Daily Archives: June 17, 2009

By Izabella Kaminska

EIA stock data is out:

EIA stock data - Reuters

All of the above suggests one thing to us: floating storage may have been restocked last week and not – as some reports have suggested – offloaded due to a dissipating contango.

This certainly would explain the larger than expected crude draw in the face of unchanged refinery utilisation, and only a small rise in imports.

The build in gasoline, meanwhile, suggests higher gasoline prices at the pump may finally be beginning to affect demand, which explains the bearish crude oil reaction:
WTI crude prices

As for the smaller than expected distillate build, that could very well be down to the new practice of storing distillates on floating storage too.

Related links:
The big floating storage debate
– FT Alphaville
‘Demand is in the toilet’
- FT Alphaville
Distillate hangover
– FT Alphaville

Kate Mackenzie

The competition for US government assistance to build new nuclear plants is heating up. The Wall Street Journal says four power companies are expected to share in $18.5bn worth of loan guarantees to fund the construction of new nuclear plants. NRG Energy, SCANA, Unistar Nuclear Energy and Southern Co were the among 17 companies competing for financing.

There was no mention of Comanche Peak Nuclear Power, which Reuters reported in early May had dropped to fifth place as a ‘first alternate’ after those four likely successful applicants.

Finding adequate funding is one of the biggest challenges in building new nuclear plants, as they require huge investments and pay off over very long time periods.

Carola Hoyos

Oil companies working in Iran have been unfazed by the violent demonstastrations that errupted after the presidential elections. Statoil, for example, is giving the small group of expats it employs there the choice to leave if they chose to and considering asking family members to leave, but business goes on as usual.

Schlumberger, the oil services company, is in a similar boat, with most of its employees out in the fields, far away from the unrest in Tehran.

If ever there was an industry used to working under tense political conditions, it is the oil and gas sector.  As one executive says: “You don’t find oil in Switzerland.”

Update: Statoil has now pulled expat workers’ families out of Iran.

Related links:

Statoil may pull expat families from Iran (Reuters, 16/06/09)
Foreign executives watch Iran’s protests and wonder..
(FT Energy Source, 16/06/09)

Kate Mackenzie

On FT Energy Source:

Climate change and the battle for hearts and minds in the US

Gazprom delays China pipeline: another project hold-up

Markets: OIl dips ahead of EIA data

Foreign oil executives watch Iran’s protests and wonder

Exxon chief says it’s about the dollar, not fundamentals

Rising crude and inflationary expectations


Crack Attack (Scarce Whales)

A pre-assembled nuclear reactor (Technology Review)

Will a royalty relief repeal slow oil and gas drilling in Gulf of Mexico? (Bnet)

An electric grid index (SeekingAlpha)

BP retreats to a paler shade of green (The Globe and Mail)

Viewpoint: China ‘unfairly seen as eco-villain’ (BBC)

Iraqi oil minister called to explain deals (The National)

Stimulus packages a boon for efficiency (Green Inc/NY Times)

Happy Global Wind Day! (Powerlines/Platts)

Mulva on replacing oil (R-Squared)

Lazy environmentalist says don’t feel bad (Reuters)

Ed Crooks

Another day, another project delay from Gazprom. On Tuesday it was the start of production from the first giant field to be developed on the Yamal peninsula that was put back; on Wednesday it is the planned gas pipeline to China that is being deferred.

Reuters reports Gazprom as attributing the delay to the fact that Russia “still cannot reach a pricing deal with Beijing” for its gas. The squeeze on Gazprom’s capital spending caused by its financial problems, which have forced a 15 per cent cut this year, is also a factor.

The problems with the China pipeline are even more serious for Gazprom than the Yamal delays. Gazprom can be pretty confident that sooner or later, the EU will need Russian gas.

Commodities prices were broadly lower on Wednesday ahead of closely followed oil inventories data from the US government’s energy department released later in the day.

Oil slipped after seperate data from the American Petroleum Institute reported a lower-than-forecast 1.3m barrel fall in US crude stocks in the week ending June 12. The institute also reported a 2.1m barrel build in gasoline stocks – a figure that surprised analysts expecting a decrease.

Nymex July West Texas Intermediate oil dropped 27 cents to $70.20, while ICE August Brent was flat at $70.18. Nymex July RBOB gasoline futures lost 3.41 cents to $2.0370 a gallon.

The US Energy Information Administration, the statistical arm of the US department of energy, is expected to report that crude stocks fell by 1.7m barrels, according to the consensus figure of a Reuters poll of analysts.

Gasoline stocks are expected to drop by 100,000 barrels, and distillates inventories are seen as rising by 800,000 barrels, according to the same survey.

Oil, which gained 37 per cent since the start of May, has slipped back over the past week as analysts have begun to question the strength of the economic recovery previously mooted as the fundamental factor underpinning the rally.

“The impact of China’s pro-growth policies is positive domestically but its effects are less clear elsewhere. Replacing the US as global consumer of last resort is not an easy task given the magnitude of US household spending,” said BNP Paribas as they reiterated their bearish stance on crude.

“In the end, it’s the economy. When the oil price sustained a move above $60 per barrel in 2007, the world economy grew by 5 per cent, in 2009 it is expected to contract 1.5 per cent or more. Whether the economy can afford a $70 a barrel price tag at this stage of the cycle remains to be seen.”

Read the full commodities report

Kate Mackenzie

The US administration is hoping to win over some of its citizens who are too suspicious of the United Nations to take their IPCC climate report seriously, by issuing a home grown report instead. It concludes that climate change is both real and mainly the result of human activity.

Public perceptions of climate change are critical this year, as the Waxman-Markey bill moves through Congress, the Copenhagen summit in December looming. At the same time, there are signs that public support for substantial action on climate change has taken a hit as the US recession takes hold.

The report, Global Climate Change Impact in the United States, chronicles the effects climate change will have on the US by industry and by region – just to make sure no-one is missed.

Kate Mackenzie

Rex Tillerson is unambiguous about what’s been driving oil prices lately.

From Bloomberg:

“When you look at just fundamentals, there’s not a lot to support the kind of price movement we have seen, let’s say, in the last six weeks,” Tillerson, head of the world’s biggest oil company, said after a speech today at a gas conference in Groningen, Netherlands. Concerns about a weakening dollar and inflation had led some investors to bet on an economic recovery and try to get ahead of a rally, he said.

Although hopes about demand are abounding, the IEA last week was very careful to point out that a small increase in demand could be mostly due to restocking of chemical products. Saudi Arabia’s Ali Naimi may have been optimistic about demand rising at last month’s Opec meeting, but Tillerson does not buy it.

“Demand has not picked up,” Tillerson said. “Demand continues to be relatively flat or down, and inventory levels are still very high around the world, including floating inventory levels,” he said.

The six-week time frame Tillerson refers to would roughly cover the period when oil shot up from about $50 to about $70:

Related links:

Exxon chief says oil’s advance reflects weak dollar (Bloomberg 16/06/09)
Speculation, and how high is too hig for the economy? (FT Energy Source, 11/06/09)
An oil-dollar signal? (FT Alphaville, 09/06/09)
Opec stirs oil speculators (FT Energy Source, 29/05/09)

- European airports pledge to become carbon neutral
Industry’s biggest commitment yet to fighting climate change (FT)

- Gazprom warns on delays to key field
Project is crucial for future European supplies of gas (FT)

- Gazprom delays raise supply crunch fears
Falling European output must be replaced (FT)

- Korea National Oil Company, Sinopec in $8bn battle for Addax
Sources say agreement could be reached in next two weeks (Reuters)

- Rio fundraising efforts exceed $625m in costs
Chinalco deal exit amounts to $195m (FT)

- ‘Cash-for-Clunkers’ auto vouchers plan heads for US Senate
Plan aims to encourage American to buy fuel-efficient vehicles (Bloomberg)

- Iberdrola to raise €1.25bn in share issue to keep rating
Move complements strategy of disposing non-core assets (FT)

- Talisman Energy to buy Rift Oil at 30% premium
Offering 13p a share for Aim-quoted exploration company (FT)

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