Daily Archives: May 29, 2009

Kate Mackenzie

Climate change is responsible for 300,000 deaths this year, and will be responsible for 500,000 by the year 2030, according to the Global Humanitarian Forum, led by Kofi Annan. And it gets worse. The study estimates:

…that climate change seriously affects 325 million people every year, a number that will more than double in 20 years to 10 percent of the world’s population (now about 6.7 billion).

Economic losses due to global warming amount to over $125 billion annually — more than the flow of aid from rich to poor nations — and are expected to rise to $340 billion each year by 2030, according to the report.

After those rather unpleasant figures sink in, the first question you might have (if you’re like me, anyway) is: how did they get those numbers?

Kate Mackenzie

Kjell Aleklett, a Swedish physics professor and president of ASPO, the main peak oil association, is taking on the IEA over future liquid hydrocarbon supply.

Platts reports Aleklett will present a paper for peer review and inclusion in the journal Energy Policy that says the IEA’s projections of liquid output of 101.5m barrels per day by 2030 is too high.  He puts the number at 75m bpd.

The difference between the IEA and Aleklett’s work is fairly straightforward. Aleklett adopts what he calls a “parameter” in determining the rate of depletion in fields that have yet to be developed or fields yet to be discovered, two key elements in the IEA’s projections.

(As another data point, the US Energy Information Agency, which launched its annual International Energy Outlook report this week, projects 107m barrels per day of liquids production in 2030, including 12m from unconventional sources).

Platts points out Aleklett is a physicist, not a geologist. Either way, we await the peer review outcome with interest.

Related story:

Peak oil vs NewsWeek (FT Energy Source, 22/04/09)

Opec dislikes speculators, or that is what the cartel says.

In the words of Abdalla El-Badri, Opec’s secretary general, on Friday speculators are back, not only to crude oil, but into all commodities. “We are not happy… and we do not want to see them to be a factor in prices.”

But at this week’s meeting in Vienna, others at Opec – and Mr El-Badri has also contributed his bit – have done everything possible to stir speculators back to buy crude oil. Ali Naimi, Saudi oil minister, has been extremely upbeat, even venturing to offer speculators a price forecast for the end of the year. “The price is good, the market is in good shape and the recovery is under way, so what else could we want?”

Mr Naimi, traditionally circumspect about prices, went onto to say ahead of the Opec’s meeting that oil prices could surge to $74-$80 by the end of the year. With the most senior Opec official in a rare on the record statement pointing to a potential increase in prices of $20 from pre-Opec’s meeting of $60 a barrel, is easy to understand why speculators are betting heavily into rising oil prices. On Friday, the Opec secretary general joined Mr Naimi, saying that the oil rally is likely to continue, forecasting oil prices by the end of the year at least at $70 a barrel.

Is this a real expectation, or are Opec’s most senior officials just trying to attract speculators by pushing up the price?

We reported on Thursday that at least some within the cartel are welcoming speculators back to the oil market:

Opec delegates in Vienna said Saudi Arabia appeared confident that the flow of money into commodities – as investors worry about a pick-up in inflation because low interest rates or a further weakening of the US dollar – would help to support oil prices. Speculative flows, long an Opec foe, could turn into an ally, they said.

John van Schaik at Petroleum Intelligence Weekly points in the same direction, but going further adding that Opec is deliberately trying to steer market sentiment an attract speculators:

Opec ministers … now banking on oil market speculators to support prices.

Unable to cut more output to bring the market into balance in the short term, Opec, led by Saudi Arabia, is trying to steer market sentiment away from the current supply overhang and bulging stocks and toward expected higher oil demand later this year and the perceived supply crunch.”

Opec’s comments could equal to add petrol to the fire. According to Barclays Capital: “risk appetite is slowly but surely on the rise, and commodities are gaining favour quickly.” The bank adds: “Institutional investors, Sovereign Wealth Funds and asset managers alike are going overweight commodities too.”

Having fallen to some of the lowest levels in two years, hedge fund exposure to commodities has increased sharply over the past few weeks, primarily on the long side. Net length, or speculative bets on higher prices, in US commodity futures markets has increased to the highest level in 10 months, equal to 12 per cent of total positions.

Related story:

Opec bets on recovery to boost price (FT, 28/05/09)

Kate Mackenzie

On FT Energy Source:

Steep crude price rise is tolerable, so far

Markets: Oil hits six-month high

Second generation biofuels: Still five years away?

Another view on cap and trade giveaways

Elsewhere:

Markets: Oil continues to outperform oil stocks But current ratio is near its average over the past seven years (SeekingAlpha)

Resources: Arctic may hold twice as much oil at previously thought And it could create tension in the surrounding regions (CNN)

China: No advances in US-China climate talks Five days of talks fail to yield much progress (NY Times)

Cap and trade: A new agency to regulate US carbon market? New responsibility doesn’t fit with FERC, CFTC or EPA, says Suedean Kelly (Power Lines/Platts)

Tech: Greenpeace rates IT companies Kind words for Sun; 2 out of 100 for Toshiba (CNet)

Nuclear: EIA projections assume China won’t  meet its nuclear targets Suggests Russia won’t, either (Next Big Future)

Politics: Beware of Obama’s ‘Battery Gold Rush’ Governments shouldn’t pick winning technologies (Reuters/Greenwirebiz)

Safety: Shots from range hit near nuclear power plant “Typically, officers shoot southward, away from the plant, while on the firing range, but during the exercise, officers somehow fired eastward.” (Washington Post)

Kate Mackenzie

Javier Blas reports from Vienna:

Oil prices on Friday rose above $66 a barrel, setting a fresh six-month high and heading for their biggest monthly gain in more than 10 years, following Opec’s upbeat comments about oil demand in Asia at its meeting this week.

Abdalla El-Badri, Opec’s secretary general, said prices could rise to $70-$75 a barrel by the end of the year. “The outlook is improving,” Mr El-Badri said over breakfast. But added: “The fundamentals are still weak.”

Mr El-Badri was explaining Opec’s decision on Thursday to keep its production unchanged, betting that the strengthening of the global economy will push prices.

In early trading on Friday, West Texas Intermediate, the US benchmark, rose to $66.01. WTI has risen 29.1 per cent this month and is on course for its best month since March 1999, when it gained 36.5%. Oil has risen 48 per cent so far this year. Brent, the European crude benchmark, was 74 cents higher at $65.13 after touching a six-month peak at $65.19 a barrel.

Meanwhile Izabella Kaminska compare’s today’s oil moves with a similarly-shaped fall in the dollar.

Related stories:
Commodities report (FT, 29/05/09)

Kate Mackenzie

Olivier Jakob at Petromatrix points out on Friday:

Today is the last trading day of the month and if things are left unchanged at the close then May 2009 will print in absolute terms the highest monthly gains ever for WTI, beating by a few cents the month of… May 2008.

So far the rise in crude prices has not spooked anyone; it has been a relatively gradual increase. The rise has even been welcomed by consuming nations, not just as a possible sign of economic recovery (although this is debatable) but as protection against a devastating fall in investment that lower prices create. Consuming nations were warning of the ill effects of low oil prices at the G8 energy ministers’ summit in Rome last weekend:

Italian Energy Minister Claudio Scajola said: “A low oil price helps in times of economic crisis but discourages investment and does not guarantee a future of stability. It is necessary to have an equitable and not volatile price that can guarantee global economic growth and also the possibility of investment.”

So far so good – as long as it doesn’t go too high and threaten growth.

Related stories:

Oil prices caused the recession, redux: and what it means for the future (FT Energy Source, 26/05/09)
Opec: $75 – $80 oil is okay, says Naimi (FT Energy Source, 27/05/09)

Fiona Harvey

Steven Chu, the US secretary of energy, is a fan of second generation biofuels. But he doesn’t call them that.

In his interview with the FT, he says: “I like to talk about 4th generation biofuels.”

First generation is burning wood. He didn’t make it quite clear what the second and third generation are, but broadly in between comes ethanol and then a new generation of biofuels scientists are currently working on, to make liquid fuels from waste.

He says that the “technologies and the science we’re doing today is quite different. There are synthetic biology tools that simply weren’t available to us five years ago.”

James Fontanella-Khan

- Opec bets on recovery to boost price
Cartel deliveres optimistic message about the global economy (FT)

- Obama says will talk to Saudis about oil prices
US president says oil dependency is not in Suadi’s interest (Reuters)

- Brazil to open up vast offshore fields
International oil companies will be invited to bid for concessions (FT)

- Gazprom to boost 2009 investment in gas pipeline from Sakhalin
Russian giant has decided to increase spending (Platts)

- France’s EDF to launch retail bond
France’s state-controlled group plans to raise at least E1bn (FT)

- Gold Reserve vows to fight Venezuela’s move to end mining rights
Canadian company to challenge Venezuelan government (Platts)

- Hoon eyes new transport climate accord
Transport secretary wants shipping and aviation included in deal (FT)

- China vows ‘constructive’ role in climate protection
US senator John Kerry says China will increase co-operation (Bloomberg)

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