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Refinery Failures Spur Bets on Higher U.S. Gasoline

Speculators increased wagers on higher U.S. gasoline prices by the most since February as refinery closures constricted supply. The net-long position jumped 45 percent from a four-year low as hedge funds pared record short bets and added long wagers for the first time in six weeks, weekly U.S. Commodity Futures Trading Commission data through Sept. 23 show. Refineries in eastern Canada and Texas shut gasoline units for unplanned repairs as others began seasonal maintenance. Futures contracts for October traded at the highest premium to November since 2012, reflecting heightened concern about supply. The closures threaten the retreat at the pump that has drivers paying the lowest late-September prices since 2010. “People have covered their positions or moved away from short to long,” Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London, said by phone Sept. 26. “There’s a huge amount of FCC outages in North America at […]

Posted On : Published By : Tom Whipple
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Permian Producers Get No Relief as BridgeTex Start Seen Slow

Producers in the largest U.S. oil field got little relief from a pipeline startup as bottlenecks in West Texas make it difficult to transport surging crude production to market. West Texas Intermediate crude in Midland, Texas, weakened by 75 cents relative to the same grade in Cushing, Oklahoma , to a discount of $8 a barrel at 1:55 p.m., according to data compiled by Bloomberg. Midland is the pricing point for the Permian Basin, which produces 1.76 million barrels of oil a day, Energy Information Administration data show Magellan Midstream Partners LP (MMP) and Occidental Petroleum Corp. (OXY) started delivering crude today to Houston from Colorado City, Texas. The pipeline wasn’t able to alleviate prices because of a lack of capacity remaining between Midland and Colorado City, about 80 miles apart. Plains All American Pipeline LP (PAA) plans to start the Sunrise pipeline between the two cities by Jan. […]

Posted On : Published By : Tom Whipple
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Russia ready should Kiev, EU renege on energy deals

Kremlin says it’s ready should agreements with European Union and Kiev falter. (UPI Photo/Sergey Starostenko) MOSCOW, Sept. 29 (UPI) — Russia is ready to respond should its Ukrainian or European Union partners renege on trilateral energy agreements, a Kremlin spokesman said Monday. Kremlin spokesman Dmitry Peskov said the Russian government is operating under guidelines spelled out last week during trilateral talks in Berlin. "Russia is guided by the agreements reached at the three-party talks, but at the same time is ready to defend its position," he said. Negotiating partners last week outlined the terms of an interim agreement that sees Ukraine paying the $3.1 billion it owes Russian energy Gazprom. Ukraine, in return, gets a price discount and assurances of adequate winter natural gas supplies. European Energy Commissioner Gunther Oettinger said that, with both sides sparring over contracts in international courts, an interim deal is necessary for short-term energy […]

Posted On : Published By : Tom Whipple
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Rosneft claims united oil win in arctic

Russian oil company Rosneft announces oil find in arctic reaches of Kara Sea. UPI/Jeremy Potter/NOAA MOSCOW, Sept. 29 (UPI) — Russian oil company Rosneft said the discovery of oil in an arctic license area came as the result of a united effort with its Western energy partners. Rosneft estimates the discovery at an area in the Prinovozemelskiy-1 license area in the Kara Sea holds at least 700 million barrels of oil. "This is an outstanding result of the first exploratory drilling on a completely new offshore field," Rosneft Chief Executive Officer Igor Sechin said in a statement Saturday. "This is our united victory; it was achieved thanks to our friends and partners from ExxonMobil, Nord Atlantic Drilling, Schlumberger, Halliburton, Weatherford, Baker Hughes, [and others]." The company said the entire area could hold as much as 87 billion barrels of oil. Greenpeace activists this year trailed some of the international […]

Posted On : Published By : Tom Whipple
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Russia’s Gazprom and Ukraine are in a gas dispute as winter approaches

Workers walk through Ukraine’s Dashava natural gas facility. (Sean Gallup/Getty Images) KIEV, Ukraine — The frigid water that comes out of the “hot” faucet of Alexander Korniienko’s shower in Kiev is a warning for his nation: After months without natural gas shipments from Russia, Ukraine may be facing a chilly winter. Ukrainians are layering their sweaters in preparation for yet another tough confrontation with the Kremlin, this time over energy. It is a replay of previous wintertime gas cutoffs by Russia that led to accusations that the Kremlin was using its bountiful energy supplies as a political weapon. This year, any wintertime shortfall could be far more serious for Ukrainians already contending with the dire effects of a separatist war. Korniienko has been on the vanguard of those facing the latest gas cutoff , since Kiev eliminated city-provided hot water in July as a conservation measure. Now he bathes […]

Posted On : Published By : Tom Whipple
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Schlumberger Said to Pull Expat Managers From Russia

Schlumberger Ltd. (SLB) , the biggest oilfield services provider, is withdrawing employees who are citizens of the U.S. and the European Union from Russia amid sanctions, two people with knowledge of the matter said. About 20 mid-level and senior managers will be pulled, one of the people said. Both asked not to be identified because they aren’t authorized to discuss the matter. The U.S. and the EU targeted Russia’s oil industry by banning exports of some equipment and technology after Russia annexed Crimea and allegedly stoked a separatist insurgency in eastern Ukraine. The sanctions have forced Exxon Mobil Corp. to suspend some projects with Russia’s OAO Rosneft, threatening a project where the state-run company announced a billion-barrel crude discovery in the Kara Sea last week. Exploration and production companies were expected to spend $51.7 billion in Russia this year, according to estimates from Barclays Plc. A large part of […]

Posted On : Published By : Tom Whipple
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Exxon says it’s safe from Russian sanctions

Russian Far East project shielded from sanctions, Exxon spokesman says. (UPI Photo/Tiffini M. Jones/U.S. Navy) MOSCOW, Sept. 30 (UPI) — Exxon Mobil can operate freely with Russian energy company Rosneft at a Far East energy project without fear from sanctions, a spokesman said. The Sakhalin-1 project envisions the development of three oil and natural gas fields located in extreme sub-Arctic conditions off the coast of Sakhalin in Russia’s Far East. Alan Jeffers, a spokesman for project partner Exxon Mobil, said Monday the company was isolated from the economic impact of Western pressure . "The Sakhalin-1 project is not impacted by U.S. sanctions," he told state news agency RIA Novosti. Western governments blacklisted Rosneft and other Russian energy companies in response to the Kremlin’s stance on the separatist campaign in eastern Ukraine. In mid-September, the European Union took additional steps by barring Russian oil company Rosneft and its counterparts Transneft […]

Posted On : Published By : Tom Whipple
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The Oil Head-Fake: The Illusion that Lower Oil Prices Are Positive

I’ve described the dynamic of structural imbalances of supply and demand leading to lower prices for crude oil as the Oil Head-Fake:  high global production (supply) continues while demand declines due to global recession, and the resulting imbalance of supply and demand triggers a major decline in price. But this drop is not positive; it’s a temporary response that triggers a variety of disruptive consequences. There’s nothing fancy about a basic supply-demand pricing model; if the world is awash in crude oil and demand slides, price will eventually follow. The interesting parts of the Oil Head-Fake Dynamic arise from the supply side, not the demand side.  Demand for oil is famously inelastic, meaning that easy substitutes are not readily available, and the primacy of oil in the global economy insures a steady demand. Yes, natural gas can be substituted for vehicles that have been converted to burn natural gas, […]

Posted On : Published By : Tom Whipple
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How Far Will the Shale Boom Go?

How Far Will the Shale Boom Go? The shale energy revolution has already upset the “peak oil” forecast, which predicted that the world will soon reach the point of highest physical oil output and thereafter global production will begin an inexorable decline. Now, in the context of the worsening political situation in the Middle East and Eastern Europe, its impact is being discussed in terms of America’s ability to secure its own energy supplies and assist its allies with theirs. The near-term enthusiasm for shale energy is understandable, but what are its longer term prospects? Energy markets are notoriously difficult to predict. In the 1970s, as U.S. oil production reached a historic high point and turmoil in the Middle East produced two spikes in crude prices, there was talk of imminent scarcity. While global output stood at around 60 million barrels per day (mbd), some analysts declared that the […]

Posted On : Published By : Tom Whipple
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Ready Or Not… The Unsustainable Status Quo Is Ending

Ready Or Not… The Unsustainable Status Quo Is Ending ~ Walking straight in a hall of mirrors I have to confess, it’s getting more and more difficult to find ways of writing about everything going on in the world. Not because there’s a shortage of things to write about — wars, propaganda, fraud, Ebola — but because most of the negative news and major world events we see around us are symptoms of the disease, not the disease itself. There are only so many times you can describe the disease, before it all becomes repetitive for both the writer and the reader. It’s far more interesting to get to the root cause, because then real solutions offering real progress can be explored. Equally troubling, in a world where the central banks have distorted, if not utterly flattened, the all important relationship between prices, risk, and reality, what good does […]

Posted On : Published By : Tom Whipple