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Cheap Oil is Gone Forever

Sixty years ago, a man stood in front of a crowd that had gathered at a small hotel in San Antonio. Minutes before approaching the podium, however, he was quietly ushered off the stage to take an urgent phone call. On the other end of the line was a PR rep for one of the largest oil companies in the world, begging him not to give his speech. Luckily, Dr. Marion King Hubbert wasn’t persuaded. He went on to deliver what was arguably the most important oil prediction since Edwin Drake first drilled a hole into the Pennsylvanian soil in search of salt brine. Essentially, Dr. Hubbert believed there would be a point in time when oil production in the U.S. would peak and begin to decline. Even though his work became the basis for the peak oil theory, far too many people haven’t realized that this isn’t a […]

Posted On : Published By : Tom Whipple
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Crude Rises Ahead of OPEC, EIA Data

Crude-oil futures remained supported in Asia Wednesday amid twin expectations of a fall in crude supplies in the U.S. and the Organisation of Petroleum Exporting Countries keeping its supply quota unchanged. On the New York Mercantile Exchange, light, sweet crude futures for delivery in July traded at $104.48 a barrel at 0505 GMT, up $0.13 in the Globex electronic session. July Brent crude on London’s ICE Futures exchange rose $0.22 to $109.74 a barrel. The U.S. Energy Information Administration will publish its closely watched inventory survey, which is due at 1430 GMT. Analysts expect the EIA to report that supplies fell by 1.7 million barrels in the week ended June 6, according to a survey by The Wall Street Journal. Expectations that crude supplies in the U.S. declined in the week to June 6 remains the key fundamental support for prices, Timothy Evans, energy futures specialist at Citigroup, said […]

Posted On : Published By : Tom Whipple
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WTI Trades Near Three-Month High on U.S. Supplies; Brent Steady

West Texas Intermediate traded near the highest price in three months amid speculation that crude inventories fell for a second week in the U.S., the world’s biggest oil consumer. Brent was steady in London . Futures were little changed in New York after declining 0.1 percent yesterday. Crude stockpiles probably dropped by 2 million barrels last week to 387.5 million, a Bloomberg News survey shows before Energy Information Administration data today. OPEC nations representing 94 percent of the group’s output said they’re at ease with global supply and demand before a meeting in Vienna to decide on a collective production limit. “Oil has been boosted by an improved growth outlook in the U.S., but it’s being contained by high supply as we start to work into the driving season,” said Ric Spooner, a chief strategist at CMC Markets in Sydney who predicts investors may sell West Texas contracts if […]

Posted On : Published By : Tom Whipple
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US crude stocks up 1.45 mil barrels last week, above expectations: API

US commercial crude stocks rose 1.45 million barrels to 383.91 million barrels in the reporting week that ended June 6, American Petroleum Institute data showed Tuesday. Analysts surveyed Monday had been expecting a 1.2 million-barrel draw. The unexpected build in stocks was likely a product of a 434,000 b/d decline in crude runs, which fell to 15.45 million b/d, according to API. This helped to cut refinery utilization rates by 2.1 percentage points to 87.8% of capacity. Analysts had been expecting a 0.5 percentage point decline. Runs on the US Gulf Coast fell 487,000 b/d to 7.62 million b/d, pushing utilization rates in that region 5.1 percentage points lower to 84.1% of capacity, according to the trade group. As a result, USGC crude stocks rose 1.95 million barrels to 204.65 million barrels. A 65,000 b/d fall in USGC imports to 3.08 million b/d also helped to limit the build. […]

Posted On : Published By : Tom Whipple
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EIA Increases 2014 WTI Price Forecast to $98.67 a Barrel

The Energy Department increased its price forecasts for West Texas Intermediate crude for 2014, narrowing the U.S. benchmark’s discount to Brent. WTI will average $98.67 a barrel this year, the Energy Information Administration , the Energy Department’s statistical arm, said in its monthly Short-Term Energy Outlook . That’s up from May’s estimate of $96.59. Brent, the North Sea-based grade, will reach $107.82, up from $106.26. WTI is estimated to trade at a discount of $9.15 to Brent, down from $9.67 in May. The WTI-Brent spread has averaged $6.66 in the second quarter, according to contracts traded on the London-based ICE Futures Europe, down from $9.41 in the January-March period. The gap narrowed as inventories at Cushing, Oklahoma , the delivery point for WTI futures, decreased and as refineries increased operating rates. The differential will widen to $11 next year, the EIA said. “We raised the Brent price forecast and […]

Posted On : Published By : Tom Whipple
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Natural-Gas Prices Dropping on Mild Weather and Technical Trading

Natural gas prices are dropping Tuesday on mild spring weather and technical traders looking to cash out on several days of gains. Natural gas for July delivery is down 5.9 cents, or 1.3%, at $4.586 a million British thermal units on the New York Mercantile Exchange. Weather forecasts are mild, the type of spring weather that’s too comfortable to drive gas demand for home heating or for the power plants that fuel air conditioners. That’s got technical traders pouncing, as they sell out to lock in gains from last week’s steady rise in prices, analysts and a trader said. It’s important they sell now before a federal data update due Thursday can show the types of large surpluses that could push prices even lower, analysts said. "It doesn’t take much in the way of mild temperature forecasts and you get quite a bit of profit-taking […]

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Natural gas buyers should have upper hand at time of abundance: IEA

With producers sitting on 200 years of gas reserves, it is the buyers who should have the upper hand in price negotiations with the sellers, International Energy Agency gas, coal and power division head Laszlo Varro said Tuesday. The global gas market has been distorted in the past few years by Japan’s need to run all its gas-fired plants at maximum to keep the lights on, he said. That has kept spot LNG prices high, with consequences for other markets that must compete with Asia. But in normal circumstances, gas has competition in most applications. Article continues below… International Gas Report International Gas Report is a biweekly report that intelligently analyzes what is happening in the natural gas industry, improving your vision and sharpening your competitive edge. Through its unrivalled network of global correspondents, it covers the whole gas chain, from the well-head to the burner tip, in Asia, […]

Posted On : Published By : Tom Whipple
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Short-Term Energy Outlook

Highlights North Sea Brent crude oil spot prices increased from a monthly average of $108/barrel (bbl) in April to $110/bbl in May. This was the 11th consecutive month in which the average Brent crude oil spot price fell within a relatively narrow range of $107/bbl to $112/bbl. The discount of West Texas Intermediate (WTI) crude oil to Brent crude oil, which averaged more than $13/bbl from November through January, fell below $4/bbl in early April before increasing to an average of $7/bbl in May. EIA projects Brent crude oil prices to average $108/bbl in 2014 and $102/bbl in 2015 and the WTI discount to Brent to average $9/bbl and $11/bbl in 2014 and 2015, respectively During the April-through-September summer driving season this year, regular gasoline retail prices are forecast to average $3.62/gallon (gal), 4 cents higher than last year. The projected monthly national average regular gasoline retail price falls […]

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OPEC Majority at Ease With Oil Markets Before Meeting

OPEC nations representing 94 percent of the group’s output said they were at ease with supply and demand in global oil markets before a meeting in Vienna today to decide on a collective production limit. Oil ministers from Angola , Ecuador , Kuwait and Venezuela all said they anticipated that the Organization of Petroleum Exporting Countries would roll over its existing ceiling of 30 million barrels a day. Saudi Arabia, Libya, Nigeria and the United Arab Emirates said supply and demand are well matched. Iraq ’s minister said there were indications the limit would be retained, while his Iranian counterpart also expected no change. The 10 nations accounted for about 28.2 million barrels a day of output in May, while the group’s combined production amounted to about 30 million barrels, data compiled by Bloomberg show. Ministers from Algeria and Qatar declined to comment on the oil market or OPEC’s […]

Posted On : Published By : Tom Whipple
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Oil prices rise on OPEC expectations, Iraq jitters

The price of oil rose on Wednesday ahead of an OPEC meeting in Europe that is expected to keep production levels steady for the year even as demand looks set to grow. Energy markets were also affected by al-Qaida-inspired militants overrunning much of the Iraqi city of Mosul on Tuesday. Mosul lies in an area that is a major gateway for Iraqi oil. Benchmark U.S. oil for July delivery was up 29 cents to $104.64 a barrel at 0820 GMT in electronic trading on the New York Mercantile Exchange. On Tuesday, the contract fell 6 cents to close at $104.35. Brent crude, a benchmark for international oils, was up 35 cents to $109.22 a barrel on the ICE exchange in London. Wednesday’s meeting in Vienna of the Organization of Petroleum Exporting Countries is largely expected to keep its output target of 30 million barrels a day unchanged. Also adding […]

Posted On : Published By : Tom Whipple