Piling into commodities

July 12, 2010 8:10 am by Kate Mackenzie

More evidence for the sometimes-reviled ‘financialisation‘ of commodities: UK pension fund managers (at least, some of them) are indeed increasing their commodities exposure.

The growing interest in commodities markets from “financial” investors — those who aren’t traditionally involved in the commodities industry itself — has been a point of contention for those who take the view that rising numbers of speculators are driving up commodities prices for those who use them, whether in business or as end-users. (Others, however, argue that more investors means more liquidity, more counterparties, and can even help keep prices lower by creating incentives to store commodities.)

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Energy headlines

July 12, 2010 6:12 am by Kate Mackenzie

- PetroChina open to closer ties on BP - FT

- New BP oil well cap to take days to fit - FT

- BP chief puts on brave face in email to staff - FT

- Italy set to cut solar incentives: industry sources – Reuters

- Oil firm on China’s large trade surplus – UpstreamOnline

- Obama urges boosting clean energy tax credit - Reuters

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Relief wells: The pressure grows

July 8, 2010 12:56 pm by Kate Mackenzie

BP’s first relief well is less than 264ft from its target depth, and about 12ft away horizontally from the well, according to the latest administration briefing.

As the two relief wells get closer to their target, BP’s ailing share price has improved somewhat.

But despite the positive reaction from investors, the prospect of the relief wells failing altogether is also being raised as the drilling nears its target.

As the FT’s Ed Crooks writes, in the event of total failure of the wells, “the company may be doomed”.

Click to view at full size

Killing a rogue well via a relief well can be rather challenging, as previous examples show. Those experienced with relief wells believe there is some cause for optimism, however.

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Tags: Gulf oil spill
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The non-Opec world’s declining oil production – and does it matter?

July 8, 2010 9:41 am by Kate Mackenzie

Crude oil prices fell on the news last month that the IEA had raised its predictions of oil supply. But were they right to?

The non-Opec world, predicted to be on the edge of production decline, would actually increase oil production by about 1m b/d in 2010 – 2015, the agency said.

But the increase during this period will only be 1m b/d — less than a fifth of total projected world supply growth. The vast majority, in otherwords, will come from Opec members.

And there are two other points making the non-Opec growth look less impressive.

First, all the gains are made in 2010 and 2011. From 2012 onwards, total output declines:

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Energy headlines

July 8, 2010 6:00 am by Kate Mackenzie

- Eni to settle US bribery probe - FT

- US seeks advance notice of any BP sales - FT

- BP’s relief well close to target - FT

- BP steps up ‘charm offensive’ - WSJ

- CBO says Kerry-Lieberman bill would save $19bn - USA Today

- BP tries to reassure shareholders - NY Times

- BP needs three more days to attach new Macondo vessel - Argus

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Nat gas prices rise: Who benefits, and for how long?

July 7, 2010 11:04 am by Kate Mackenzie

Henry Hub

A particularly hot summer in much of the US has boosted natural gas prices somewhat, as the FT reports, with spot prices soaring in some areas and gas futures rising 19 per cent since May.

But will it do much to address the structural changes going on in the US gas market?

Barclays Capital’s gas analysts last week said they would remain relatively bearish on 2011 gas prices despite the recent upswing, are now worrying about the impact of Gulf of Mexico hurricane season, too. Both the incidence of hurricanes and their effect on gas production are difficult to predict, they wrote:

Last year provided a good example of how changing climate conditions can alter the prospects for hurricane activity in the Atlantic. 2009 was marked by an El Nino event, a condition whereby the temperatures of the Equatorial Pacific Ocean are warmer than historical norms, which was unforeseen at the beginning of the summer. El Nino conditions tend to suppress hurricane activity in the Atlantic. Forecasters had expected a more active hurricane season for 2009, but
the development of El Nino conditions later in the year resulted in the quietest season since
1997.

They also point out that hurricane seasons can destroy gas demand, by heralding wetter, rainier summers.

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Oil board games excitement for all the family

July 7, 2010 9:47 am by Kate Mackenzie

We’re not sure what is more disturbing: this obscure but eerily prescient BP oil game from the 1980s that is doing the rounds:

Or the fact that, as this Flickr photo suggests, there was/is a whole genre of oil-themed board games:

‘Black Gold’, ’The Slickest Game in Town’, ’Alaska Pipeline’ and the creatively titled ‘The Oil Game’ all seem to figure in there.

H/T Frankie Roberto/Flickr.

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Arctic oil drilling is set to keep growing, despite new fears

July 7, 2010 8:50 am by Kate Mackenzie

The Macondo blowout in the Gulf of Mexico has reminded everyone of the risks of drilling in new and more challenging environments. And it has led to a suspension of plans to allow companies to begin drilling in both Alaskan and Canadian Arctic waters.

Greenland, however, is not deterred; drilling in its Arctic waters commenced last week, by a small UK oil company called Cairn Energy, which began the first of four planned exploration wells. Greenland, the FT reports, is expected to hand out more drilling licences in August.

We looked at Greenland’s potential to become a big new oil play last year, and noted that Cairn was able to sell a 10 per cent stake in its holdings there to Petronas of Malaysia – a relatively small sale, but one that indicates a wider interest in the oil fields west of Greenland.

While Cairn’s Greenland fields aren’t at the depth of Macondo (900 – 1,500ft compared to 5,000ft), they are still deep. And some warn that the conditions make the prospect of fixing and cleaning up any accidents extremely daunting.

Continue reading: “Arctic oil drilling is set to keep growing, despite new fears”

Tags: Gulf oil spill
Posted in Oil, Politics | Permalink