Daily Archives: November 3, 2009

By Kate Mackenzie

Chinese demand is one of the few bright spots in a generally depressed crude oil market. The phenomenally high amount of crude oil (and refined products) in storage around the world, meanwhile, is a big cause for concern for anyone wishing to see a demand upstick.

Given those two facts, this doesn’t look good:

BEIJING, Nov 3 (Reuters) – China OGP, an oil industry newsletter issued by Xinhua news agency, will no longer publish data on China’s stockpiles of crude oil, gasoline and diesel, it said on Tuesday.

The move removes the only public source of information on Chinese crude and fuel stockpiles, key information for oil traders trying to assess the real level of demand in China, the world’s second-biggest oil consumer.

Kate Mackenzie

Today Daniel Yergin, author of the seminal oil industry tome ‘The Prize’, wrote in the Wall Street Journal that shale gas is a game changer for US energy. Those who follow natgas will have heard it all before: more advanced and affordable technology, mainly hydraulic fracturing or fracking, has opened up an abundant supply of gas that could satisfy US needs for many, many decades to come. Yergin’s point that this has happened with ‘no great fanfare,’ however, probably stands true for the average person who isn’t an avid follower of energy news.

Shale gas not only promises to relieve the US of a potential energy security headache, but there’s the oft-quoted environmental angle, too: as a source of electricity, natural gas can give off 50 per less CO2 than coal, when burnt in the modern plants.  It’s not just for the US, either: suggestions are that Europe and Asia might have huge supplies of shale gas, too (although Yergin notes that development of such resources could be some way off).

Kate Mackenzie

On FT Energy Source:

All your questions about India, China and Copenhagen answered

Distillates in distress

The big challenge in US CO2: Coal

Index investors are a force for good in oil – for now

Timor Sea oil rig fire extinguished

Bike-sharing woes in Paris

Misplaced efforts of rising carbon price floors

Further reading:

The mysterious fall in Saudi crude exports to the US (The Barrel/Platts)

Morgan Stanley’s love affair with oil (Green Sheet)

Unsafe refineries: Is it a Texas thing? (Houston Chronicle)

Winners and losers under cap-and-trade (Environmental Capital/WSJ)

Enoc completes Dragon Oil takeover (The National)

Which societies will cope best with climate change? (Yale 360)

Winter descends on oil markets (Scarce Whales)

By Izabella Kaminska

US distillate demand data for August tells a bleak tale, according to Barclays Capital. The latest monthly data available , they report, came out at 3.38mb/d, the lowest reading recorded since July 2000.

The year-on-year rate of decline, meanwhile, was a very significant 7.5 per cent, only marginally better than the 8.9 per cent recorded between January and July. Initial data for September and October traced a very similar picture, according to the analysts.

Sheila McNulty

At NRG Energy’s coal-fired electricity plant in Thompsons, Texas, a train from the Powder River Basin coal mines of Wyoming pulls in after a five-day trip from Wyoming, loaded with more than 15,000 tonnes of coal.  It takes eight hours to unload the 130-car trains, and then the next train pulls in.

This plant burns 35,000 tons of coal on a hot day to provide electricity to cool area homes. And bulldozers must constantly shift the coal stockpiled in a giant mound under the hot, noonday sun to prevent combustion as it awaits its turn in the 2,200°F furnace.

Yet burning the coal to make electricity, transporting it 1,500 miles to the power plant and keeping it cool emits enormous amounts of carbon dioxide.

The US government estimates CO2 emissions from coal-fired electricity generation comprise nearly 80 per cent of total CO2 emissions produced by the generation of electricity in the US. Sixty to 80 per cent of coal is, in fact, carbon, making it the most carbon intense of all the fossil fuels. The Environmental Protection Agency has estimated the average US coal plant emits 4.6m metric tons of CO2 each year. And there are 600 coal-fired electricity plants across the country.

Kate Mackenzie

Are speculative traders responsible for pushing up crude oil prices? Many, particularly in US congress, are arguing that they are. But traders and others who follow the markets tend to disagree, usually pointing out that the commodity futures markets, unlike cash stock markets, are not trading in a finite number of items, but are merely trading contracts that are eventually settled based on physical supply and demand.

The CFTC recently began publishing weekly figures that shed some more light on who is doing what in the sometimes opaque energy commodity markets, by breaking up categories of traders into four categories according to their involvement with the physical or financial sides of markets.  Market participants and commentators interpreted the data in a variety of ways: Barclays Capital, for example, said it indicated speculative traders (as opposed to those who deal in physical oil) were not unduly influencing prices; while others were less convinced that the new categories revealed anything of value at all.

Another set of figures published by the CFTC, published only quarterly, reveals the net positions of index investors - which includes index funds, swap dealers, pension funds, hedge funds and mutual funds. This data, according to Philip Verleger, energy analyst and economist, underlines the lack of influence that these investors have on energy prices.

Kate Mackenzie

PTTEP

Source: PTTEP

The fire on an oil rig platform in the Timor Sea has been extinguished and the leak, which had been spewing oil into the water for 10 weeks, has been plugged.  PTT Exploration and Production, the Thai company that operates the West Triton rig, had made several attempts to plug the leak since it began in August. But today it managed to fix both the leak and the fire it had been feeding since Saturday.

From PTTEP’s media release:

Well control experts onboard the nearby West Triton rig pumped approximately 3,400 barrels of heavy mud plus 1,000 barrels of brine down the relief well which had successfully intercepted the leaking well on Sunday morning. The well will now continue to be monitored for the next 24 to 48 hours to ensure that it remains stable.

Fiona Harvey

Some people may be confused as to the positions of developing countries in the negotiations leading up to Copenhagen. That is not surprising, as they are confusing. Here are some pointers, and some myths busted.

Q. India and China keep saying they will not take on binding targets to cut their emissions or caps on their emissions. This scuppers a deal, right?

A. Wrong. For a start, India and China are not being asked to take on binding targets to cut their emissions. They are, along with other developing countries, being asked to take on “nationally appropriate mitigation actions”, or NAMAs. (Mitigation, in the climate change context, always means cutting or curbing emissions. It never refers to adjusting to the effects of climate change – that is called adaptation.)

James Fontanella-Khan

Analysis: Heating up
Campaigners are badging the talks as the last 45 days in which to save the world (FT)

Editorial: The deal we need from Copenhagen
In order to prevent catastrophe the whole world needs to cut emissions (FT)

Burma’s neighbors advance pipeline project
Oil and gas plans to lift financial strength as West tries to weaken Junta (WSJ)

UN climate envoys may want Chinese actions
Poorer nations may be urged to adopt measures to limit emissions growth (Bloomberg)

Coal-rich US puts faith in CO2 storage
Demand is so high for coal, which fuels 50 per cent of US electricity output (FT)

EDF set to finalise $4.5bn deal in US
A move that could prevent the French group’s pull out of the US market (FT)

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