ODAC News
Wednesday 12 Sept
The Oil Depletion Analysis Centre
The next ODAC News will be Sunday
23rd Sept.
Oil Prices
1a/ Crude Oil Trades Near Record on Fourth-Quarter Supply Concern
(Bloomberg, Wed 12 Sep)
1b/ US Agency Sees Oil Prices Staying Above $70 Through 2008
(Energy Intelligence [Oil Daily], Wed 12 Sep)
1c/ Oil Rises to Record $80 on Larger-Than-Expected Supply Decline
(Bloomberg, Wed 12 Sep)
1d/ PETROLEUM ($US/bbl) (Bloomberg, Wed 12 Sep)
Global Refinery Production
2/ IEA Says Global Refinery
Runs to Fall 1.4 Million Barrels a Day
(Bloomberg, Wed 12 Sep)
Economy - Subprime scam, Credit Squeeze
3a/ Bracing
for collateral damage among Wall Street's big houses (IHT, Mon 10 Sep)
3b/ More
US subprime borrowers hit (Financial
Times, Thu 06 Sep)
3c/ Andreas
Whittam Smith: There's a storm brewing – and it's
coming this way (The Independent, Tue 11 Sep)
3d/ Too
close to home (BBC News [Robert Peston], Mon 10 Sep)
Mexican Oil Production
4/ Pemex Blames Sabotage
in 6 Separate Pipeline Blasts
(Bloomberg, Mon 10 Sep)
Geopolitics / LNG -
5/ Sonatrach
seeks damages from Repsol and Gas Natural
(Elkhabar [
6/ Russian Car Imports Up
60% in January-July (FC Novosti, Mon 10 Sep)
7/ Aluminium smelter
planned for Saudi (Arabian Business, Tue 11 Sep)
Canadian Tar Sands / OPEC Oil Exports
8a/ OPEC exports predicted to fall putting Canadian oil sands in
global energy spotlight (CNN Money, Tue 11 Sep)
8b/ OPEC’s Growing Call on Itself
(CIBC World Markets, Occasional Report #62, Mon 10 Sep)
8c/ Oil
sands facing capacity squeeze (Globe and Mail, Mon 10
Sep)
Energy Intelligence – Various
9a/ Rosneft
Will Not Extend China Crude Supply Contract Past 2010
(Energy Intelligence [International Oil Daily], Wed 12 Sep)
9b/ Another
Shtokman Surprise Coming?
(Energy Intelligence [World Gas Intelligence], Wed 12 Sep)
9c/ Gazprom's
Eastern Strategy (Energy Intelligence [World Gas Intelligence], Wed 12 Sep)
9d/ PetroChina Goes For Pricey Term LNG
(Energy Intelligence [World Gas Intelligence], Wed 12 Sep)
Economy -
10/ Imports
of oil hit trade deficit data (Financial
Times, Wed 12 Sep)
Food – Wheat Prices
11/ Wheat
tops $9 mark for first time (BBC News, Wed 12
Sep)
**********************************************************************************************************
1a/ Crude Oil Trades Near Record on Fourth-Quarter Supply Concern
(Bloomberg, Wed 12 Sep)
http://www.bloomberg.com/apps/news?pid=20601072&sid=aZrsFJDJedf0&refer=energy
Comment: Yesterday at its quarterly
meeting to discuss such issues, OPEC agreed to increase its oil production
output by 500,000 b/d (from November), sending oil prices UP by a dollar or so.
This is reminiscent of early last year when oil prices were going up, and OPEC
agreed to raise their quotas – to a level everyone suspected they were already
producing, resulting in oil prices going up. The message is 500,000 b/d is
considered too little, too late, for now anyway.
Note that US crude oil stock piles are actually in
good shape at the moment: “
But not gasoline/petrol stocks: “Gasoline supplies
probably fell 500,000 barrels from 191.1 million the week before, which was 5.2
percent below the five-year average and the lowest in two years.”
Article: Crude oil traded near a
record in
The U.S. Energy Department will probably report later
today that supplies of crude oil fell last week, according to analysts surveyed
by Bloomberg News. The Organization of Petroleum Exporting Countries said
yesterday it would increase production by 500,000 barrels a day, citing concern
over
``Any increased production from OPEC will be soaked up
easily,'' said Julian Keites, a broker at Fimat International Banque SA in
Crude oil for October delivery was at $78.18 a barrel,
down 5 cents, in after-hours electronic trading on the New York Mercantile
Exchange at 10:29 a.m. in
So far, it's ``premature'' to try to determine whether
mortgage-loan losses in the
Prices have gained on speculation an Energy Department
report today will show crude oil-supplies in the
``OPEC's decision to only increase by 500,000 barrels
is clearly not enough in regard to market imbalances ahead, so people are
paying careful attention to the crude inventory numbers to see how fast they're
falling,'' said Harry Tchilinguirian, an analyst at
BNP Paribas in London. ``If these inventories stabilize, that should calm
nerves a little bit, but not that much.''
... ``The high-demand winter season necessitates
keeping the market adequately supplied,'' the statement said. Oil demand
typically peaks in the fourth and first quarters as refiners make heating oil
for the Northern Hemisphere winter.
The increased production from OPEC, the supplier of
about 40 percent of the world's crude oil, reverses a year of curtailed output.
It won't be enough, some strategists said.
... The added 500,000 barrels of OPEC production comes
on top of an acknowledgement that OPEC members were already pumping about
900,000 barrels more a month than their quotas allowed. The group's members
will now target 27.2 million barrels a day of production after abandoning their
former quota of 25.8 million barrels a day…
1b/ US Agency Sees Oil Prices Staying Above $70 Through 2008
(Energy Intelligence [Oil Daily], Wed 12 Sep)
No link, from newsletter.
Comment: For further info, see the EIA’s Short-Term
Energy Outlook, updated yesterday (11th Sept).
Article: The
1c/ Oil Rises to Record $80 on Larger-Than-Expected Supply Decline
(Bloomberg, Wed 12 Sep)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDi.du4Ck2qo&refer=home
Article: Crude oil rose to a record
$80 a barrel in
``Seven million barrels is an awful lot of oil to lose
in one week,'' said Rick Mueller, an analyst with Energy Security Analysis Inc.
in
Crude oil for October delivery rose $1.60, or 2.1
percent, to $79.83 a barrel at 2:08 p.m. on the New York Mercantile Exchange.
Futures touched the highest price since trading began in 1983. The previous
record of $78.77 was reached on Aug. 1. Prices are up 25 percent from a year
ago.
Prices rose from 1979 through 1981 after
A 2.7 million barrel drop was expected, according to
the median of responses by 17 analysts surveyed before today's report. The
department released its weekly report on inventories at 10:30 a.m. in
1d/ PETROLEUM ($US/bbl) (Bloomberg, Wed
12 Sep)
http://www.bloomberg.com/markets/commodities/energyprices.html
PRICE CHANGE %
CHANGE TIME
Nymex Crude
Future 79.77 1.54
1.97
13:53
Dated Brent
Spot
78.34
1.67
2.18
14:23
WTI Cushing
Spot
79.78
1.55
1.98
14:03
**********************************************************************************************************
2/ IEA Says Global Refinery Runs to Fall 1.4 Million Barrels a Day
(Bloomberg, Wed 12 Sep)
http://www.bloomberg.com/apps/news?pid=20601207&sid=aTdxUpT7cKuc&refer=energy
Article: Global refinery runs, or the
amount of crude processed into oil products worldwide, are forecast to fall by
1.4 million barrels a day this month because of plant maintenance, according to
the International Energy Agency.
Refinery runs are expected to average 73.5 million
barrels a day in September, increasing to as many as 75.8 million barrels a day
by December.
Forecasts for the third and fourth quarters have been
reduced by 300,000 barrels a day to 74.2 million barrels a day and 74.6 million
barrels a day respectively, the Paris-based IEA said today in its Oil Market
Report.
``Higher planned maintenance, weaker than expected
August throughputs and downward revisions to demand estimates, underpin the
reductions,'' according to the report.
The lower runs may tighten fuel markets, resulting in
higher prices. Europe already has record-low fuel-oil yields, the IEA said,
citing refinery shutdowns in
**********************************************************************************************************
3a/ Bracing for collateral damage among Wall Street's big houses
(IHT, Mon 10 Sep)
http://www.iht.com/articles/2007/09/10/business/deal.php?WT.mc_id=newsalert
Comment: Andrew Ross Sorkin implies the large investment banks, contrary to
their claims that all is well, are about to layoff large numbers of employees.
Article: By now, all of Wall Street
understands that the private-equity gravy train has jumped the tracks. But few
seem to realize how ugly the pile-up could become.
With the buyout market in free fall, lots of attention
has focused on a few obvious pressure points, like which investment banks will
rack up big losses on the $330 billion in debt that they committed to pay for
leveraged buyouts over the last year.
For the most part, though, Wall Street seems to be
taking it all in stride. James Dimon, the chief
executive of JPMorgan Chase, said last month that he
was "comfortable."
Comfortable? Let me offer a more dour view: wide
swaths of Wall Street, and many of the industries that serve it, are in for
some serious collateral damage. Not only has private equity been out of
business for the past two months, but that activity is not likely to resume
with any significance soon. And when it does, it will be at a fraction of its
recent peak.
So what does that mean? For much of Wall Street, a
severe case of withdrawal. Forget about cutting the size of bonuses: let's
start really thinking about the possibility of slashing jobs...
3b/ More
http://www.ft.com/cms/s/0/5a2869ea-5c80-11dc-9cc9-0000779fd2ac.html
Article: More than one in seven US
homebuyers with subprime loans failed to keep up with mortgage payments in the
second quarter, in a sign of growing distress in the housing market.
More than 619,000 homeowners – or 1.4 per cent of all
those with mortgages – face the prospect of repossession, up from 1.28 per cent
in the first quarter, according to estimates by the Mortgage Bankers’
Association. Total delinquencies rose to their highest level since 2002 – by
0.28 percentage points to 5.12 per cent of all mortgages.
The data indicates an acceleration in the troubles in
US mortgage markets, and covers the period before last month’s
credit squeeze raised the cost of borrowing.
Most of the rise in foreclosures came from growing
numbers of seriously delinquent adjustable-rate subprime, and prime, mortgages.
Economists expect foreclosure rates to increase dramatically as subprime loans
re-set to higher rates in the coming months.
“Higher foreclosures will add to already bloated
inventory of homes, extending the housing recession,” said Drew Matus, a Lehman Brothers economist, pointing to further
weakness in house prices and cuts for construction companies.
... There are more than 6.2m outstanding subprime
mortgages, nearly half of which are adjustable rate. Delinquencies on these
mortgages rose to 14.82 per cent of all loans.
Delinquencies on prime mortgages – those made to
borrowers with a good credit rating – rose to 2.73 per cent of outstanding
loans, up from 2.58 per cent in the first quarter...
3c/ Andreas Whittam Smith: There's a storm brewing
– and it's coming this way (The Independent, Tue 11 Sep)
http://comment.independent.co.uk/columnists_m_z/andreas_whittam_smith/article2947413.ece
Comment: Good summary of where we are
with the
Article: … Unfortunately, interest
rates started rising and the American housing market weakened. Subprime loans
began to go wrong. Sometimes they were poorly documented. The shocking result
is that some 15 per cent of all subprime lending has developed, as the
Americans put it, "serious delinquencies". Aggregated together, that
is what the £500bn of bad debt mentioned above comprises. The first casualty is
the American housing market, where activity has been sharply reduced and prices
are under pressure. In turn, this is helping to drive the
The second casualty might be as serious – the world's
credit markets. The central banks have been trying to ease conditions by making
billions of pounds of very short-term funds available. This is not working
because the underlying problem is not so much a shortage of liquidity as a lack
of information. Where are the bad debts? Alas, no institution with a
substantial holding of subprime mortgage paper wants to disclose its position
before it has to do so.
What are likely to be the consequences? The shortage
of credit will mean that high-risk borrowers will have to pay a lot more for
loans than those with a good credit rating. At the extreme, some who could have
borrowed money before the summer may find that they cannot do so any longer.
They may have to sell assets. There will be fewer debt-financed takeovers.
Governments and central banks will find it difficult to undo the credit crunch
that financial institutions will have brought upon themselves. It's the
hangover after the party. It is not a mere indiscretion, however. For as a
result, some sort of recession, and with it a stock market correction, is
almost certainly on the way.
3d/ Too close to home (BBC News [Robert Peston], Mon 10
Sep)
http://www.bbc.co.uk/blogs/thereporters/robertpeston/2007/09/too_close_to_home_1.html
Comment: Robert Peston comments on the
significance of the British small mortgage lender, Victoria Mortgages, going
bankrupt last week.
Article: The collapse of a small
mortgage lender, Victoria Mortgages, may seem neither here nor there in the
scale of things.
The City watchdog, the Financial Services Authority,
has tried to play down the significance of
And in one sense, the FSA’s
relaxed demeanour is reasonable.
Last year it sold around £500m of mortgages. Even so,
the only people who should be seriously inconvenienced or damaged by its demise
are the 381 customers with current mortgage offers from Victoria that are yet
to receive their money.
But what did for
Here’s
why
The Bank of England and the Financial Services
Authority will be hoping that what has happened to
**********************************************************************************************************
4/ Pemex Blames Sabotage in 6 Separate Pipeline Blasts
(Bloomberg, Mon 10 Sep)
http://www.bloomberg.com/apps/news?pid=20601086&sid=aIhtsi1yZPyY&refer=latin_america
Comment: It would seem that we can now
add
Article: Petroleos
Mexicanos, the country's state oil monopoly, said
saboteurs blew up three oil and gas pipelines in the energy hub of
The six explosions that shut down lines carrying crude
oil, natural gas and propane were ``premeditated acts,'' Pemex said in an
e-mailed statement. About 12,500 people were evacuated after the blasts at 3
a.m.
... The blasts today follow two separate pipeline
bombings in July that disrupted natural gas for thousands of residents and
businesses in four central states. The damage to industrial production from
this attack may be greater because it affects a larger gas pipeline and lines
that connect to
``These pipelines are the main arteries of supply to
Vitro SAB, Mexico's biggest glassmaker, halted
production at five glass factories as gas supplies were cut to Vitro's plants
in Mexico City, Toluca, Queretaro
and Guadalajara, the company said in a statement. Grupo
Industrial Saltillo SAB, the
... Pemex will take three to five days to repair the
damage and restore natural-gas service, said Carlos Ramirez, a Pemex spokesman,
in an e-mail. The blasts cut off supply of about a billion cubic feet per day,
mostly to businesses, he said.
... Following the Pemex blasts in July, President
Calderon deployed 5,000 troops from an elite military unit to safeguard Pemex's facilities as well as dams and power plants. Pemex
stepped up aerial surveillance of its 60,000-kilometer pipeline system.
The company's pipeline network is too extensive to
patrol completely, Shields said.
``If terrorists have decided they're going to blow up
Pemex pipelines, then it's going to be very hard to stop,'' he said. ``There
was a time in
**********************************************************************************************************
5/ Sonatrach seeks damages from Repsol
and Gas Natural (Elkhabar [
http://www.elkhabar.com/FrEn/lire.php?ida=80272&idc=52
Comment: Last week the Algerian
national oil and gas company Sonatrach ended its
contract with Repsol and Gas Natural, two Spanish companies, the former oil and
gas, latter a utility, to build an LNG facility. The Spanish companies
reportedly invested over $500M in the project, and now Sonatrach
wants compensation. The more important point though is that according to this
article, the project was/is three years behind schedule. Just how many LNG
projects are this far behind schedule?
Article: Oil state-owned group Sonatrach announced yesterday to refer to the international
arbitration to seek damages; following its decision to cancel a 1.5b euros
contract signed in 2004 with the two Spanish oil firms Repsol YPF and Gas
Natural to explore and develop natural gas in Gassi Touil.
The state-owned group released a statement yesterday
saying “Sonatrach has started undertaking an
arbitrage procedure against Repsol and Gas Natural seeking damages”.
Sonatrach
statement mentioned further that Repsol and Gas Natural have not respected
their commitments, as Gassi Touil
project recorded delays and overcame its costs. It explained that according to
the contract provisions the project is to be complemented as by 2009, whereas,
according to Repsol and Gas Natural expectations the project would be finished
probably before the 2012 end. By doing so, Sonatrach “has
implemented the provisions of the contract itself” concluded the statement.
**********************************************************************************************************
6/ Russian Car Imports Up 60% in January-July
(FC Novosti, Mon 10 Sep)
http://www.fcinfo.ru/themes/basic/materials-rfcm-index.asp?folder=3352
Article: Car imports in
**********************************************************************************************************
7/ Aluminium smelter planned for Saudi
(Arabian Business, Tue 11 Sep)
Comment: What has an aluminium smelter
in
Article: State-run Saudi Arabian
Mining Company (Maaden) said on Monday it will start
work in about a year on an aluminium smelter joint-venture project with
"Construction of the first phase will start in
the third quarter of 2008 and we hope we will begin production in
2011/12," said Mohammed Samir Waly, director of the smelter project.
"In the first year of phase one we will produce
350,000 tonnes, and then 720,000 tonnes in the second year. We hope within
seven to 10 years will have a capacity to produce two million tonnes per
year," he told Reuters on the sidelines of an aluminium conference in
The plant will be located in Ras
Al-Zour in eastern
A construction boom in the world's biggest oil
exporting region has fuelled strong aluminium demand growth.
More than $1 trillion worth of infrastructure projects
are afoot in the Gulf region. Cheap energy has given the Gulf a competitive
edge for aluminium production.
The project is part of a world-scale integrated
aluminium complex on the Gulf coast. The complex also includes an alumina
refinery with capacity of 1.6 million tonnes a year.
The UAE's Dubai Aluminium (Dubal) plans to build the world's largest aluminium smelter
complex, an $8 billion plant that would start operations in 2010 and would
eventually have an output capacity of 1.4 million tonnes a year...
**********************************************************************************************************
8a/ OPEC exports predicted to fall putting Canadian oil sands in global
energy spotlight
(CNN Money, Tue 11 Sep)
http://money.cnn.com/news/newsfeeds/articles/prnewswire/TO12411092007-1.htm
Comment:
Article: Soaring rates of domestic oil
consumption will reduce crude exports from OPEC,
The study found that suddenly oil producing countries
are themselves becoming major oil consumers. Last year, OPEC members together
with independent producers
"Domestic demand growth of as much as five per
cent per year in key oil producing countries is already beginning to
cannibalize exports and will increasingly do so in the future as production
plateaus or declines in many of these countries," says Jeff Rubin, Chief
Economist at CIBC World Markets. "At current rates of domestic consumption
growth in the
... Mr. Rubin, will raise these issues and other
challenges facing the energy sector in his presentation at the 6th Annual
Association for the Study of Peak Oil & Gas conference in
8b/ OPEC’s Growing Call on Itself
(CIBC World Markets, Occasional Report #62, Mon 10 Sep)
http://research.cibcwm.com/economic_public/download/occrept62.pdf
Comment: The report referred to item
8a. Plenty of colourful charts and a table. Chart 8, ‘Growth in Canadian Oil
Sands Production’, is at the optimistic end of a large range of forecasts for
future growth in oil from tar sands. ODAC understands, for example, that the
Hedberg conference in the
Article: The call on OPEC has long
been referred to as a measure of pressure on world supply, being the difference
between world demand and non-cartel production. But increasingly, what bears
watching is OPEC’s growing call on itself, which is
simply the difference between what OPEC produces and what it consumes. Not only
is the cartel, along with other key producers like
Higher global oil prices and the growing move to limit
greenhouse gas (GHG) emissions may be keeping a lid on fuel consumption in
North America, Europe and
of the decade in the OECD.
Over the last five years, however, the demand for oil
is exploding in the developing world, growing at six times the pace of demand
in the OECD countries. Oil consumption grew by 4% outside of the OECD and is
widely expected to continue to grow at that pace for the rest of the decade.
Consequently global demand is now growing at 2% per year, almost double the
global average since 1980, despite the huge slowdown in demand growth seen in
much of the developed world. At current trends, the developing world will
surpass the OECD as the major consumer of oil within a decade (Chart 2)...
8c/ Oil sands facing capacity squeeze
(Globe and Mail, Mon 10 Sep)
http://www.theglobeandmail.com/servlet/story/LAC.20070910.RCANADAOIL10/TPStory/Business
Article: A lack of pipeline capacity
to take Canadian crude to refineries in the
And the constraints could result in apportionment, an
unpromising scenario where there's not enough infrastructure in place to take
all production to market, creating both lower prices and higher price
volatility.
Consequently, producers could delay some oil sands
projects to try to ensure they don't have to discount their future output to
guarantee it gets to market, said Tom Wise, executive vice-president at Purvin & Gertz.
"We do see growth in Canadian production, but the
pipelines are full and we could see apportionment," he said in an
interview.
"Responsible producers are looking at how much
production they can move to market, and are gauging their projects
accordingly."
Purvin
& Gertz estimates output from the oil sands will
grow to slightly more than three million barrels a day by 2015 from 1.2 million
barrels currently as new projects are brought on stream.
While the target does reflect the dynamic growth
expected in
The threat of apportionment could ease by 2010, when a
major pipeline - such as Enbridge Inc.'s Alberta
Clipper or TransCanada PipeLines
Ltd.'s Keystone projects - is expected to come on
stream, relieving the congestion, Mr. Wise said...
**********************************************************************************************************
9/ Energy Intelligence – various
No links – all from newsletter.
9a/ Rosneft Will Not Extend
Article: Rosneft has threatened not to
renew its current crude oil supply contract with China National Petroleum Corp.
(CNPC) and may stop supplying China altogether as it diverts more crude to its
own refineries, according to a senior Rosneft executive. In addition, construction
of a pipeline spur to
9b/ Another Shtokman Surprise Coming? (Energy
Intelligence [World Gas Intelligence], Wed 12 Sep)
Article: Russian state Gazprom is nearing
a decision to add one or more new partners to the consortium developing the
huge Shtokman gas field in the
9c/ Gazprom's Eastern Strategy
(Energy Intelligence [World Gas Intelligence], Wed 12 Sep)
Article: The long-term plan to develop
9d/ PetroChina Goes For Pricey Term LNG
(Energy Intelligence [World Gas Intelligence], Wed 12 Sep)
PetroChina's
dramatic entry into the global LNG market last week with two Australian supply
deals may well mark a turning point in
**********************************************************************************************************
10/ Imports of oil hit trade deficit data
(Financial Times, Wed 12 Sep)
http://www.ft.com/cms/s/0/c0668448-6046-11dc-8ec0-0000779fd2ac.html
Comment: “But the deficit in oil trade
increased from less than £0.1bn in June to £0.3bn in July, the biggest
shortfall since January.” With the Buzzard oil field now at producing at
maximum capacity, and depletion now in the driving seat of
Article: Higher oil imports and a
deterioration in net trade outside the European Union drove a sharp widening of
the UK’s trade deficit in July, official data showed
on Tuesday.
The goods deficit grew from an upwardly revised £6.5bn
in June to £7.1bn in July, compared with expectations of a £6.4bn deficit. The
Office for National Statistics said the revision for June was due to
double-counting of a £300m submission from an oil trader. The
“Today’s data show that the
... But the deficit in oil trade increased from less
than £0.1bn in June to £0.3bn in July, the biggest shortfall since January.
There was also a drop in net exports to countries outside the EU, including the
One welcome development for policymakers was a second
monthly decline in import prices, which fell 0.7 per cent.
**********************************************************************************************************
11/ Wheat tops $9 mark for first time
(BBC News, Wed 12 Sep)
http://news.bbc.co.uk/1/hi/business/6990821.stm
Comment: It looks like the price of
wheat can go quite a bit higher yet.
Article: Wheat prices have surged to a
record, breaking through the $9 a bushel mark for the first time, fanning fears
that the cost of bread will also increase.
... As a result, the price of wheat rose as high as
$9.1125 a bushel on US commodity markets. One bushel can make about 73 loaves
of bread.
The surge in demand has seen the price of wheat double
in value since April. There also is a danger that milk and meat price may rise
as animal feed prices climb because of higher grain costs, analysts said.
Last month the US Department of Agriculture forecast
global wheat supplies dropping to 26-year lows, and this forecast was expected
to be revised lower later on Wednesday.
The gloomy outlook has been exacerbated by the Grains
Council of Australia slashing production forecasts in the third-largest wheat
exporter to 15 million tonnes after late summer droughts ruined the country's
harvest.
Meanwhile, official figures from
Analysts have warned that
As well as growing demand and weather problems, an
increase in production of biofuels, which are made from crops such as wheat,
has also helped amplify shortages...
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