Crude oil prices are up, up, up. This may be good news for oil producing countries and IOCs, but few want to see prices being driven high enough to harm the economy on pure speculation.
But how high is too high? BP yesterday said $60 to $90 is the “right sort of level” and Opec members and officials have hinted they agree. Merril Lynch last month suggested OECD countries could tolerate up to $80, and as we’ve seen, Ali Naimi, the Saudi Arabian oil minister, said last month that $75 to $80 was okay. Read more
Pity the Saudi oil field engineer and accountant: Just as the kingdom enters the final stages of its massive, complex, expensive development programme to boost its production capacity to 12.5m barrels a day, the economic crisis hits and oil demand tanks.
For Saudi Aramco, the kingdom’s national oil company, this means the majority of work and expenditure was done while oil prices and costs of equipment and labour were astronomical and the world was breathing down their sun-burned necks, shouting, “faster, faster.” Now many of the projects are ready to come on stream, the company’s engineers are being told to keep the taps closed because no-one wants the oil, and Saudi Arabia is adhering to Opec’s reduced quotas.
That might be an easier order to swallow – especially for accountants back at Saudi Aramco’s headquarters – when prices are at $32 a barrel (the low they hit in February) but has become more difficult as prices have recovered to $72 a barrel – right where the Saudis want them. Read more
DNO, the Norwegian company that operates the Tawke field in Iraqi Kurdistan, gave a briefing on Thursday morning to discuss its oil exports through Iraq’s main pipeline to Turkey.
Although when the exports began on June 1 there was great excitement about them, there was one big problem: there is no agreement on how the exporters will get paid.
That affects not only DNO, but also Heritage Oil, the operator of the potentially vast Miran field, which is now merging with Genel of Turkey, and Addax Petroleum, operator of the Taq Taq field, which is in preliminary talks about a takeover or deal with KNOC of Korea. Read more
Miles Johnson writes:
Crude continued to rebound on Thursday, rising above $72 a barrel for the first time in seven months as the International Energy Agency said oil’s recent rally was in part justified by market fundamentals. Read more
The IEA’s upward revision of its oil demand forecast by 120,000 barrels per day came as welcome news to markets, supporting the $71+ price levels achieved in the past few days. It was certainly more substantial than the US energy department’s upward revision of a measly 5,000 barrels per day earlier this week. But the IEA maintains that this is not necessarily a sign of recovery.
The revision, it says, is mostly due to stronger than expected demand in petrochemical feedstocks in OECD countries:
However, the rebound of petrochemical activity, which reached historical lows in early 2009, is possibly due to restocking. By contrast, demand for transportation fuels remains very weak, suggesting that other economic sectors (notably services) are still constrained. As such, revisions have not been carried forward until more solid evidence emerges.
Further along, the report concedes that lower than expected falls in Japan could be due to restocking, but also ‘possibly renewed exports to China’. Read more
The push toward fuel made from cellulosic ethanol made a giant leap yesterday.
Royal Dutch Shell began a pilot program to sell for one month, starting today, regular gasoline at a single service station containing 10 per cent cellulosic ethanol. That’s right, ethanol made from wheat straw. This is what the world has been clamouring for - using the straw itself to make fuel instead of just the wheat, corn or soybean. In other words, using the rest of the plant – not the food itself.
Yet few are heralding such an important leap. This could well be because the service station that has become the first in the world to provide gasoline containing advanced biofuel made from wheat straw is in Ottawa, Canada. Not exactly easy for the world’s mainstream media to head out to.
Indeed, one has to wonder at Shell’s soft sell approach. Read more
- China criticise Japan over emissions pledge
Japanese premier Aso talks to the FT
- Concerns for recovery as oil surges
Oil prices rose to almost $72 a barrel (FT) Read more