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Pouring oil on troubled waters: ‘Surplus until 2017’

Thomas Pugh economist at Capital Economics predicts oil could hit $55 per barrel for Brent crude at the end of 2015, with oil to remain in surplus for another couple of years. “The market is still going to be in surplus by this time next year, so by the time you actually have supply and demand starting to equate, it will be well into 2017,” he told CNBC via telephone. The oil industry is full of booms and busts. The norm for oil for the last decade has been $90 – $100 per barrel, but Brent is currently trading closer to $45 a barrel. The U.K. oil giant BP announced on Tuesday it was slashing costs as it prepares for a long term low oil price environment. The company is planning for oil to be around $60 per barrel until 2017. Jason Gammel, equities analyst at Jefferies, believes that […]

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US natural gas crashes to lowest level since 2012

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Iran Is Invited to Join U.S., Russia and Europe for Talks on Syria’s Future

WASHINGTON — Iran has been invited to join talks in Vienna this week with Russia , the United States and European nations on whether a political resolution is possible in the Syrian civil war. If Iran accepts, it will be the first time Secretary of State John Kerry will enter formal negotiations with Tehran on issues beyond the nuclear accord reached in July. Russia has been pressing to include Iran, the only other major power giving military support to President Bashar al-Assad in his effort to remain in power. Senior American officials have begun to acknowledge in recent weeks that no serious discussion of a possible political succession plan in Syria can happen without Tehran’s involvement. But the American denunciation of Iran’s activities in Syria, including its support for Mr. Assad’s forces and for terror groups like Hezbollah, has always prevented the United States from including Iran in formal […]

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Saudi Arabia Considers Cutting Energy Subsidies

RIYADH–Saudi Arabia, the world’s top crude-oil exporter, is considering raising its domestic energy prices, its oil minister Ali al-Naimi said Tuesday. Asked if the kingdom is considering cutting energy subsidies in the near term, Mr. Naimi told reporters in Riyadh: “What you are asking is: is it under study? And the answer is yes.” Saudi domestic energy prices are among the lowest in the world. The country, the de-facto leader of the Organization of the Petroleum Exporting Countries, is losing potential export revenue by selling oil domestically very cheaply when international buyers pay much higher prices. The country currently spends around $86 billion a year on subsidies for petroleum products like motor fuel, making a gallon of regular gasoline cost about 46 cents. The review has been previously reported, but isn’t something Saudi Arabia’s leaders have talked about openly. Any move to reduce energy subsidies would risk a backlash […]

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Analysts Forecast 3.7 Million-Barrel Build in Crude Stocks

NEW YORK–U.S. crude-oil stocks are expected to rise in data due Wednesday from the Department of Energy, according to a survey of analysts by The Wall Street Journal. Estimates from 13 analysts surveyed showed that U.S. oil inventories are projected to have increased by 3.7 million barrels, on average, in the week ended Oct. 23. Twelve analysts expect stockpiles to rise, while one expects a fall. Forecasts range from a rise of 6.4 million barrels to a drop of 3 million barrels. The closely watched survey from the Energy Information Administration is due at 10:30 a.m. EDT Wednesday. Gasoline stockpiles are expected to fall by 900,000 barrels, according to analysts. Ten analysts expect a decline, with two expecting a rise and another seeing no change. Estimates range from a rise of 1 million barrels to a drop of 2 million barrels. Stocks of distillates, which include heating oil and […]

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U.S. crude rises after inventory drawdown at Cushing hub

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. U.S. crude futures rose from multi-week lows in thin early Asian trade on Wednesday after an industry group reported that stocks fell at the Cushing hub in Oklahoma, the delivery point for U.S. oil contracts. Crude stocks at the Cushing delivery hub fell by 748,000 barrels, data from the industry group, the American Petroleum Institute, showed late on Tuesday. <API/S> General inventories rose by 4.1 million barrels in the week to Oct 23 to 477.1 million barrels, the data showed. Gains were limited as a supply glut persists even after U.S. production cuts and investors are awaiting official inventories data due out later on Wednesday that is expected to show further stockpiling. U.S. crude for December delivery was up 6 cents at $43.26 a barrel at 0049 GMT after […]

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Occidental Posts Loss as Oil’s Slide Bring Sales, Writedowns

Occidental Petroleum Corp. reported a third-quarter loss on sliding crude prices, a slump in production tied to the spin off of the company’s California business, and writedowns of the value of oil and natural gas fields. The company lost $2.61 billion, or $3.42 a share, compared with net income of $1.21 billion, or $1.55, a year earlier, Houston-based Occidental said in a statement Wednesday. Excluding some one-time items, the per-share gain was 3 cents above expectation. Estimates had ranged from a 15-cent loss to a 14-cent gain among the 27 analysts surveyed by Bloomberg. Occidental’s crude and natural gas output fell after the company cleaved off its West Coast holdings into a separate company in late 2014. A glut of North American supply has deflated the benchmark U.S. oil price by 52 percent to an average of $46.50 a barrel during the quarter from $97.25 a year earlier. The […]

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U.S. And China Still Driving Demand Higher

Despite prognostications otherwise, gasoline demand in the United States and globally continues to grow. Lower gasoline prices combined with net additions to the global fleet of vehicles powered by gasoline mean that despite increases in sales of electric and hybrid vehicles, gasoline demand will likely continue to grow in absolute terms in the near future. U.S. and Chinese Consumers Buying Bigger Cars Low gasoline prices in the United States has not only induced demand growth at the fastest year-over-year rate in 14 years but also the highest increase in auto sales in more than 10 years. U.S. consumers are also electing to buy heavier SUVs so the new fleet mix demands relatively more gasoline than anticipated by analysts in the past. While less robust than predicted prior to the recent Chinese economic slowdown , Chinese auto sales remain the highest volume of all nations. Chinese buyers have also elected […]

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Forget VW: Oil slump more to blame for weak U.S. diesel demand

A Sunoco station with current gasoline and diesel prices is seen during a fill up in Colesville, Maryland February 10, 2015. Long before Volkswagen AG’s ( VOWG_p.DE ) emissions scandal spelled bad times for diesel, U.S. consumption of the fuel was bafflingly weak. Despite surprisingly robust economic growth, rising truck cargo, and pump prices that fell to parity with gasoline for the first time in six years, U.S. diesel use rose by only 0.2 percent in the first seven months of the year. That marked a sharp contrast with gasoline demand, which rose nearly 3 percent at the fastest clip since the 1990s, according to Energy Information Administration (EIA) data. Analysts and traders see several factors at play: lower traffic on diesel-powered railroads due to reduced coal and oil shipments; an economy increasingly tilted to services rather than heavy industry; and the baseline effect from unusually strong heating fuel […]

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U.S. Plans to Sell Down Strategic Oil Reserve to Raise Cash

The U.S. plans to sell millions of barrels of crude oil from its Strategic Petroleum Reserve from 2018 until 2025 under a budget deal reached on Monday night by the White House and top lawmakers from both parties. The proposed sale, included in a bill posted on the White House website, equates to more than 8 percent of the 695 million barrels of reserves, held in four sites along the Gulf of Mexico coast. Sales are due to start in 2018 at an annual rate of 5 million barrels, rising to 10 million by 2023 and totaling 58 million barrels by the end of the period. The proceeds will be “deposited into the general fund of the Treasury,” according to the bill. The sale is the second time the U.S. has raised cash from the reserve, created as a counter-balance to the power of Arab producers after the first […]

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Shale-rich Oklahoma expecting budget squeeze

Oklahoma Governor Mary Fallin calls for cuts in non-essential spending as state coffers see dwindling revenue from oil and natural gas. File photo by J.P. Wilson/UPI OKLAHOMA CITY, Oct. 27 (UPI) — The governor of emerging oil and gas state Oklahoma signed an executive order calling for preparations for what’s expected to be a challenging budget year. Gov. Mary Fallin signed an executive order calling on all state agencies, boards and commissions to outline plans to cut non-essential expenses by 10 percent for the rest of the fiscal year and for the 2017 fiscal year, which begins July 1, 2016. "I’m asking every agency to start planning for potential spending cuts, and to develop a strategy that protects essential services," Fallin said in a statement. "It’s important we get ahead of this issue as we enter a difficult budget year." In a September report, State Treasurer Ken Miller said […]

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Weak oil market not yet caught up with Texas

Data from Texas show state oil production in August increased despite weak market. File photo by ekina/Shutterstock AUSTIN, Texas, Oct. 27 (UPI) — A preliminary estimate of the total crude oil production from Texas, the No. 1 oil producer in the nation, shows output remains resilient, state data show. The Railroad Commission of Texas, the state’s energy regulator, reports a preliminary estimate of crude oil production in August , the last full month for which data are available, was about 2.41 million barrels per day. That’s an increase of nearly 8 percent year-on-year. Crude oil prices started falling steadily in mid-2014 when markets moved toward the supply side because of the glut of oil coming from U.S. shale basins and weak global economic growth. China’s economy, once growing at a double-digit pace, is slowing down and other major economies, like the United States and Europe, are growing, but at […]

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Low oil prices helping U.S. drivers

Stockpiles at U.S. refineries a sign markets are still favoring the supply side, spurring benefits for most motorists, analysts find. Photo by akiyoko/Shutterstock. WASHINGTON, Oct. 27 (UPI) — Falling crude oil prices, driven in part by weak global economic growth, means gas prices should keep moving lower for U.S. motorists, analysts said. Motor club AAA reports a national average retail price for a gallon of regular unleaded at $2.20 per gallon for Tuesday, about 2.1 percent less than one week ago and 28 percent, or about 85 cents, less than this date in 2014. Lower crude oil prices , falling since late 2014, has translated to a general decline in retail gasoline prices for motorists. Brent, the global benchmark price, traded early Tuesday at $47.24 per barrel, about 45 percent less than one year ago. Gregg Laskoski, a senior petroleum analyst for consumer price watcher GasBuddy.com, reported a slowing […]

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Anadarko Petroleum Posts $2.24 Billion Loss

The Houston-based oil-and-gas exploration and production company has been hurt by the tumble in crude prices over the past 15 months. Anadarko’s third-quarter results included a number of special charges, totaling $1.88 billion on an after-tax basis, for impairments, losses on divestitures, and losses on derivatives. That drove Anadarko to an overall loss of $2.24 billion, or $4.41 a share, compared with a profit of $1.09 billion, or $2.12 a share, a year earlier. Excluding certain items, per-share loss was 72 cents a share. Analysts polled by Thomson Reuters had forecast a 73-cent loss. Total revenue, which includes gains and losses on divestitures, tumbled to $1.69 billion from $5.01 billion a year earlier. Shares of Anadarko, inactive in after-hours trading, are down 21% this year.

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Royal Dutch Shell to Abandon Carmen Creek Oil-Sands Project

CALGARY, Alberta— Royal Dutch Shell RDS.A -1.70 % PLC said Tuesday it would abandon the construction of a major oil-sands project in Western Canada and take a $2 billion write-down, a stark reflection of the challenging economics for unconventional oil projects amid a sharp slump in crude prices. The energy giant said it would discontinue its 80,000 barrel-a-day Carmen Creek oil-sands project, citing an uncertain business environment and highlighting concerns about sufficient pipeline capacity to ship oil-sands crude to markets. Several proposed pipeline projects connecting northern Alberta’s oil sands to refiners in the U.S. and elsewhere have been delayed by regulatory issues, including the Keystone XL pipeline to the U.S. Gulf Coast. “We are making changes to Shell’s portfolio mix by reviewing our longer-term upstream options world-wide, and managing affordability and exposure in the current world of lower oil prices. This is forcing tough choices at Shell,” Ben van […]

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Shell takes $2bn charge on Canada oil sands project

Sign up for quick access to a wealth of global business news, including: Newspaper + Premium online Newspaper + Premium online Premium Full FT.com subscription Premium Full FT.com subscription Standard Full news & archive Standard Full news & archive Trial Try Premium online Trial Try Premium online Price Monthly Annual $66.30 $11.77 per week $53.00 $9.25 per week $36.00 $6.45 per week $1.00 for 4 weeks $1.00 for 4 weeks FT Alphaville plus selected FT blogs yes yes yes yes Unlimited FT.com article access yes yes yes yes Unlimited mobile and tablet access yes yes yes yes Unlimited fast FT yes yes yes yes 5 year company financials archive yes yes yes yes The LEX column yes yes no yes ePaper access yes yes no yes Three exclusive weekly emails yes yes no yes Daily newspaper delivery yes no no For 4 weeks receive unlimited digital access to the […]

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The North Slope puzzle: more gas means less oil

During this week’s special session in Juneau, most lawmakers have been focused on whether the state should take a larger stake in the Alaska LNG project, which would build a natural gas pipeline from the North Slope. But on Monday afternoon (Oct. 26), the Senate Resources Committee met to hear about another crucial, if little-discussed issue: if you tap the state’s supply of natural gas, you’ll end up with less oil. Cathy Foerster of the Alaska Oil and Gas Conservation Commission, put it this way: “Taking the gas from an oil field…before all the oil has been produced, will – will , all caps – cause some of that oil to be lost,” Foerster said. “That’s not my opinion. That’s not somebody’s prediction…When you take the gas out of an oil field, and there’s oil still left, some of that oil is unrecoverable. Period.” That’s because the natural gas […]

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Norway’s Wealth Fund Suffers Biggest Loss in Four Years

Yngve Slyngstad. Photographer: Krister Soerboe/Bloomberg The world’s largest sovereign wealth fund posted its biggest loss in four years, dragged down by Chinese stocks and Volkswagen AG, just as the Norwegian government prepares to make its first ever withdrawals to plug budget deficits. The $860 billion fund lost 273 billion kroner ($32 billion) in the third quarter, or 4.9 percent, the Oslo-based investor said on Wednesday. Its stock holdings declined 8.6 percent, while it posted a 0.9 percent gain on bonds and a 3 percent return on real estate. It was the first back-to-back quarterly loss in six years. “We have to expect fluctuations in the value of the fund when there are large movements in the market,” said Yngve Slyngstad, its chief executive officer. “With the fund as big as it is today, this can have a considerable impact in the short term. The fund has a long-term horizon, […]

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Russian Bonds Decline as Ruble Swings Reduce Case for Rate Cuts

Russian bonds fell, sending yields higher for a second day, after a drop in the ruble this week raised the prospect that the Bank of Russia will struggle to justify resuming interest-rate cuts to support the economy. Yields on the government’s local-currency bonds climbed three basis points to 10.16 percent by 11:52 a.m. in Moscow. The ruble was little changed after slumping 3.9 percent in the previous two days. Forward-rate agreements showed wagers for interest rates to fall by 55 basis points in three months, down from 70 basis points at the end of last week. The ruble’s depreciation this week, which happened as oil fell and currency demand from exporters to pay taxes waned, may make it harder for Bank of Russia policy makers to justify restarting interest-rate cuts when they meet on Friday. Economists surveyed by Bloomberg are evenly split on their outlook for the decision, with […]

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Oil Prices Slide on Concerns About High Product Supplies

NEW YORK—Oil prices fell to a two-month low Monday on concerns about growing supplies of petroleum products and weak demand. Light, sweet crude for December delivery settled down 62 cents, or 1.4%, to $43.98 a barrel on the New York Mercantile Exchange, the lowest settlement since Aug. 27. Brent, the global benchmark, fell 45 cents, or 0.9%, to $47.54 a barrel on ICE Futures Europe, the lowest level since Sept. 28. U.S. prices have erased many of their gains from a sharp jump in late August, when declining U.S. production helped fuel the biggest three-day rally since 1990. Though analysts and investors expect U.S. output to keep falling, they say that continued high production in other countries will keep the market oversupplied. Traders are focused on rising inventories of refined products, including diesel. Analysts have long warned that the global glut of crude oil that sent prices plunging in […]

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After Years of Decline, U.S. Oil Imports Rise

An oil tanker unloads its cargo in New Jersey. U.S. imports of foreign oil are rising again after a long decline, as the oil bust forces domestic producers to scale back. Less than a year after the Organization of the Petroleum Exporting Countries opted to continue production despite plummeting prices, member countries including Saudi Arabia and Iraq are clawing back market share they ceded to oil companies pumping in Texas and North Dakota. U.S. crude imports declined 20% between 2010 and 2014 amid the domestic energy boom but have recently started to rise again. Total crude-oil imports rose for three straight months between April and July, according to the most recently available data from the Energy Information Administration. Imports of light crude grew more rapidly, from 5.6% of total imports in April to 11% in July. On the Gulf Coast, vessels carrying nearly a week’s worth of imports waited […]

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New way to bet on oil wipes out billions in investor savings

AP Photo/LM Otero NEW YORK (AP) — When Karen Robinson’s husband died, she worried she wouldn’t have enough money to raise her two young girls and save for retirement. Then she met a financial planner, Tom Parks, who told her about investment partnerships that would allow her to ride the boom in U.S. oil and gas production while receiving a steady stream of payments to help pay her bills. "He showed me this picture of the United States, and said they were getting oil out of shale, and energy was the way to go," says Robinson, a high school teacher from Cranfills Gap, Texas. She liked that Parks seemed so confident. "I trusted him." Two years later, her partnerships have plunged in value and Robinson has lost more than half of the $202,000 she invested, according to a complaint filed with regulators against Parks and his firm, Ameriprise Financial […]

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Diesel prices pressured by poor demand, high stocks

Vehicles are seen in queues as drivers wait to fill their tanks at a Sinopec gas station before the fuel price hike, in Zhengzhou, Henan province February 9, 2015. Reported stocks of crude and refined fuels continue to climb in the United States, pressuring on oil prices, but the stock build is concentrated in specific parts of the complex. Most of the stock build has occurred in crude petroleum and the middle distillates used for road diesel and home heating oil, while gasoline stocks have remained relatively normal. The result has been a marked weakening of diesel prices relative to gasoline since the second quarter of the year which has spread from the United States to Europe. According to the U.S. Energy Information Administration (EIA), the total volume of crude petroleum and refined products being stored in the United States hit a record 2 billion barrels this month. The […]

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Oil prices weak as demand seen sagging toward year-end

A pump jack operates at a well site leased by Devon Energy Production Company near Guthrie, Oklahoma September 15, 2015. Crude oil prices remained weak on Monday as a slowing demand outlook implied oversupply will remain in place for months, prompting speculators to cut their bets on rising prices. Front-month U.S. crude futures were trading at $44.69 per barrel at 1.57 a.m. ET, 9 cents above their last close but more than 12 percent below their October peak. International benchmark Brent was 8 cents higher at $48.07 a barrel, but over 10 percent below this month’s high. Goldman Sachs said that oil prices could drop "sharply lower" as refined product storage sites come close to filling, stoking a glut that has already seen crude prices fall by more than half since June 2014. ANZ said it expected prices to remain low for the rest of this year, due to […]

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Oil Speculators Make `Easy’ Bearish Call at 85-Year Supply High

Hedge funds placed the most bets on falling oil prices since July as rising piles of crude dashed hopes of a near-term recovery. Money managers’ short position in West Texas Intermediate crude jumped by 18 percent in the week ended Oct. 20, the largest surge since July 21, according to data from the Commodity Futures Trading Commission. That pulled their net-long position down by more than 16,000 contracts of futures and options. Crude stockpiles in the U.S. rose 22.6 million barrels in the past four weeks to the highest October level since 1930, even as producers have idled more than half their drilling rigs in the past year. A global surplus of crude could last through 2016, according to the International Energy Agency. “The decline in U.S. drilling and production is not enough to rebalance even the U.S. market, let alone the global market,” said Tim Evans, an energy […]

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NYMEX November gas slumps 22.4 cents, settles at three-and-a-half year low

Updated weather forecasts released Sunday triggered an even steeper decline on Monday. WSI’s six- to 10-day and eight- to 14-day outlooks call for above-average temperatures throughout the US, with particularly warm weather expected in the key consumption areas of the Upper Midwest and Northeast. "Today’s fall is purely a weather play. Mother Nature is not cooperating and the November contract is getting hammered," said Stephen Schork, principal at The Schork Report. Schork said the US industrial complex is in recession and overall US growth has traders skeptical about future gas demand. "With all of the gas in the ground and lackluster economic growth, we are going to need a very cold winter to push prices up," Schork said. Also putting pressure on futures prices are expectations that US power burn will fall. After averaging 26.5 Bcf/d in October, Platts unit Bentek Energy predicts power burn will fall to 23.6 […]

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Middle East May Suffer `Intolerable’ Heat, Climate Study Warns

Extreme heat waves with conditions “intolerable to humans" may become a regular occurrence in the Persian Gulf by century’s end, according to a study evaluating the consequences of unchecked global warming. Temperature and humidity levels exceeding anything previously recorded on earth may bake major cities including Abu Dhabi, Dubai, Doha and Dharhan, according to the research published Monday in the journal Nature Climate Change. Less severe but still “extremely dangerous" heat waves, now seen once every 20 years or so, would become “the normal summer day," said Elfatih Eltahir, an engineering professor at the Massachusetts Institute of Technology who co-authored the paper. “What we are talking about is significantly more severe than people have experienced anywhere before," Eltahir said in a conference call with reporters. The most extreme conditions “would exceed what a human body may be able to tolerate." The research studied what scientists call “ wet bulb […]

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Algeria Backs Venezuela on OPEC, Non-OPEC Summit to Boost Prices

Algeria supports Venezuela’s call for a summit among heads of state from OPEC and other oil-exporting nations in a bid to lift crude prices, Algerian Foreign Minister Ramtane Lamamra said. ”Algeria has always been a pioneer when it comes to strengthening solidarity between producing countries,” Lamamra said Monday in an interview in Paris after meeting President Francois Hollande. “We would only convene a summit if its success is guaranteed; meetings at the level of ministers and experts will therefore precede such an event.” Venezuela has proposed that heads of state from the Organization of Petroleum Exporting Countries and other oil producers meet in November to discuss the price needed to sustain investments in future supplies, the country’s Oil Minister Eulogio del Pino said on Oct. 21. Speaking in Vienna during a meeting of experts from OPEC and from outside the group, del Pino said Venezuela seeks to set an […]

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Iran lays out future upstream investment expectations

Iran lays out investment expectations for its energy sector over the next 10 years. IMF said a lack of investments curbing Iran’s economic growth. File photo by Maryam Rahmanian/UPI TEHRAN, Oct. 26 (UPI) — The exploration and production side of the energy sector needs the bulk of the focus for a re-emerging Iran, a managing director at Iran’s oil company said. Iran next month rolls out the preliminary terms for contracts in a post-sanctions climate. Ahead of next month’s investment conference in Tehran, Ali Kardor, deputy managing director at the National Iranian Oil Co., said the county needs at least $250 billion in new investments . "During 2016-25, our upstream sector needs $176 billion and the downstream sector needs $77 billion of investment," he said. Lower crude oil prices, down about 45 percent from last year, has forced most major energy companies to cut back on spending in exploration […]

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Iranian State Oil Company in Talks With India’s ONGC Over $10 Billion Gas Project

India’s Oil and Natural Gas Corp. EQONGC -0.33 % is in talks with Iranian state company Pars Oil and Gas Co. to return to a $10 billion gas project that it abandoned because of American pressure, a top official in Tehran said Wednesday. The Indian company, known as ONGC, approached the Iranians last week during an energy conference in Tehran, said Ali-Akbar Shabanpour, the managing director of Pars Oil and Gas Co., in an interview. ONGC is interested in returning to Farzad B, a giant natural gas concession in the Persian Gulf overseen by Mr. Shabanpour’s company. ONGC discovered gas in the field in 2008, but left the project after 2010 as the U.S. pressured countries to quit doing business with Iran because of its nuclear program. “They came to us” to discuss reviving the deal, Mr. Shabanpour said. "We will get the history and documentation of the project” […]

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‘Intolerable’ Heat May Hit the Middle East by the End of the Century

Photo Pilgrims prayed in Mecca, Saudi Arabia, in September. A study warning of "intolerable" temperatures in some Middle East population centers due to climate change could have severe consequences for the annual hajj pilgrimage. Credit Ahmad Masood/Reuters By the end of this century, areas of the Persian Gulf could be hit by waves of heat and humidity so severe that simply being outside for several hours could threaten human life, according to a new study published Monday. Because of humanity’s contribution to climate change , the authors wrote, some population centers in the Middle East “are likely to experience temperature levels that are intolerable to humans.” The dangerously muggy summer conditions predicted for places near the warm waters of the Gulf could overwhelm the ability of the human body to reduce its temperature through sweating and ventilation. That threatens anyone without air-conditioning — including the poor, but also those […]

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Saudi Arabia’s Fiscal Break-Even Oil Price to Be Around $US 100 Mark for the Foreseeable Future

Extract: Government spending has increased substantially in recent years. Consequently, the breakeven oil price rose to $106 a barrel in 2014 from $69 a barrel in 2010. As a result, with the large decline in oil prices, the fiscal deficit has increased sharply and is likely to remain high over the medium-term. These deficits will rapidly erode the fiscal buffers (in the form of government deposits and low public debt) that have been built over the past decade. http://www.imf.org/external/pubs/ft/scr/2015/cr15251.pdf Let’s put this into some graphs. We start with the fiscal deficit first, then look at the external balance. Expenditure Fig1: Expenditure, Budgetary Central Government Operations During the period of high oil prices until 2014, expenditure grew by 9-15% pa. In early 2015, King Salman disbursed a bonus of 50 bn Riyal to government employees, contributing to a 30% increase of the annual wage bill. Capital expenditure (transportation, health and […]

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Africa Must Allow Currencies to Fall to Absorb Shocks, IMF Says

Sub-Saharan African countries should allow their currencies to weaken to absorb shocks to their economies, the International Monetary Fund said. Resisting currency pressure depletes foreign-exchange reserves and results in weaker imports and economic growth, the Washington-based lender said in its Regional Economic Outlook for sub-Saharan Africa. Sliding commodity prices have put African currencies from Ghana to Zambia under pressure, forcing governments to scale back spending as debt rises and prompting central banks to implement aggressive monetary policy tightening to curb inflation. Nigeria, Africa’s biggest oil producer, has resisted devaluing its currency despite a plunge in crude revenue, imposing foreign-currency controls instead that are undermining economic output. “Interventions should be limited to disorderly movements of the exchange rate,” the IMF said. “Monetary policy should only respond to second-round effects, if any, of exchange rate pass-through and other upward shocks to inflation.” The IMF is forecasting economic expansion of 3.8 percent […]

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Nigeria: Country’s Crude Oil Prices Dip to Two Months Low

The prices of Nigeria’s crude oil grades have recorded significant decline over the last two weeks, fuelling concerns over the ability of the country to meet its revenue target and fund its budget. This was even as shipping companies have started hiking their price for the lifting of crude oil from Nigeria. Meanwhile, the call, weekend, by Lamido Sanusi, Emir of Kano and immediate past governor of the Central Bank of Nigeria, CBN, for the removal of fuel subsidy has continued to draw reactions from stakeholders and industry experts. 5Data obtained, weekend, from Platts, a global energy information service, revealed that Nigeria’s crude oil grades had, over the last two weeks, dropped between 60 cents and 40 cents, the lowest in two months. According to the report, Nigeria’s flagship crude oil grade, Qua Iboe, was assessed at a premium to Dated Brent of $0.65 per barrel, the lowest since […]

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Long-awaited pipeline through Afghanistan moving forward

Parties to a gas pipeline planned east from Turkmenistan sign long-awaited shareholder agreement to steer project forward. File photo by Hamid Forotan/ISNA MANILA, Oct. 26 (UPI) — Roughly 15 years in the making, a multilateral agreement on the planned Turkmenistan- Afghanistan -Pakistan-India natural gas pipeline was signed during meetings in Ashgabat, the capital of Turkmenistan. Members of a pipeline consortium planning the gas pipeline east from Turkmenistan announced their preliminary shareholder arrangements at a steering committee. Sean O’Sullivan , director general for the region at the Asian Development Bank, which supports the project, said the momentum was a welcome milestone for the project . "ADB looks forward to the stakeholders continuing to build on the strong momentum in the implementation of the TAPI pipeline project," he said in a statement. Project leaders include Turkmengaz, the consortium leader and state-run gas company of Turkmenistan, and Indian energy company GAIL. Turkmengaz […]

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Some U.S. bond funds bet on high-yield survivors of oil carnage

People walk past the New York Stock Exchange in the Manhattan borough of New York, September 21, 2015. High-yield energy bonds are on track for their worst year since the global financial crisis yet some funds are holding on, convinced that markets underestimate the ability of many oil companies to ride out the crude price slump. Some money managers such as Western Asset Management Co., Eaton Vance Corp. and Aberdeen Asset Management have broadly held on to their investments in bonds of oil and gas producers throughout the year even as now they lag more than 95 percent of their peers, according to Morningstar data. Their exposure to energy is around 10 percent or more, with varying shares of that in high-yield energy debt. The average yield on U.S. high-yield E&P credits has risen to 13.7 percent through Friday from 10.6 percent at the end of last year, according […]

Posted On : Published By : Tom Whipple
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Oil Heads East, Leaving an Oklahoma Pipeline Unusually Empty

A pipeline to America’s largest oil hub is about to find itself in an unfamiliar position: not full. One of the main pipelines that carries crude to Cushing, Oklahoma, will run at less than capacity in December for the first time in nearly two and a half years. The drop in supply coincides with the opening of a pipeline to Quebec, giving shippers the option of diverting some oil from the middle of the U.S. “There will be less light sweet crude available to make its way to Cushing,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “There’s going to be some significant rebalancing of where oil flows in North America.” Shippers on Enbridge Inc.’s Spearhead pipeline only asked to transport about 155,000 barrels of crude a day in December, below the system’s capacity to move about 193,000 to Cushing from Flanagan, Illinois. It’s the first […]

Posted On : Published By : Tom Whipple
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Has oil-rich North Dakota passed downturn?

Data from North Dakota show exploration and production activity in the shale-rich state may be stabilizing. UPI/Gary C. Caskey BISMARCK, N.D., Oct. 26 (UPI) — The number of rigs actively exploring for or producing oil and gas in North Dakota held steady for the third straight week, state data show. The North Dakota Industrial Commission reports 68 rigs in service as of Monday , unchanged for the last three weeks. Rig counts serve as a barometer for the health of an energy sector burdened by depressed crude oil prices, down roughly 45 percent from this time last year. The price for West Texas Intermediate, the U.S. benchmark for crude oil prices, of $44.60 per barrel is down about 8 percent from the start of October. Year-on-year, the number of rigs in service in North Dakota, the No. 2 oil producer in the nation, is down 65 percent. In terms […]

Posted On : Published By : Tom Whipple
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Duke Energy to Buy Piedmont Natural Gas for $4.9 Billion

The Duke Energy Gallagher Station power plant in New Albany, Indiana. Duke and Piedmont are based in Charlotte, N.C. and deliver natural gas to homes and businesses in different regions. But Duke primarily owns electric utilities that serve customers in seven states in the Midwest and Southeast. Duke’s all-cash acquisition price of $60 a share for Piedmont amounts to a 40% premium to that stock’s closing price on Friday. Similarly, Southern’s $66-a-share buyout of AGL represents a 38% premium for that company. Duke and Southern are willing to pay high premiums for the regulated gas companies because they offer reliable returns and a way to capitalize on the glut of natural gas. U.S. utilities anticipate only modest growth in electricity sales in the next few years, but gas demand is expected to be robust. That demand will be particularly strong in eastern regions where new natural gas pipelines are […]

Posted On : Published By : Tom Whipple
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Technical review outlines challenges for both batteries and fuel cells as basis for electric vehicles

In an open-access invited review for the Journal of the Electrochemical Society , Dr. Oliver Gröger ( earlier post ), Volkswagen AG; Dr. Hubert A. Gasteiger, Chair of Technical Electrochemistry, Technische Universität München; and Dr. Jens-Peter Suchsland, SolviCore GmbH, delve into the technological barriers for all-electric vehicles—battery-electric or PEM fuel cell vehicles. They begin by observing that the EU’s goal of 95 gCO 2 /km fleet average emissions by 2020 can only be met by means of extended range electric vehicles or all-electric vehicles in combination with the integration of renewable energy (e.g., wind and solar). Based on other studies, they note that without an increasing percentage of renewables in the European electricity generation mix, the only vehicle concept which could meet the 95 gCO 2 /km target is the pure battery electric vehicles. (Hydrogen produced via electrolysis using the EU mix or by natural gas reforming would exceed […]

Posted On : Published By : Tom Whipple
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Inside the Secretive Circle That Rules a $14 Trillion Market

Fifteen of the biggest players in the $14 trillion market for credit insurance are also the referees. Firms such as JPMorgan Chase & Co. and Goldman Sachs Group Inc. wrote the rules, are the dominant buyers and sellers and, ultimately, help decide winners and losers. Has a country such as Argentina paid what it owes? Has a company like Caesars Entertainment Corp. kept up with its bills? When the question comes up, the 15 firms meet on a conference call to decide whether a default has triggered a payout of the bond insurance, called a credit-default swap. Investors use CDS to protect themselves from missed debt payments or profit from them. Once the 15 firms decide that a default has taken place, they effectively determine how much money will change hands. And now, seven years after the financial crisis first brought CDS to widespread attention, pressure is growing inside […]

Posted On : Published By : Tom Whipple
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Deepwater Horizon ripples help sink US Arctic drilling

Investigators into the 2010 Deepwater Horizon disaster in the US Gulf of Mexico often lament the failure of Congress to pass any meaningful safety-related measures informed by the lessons learned from the tragedy. But make no mistake — the ripples of Deepwater Horizon have been felt by the industry and can be clearly seen in the decision of Shell to abandon its offshore Alaska exploration as well as the canceling of Arctic lease sales for the remainder of the current US five-year leasing plan. The Macondo Effect, if you will, can also be seen in more subtle ways, as a close reading of the recent 300-plus page final consent decree between BP and federal and state governments reveals. Shell’s decision to indefinitely suspend exploration offshore Alaska may have been sparked mainly by the disappointing results from the one well spud in the Chukchi Sea. But the company made it […]

Posted On : Published By : Tom Whipple
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Dispelling The Oil Storage Myth

Summary One concern hitting many investors recently has been the possibility that the U.S. is approaching full oil storage capacity. If true, this would certainly result in firesale energy prices at some point, throwing oil and other products down much lower than they are today. Upon digging into this, however, I discovered something that should dispel the concerns investors have regarding peak storage capacity that should allow long-term oil bulls to sleep at night. One thing that some of my readers have brought up on a regular basis has been the question of how much of this nation’s oil storage capacity is full since commercial crude inventories are at 80-year highs. At first glance, this may not seem like an important topic but it’s actually exceedingly important to oil investors for one particular reason; if we were to max out our storage capacity, the price of crude and other […]

Posted On : Published By : Tom Whipple
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BP Details Plans to Cope With Weaker Oil Prices

LONDON— BP BP -1.88 % PLC on Tuesday laid out plans to cope with an extended period of low oil prices that anticipate crude at $60 a barrel in 2017 as it reported third-quarter earnings that nearly halved compared with a year earlier. The oil industry has been buffeted over the last 16 months by a sharp slump in oil prices. The third quarter was particularly brutal as the price of international benchmark Brent crude dropped to around $50 a barrel, its lowest level since the financial crisis and roughly half its level during the same period last year. Brent traded at about $47 a barrel on Tuesday. BP has already announced plans to cut spending and reduce costs this year in preparation for a sustained period of low prices, but on Tuesday gave the first indication of its longer term plans and price expectations. Shares in BP rose […]

Posted On : Published By : Tom Whipple