Daily Archives: June 15, 2009

Ed Crooks

Gazprom’s company song is probably the only example of a company in a safety-conscious industry that encourages alcohol consumption. The video is certainly impressive, with its shots of some tough-looking Siberian operations and the spectacular Moscow head office, even if the singer leaves something to be desired in the glamour stakes. It is exactly what you need to cheer you up at a time when things haven’t been going too well with one of your key suppliers.

Ed Crooks

Addax Petroleum shares were up almost 14 per cent on Monday morning after the Sunday Times report at the weekend that Sinopec of China had made an indicative offer, valuing Addax at about £4.8bn.

The listed Sinopec group said it had not made a bid, but left open the possibility that its state-owned parent group might have made an approach.

The news follows the emergence of last week of the Korea National Oil Company as a possible bidder.
The possible bid or bids turn the spotlight on Jean Claude Gandur, Addax’s chief executive and president, who has a hold over almost 40 per cent of the shares.

The outcome is also likely to be tightly bound up with the politics of Iraq.

Kate Mackenzie

On Energy Source:

What Monty Python can tell us about commodities

Markets: retreat as Wen questions recovery

Drivers already feeling oil price rise

Australian resources companies under fire over carbon comments

Shell’s outlook for oil production and prices: why $70 oil matters

Cap-and-trade versus everything else

It’s an oil shock, but not as we know it

Elsewhere:

Mexico state oil co optimistic on two fields
Pemex seeks to counter Cantarell’s decline (Rigzone)

We need a stable oil price: but we’re at the mercy of Opec
Author David Strahan says declining non-Opec production is a risk (Independent)

Shell’s cellulosic ‘first’ is more of a second
A somewhat qualified debut (Green Inc/NY Times)

Whither cap-and-trade? An IM exchange
Felix Salmon learns about Waxman-Markey (SeekingAlpha)

GOP Energy plan draws heavy flak
Nuclear proposals raise a lot of ire (Environmental Capital/WSJ)

Fuel filters clogged with kebab fat
The drawbacks of DIY biofuel (Guardian)

Emirates must decide whether oil partners are worth keeping
Concessions for the likes of Shell and Exxon near end (The National)

Kate Mackenzie

For those who missed it on Saturday, John Authers combined the two topics. The commodities surge of recent weeks, he writes, could reflect a scenario similar to the cheese shop sketch; or it could reflect the dead parrot sketch.  Which one depends whether the tentative signs of demand picking up reflect genuine green shoots, or simply the effect of re-stocking.

One explanation is the cheese shop scenario; that demand is drastically outstripping supply. Manufacturers across the world leapt to close off production last year, either because they expected lower demand or because the credit crunch meant that they could no longer get financing.

That would support the ‘super cycle’ theory of commodities markets, and the peak oil thesis.

Commodities staged a broad retreat on Monday as a stronger dollar and cautious comments from Chinese premier Wen Jibao over the durability of economic recovery in the world’s third largest economy.

Gains seen across commodities last week also prompted analysts to question whether the rally had been over bought and a correction was due.

“We retain our view for a strong correction in the price of oil from current levels, albeit we push back the bulk of this correction to July on the assumption of a slow release of oil tied up in floating storage,” said Harry Tchilinguirian of BNP Paribas.

“On the fundamental side, a high level demand cover by inventories in OECD countries, OPEC slippage in compliance with stated targets reductions in supply and still weak economic activity combine to put downward pressure on the oil price.”

Comments from Wen that the drop off in foreign demand for Chinese goods could hamper the country’s economic growth knocked the confidence of investors convinced that a sharp upturn in Chinese demand will reinvigorate the commodities markets.

Read the full commodities report on FT.com

Kate Mackenzie

The LA Times’ car blog says drivers are again reacting to rising gasoline prices. While the average for the state on Friday was $2.96, prices above $3 have been spotted at some gas stations, and a recent survey shows drivers are taking note:

Kelley, the Irvine-based auto information firm, surveyed new car shoppers last month about gas prices and found that more than 60% have changed their buying approach because of rising pump prices, with many saying they would make compromises in their choice of a new vehicle in order to save money on gas.

The No. 1 compromise was moving to a smaller engine (a four-cylinder, say, instead of a V6 or V8). That was followed closely by vehicle size (moving down to a mid-sized sedan from a larger model, for instance).

Significantly, 87% of new car shoppers said last month that they expected gas prices to rise, compared with 66% in April. And 73% said they plan to change their spending habits if gas prices go much higher.

So rising oil prices may take care of what US politics can’t do, in terms of encouraging a shift to smaller cars.

As the blog points out, it could be a happy coincidence for the auto companies if growing popularity of smaller cars helps them meet new emissions standards. The new scrappage scheme doesn’t look like it will help, as it will also provide rebates for some SUVs.

Related links:

Cash for clunkers scheme put to the test (FT, 15/06/09)
$3 gas is back and car buyers are noticing (LA Times, 12/06/09)
Tough standards are welcomed (FT, 20/05/09)

Kate Mackenzie

Australian resources companies are being criticised for their strong warnings to government and the media on the cost of a proposed carbon reduction scheme, while making milder comments to markets on the likely material impact.

The Australian Conservation Foundation and Australian Climate Justice Project filed a complaint with the country’s competition and consumer watchdog to investigate claims by Boral, Bluescope Steel, Caltex Australia, Rio Tinto, Woodside Petroleum and Xstrata.

Kate Mackenzie

BP close to choosing chairman
Former BHP Billiton chief executive Paul Anderson on shortlist (FT)

Qatar, Shell in talks on joint projects outside country
Gas rich state considers foreign investments (Bloomberg)

Long View: Surreal goings-on in the commodities show
Rising prices could stifle a recovery; or knock the economy right off its perch (FT)

Bid decision for Addax chief
Stands to gain £1bn-plus by recommending bid (FT)

China Petroleum isn’t bidding for Addax, spokesman Huang says
Sinopec £4.8bn bid ‘isn’t clear’ (Bloomberg)

Chesapeake in 50/50 global shale gas JV with StatOilHydro: CEO
McClendon provides few details of partnership (Platts)

Climate change talks move at glacial pace
Hopes for July G8 meeting as Copenhagen deadline draws nearer (FT)

FutureGen ‘clean coal’ project scaled back by Obama
Revived, but with more modest targets (Bloomberg)

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