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Why Are Food Prices so High? Because We’re Eating Oil

Regardless of what we eat, we’re actually eating oil. Anyone who buys their own groceries (as opposed to having a full-time cook handle such mundane chores) knows that the cost of basic foods keeps rising , despite the official claims that inflation is essentially near-zero. Common-sense causes include severe weather and droughts than reduce crop yields, rising demand from the increasingly wealthy global middle class and money printing, which devalues the purchasing power of income. While these factors undoubtedly influence the cost of food, it turns out that food moves in virtual lockstep with the one master commodity in an industrialized global economy: oil. Courtesy of our friends at Market Daily Briefing , here is a chart of a basket of basic foodstuffs and Brent Crude Oil: In other words, regardless of what we eat, we’re actually eating oil. Not directly, of course, but indirectly, as the global production […]

Posted On : Published By : Tom Whipple
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Oil Rises Ahead Of U.S. Inventory Data

Brent crude prices rose slightly Wednesday, with U.S. oil inventory data the key to whether the contract maintains its five-session run above $110 a barrel. Brent moved above that mark on May 21, the day some Western oil companies said they were removing employees from Libya where violence surrounding the oil sector is increasing. Two major oil fields remain shut in the North African country despite government proclamations weeks ago that disputes with protesters were resolved and operations would resume, and there were reports that occupiers of key oil ports refuse to recognize a newly organized central government. The disputes have dragged Libyan oil production down to 160,000 barrels a day, far below the nation’s capacity. Brent crude for July delivery rose 0.2% to $110.25 a barrel on ICE Futures Europe. U.S. crude-oil futures were up 0.1% at $104.24 a barrel on the New York Mercantile Exchange. Later Wednesday […]

Posted On : Published By : Tom Whipple
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Brent Gains for First Day in Three on Libya, Ukraine; WTI Steady

Brent crude rose for the first time in three days as violence in Ukraine escalated and unrest continued to curb Libyan supplies. West Texas Intermediate was steady before inventory data. Futures climbed as much as 0.4 percent in London . Ukraine said it will press on with military operations after its forces regained control of Donetsk airport and inflicted “significant” losses on pro-Russian separatists. The U.S. advised its citizens to leave Libya because of clashes between armed groups in the OPEC member nation. U.S. government data tomorrow will probably show crude stockpiles rose last week, according to a Bloomberg News survey. “The unrest in both Libya and Ukraine continues” to support oil prices , Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark , said by e-mail. Brent for July settlement increased as much as 38 cents to $110.40 a barrel on the London-based ICE Futures […]

Posted On : Published By : Tom Whipple
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NYMEX June natural gas settles 10 cents higher on hot weather

The NYMEX June natural gas futures contract closed 10 cents higher at a $4.505/MMBtu settlement on Tuesday as the market eyed forecasts for above-normal temperatures into June that could curb storage refills. "What we’re seeing is the forecast getting priced in," said Gene McGillian, broker at TFS Energy Futures. "The fundamentals remain tight. So any kind of seasonal demand can be expected to firm things up." Forecasts show above-normal temperatures across much of the US over the next six to 10 days, with the hottest weather expected from the Rockies into the Midwest and Ohio Valley, with some cities seeing highs about 10 degrees above normal, according to private forecaster WSI. Those forecasts "would limit the availability for power generators to choose their fuel and mark the end of the shoulder season," said Gelber & Associates analyst Aaron Calder. "The market is spooked on the onset of cooling demand […]

Posted On : Published By : Tom Whipple
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Natural-Gas Prices Close Higher

By Timothy Puko NEW YORK–Natural gas prices settled more up than 2% Tuesday, likely from buyers jumping on prices that hit near a seven-week low. Natural gas for June delivery rose 10 cents, or 2.2%, to $4.505 a million British thermal units on the New York Mercantile Exchange. June options expire Tuesday and the contract expires Wednesday. The July contract is up 10.6 cents, or 2.4%, to $4.511/mmBtu. Futures traded down overnight and only sprung up once they bottomed out below $4.37/mmBtu, just before 9 a.m. ET. The low price may have triggered bargain shoppers to jump in, said John Woods, president of JJ Woods Associates and a Nymex floor trader. "For the big boys with deep pockets, this is where you’re buying," he said. Gas has been trading within a 20-cent range for about two weeks. Many traders are likely waiting for Thursday’s update on gas stockpiles before […]

Posted On : Published By : Tom Whipple
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Big Oil Spending More, Getting Less in Production

Despite increased spending, oil majors are seeing flat or declining production as they struggle to replace reserves, according to a recent analyst report. Exxon Mobil Corp., Chevron Corp., Royalty Dutch Shell plc and BP plc recorded declines in their 2013 production. ExxonMobil reported an average production of 4,175 million barrels of oil equivalent per day (MMboepd), down 1.5 percent from 2012, and Chevron saw its production decline by .5 percent from 2012 to 2013 to 2,597 MMboepd. Shell’s average 3,199 MMboepd of production for 2013 was down 1.9 percent from 2012 levels, while BP saw its production volumes fall to 2,256 MMboepd, or 2.7 percent, from 2012 to 2013. France’s Total S.A. was the only company to buck the trend in declining production, with average hydrocarbon production in 2013 of 2,299 MMboepd, Zacks Equity research analyst Nilanjan Choudhury said in a May 16 report. “But overall, most ‘Big Oil’ […]

Posted On : Published By : Tom Whipple
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Oil and gas well costs surge

As ExxonMobil and partners Santos and Oil Search yesterday celebrated the sailing of a maiden cargo from their $US19 billion ($20.6 billion) PNG LNG plant in the Pacific, Australia’s peak oil and gas lobby has revealed a five-fold increase in the cost of locally drilled offshore wells. Based on industry data, the average cost of a well spudded off Australia is more than $130 million. The huge rise in well costs has coincided with a more than two-thirds fall in activity levels since 2003, according to an analysis by the Australian Petroleum Production & Exploration Association. APPEA has used the analysis to warn about Australia’s fast-diminishing competitiveness at a time when oil and gas majors are finding massive gas finds elsewhere in the world where construction and operating costs are much lower, including in PNG, east Africa and North America. "Australia is already at the top of the cost […]

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Iraqi forces launch attack on ISIS in Babil, bombard Fallujah

Iraqi security forces clashed with members of the Islamic State of Iraq and Syria (ISIS) in the province of Babil on Sunday, as part of an effort to reassert control of the nearby city of Fallujah. A police spokesman said army and police units were searching for members of ISIS in the province area when the fighting erupted. In a statement, the spokesman said: “A unit from Babil police, in cooperation with the army, launched an extensive operation in Al-Abed, Yas and Bahbahan areas, in search of members of the armed groups who booby-trapped houses and planted a number of explosive devices on the roadside to target the army.” He added: “The operation involved violent clashes where all types of arms were used.” Meanwhile, the head of the security committee for the central and southern areas at Babil’s provincial council, Falah Al-Khafaji, said: “A unit from […]

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Nineveh requests to become autonomous region

THE GLOBE Nineveh Governor, Ethel al-Nujaifi, announced that Nineveh Provincial Council has submitted a request letter to the Iraqi central government asking for making the Province an autonomous region. Nineveh Governor, Ethel al-Nujaifi, announced that Nineveh Provincial Council has submitted a request letter to the Iraqi central government asking for making the Province an autonomous region. Al-Nujaifi pointed out: ?Nineveh administrative body has lost its trust in the central government because the Province?s requests and demands have been neglected and ignored in many respects.? Al-Nujaifi found it essential to request the central government to approve the law of the Province Council, especially the one that is related to the security case of the Province, although the Governor does not expect the central government to answer affirmatively. ?The government has no intention to solve the issues the Province is suffering from. Many key issues regarding security, energy and the public […]

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Turkey flexing muscle with Kurdish oil sales

Turkey is flexing diplomatic muscle and showing it’s ready to position itself as a key energy hub with the export of Kurdish oil, an international analyst said. The semiautonomous Kurdistan Regional Government confirmed in a statement Friday a tanker loaded with more than 1 million barrels of crude oil left a Turkish port, the first of what it said would be "many such sales of oil" from northern Iraq. The central government in Baghdad filed a case at an international court of arbitration in Paris to challenge the export. The central government says any unilateral deals in the energy sector from KRG are illegal , though the Kurdish side said it’s operating according to the rule of law. Soli Ozel, an international relations analyst at Kadir Has University in Istanbul, told Voice of America the oil issue spills over into Turkish ambitions for the […]

Posted On : Published By : Tom Whipple