Sure, it’s politically tricky and a security nightmare. But Iraq also has abundant, easily-accessible oil.
BP’s involvement in Iraq came under scrutiny as the company announced its results today. BP, together with China’s CNPC, won the right develop Iraq’s Rumaila oil field last month – but it was the only successful bid after many bidders pulled out when Iraq said winners would only receive $2 per barrel. This was half the amount in the original BP/CNPC bid.
Despite this, chief executive Tony Hayward was bullish about the prospects for BP in Iraq today.
On the first day of hearings on whether commodities speculation should be more heavily regulated, new-ish chairman Gary Gensler said the Commodities and Futures Trading Commission should “seriously consider setting strict position limits in the energy markets”.
Jeff Sprecher, chief executive of Intercontinental Exchange and Terry Duffy, chief executive of Chicago Mercantile Exchange, were on the witness stand today.
Both exchange officials said they would be willing to adhere to (or in CME’s case, actually administer) more pervasive position limits. Position limits currently only apply on the final three days before a contract expires.
The problem is however is that extending position limits on non-commercial traders still leaves open a raft of opportunities for speculation to distort the markets.
“And the best way to foster the innovation that can increase our security and prosperity is to keep our markets open to new ideas, new exchanges, and new sources of energy.”
So said President Obama at the opening of the first round of the Strategic and Economic Dialogue talks between China and the US in Washington yesterday.
Getting some agreement between the world’s two biggest carbon emitters is likely to be crucial to any wider multilateral agreement at Copenhagen in December. As both governments juggle the often competing goals of getting the best deal, making real progress toward an agreement and satisfying their own constituencies, every word – and its interpretation – counts.
So what was Obama getting at? Several bloggers have had a stab at interpreting them.
Once again oil is in a bullish mode, and once again non-fundamental factors go a long way toward explaining why: macro-economic data and announcements, equity markets, risk appetite and the dollar.
But is there also an element of fundamental improvement driving the price rise?
As Société Générale’s Michael Wittner writes in the bank’s weekly commodities report, the now-familiar answer to most questions on oil price movements is non-fundamentals: macro-economic outlook, equity markets, risk appetite, and the dollar.
However there is a hint of fundamental signs supporting the rise.
Among BP’s second quarter results the company said it had already met and exceeded its target of cutting $2bn for the year and was raising its operational savings target to $3bn.
In the first quarter BP reported it had progressed with $1bn of those savings. But where did they come from? Citi’s Mark Bloomfield noted that “Although the like-for-like improvement is unclear, as the impact of helpful forex moves is not disclosed, it represented about a third of the c$1bn achieved at
BP OUTPUT RISES AS CEO HAYWARD SEES COSTS FALLING $1 BILLION MORE THAN EXPECTED BY YEAR-END.
Compared to the same period last year, BP’s reported daily production jumped 4 per cent to more than 4 million barrels of oil equivalent in the three months to end-June. Also, the $2 billion reduction in cash costs targeted for 2009 as a whole has already been exceeded and a further $1 billion saving is expected over the remainder of the year, the company said today.
So begins the press release accompanying BP’s second quarter results. But are we alone in thinking it’s somewhat sad that a company of BP’s size and stature has to make so much of its efficiency drive?
That BP is keen to demonstrate its cost cutting abilities is not surprising and other big oil companies will do the same as they report over the next couple of weeks. After all, they can’ t fund both their exploration activities and maintain dividends with slashing costs and jobs, as Neil McMahon of Sanford C. Bernstein has recently noted.
The UK government is offering £6m to the wind turbine maker Vestas in order to encourage the company to continue some operations in the south of England.
The company announced in March its intention to close its factory on the Isle of Wight – the only facility of any size making wind turbine parts in the UK.
This new £6m – which Vestas has not yet agreed to take up – would not save the factory, or the 600 plus jobs there.
It would fund, instead, a new development – a research and development facility for Vestas to experiment with making offshore wind turbines. If that facility went ahead, it could create up to 300 jobs.
But investors might ask themselves – what is really the point of that?
Climate activists are also in denial
International politics a dilemma for climate change lobby (FT)
CFTC hearings look to curb price spikes in commodities
US watchdog could limit number of futures contracts traders (FT)
The carbon-capture challenge
Company testing technology promising power without pollution (FT)
CNOOC drills new oil discovery in Bohai Bay
New oil field in northeast of Liangdong Bay in Jinzhou (Reuters)
Speculators cleared in UK oil volatility
No evidence speculators behind big swings in oil prices (WSJ)
Maersk hit with frontline as fuel oil beats crude
Fuel oil becoming as valuable as crude for first time in 6 years (Bloomberg)