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Oil hovers above $80 after 3-week rally
By ALEX KENNEDY , 02.23.10, 03:23 AM EST


SINGAPORE -- Oil prices hovered above $80 a barrel Tuesday in Asia as investors mulled whether sluggish U.S. crude demand justified a 15 percent rally over the last three weeks.

Benchmark crude for April delivery was down 15 cents at $80.15 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract added 25 cents to settle at $80.31 on Monday Oil has jumped from $69.59 a barrel on Feb. 5 on investor optimism that the global economy will rebound strongly from recession last year. Yet growing inventories of crude, gasoline and diesel fuel suggest demand in the U.S. remains weak.

Some analysts expect crude demand in the U.S. and Japan will gradually follow overall economic growth and lift prices. Goldman Sachs ( GS - news - people ) expects crude to trade between $85 and $95 for most of this year.

"Continuing growth in the two largest developed market economies suggests that the economic recovery is still on track." Goldman Sachs said in a report. "We expect that Japanese oil demand will break the trend of the past decade and grow in 2010."

In other Nymex trading in March contracts, heating oil was steady at $2.0785 a gallon while gasoline rose 0.3 cent to $2.1185 a gallon. Natural gas fell 2.1 cents to $4.874 per 1,000 cubic feet.

Oil prices tumble on economy worries
By MARK WILLIAMS, AP Energy Writer Mark Williams, Ap Energy Writer 5 mins ago
Oil prices tumbled Thursday on new signs that the economy remains weak and that demand for crude is still tepid at best.

Benchmark crude for April delivery fell $2.80 to $77.20 a barrel on the New York Mercantile Exchange. The contract rose $1.14 to settle at $80 on Wednesday.

Oil has been bouncing back and forth for months between $70 and $80 as investors watch economic data for clues about where the economy is heading following the Great Recession.

The signs Thursday were mostly negative as the government said new claims for unemployment benefits last week jumped unexpectedly while a separate report on big-ticket manufactured goods was mixed.

Crude prices rose Wednesday after Federal Reserve Chairman Ben Bernanke told Congress that he expects interest rates to stay low for a while to help boost the economy.

The economy has grown for six months but is not yet spurring hiring and unemployment remains stubbornly high. Couple that with more than ample supplies and signs that the economy still needs to be propped up by federal stimulus "means that the demand were expecting to see may not develop," said Phil Flynn of PFGBest.

Oil prices were also pushed down Thursday by a stronger dollar and a drop in the stock market.

Because crude is traded in dollars, it gets cheaper when the dollar climbs and forces investors holding other currencies such as the euro to pay more for oil. The dollar was near a nine-month high against the euro over worries about economic growth and debt problems in Europe.

Major stock averages were down nearly two percent around midday.

Despite the drop in oil prices, retail gasoline prices headed higher for the eighth straight day, rising 1.5 cents a gallon to a national average of $2.693, according to AAA, Wright Express and Oil Price Information Service.

Pump prices have climbed 7.9 cents over the past week and are nearly back to the levels of a month ago when they were at $2.70 per gallon. Prices remain 80.2 cents above year-ago levels.

In other Nymex trading in March contracts, heating oil fell 7.55 cent to $1.9666 a gallon, and gasoline lost 7.05 cents at $2.0284 a gallon. April natural gas prices were down 10.2 cents to $4.757 per 1,000 cubic feet.

In London, Brent crude gave up $2.64 at $75.45 on the ICE futures exchange.

.Oil plunges below $82 on volcano, Goldman gitters

Associated Press Writer 1 hr 37 mins ago
SINGAPORE Oil prices plunged below $82 a barrel Monday in Asia, extending big losses on expectations that disruption to air travel from the Icelandic volcano will undermine the global economic recovery and crude demand.

Benchmark crude for May delivery was down $1.38 to $81.86 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

A huge cloud of volcanic ash has shut down air traffic in most of Europe for four days, scuttling travel plans and freight services that could end up costing billions of dollars.

At the very least, traders say the volcano crisis will lower demand from airlines for jet fuel.

"The market had underestimated the impact of the volcano," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "There's still a lot of uncertainty about how much this will affect the overall economy."

Oil fell $2.27 to settle at $83.24 a barrel on Friday after the Securities and Exchange Commission said Goldman Sachs & Co. defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2008.

Investors speculated that Goldman may have to liquidate some positions in crude to pay for penalties if found guilty.

"I think the whole market sentiment has switched to less optimistic," Chu said. "Things are pointing more bearish now."

All major Asian stock markets fell Monday.

Crude had jumped to an 18-month high above $87 a barrel earlier this month from $69 in early February.

In other Nymex trading in May contracts, heating oil fell 3.24 cents to $2.185 a gallon, and gasoline dropped 2.70 cents to $2.250 a gallon. Natural gas was steady at $4.044 per 1,000 cubic feet.

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer 34 mins ago
SINGAPORE Oil prices rose above $82 a barrel Tuesday in Asia, clawing back a little ground after the fraud case against Goldman Sachs and flight disruptions in Europe from volcanic ash triggered a two-day plunge.

Benchmark crude for May delivery was up 74 cents to $82.19 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. Oil tumbled $1.79 to settle at $81.45 on Monday, after it fell $2.27 on Friday.

A rebound in stock markets helped boost crude prices. The Dow Jones industrial average rose 0.7 percent Monday as Citigroup Inc. reported better than expected earnings and revenue, and most Asian indexes gained Tuesday.

Stocks dropped Friday after the Securities and Exchange Commission said Goldman defrauded investors by failing to disclose key information about mortgage investments it sold as the housing market was collapsing in 2007.

Oil traders often look to equities as a barometer of overall investor sentiment.

"The stock market proved that lawsuits and courts are no match for profits," Cameron Hanover said in a report. "That took away one source of selling in oil."

Investors are also eyeing a huge cloud of ash from an Icelandic volcano that has shut down air traffic in most of Europe for five days. Some cities, such as Barcelona and Rome, were beginning to receive flights Tuesday, but most European airports remained shut.

In other Nymex trading in May contracts, heating oil rose 1.70 cents to $2.17 a gallon, and gasoline gained 0.79 cent to $2.26 a gallon. Natural gas jumped 1 cent to $3.96 per 1,000 cubic feet.

In London, Brent crude's June contract was up 56 cents at $84.79 on the ICE futures exchange.

Bank of America Merrill Lynch said in a research note Tuesday that Americans simply aren't consuming enough to justify higher prices and predicted that oil will struggle to rise later this year. The analysts noted that a lot of oil is simply moving to storage houses and supertankers not to refiners who make gasoline and other fuel. They said OPEC also has boosted production recently and could push even more oil onto the world market.

Bank of America Merrill Lynch said it expects benchmark oil to slip to an average of $83 a barrel in the second quarter. It said oil should rise to an average price of $92 a barrel in the second half of the year.

Edward Meir, a senior commodity analyst at MF Global in New York, added that oil will continue to suffer as the dollar strengthens. A stronger dollar usually helps push down oil prices by making crude more expensive for investors holding other currencies.

"Commodity markets have to work against the headwind of a stronger dollar, which, given the turmoil in Europe, will only intensify," Meir said.

At the pump, gasoline prices dipped overnight to a new national average of $2.859 a gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 3.9 cents more expensive than it was last month and 80.1 cents more expensive than a year ago.

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer 10 mins ago
SINGAPORE Oil prices dropped below $70 a barrel Monday in Asia as the euro sank to a four-year low and stock markets tumbled on investor concern Europe's economy will wither amid a debt crisis and fiscal austerity measures.

Benchmark crude for June delivery was down $1.64 to $69.97 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The June contract lost $2.79, almost 4 percent, to settle at $71.61 on Friday.

Crude fell as low as $69.82, the lowest since $69.59 on Feb. 5, as the U.S. dollar gained against the beleaguered euro, which was at a four year-low. Oil, which is priced in dollars, becomes more expensive to investors holding other currencies when the dollar advances.

The euro fell to $1.2279 on Monday from $1.2352 on Friday while the dollar slid to 92.03 yen rom 92.30 yen.

Asian stock markets also plunged Monday, and oil investors often look to equities as a sign of overall investor confidence.

"It's a sea of red out there," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The euro concerns have really impacted confidence among investors across markets."

"Oil will be under pressure as long as the dollar is surging," he said.

In other Nymex trading in June contracts, heating oil fell 3.11 cents to $2.0393 a gallon, and gasoline fell 3.77 cents to $2.0931 a gallon. Natural gas was steady at $4.313 per 1,000 cubic feet.

In London, Brent crude was down $1.08 to $76.85 on the ICE futures exchange.

Charts updated ; ))

Oil drops to near $68 as stock markets, euro fall

Tue May 25, 4:03 am ET
SINGAPORE Oil prices fell to near $68 a barrel Tuesday in Asia as plunging regional stock markets and a weaker euro rattled the confidence of commodity investors.

Benchmark crude for July delivery was down $1.85 to $68.36 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract advanced 17 cents to settle at $70.21 on Monday.

Oil has plummeted 22 percent from $87.15 a barrel earlier this month as a falling euro made dollar-based crude more expensive for investors holding the European currency.

Investor concern that Europe's debt crisis could undermine global economic growth has also hurt stock markets, which oil traders watch as a measure of overall confidence.

All major Asian stock markets fell Tuesday, following a 1.2 percent pullback in the Dow Jones industrial average Monday. The euro dropped to $1.2226 from $1.2342 on Monday.

"The market appeared to acquiesce to the weakness in the stock market," Ritterbusch and Associates said in a report. "The primary drivers of this month's price plunge remain heavily skewed toward the bearish side."

In other Nymex trading in June contracts, heating oil fell 3.8 cents to $1.861 a gallon, and gasoline dropped 3.95 cents to $1.931 a gallon. Natural gas was off 0.1 cent at $4.016 per 1,000 cubic feet.

In London, the Brent crude July contact was down $1.83 to $69.34 on the ICE futures exchange.

Analysts are projecting a modest rise in oil prices in 2010. But there's another side to the story that Wall Street doesn't want you to know about... And, it's going to push oil prices through the roof.

Oil prices staged a remarkable rally in the past year on the back of a weak dollar and a nascent economic recovery.

And most forecasts are calling for oil to edge up slowly over the year.

At least, that's what the big firms want you to think...

Goldman Sachs controls over 43,000 miles of pipeline and more than 150 oil storage terminals. Morgan Stanley has the capacity to store and hold 20 million barrels. And these firms have the power to direct billions of dollars of their clients' money in oil.

Which way do you think they will push oil prices?

If you guessed "through the roof" you're right. And, those who invest right along with Wall Street have the opportunity for windfall profits.

NEW YORK Oil prices climbed above $74 a barrel on Wednesday, as crude followed the stock market higher on encouraging earnings news.

Drivers got another break at the pump. The national average for a gallon of unleaded regular slipped to $2.721, down 0.3 cent from Tuesday, according to AAA, Wright Express and Oil Price Information Service. That's 3.4 cents lower than a week ago and 11.7 cents higher than a year ago.

Benchmark crude rose $2.09 to settle at $74.07 a barrel on the New York Mercantile Exchange.

In recent months oil prices have been influenced by the stock market as an indicator of economic recovery and potential demand for oil and gas. The Dow Jones Industrial Average rose almost 275 points, or 2.8 percent, to close at 10,018.28. The NASDAQ and S&P 500 were each up more than 3 percent. Financial stocks led the way just ahead of earnings season, as State Street Corp. issued a second-quarter profit forecast that was better than analysts expected.

Crude also got a boost from a forecast of lower inventories when the Energy Department's Energy Information Administration issues its weekly report on Thursday. Analysts expect crude supplies to shrink by 3.5 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Even with a decline, the U.S. and the world are awash in oil and the question of demand weighs heavily on pricing. Some analysts are concerned that growth in developed nations will slow in the second half and next year as massive government stimulus programs taper off.

"Following a robust increase in oil demand in the past year, the stimulus-driven rebound is giving way to slower growth," Bank of America Merrill Lynch said in a report. "Oil inventories look high as demand is set to soften."

The intense heat wave gripping the eastern U.S. has not had much effect on the price of natural gas, used by some power plants to generate electricity. That could change with forecasts of sustained heat and an active hurricane season this summer.

"We see reasons to expect prices to strengthen over the next two months," energy consultancy Cameron Hanover said in a note to investors. "Hurricanes and heat are what natural gas bull markets thrive upon, and this year has several elements suggesting that hurricanes and heat will be common."

Natural gas lost 11.7 cents to close at $4.565 per 1,000 cubic feet on the Nymex.

In other trading heating oil rose 6.15 cents to close at $1.9787 a gallon, and gasoline gained 5.40 cents to close at $2.0253 a gallon.

Brent crude added $2.06 to settle at $73.51 a barrel on the ICE futures exchange.

India is urging its oil companies to expand overseas to meet the soaring demands of its growing economy. India 's massive dependence on imported oil has prompted the country to look for energy assets overseas.



Prime Minister Manmohan Singh told a petroleum conference Monday in New Delhi that over the coming decade, India 's demand for fossil fuels is set to increase massively. He said domestic production, though rising, will not keep pace with this demand.

"In India, the demand over the next 10 years will increase by about 40 percent, whereas the increase in supply from the maturing oil fields is expected to be about 12 percent," said Sing.

Mr. Singh told delegates that India 's state-owned oil companies will search for energy assets overseas. "Indian government is therefore encouraging all national oil companies to pursue equity oil and gas opportunities overseas. For these reasons we seek to build strong economic partnerships with other producing countries, and their oil and gas industries, to the mutual benefit of all us."

The push to acquire overseas oil assets already has acquired momentum in a country that imports about 70 percent of its energy needs. This year, India 's oil minister, Murli Deora, traveled to several countries, including Nigeria, Uganda, Sudan, Angola and Venezuela, to lend diplomatic support to the search for oil and gas fields by state-owned companies.

India 's Oil and Natural Gas Corporation is planning to borrow $10 billion over the next decade to buy overseas assets, according to media reports. The government also has increased to $1 billion the amount that state-owned companies can spend on acquisitions without government approval.

The hunt for sources of oil overseas has acquired a new urgency as India races to catch up with China, which has spent billions of dollars in acquiring oil assets in several countries. India 's oil companies have often lost out to China in the past while bidding for overseas assets. Energy experts say this is partly because China 's bids are backed by offers of aid, investment and loans to countries with oil assets.

As India, too, gives political backing to its bid to secure oil assets, Prime Minister Singh said hydrocarbons will continue to be India 's major source of energy for quite some time in the future.

From twitter:

MARKET WATCH: Crude oil hits highest closing price since early April


Nov 5, 2010
Sam Fletcher
OGJ Senior Writer

HOUSTON, Nov. 5 -- The price of December crude jumped 2.1% Nov. 4 to the highest level for a New York front-month contract since Apr. 6 as the market continued its reaction to the Federal Reserve Banks decision to buy $600 billion of Treasuries over the next 8 months to stimulate the US economy.

It was the fourth consecutive price hike for crude this week. The December natural gas contract increased 0.5%, regaining most of its loss from the previous session.

Analysts in the Houston office of Raymond James & Associates Inc. said, Apparently, the market needed some time to make up its mind about the Fed's latest round of quantitative easing (QE2). After posting modest gains [on Nov. 3], the broader market screamed higher yesterday with the Standard & Poors 500 Index (up 1.9%) reaching levels not seen since 2008. They said energy corporate stocks took the cue from crude, outperforming the broader market.

The Feds monetary stimulus plan furthered weakened the US dollar, which fell 0.4% against the euro to the lowest level since Jan. 20, encouraging investors to shift their money to the riskier commodities of oil and gold. Gold prices surged 2.5%, the biggest 1-day jump in nearly 6 months.

We dont see crude decoupling from the currency markets in the near future as the reactions about the USs looser monetary policy will keep this pot boiling, said Anuj Sharma, research analyst at Pritchard Capital Partners LLC in Houston. The Fed also kept the benchmark funds rate unchanged at 0.25% as economic recovery remains disappointing slow.

The dollar exchange rate and equity market trends are working in favor of even higher oil prices, said Adam Sieminski, chief energy economist for Deutsche Bank in Washington, DC. However, he said, We would be more convinced of the sustainability of the oil price rally if it were accompanied by an elimination in contango in the crude oil forward curve and improvements in fundamentals.

Sieminski said, The recovery in middle distillates demand growth has been more robust relative to other fuels. Demand growth among nonmembers of the Organization for Economic Cooperation and Developmentspecifically Asian countriescontinues to outpace the developed world. In our view, these two features of the market will persist, which has implications for supply-demand balances from a seasonal perspective as well as price trends, he said.

Meanwhile, Walter de Wet at Standard New York Securities Inc., the Standard Bank Group, said, We believe that the Commodity Futures Trading Commission data released later today is likely to show that noncommercial long positions have increased from already high levels last week. The weekly CFTC report last week showed net speculative length in crude pushed higher last week, while net speculative length in oil products declined.

De Wet said, The current level of the speculative length in oil could cause oil prices to pull back very sharply despite the Feds QE2 program. To highlight the risk of such a correction, there were two previous big drops in oil prices when net speculative length had reached current levels. One was in January-February, another was April-May. We believe that commodity markets are pricing in QE2 already, and commodities will not necessarily continue to rally. We need new data to support higher prices.

The biggest immediate threat to the current commodity price rally is another round of tightening in monetary policy in China, he said.

Olivier Jakob at Petromatrix, Zug, Switzerland, said, We continue to believe that QE2 is better played in equities than in oil futures. Oil prices are already back to the end 2007 levels, but the oil fundamentals are nowhere near those of 2007, and we continue to expect that higher commodity prices will be met with increasing hectic reactions from the CFTC (never mind that it is the Fed fueling the commodity price hike).

In its just-published medium-term outlook for crude, the Organization of Petroleum Exporting Countries assumes oil prices will stay at $75-85/bbl until 2020. They have a Call-On-OPEC for 2014 at 30.4 million b/d, i.e. only 1.2 million b/d higher than the current production and 1.6 million b/d less than the 2007 Call-On-OPEC, Jakob noted. It is easy to discount anything that comes out of OPEC, but we need to keep in mind that the International Energy Agency also is not calling for an increase in the Call-on-OPEC for next year. In the meantime, unresolved unemployment and rising oil prices are not a positive for oil demand, and it is at those price levels that US oil demand started to get hit at the end of 2007.

Energy prices
The December contract for benchmark US light, sweet crudes traded at $84.92-86.83/bbl Nov. 4 before closing at $86.49/bbl, up $1.80 for the day on the New York Mercantile Exchange. The January contract climbed $1.81 to $87.16/bbl.

On the US spot market, West Texas Intermediate at Cushing, Okla., was up $1.80 to $86.49/bbl, once more in lockstep with the front-month futures price. Heating oil for December delivery gained 4.52 to $2.33/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month increased 3.91 to $2.18/gal.

The December natural gas contract recovered 2 to $3.86/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated by 13.9 to $3.51/MMbtu. Meanwhile, the Energy Information Administration reported the injection of 67 bcf of natural gas into US underground storage in the week ended Oct. 29. That put working gas in storage above 3.8 tcfup 37 bcf from the comparable period last year and 353 bcf above the 5-year average (OGJ Online, Nov. 4, 2010). Weak supply and demand balances suggest excess storage will persist across the winter, Sieminski said.

In London, the December IPE contract for North Sea Brent crude was up $1.62 to $88/bbl. Gas oil for November gained $15.25 to $737.50/tonne.

The average price for OPECs basket of 12 reference crudes rose $1.77 to $84.33/bbl.

By KELVIN CHAN, AP Business Writer Kelvin Chan, Ap Business Writer Thu Nov 11, 9:46 am ET
LONDON The price of oil, which tumbled as the global financial turmoil worsened in late 2008, has climbed back to where it was at the beginning of the crisis, thanks to a recovering U.S. and global economy and the Federal Reserve's latest stimulus program.

Benchmark oil for December delivery was up 30 cents to $88.11 a barrel mid-afternoon Thursday in Europe after rising as high as $88.63 earlier in the session during electronic trading on the New York Mercantile Exchange. On Wednesday, crude prices added $1.09 to settle to $87.81 on Wednesday.

Analysts say oil could easily reach the $90 mark in the next few days, with $94-$95 being the next big milestone. That spells more financial pain for businesses, consumers and drivers, who were at least able to find some comfort in cheaper energy costs over the past two years of recession.

"We still have enough oil to make it through the winter and into the next economic expansion. But, the surpluses are not as large and demand is making the kind of strides forward that suggest the economy is improving faster than we dared imagine," said energy research company Cameron Hanover.

"If the economy starts to really improve, then prices are likely to gain an extra boost."

Crude prices are following gold, copper, cotton and other commodities, which are rising to record highs as investors seek safety after the Federal Reserve's decision to pour $600 billion into a bond-buying program to stimulate the U.S. economy. The Fed's program will unleash more dollars on the market, effectively devaluing the dollar.

Commodities, which are priced in dollars, tends to go up if the dollar weakens because it makes them cheaper for overseas portfolio managers who have euros, pounds or yen to spend.

Recent U.S. economic data reports have also been upbeat, which is also giving oil a boost since they suggest more consumption ahead.

U.S. commercial crude inventories fell by 3.3 million barrels to 364.9 million barrels for the week ending Nov. 5, the Energy Department said Wednesday.

The government also said gasoline inventories declined by 1.9 million barrels to 210.3 million barrels while demand over the past four weeks was up slightly, averaging 9.1 million barrels a day. That's an increase of 1.8 percent from the year earlier period.

The amount of oil in storage remains above the average for this time of year, yet the oil price is now at its highest level since October 2008, when the global financial crisis was taking hold in the wake of the bankruptcy of U.S investment bank Lehman Brothers. Oil prices have risen about 11 percent this year, while crude supplies have increased by 11.5 percent.

Oil was higher Wednesday even though the dollar was stronger as traders concluded the inventory decline was a sign of an improving economy. On Thursday the dollar fell against the euro and rose versus the yen.

"Even the firmer U.S. dollar is clearly no obstacle to higher prices at present," Commerzbank said in a research note. "The inventory report of the U.S. Department of Energy was one factor driving prices, revealing a stronger-than-expected reduction of stocks in all categories."

Commerzbank also said oil "gained additional impetus from the economic data from China."

Authorities in China said yesterday that factory output and retail sales both rose at double-digit rates in October over a year earlier.

In other Nymex trading in December contracts, heating oil fell 2 cents to $2.44 a gallon and gasoline was down 0.4 cents to $2.23 a gallon. Natural gas was down 2 cents at $4.03 per 1,000 cubic feet.

In London, Brent crude climbed 2 cents to $88.98 a barrel on the ICE Futures exchange.

China consumed more oil in November compared with the same period last year as temperatures dropped, China's top economic planner, the National Development and Reform Commission (NDRC), said Tuesday.

China's November apparent oil consumption - domestic production plus imports minus exports - jumped 15.2 percent year on year to 20.07 million tonnes.

Apparent natural gas consumption in November increased 13.3 percent month on month to 10.2 billion cubic meters.

The NDRC said Chinese oil consumption has remained at a high level since November but that diesel shortages in some regions have eased after producers increased supply.

NDRC data shows November daily average diesel consumption hit an all-time high of 438,667 tonnes, with total diesel consumption in the month jumping 21.4 percent year on year to 13.16 million tonnes.

Data also shows China's domestic crude oil output in the first 11 months rose 6.7 percent year on year to 184.22 million tonnes while crude oil imports in the same period totaled 207.38 million tonnes, up 18.3 percent year on year.

The crude oil data shows China's dependence on imported oil was about 53 percent in the January-to-November period.

According to the NDRC, China refined 350.72 million tonnes of crude oil in the January-November period, up 13.3 percent year on year.

China produced 86.2 billion cubic meters of natural gas from January to November, up 12.5 percent year on year, while its imports of the gas in the same period surged 130 percent year on year to 15.3 billion cubic meters.

By Staff of Iraq Oil Report
Published January 3, 2011
BAGHDAD - In less than two weeks on the job, Abdul Karim Luaibi has announced an increase in output from oil fields, which he said is record production, and acknowledged that a fourth bidding round is being prepared for a dozen exploration blocks.

He has given few details, such as from which fields exactly a struggling oil sector has been able to find this boost and what contract models will be used for the exploration round. Yet hes marked the first days of his tenure with an openness that could bode well for a transparent look at how the worlds third largest oil patch in the world will make good on its pledge to become the largest producer ever within seven years.

Work is progressing, he said, by the foreign oil companies which signed 11 contracts from the June and December 2009 bidding rounds. The deals, which pair international oil companies with Iraqs state operators in long-term service contracts, are aimed to boost oil production capacity to more than 13 million barrels per day (bpd) within seven years.

The oil contracts are going as it should be and programs that we have for production will be more than we anticipated, Luaibi said in a press conference Sunday at the ministry. Oil production today is more than 2.7 million bpd.

He said the output has recently witnessed a jump of of more than 250,000 bpd due to our national effort in some oilfields, and also the efforts of some (foreign) companies.

The most advanced of the projects are the Rumaila oil field, awarded to BP and the Chinese National Petroleum Corp., and Zubair, awarded to Italys Eni, the Korean Gas Corp. (Kogas), and Occidental Petroleum. But Luaibi didnt announce which fields account for such a dramatic increase in production or exports.

Iraq has its hands tied on numerous fronts, though many bottlenecks are being addressed. Exports are capped by the 500,000 bpd capacity in the northern export route to Turkey and the southern export routes are rated for only 1.6 million bpd. But construction is underway for a new southern system which could see its first capacity increase by years end with the first of four single point mooring floating terminals, which are rated for 900,000 bpd capacity each. This would allow Iraq to start studying and either fixing or replacing the existing southern routes to the al-Basra and Khor al-Amaya oil terminals.

Iraq has also begun using a new drag-reducing chemical which allows an increase in output without increasing pressure on the pipelines, and could account for an export increase in the south to as much as 1.83 million bpd.

He said weather shut-in exports for five days in December a result of nature mixed with old facilities and equipment but was bullish on January.

For the past month, our export of oil was 1.95 million bpd and oil revenues for the last month exceeded $5 billion, Luaibi said. According to the case that we have now, oil exports will increase this month to more than 2 million bpd.

In order to make room for the expected output boost in 2011, and also for longer-term increases, Iraq is looking at new export routes, including to Syria, as well as the necessary though expensive additional and expanded domestic pipeline, storage and refinery networks.

Its also preparing for a fourth bidding round the third took place Oct. 20, 2010 with the award of the Siba, Mansuriya and Akkas gas fields for the long anticipated exploration blocks. Much of the country is under- or un-explored, including the western desert believed to have massive dry gas deposits.

Exploration deals have had foreign oil companies licking their chops since the planning of the Iraq war in 2002, when many anticipated a wholesale opening of the nationalized oil sector. The result, however, has been a mix; the service contracts, however lucrative, arent the type of deal the global oil industry prizes.

This fourth round needs some details still on how to prepare a draft contract and the coming days will witness series of meetings until we reach an acceptable formula, Luaibi said.

We have identified about 12 geographical areas, he said, but there has been no decision on the exact parameters and exactly which blocks would be included.

Luaibi has taken over the ministry as it continues to battle with local governments which directly challenge the central governments sole authority to set the oil policy. This includes the dispute with the semi-autonomous Kurdistan region, from which 150,000 bpd is expected to be exported this year but remains shut-in due to disputes over the regions contracts. Luaibi, as deputy oil minister, was the main negotiator with the Kurdistan Regional Government. Although the ministry, the KRG and the new government have all indicated optimism that a deal will be reached, there has been no progress yet.

Complaints from the Anbar government, home to the Akkas gas field, have also delayed the initial signing of the Akkas deal with Kogas and Kazakhstans KazMunaiGaz. There are internal concerns that the gas will be exported and not used for domestic consumer and industrial needs, and complaints from provincial officials who werent given a bigger role in the contracting process. The two other deals from the third bidding round Mansuriya to the Turkish Petroleum Corp. (TPAO), Kuwait Energy and Kogas; Siba to Kuwait Energy and TPAO have been initialed but not given final approval.

Luaibi has thus far taken everything in stride, and relatively in the open. He even gave a tour of the parts of the ministry affected by a fire last Thursday, believed to be sparked by a tea burners left unattended in the second floor nursery.

With the efforts of its staff and the firefighters we were able to control the fire, and as you can see the damage is minor and office work will continue as usual, Luaibi said. I hope that journalists will be extra cautious in the transfer of information; unfortunately, some satellite channels talked about the burning of documents and contracts, but I think the picture is clear to you now. The damage was minor.

And he assured journalists that a planned tour of oil fields in Basra, Missan and Wasit provinces will take place. You shall be able to see the size of the work that is being done and activities that are taking place in these oilfields.

In the short term, the biggest global economic worry remains oil prices. Egypt itself isnt a big energy producer. But significant shipments of oil and petroleum products pass through Egypt each day on their way from the Mideast to European and U.S. markets.

About a million barrels a day of crude and refined products are shipped northward on the Suez Canal, according to estimates from the U.S. Department of Energy. A separate pipeline linking the Red Sea and the Mediterranean carries another 1.1 million barrels a day. Together, that is roughly 2% of global oil production.

If oil shipments through Egypt were disrupted, European supplyand global priceswould be affected tremendously, said Dalton Garis, an associate professor in petroleum-market behavior at the Petroleum Institute, an energy-research center in Abu Dhabi.

So far, oil flowing through both conduits appears unhindered. But a dusk-to-dawn curfew across the country had shippers operating in the canal warning customers over the weekend of potential delays and difficulty in contacting shipping agents and pilots and arranging for spare parts. Including the oil flows, about 8% of the worlds seaborne trade passes through the canal, according to Egyptian government figures.

The protests have no effect on the shipping traffic, Abdul Ghani Mohamed Mahmoud, a spokesman for the Suez Canal Authority, said Sunday. Everything is going as usual, he added. Officials at Arab Petroleum Pipeline Co., which owns the Suez-Mediterranean pipeline, couldnt be reached to comment.

For now the impacts on the oil markets appear minimal, however, there is no telling how this situation could evolve. Rising oil prices will have broad impacts as Europe remains mired in a crisis, the USA remains in a government driven recovery during a balances sheet recession and Asia battles inflation. If oil prices were to continue rising into the seasonally strong summer months it would not be surprising to see prices approach the levels that Merrill Lynch has described as the breaking point for the global economy:

According to Merrill Lynchs Sabine Schels, a commodity analyst, the breaking point for the global economy is when the size of the energy sector hits 9%. With the sector currently at 7.8% Schels says the breaking point is $120 oil:

Whenever the size of the energy sector in the global economy reached 9 percent, we went into a major crisis, said Sabine Schels, a commodity analyst at Merrill Lynch.It was in the 1980s and it was the same in 2008. Right now we are at about 7.8 percent and if you go above $100 per barrel to $120 per barrel, you get to that 9 percent level.

Iraq Oil Minister in Tehran Says OPEC Must Avoid Politics



By Ladane Nasseri - Jan 22, 2012 9:04 AM GMT

Iraq’s Oil Minister Abdul Kareem al- Luaibi told Iran that the Organization of Petroleum Exporting Countries must avoid political considerations as crude is a strategic commodity affecting the world, the Islamic Republic News Agency reported.

Iran’s enemies are seeking to pass sanctions, al-Luaibi said in a meeting with Iranian Vice President Mohammad Reza Rahimi yesterday, according to IRNA.

“Our efforts are for OPEC not to enter political matters, as oil is a vital and strategic matter for the world and we will act in line with the interests of oil-exporting nations,” al- Luaibi said.

Speaking in his capacity as current head of OPEC, al-Luaibi said in a Jan. 18 press conference in Baghdad that he will visit Iran to seek “clear assurances” on Persian Gulf crude shipments and Iranian production.

Al-Luaibi’s initiative came after Rahimi said on Dec. 27 that Iran may close the Strait of Hormuz, a chokepoint for about a fifth of globally traded oil, if the U.S. and its allies impose a ban on Iranian oil exports to halt the nation’s nuclear work. European Union foreign ministers meet in Brussels tomorrow to consider imposing the oil ban and additional financial sanctions against Iran, which is under four rounds of United Nations sanctions.

The IRNA report published earlier today did not specify whether protection of the waterway and exports of crude oil in the region had been discussed between the two officials.

“The enemies of the Iranian nation for years forced the UN’s Security Council to impose sanctions against Iran and are today starting a new game,” Rahimi was quoted as saying by IRNA. “It is clear that Iran will resist in the face of this oppression.”

An average of 14 crude tankers sail each day through the strait between Iran and Oman, according to the U.S. Energy Information Administration. Iran is the second-largest OPEC oil producer after Saudi Arabia, pumping 3.575 million barrels a day in December, according to data compiled by Bloomberg News.

22 Jan, 2012, 12.14PM IST, PTI


Crude oil prices may remain below $100/barrel in 2012: Report

NEW DELHI: Crude oil prices are expected to remain below $100 a barrel in 2012 due to slowing global demand amid an expected higher supplies, a report has said.

"Oil prices ( World Bank average) are expected to decline from $ 104 per barrel in 2011 to an estimated $ 98 a barrel in 2012," the World Bank said in its report 'Global Economic Prospects 2012'.

It said that slowing of global demand, growing supplies on efficiency improvements and availability of substitute for crude oil could weigh on prices.

The multi-lateral agency further said: "It is expected that OPEC (Organisation of the Petroleum Exporting Countries) will endeavour to limit oil output to keep prices relatively high, given the large expenditure needs in most countries".

However, the OPEC will "also be wary of letting prices rise too high, having witnessed the impact this has had on demand in recent years, especially in OECD countries, which accounts for 60 percent of total world oil supplies," it said.

Nevertheless, the return of Libya's oil production may necessitate accommodation by other OPEC members to keep prices from falling significantly, it added.

Currently, crude oil prices are showing a declining trend. Last week, oil futures for February delivery fell 1.9 per cent to $ 98.46 a barrel on the New York Mercantile Exchange, the lowest settlement since December 20, 2011.

Similarly, brent oil for March settlement dipped 1.5 per cent to $ 109.86 a barrel on the London-based ICE Futures Europe exchange.

Highlighting the global supply-demand situation of crude oil, the World Bank said the oil demand from the OECD, a grouping of 34 developed and developing nations, is on track to fall again this year.

However, the overall world oil demand is projected to jump by 1.3 million barrel per day or 3.6 percent in 2012, with all of the growth in emerging markets, it noted.

On the supply side, the report said in the near term, light/sweet crude markets could ease with recovery of oil production in Libya and growing supply in non-OPEC countries.

Production increases are seen from non-OPEC countries such as Brazil, Canada, the Caspian and West Africa, it said.

Last month, oil production in Libya is reported to have reached 0.9 million barrels per day (mb/d), which is more than half of pre-crisis levels of 1.6 mb/d, the report said

It said the International Energy Agency (IEA) expects production in that country to fully recover by 2014.

Similarly, Iraq's oil output is expected to reach nearly 3.2 mb/d in 2012. Its production has risen above 2.7 mb/d, due to increased output from new joint venture projects. Its Oil exports have also reached new highs, it added.

Offshore oil drilling in South Atlantic could lead to North Sea-style boom

It's not just a bunch of windswept rocks and sheep – there's oil in the Falklands, enough perhaps for a real boom that could generate billions of pounds.


The Falklands are not just a bunch of windswept rocks and sheep – there's oil in the Falklands, enough perhaps for a real boom that could generate billions of pounds. Some was found in the 1990s, but what has really got the oil industry excited is Sealion, a "discovery" which geologists think is about the size of decent North Sea oilfield. Other finds nearby in the North Basin, about 70 miles north of the islands, are also promising.

By Nick Meo

8:20PM GMT 21 Jan 2012


Some was found in the 1990s, but what has really got the oil industry excited is Sealion, a "discovery" which geologists think is about the size of decent North Sea oilfield. Other finds nearby in the North Basin, about 70 miles north of the islands, are also promising.


And then there is the South Basin, which has never been drilled. It is big, and the geological structures look good. A drilling ship is en route from Aberdeen to start a proper search. There was speculation about oil even at the time of the Falklands War, but the islands were too far away in an environment which was too difficult for any company to raise the investment to prospect seriously. Now the price of oil is high, the world's main oil fields are menaced by political insecurity - whether in the Gulf or Nigeria - and technology is better than ever at extracting black gold, even in the harshest environment.


The stage is being set for the transformation of the South Atlantic.

Oil, Euro Fall on Greek Debt Concerns

By Lynn Thomasson and Sarah Jones - Jan 23, 2012 8:42 AM GMT

European stocks rose and the euro erased losses before regional policy makers meet in Brussels to discuss new budget rules and a Greek debt swap. U.S. equity futures and oil declined.

The Stoxx Europe 600 Index climbed 0.2 percent as of 8:20 a.m. in London, poised for its fifth advance in six days. The euro was little changed against the dollar after earlier falling as much as 0.6 percent. Standard & Poor’s 500 Index futures slid 0.1 percent and oil declined 0.2 percent. Treasuries snapped three days of losses and wheat and corn futures added at least 0.9 percent.

Markets including China, South Korea and Taiwan were shut today for the Lunar New Year holiday. Bondholders negotiating a debt swap with Greece have made their “maximum” offer, leaving it to the European Union and International Monetary Fund to decide whether to accept the deal, said Charles Dallara, managing director of the Institute of International Finance and representative for the private creditors.

“Traders are treading cautiously, faced with the heightened risk of a disorderly default in Greece,” said Jonathan Sudaria, a trader at London Capital Group. A deal “is in the hands of two groups that appear to be in a standoff waiting to see who blinks first.”

Lower S&P 500 futures suggest the U.S. equity benchmark may end its four-day winning streak. The index has gained 4.6 percent in 2012, the best start to a year since 1997, after companies from Goldman Sachs Group Inc. to Union Pacific Corp. and EBay Inc. topped analysts’ profit projections.