Daily Archives: February 5, 2010

Kate Mackenzie

On FT Energy Source this week:

- Much ado about climate science

- When the free market fails energy

- China declared the renewables race winner

- Shell‘s refining headache

- Gasoline is still cheap in the US

- BP‘s unsurprising refining surprise

- Opec still procrastinating on Iraq and quota reforms

- The shortsighted US energy budget

- The UK/US natgas divergence

That’s crude on Friday afternoon, the same day BlueGold Capital Management fiercely denied rumours of company-related liquidations in the WTI market.

Related link:
Bluegold hedge fund denies causing WTI volatility – FT Alphaville

Kate Mackenzie

On FT Energy Source:

- Peak demand: going mainstream

- Bluegold hedge fund denies causing WTI volatility

- The nuclear renaissance is not coming soon

- The China-floating oil storage connection

- Peer review and the IPCC under pressure in Energy headlines

- A long week in cap-and-trade

- Strong laws needed for US clean tech

Further reading:

- Sudanese conflict and oil exploration

- The coal element of the US federal energy announcement

- Refining: a cyclical downturn – or a catastrophe?

- People’s power

- Nuclear renaissance not so assured after all

- When windmills don’t spin

- Boosting biofuels, bothering enviros

There are some very intriguing flashes coming out on Reuters regarding the BlueGold hedge fund on Friday:




Readers might remember BlueGold for poaching one of Morgan Stanley’s most respected FX analysts, Stephen Jen, back in May last year.

Kate Mackenzie

A few weeks ago Philip Verleger argued that contango (and by extension, speculators) in heating oil had helped avoid a blowout in home heating costs during this cold, cold northern winter.

Goldman Sachs has theorised something similar may have gone on in oil markets – albeit from a completely different angle. They suggest that big floating oil inventories may have shielded the effect of rising demand from China – and that that shielding effect might be unwinding.

The drawdown in floating storage during January, analyst David Greely estimates, was fairly substantial in January [update NB that's in relation to the 5-year average, which would have been mightily increased by big builds in January 09]:

Goldman Sachs

Source: Goldman Sachs

Meanwhile the draw-down in US onshore inventories during January was fairly small. Although this is normally a month when inventories build, Goldman says the wide difference in the two measures suggests – you guessed it – China’s ever-increasing importance in worldwide oil trade:

However, the low draw on US total petroleum inventories in January does highlight once again that the principal driver of the tightening supply-demand balance is the continuing strong demand coming out of China and the emerging markets.

More specifically, China accounted for most of the recent growth in global oil demand, with Chinese oil demand growth reaching 1.3 million b/d year-over-year in December, well above our forecast of 580 thousand b/d, driven by continuing strong industrial production (IP) growth which reached 18.5%. Going forward, although we expect China’s demand growth to slow from it current torrid pace, we see a substantial risk that Chinese demand growth may outstrip our forecast for 2010. Consequently, we believe that concerns regarding a slowdown in Chinese oil demand are misplaced as we see the issue over the next several years as being one of too much oil demand from China, rather than too little, and we are maintaining our average WTI crude oil price forecasts of $90/bbl for 2010 and $110/bbl for 2011.

None of which bodes particularly well for the fragile global recovery.

Related links:

Thank speculators (and contango) for relatively low heating bills (FT Energy Source)

Kate Mackenzie


Source: CIGI

Canada’s Center for International Governance Innovation has come out with a rather pessimistic report on the likelihood of a nuclear renaissance in the near future.

(Pessimistic, that is, if you’re a proponent of nuclear energy.)

The authors say that on balance, an increase in the role for nuclear energy to 2030 is unlikely. Meanwhile new reactor additions will likely be offset by the retirement of older plants. The main reasons given are familiar to anyone who follows nuclear – too costly, too slow to build, and inadequate government support:

Globally, while the gross amount of nuclear-generated electricity may rise, the percentage of electricity contributed by nuclear power is likely to fall as other cheaper, more quickly deployed alternatives come online. An increase as high as a doubling of the existing reactor fleet as envisaged in some official scenarios seems especially implausible, given that it can take a decade of planning, regulatory processes, construction and testing before a reactor can produce electricity.

So what are those cheaper, more quickly deployed alternatives?

Kate Mackenzie

It’s not over yet, but this has so far been a tumultuous week for the prospects of a US cap-and-trade system, which appear to have done something of a 360° turn.

Earlier this week it looked like enough US politicians were giving up on it that pundits were binning the idea altogether, at least for this Congress.

President Obama was talking about the possibility of splitting cap-and-trade legislation out from other energy initiatives:

The most controversial aspects of the energy debate that we’ve been having — the House passed an energy bill and people complained about, well, there’s this cap and trade thing.  And you just mentioned, let’s do the fun stuff before we do the hard stuff.  The only thing I would say about it is this:  We may be able to separate these things out.  And it’s conceivable that that’s where the Senate ends up.

[The 'fun stuff' is energy efficiency investments and clean tech R&D.]

Kate Mackenzie

Peer review system comes under strain (FT)

Pressure mounts on IPCC chief (FT)

Shell to cut jobs as refining profits fall (FT)

Gazprom consortium hit by weak demand (FT)

Eni offers to sell pipeline stake to settle EU antitrust case (Bloomberg)

ConocoPhillips aims for Syncrude sale within months (Bloomberg)

Plastics explosion for petrochemical prices (FT)

CFTC says ICE compliance staff under ‘strain’ (FT)

Sempra said to be in talks to buy US gas, power unit of RBS (Bloomberg)

British Gas cuts prices by 7% (FT)

Mongolia signals shift on coal demand (FT)

Senators seek sulphur dioxide emissions cuts (Reuters)

Taiwan demands heavy industries cut or offset their emissions (Reuters)

White House committed to climate policy, advisor says (Argus)

Dubai discovers new oil field in Persian Gulf (Dow Jones)

Germany’s solar industry predicts 44% cut in power price (Bloomberg)

Enel’s profits rise 12%, beating analysts’ estimates (Bloomberg)

Companies feel threatened by climate fight: UN chief (Reuters)

Spain’s 2008 emissions fall, but remain above target (Argus)

Sinopec says China needs to review fuel price more frequently (Bloomberg)

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