The tragic accident in the Gulf of Mexico this week, with 11 missing since the explosion and resulting fire on the Transocean rig Tuesday night, is a reminder to the industry about how dangerous the work it does really is. But so far the environmental impact has been minor, and it’s too early to say whether the accident will lead to a rolling back of access to new offshore areas, as some in the industry fear will now happen.
It could be a bad combination. Olivier Jakob of Petromatrix points out that one of the key factors keeping investors in crude futures – namely, rising prices – could turn out to be a problem if a couple of other recent themes continue – namely, the return of the Brent premium over WTI, combined with a strengthening dollar.
Rising crude prices, he writes, mean that passive funds tracking indices such as US Oil and GSCI continue to attract investors, adding:
The growing problem however is that the continued buying into oil commodities is still done despite the rise of the Dollar Index and on top of it with Brent at a premium to WTI this is starting to make life more difficult for the non-USD economies that are supposed to fuel the oil demand recovery.
Some recent themes in oil futures markets have returned rather sooner than some expected. Brent is once again trading at a premium to WTI, when the opposite is normally the case. And contango is again strengthening, not long after talk that markets could actually slip into backwardation.
On Thursday both these characteristics were enhanced by a bearish report on US crude oil stocks from the EIA, which included a 20-year-plus record high for the mid-West area.
But do the WTI contango normally correlate to the Brent/WTI premium? Harry Tchiligurian at BNP Paribas says the two are connected – and so are stocks at Cushing, which were last year blamed by some for making WTI a less relevant benchmark:
Asked whether they would like the government to invest more in clean energy and the creation of new green jobs, about two thirds of the British public say yes, according to a YouGov poll commissioned by Greenpeace.
This could be taken as a strong indication that the parties vying to form the next UK government, in the general election scheduled for May 6, should step up their efforts to woo voters on green grounds.
However, as with a lot of pre-electoral polling, it is hard to resist thinking that some people are just saying what they think they ought to say.
Monday will indeed be the day that the Kerry-Graham-Leiberman Senate bill on climate change will be unveiled, according to several reports. The Hill notes that there remains some uncertainty, over how it will be prioritised in the Senate – majority leader Harry Reid won’t be drawn on how climate will fare, given there is talk of an immigration reform bill also being presented soon.
Bloomberg reports that the bill will no longer contain a gasoline tax, as it was too unpopular with other politicians. The wire has summarised the main points they have been told of, which include a 17 per cent reduction in greenhouse gas emissions by 2020 (from 2005 levels). And:
OIL INDUSTRY: The latest proposal being considered would give the oil industry free pollution allowances that would expire by a certain date, after which allowances would have to be purchased. The Congressional Budget Office would be called upon to certify the mechanism wasn’t a tax.
Reuters has some background of how the gasoline tax idea evolved into this. We’ll be very interested to see how the details unfold.
UK natural gas prices have traditionally followed oil prices due to the practice of linking long-term contracts to crude in Europe.
Analysts in the market, however, are getting excited because of a nascent disconnect in that relationship, one which could be about to make their lives a little more interesting.
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