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Ukraine says it pays for gas, Russia demands more

MOSCOW (AP) — Ukrainian gas company Naftogaz announced Friday that it had paid $15 million for another month of Russian gas, but Moscow says that the sum will only be enough for an additional day of deliveries. Interfax-Ukraine news agency quoted Naftogaz’s executive, Andrei Kobolev, as saying that the company had paid for gas supplies from Russia for the month of March. But a spokesman for Russian energy giant Gazprom said that the payment was only enough for one additional day of delivery if gas continues to be pumped to Ukraine at the current rate. Following a bruising dispute over prices and debt that raised fears of supply disruptions in Europe, Russia and Ukraine signed a deal in October requiring Kiev to pay in advance for gas shipments. President Vladimir Putin and other government officials warned earlier this week that Russia would cut off supplies to Ukraine by the […]

Posted On : Published By : Tom Whipple
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Russian Sanctions Seen Entrenched as EU, U.S. Maintain Pressure

Vladimir Putin, Russia’s president. Photographer: Oliver Bunic/Bloomberg (Bloomberg) — The European Union will probably overcome internal divisions and extend economic sanctions against Russia that expire in July even as the conflict in eastern Ukraine shows signs of abating, according to a survey of economists. The punitive measures will remain in place, according to 13 of 24 respondents surveyed by Bloomberg. Analysts are evenly split over whether initial violations of a cease-fire negotiated in Belarus this month may trigger new and tighter curbs. The EU’s next planned leaders’ summits, which may include a debate on Russian sanctions, are on March 19-20 and June 25-26. The 28-member bloc, along with the U.S., has continued to raise the threat of more sanctions even as a cease-fire sealed this month in Belarus takes hold in eastern Ukraine following a flareup in fighting. The penalties are heaping further pressure on an economy sliding into […]

Posted On : Published By : Tom Whipple
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Are We In The Midst Of An Epic Battle Between Interest Rates And The Oil Price?

What follows is the continuance of my research, discussions, observations and thoughts around the nexus of debts, interest rates and the oil price. I now believe these relations are poorly understood and with total global debt levels at all time highs (and growing), years of low interest rates, which are kept low (by concerted efforts by central banks) while the oil price in recent months has collapsed may hide a SIGNAL that struggles with attention from too much noise. A collapsing oil price while interest rates remain low is likely the proverbial canary. Global Crude Oil Supplies, The Oil Price And Interest Rates Figure 1: The green area [left hand axis] in the chart above shows the world’s development of crude oil and condensates supplies between 1980 and 2013. The pink line shows the development in the interest rate (yield) for US 10 Year Treasuries [right hand axis]. The […]

Posted On : Published By : Tom Whipple
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Crude Oil: Abundance Wins Over Depletion Theory

While some observers, including oil giant BP, are now predicting a slowdown in U.S. shale oil production as wells are depleted at a faster rate, to be replaced by Middle Eastern output that has lost ground to U.S. sha.. In 2008, Canadian economist Jeff Rubin stunned the oil market with a bold prediction: With the world economy growing at 5 percent a year, oil demand would grow with it, outpacing supply, thus lifting the oil price from $147 to over $200 a barrel. The former chief economist at CIBC World Markets was so convinced of his thesis, he wrote a book about it. “Why the World is About to Get a Whole Lot Smaller” forecast a sea change in the global economy, all driven by unsustainably high oil prices, where domestic manufacturing is reinvigorated at the expense of seaborne trade and people’s choices become driven by the ever-increasing prices […]

Posted On : Published By : Tom Whipple
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How correct were Colin Campbell and Jean Laherrère when they published “The End of Cheap Oil” in 1998?

End of Cheap Oil Scenario Desmond Smith posted a comment after my previous blog: “The crash in the price of oil may change the oil market – a look at the IEA’s “Oil Medium-Term Market Report 2015” and it requires a lengthy response. Therefore, I am giving it in this separate blog. End of Cheap Oil Scenario 17 years ago, in March 1998, Colin Campbell and Jean Laherrère published their now classic article, “The End of Cheap Oil” in the journal Scientific American. The figure above is copied from the 1998 article and shows curves fitted to oil production with the source of this information given as Jean Laherrère. It has been quite a long time since I read Colin and Jean’s article but after a comment by Desmond Smith below my blog, “The crash in the price of oil may change the oil market – a look at […]

Posted On : Published By : Tom Whipple
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Oil rises above $62 after Saudi comments on demand

LONDON (Reuters) – Oil rose above $62 a barrel on Thursday as indications of a coming recovery in demand offset a further jump in U.S. crude stockpiles which underlined currently ample supplies. Crude benchmarks in the U.S. and Europe posted their largest percentage gains in nearly two weeks on Wednesday, supported by remarks from Saudi Arabia’s oil minister, Ali al-Naimi, and a slightly stronger-than-expected Chinese manufacturing survey. Brent crude LCOc1 rose 71 cents to $62.34 by 5.23 a.m. ET, after jumping more than 5 percent on Wednesday. U.S. crude CLc1 fell 40 cents to $50.59, following a more than 3 percent gain in the previous session. "The comments yesterday, the change of tone from Saudi Arabia, is still an element," said Olivier Jakob, analyst at Petromatrix, of Brent’s gain. "The market is still reacting to that." Brent collapsed from $115 in June on global oversupply, in a decline that […]

Posted On : Published By : Tom Whipple
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Brent inches up toward $59 on Fed flexibility, China factory growth

SINGAPORE (Reuters) – Brent crude edged up toward $59 a barrel on Wednesday, helped by better-than-expected Chinese factory activity data, the Federal Reserve’s flexible stance on U.S. interest rates and the euro zone’s approval of reforms proposed by Greece. But U.S. crude was weaker after settling lower for the fifth consecutive session on Tuesday on the back of a bigger-than- anticipated crude stock build-up. Brent had climbed 11 cents to $58.77 a barrel by 0751 GMT (2.51 a.m. EST), while U.S. crude futures fell 17 cents to $49.11 a barrel. China’s factory sector showed marginal expansion, according to the flash HSBC/Markit Purchasing Managers’ Index, which inched to a four-month high of 50.1 in February, just above the 50 level that separates growth in activity from contraction. A Reuters poll of economists had forecast a reading of 49.5. "That’s good news (as it means) potential oil demand, but I think […]

Posted On : Published By : Tom Whipple
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Saudi satisfaction with ‘calm’ oil markets signals $60 anchor

LONDON (Reuters) – OPEC kingpin Saudi Arabia is feeling vindicated after a strategy of allowing oil to flood the market has begun to achieve what it was aiming for. As a global oil glut pushed prices down 60 percent between June 2014 and January 2015, signs began to emerge that OPEC’s rivals, including North American producers, will have to curtail output of their expensive barrels. Two months into 2015, oil prices have recovered to around $60 per barrel from their January lows of $45 – much faster than Saudi Arabia had hoped for when it convinced fellow OPEC members in November not to cut output to defend market share against shale oil and other competing supply. In his first public comments since oil prices rebounded, veteran Saudi Oil Minister Ali al-Naimi signaled satisfaction with developments, saying he saw oil demand growing and that markets were "calm". A day earlier, […]

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Oil Demand Seen Rising by Saudi’s al-Naimi as Market Calm

Saudi Arabia’s Oil Minister Ali Al Naimi. The Organization of Petroleum Exporting Countries, led by Saudi Arabia, decided on Nov. 27 to keep its production target unchanged, leaving more expensive operators to reduce output. Photographer: Samuel Kubani/AFP/Getty Images (Bloomberg) — Oil demand is growing and the market has turned “calm,” Saudi Arabia’s Oil Minister Ali al-Naimi said. “We want to see calm markets,” al-Naimi told reporters after a speech at a conference in the Red Sea city of Jazan in the nation’s southwest. Saudi Arabia will remain the largest oil exporter, he said, without specifying dates. Brent crude futures, a benchmark for more than half of the world’s oil, has gained 3.6 percent this year after plunging 48 percent in 2014. The contract rose as much as 91 cents in trading Wednesday and was at $59.43 a barrel at 2:04 p.m. in London on the ICE Futures Europe exchange. […]

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Gulf Keystone paid for future Iraqi oil sale

Gulf Keystone Petroleum announces receipt of payment for future Iraqi crude oil sales, one day after said it was engaged with other parties on a possible sale of the company. Photo courtesy: Gulf Keystone Petroleum. The company said Thursday it received $20.8 million from an undisclosed third-party buyer for future sales of crude oil from its Shaikan development in the Kurdish north of Iraq. The company, which has headquarters in London, is producing oil from seven wells in the Shaikan development in the Kurdish north of Iraq. Total production was around 40,000 barrels of oil per day at the end of 2014. This week, it said it was engaged in talks with "a number of parties" about a possible sale of the company or transaction of assets. Earlier this month, it said it was owed an undisclosed amount of money from the Kurdish government. Company spokesman Mark Antelme said […]

Posted On : Published By : Tom Whipple