS - Just watch JPM over the next few months ;)

A contrarian view might be that we should be grateful to Soros for helping keep us out of todays Euro mess, and that he was trading off the inevitable outcome of politicians trying to buck reality (as traders are doing today). Equally the rioters were created by the welfare state, minimum wage and immigration laws that make the creation of an unemployable underclass inevitable. Again a political construct that is starting to crack. Sorry again for being gratuitously off topic.

Morning EE

"There is little difference in moral terms between the destructive activities of a very small number of well-funded investors and the destructive activities of the mob on the streets......."

Have you read "A week in December" by Sebastian Faulks? I thought the amoral hedge fund manager it portrayed was a rather over-blown caricature, but if you are right it might have been an accurate depiction.

T

Sorry ee, I re-read my post and it does come across as a bit aggressive. Thanks for your thoughts.

Wow - do you think the sovereign debt crisis to be a storm in a teacup hyped up by maniacs EE?.

I cant help but feel that gold is a one way bet against the dollar with a 18 month view. But most of my dead certs pull up on the last stretch. The last gold fever was pulled up short by interest rates that gave positive real returns - is that remotely possible in today's indebted west?. Perhaps it is a little overheated at the moment, but nothing goes up or down in a straight line, or people would leverage the certainty. Do you see the sunny uplands of global recovery in the next eighteen months ahead?.

I am puzzled as to how one arrives at a rational valuation for gold in the first place, given its money function - it seems daft to value it on its demand in manufacturing industry.

Sorry for straying off topic - I would agree that oil (and everything else that the far east needs) ought to be one of the better investments.

Nevertheless, I'd expect another week or three of wild oscillations until the grown-ups return to restore some order ;-)

Who are the grown ups? I just find this statement silly.

The markets are trading at record volumes, if the "grown ups" are not trading this market then who is?

Time will show hedge funds and perhaps fund managers/banks/institutions go bust and your statement implies the show has simply been left to some school kids.

France is about to lose it's AAA rating, hardly kids are playing around here!

Not surprisingly, I think oil equities have been greatly oversold in the expectation of continued falls in the oil price - which simply won't emerge on the scale that the markets appear to expect.

You sound like your statement is 100% true, which remains yet to be seen, Oil can go anywhere, guess what markets are turbulent in a high Oil price environment...again.

If you are so sure Oil won't have contunued falls then why don't you throw your whole pension fund into Soco? I understanf they are about to bring online TGT and produce lots of Oil / cashflow. Surely it is a nobrainer in your high oil price environment?

I am not bearish Oil, I just don't think these loose statements can be made with certainty.

No disrespect ee but you have been dead wrong about Gold for a long time. It has been in a bull market making new highs for the past decade. It has outperformed Oil. There are'nt many asset classes that are well above their 2008 peaks............

Lex makes a very interesting point (coincidentally one that I have also been making!  ;-)):

If those pushing gold to daily records today believe that this crisis is about the demise of fiat currencies, then the far larger market for a far more useful commodity – stored for free underground by Mother Nature – should surely catch a bid. But for now, the oil market’s collective wisdom seems to hold that it is recession, not inflation, that is the thing to fear.

Just an update on the chart above, showing WTI in GBP terms.....

http://www.livecharts.co.uk/daily_charts/chart_producer.php?type_symbol=specials_wi-gbp&style=bar&scheme=beige&dura=953&width=600&volbars=n

.......new highs yesterday (over £50, prior to the USD rally) for the per bbl price of WTI - which takes us back into the price range of February-September 2008

ee

Not sure whether this will have much of an impact on oil prices, but Abu Dhabi has announced a cut in production for February - perhaps foreseeing a decline in demand

http://www.thenational.ae/apps/pbcs.dll/article?AID=/20091228/BUSINESS/712289924/1005

ADNOC said it would cut output of its most prolific crude oil grade, Murban, by 13 per cent from normal volumes, compared with a 10 per cent cut announced for next month. It announced 15 per cent February cuts for Lower Zakum and Umm Shaif crude and 10 per cent for oil pumped from the Upper Zakum field.

The corresponding January cuts were 10 per cent for Lower Zakum and Umm Shaif and 20 per cent for Upper Zakum.

ADNOC does not regularly publish production figures, but in 2007 it put its output capacity for Murban crude at 1.5 million barrels per day (bpd) and said it could pump 600,000 bpd from each of the other three fields. Based on those figures, its proposed January and February output cuts amount to 390,000 bpd and 435,000 bpd respectively, or 13 per cent and 15 per cent respectively of the UAE’s total oil production capacity of about 2.85 million bpd.

Man Siarad

 Not sure if the chart below will display correctly, but it is interesting to see that the last few days' rally in oil prices, coupled with the rally in the USD v GBP, has returned the chart of "WTI oil prices expressed in GBP" to almost its high for the year:

https://images.stockopedia.com/user-images/node-34235-chart_producer.php

WTI closed at £48 per bbl and has only on one day closed at over £49!

Whilst the UK enjoys its extended break, it seems quite possible to me that it moves still higher - which may well mean that UK-listed E&Ps should start 2010 in high demand!

ee

Interesting piece here on the Brent/WTI spread:

Brent crude oil has moved above U.S. crude as European and Asian demand has outstripped U.S. buying, and analysts say the North Sea benchmark looks likely to keep its premium for some time to come.

Brent futures rose above U.S. light sweet crude, also known as West Texas Intermediate or WTI, in mid-November and have jumped to a premium of almost $1.20 this week, their highest since August.

As the U.S. economy stays weak but many countries in Asia and Europe recover more quickly, analysts say Brent could stay more expensive than its U.S. counterpart -- possibly for months.....

Oil consumption in Asia is booming and demand is also beginning to pick up in parts of Europe.

Refineries in China are running near record rates and demand for some types of oil products used in manufacturing, for example the petrochemical feedstock naphtha, are rising sharply.

The crack spread, or notional profit margin, for naphtha in Asia is running at a 14-month high, Reuters data show, indicating the rapid recovery of Asian industry.

Tapis and Minas grades (the Asian benchmarks) are now at a $7 premium to WTI and a $4 premium to Brent. You can see from this table how these spreads have widened recently:

http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm

ee

Its a while since I last looked at the full futures strip:

http://futuresource.quote.com/quotes/quotes.jsp?s=cl

.....everything from September 2012 is now over $90 and the last three contracts are all over $100

....and every contract that is more than about two years out is trading at 12 month highs

...which in turn perhaps makes it tempting for chartists to consider whether the consolidation pattern in the $85 area on charts such as this one might be about to repeat their move at the start of 2008?  ;-)

Interesting times, with the OPEC meeting coming up....

ee

Poll on 2010 supply and demand outlook:

Growing world oil use will likely outpace the rate of new supplies in 2010, eroding the huge stockpiles of crude which have mounted around the world since the start of the global economic crisis.

According to a Reuters poll of 10 top oil-tracking analysts and organisations, oil demand is predicted to rise by 1.3 million barrels per day next year to 85.9 million bpd.

At the same time, the rise in production from outside Opec and output of natural gas liquids from Opec members is seen rising by just 800,000 bpd in total.

"The key question for prices is supply," Barclays Capital analyst Costanzo Jacazio told the news agency.

"2010 is really a bridging year - if the economies continue to perform as well as they have been doing during the early stages of the recovery, then I think by 2011 we'll be seeing the demand numbers at or above where they were in 2008."

FWIW

ee

CERA have a new report out:
http://www.cera.com/aspx/cda/client/report/report.aspx?KID=5&CID=10720
They claim:

*Supply evolution through 2030 is not a question of resource availability.
*IHS CERA projects growth of productive capacity through 2030, with no peak
evident.

which has provoked some discussion here:
http://www.theoildrum.com/node/5975

Its hard for me to know which expert to listen to, but I get the impression that CERA are known for being over optimistic, so maybe best to take it with a pinch of salt.

Any views?

In reply to tournesol (post #36)

TS "The proposition that political influence over oil producing states provides protection (or is might conceivably provide protection) against high oil prices or supply shortages is IMHO completely mistaken."

My arguement (quite probably not clearly expounded) is not that political influence over oil producing states is a successful strategy to counter peak oil, rather that it is a somewhat desperate (in my opinion) tactic to try and mitigate against the peak. For example, and briefly put, Iraq had large untapped reserves (relatively) but with the way things had panned out with Saddam, contracts were going to the wrong guys (the Russians for example), whereas post-invasion the contracts are going to the right guys (Shell, Exxon) as far as Western Governments are concerned. However, given that the these firms happily sell oil on international markets (as you point out), I can't see much benefit to Western Governments from this strategy (though presumbably they may be "encouraged" to sell oil back home if things get really messy). Chinese sovereign firms buying up swathes of African production may be a more productive strategy from the Chinese perspective. Anyhow, the central point of my arguement is that in public, our governments deny that there is a peak approaching, but their actions bely the official denials. Quite clearly they are aware that the peak is upon us and are acting to try to mitigate this, with attempts at resource grabbing one part of the strategy. However, their actions are as far as I can tell quite ineffectual, so the problem has by no means gone away.

In reply to emptyend (post #27)

The Guardian seems to be continuing in the same vein in an article they have just published

Oil: future world shortages are being drastically underplayed, say experts

• Swedish academics slate IEA's report as 'political document' for countries with vested interest in low prices
• Oil production 'likely to be 75m barrels a day rather than 105m'

 ....the strong theme remains - we are all being lied to [and that is why oil prices remain somewhat stronger than the present supply/demand numbers may suggest]

ee

The guy is nuts. Just have a look at a passage he quotes in "evidence":

Indeed the evolution of the Brent market has been a response to declining production and the fact that traders could not resist manipulating the market by buying up contracts and “squeezing” those who had sold oil they did not have. The fewer cargoes produced, the easier the underlying market is to manipulate." - Chris Cook, Former Director of the International Petroleum Exchange, which was bought by ICE.

Just who's doing the scamming here: the short-sellers sellng contracts for oil they did not have, that was in short supply, or those that stung them for making such a foolish trade?

Short-term, I do think the oil price isn't a fair reflection of the current supply/demand situation, as supplies seem to be (relatively) plentiful under muted demand conditions. That, however, is only short-term. The harsh fact is that pricing around current levels is required to stimulate sufficient investment to maintain global supplies (and support investment in "alternative energy"), in the face of increasing difficulty and cost of finding and extracting oil.

Obviously this view depends on who you believe: the Saudis and the IEA, who claim that they have plentiful supplies & can increase production more or less at will (from aging fields)... or  Matt Simmons. The IEA's latest report does show increasing reliance on OPEC and dwindling supplies elsewhere. See #34 above.

Regards,

Mark

Is this guy nuts or is there something to this?

$2.5 Trillion - That’s the size of of the global oil scam.

It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in "Madoff Units" ($50Bn rip-offs).  That’s right - $2.5Tn is 50 TIMES the amount of money that Bernie Madoff scammed from investors in his lifetime, yet it is also LESS than the MONTHLY EXCESS price the global population is being manipulated into paying for a barrel of oil. 

http://www.philstockworld.com/2009/11/11/goldmans-global-oil-scam-passes-the-50-madoff-mark/

For the sake of clarity, I'd like to say that isaac's post #37 reflects a complete misunderstanding and/or misrepresentation of what I said. In consequence I think it is simply irrelevant to this discussion. However I have decided not to respond in detail.

I'd also like to say that I did not use my moderator status on #39 - I don't trust myself to be fair and objective in this case, so I referred it to a higher authority and left it to them.

In reply to extrader (post #40)

Yes, look up, at the heading of this thread.

Help ! Is there a moderator in the house ?

I've decided to bite my lip....

Oil is bought and sold at whatever price the world market determines. Whether US troops are in Iraq or not makes no difference at all to the price paid by ExxonMobil for a tanker cargo of crude.

The bold is SO UNTRUE and you know it RG. Are you telling me having US troops in Iraq which is one of top Opec producers will not have an impact on the price of Crude? It is like saying If the US were to attack Iran then the Oil price would not rise. Go and read about the 1970s Oil price shock if you don't believe me. If there is a war in any of the major oil producing countries then I expect it to impact Oil prices. Do you not think there will be some form of disruption to supply?

How safe would you feel filling up your tanker near a Jetty where bombs are going off? Do you not think it would be difficult to Explore for Oil in war zones or even develop fields and carry out maintenance? What about pipelines being blown up? You only need to look at the disruptions that have occured in the last few years in Nigeria to understand where I am coming from.

The price reflects supply and demand, the global balance between these factors and the strength of marginal production/demand.

That comment is not something set in stone. You only need to look at the 2008 spike to realise that, as well as the level of speculation and buying of paper contracts.

The price we pay is more or less the same as the price the Chinese pay, or the Russians, or anybody else. It does not matter which barrel goes where, what matters is how much gets produced in total and how much demand there is in total.

Nonsense. Are you trying to tell us that selling Oil produced in the North Sea is not more expensive to transport to China then it is for the UK to consume? In every physical Oil transaction there is a cost known as Freight. People carry out transactions with each other that includes the cost of Freight and in some cases Insurance. Not everyone pays the price listed on Nymex or Ice. One can tailor contracts with counterparties to obtain discounts or in some cases premiums depending on the tems of the contract. The prices listed on exchanges are there for guidance, they are in no way absolute.  

What about Crude that trades at a discount to Brent? There are various types of crude of different quality that produce products in various proportions and I can assure you the different types of crude do not all trade at the same price. They trade at premiums and discounts and these diffs can vary.

Jackalope, you say

action being taken by governments to secure the dwindling oil supplies that remain.

The proposition that political influence over oil producing states provides protection (or is might conceivably provide protection) against high oil prices or supply shortages is IMHO completely mistaken.

Oil is bought and sold at whatever price the world market determines. Whether US troops are in Iraq or not makes no difference at all to the price paid by ExxonMobil for a tanker cargo of crude. If Iraqi oil were taken off the market and sold to China there would be no lasting effect on the global PoO to which the US (and we) are exposed. The price reflects supply and demand, the global balance between these factors and the strength of marginal production/demand.

We cannot imagine that we can ever get into a position where a friendly regime lets us have our oil at mates' rates. The price we pay is more or less the same as the price the Chinese pay, or the Russians, or anybody else. It does not matter which barrel goes where, what matters is how much gets produced in total and how much demand there is in total.

Other commodities do not have global transparent markets operating on spot prices, so the same cannot be said of them. Gas transport is mostly constrained by the fixed infrastructrure of pipelines and terminals. As a result it is mostly sold on fixed rate long term contracts. The underlying prices vary very substantially because of differences between the many localised markets. In some places there is an excess of gas and prices are very low. In some places gas is stranded without infrastructure and is effectively worthless.

Uranium is an example of a mineral commodity where the majority of production is sold on long term contracts which never go anywhere near the open market. There is a spot price, but that is substantially lower than the prices embedded in many long term contracts. For uranium buyers what is important is not lowest price in the short term, it is security and reliability of supply in the long term.

If you posited the idea that governments made efforts to "secure" supplies of gas or uranium, I could follow the line of your argument. But as far as oil is concerned, the open globalised market and the transportability of the product means the idea is a non-starter.

In reply to tournesol (post #34)

I'm increasingly convinced that when it comes to oil reserves in particular, we have to distinguish between public pronouncements which as you rightly point out are frankly absurdly optimistic and action being taken by governments to secure the dwindling oil supplies that remain. In the case of the US and its allies, the focus has been on regime change in the Middle East, and to a lesser extent securing contracts in Africa, whilst the Chinese are using their money to buy up reserves (e.g. recent purchase of Addax, deals in Angola etc.). The Chinese strategy would seem more productive per dollars spent, but the US / UK strategy has also reaped some dividends (see for example this recent FT article on Iraqi oil deals going to US / UK majors). Reassuring public pronouncements are presumably intended to stop panic buying - the UK petrol blockades of 2000 showed how quickly this could cripple industrial economies - and quite probably as politicians remain in denial and/or realise just how explosive the oil supply situation is.

Latest IEA Outlook - here are the links

powerpoint presentation for the press

executive summary

fact sheet

IEA home page

Thanks to Sawney in the other place for pointing those out

FWIW I've scanned the material above and IMHO the most striking bits of the whole thing are this bit of the executive summary....

...Oil demand (excluding biofuels) is projected to grow by 1% per year on average over the projection period, from 85 million barrels per day in 2008 to 105 mb/d in 2030. All the growth comes from non-OECD countries: OECD demand actually falls. The transport sector accounts for 97% of the increase in oil use. As conventional oil production in countries not belonging to the Organization of the Petroleum Exporting Countries (OPEC) peaks around 2010, most of the increase in output would need to come from OPEC countries, which hold the bulk of remaining recoverable conventional oil resources....

and slide 16 of the press conference presentation

These tell us some extremely interesting things, whilst failing to make them clear

1) for non-OPEC reserves, Peak Oil arrives next year.

2) Global oil supply will need to increase from today's 85 million bopd to 105 million bopd in 2030 - a net increase of 24%

3) Most of the incremental 20 million bopd will have to come from OPEC

4) OPEC will have to find a way of increasing production from today's level of 36 million bopd to around 52 million (base case) or 47 million in what is called the 450 scenario

5) The target for OPEC increases amounts to 44% (base case) or 30% (450 scenario) compared with current levels of production

6) Remember that before production can be increased, depletion needs to be replaced. That means OPEC needs to replace its depletion AND add the additional production specified above - that implies OPEC bringing on stream new production which represents somewhere between 80% - 95% of its current production in the next 20 years.

IMHO this goes beyond wishful thinking - it's ludicrous over-optimism

In reply to DJP, I think we sing from the same hymn sheet.

Si vous avez lu le premiere lien,Westmister aime l'argent de mer du Nord je crois.

Flyinghorse

In reply to flyinghorse (post #31)

I think the O&G inductry in this country is viewed by politicians as a old fashioned & dirty business

Au contraire mon ami, I think that Brown and Darling view the O&G business as a pure cash cow, hence their repeated assaults on the industry via tax (and the subsequent plunge in investment - good call eh?)

On a Oil and Gas note Milliband has not set foot in Aberdeen since taking office. The agenda is Nuclear.

2 short links on this with a regional perspective:

http://www.pressandjournal.co.uk/Article.aspx/1470680 and

http://www.pressandjournal.co.uk/Article.aspx/1471542

Sir Ian Wood made the point that the UK O&G industry could bail the uk out of its current hole.

I think the O&G inductry in this country is viewed by politicians as a old fashioned & dirty business.

ee

LOL. I don't have any EO. shares.

Each episode is first being shown on BBC3 on Friday at 9 p.m. before being repeated the following Wednesday on BBC1

Apologies for being somewhat O/T.

Cheers, Martin

Perhaps he'd also already watched tomorrow's episode of Spooks, albeit it suggests the UK has more gas storage than I understand is actually the case.

Obviously written by an Encore shareholder  ;-)

I wonder how many of the current series will be about energy issues.....

ee

ee

Interesting article.

Perhaps he'd also already watched tomorrow's episode of Spooks, albeit it suggests the UK has more gas storage than I understand is actually the case.

Cheers, Martin

Today's UK Guardian newspaper is claiming an exclusive:

The world is much closer to running out of oil than official estimates admit, according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying.

The senior official claims the US has played an influential role in encouraging the watchdog to underplay the rate of decline from existing oil fields while overplaying the chances of finding new reserves.

The allegations raise serious questions about the accuracy of the organisation's latest World Energy Outlook on oil demand and supply to be published tomorrow – which is used by the British and many other governments to help guide their wider energy and climate change policies.

In particular they question the prediction in the last World Economic Outlook, believed to be repeated again this year, that oil production can be raised from its current level of 83m barrels a day to 105m barrels. External critics have frequently argued that this cannot be substantiated......

...rest of the article worth a read too. Lets see if the oil markets pick the story up!

ee

...ps.....I may be trying to make something out of nothing, but I happened to watch the start of Ed Miliband's statement to the House of Commons about nuclear energy yesterday at about 4pm. He seemed unusually flustered and in a hurry and appeared to be watching the clock...... I just wonder in retrospect whether he might have heard that the cat was out of the bag? Certainly he was laying huge stress on there being no option to nuclear if the lights are to be kept on!

Quiet season, but GOM hurricane forcing shutdowns......

But already weakend so shouldn't see much if any damage.

http://www.ottawacitizen.com/news/Hurricane+weakens+path+Gulf+Coast/2201575/story.html

U.S. oil companies were shutting production and evacuating workers from the Gulf in the face of Ida.......

.........The Louisiana Offshore Oil Port, the only terminal in the United States capable of handling the largest tankers, stopped unloading ships due to stormy seas.

So are there any facts to contradict the (rumoured) IEA view prominently featured in this morning's FT?: http://www.ft.com/cms/s/0/b93be716-c981-11de-a071-00144feabdc0.html

Watchdog forecasts gas glut

 

The world faces a natural gas glut that will cool prices, says the International Energy Agency, raising the prospect that Russia’s grip over Europe’s energy security will loosen.

In a draft version of its World Energy Outlook (WEO), to be published next Tuesday, the rich countries’ energy watchdog says that “global gas markets have evolved from a seller’s market, driven by tight supply and demand, to a buyer’s market as demand weakens while new supply comes on stream”....

 

...In the report, the IEA expects overcapacity of gas pipelines and liquefied natural gas terminals to reach at least 250bn cubic metres by 2015, more than four times the spare capacity in 2007. For the US, the gas glut will force companies to scrap plans for new LNG import terminals and mean that much of its existing capacity will be underused...

 

...The watchdog says that environmental policies to limit carbon dioxide emissions to prevent global warming, far from supporting demand for gas, would cause gas demand to peak in the early 2020s. Industry executives have promoted gas as an low-carbon alternative to coal for power generation...

There is also this article: http://www.ft.com/cms/s/0/114e6ac2-c97e-11de-a071-00144feabdc0.html

... If environmental policies are put in place to stabilise greenhouse gases at levels that scientists believe will give the world a good chance of avoiding a sharp rise in temperatures, they will have a significant effect on gas demand, the IEA believes.

Increases in energy efficiency and faster growth in renewables such as windpower and nuclear energy would reduce gas consumption by 5 per cent by 2015 and 17 per cent by 2030 compared with the business-as-usual scenario.

If demand were to fall in this way, the US would become largely self-sufficient and Europe would rely less on Russian gas, long an area of acute anxiety among European Union officials.

 

If environmental policies being discussed today were passed, demand for gas in Europe would not recover to 2008 levels of 542 billion cubic metres until 2020 and would fall away to 525bcm by 2030, prompting a drop in imports from Russia and the Middle East...

 

Hmmmm....

Mark

Perhaps worth pointing out, having had a few days of wobble and uncertainty over growth prospects etc, that oil prices this morning are back to closing in on $80 again ($79.65 as I write). It feels like a strong start should be in order for the oil sector......especially with the FTSE futures at +43.

Bloomberg was yesterday expecting a rise in US stocks when the DoE report comes out - but in fact the API figures last night showed a 3.3mn bbls fall.

Anyone's guess though, I suppose....since I started writing this someone has tonked the futures back to $79.35......

ee

Hi ee,

I suspect one of the reasons that weekly US inventory figures are heavily monitored by speculators or analysts is because of the comprehensive published data. Other countries' data are not so reliable. When US sneezes, the whole world sneezes, too. Extrapolating demand in the US would at least give reasonable estimates for other parts of the world.

rgds,
fb

suggests that SIA was being held artificially high for the last few months of 2008 - and perhaps there were expectations back then which weren't fulfilled in the timescales expected by some holders?

yes - fair point SW10  ;-(

also re the sensitivity to start dates 

My main point though was that the sector median seemed to be right back where it was.  I might also have wondered, though, whether the dramatic outperformance of Tullow is of a scale that is justified by fundamental news over the period.

rgds

ee

In reply to emptyend (post #20)

the share prices of CNE, BG, DNX and PMO have all roughly returned to where they were in early 2008 (and indeed are surprisingly tightly-grouped in having done so

The grouping of those four really is remarkable.

I suppose a neutral, trying to understand how the divergences in your chart has come about, might ask if there's a problem with the start date - was SIA trading at an inflated calue back then? And if so, then maybe what the rest of the graph shows is simply a correction.

Looking at the curves as a log analyst might (!), they appear to be more-or-less 'on-depth' with one another - which is to say that the peaks and troughs are largely in the right places.

Resetting the chart with Sep 08 as the base shows SIA finishing in the same tight group as the others (except TLW of course). What's interesting here is that SIA tracks CNE almost perfectly for most of 2009! But also suggests that SIA was being held artificially high for the last few months of 2008 - and perhaps there were expectations back then which weren't fulfilled in the timescales expected by some holders?

It would be interesting to look into it a little further - and of course, picking the base date is always key factor in drawing these charts. I wondered if there was a way to get your WI-GBP chart as an overlay to help choose a good start date? I've fiddled about a bit and couldn't find a way!

SW10

Some of you will remember me showing charts like this:

This is the price of front month WTI oil contracts expressed in sterling terms. As such I would argue that it is quite a good proxy for the relative valuations of sterling-quoted (ie UK) E&Ps....because it ought to roughly mirror their profitability assuming that production costs stay steady.

As you can see, the sterling price of crude is now back to the levels it was at in Jan/Feb 2008. In fact it has only been higher than current levels for the four months from March to June in 2008.

So it is interesting to look at the price histories of half a dozen of the larger E&Ps: What that chart shows is that, yes indeed, the share prices of CNE, BG, DNX and PMO have all roughly returned to where they were in early 2008 (and indeed are surprisingly tightly-grouped in having done so!!). The two standout exceptions to this patterns are:

a) Tullow - which has doubled relative to the peer group....almost all of this doubling taking place since last December as drilling success has continued and bid speculation has mounted. And

b) SOCO - which is down by a third relative to the peer group....and again this laggardly performance has virtually all taken place over the same period since last December.

One wouldn't think that SOCO was the only stock in the sector which has had interest from a bidder for most of its assets during this whole period.... ;-/

Notwithstanding the curiosity (for me!) of these exceptions, the share price performance of the other four stocks goes a long way to validating the use of the WI-GBP chart as a sector proxy, IMO.

ee

In reply to emptyend (post #18)

In reply to marben100 (post #17)

Hayward is right of course. Dollar weakness is an important driver for the rush to safe haven assets (real commodities and even equities have this function at present it seems).

I don't think OPEC quite "gets it" though. The market is clearly looking forward (as markets do) to the time when the supply glut of physical oil gets cleared - and it is figuring that much higher prices will then be needed in order to stimulate enough alternative energy sources to plug what seems likely to be a growing supply gap.

There is also the subtext that the market has lost faith in OPEC as a reliable swing producer......

....now......when is Matt Simmons speaking about Ghawar??  ;-)

ee

ps.....  http://wallstreetpit.com/11345-we-should-expect-a-global-oil-shock-by-2012

.....Pemex walking off a cliff of underinvestment, depletion and decline. According to Matt Simmons, Pemex may not be exporting any oil at all to the U.S. within 18-24 months.

Iran’s oil industry is in a slow death spiral, despite the occasional report of Chinese assistance with field development… Next door in Iraq, chaos reigns. The Iraqi oil legislation is so burdensome that almost all players within the international energy industry are spurning Iraq, including the Chinese. Wow. When the Chinese won’t invest in your oil fields, there MUST be something wrong.

And so it goes. The bottom line is that we should expect a global oil shock by 2012, or earlier

 

...and, for balance, here are OPEC and BP's views: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article6882056.ece

Opec, the oil producers' cartel, suggested speculators were to blame for a recent spike in oil prices to more than $80 a barrel, which was not justified by fundamentals.

Speaking as the price of benchmark US crude exceeded the $80 mark for the first time this year, Abdullah al-Badri, the secretary-general of Opec, said the group would not be comfortable with oil at $100 a barrel and that the recent price activity had the “flavour” of speculation.

“There is no shortage of oil supply, we have floating storage of 125 million barrels so it is these two reasons with a flavour of speculation,” he said, speaking on the sidelines of the Oil & Money conference in London.

He added: “We are seeing an $80 price, which is a little bit high at this time of economic crisis, but we have to wait and see if it will continue or not.”

Speaking at the same conference, Tony Hayward, chief executive of BP, said that the recent rise in oil prices was related to currency movements. He said: “Today it’s more about the weakness of the dollar.”

Cheers,

Mark

Mulva sees price rises:

http://www.upstreamonline.com/live/article196356.ece

ConocoPhillips boss Jim Mulva said he expected spare capacity in oil markets to be eroded and prices to recover before long, due to strong underlying growth in global energy demand.

 We are unlikely to have long production surpluses and weak oil prices," Reuters quoted Mulva saying at the Oil & Money conference today. Mulva added that the cost for oil companies of replacing the oil they pump with new reserves had fallen in the past year, but not as much as the drop in oil prices......

Mulva said tie-ups did nothing to solve the biggest challenge facing the industry, which is to add new reserves.

I suspect there will be quite a few other quotables from this two day conference, judging from the speaker list here:

http://www.energyintel.com/om/program.asp?Year=2009

ee

This news won't do much to help oil prices - Russia is pumping more than at any time since 1991, ahead of the Saudis.

http://www.thenational.ae/apps/pbcs.dll/article?AID=/20091003/BUSINESS/710039942/1005

Russia pumped more than 10 million barrels per day (bpd) of crude last month, a level not bettered since the collapse of the Soviet Union in 1991. Thew new record consolidates Russia’s position as the world’s largest oil producer.

Russian output rose to 10.01 million bpd from 9.97 million bpd in August and from 9.84 million bpd the previous September, the country’s energy ministry reported at the weekend.

The strong showing put Russia 25 per cent ahead of its nearest rival, Saudi Arabia....

Russia has increased it market share at the expense of Arab Gulf oil producers, including Saudi Arabia and the UAE, which have been pumping oil at well below their capacity this year in order to bolster the international market.

Saudi Arabia, which remains the world’s biggest exporter of crude, has recently pumped about 8.1 million bpd, in keeping with its OPEC quota. Late last year, the group pledged to trim a record 4.2 million bpd of output to stem a steep price slide.

More information available on the web, I assume - I haven't checked. Not very encouraging news for the OPEC producers, or, rather, those that HAVE made a clear effort to reduce production. Still, if oil prices drop back a bit, perhaps that will encourage more M & A activity....

Man Siarad

In reply to djpreston (post #13)

I think that there is excessive attention paid by the market to short-term moves in matters like US inventories. When all said and done, a 5mn bbl inventory build in the US is equivalent to 6 hours of consumption......

....the much bigger and more important picture (especially re E&P equities) if what is happening to WORLD demand and supply, especially in terms of the forward balance 2-5 years out. The warnings of the TOTAL boss and others are relevant in this respect.

I do, however, think that some of the FTSE100 oils are pretty fully valued, unless a bid emerges for the likes of Tullow or BG - both of which are credible candidates in terms of attractiveness, though few buyers would have the capacity to finance them (though of course there is little to stop them making an all share offer.....on the right terms there would be little reason to turn down BP or Shell paper)

ee

DOE data yesterday was very negative.

A 10% surge in crude imports bringing about a 3mm bbl inventory build.

Refiners getting squeezed badly with a 5 mm bbl build in product inventory.

Looks like a seasonal dip in demand which comes against v weak comparables for last year.

I do really worry that we are still not seeing the pick up in demand that is needed for a sustained $70 per barrel. Ceretainly any increase in demand running down inventories will not have as big an impact on POO as before due to the supply cuts by OPEC which will be gradually eased (or Quotas broken) to keep demand/supply in balance. Okay, that woudlnt be too bad in iteslf in that it would allow a firm backdrop of controlled prices (good for capex planning etc) but then again, it could mean that some optimistic forecasts prove to be just that, optimistic.

OTish for the board but interesting to see that some of the big oily directors are now taking lumps off the table like BG (CEO sold £18m and CFO £5.5m) and APC chairman selling $15m worth and TLW sales..... Then again, that sort of ties in with my own view that Im struggling to find anythign in the sector that is a real "cert" as opposed to a decent medium/long term play (I dont want that as Im too concerned about what may or may not happen int he short term viz the markets).

Morgan Stanley have just raised their forecast for 2012 oil prices from $95 to $105:

http://www.theglobeandmail.com/globe-investor/morgan-stanley-ups-2012-oil-forecast-to-105/article1286563/

....citing tightening spare capacity......

....which is music to the ears of those of us with shares in E&P companies that have explo assets to bring onstream!

:-)

ee

Alternative energy powerhouse Brazil finds big oil

On the verge of becoming an oil giant, some fear Brazil's alt. energy advances will falter

http://finance.yahoo.com/news/Alternative-energy-powerhouse-apf-3449508334.html?x=0&sec=topStories&pos=main&asset=&ccode=

Particulary interesting article for those with an interest in British Gas (BG) shares, not currently holding any but will do at sometime soon.

Been a very quiet season so far, but the first named storms are brewing.

Ana, Bill and un-named Four

http://www.nhc.noaa.gov/

There's a very interesting article on the short-term outlook for US natural gas prices in Alphaville today: http://ftalphaville.ft.com/blog/2009/08/13/66866/natgas-literally-under-pressure/

In the short-term, this won't help US gas producers but it strikes me that the lack of drilling likely to occur as a consequence will lead to shortages next year. The futures strip seems to agree, with winter 2010/11 prices about double the current level.

Good article on Oil Voice

US$200 Oil Price Predicted by UK Energy Expert in Adelaide

Wednesday, August 05, 2009

 

....Part of the price hike blame, the expert warns, can be laid at the feet of national and international oil companies for their inadequate investment in hydrocarbon exploration, development and infrastructure over many years....Professor Paul Stevens ....said the US$200 per barrel horizon could be reached within five to 10 years “but more likely nearer five”.

...“This increasing supply-demand dynamic will be further frustrated by the wrong and illogical guessing by “Paper Barrel Oil Markets “ - the money managers such as those in charge of super funds - who invest in oil futures but who have no real grasp of the factors governing oil price and supply....“Yet their bad decisions have an undue influence on price settings in the “Wet Barrel Market” - those oil markets that actually deal in real barrels of oil.....“Combined with the difficulties of OPEC producers in controlling output - and it was as recent as 2004 that any excess oil capacity disappeared globally - this could force prices above the 2008 records of around US$140 a barrel and well towards US$200.

.......Professor Stevens warned that the price hike would come despite the current market where world oil inventories are full, the impacts of the recession had dampened oil demand and how this “appeared” to have led to much lower oil prices....“In the short-term, I expect oil prices could go even lower during the rest of this year,” Professor Stevens said....“However, as the world emerges from recession and oil demand begins to grow again, the recent inadequate investment in the industry both by international oil companies and national oil companies will lead to the “supply crunch”, a very sharp spike in oil prices and serious consequences for the world economy and for the development of energy policy in many countries.

"This inadequate investment means recent global spare crude oil producing capacity will be quickly eroded. It will only take some geopolitical event to cause a supply outage – adding to the price pressure and pushing prices towards $200 per barrel. ...the major oil companies in recent years have returned massive funds to shareholders instead of re-investing greater portions of those funds in new infrastructure and field development....“In 2005 for example, the world’s six largest oil companies invested US$54 billion in new projects - but gave back US$71 billion to shareholders in the hope that this created ‘shareholder value’,” Professor Stevens said.

“....many national governments have adopted ....“leave it in the ground” as the safest value builder, or alternatively, adopting resource nationalism .....

 

....Professor Paul Stevens: Senior Research Fellow (Energy) at Chatham House ....Professor Emeritus at the University of Dundee and Consulting Professor at Stanford University. Professor Stevens has published extensively on energy economics, the international petroleum industry, economic development issues and the political economy of the Gulf.  He also works as a consultant for many companies and governments. In March 2009 he was presented with the OPEC Award in recognition of his outstanding work in the field of oil and energy research.

As we have seen before, there is far too much attention paid to the data at Cushing, in the belief that the WTI is the leading indicator of global oil demand.  There are so many American commentators who fail to see the global picture and  there is a desire to push prices lower to help the overstretched US consumer and keep inflation down.  The era of 5% of the world consuming 25% of the energy is at an end, so US demand will no longer dictate global prices.

For what it is worth, I read the OPEC announcement as a reason for them to keep production low, to prevent oversupply pushing down prices below about $70 to $80 a barrel to which is I see as a floor in prices.  If oil were to drop in the near term, the cuts in development of new resources would risk a much more severe price spike in the future.  

In reply to djpreston (post #5)

I never fail to be amazed at the notice the market takes of piddling changes in inventories in just a single country. The US is indeed a large oil consumer - but it consumes about 19 MILLION BARRELS A DAY .......so changes of 2mn bbls here or 3mn bbls there represent only a few hours of consumption!!

Not only that, but obviously these figures say ABSOLUTELY NOTHING about the 75%+ of demand/supply that takes place in other global economies....so it is small wonder that a market that is undersupplied with useful information is prone to completely over-react to their weekly shot of data, despite it being nearly always pretty irrelevant!

Meanwhile all the big picture difficulties enumerated by tournesol in post 4 above still remain......

ee

Crude stocks rose last week by 2.5mmbbls, gasoline stocks dipped by 1.0mmbbls & distillate stocks rose by 0.8mmbbls.

Latest Inventories:

Gasoline imports were again at the 1.0mmbblsd level, although refiners upped distillate production at the expense of gasoline

Crude imports rose just under 250mbblsd to stand at 9.5mmbblsd

Crude stocks at Cushing nudged up 0.3mmbbls to stand at 33.6mmbls

Crude prices, having risen by over a dollar in the hour ahead of the release of the inventory figs have fallen back just as quickly. Front Brent was just over a dollar up at 3:30, is currently up 35c on the day. Front Texas was 150c ahead on the day, currently up 75c ... Brent at $72.75 & Texas at $70.15

In reply to Gradders73 (post #3)

Bt as reported above in post #2, the people at the top of the biggest oil companies are saying that it isn't speculation that has driven/is driving the price of oil. Its the fundamentals of supply and demand exacerbated by inadequate investment.

Blaming the problem on speculators is, IMHO, a lazy and shortsighted excuse for the lack of leadership by governemtns and politicians in addressing

• unsustainable population growth
• unsustainable increase in energy usage per capita
• inadequate investment in sustainable energy
• inadequate investment in energy efficiency
• inadequate investment in low energy lifestyles
• inadequate investment in conventional energy production
• inadequate investment in hydrocarbon exploration/development

When governments and politicians have consistently  signally failed to take a lead in the areas which need urgent and concerted attention, it is so much easier to blame speculators for the problems which arise.

http://www.washingtonpost.com/wp-dyn/content/article/2009/07/06/AR2009070603584.html

CFTC Floats Rules Aimed at Speculation

Interesting to see the high prices are being blamed on "speculators", though they don't talk about the speculation being on weakening of fiat currencies caused by reckless monetary policy.  I expect they will try to broaden this to restrict other trades such as short govies, and long silver or gold (I still suspect they have serious supply issues and are smacking the prices down.)

What is interesting is seeing when spot prices are falling, like now, plenty of sellers seem happy to keep the ships off shore and wait, as they know how inelastic demand is.

Good article at the Telegraph

Oil Prices - Is there a spike on the horizon? 

 

...At the start of June last year Alexei Miller, deputy chief executive of Gazprom, predicted oil prices would continue to rise to $250 a barrel. Just one month later, the price peaked at $147 – and the plunge to below $40 a barrel had begun....

 

...senior industry figures have strongly denied that speculation was the main cause of the spike – and executives at oil companies certainly believe that the long-term price trend is up.

 

...Tony Hayward, BP's chief executive, said he thought the oil price spike was nothing to do with speculation. Instead, he said it was down to under-investment when oil prices were low....

 

...Jeroen van der Veer, ...recently-retired chief executive of Shell ...warned that the next oil price spike may already be in the making. He said that the recent steep slide in prices was "only a dent in a graph that goes up all the time". He believes that underinvestment now means that future supplies are in jeopardy – at the same time as demand will be soaring. The International Energy Agency estimates a 20pc year-on-year drop in oil and gas project investment this year....

 

...On Tuesday, Merrill Lynch increased its oil price forecast for 2009 and 2010...average $58.50 in 2009 and $75 in 2010. ...may reach $82 by the fourth quarter of 2010...

 

...van der Veer also believes that the increase in global energy demand is unstoppable. As the world's population increases from 6 billion to 9 billion by 2050 "energy demand, even taking into account energy saving, will double," he said

Just FYI, there's some discussion in relation to the Oil Price here in the Peak Oil Theme - http://www.stockopedia.com/forum/threads/Peak_Oil Worth cross-referring to the link in the header?