World Petro Energy Overview

[VimyJ]

We'll see.

If what you say does come true, it is time to panic.. I don't think you realize how much of our economy is dependent on cheap oil.. We can't just switch over to europe prices, and expect everything to be fine.. Many jobs will be lost, the impact to our economy will be huge..

If what you say is true, it is time to panic..

Oil is at $41.32 as I write. I wrote, "Civilization as we know it depends on cheap energy." It is being written that the increase in oil prices is acting like an additional tax on consumers.

China and other developing economies will be better able to handle rising energy prices as they have not become addicted to cheap oil over the years as we have.

Interesting times ahead.

[VimyJ]

Informative article about current oil prices. Inflation adjusted, oil is still relatively "cheap" in relation to historical norms. US gas prices are being affected by larger numbers of SUVs driving domestic demand up by 3% (according to the article).

http://biz.yahoo.com/rb/040514/markets_oil_7.html

[AZ94Q]

"There is a war or fear premium built into the price of crude oil," said Ed Silliere, vice president of risk management at New York-based Energy Merchant Corp. "It seems that al Qaida is ready, willing and able to attack Saudi Arabia's oil facilities and that fear is bringing speculators pouring into the Nymex."

"Silliere said the recent events in Iraq (news - web sites) — which had clearly taken a turn for the worse — had compounded terrorism fears. A weekend attack curbed Iraqi production and on Tuesday, a videotape of an American being decapitated in Iraq was released."

"Loss of oil production in Iraq, coupled with lower production in Nigeria and Venezuela, had worsened the situation, he said. "

"Tight gas supplies and the fear of insufficient supply in time for the summer driving season is leading to higher prices, Silliere said. "

As I said before......

Just like Gold/Silver ran on inflation fears, crude is running on terrorism/short term demand fears.. Once these issues clear up...

Profit taking kicks in, and crude falls hard..

[VimyJ]

There definitely is a security premium involved but the demand part of the equation is long term rather than short term. World oil production will peak in the next few years and demand is increasing faster than supply.

As I keep saying, the cheap oil is gone. The premiums present in the current price structure of oil will not go away so they can be considered part of the long term cost. Middle East tensions are not going to go away and Christians and Muslims are hacking each other to death in W. Africa. Demand is only going to increase and new discoveries of economically viable oil deposits are decreasing.

We're not going to run out of oil but we'll pay substantially more for the oil we do use. Still, when adjusted for inflation, oil is at normal historic price levels when adjusted for inflation which implies there is no price pressure function to indicate that oil prices are out of line. Therefore, there is no real reason for the CL price decrease.

Oil traders all agree on one thing: they believe that there is currently only 2 mbpd of spare production capacity and the majority of that supply would come from Saudi. Current global daily crude demand is about 80 mbpd.

[VimyJ]

Our generally younger members who hang out in the General section are being substantially affected rising gas prices. Many have only ever known low prices. Now that oil prices are up to inflation adjusted historical norms, they are really beginning to feel the pinch.

Interesting times ahead. Damn!

[VimyJ]

I'm still mulling this article over in my head. Seems that whatever position is predominant, the cheap oil is gone. Warning: It's a bit of a read but worth it.

http://www.scoop.co.nz/mason/s...3.htm

[VimyJ]

NY Times report:

http://www.nytimes.com/2004/05...eqYNA

Mentions SUV sales off in the last month.

[AZ94Q]

Vimyj,

I believe the latest National Geographic has the headline "Cheap oil is gone" I briefly saw it, didn't have time to check it out..

You should check it out and post the highlights..

[VimyJ]

Vimyj,

I believe the latest National Geographic has the headline "Cheap oil is gone" I briefly saw it, didn't have time to check it out..

You should check it out and post the highlights..

Damn! I should have copyrighted it!

On another topic, looks like it's going to be a bad day in the financial markets. Oil concerns are causing the Asian markets to sell off and the bears here have their assassination news.

[AZ94Q]

Some headlines

"Qatar oil minister sees $28 per barrel as fair price for crude"

"Qatar oil minister agrees with Saudi oil minister on 1.5 mil barrel production increase"

Look at a chart of crude today.. As soon as news hit about the assisnation hit, oil spiked to new highs... The fear premium continues to rise

[VimyJ]

terrorlst concerns towards the beginning and supply demand toward the end.

http://biz.yahoo.com/rb/040519/oil_markets_2.html

[AZ94Q]

Crude oil prices were down slightly Wednesday after ending a four-session run of record highs Tuesday, as traders sorted through a mixed government report on energy inventories.

The Department of Energy said oil inventories were down 1.1 million barrels, or 0.4%, for the week ended May 14 but gasoline production was up 1.2 million, or 0.6%. Imports rose by 980,000 barrels, or 1%, the report said.

Market reaction was also mixed, given traders' recent fixation on gasoline supplies.

The benchmark U.S. crude was off 14 cents, or 0.4%, to $40.40, trimming earlier losses.

Gasoline futures, however, erased early losses and were up a half-cent, or 0.4%, to $1.375 a gallon, following a sharp drop yesterday.

European crude was off 27 cents, or 0.8%, to $36.68 in London trading, largely unchanged after the release of the DOE report.

Energy prices have repeatedly hit record highs lately, as traders worry about supply because of the recent attacks on production facilities in the Middle East and the approach of the peak summer driving season. Crude oil prices last week closed above $41 for the first time in the history of trading on the New York Mercantile Exchange, surpassing the previous high set in October 1990 when Iraq occupied Kuwait.

Saudi Arabia recently called on OPEC to increase production by about 6% to head off any possible damage to world economic growth, but traders have largely discounted any benefit from that because cartel members are already producing above their official quotas.

OPEC later this week meets with key oil-consuming nations to discuss market conditions.

[VimyJ]

Oil back up to $41.20. Looks like a $40 base is forming. Then it's on to $45 then back to $43 and on to $50. Whoa!

[AZ94Q]

Lol..

See you in the 30s..

[VimyJ]

Oil finished today at a record close of $41.50 up 96 cents.

[AZ94Q]

Upward trend is still intact, no doubt...

[AZ94Q]

Fear premium increases daily. Everyone agrees on this.

[VimyJ]

T. Boone Pickens said that while $50 oil is not probable it is quite possible with $45 very likely.

[VimyJ]

Falling NG Production in Argentina and Some Ramifications

Argentine April Output Has Biggest Drop in 3 Years (Update2) May 18 (Bloomberg) -- Argentine industrial production had its biggest decline in more than three years in April, halting six months of expansion, as a gas shortage forced manufacturers such as brickmaker Fanelli SA to cut output.

Production tumbled a seasonally adjusted 3.9 percent from March after rising 1.3 percent the previous month, the National Statistics Institute said.

``We were supposed to have the best year in at least five as construction recovered and demand increased,'' said Claudio Moretto, 43, a partner at Fanelli, which is based in La Plata, in the Buenos Aires Province. ``We are producing at half of our target and we don't want to take long-term contracts because we don't know if we will be able to fulfill them.''

Fanelli had to halt production for four days last month because it had no gas to power its furnaces, Moretto said.

The shortage of gas -- the result of a lack of investment in the industry after years of government price controls --threatens to curb the recovery in South America's second-biggest economy, said analysts such as Pablo Morra at Goldman, Sachs & Co. He said he will lower his 6.7 percent growth forecast for 2004 after he calculates an estimate of how much the shortage will slow the economy. Argentina grew 8.7 percent in 2003, rebounding from its worst slump on record, brought on by the government's debt default.

`Same Problem'

``The gas shortage will affect economic growth not only this year, but next year,'' Morra said in a telephone interview from New York. ``Even if there are new investments in production and transportation, they may not be enough to solve the same problem next year. The energy crisis will affect investment decisions.''

The 3.9 percent decline in April was the biggest since January 2001, when output fell 8.5 percent. The median forecast in a Bloomberg News survey of six economists was for growth of 0.5 percent in the month. The statistics institute said output rose 9.3 percent in April from the year-earlier period.

``It's too early to say if this is a deceleration of the economy or a slowdown because companies moved production to other months to avoid the energy shortages,'' said Carlos Pallordet, an economist at Buenos Aires-based consulting company Fundacion Capital. ``If there is a cold and dry winter, we are going to see some significant energy cuts.''

The Argentine Industrial Union has said a lack of power may trim 2 percentage points off economic growth this year. President Nestor Kirchner's administration predicts the economy will expand 5.5 percent this year.

Daily Fax

Kirchner cut gas supply to the biggest industrial users in the country in March as shortages threatened to leave households without gas in the winter months. Demand of gas surged last year as Argentine industrial output grew 16 percent, the biggest rise in a decade.

Moretto at Fanelli said he receives a fax every day from Camuzzi Gas Pampeana SA, Argentina's largest gas distributor, telling him how much gas he will receive the following day for his plant. Moretto said he's concerned that colder temperatures in the country may again prompt Camuzzi to deliver so little that it leaves Fanelli without gas, which the company uses to bake its bricks.

Demand for Fanelli's bricks has surged as Argentina's construction industry has grown 34 percent this year after expanding 38 percent in 2003. Fanelli needs 24,000 cubic meters to reach its normal output level of 1 million bricks per month, Moretto said. In April, it received 12,000 cubic meters, allowing it to only produce half that amount, he said.

``Earlier this year we expected to double our production,'' Moretto said. ``Now we hope at least to keep this level of production.''

[AZ94Q]

Few interesting points..

Adjusted for inflation, gas is still relatively cheap. It peaked during the 80s at 3ish..

If gas continues to rises, it adds to inflation, which will move greenspan to raise rates sooner/higher..

Everyone is commenting on the fear premium now. Most of everyone accepts every penny crude rises, it's the fear premium increasing..

We need rising wages, if we hope to deal with permanent upward price movements in crude.

Bush won't release any of the strategic oil reserve, which is now nearly full (95 percent) 700 million barrels.

Dems have permanently stalled Bush's energy bill, which would allow further drilling in Alaska. Interesting Bush wants to drill into alaska, and the dems want to release the strategic reserves. Political stalemate.. will be interesting to see who (if anyone) buckles first on this one.

Opec wants crude around 28-30 barrel. Market says otherwise..

Fun times ahead

[VimyJ]

Oil Price Out of OPEC's Hands

http://biz.yahoo.com/rb/040520/markets_oil_2.html

Anwr will eventually be developed but the estimated reserves there of 9 billion barrels are not enough to make a meaningful difference in the overall supply. With daily oil consumption @ 80mbpd the Anwr fields would only add 112.5 days worth of supply to the global market.

[VimyJ]

The Main Reason Gas Price Is Rising

http://www.globeinvestor.com/s...r0520

[AZ94Q]

Oil Prices Drop As Much As $1 Per Barrel

Fri May 21, 7:29 PM ET Add Business - AP to My Yahoo!

By BRAD FOSS, AP Business Writer

WASHINGTON - Oil prices fell as much as $1 per barrel Friday after Saudi Arabia said it will push OPEC (news - web sites) to raise its daily production quota by 2 million barrels, or 8.5 percent, in order to calm jittery energy markets and protect global economic growth.

AP Photo

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Saudi oil minister Ali Naimi, who had called for a smaller production increase just two weeks ago, said the new target was decided upon after reviewing updated projections for supply and demand. Naimi also announced that the Saudis have agreed to pump an additional 500,000 barrels of crude per day, beginning in June.

Analysts said the Saudi plan would have little immediate effect on retail gasoline prices in the United States, where motorists are paying more than $2 a gallon, on average.

"It will take 45 days for the additional crude to make its way to the U.S. and by then it's mid July and the gasoline season is already over," said Tom Bentz, an analyst at BNP Paribas Commodity Futures in New York.

However, "the markets have to respect that the Saudis are trying to make a stand to prevent the prices from rising further," Bentz said.

Citing concerns about the negative impact the high price of oil could have on the global economy, particularly developing nations, the world's largest petroleum producer said Friday that it intends to propose the higher output level on Saturday, when several members of the Organization of Petroleum Exporting Countries gather informally at an industry conference in Amsterdam.

The news sent energy futures tumbling.

The price of light crude for July delivery on the New York Mercantile Exchange dropped as low as $39.65 per barrel on Friday, before settling at $39.93, a decline of 87 cents. Since hitting an all-time high of $41.85 on Monday, crude has fallen nearly $2 or 5 percent amid rising expectations OPEC will raise production. June unleaded gasoline was down 3.34 cents per gallon at $1.4168 on Friday.

In London, Brent crude settled at $36.51, down 75 cents on the International Petroleum Exchange.

The Saudi Oil Ministry said in a statement attributed to Naimi that the country had already pledged to increase its production to around 9 million barrels per day as of June 1. The Saudi government is currently believed to be producing 8.4-8.6 million barrels a day.

The statement, issued in Amsterdam Friday morning, also said that "recent revisions in oil demand and supply projections for the coming months point to an increase in the required production from OPEC by an excess of 2.0 million barrels per day."

The statement went beyond a proposal made early last week, when Naimi said OPEC, which formally meets on June 3, should approve a bump up in its production quota that "not be less than 1.5 million barrels a day."

The cartel's official production quota is at 23.5 million barrels per day, but analysts believe OPEC members are producing, or "cheating," in excess of 2.3 million barrels a day above their current quota.

By raising the output quota OPEC members with excess capacity, such as Kuwait, the United Arab Emirates and Saudi Arabia, could cheat even more, analysts said.

Just how much remains to be seen. "I question how much additional crude will come out of any agreement," said Bentz, noting that most OPEC members have no spare capacity and might be loathe to accept a deal that only benefits the biggest players.

The Emirates oil minister said Tuesday OPEC should increase its production to match global oil demand, but he declined to give a number or specifically back the Saudi proposal.

In a conference call with journalists later in the day, Saudi foreign policy adviser Adel al-Jubeir signaled his country's willingness to commit even more oil to customers if 9 million barrels per day is still not enough. "Nobody is going to be turned back if they want crude," al-Jubeir said.

"The price of oil should be at moderate levels so that consumers are not hurt and producers are not hurt," he added.

In addition to the lack of supply, Al-Jubeir blamed the high price of oil on "massive" price speculation by hedge-funds, terrorism fears and a shortage of refining capacity in the United States.

In other trading on Nymex, June heating oil futures fell 3.11 cents to 99.60 cents per gallon and natural gas for June delivery settled 2.9 cents higher at $6.353 per 1,000 cubic feet.

[VimyJ]

An excellent piece discussing threats to the world oil supply and ramifications of the growing al Qaeda movement in Saudi Arabia.

http://news.scotsman.com/opinion.cfm?id=641682004

[1992Q45A]

I just watched a roundtable on oil price discussion. All the leading oil anaylsts from the major brokerage firms on wall street. They all agreed this was a simple fear premium leading to the increased prices of crude. Evidence of this is the near 2 dollar drop when opec announced production increases, then when those oil execs were kidnapped in kobar, the sudden spike in prices.

It's simple. When middle east tensions ease up, crude falls back to normal levels. Crude is having a hard time staying above 40 now.. In fact the only reason it has broken that level in the last week, is from terror concerns (kidnapping/bombing/etc)

OPEC wants 28-30 barrel. We will see that level before too long. The fear premium can't remain intact for ever. It has always begun to break it's hold on the price of crude. Fallen below the 40 level, and only broke back through when there is a bombing/attack.

[VimyJ]

OPEC doesn't want $28 oil. That's only lip service. There is a security premium to be sure but OPEC has already been pumping at their new "higher quota" for some time. The mere fact there is a fear premium underlines the fact that supplies are tight. Only SA has the capability of increasing crude output any meaningful amount. The OPEC countries are loving these high prices and see that demand has only been increasing despite the higher costs causing "leakage" above previous quota rates.

Seems that no amount of evidence regarding tightening supply and rising demand can shake many people from their belief that oil will never run out and that the major factor in the higher oil prices is security.

[1992Q45A]

People who have no actual control of crude, are moving the prices up. You can believe whatever you want, but the price movement and correlation of terrorlst attacks is obvious. You can believe opec secretly wants higher prices, but higher prices are good for no one. We used less saudi crude then 10 years ago. We essentially bank the house of Saud.. Higher prices only do more to make people less and less crude supportive.

Believe what you want, but OPEC has said 28 is a fair price for crude..

Crude can barely hang on to 40.. the only reason it topped it again was the attacks in KOBAR..

we'll see what happens, but the uptrend is weakening daily.

[1992Q45A]

Maybe nobody believes it, because it's flat out wrong. This has all been said before. People have been calling for the end of crude for years. It's been proven wrong time and time again.

Maybe you're just flat out wrong, but I know you would never consider that.

[VimyJ]

The cheap oil is gone. Or do you consider oil a renewable resource? The once mighty Texas fields are in fast decline. The North Sea areas are in decline. The new discoveries are fewer, smaller and more remote. Note the restated reserve estimates of Shell oil for one.

The House of Saud is in peril and even their mighty Gawar field is showing signs of depletion. Their pumping is resulting in ever increasing amounts of water. Oil will be around for many years to come but as I have said here many times, the cheap oil is gone for good.

When the easy crude that bursts forth from the ground is gone then there will be the reserves that require pumping to be recovered. When those begin their inevitable decline the move will be to shallow offshore recovery. Then to deep water and other geographically more remote locations (not to mention ever more politically unstable regions). Then there will be the exploitation of synthetic crude from tar sands and heavy oil. Then coal bed methane and coal liquification. Every step taken involves greater amounts of energy and capital to mine and/or process.

The cheap oil is gone but there is still a substantial amount of expensive petro energy to meet our energy demands.

How could I be wrong? I have just outlined the history and future of the oil industry. In fact, oil companies recentyly raised their base price estimates for new exploration from $18 to $25 per barrel. "So what?", you ask. That represents about a minium 30% increase in the price of their very conservative exploration considerations. The major oil co.s themselves are planning on more expensive oil. Bear in mind that those figures amount to what an oil co. would consider an ideal "gross margin" type of pricing.

Oil isn't disappearing. It's just going to be more expensive. Remove the security premium and oil would still be increasing in price due to demand increase.

[texasoil]

A very thorough technical analysis by a joint auto-oil group was called 'well to wheels' to include ALL the factors in all forms of transportation.The BEST solution efficiency wise is modern diesel/electric hybrid. This is considering crude oil availability, refining total costs, distribution, car cost, and car efficiency, with ultra-low emmissions. Hydrogen is clean in a car, but real 'dirty' if it is made from oil or natural gas, and not anymore efficient.

Unless we build a bunch of nuclear breeder reactors and solve the fusion reactor technical hurdles, we are tied inseperably to oil and internal combustion engines, with the above hybrid as the best overall.