Category:

Analysts Blow Calls on Oil

ENLARGE A worker at a Southwestern Energy Co. site in Pennsylvania in 2011. Raymond James analysts didn’t downgrade the company’s shares until January, months after the stock–and oil prices–had begun to slide. Photo: Bloomberg News In late November, as collapsing oil prices pummeled energy-company shares, a Raymond James & Associates analyst told investors that energy stocks were still a good bet. With a barrel of crude having dropped nearly 30% since June, Pavel Molchanov reasoned, the worst of the selloff was likely history. He issued a report contending oil prices and energy stocks were “within weeks of bottoming.” He and his colleagues maintained the equivalent of a “buy” recommendation on Houston energy producer Southwestern Energy Co. , also down about 30% since June. More than two months after Mr. Molchanov made that call, it is clear he and many other analysts were wrong. Nymex crude prices and Southwestern Energy’s […]

Posted On : Published By : Tom Whipple
Category:

End of an Era as CME to Close Almost All Floor Trading for Futures

ENLARGE Traders work in the corn options trading pit of CME Group’s Chicago Board of Trade in 2012. Photo: Tim Boyle/Bloomberg News One of the last vestiges of the swashbuckling era of commodities floor trading is fading away. CME Group Inc., the world’s largest futures-market operator, said Wednesday it is closing most of its futures trading pits in Chicago and New York as electronic trading has become the overwhelmingly dominant way futures contracts are bought and sold. The move, which will take effect by July 2, brings to a close nearly 150 years of barking and jostling over the price of grain, oil and interest-rate contracts. “The time has finally come,” said Leo Melamed, chairman emeritus at CME and a former chairman who helped the exchange develop its electronic trading platform in the late 1980s. “It’s a historic moment, but one that I think was always out there and […]

Posted On : Published By : Tom Whipple
Category:

Hess to Reduce Bakken Spending by 18%

Hess’ Bakken Acreage Map Hess Corporation recently announced revisions to its 2015 capital and exploratory budget that includes a big cut in the Bakken. The company plans to reduce spending in the region by 18% from 2014 numbers, hoping to allow the company to remain flexible in the face of an extreme pricing environment. The company has revised its budget several times in response to the sharp decline in crude prices throughout 2014. The company reduced 2014 capital expenditures below its planned capital budget of $5.8 billion and the capex budget for 2015 is is $4.7 billion. Related:  Hess Increases Bakken Production Guidance Through 2020 Greg Hill, President and COO, stated that “We are reducing our 2015 spending in the Bakken to $1.8 billion, compared with $2.2 billion in 2014. In 2015, we plan to operate an average of 9.5 rigs and bring approximately 210 new operated wells online, compared […]

Posted On : Published By : Tom Whipple
Category:

EPA wants further review of Keystone XL

Oil and gas lobby group says EPA’s latest comments on Keystone XL another example of unnecessary delays. (courtesy TransCanada) WASHINGTON, Feb. 4 (UPI) — A statement from the EPA on how low oil prices may influence decisions on Keystone XL pipeline ruffled feathers, with the industry crying foul. The Environmental Protection Agency said assessments made to date on the pipeline meant to cross the U.S.-Canadian border should be re-evaluated because crude oil prices are about 40 percent lower than when most recent considerations were made. Pipeline planner TransCanada submitted an application to the U.S. government to build Keystone XL more than six years ago. Louis Finkel, executive vice president for the American Petroleum Institute, said the EPA’s decision is another example of bureaucratic delays . "Suggesting that the drop in oil prices requires a re-evaluation of the environmental impact of the project is just another attempt to prolong the […]

Posted On : Published By : Tom Whipple
Category:

U.S. refinery strike not impacting operations

Situational normal at U.S. refineries despite labor strikes, monitoring group says. Photo by Kodda/Shutterstock AUSTIN, Texas, Feb. 4 (UPI) — A strike at U.S. refineries by the United Steelworkers union isn’t curbing operations at the affected plants, a monitoring group said. Labor talks between USW and refineries, represented by Shell, broke down during the weekend, prompting the union to call for a work stoppage at seven U.S. refineries. Union officials said they had "no choice" but to call a strike, blaming the industry itself for the stalemate. Genscape, which monitors refinery operations, said it’s seen no major operational changes at refineries impacted by the strike. "Barring any surprises, normal operations are expected to continue at the refineries where workers are striking," the group said in a Tuesday briefing on the industry impacts. Genscape said strikes at refineries usually don’t impact operations because refining companies have contingency plans in place […]

Posted On : Published By : Tom Whipple
Category:

Suncor to Push Ahead With Fort Hills Oil Sands Amid Oil Rout

(Bloomberg) — Suncor Energy Inc., Canada’s largest oil company, will push ahead with its planned Fort Hills oil sands project even as the price of oil hovers around $50 a barrel. Suncor will spend C$1.6 billion ($1.3 billion) this year as it advances construction of the project, the Calgary-based company said in a statement Wednesday. The operation will begin producing oil at the end of 2017, the company added. Last month Suncor announced 1,000 job cuts, lowered its 2015 capital budget by $1 billion and delayed projects to weather collapsing prices. The company and its competitors are squeezing spending in oil sands, among the most expensive reserves to develop. “Our commitment to capital discipline has put us in a better position to weather the price downturn,” Steve Williams, Suncor’s chief executive officer, said in the statement. On Wednesday, oil traded below $50 a barrel amid the most volatility since […]

Posted On : Published By : Tom Whipple
Category:

Kremlin denies it’s in oil talks with Riyadh

Russia denies its in talks with Saudi Arabia on oil for use as a diplomacy tool in the Syrian conflict. Photo by Denis Larkin/Shutterstock MOSCOW, Feb. 4 (UPI) — There’s no validity to reports Saudi Arabia may be discussing oil production cuts with Russia in exchange for concessions on Syria, an official said Wednesday. A report published Tuesday by The New York Times says the government in Riyadh is using its leverage in the global oil market to pressure the Kremlin to reconsider its long-standing alliance with Syrian President Bashar Assad. Alexei Pushkov, head of the international affairs committee in the Russian State Duma, said there was nothing behind the Times’ report, which cited "an array of diplomatic, intelligence and political officials." "There have been no negotiations on cutting oil production by the Saudis in exchange for Moscow’s refusal to support Assad," he said. "[The report is] a canard." […]

Posted On : Published By : Tom Whipple
Category:

Sechin Says Rosneft to Cut Spending 10 Percent After Oil Slump

(Bloomberg) — OAO Rosneft, Russia’s largest oil producer, will cut spending 10 percent this year after oil prices slumped. “For the past year and a half we have cut spending by 10 percent annually, and this year this tendency will continue,” Rosneft Chief Executive Officer Igor Sechin told Russian President Vladimir Putin outside Moscow. The company has set its plans for this year based on an average oil price of $50 a barrel, Sechin said. Russia’s largest oil and gas producers, Rosneft and OAO Lukoil, have both cut spending plans after oil prices halved over the past six months. The price squeeze has hit Rosneft particularly hard as it seeks to repay debts raised for the $55 billion acquisition of TNK-BP in 2013. Rosneft was able to maintain oil and gas output growth even as it cut spending, Sechin said. Hydrocarbons output grew 4.6 percent to 252 million tons […]

Posted On : Published By : Tom Whipple
Category:

Why Cheaper Oil Doesn’t Always Lead to Economic Growth

ENLARGE Tumbling oil prices were supposed to boost growth in a host of major oil-importing economies. It isn’t necessarily working out that way. Some governments have moved already to shore up their revenues by raising gasoline taxes or cutting fuel subsidies. At the same time, falling oil costs have pumped up deflation fears across Europe and Japan, adding to the risk that consumers and businesses will hold back on spending and investment, dragging on growth. China has raised fuel-consumption taxes by 50% since November. Gasoline prices have soared in Indonesia as the authorities eliminated subsidies altogether. High taxes in Japan mean pump prices have fallen only 15% in the past six months, compared with a 40% decline in the U.S. Taxes also blunt the fall in Europe: premium gasoline prices have fallen 29% in the U.K. and 32% in France. Brazil has trimmed subsidies and raised taxes to shore […]

Posted On : Published By : Tom Whipple
Category:

Cheap Oil Does Not Mean That Peak Oil Is a Myth

Cheap Oil Does Not Mean That Peak Oil Is a Myth thumbnail Peak oil is a fundamental tenet of the Transition Towns concept, but the current return of “cheap oil” has muddied the waters about how to discuss it. At a recent meeting of Transition Town Reading (U.K.), we discussed the prevailing low oil price, and the group asked me to put together some salient points on the subject, set within the context of whether or not we can now dismiss peak oil, e.g. as it is currently being contested   here and here . The following points are based on an article that I wrote on this blog which was re-posted on Resilience.org here. Most of the references that I have drawn from are in the links posted there, with a few more added into the text below. Some of the points overlap with each other, but hopefully […]

Posted On : Published By : Tom Whipple