By Izabella Kaminska
Last week, prominent oil-industry financier Matt Simmons, CEO of Simmons & Company International, weighed in on the UNG/commodity exchange-traded-fund (ETF) debate by posting the following missive to a handful of recipients:
How on earth can a tiny firm amass 30% of nat. gas contracts, with funding jumping from $727 million to $4.5 billion in three months as nat. gas prices tank? Why would so many little investors plunge into buying natural gas contract exposure when every new article over past three months predicted gas gluts and prices soon to plunge to $1 to $2 dollars?
Simmons’ email includes some pretty frothy allegations, which we are not minded to repeat here. But his core point is undeniably valid, especially when demand for this particular ETF still remains high despite torrid fundamentals for nat gas.
On FT Energy Source:
China demand doubts
Markets: Corrections extended
China talks about 2050 emissions peak
A crude correction
UNG moves further into OTC, other energy markets
Demand rebound: Everyone, calm down
EPRI export on the need for cheap energy storage (SeekingAlpha)
PetroChina starts oil trading office in Houston (Chron.com)
Cash for clunkers, still evil (NY Times)
Nuclear power plants around the world (Guardian)
Applying the elegance of internet routing to energy cost savings (Tech Review)
Pro-nuclear bloggers increasingly irritated with the environment-natural gas hookup (Atomic Insights)
IMF predicts Ghana’s oil revenue will reach $6.6bn in 2011 (Argus)
Are natural gas reserves now overstated? (The Oil Drum)
As equity and crude oil markets fall today on fears over China’s demand, two reports are saying China’s recent appetite for oil imports might not have been all that it seemed.
The Centre for Global Energy Studies says that China’s record demand for oil imports in July were mostly due to state-owned companies taking advantage of lower prices to build up stocks. That could be about to end:
The price surge may be running out of steam, though. Chinese commodity purchases have slowed as prices have risen, while the cheap loans made available through the country’s stimulus package may also be coming to an end. The Chinese economy has struggled to absorb the wave of money thrown at it through investment in infrastructure and the central bank estimates that as much as 20% of the credit has gone into equity markets.
Oil prices fell on Monday while base metals moved lower as the correction on commodity markets continued into a second week.
The falls began following disappointing US retail sales and consumer confidence data, shaking the outlook demand in the context of hopes for a swift global economic rebound.
In energy markets, Nymex September West Texas Intermediate fell $1.58 to $65.92 a barrel while ICE September Brent lost $1.69 at $69.84 a barrel.
“We have repeatedly warned that the oil price increase of the past weeks and months was predominantly driven by financial markets and was not based on an improvement in fundamentals,” said Eugen Weinberg, analyst at Commerzbank: “The risk of a setback in the oil price is high as soon as support from financial markets abates. Hence, the correction is likely to continue.”
Read the full commodities report
So, China says its emissions will start falling by 2050. Is this good news? The comments by Su Wei, director-general of the climate change department at the National Development and Reform Commission, are encouraging in one light – China has been so strongly opposed to committing to any emissions reductions targets that the mention of a time frame could be seen as an improvement. But on the down side, 2050 is very far off for the world’s biggest CO2 emitter.
By Izabella Kaminska
Brent crude oil was trading at $70.02 on Monday morning; Nymex WTI crude, meanwhile, was trading at $66.08.
That is almost a $4 per barrel spread between the two contracts — its widest since mid-February when storage at Cushing, Oklahoma, the physical delivery point for Nymex traded WTI crude, peaked and caused numerous analysts to question the viability of the Nymex contract.
The downward correction in WTI to $66 per barrel from over $70 per barrel levels this month, meanwhile, came just as macroeconomic news was actually looking a bit more bullish.
Oil industry split on climate law protests
Rift over ‘energy citizen’ rallies plan (FT)
China waves its little green book
Largest emitter spies on advantage in carbon cuts (FT)
Beijing sets date for emissions cut
China’s carbon emissions will start declining by 2050 (FT)
US sends mixed signals about sanctions
Potential review of sanctions on Sudan and Syria (Argus)
Low demand depresses European refinery runs
Run cuts and shutdowns across Europe this quarter (Argus)
The brighter side of expensive oil
Soaring petrol price will see America flourish (FT)