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Short-Term Energy Outlook

Highlights North Sea Brent crude oil prices averaged $64/barrel (b) in May, a $5/b increase from April and the highest monthly average of 2015. Despite estimated global inventories increasing by more than 2 million barrels per day (b/d) for the third consecutive month, several factors contributed to higher prices in May, including continued signals of higher global oil demand growth, expectations for declining U.S. tight oil production in the coming months, and the growing risk of unplanned supply outages in the Middle East and North Africa. EIA forecasts Brent crude oil prices will average $61/b in 2015 and $67/b in 2016. The 2016 price forecast is $3/b lower than in last month’s STEO. West Texas Intermediate (WTI) prices in both 2015 and 2016 are expected to average $5/b less than the Brent price. The current values of futures and options contracts for December 2015 delivery suggest ( Market Prices […]

Posted On : Published By : Tom Whipple
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A $500 Billion Maybe: Why Big Iran Moment May Be Years Away

U.S. Treasury Secretary Jacob J. Lew. Photographer: Simon Dawson/Bloomberg For every investor who sees opportunity in a post-sanctions Iran, there are others who see the same old legal morass. The Islamic Republic is banking on a nuclear accord with world powers to unleash a flood of foreign cash into an economy crippled by decades of sanctions. Companies including Royal Dutch Shell Plc, BP Plc and Total SA say they’re willing to invest in the OPEC member. Major investments, however, may take years as companies weigh the risk of Iran violating the agreement, which would bring sanctions back, according to analysts and former officials. Decades of hostile relations with Western powers and tight scrutiny by the U.S. Congress and Treasury could also make many investors reluctant to jump back right away. “Businesses have become terrified about doing business with Iran, and it’s not easy to un-terrify them,” says Trita Parsi, […]

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U.S. Says It’s Firm on Iran Demands as Nuclear Deadline Looms

As Secretary of State John Kerry heads to Vienna Friday seeking to complete an agreement restricting Iran’s nuclear activities, two senior Obama administration officials rejected suggestions that the administration is backtracking on its demands in its eagerness for a deal. The U.S. is standing firm in insisting that Iran must grant access and transparency so that United Nations inspectors can verify that its nuclear program is solely for peaceful purposes, according to the officials, who are close to the negotiations and spoke on condition of anonymity. The officials’ insistence that Iran must adhere to the strict terms of an April 2 framework for a deal is significant because skeptics of a deal with Iran have raised alarms that U.S. negotiators are backsliding on their demands. “Despite getting virtually nothing in return, the president has handed Iran concession after concession after concession,” Republican House Speaker John Boehner of Ohio told […]

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U.S. lawmakers step up warnings against ‘weak’ Iran deal

WASHINGTON As talks on an Iran nuclear deal enter the final stretch, U.S. lawmakers are sharpening warnings against a "weak" agreement and laying down red lines that, if crossed, could prompt Congress to trip up a carefully crafted international pact. Several influential lawmakers said they do not want to see any sanctions lifted before Tehran begins complying with a deal, and want a tough verification regime in which inspectors could visit Iranian facilities anytime and anywhere. They also want Tehran to reveal past military dimensions of its nuclear program, particularly after Secretary of State John Kerry seemed to soften the U.S. stance last week by saying Iran would not be pressed on this point. "I have become more and more concerned with the direction of these negotiations and the potential red lines that may be crossed," Senator Bob Corker, the Republican chairman of the Senate Foreign Relations Committee, told […]

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ISIS Attacks Two Border Towns in Northern Syria

Photo As they waited at the border to cross into Turkey on Thursday, relatives of a woman who died after being wounded in Kobani, in northern Syria, mourned over her body. Credit Rodi Said/Reuters BEIRUT, Lebanon — The militants of the Islamic State carried out two new offensives in northern Syria on Thursday, entering a provincial capital and detonating large bombs in the border town of Kobani, where intensive airstrikes by a United States-led coalition helped Kurdish forces rout the jihadists last year. In southern Syria, rebel groups began a new campaign to push government forces from the city of Dara’a. The new attacks by the Islamic State came more than a week after its fighters lost the town of Tal Abyad, on the Turkish border, to Kurdish militias and Arab rebels in what was seen as a strategic setback for the group . In striking back, the Islamic […]

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Fuel Shortages to Hit Nigeria in Three Weeks, Seplat CEO Says

Nigeria will probably be hit by fuel shortages in three weeks as the government doesn’t have enough money to pay for gasoline subsidies, according to the head of Seplat Petroleum Development Co Plc. “In three weeks we will be back to scarcity because we simply don’t have the money to pay for the subsidy,” Austin Avuru, chief executive officer of Lagos-based Seplat, said on Thursday at a Bloomberg conference at the Nigerian Stock Exchange. Nigeria almost ground to a halt last month during the country’s worst fuel shortage in a decade due to a dispute between oil-product marketers and the outgoing government. The shortage left service stations closed, aircraft grounded, and businesses unable to operate. A lack of oil refining capacity means Nigeria subsidizes gasoline imports and suffers frequent fuel shortages even though it’s Africa’s biggest crude producer of about 2 million barrels a day. President Muhammadu Buhari, who […]

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Natural Gas Production in East Africa: An Inevitable Resource Curse

East African nations such as Mozambique, Uganda, Tanzania, and Kenya are experiencing a boom in oil and natural gas production that is increasingly exported by Western production companies to meet growing global demand. While these activities may appear to be an economic boon to these countries, the problem is that they could potentially cause natural gas to be a “ resource curse ” for these developing nations. A resource curse, or a “paradox of plenty,” can occur when the extraction of natural resources like fossil fuels and minerals in resource-rich countries contributes to slower economic growth than countries that are less abundant in these same natural resources. This effect could be mitigated if the government takes proactive steps to grow the rest of the economy, facilitate skills transfer, and combat corruption. Several economic mechanisms contribute to the resource curse. The import of foreign currency needed for foreign firms to […]

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Pemex in Talks With Union Over Pension, Labor Reforms

MEXICO CITY—State-owned Petróleos Mexicanos is in advanced talks with Mexico’s powerful oil workers union to lower labor costs via a pension overhaul and for more flexible work rules to secure its future in a newly competitive environment, according to people familiar with the negotiations. Success in renegotiating the collective bargaining agreement at Mexico’s biggest company by sales and staff could determine how well Pemex performs now that oil prices are low and the former energy monopoly faces private-sector competition for the first time, analysts say. Moreover, the Mexican government has said it would assume a significant portion of Pemex’s $100 billion in unfunded pension liabilities if the current system is successfully changed. “If they finally agree on these changes, it would be the most important step Pemex can take to guarantee it remains a dominant and competitive player in the long run,” said Leo Zuckermann, political analyst at the […]

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Pirates and hold-ups: crime strikes Venezuela’s oil industry

MARACAIBO, Venezuela When night falls over western Venezuela, armed gangs known as "pirates" sometimes ride boats into muggy Lake Maracaibo to steal equipment from oil wells. In the country’s Paraguana peninsula, opposite the Caribbean island of Aruba, slum dwellers at times break through a perimeter wall into Venezuela’s biggest refinery and rob machinery, construction tools, and cables to sell as scrap. On the other side of the OPEC country in Monagas state, around 26,000 potential barrels were lost in March during a shutdown after state oil company employees and contractors stole copper cables and caused a tank to overflow. Venezuela’s national crime pandemic – the United Nations says the country has the world’s second-highest murder rate after Honduras – is a growing headache for the oil industry, which accounts for nearly all of the country’s export revenues. Hold-ups and thefts in the sector are on the rise, taking a […]

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Wall Street Pumps Billions Into Renewable Energy

After years of lofty promises, Wall Street believes the renewable energy industry can produce a payoff. In just a few years, investors have gone from zero to billions in the amount of money they’re pumping into renewable-energy companies and environmentally friendly projects. Tax-equity funds and specialty financial tools like “green bonds” and yieldcos have become increasingly popular. And investments in the renewable-energy companies that benefit from these financial tools have far outperformed those in oil-and-gas drilling and coal mining since the start of 2013, according to Bloomberg New Energy Finance, a research arm of Bloomberg LP. Analysts, bankers and investors at the Renewable Energy Finance Forum in New York this week were ebullient. Many see the sector as past a tipping point: Skepticism has melted among the financial brokers of the energy world, and they have started to fund the renewable-power sector as a legitimate upcoming rival to fossil […]

Posted On : Published By : Tom Whipple