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EU Outlines Plans to Wean Itself Off Russian Gas

The European Union sketched out new plans to reduce its dependence on Russian natural gas and to bolster its energy security while warning Moscow not to cut off gas supplies to Ukraine. The push to forge closer energy ties among the bloc’s 28 countries and find alternative suppliers has intensified over the past weeks, as Russian threats to shut off the flow of gas to Ukraine raise the specter of supply disruptions for Europe as well. The Ukraine crisis has galvanized the EU into mapping out a new energy-security strategy for the 28-country bloc that will be discussed by EU leaders at the end of June. "The great game of geopolitics is making an unwelcome return and this is being felt particularly in the area of energy," European Commission President José Manuel Barroso told a conference on energy security in Brussels on Wednesday, in which he outlined proposals to […]

Posted On : Published By : Tom Whipple
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The World’s Demand For Oil Is Slowing

According to Oil Market Intelligence (OMI), world crude oil supply rose to a record 90.2mbd on average over the past 12 months through April. The price of a barrel of Brent crude oil has been remarkably flat (with some volatility) around $110 since early 2011. World oil supply has been well balanced with world oil demand at this price. Let’s review some of the highlights of the latest demand data compiled by OMI through April using 12-month averages to smooth out seasonal volatility: (1) World . World crude oil demand rose to a record 91.7mbd last month. However, the growth rate has slowed from a recent high of 1.5% y/y during September 2013 to 1.0% during April. This suggests that the global economy is growing, but at a relatively slow pace. (2) Emerging countries . Most of the recent slowdown is attributable to emerging economies. The OMI data show […]

Posted On : Published By : Tom Whipple
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The Connection Between Oil Prices, Debt Levels, and Interest Rates

If oil is “just another commodity,” then there shouldn’t be any connection between oil prices, debt levels, interest rates, and total rates of return. But there clearly is a connection. On one hand, spikes in oil prices are connected with recessions . According to economist James Hamilton, ten out of eleven post-World War II recessions have been associated with spikes in oil prices . There also is a logical reason for oil prices spikes to be associated with recession: oil is used in making and transporting food, and in commuting to work. These are necessities for most people. If these costs rise, there is a need to cut back on non-essential goods, leading to layoffs in discretionary sectors, and thus recession. On the other hand, the manipulation of interest rates and the addition of governmental debt (by spending more than is collected in tax dollars) are the primary ways […]

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Export Delusions: Why the rush to export natural gas is a fool’s errand

On a sweltering day in May last year I sat dumbfounded at a US Senate Energy & Natural Resources Committee meeting. Pat Outtrim, VP of Cheniere Energy, was arguing for fast-tracking approval of Liquified Natural Gas (LNG) exports because it would benefit energy consumers… in Great Britain . A year later and the drum beat for approving LNG export operations is reaching a crescendo. This time it’s spurred by claims that we must save Europeans from the grip of Russia, who is using its position as the primary natural gas provider in Europe to annex Crimea and assert its power in the region. In both cases, the rationale is the same: The US has an over-supply of natural gas—thanks to an explosion of hydraulic fracturing (“fracking”) for previously inaccessible shale gas—and it’s our duty as international […]

Posted On : Published By : Tom Whipple
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Oil Up Ahead of Likely U.S. Stockpile Drop

Crude oil futures were up in London trading Wednesday ahead of data that may show a decrease in U.S. inventories, and as geopolitical tension remains supportive of higher prices. Brent crude for July delivery was up 33 cents at $110.02 a barrel on ICE Futures Europe. July crude was up 77 cents at $103.10 a barrel on the New York Mercantile Exchange. A reduction of inventories at Cushing, the delivery point for Nymex-traded futures, is likely to be evident in weekly inventory statistics due later in the day, said Ole Hansen at Saxo Bank. Lower inventories would lend support to U.S. futures, signaling higher demand and more draw on stockpiled oil. "Other supporting factors such as the crisis in Ukraine and renewed violence in Libya leaves the downside risk limited at the moment," Mr Hansen said. Other data releases will also be closely watched by a market searching for […]

Posted On : Published By : Tom Whipple
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WTI Crude Rises to One-Month High on Supply Drop; Brent Advances

West Texas Intermediate climbed to the highest intraday level in a month after industry data showed crude inventories slid in the U.S., the world’s biggest oil consumer. Brent crude rose amid tension in Ukraine and Libya. Futures for July advanced as much as 0.9 percent in New York. Crude supplies shrank by 10.3 million barrels last week, the American Petroleum Institute reported yesterday. Stockpiles were probably unchanged near a record high , according to a Bloomberg News survey before government data today. Citigroup Inc. raised its Brent price forecasts, citing increased risk from the crisis in Ukraine and supply uncertainty in countries including Libya. The API “reported a very large drop in crude oil imports leading to a huge crude oil stock draw,” Olivier Jakob , managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail. “It will be interesting to see the import breakdown” in the government […]

Posted On : Published By : Tom Whipple
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API shows surprise 10.3 million-barrel weekly draw in US crude stocks

US commercial crude stocks fell 10.3 million barrels to 390.69 million barrels for the reporting week ended May 16, American Petroleum Institute data showed Tuesday. The draw is far larger than analysts had expected. A Platts survey of analysts Monday showed stocks were expected to have fallen 300,000 barrels. NYMEX July crude rose to $102.90/b in electronic trading shortly after the data. The contract had earlier settled at $102.33/b. The draw comes amid a sharp, 468,000 b/d decline in US Gulf Coast crude imports, which fell to 3.52 million b/d last week. USGC crude runs edged higher, up 47,000 b/d to 8.28 million b/d. These factors combined to cut USGC crude stocks by 6.41 million barrels to 202.05 million barrels. Total US imports fell 860,000 b/d to 6.78 million b/d, while crude runs rose 170,000 b/d to 15.87 million b/d. The increase in runs helped to boost US refinery […]

Posted On : Published By : Tom Whipple
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Diesel Futures Gain on Speculation Demand Will Climb

Diesel futures rose, reversing an earlier decline, on speculation demand will climb from a six-month high and as U.S. exports rise. Futures climbed as much as 0.6 percent in New York . Demand for distillates in the four weeks ended May 9 was 4.09 million barrels a day, the highest level since November, according to government data. That may reach 4.5 million this week as export flows are forecast to increase, according to Energy Analytics Group Ltd., a fund adviser. “Demand is already exceptionally high and exports are growing dramatically,” said Tom Finlon, director of Energy Analytics in Jupiter, Florida. “It’s very good for diesel.” Ultra low sulfur diesel for June delivery advanced 1.25 cents, or 0.4 percent, to $2.9534 a gallon at 12:59 p.m. on the New York Mercantile Exchange . The fuel’s crack spread versus West Texas Intermediate crude swelled 72 cents to $21.63 a barrel while […]

Posted On : Published By : Tom Whipple
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Natural-Gas Prices Keep Climbing on Predictions for a Warm June

By Timothy Puko NEW YORK–Natural gas futures climbed to their highest close in more than a week, as June weather forecasts suggest an early start to the summer demand season. Prices for the front-month June contract rose 8.2 cents, or 1.8%, to $4.552 a million British thermal units on the New York Mercantile Exchange. Prices jumped 4.5% during the past week of trading, finishing Tuesday at their highest point since May 8. Warming weather forecasts have been the recent driver, pushing up prices for two sessions. They predict highs into the 80s in early June that could lead to air conditioners turned on around the clock. That could lead to an unseasonably high demand for electricity and the natural gas that fuels it. "Every little piece of data…is having an outsized impact on the market," said Richard Soultanian, co-president of NUS Consulting Group in Park Ridge, N.J. "There’s a […]

Posted On : Published By : Tom Whipple
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Iran wags finger at foreign energy contractors

Foreign contractors working in the Iranian energy sector need to stay committed to their obligations or face expulsion, a development official said Tuesday. Abdorreza Haji Hosseinnejad, the director of Iran’s Petroleum Engineering and Development Co., said contractors need to respect the terms of their contracts with the Iranian government. "Unjustified delays, refusal to respect legal obligations in the development of fields particularly joint fields will lead to their removal," he said . Iran in early May canceled a contract with China National Petroleum Corp. for work at South Azadegan oil field, a 40-billion barrel field straddling the Iran-Iraq border. Awarded the contract in 2009, Iran says CNPC was dragging its feet on the project. Iranian Oil Minister Bijan Zanganeh had said Chinese companies were still welcome to participate in Iran’s energy sector despite issues with CNPC, though the development official said all parties working on […]

Posted On : Published By : Tom Whipple