As oil benchmarks go, West Texas Intermediate has had a rough time of it lately. Earlier this year some traders said storage at its delivery point in Cushing, Oklahoma, was being pushed to its limits by the market contango, and the IEA feared it was distorting the perceived price of oil. Meanwhile the deadline for 10-yearly safety inspections has reportedly seen a ‘massive destocking of fuel in tanks’ since May, again squeezing storage.
But Brent crude might have its own issues. Unlike WTI, Brent is not physically settled, but it forms the basis of 65 per cent of the world’s daily physical oil trades. According to Platts’ The Barrel, the Brent/Ninian grade blend, one of four used in the Dated Brent assessment, is dwindling away:
Grist has a snappy Q&A with Sarah Forbes, who leads the CCS programme at the World Resources Institute, which collaborated with coal companies and environmental groups to develop a set of CCS guidelines.
Some of the highlights:
- Given the huge reliance that legislation makes on CCS, getting the technology up and running is a worry – “we shouldn’t count our chickens before they hatch”
- Finding enough places suitable for burying CO2 is not a problem
- The big disagreements in the process came over stewardship of the carbon once it is buried; liability was a particular concern
- China, which burns massive amounts of coal, is keen: “I went to China for the first time last December and I was blown away. They’re doing much more than I had dreamed possible.”
The WRI also produced this video, presented by Forbes, below, which explains among other things how some of the storage techniques planned for use in CCS have already been in use for other purposes such as storing other gases, and enhanced oil recovery:
According to Cazenove’s Darren Winder and Robert Griffiths, UK companies are expected to pay £55bn in dividends this year with the biggest contribution (£14.6bn, or 26 per cent) coming from the oil & gas sector.
However, in a report published on Thursday, Sanford Bernstein has warned clients that something has got to give at the big integrated oil companies.
Are the US efforts to persuade China to commit to reducing greenhouse gas emissions falling on deaf ears?
The visit by US energy secretary Steven Chu and commerce secretary Gary Locke to Beijing follows several visits by other high level officials including Hillary Clinton and Todd Stern, but The New York Times described Hu and Locke gave ‘by far the strongest criticisms yet, and the clearest demands that China take action’. The newspaper said Hu pointed out that China would emit more in the next thirty years than the US has in its entire history, if current growth rates continue.
Even more sharply, Locke said: ““Fifty years from now, we do not want the world to lay the blame for environmental catastrophe at the feet of China.”
Among the UK government’s raft of carbon reduction plans announced today, it confirmed it will be making a decision on a Severn River estuary tidal power scheme next year.
It will not be easy to get there, however. Few oppose harnessing the Severn’s massive power. The idea has been around for decades – in fact more than a century, according to some reports – because of its high tidal range of up to 11.3m. Located in Britain’s south-west, it is also handily close to people and industry, meaning transmission costs would not be a big hurdle.
Oil prices dipped and base metals eased as commodity markets consolidated on Thursday after strong gains earlier this week but evidence of activity strengthening in the Chinese economy provided a boost to sentiment.
In energy markets, Nymex August West Texas Intermediate slipped 44 cents to $61.10 a barrel after rising by just over $2 a barrel on Wednesday.
ICE August Brent lost 77 cents at $62.32 a barrel. The August Brent contract was due to expire at the end of trading today and September Brent fell 52 cents to $63.00.
There are two historical analogies for big US government spending on energy R&D floating around this month. One is the Carter administration analogy: a new Democratic administration spends on renewables as a way to tackle the energy prices and security following an oil price shock. It is comprehensively explored in this month’s issue of The Atlantic and debated in the National Journal’s weekly energy series.
The other, amid calls for an ‘Apollo programme of energy’, is the anniversary of the first manned landing on the moon.
The small oil and gas companies that account for most US production are still under pressure, regardless of how good the price of oil looks compared to a few months ago. That is because most of their business is in natural gas, and the curiously low price of natural gas makes it more expensive to drill than not.
Barclays Capital Research noted in a new report that it was but one year ago that natural gas was flying high, closing above $13.50/MMBtu in early July. Now, natural gas prices are closer to the $3.50 level.
The American Petroleum Institute said in a report this week that natural gas domestic drilling was down 43 per cent in the second quarter of 2009 from the year-earlier quarter – the most severe quarterly decline this decade. And API is not the only one publishing dour numbers.