Watch out, commodities speculators. The US Commodities and Futures Trade Commission and the UK’s Financial Services Authority have agreed a little more of the detail of their 2006 agreement aimed at stamping out the ‘London loophole’. This agreement deals with the trading of lookalike oil futures contracts between the US and London markets – particularly, the copy of the Nymex’s West Texas Intermediate contract that trades on the London-based ICE exchange.
As fears over commodity speculation has been a concern for US lawmakers in recent years, the goal was to make sure that the more lightly-regulated UK-based contract was not manipulating the WTI price. Read more
Big oil has few fans as it is. After it finishes the string of rallies it is planning across the US in coming days, it may have even less.
The American Petroleum Institute, the industry’s national trade organization, is among those sponsoring demonstrations against the Waxman-Markey legislation making its way through Congress. The first of these rallies was in Houston, energy capital of the world, on Tuesday, and set the tone for what is to come.
At the rally, oil companies tried to put a human face on their campaign, keeping oil executives off the stage, which was dominated by local leaders, such as the head of the Astros baseball team and the local chambers of commerce. But there was no doubt most of the 3,000 in attendence were from oil companies, whose leaders urged them to spend their lunch break giving a voice to the fears of conventional oil that their jobs could well be lost by plans in the bill to build a renewable energy future on the back of the fossil fuel industry. Read more
By Izabella Kaminska
The bullish case for oil has been fairly well established by the likes of Goldman Sachs, Barclays, Merrill Lynch at al.
But, as it turns out, there’s a convincing bearish case to be made too — and the man putting it forward most recently is Edward Morse, director of economic research at LCM Commodities.
In a piece published in the latest edition of Foreign Affairs Magazine Morse makes the key point that oil only went to $147 per barrel in 2008 because of the coincidental convergence of a number of supply-related circumstances unlikely to be repeated any time soon. Read more
Power companies have, by and large, tended to voice support for introducing smart meters. This makes sense – one of the big advantages of smart meters is they remove the need to regularly send staff out to check meter readings. Another aspect of smart meters makes them less logical for utilities: those that display household energy use also lead to a reduction in use – although estimates of exactly how much vary from 1 per cent to 15 per cent.
Now, The Times reports, the Energy Retail Association is accused of lobbying UK government ministers against mandating that smart meters include a display allowing customers to monitor their own energy usage over time. Read more
Crude oil prices dipped on Thursday after a strong rise in the previous session while base metals made modest gains and sugar prices extended their advance, helped by a recovery in risk appetite.
In energy markets, Nymex September West Texas Intermediate dipped 7 cents to $72.35 a barrel after jumping $3.23 on Wednesday following the latest US inventories data which showed a big drop in crude stocks. The September contract was due to expire on Thursday and the October WTI contract traded 26 cents lower at $73.57 after rising $2.75 on Wednesday. Read more
By Izabella Kaminska
A yet ‘undisclosed’ hedge fund has taken out call options at triple — yes triple — the price of today’s spot market price for natgas come winter.
Here’s the mysterious trade in question:
Crude oil prices shot up yesterday after the Department of Energy published its weekly storage estimates, showing inventories had fallen by 8.4m barrels – much more than expected.
The market consensus forecast was for a decline of only 1.3m – so what explains this? Underlying demand didn’t seem to improve much: refinery utilisation was up 0.5 per cent to 84 per cent, but that is still historically poor.
A big component was a fall in crude imports to 8.4m – down 15 per cent. Theories included delays to shipments or even diversion of shipments to take advantage of the historically high premium for Brent crude over West Texas Intermediate. But as Stephen Schork points out, the week-on-week fall in the level of crude imports was the sixth-highest recorded since February 2002 . Read more
Fund bets millions on tripling of gas price
Hedge fund spends millions on US natural gas options (FT)
Lex: Naturally gassed
Natural gas has hit seven-year low (FT) Read more