The Weekender
This week on FT Energy Source:
- Oil price gloom returns with a vengeance
- Why we don’t do much about climate change
- Nigeria’s fragile oil amnesty: Reportage from the Delta
- Is taxing pollution a political winner, after all?
- CCS costs an awful lot
- The great West Texas Intermediate snub
- Is the US energy stimulus spending mis-timed?
- A bit of a smart grid-lock
- BP’s weather bonus
- Commodity funds, beware the roll
Number, quote and images of the week
Number of the week:
The Dow at this level, at current oil-dollar correlations, would translate to $100 oil, calculates Petromatrix’ Olivier Jakob
Quote of the week:
Jordan Barab of the US Occupational Safety and Health Administration, on finding BP a record $87m for safety violations at its Texas City refinery. The previous record penalty, $21m, was also issued against BP for the 2005 explosion at the same refinery. (More.)
Images of the week:
Not all energy-related, as such, but too striking to pass up: these images of pollution in China won photographer Lu Guang an $30,000 award earlier this month. Click through for more:
The New York Times has a slideshow with some of the same photos, and some more background to the series.
Somewhat more prosaic: Wired has put together neat chart of how $150m worth of grants for ‘bold, transformational’ energy projects was divided up this week:
The Source: Wind turbine manufacturing; More on Saudi quitting WTI; Oil results wrap
On FT Energy Source:
Offshore wind turbine manufacturing: Blame someone!
RIP oil fundamentals
CCS: Yes, it costs a lot
Markets: Oil dips after US GDP boost
Oil major results and GoM discoveries in Spot news
Further reading:
Shale gas Nimby-ism ramps up (NY Times)
Counting all the emissions in biofuels (Energy Outlook)
Proven oil reserves wouldn’t look so bad under new SEC rules (Oil & Gas Journal)
Saudi move increases pressure on Nymex, writes John Kemp (Reuters)
Don’t cry for WTI (Scarce Whales)
Abu Dhabi gearing up to raise oil production (The National)
China outperforms US on green issues (New Scientist)
By Izabella Kaminska
Remember the days when hurricanes and geo-political events made oil fly?
Well, according to Olivier Jakob at Petromatrix, those days — for the time being at least — should be forgotten. The correlations between the Dow, the dollar and oil are now so well set, traders simply can’t afford to ignore them.
Here’s a particularly insightful comment from Jakob on the subject (our emphasis):
WTI is still not able to break away from its pure correlation to the exogenous markets of Dollar and Equities. For the last two days WTI and the Dow Futures have run an R square of 0.9 on the intraday 10 minutes and at such ratio it is just possible to beat the theme of purely trading the Dow on oil futures.
Carbon capture and storage in very, very expensive shock
So, carbon capture and storage (or carbon capture and sequestration, if you prefer) costs a lot. That is the finding of a report by the phenomenally well-funded by the Global CCS Institute, launched by the Australian government earlier this year.
The report states that CCS is unlikely to be cost-effective, at market carbon rates, before 2030 – 2040.
Matching the market price of carbon, under whatever cap-and-trade schemes are in operation, is the crucial threshold for CSS. When CCS plants first begin truly operating at scale – which won’t be until well into next decade – the cost of capturing a tonne of CO2 will likely be much, much higher than simply buying emissions allowances on the market.
Still, it’s hardly news that CCS is likely to be very expensive.
Oil prices dipped on Friday while base metals were mixed as commodity markets paused following a strong rally in the previous session prompted by news that the US economy had escaped recession in the third quarter.
After rising by more than $2 on Thursday, Nymex December West Texas Intermediate retreated 43 cents to $79.44 a barrel, while ICE December Brent lost 52 cents at $77.52 a barrel.
Crude oil’s extremely high correlation with movements in the US dollar and stock market is continuing to trouble analysts who argue that oil market trading is not currently based on supply and demand fundamentals.
US wind turbines: Blame the Europeans
Or, blame the shortcomings of policy.
The US and China might be making nice this week, with several trade disputes being resolved at a meeting in Hangzhou – which included a promise by China to drop the ‘local content’ requirement on wind farm tenders. Meanwhile a big wind project in Texas announced yesterday will use turbines supplied by a Chinese company, A-Power Energy.
But if US wind turbine manufacturers want another foreign renewables contingent to worry about, there’s always the Europeans. A study by non-profit group the Investigative Reporting Workshop found that 84 per cent of the $1.05bn handed out by the US government since September 1 has gone to foreign companies – mostly European.
Spot news
Repsol makes 2 oil finds in Gulf of Mexico (Reuters)
Both at depths of more than 7.8km
US wind energy stimulus spent overseas (FT)
Study finds 84 per cent goes to European companies
China and US resolve trade disputes (FT)
China to remove local rules for wind tenders
Oil majors respond to falling profits (FT)
Exxon, Shell take different tactics to lower prices
Shell’s rivals prove a tough act to follow (FT)
BP-Shell comparisons are complex
Solar power execs bullish on 2010 despite earnings (Reuters)
Suntech, BP Solar and others see growth next year
Plan to drill on Colorado plateau meets resistance (NY Times)
Opposition grows to Roan Plateau gas plans
The Source: The subtle reasons for not taking action on climate change; Shell results; Saudi drops WTI
On FT Energy Source (a somewhat belated edition due to oil companies reporting today):
Why we don’t do much about climate change
Shell expects higher oil prices, but not just yet
Saudi Aramco’s WTI snub
In defence of speculators, redux
Markets: Oil steadies
Further reading:
Solar projects battle for water (Ecogeek)
Testing cheap wind power (MIT Technology Review)
UK’s notorious Sellafield nuclear site bought up (Guardian)
Futures as predictors of commodity prices (Econbrowser)
August driving and winter weather: Still higher than last year (Bit Tooth Energy)
Oil prices and California’s inflationary depression (Gregor)
China to double down on Texas wind (maybe) (Houston Chronicle)
Do green jobs create greener Americans? (NY Times)
Qatar’s LNG output set to double with new plant (The National)
Oil prices managed a partial recovery on Thursday after falling more than $2 a barrel in the previous session, while base metals were firmer as commodity markets steadied ahead of data expected to show that the US economy escaped recession in the third quarter.
The consensus forecast was for US gross domestic product to have expanded at an annualised rate of 3.2 per cent in the third quarter following an 0.7 per cent contraction in the previous three months.
Nymex December West Texas Intermediate rose 44 cents at $77.90 a barrel, while ICE December Brent added 44 cents at $76.30 a barrel.
Energy Source is no longer updated but it remains open as an archive.
Insight into the financial, economic and policy aspects of energy and the environment.
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