Cat Cracker

speculation

2008-06-10T10:41:00.000-07:00

http://www.ft.com/cms/s/0/ed8a1fdc-3667-11dd-8bb8-0000779fd2ac.html?nclick_check=1

http://news.xinhuanet.com/english/2008-06/10/content_8341383.htm

Pickens and Speculative Hype

2008-05-20T23:24:00.000-07:00

NYMEX Oil Complex Roars Higher on Speculative Hype; We Compare Hype to Reality

May 20, 2008
By John Troland, Tom Waterman
Oilintel.com

All records fell again today as speculators drove the oil markets to new heights after T. Boone Pickens added his two cents to the Goldman rally. Speculators were only too happy to oblige.

The NYMEX June crude, which expired today, along with the gasoline and heating oil contracts roared higher, setting new all time highs and settles.

There are few real reasons for today's rally other than to say this is how the commodity speculators have been playing the energy markets for about four years, and never more pronounced than since the first Goldman rally back in December drove prices to within an eyelash of $100 per barrel.

The standard reasons are as numerous as they are irrelevant. A weak dollar, demand in growth areas such as China, India and the Middle East, geo-political concerns regarding potential supply disruptions in producer countries Iran, Iraq, Nigeria and Venezuela and so on.

Today's rally began early in the morning after T. Boone Pickens was interviewed on CNBC and affirmed last week's predictions by Goldman Sachs' analysts that prices for crude would hit at least $150.00 by year's end. It should be mentioned that at one point in the interview, Mr. Pickens had to admit that he was quite long some NYMEX energy contracts such as crude oil and natural gas. As anyone that heard the full interview knows, these types of predictions are self serving, and are the root cause of current runaway prices.

It's our opinion that this is just another example of what's going on in the energy and commodity markets and yet politicians are helpless to do anything about it.

Maybe it is time for Washington to step in and put the brakes on speculative trading. We don't suggest eliminating speculation, merely limiting the amount of influence it now has. Today, Congress was holding hearings about speculation, but there were probably enough smoke and mirrors in the room to at least deflect what damage is being done as a result of a market that escalates on a whim. We don't have much confidence that Congress will get deep enough into the matter to suggest any way out. They need to hire specialists to watch the markets on a day-to-day basis for about a month and report back. Unfortunately, nobody is doing that currently.

While there is truth to the argument that oil resources need to advance in order to satisfy rising energy demand, it is has already reached the point where demand for those resources is slowing down. It is also at the point where many other alternatives are suddenly more viable.

If current fundamentals mean anything at all, the crude oil glut just continues to expand, as do gasoline supplies. The slow U.S. market is backing up gasoline in Europe, where demand is not exactly flourishing either. This is supposed to be the spring gasoline rally but it has become the diesel and crude oil rally instead. By this time in a "normal" year, there would have been many more millions of barrels of gasoline flowing into the U.S. from Europe.

While the total amount of imported gasoline is down by less than 1.0% (it's actually down 0.4%), the actual volumes are more dramatic. On average since the beginning of the year, the U.S. has imported about 4,000 barrels per day less gasoline than a year ago. In total, it's a little more than a half million barrels of gasoline that has not arrived in U.S. ports this year. Yet refiners have not been running at rates seen in normal years and gasoline stocks remain well above last year.

In total, this tells us that we're probably right about how gasoline demand is going to fall by 1.5% to possibly as high as 2.4% this year. That tells us we will need a lot less crude oil this year as well.

Diesel inventories are admittedly low in Europe, parts of Asia and South America due to an extended spring maintenance season in all regions of the world. In the real world of oil, that is a temporary situation as refiners will surely start building excess distillate supplies if for no other reason than they are worth more than gasoline at the moment. What is not true is that demand for diesel is soaring. Quite the contrary, diesel demand is slowing down perhaps faster than gasoline, which will shorten the period where there is a perceived tightness.

Here in the U.S., there are cargoes slated for export to various locations, particularly Europe and South America, as refiners, faced with lower profit margins at a time when margins should be the highest of the year, are purposely churning out more diesel.

Are gasoline inventories in danger? Highly unlikely given the fact that U.S. supplies are still well above last year while demand will be under year ago totals.

Goldman Sachs Revision

2008-05-18T20:46:00.000-07:00

Oil Higher On Goldman Sachs Revision
May 16, 2008
By John Troland, Tom Waterman
OilIntel.com

The June NYMEX crude, RBOB gasoline and heating oil contracts are expected to open higher this morning as it appears the large hedge funds and financial trading house have returned to the buy side of the market in front of the weekend. We believe that after yesterday's volatile trading session where prices jumped early, collapsed at midday and rallied hard late in the day, speculators have returned not to balance positions but to make another run at record prices.

To the best of our knowledge there is little market moving news to have prompted a sharp move higher other than the usual hype and fear mongering about supplies being inadequate to keep up with demand, plus another market-moving prediction by none other than Goldman Sachs.

Goldman Sachs told clients that they have revised higher its New York crude-oil price forecast for the second half of this year indicating it will average $141 a barrel in the second half of the year, up from its previous forecast of $107. The company said prices will rise further in 2009, averaging $148 a barrel, the bank said. We suppose that the firm was a little nervous about their longer-term options positions, given the fact that fundamentals are essentially toilet-bound.

So there you have it, another Goldman rally starts today as no doubt all the speculators will pile on this one and prices have nowhere to go but up.

These "geopolitical tensions" and supply constraints are bogus as OPEC supply and non-OPEC supply will rise this year and in case they haven't noticed, demand is weakening and will weaken further, especially as Asia starts to feel the effects of a global economic downturn.

One of the latest concerns mentioned is the catastrophic earth quake in China will increase demand for diesel fuel and put a greater strain on supplies that the bulls claim is at a breaking point. Our opinion is that these reasons we hear every day are just hype, used to cover up the real reason prices have risen for nearly four years.

Our first look at today's open outcry session suggests prices have a good chance of repeating yesterday's trade action with prices moving in both directions, however as the major speculative firms get to the office this morning, they will be jumping on this bandwagon.

Oil's Murky Math

2008-05-14T10:10:00.000-07:00

Oil's Murky Math
by Peter Coy
Business Week
May 13th, 2008

Where are we headed: Up to $200 a barrel? Down to $80? With little good data on supply or demand, oil's next price move is anyone's guess

At around $125 a barrel, crude oil has more than doubled in price since the end of 2006. How is it possible that the vast majority of government forecasters, stock analysts, economists, traders, and journalists who follow the oil market failed to foresee this? Moreover, how can it be that even today, the bulls and bears on oil are extremely far apart, disagreeing not only on the oil outlook but even the present situation?

The answer is simple. You can't predict what oil prices are going to do even in the short-to-medium term unless you have a good handle on the forces of supply and demand. And that requires thorough and reliable data—which don't exist. Regrettably, the world oil market is no more transparent than a fragrant barrel of extra-heavy Orinoco crude. And the situation is getting worse because the world's fastest-growing oil consumer is also one of the most opaque: China.

Contradictory Predictions

The scarcity of good global data is a key reason why it's impossible to know for sure whether the next "super-spike" in oil in the coming three or four years will be up to $200 or more…or down to $80 or less. Even though the statistics aren't exact, they're all anyone has to go on, so they still have an enormous impact.

On May 13, for example, the price of crude oil rose to a record close of $125.80 on the New York Mercantile Exchange after the International Energy Agency announced its estimate that inventories of distillate fuels such as diesel and heating oil in developed nations fell 6.7% in March from a year earlier. If inventories really are shrinking, it should be bullish for prices because it indicates that production isn't keeping up with consumption. That's certainly the viewpoint of oil bulls like Matt Simmons, president of Houston investment bank Simmons & Co. International. Says Simmons: "We have lousy data, but what data we have is somewhat scary." He sees prices hitting $200 to $500 in six months to four years.

But other experts say oil inventories appear to be at least adequate. While agreeing with Simmons that the oil market is "data-famished," analyst Edward Morse of Lehman Brothers (LEH) concludes in a May 9 report that "fundamental misperceptions" have caused prices to overshoot. He thinks crude could fall to $83 by next year, a one-third drop.

No Transparency

Chalk up the poor underlying data to a combination of gamesmanship and incompetence.

Oil statistics are reasonably good for the wealthy nations that make up the Organization for Economic Cooperation and Development (OECD), although even in data-rich countries like the U.S. there are unexplained discrepancies. But the rich countries matter less and less because their production and consumption are both roughly flat.

Outside the OECD, where the growth is, countries either don't want to divulge data for strategic reasons, or haven't yet developed the systems to collect and compile the necessary numbers. The Joint Oil Data Initiative, an organization launched jointly by producing and consuming nations in 2002, is supposed to improve matters. But the group acknowledges on its Web site that "the database is still far from perfection."

China, which has grown into the world's second-biggest oil consumer after the U.S., stands out as a particular problem. Just ask Eduardo Lopez, who tries to dope out the China market as the senior demand analyst for the Paris-based International Energy Agency, an affiliate of the OECD. He says China does not report demand, leaving him and others to figure it out from data on production, trade, and inventories. What's more, he says, "there are thousands of so-called teapot refineries all over China" that are technically illegal and therefore left out of China's official statistics.

Making his job even more trying, China appears to be creating a strategic stockpile of oil, but has never acknowledged it, Lopez says. If Lopez and others are underestimating how much oil China is squirreling away, then they're inadvertently overestimating true global consumption, and vice versa if they've overestimated China's stockpiling.

Speculation, Too

Many other countries aren't much better. Lopez says Russia produces "awful data" and demand statistics are patchy in countries like India and Indonesia. On the supply side, OPEC nations don't report their output reliably, sometimes because they don't want to officially admit they're producing above OPEC's quota. That leaves the agencies relying on unofficial "tanker trackers" like Lloyds Maritime Information Services and Petro-Logistics SA, a tiny company that operates upstairs from a grocery store in Geneva, Switzerland. OPEC members also jealously guard critical data about when new fields will begin production and how quickly existing fields are declining, says Matt Cline, an economist for the U.S. government's Energy Information Administration in Washington.

What makes good information so important in the oil market is that both the supply and the demand for oil are extremely inflexible, especially in the short term. That means even a small, unanticipated shortfall in output—from, say, strife in Nigeria—or a bigger-than-expected rise in consumption can send prices through the roof. On the other hand, prices can plummet if demand growth drops because of an economic slowdown or production jumps because some delayed project finally comes on line.

One indication of uncertainty is the extreme range of bets being made in the oil options market. On May 13, bulls were willing to pay around $1.40 per barrel for a "call" option that will pay off if oil goes over $200 a barrel by next February. Bears, meanwhile, were paying about the same amount for a "put" option that will be in the money if oil goes below $84 by then. Larry Chorn, chief economist of Platts, the McGraw-Hill Companies' (MHP) energy information unit, says the actual costs incurred in producing the most expensive oil is only around $70 or $80 a barrel, meaning that about $50 of the current price represents "the market's risk premium plus speculation."

In other words, there's a big slab of unknown built into the price of oil. Lots of people will confidently predict where prices are headed next, but most of them, including the bulls, have been wrong more than once. Truth is, the world is almost as starved for information as it is thirsty for oil.

Barclays Raises 2008 Crude Oil Forecast

2008-05-08T06:36:00.000-07:00

Barclays Raises 2008 Crude Oil Forecast to $116.90
By Christian Schmollinger and Sophie Tan
May 8 (Bloomberg)

Barclays Capital raised its forecast for U.S. crude oil prices this year by 16 percent, citing stronger demand from China and the Middle East and declines in production at non-OPEC countries.

Barclays increased its average estimate for West Texas Intermediate, the physical grade for oil futures traded on the New York Mercantile Exchange, to $116.90 a barrel from its previous prediction of $100.80.

``Non-OPEC supply remains weak and continues to under perform dramatically relative to consensus expectations,'' Barclays said in a May 7 report, led by commodity research analyst Paul Horsnell.

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations.

Crude futures for June delivery in New York rose $1.69, or 1.4 percent, to settle at $123.53 a barrel yesterday, the highest close since trading began in 1983, on signs that the U.S. economy is improving and may spur energy demand.

``We are in a phase during which the nature of the fundamentals is being revealed by the ascent of prices,'' the report said.

Supply Response

The supply response from oil-producing nations outside of the Organization of Petroleum Exporting Countries has been weak, with Russia ``having been added to the already-significant list of supply disappointments,'' the report said.

The drop in oil demand in the 30 developed nations, including the U.S., Japan and Germany, represented by Paris- based Organization for Economic Cooperation and Development ``has not been consistently large enough to bring global demand growth much below 1 million barrels a day,'' the report said.

``Non-OECD demand growth remains robust, most particularly China, Middle East and India,'' Horsnell said. ``The decline in OECD demand started in 2005 hasn't accelerated significantly.''

Alternative energy sources aren't being developed fast enough to stop fossil fuel prices from going higher and Barclays estimates the new investment flow into commodity indexes during the first quarter is $2 billion, which has gone mostly into agriculture and precious metals, not energy, the report said.

``Biofuels look set to be smashed against political rocks, oil sands lack scale and are being enveloped in carbon and other issues,'' the report said. ``There is no evidence for the price rise this year being due to speculation, exchange rates or flows of funds into commodities.''

The push to increase biofuel usage as a means to reduce carbon emissions has driven prices for staple foods such as rice and wheat to records as farmers convert more land to grow palm and soy beans to benefit from government subsidies.

Global food prices rose 57 percent in March from a year earlier, according to the United Nations. The World Bank says civil disturbances may be triggered by rising food prices in 33 countries. Rice, the food staple for half the world, has more than doubled in the past year.

Murti Says Oil Likely to Reach $150-$200

2008-05-06T16:04:00.000-07:00

Goldman's Murti Says Oil `Likely' to Reach $150-$200
By Nesa Subrahmaniyan
May 6 (Bloomberg)

Crude oil may rise to between $150 and $200 a barrel within two years as growth in supply fails to keep pace with increased demand from developing nations, Goldman Sachs Group Inc. analysts led by Arjun N. Murti said in a report.

New York-based Murti first wrote of a ``super spike'' in March 2005, when he said oil prices could range between $50 and $105 a barrel through 2009. The price of crude traded in New York averaged $56.71 in 2005, $66.23 in 2006 and $72.36 in 2007. Oil rose to an intraday record of $122.49 today on speculation demand will rise during the peak U.S. summer driving season.

``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty,'' the Goldman analysts wrote in the report dated May 5.

A report yesterday showed U.S. service industries expanded in April, signaling higher energy use. The Institute for Supply Management said its index of non-manufacturing businesses, which make up almost 90 percent of the economy, grew for the first time since December. China is increasing refining capacity and boosting imports to meet rising demand for the Olympic Games.

U.S. gasoline demand typically climbs going into the summer season when Americans take to the highways for vacations. The peak-consumption period lasts from the Memorial Day weekend in late May to Labor Day in early September. Monthly fuel sales were the highest during August in five of the last six years, according to data from the Department of Energy.

China Consumption

China, the world's fastest-growing major economy, has more than doubled oil use since New York crude oil dropped to this decade's low of $16.70 a barrel on Nov. 19, 2001. Record prices have failed to stem rising consumption in developing nations, with demand led by China, India and the Middle East.

Price forecasts for spot U.S. benchmark West Texas Intermediate crude oil for 2008 to 2011 were revised higher by Goldman. The 2008 price estimate was raised to $108 a barrel from $96, the 2009 forecast to $110 from $105, and 2010 to 2011 estimates are projected at $120 from $110, the analysts including Murti and Brian Singer said, citing slowing supply growth in Mexico and Russia, and low spare production capacity in OPEC.

Deutsche Bank AG Chief Energy Economist Adam Sieminski, who forecasts oil averaging $102.50 next year, today said Asian demand and limited extra supply will keep pushing oil to record levels. There's a ``huge risk'' that prices will rise to a level, perhaps $200, ``when demand finally collapses because ordinary people can no longer afford to burn as much energy as they are burning now,'' Sieminski said in an April 25 report.

Threats to Supply

Oil has also rallied amid a dispute between the U.S. and Iran regarding the Persian Gulf oil producer's plan to develop nuclear energy.

In Nigeria, Africa's biggest oil exporter, militants have attacked oil installations and kidnapped workers since the beginning of 2006, forcing Royal Dutch Shell Plc to halt output.

In Venezuela, production has slumped to about 2.34 million barrels a day from almost 3 million barrels a day in 2002, according to Bloomberg's estimates, before President Hugo Chavez fired almost 20,000 workers who had closed the state oil company in an attempt to overthrow the government.

Iraq's oil production has yet to reach levels attained before the U.S.-led invasion of 2003 as the country struggles with sectarian fighting and attacks on its energy infrastructure.

Mexico's production has fallen below 3 million barrels a day since October as Petroleos Mexicanos, the state-owned oil company, failed to compensate for a 30 percent drop at Cantarell, its largest field, which accounts for 40 percent of output.

OPEC Capacity

``There are supply constraints with many producers, especially from non-OPEC struggling to find new reserves and China and Middle East demand keeps growing,'' said Victor Shum, senior principal at energy consultant Purvin & Gertz Inc. in Singapore. ``The fundamentals are prompting investors to get into oil in a big way and all that points to higher prices.''

Spare production capacity of the Organization of Petroleum Exporting Countries is low and the group's exports may fall because of ``lackluster'' supply growth and rising domestic consumption in member countries, the Goldman analysts said.

``Non-OPEC supply is struggling to grow, with notable declines being seen in Mexico and Russia showing signs of rolling over following an extended period of rapid growth,'' said Goldman, the world's biggest securities firm by market value.

Prices are also poised to gain as major oil-exporting countries restrict foreign investments, limiting supply growth, while demand from developing countries, or ``non-OECD'' nations is rising on economic expansion and power shortages, prompting higher demand for gasoil and fuel oil, the Goldman analysts said.

`Super-Spike'

Crude oil for June delivery was trading at $122.18 a barrel, up $2.21, on the New York Mercantile Exchange at 12:22 p.m. Futures yesterday rose to $119.97, the highest closing price since trading began in 1983.

``The core of our super-spike view has been that a lack of adequate supply growth coupled with price-insulated non-OECD demand growth'' is leading to higher prices, the analysts said. That could result in a ``sharp correction in oil demand,'' the Goldman analysts said.

Crude oil's increase above $100 a barrel was partly because of the dollar's decline against the euro, which boosted oil prices because it made commodities cheaper for buyers outside the U.S. and attracted investors as a hedge against inflation. Oil in New York touched $100 a barrel on Jan. 2.

The U.S. currency has declined more than 5 percent against the euro so far this year.

Members of OPEC, which supply more than 40 percent of the world's oil, have said supplies are adequate and blamed speculators for pushing prices up to records. The producer group won't consider raising output before it meets in September as the market is well supplied, Qatari Oil Minister Abdullah al-Attiyah said on May 2.

There's a fundamental misperception that so-called speculators are driving prices to unjustified levels, the Goldman analysts said. ``Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big bad speculator.''

Commodity investors, the Goldman analysts wrote, are ``helping to solve the energy crisis'' by speeding up the process for oil companies to spend more on energy projects and at the same time encourage efficiency.

America's Energy Security a 'Mess'

2008-02-21T17:17:00.000-08:00

Shell President: America's Energy Security a 'Mess'
by Kerry Laird
Rigzone 2/21/2008
URL: http://www.rigzone.com/news/article.asp?a_id=57175

Shell President John Hofmeister addressed U.S. policy makers on Feb. 21 to proffer suggestions for energy policy changes. Hofmeister urged policy shapers to extend the rights of U.S. companies by allowing them to drill the outer continental shelf of the U.S., which is currently illegal.

Hofmeister said that the U.S.'s energy consumption, along with outdated policy, have led to a failure in energy security.

"During the course of today, the U.S. will consume 10,000 gallons of oil a second," said Hoffmeister. "That equivalent is 21 million barrels of oil a day ... that's a swimming pool full of oil every second of every minute of every hour throughout the day.

"In addition, we will consume some 60 billion cubic feet of gas. Sixty billion cubic feet of gas, if stacked on top of each other, would be 25 roundtrips to the moon. So when you put that kind of energy consumption in perspective … when we deal with energy security in this country, that's a very big deal.

"It's the basis of our lifestyle."

Hofmeister admitted that while Shell has been one of the first big oil companies to invest in alternative energy sources, such supplies "while meaningful over the longer term … cannot displace or replace the kind of day-to-day demand for hydrocarbon energy" the U.S. has today.

"My goodness, what a mess we're in when it comes to national energy security," he concluded.

Hofmeister said that energy security should enjoy the same importance as homeland and economic security, because each contributes to the other as a part of the "foundation of America's well-being."

"With energy security, we can have the best of all worlds," he said.

The Shell president defines energy security as a "comprehensive, holistic strategy with a short-term makeup, a medium-term makeup, and a long-term makeup," which is how Shell designs its own business model.

Consequently, Hofmesiter said that this country's "short-term hurt" is that it imports more than 60% of the oil it consumes. The $2 trillion the U.S. spends on oil imports is $2 trillion that the country will never see again, he said. That money is used to develop and maintain resources for oil exporters in other parts of the world.

Last year, S&P's top-six oil companies were state-run companies, like PDVSA, Petrobras, and Rosneft. Hofmeister said the nationalism of natural resources is the "legitimate" right of sovereign nations, yet this is where American energy security fails. He said that contrary to popular belief, the energy market place is not a free market.

"When a cartel of countries can determine production limits which help to guide a price level, and when U.S. companies are prohibited by public law from developing U.S. natural resources, that represents constraint of a free market," said Hofmeister. "And so it is a myth to think that U.S. oil companies can just go and explore and produce where they choose in a free oil market."

Hofmeister pointed out that only 15% of the outer continental shelf of the U.S. is available for E&P purposes while 85% is off-limits by law.

"As long as that is the case, we are contributing to, in a sense, the lack of development of our own national natural resources," he said, "and it is necessary for us then to pull upon a pool of international natural resources, which are controlled by nationally sovereign nations."

Hofmister said that to secure the U.S.'s energy future, policies must be moved so that the country can manage its natural resources in the interest of the American people.

"Calling for a comprehensive, integrated, short-term, medium-term, long-term energy strategy would put in place for America an energy strategy that has not existed over the last 50 years," said Hofmeister. "The last time America had an energy strategy … in terms of a coherent, integrated, short-medium-long-term approach, was World War II.

"The strategy was simple: Produce all the energy the nation can produce and ration it to consumers in order to support the war effort.

"Since then, we've relied upon free markets, which have consistently lost their degrees of freedom over the last 50 years. It's time now for the nation … to approach energy security in a bipartisan nationally led model, such as we do with homeland security and economic security."

Nigeria to Renegotiate Contracts

2008-01-22T14:41:00.000-08:00

Nigeria to Renegotiate Contracts With Oil Companies
By Julie Ziegler
Jan. 22 (Bloomberg)

The Nigerian government informed oil companies it would like to renegotiate production contracts within the next three months, a move that will likely increase the nation's share of oil wealth.

``There's an indication of that made to the oil industry,'' Nigerian National Petroleum Corp. spokesman Levi Ajuonuma said in an interview today, adding that the renegotiation of some of the contracts is ``long overdue.''

About 95 percent of NNPC's projects are funded through joint ventures such as Shell Petroleum Development Co., in which NNPC has a 55 percent stake. Nigeria's 2006 budget called for about $4.2 billion for funding of these ventures. The country also wants more favorable terms to improve its deepwater production-sharing contracts, many of which were signed during the 1990s when oil prices were below $20 a barrel.

Nigerian President Umaru Yar'Adua said he wants to end government funding of joint ventures and instead leave oil companies to raise money on international capital markets. Oil companies, in turn, have also complained that the joint ventures don't work. Shell's Nigeria venture, in its latest annual report, said a shortfall in government funding impeded the company's ability to meet a target to stop the flaring of gas associated with oil production.

`Planned Review'

``We are aware of the Nigerian government's planned review of aspects of the 1993 production-sharing contract agreement which guide offshore concessions,'' Caroline Wittgen, a spokeswoman for Shell, said in an interview.

``We intend to make our position known to the government at the appropriate time, and do not wish to comment further or speculate ahead of anticipated discussions,'' Wittgen said.

Michael Barrett, a spokesman for Chevron Corp., said he hadn't heard of any official notification.

Shell, Chevron and other companies signed production- sharing contracts during the 1990s that allowed them to operate without a joint venture with the government and to pay royalties once the cost of developing the field was fully recovered.

H. Odein Ajumogobia, Nigeria's petroleum minister of state, said in September that a ``fundamental change of circumstances'' will influence the renewal terms of those contracts. Oil prices reached a record $100.09 on Jan. 3.

Oil companies also favored the deepwater oil blocks to move away from the restive Niger delta where militant groups and criminals damaged pipelines and created production outages. The Movement for the Emancipation of the Niger Delta, or MEND, has shut as much as a fifth of Nigeria's oil production since attacks in February 2006.

China Calls for Warning System

2007-11-25T03:19:00.000-08:00

China Calls for Warning System to Ensure Oil Supplies
By Xiao Yu
Nov. 25 (Bloomberg)

China urged local governments to set up an early warning system to ensure sufficient oil supplies at filling stations, which face shortages across the nation, the state-run Xinhua News Agency reported.

The Ministry of Commerce ordered local authorities to monitor oil supplies and work out measures to cope with emergency shortages, Xinhua said yesterday. The report didn't elaborate on requirements for the warning system.

Demand for crude oil in China has exceeded output as some refineries cut production because of soaring costs and government-capped fuel prices. The nation's crude oil imports also fell to the lowest in eight months in October as prices climbed to records.

``China's fuel shortage will continue unless the government improves its pricing mechanism and raises domestic fuel prices,'' said Wu Jun, a Shanghai-based analyst with China International Futures (Shanghai) Co. in a telephone interview today.

Premier Wen Jiabao last week said he would ask refiners to expand capacity to turn crude oil into fuels to run cars and factories. Some of the nation's refineries aren't running at their maximum operating rates, Wen said Nov. 21 in Singapore, where he attended the East Asia Summit.

``Refiners lack incentives to produce more after crude oil prices rose to a record. Domestic fuel prices are lower than international prices'' because the government determines prices, China International's Wu said.

Fuel Supplies

China's government has urged refiners including China Petroleum & Chemical Corp., known as Sinopec, to ensure fuel supplies are sufficient, Xinhua reported. Many regions still face ``tight diesel supplies,'' Xinhua said, citing a notice from the Commerce Ministry.

China increased fuel prices by as much as 10 percent from Nov. 1 in what the government said was an ``urgent step'' to help the nation's oil refiners cover rising costs.

``The increase of fuel prices is far from sufficient to cover the cost of rising crude oil,'' Wu of China International said today. ``Some refiners may take advantage of the fuel shortage to press the government for a fundamental change of its pricing mechanism.''

Oil Rises to Record $94.74

2007-10-31T13:06:00.000-07:00

Oil Rises to Record $94.74 as U.S. Supplies Fall to 2-Year Low
By Mark Shenk
Oct. 31 (Bloomberg)

Crude oil rose to a record $94.74 barrel in New York after an Energy Department report showed that U.S. inventories fell to a two-year low. Today's 4.6 percent gain was the biggest since Jan. 30.

Stockpiles dropped 3.89 million barrels to 312.7 million barrels last week, the department said. It was the lowest since October 2005. A 400,000 barrel gain was expected, according to a Bloomberg News survey. Supplies at Cushing, Oklahoma, the delivery point for New York futures, fell 17 percent.

``We've lost a lot of oil at a time when we should be building supply for winter,'' said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. ``Nearly all the analysts expected inventories to rise, making this an extremely bullish number.''

Crude oil for December delivery rose $4.15 to settle at $94.53 barrel at 2:50 p.m. on the New York Mercantile Exchange. Futures touched $94.74 the highest since trading began in 1983. The exchange reported a high of $94.80 during the session and subsequently canceled the trade.

Oil rose 16 percent in October, the biggest one-month gain since September 2004. Prices are up 61 percent from a year ago.

The futures plunged 3.4 percent yesterday after Goldman Sachs Group Inc., which said in July oil may reach $95 a barrel, told clients it was ``time to take profits.''

``The DOE report was the catalyst for this breakout,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``Prices are also up because of the falling dollar and strong GDP number, which is a sign that demand will pick up. Economic growth both here and abroad are leaving us vulnerable to the myriad of supply threats out there.''

Economic Growth

Economic growth in the U.S. unexpectedly accelerated in the third quarter as increases in exports, consumer spending and investment made up for another plunge in home construction, a government report today showed. Gross domestic product grew at an annual rate of 3.9 percent in the quarter, the most since the first three months of 2006.

Oil inventories at Cushing, where West Texas Intermediate and other sweet, or low-sulfur, grades of oil are delivered for the futures market, dropped to 15.1 million barrels, the lowest since October 2005. Today's decline was the biggest since November 2004, Energy Department data show.

``There is no reason I can think of for a refiner to buy a single barrel to put a barrel in inventories,'' said Tim Evans, an analyst with Citigroup Global Markets Inc. in New York. ``Crude oil is expensive, refinery margins are weak, product inventories are rising anyway and backwardation makes it very dangerous to hold into oil.''

Backwardation

New York crude oil futures closest to delivery are more expensive than the prices for contracts for later delivery, a condition known as backwardation. During the first half of the year the market was in contango, where oil for future delivery is higher than near-month prices. Contango trading encourages companies to increase stockpiles.

``The bottom line is that there isn't enough sweet crude to meet demand,'' said Ric Navy, a broker at BNP Paribas SA in New York. ``We've almost erased yesterday's correction and may get another leg up if the Fed makes an interest rate cut.''

The Federal Reserve today announced a quarter-point interest rate reduction to bolster economic growth. Crude-oil surged and the dollar plunged after the Federal Reserve cut its benchmark interest rate by half a percentage point on Sept. 18, more than economists had predicted.

Weak Dollar

``When the dollar is weak, a lot of overseas investors seek a safe haven in commodities, such as gold and oil,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``Falling interest rates also have bullish implications for demand because it may boost economic growth. A weak dollar also cushions European consumers somewhat against higher prices.''

Brent crude oil for December settlement rose $3.19, or 3.7 percent, to $90.63 a barrel on the London-based ICE Futures Europe exchange, a record close. Brent reached $90.94 a barrel during today's session, a record intraday price.

The Organization of Petroleum Exporting Countries agreed last month to raise output by 500,000 barrels a day starting tomorrow to help ease prices that threaten economic growth. The move failed and prices have jumped 17 percent since the Sept. 11 announcement of the increase.

``Global demand for oil largely exceeds the production of non-OPEC countries and the difference is not matched by OPEC, so there is tension on the market,'' said Harry Tchilinguirian, an analyst at BNP Paribas in London. ``Oil-consuming countries will certainly be putting pressure on OPEC to increase output, but in the short term we don't anticipate a production increase above 500,000 barrels a day.''

Goldman closes out long positions

2007-10-31T12:51:00.000-07:00

Goldman Says `Take Profits' After Crude Hits Record
By Mathew Carr and Margot Habiby
Oct. 30 (Bloomberg)

Goldman Sachs Group Inc., the bank that said in July oil may reach $95 a barrel, told clients it was ``time to take profits'' after crude rose to a record $93.80 in New York yesterday.

``We are now more cautious on the near-term upside potential for oil prices,'' analysts including Jeffrey Currie in London said in the bank's Energy Weekly today. ``We are not trying to call a top here, just take profits.''

Goldman said it was closing its long positions in New York oil futures. Oil has gained 51 percent this year as hedge funds and other large speculators increased bets on rising prices. Net-long positions in New York crude futures in the week ended Aug. 3 jumped to the highest in more than a decade.

Goldman predicted in March 2005 that oil would enter a ``super spike'' period, fueled by rising demand, and could reach $105 a barrel in the next several years.

Crude oil for December delivery fell $3.15, or 3.4 percent, to settle at $90.38 a barrel on the New York Mercantile Exchange. The price for March delivery was at $87.99 a barrel and at $82.92 for December next year.

``The downside risks we have embedded in our end of first quarter 2008 oil price target of $80 a barrel are beginning to gain momentum,'' Goldman said in the report. ``These include increasing exports, a slowing U.S. economy, an adequate level of heating oil inventories.''

Cold Weather Factor

Goldman's recommendation ``might be a bit early,'' especially if colder weather boosts demand during the next two months, said Francisco Blanch, a London-based analyst at Merrill Lynch & Co. Blanch predicts oil will average $80 a barrel for the three months through December, and that prices are more likely to reach $100 soon than $60.

Twenty-one, or 49 percent, of 43 analysts surveyed by Bloomberg News last week said oil prices will fall through Nov. 2, the least bearish response since Sept. 7. Eighteen, or 42 percent, said prices will rise, the most bullish response since the week ended July 6. Four forecast little change. The previous week, 69 percent of respondents said oil would fall.

``I think you'll get some more oil into the U.S.,'' Blanch said today by phone. ``It will take another few months to get it up and running.''

An increase in crude supplies will partly come from the Greater Plutonio oil field in Angola and the Genghis Khan field in the U.S. Gulf of Mexico, which both started this month and will likely ramp up production during the next few weeks, Goldman said.

Freight Rates

``The strength in freight rates from West Africa to the U.S. Gulf Coast suggests that U.S. refineries may be preparing to receive more of the new Angolan low-sulfur medium grade Plutonio,'' Goldman said.

Lehman Brothers Holdings Inc. forecast a ``sharp price fall'' by late winter in a report released today. The Lehman analysts, led by New York-based Edward Morse, said there's a 50 percent chance that Nymex futures will exceed $96.50 a barrel before the December contract expires.

Lehman raised its fourth-quarter forecast for Brent oil by $10 to $85 and said it expects Nymex oil to average about $2.50 a barrel higher than that.

``Our view is that we don't think prices are sustainable where they are,'' Michael Waldron, an energy markets research analyst in New York and one of the authors of the Lehman report, said in a telephone interview earlier today.

OPEC Objectives

OPEC, whose members produce more than 40 percent of the world's oil, said current crude prices don't reflect the group's objectives.

The Organization of Petroleum Exporting Countries has a ``duty'' to supply the world with oil at stable prices, Mohamed al-Hamli, the group's president, said today at an oil conference in London. If the market needs more oil, OPEC will supply it using spare capacity of 3.5 million barrels a day, he said.

OPEC ``recognizes it has a responsibility'' to ensure ``stable'' prices for producers and consumers, he said. Al-Hamli said he doesn't expect oil to reach $100 a barrel in the near future.

Oil Futures Market Is Better Predictor Than Analysts

2007-10-09T09:09:00.000-07:00

Oil Futures Market Is Better Predictor Than Analysts
By Bill Murray
Oct. 9 (Bloomberg)

The crude futures markets in London and New York have been more accurate predictors of oil prices than market analysts during the past eight years, Deutsche Bank AG said.

The average forecasting error by the crude futures market since 1999 has been 17 percent, compared with 31 percent by a group of more than 30 oil analysts surveyed by Reuters, senior analysts Michael Lewis and Adam Sieminski said in a note to clients published Oct. 5.

``The hidden truth behind analyst oil price forecasts is that they have more to do with the current spot oil price than prospective oil market fundamentals,'' they wrote. ``We find that for the past nine years the analyst community has consistently under-estimated the oil price.''

In the 1990s, crude traded between $15 and $25 a barrel 85 percent of the time. In the present decade, it has averaged $42 a barrel with greater price volatility, the report said.

Oil prices have quadrupled since January 2002 as surging demand, led by China and the U.S., has left a narrower margin of spare capacity to tap during supply disruptions.

Hurricanes in the U.S. Gulf of Mexico in 2005 and cuts in production from the Organization of Petroleum Exporting Countries helped spur oil prices, which reached a record $83.90 on Sept. 20 this year.

Crude oil for November delivery was up $1.53 at $80.55 a barrel in trading on the New York Mercantile Exchange at 4:06 p.m. London time. Brent crude oil for November was at $77.41 a barrel, up 83 cents, on the London-based ICE Futures Europe exchange.

Brent at $87.80

If the average absolute forecasting error of analysts persists through next year, that would imply Brent crude oil prices in 2008 will actually average $87.80 a barrel, the report said.

The average absolute futures market forecasting error would price Brent at $88.20 a barrel in 2008.

Deutsche Bank itself said oil may fall below $70 a barrel by the end of the quarter as demand for gasoline in the U.S. weakens along with the economy. Oil prices will average $60 a barrel in 2010, the Frankfurt-based bank said.

While oil prices probably won't fall during the fourth quarter as much as they did last year during the same period, fading geopolitical risks, OPEC production growth and economic weakness in the U.S. mean prices are still likely to decline, Deutsche Bank said.

Fuel Consumption

``Futures are saying that in two years prices will be in the low $70s,'' Siemenski said in an interview. ``In addition to the fundamentals of crude, demand has been eroded. Demand has been flat in the U.S. for the past two months.''

U.S. fuel consumption in the four weeks ended Sept. 28 averaged 20.45 million barrels a day, down 0.3 percent from the same period a year earlier, according to the Energy Department.

The Paris-based International Energy Agency, an adviser to 26 industrialized countries, reduced its forecast for global oil demand last month on lower estimates for U.S. economic growth.

Does the Middle East Matter?

2007-09-20T19:34:00.000-07:00

Does the Middle East Matter?
By Peter Glover
Energy Tribune
Sep. 19, 2007

The May and June issues of the British magazine Prospect hosted a fascinating spat over the strategic importance of the Middle East. In May, “The Middle of Nowhere” by Edward Luttwak, a senior advisor at the Center for Strategic and International Studies in Washington, D.C., made the case that “despite its oil this backward region is less relevant than ever, and it would be better for everyone if the rest of the world learned to ignore it.” Strong stuff.

Enter David Strahan, author of The Last Oil Shock, with a June letter demolishing Luttwak’s critical claim that the importance of Middle East oil is declining, summed up in his pithy counter-assertion, “It’s the oil, stupid.” We agree with Strahan’s conclusion, but with two amendments. Not only does Middle East energy still matter, it will soon matter increasingly – and…it’s the oil and gas, stupid.

As Strahan says, many of Luttwak’s political points “ring horribly true.” Luttwak attacks the oft-repeated fallacy that solving the Israeli-Palestinian conflict is the key to resolving Arab/Muslim-Western tensions. Luttwak also uses statistics to bolster his point that the region is “remarkably unproductive” with a correspondingly low per capita income as a result: “Despite its oil wealth, the entire Middle East generated under 4 percent of global GDP in 2006 – less than Germany.” But it is in his assertion that the region’s relevance is diminishing because “global dependence on Middle Eastern oil is declining,” and the assumption that the region’s energy reserves are unimportant, that Luttwak ultimately gets it badly wrong.

Strahan rightly points out, “Luttwak claims the Middle East is irrelevant because it produces little but petroleum. Hasn’t he heard that oil provides 95 percent of all transport energy and that spikes in oil price have precipitated every major recession in the last 30 years?”

Luttwak comments: “The region produces under 30 percent of the world’s crude oil compared to almost 40 percent in 1974-75. In 2005, 17 percent of American oil imports came from the Gulf, compared to 28 percent in 1975.” True enough. But as Strahan counters, “This is unlikely to last. Non-OPEC production will peak by 2010 or soon after. According to the International Energy Agency, the U.S. Department of Energy, Exxon Mobil, Shell and PFC Energy…OPEC will soon have to provide a much bigger proportion of global supply – almost 50 percent by 2030 according to the IEA – mostly from the Middle East.” However, Strahan acknowledges: “There are well-justified fears that OPEC output will also peak within the next decade…so dragging global oil production into terminal decline. Since OPEC controls 75 percent of known reserves – overwhelmingly concentrated in the Middle East – this can only make the region more critical, not less.” While ET concurs that the region’s importance is growing, we do not agree with Strahan’s overly alarmist view of what he terms the “imminent extinction of Petroleum Man,” central to his thesis in his book, The Last Oil Shock. (A timely, though poorly written, corrective to Strahan’s peak oil theory can be found in the recent The Battle for the Barrels by Duncan Clarke, Profile Books.)

Where Is Oil Headed?

2007-09-19T00:59:00.000-07:00

Where Is Oil Headed? A Contrarian Says $45 [Pt.I]

Where Is Oil Headed? A Contrarian Says $45 [Pt.II]

OPEC Says $80 Oil Won't

2007-09-16T18:04:00.000-07:00

OPEC Says $80 Oil Won't Last Due to `Fundamentals'
Sept. 14 (Bloomberg)
By Fred Pals

OPEC, whose members produce more than 40 percent of the world's oil, said crude at $80 a barrel won't last because ``fundamentals'' don't support the price.

``I don't think the price will stay at $80,'' Secretary General Abdalla el-Badri said today at a press conference in Vienna. ``The fundamentals don't support that.'' The price of $80 a barrel is ``too high,'' he added.

The Organization of Petroleum Exporting Countries unexpectedly agreed to increase oil production by 500,000 barrels a day at a ministerial meeting in Vienna on Sept. 11. The increase, which will be added to the current 26.7 million-barrel-a-day output of 10 OPEC members, starts Nov. 1.

Oil prices gained after OPEC's decision to raise supply, when the U.S. Energy Department reported the country's stockpiles of crude fell more than expected last week. That suggested the increase may not be enough to meet demand as winter approaches in the Northern Hemisphere. Hurricane threats and an attack on Mexican pipelines have also driven up oil prices over the past few days.

Crude oil for October delivery traded down 18 cents at $79.96 a barrel at 9:06 a.m. local time on the New York Mercantile Exchange. The contract rose above $80 a barrel yesterday for the first time, touching $80.20.

December Meeting

El-Badri declined to comment on whether OPEC would discuss raising output again at its December meeting if crude prices remained near their current levels. ``Of course, we will discuss supply, demand and inventories, as usual,'' he said.

OPEC is not pursuing any specific price target or range, El- Badri said. ``It has been a long time ago since we've had a range,'' he said. OPEC having a specific target is ``rubbish.''

Angola, the African nation which joined OPEC on Jan. 1 this year as its 12th member, is expected to have a production quota next year, and El-Badri said he hopes to announce that level at OPEC's December meeting. He declined to comment on whether Angola would get a quota as soon as it reached production of 2 million barrels a day.

Exxon Mobil Corp., BP Plc and other international oil companies see Angola as a growth area. They're finding it harder to expand oil and gas production in other resource-rich countries such as Russia and Venezuela.

The Energy Report

2007-09-13T23:29:00.000-07:00

The Energy Report
Phil Flynn
September 13, 2007

Oil at 80. Are the stars out tonight? I can’t tell if it’s cloudy or bright and that may depend on whether or not you're long oil. The bullish stars came into perfect alignment in an explosive trading session that sent oil out of this world. Oil surged to an all time not inflation adjusted high of $80.00 a barrel in a day that saw all the energy products soar.

Oil seemed on a mission to fulfill some technical destiny of $80.00 a barrel. It was a price level that was denied this summer as logistical issues kept oil undervalued for most of the summer. But sometimes things are written in the stars and the just wont be denied. It would be easy to point to yesterday’s wildly bullish inventory report as the main reason for the oil market's star search but in reality that was only a small part of the overall story. The market got just about anything a bull could want and perhaps even more.

Even before yesterday's inventory report the market had a strong upward bias. Oil had closed the day before at a record high as it laughed in the face of the OPEC production increase. Why did they raise production? Because OPEC cares. What they care about is a bit uncertain but they say they care all the same. Abdullah el-Badri, OPEC’s Secretary General, said that, “our message to consumers is that we are concerned and we care, and that is why we are raising production". Can you feel the love. Ah gee. OPEC cares about me! I feel special. And of course with OPEC - as always - the devil is in the details. And what you can sure about is what OPEC really cares about is covering their behind.

OPEC raised production because mainly they fear the backlash if the world goes into a recession. The IEA and the market have been sending signals to the cartel all summer that more oil was needed but they failed to act. Now OPEC has made a valiant effort by raising their quota from 25.845 million barrels a day to 27.2 million barrels a day which means that OPEC according to their math would be adding 500,000 barrels of oil. That’s not paper barrels but real oil for real men.

Yet because OPEC leaked its intentions early there was no surprise and the market discounted the oil as just replacing oil that was lost during the last two hurricanes. OPEC is proving once again that as a cartel they are very good at getting the price of oil from falling but they are always behind the curve and fail to stop prices from rising. Sometimes it is an issue of not having enough spare production capacity but many times it is because they are quick to cut but slow to raise production.

So then it was onto the weekly supply report from the Department of Energy. Would it give the bulls more reasons to buy! Well, before the stocks report even came out, natural gas bulls were already buying! This time it was because of the weather. A tropical wave that turned into a tropical storm Humberto caused havoc in the Gulf. The Houston shipping channel would close and there was talk that perhaps some oil rigs might be evacuated. Some weather experts fear that this active storm season will continue to cause more havoc and we may have to get prepared for one storm after another.

Then came the weekly inventory report. It was like a bullish dream. Crude supplies plunge 7.1 million barrels more than twice the average estimate. And that was and in all major categories. But even without the bullish report the mood for oil is bullish; decidedly bullish. The psychology after the OPEC announcement and the subsequent rally was a clear sign that the energy markets are poised to move higher.

Crude is convinced that a Fed rate cut is in store for next week and that should help keep the demand for oil much stronger than feared. The market is also showing that funds are getting an appetite for risk once again. Funds that fled from record long positions because they feared the housing slowdown perhaps are jumping back in. Even those without sub prime exposure fled from risk. Now they are coming back, a strong sign of confidence in our economic future.

Yes the backwardation being at near record levels could signal some slowing demand in the future but it also could signal a lessening of refiners worrying about geo-political risk. Let’s face it, with dealt with a lot of talk of the terror premium and war cutting off supply. Take yesterday, there was talk of the US making war plans against Iran and hardly anyone in the oil patch was talking about it.

Even talk about how Russian President Vladimir Putin rearranging the Russian Democracy in his own KGB image had little effect. No one in oil cared yet.

And we had a fire in Prudhoe Bay Alaska and cut production at a BP plant. We have refineries shutting down due to losing power in Texas we have it all. Aned this all means the bears are dancing in the streets.

Venezuelan Oil Output

2007-09-13T23:27:00.000-07:00

OPEC Seeks to Bridge Gulf Over Venezuelan Oil Output
by Adam Smallman, Dow Jones Newswires
FWN Financial News 9/13/2007
URL: http://www.rigzone.com/news/article.asp?a_id=50129
VIENNA, Sep 13, 2007

Staff from the Organization of Petroleum Exporting Countries have met with officials from member country Venezuela in a bid to bridge the gulf between the country's stated official oil production level and estimates a third lower by news agencies and institutions, a gap that some say has undermined the credibility of the Latin American nation's oil policies.

Fuad Al-Zayer, who leads OPEC's data services department, said Thursday that he and his colleagues were working closely with Venezuelan officials to narrow the differences to the point where OPEC no longer has to use secondary sources, such as energy information provided by Platts, a unit of McGraw-Hill Co. (MHP), or the Paris-based energy watchdog the International Energy Agency.

Dow Jones Newswires is also a provider of estimated oil output by OPEC member countries.

"We are there to provide them with facilities, to show them how they can coincide with what the secondary sources are saying," al-Zayer said after a press conference on OPEC energy data.

"But there is a gap between the two. We are hoping that they gap will become closer."

Venezuela has longed claimed its oil output is far higher than secondary sources suggest, with the official number around 3.2 million barrels a day, against estimates by Dow Jones Newswires, Platts and the IEA of around 2.4 million barrels a day.

Some analysts attribute the difference to the government of President Hugo Chavez covering up sharp oil production losses experienced in the wake of a clear-out of veteran staff from the state-run Petroleos de Venezuela S.A., or PdVSA, following a crippling strike in December 2002 that lasted two months.

The government subsequently said output levels rebounded to pre-strike levels of around 3.1 million barrels a day.

Some analysts have linked the stated production level to Venezuela's reluctance to lose its influence inside OPEC, which has output targets in place for 10 of its 12 members, including Venezuela.

Al-Zayer said Venezuela's production of heavy, tar-like crude oil may have colored the picture of its actual output.

"We know Venezuelan officials are meeting with Platts and the IEA to show them what's happening," al-Zayer said.

"Some of the problems are that heavy oil is produced in Venezuela and maybe some of the agencies don't count it. So we are trying to iron out this."

However, the International Energy Agency, as an example, clearly breaks out production of Venezuela's Orinoco-derived heavy crude, which it said in Wednesday's monthly oil market report contributed 475,000 barrels a day to Venezuela's output of 2.34 million barrels a day.

OPEC is incorporating secondary-sourced data in its estimates as "that is what the market believes in these days and eventually we hope that we won't do that in the future," Al-Zayer said.

Oil Rises to Record $80.18

2007-09-12T15:43:00.000-07:00

Oil Rises to Record $80.18 on Larger-Than-Expected Supply Drop
By Mark Shenk
Sept. 12 (Bloomberg)

Crude oil rose to a record $80.18 a barrel in New York after supplies dropped the most this year.

U.S. oil inventories fell a greater-than-expected 7.01 million barrels to 322.6 million last week, the Energy Department said today. Prices also rose after OPEC said yesterday it would increase production by 500,000 barrels a day, less than is needed to meet a seasonal rise in demand.

``We've shrugged off OPEC's offer of 500,000 barrels,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``There's a tropical storm in the Gulf and inventories posted a huge decline.''

Crude oil for October delivery rose $1.68, or 2.2 percent, to settle at $79.91 a barrel at 2:54 p.m. on the New York Mercantile Exchange, a record close. Futures also touched the highest intraday price since trading began in 1983. The previous record of $78.77 was reached on Aug. 1.

The average cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, or $84.73 in today's dollars, according to the Energy Department. Prices rose from 1979 through 1981 after Iran cut oil exports.

Brent crude oil for October settlement rose $1.30, or 1.7 percent, to $77.68 a barrel on the London-based ICE Futures Europe exchange, the highest since Aug. 7, 2006.

A 2.7 million barrel drop in oil supplies was expected, according to the median of responses by 17 analysts surveyed by Bloomberg News before today's report.

``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 Wakefield, Massachusetts. ``There's a feeling that OPEC waited too long to make this move.''

Two Tropical Depressions

Oil also rose after the National Hurricane Center said Tropical Storm Humberto formed off the coast of Texas in the northwestern Gulf of Mexico. Tropical storms or hurricanes spur prices higher because they can threaten offshore production.

Some manufacturers and utilities can switch between oil- based fuels and natural gas depending on costs.

``There's a huge amount of hedge fund money moving into the long side of the crude-oil market,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``The global supply balance will be tight as we go into the fourth quarter. There's already a lot of concern about low stocks.''

Oil prices have risen 31 percent this year as hedge funds and other speculators purchased futures because of surging energy demand. Long positions are bets that prices will rise.

OPEC Production

OPEC will target crude production of 27.2 million barrels a day after abandoning its former quotas. The 500,000 barrel-a-day increase will be on top of actual output, according to Kuwait's acting oil minister, Mohammed Abdullah al-Aleem.

``Too much attention was paid to what the Iranians, Venezuelans and Nigerians said before the meeting,'' said Brad Samples, commodity analyst for Summit Energy Services Inc. in Louisville, Kentucky. ``The Saudis and other Gulf producers are the swing producers, the only members with spare capacity, and have the greatest influence. The Saudis had been silent.''

Before the decision, OPEC members including Venezuela, Algeria, Iran and Libya had said the world was adequately supplied with oil. Western officials, including the head of the International Energy Agency and U.S. Energy Secretary Samuel Bodman, lobbied for increased output.

November Maintenance

The United Arab Emirates is expected to cut crude oil production in November by as much as 600,000 barrels a day because of maintenance, reducing output by about one quarter, the IEA said.

``The supply and demand is pretty OK,'' Royal Dutch Shell Plc Chief Executive Officer Jeroen van der Veer said at a briefing with reporters in Calgary today. ``What we do have is a lot of psychology in the price. We have to expect volatility in the oil price due to this psychological component.''

The IEA, an adviser to 26 industrialized nations, said global oil demand will rise 1.4 percent to 85.9 million barrels a day this year, in a monthly report. Consumption will increase 2.1 million barrels a day in 2008.

`Big Question'

``The IEA report is still bullish, even with the downward revisions,'' Mueller said. ``They are still looking for pretty strong gains in demand. It doesn't appear that they are too worried about the subprime crisis hurting demand.''

The agency reduced its demand forecast for this year by 90,000 barrels a day and by 160,000 barrels a day in 2008 from last month's forecast.

``There's still a big question of how the credit crunch will ultimately affect demand,'' said Eugene X. Hodge, a managing director at John Hancock Financial Services Inc. in Boston, who manages a $4.3 billion oil and gas company bond portfolio. ``It's too early to know what will happen.''

Platts: OPEC Output Dips in August

2007-09-08T00:33:00.000-07:00

Platts: OPEC Output Dips in August
Platts 9/7/2007
URL: http://www.rigzone.com/news/article.asp?a_id=49966

OPEC crude production fell by 40,000 barrels per day (b/d) in August, to 30.46 million b/d from 30.5 million b/d in July, mainly because of lower exports from Iraq, a Platts survey showed September 7.

The ten members bound by production agreements, however, boosted output by 80,000 b/d, to 26.79 million b/d in August from 26.71 million b/d in July, the survey showed.

OPEC ministers meet in Vienna on September 11 to review the current agreement, which sets target output at 25.8 million b/d. Several ministers have said in the runup to the meeting that they do not see any need for the group to raise this target.

Actual OPEC-10 production has been steadily creeping up over the summer, however, and is now about a million barrels per day above the 25.8 million b/d target.

John Kingston, Global Director of Oil at Platts, said, "OPEC faces a real dilemma at its upcoming meeting. On the one hand, prices have climbed back up toward the $75 level, and the supply/demand balance projects a tight market in coming months, which might encourage OPEC to raise production. But when the organization looks at Friday's U.S. employment figures, and considers the ramifications of the US subprime mess, it will be concerned that a significant slowdown in demand could be around the corner. With that in mind, it is difficult to see a scenario in which it will vote to raise output, given that based on our survey, production is rising slightly regardless."

Apart from a small dip in Iranian production, the only significant decline came from Iraq. Iraqi exports had been boosted in July by the first liftings from Turkish Mediterranean port Ceyhan since January. There were no exports from Ceyhan in August, leaving Iraq to rely solely on its southern terminals. State oil marketer SOMO will sell 5 million barrels from Ceyhan in September, however, having built up stocks at the port.

Iraq, struggling to rebuild its oil industry after years of United Nations sanctions and a US-led war in 2003, does not participate in OPEC output pacts. Angola, which became a member in January this year, has yet to join the quota system.

Table in original article

OPEC Output -840,000 B/D on Year

2007-08-23T22:47:00.000-07:00

OPEC Output -840,000 B/D on Year, Inline vs. Past Wks
by Spencer Swartz
Aug 23, 2007

LONDON - Seaborne OPEC oil shipments are expected to jump by 610,000 barrels a day in the four weeks to Sept. 8 from the previous one-month period as some of the producer group's Middle East members respond to market calls for more crude, U.K. tanker tracker Oil Movements said Thursday.

The rise, the third in as many weeks, was also pinned to a weaker comparison in the month-ago period, when OPEC shipments were unseasonably low, said Roy Mason, head of the consultancy.

Shipments by Organization of Petroleum Exporting Countries are seen rising to a total of 24.2 million barrels a day versus 23.59 million barrels a day in the four weeks to Aug. 11, he said.

Mason said the last time OPEC shipments were at the current expected levels was in late April when they came in at 24.3 million barrels a day.

He maintained though that he didn't expect OPEC shipments to continue ramping up in the weeks ahead as milder autumn weather arrives in U.S. and European markets.

"We're now moving into the beginning of the period when refineries go into maintenance which normally means demand for crude goes down," he said.

Mason made a negligible reduction of 30,000 barrels a day to last week's data.

Sailings from key OPEC Middle East countries are forecast to increase by 540,000 barrels a day to 17.35 million barrels a day in the four weeks to Sept. 8 relative to the previous one-month period of 16.81 million barrels a day.

OPEC is currently pumping about 840,000 barrels a day fewer than at this time last year, Mason said, inline with the past couple of weeks, although well below about a month ago when OPEC had even more barrels out of the market at about 1.2 million barrels a day year-on-year.

OPEC is scheduled to meet in Vienna on Sept. 11 and indications from some OPEC ministers and officials are that the 12-nation group is likely to keep its production targets unchanged and not increase output, as the International Energy Agency has urged, due to concerns about high U.S. oil inventories and uncertainties over the fallout on energy demand caused by U.S. credit woes.

Oil Movements forecasts OPEC exports based on spot and term chartering of crude from OPEC member countries. Production from OPEC's 12 members meets around 40% of the 86 million barrels consumed globally each day.

Oil Falls

2007-08-06T11:56:00.000-07:00

Oil Falls on Concern U.S. Economy Will Slow, Reducing Demand
By Robert Tuttle
Aug. 6 (Bloomberg)

Crude oil fell more than 3 percent in New York, the most in almost four months, on concern the U.S. economy will slow, reducing demand at a time of rising fuel supplies.

Oil prices have dropped 7.5 percent from the record $78.77 reached on Aug. 1 amid declines in U.S. stocks and signs losses in the mortgage market may slow the economy. In July, the nation's employment grew at the slowest pace since February. OPEC production, source of about 40 percent of world supplies, rose last month to its highest since September 2004.

``The equity markets around the world are not that robust right now,'' said Dominick Chirichella, an analyst at Energy Management Inc. in New York. ``That is getting people concerned about demand growth tailing off'' for oil.

Crude oil for September delivery declined $2.60, or 3.4 percent, to $72.88 a barrel at 1:16 p.m. on the New York Mercantile Exchange, the biggest drop since April 9. Prices are down 2.4 percent from a year ago.

Default rates for subprime mortgages in bonds are at a 10- year high. U.S. non-farm payrolls increased 92,000 last month, less than the 127,000 forecast in a Bloomberg News survey of 85 economists.

``You can't really remove what is going on with oil with what's going on with the economy,'' said Brad Samples, commodity analyst for Summit Energy Services Inc. in Louisville, Kentucky. ``People's discretionary spending is going to be cut and that's going to cut out excess driving, it's going to cut out trucks driving goods to stores.''

Brent crude oil for September settlement dropped $2.55, or 3.4 percent, to $72.20 a barrel on the ICE Futures exchange in London.

OPEC Production

Oil demand may decline as OPEC output rises. Production by the group climbed last month by the most since September 2004, a Bloomberg News Survey showed.

The 10 members of the Organization of Petroleum Exporting Countries with production quotas increased output by 85,000 barrels a day to 26.595 million barrels a day, according to a Bloomberg News survey.

The 10 countries, in an effort to maintain prices, pledged to trim 1.7 million barrels a day in two rounds of cuts, one that started Nov. 1 and another that took effect Feb. 1. The 10 members pumped 27.5 million barrels a day in October.

OPEC's basket price, a weighted average of 11 blends produced by the member nations, fell 16 cents to $72.01 a barrel on Aug. 3.

OPEC ministers are scheduled to hold their next conference on Sept. 11 in Vienna. The group is unlikely to increase crude oil production before its scheduled meeting, Algerian Energy Minister Chakib Khelil said, as cited by Kuwait News Agency yesterday.

Iraqi Output

Iraqi output rose 310,000 barrels to an average 2.235 million barrels a day last month, the highest since October 2004, the survey showed. Nigerian production climbed 150,000 barrels to an average 2.2 million barrels a day last month, the highest since February. Civil strife has reduced oil production in both countries in recent years.

``We can't necessarily rely on that flow from Iraq or that flow from Nigeria continuing on that kind of a volume,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. The increase indicates ``insurgents in both places stopped shooting at pipelines and a little more flowed.''

Oil prices have dropped 8.5 percent in euros in the past year, risen 1.4 percent in Japanese yen and fallen 8 percent in British pounds.

Falling oil prices have pushed gasoline futures to a four- month low. The prices for September delivery fell 5.38 cents, or 2.7 percent, to $1.9752 a gallon in New York, the lowest since March 23.

The national average pump price for regular gasoline fell 0.5 cent to $2.838 a gallon, according to AAA, the nation's largest motoring club. Oil accounts for about half the pump price of gasoline.

OPEC oil output to rise in July

2007-07-26T15:42:00.000-07:00

OPEC oil output to rise in July:
Petrologistics
Jul 25, 2007

OPEC oil output is expected to rise this month due to higher supply from members including Nigeria, Iraq and Angola, a consultant said on Wednesday.

OPEC's 10 members subject to output limits, all except Iraq and Angola, are expected to pump 26.9 million bpd, up from 26.8 million bpd in June, said Conrad Gerber, head of Petrologistics, which tracks tanker shipments.

The estimate, while showing rising supply in some OPEC countries, indicates top world exporter Saudi Arabia is keeping a cap on output in spite of a jump in oil prices towards a record high above $78 a barrel.

"There's no major opening of the taps," Gerber said. "They fear that if they opened the taps, prices would slide."

Nigeria is raising supply in July by about 100,000 bpd to 2.12 million bpd, Gerber said. The increase reflects fewer disruptions to the country's oil industry from militant attacks in the Niger Delta.

Iranian oil output is also on the increase -- climbing by 50,000 bpd to 3.95 million bpd, according to the Geneva-based company.

Overall supply from the 12-member Organization of the Petroleum Exporting Countries is set to rise 300,000 bpd to 30.7 million bpd, Petrologistics said, as Iraq and Angola pump more.

Iraqi output is on course to reach 2.08 million bpd, up from 1.94 million bpd in June, because the country is exporting some Kirkuk crude from its northern fields.

Storage tanks at the Turkish port of Ceyhan receive sporadic deliveries of Kirkuk by pipeline from Iraq's northern oilfields. Iraq sold 3 million barrels for shipment in July, the first such sale since January.

Angolan output, rising steadily as new fields off the country's coast come on stream, is on course to climb by 30,000 bpd to 1.69 million bpd in July.

By contrast, output in Saudi Arabia, OPEC's largest producer, is expected to hold steady at 8.6 million bpd, Petrologistics said.

OPEC, source of more than a third of the world's oil, agreed to curb supply by 1.7 million bpd, or about six percent, last year in two steps. The second stage took effect from February 1.

Despite July's rise from the 10 members party to the output curbs, output remains lower than when OPEC started cutting production in November. OPEC said the 10 were pumping 27.5 million bpd before the cutbacks began.

The exporter group is next scheduled to met in September to decide production policy.

The Dhando Investor

2007-07-16T23:06:00.000-07:00

The Dhandho Investor : The Low - Risk Value Method to High Returns
by Mohnish Pabrai

This book is a bit pricey for its length and content, but it contains an extremely interesting case study on Knightsbridge (VLCCF) and Frontline (FRO) in 2002. Short enough to read over a cup of coffee in your local Barnes and Noble. Highly recommended. It's too bad this account wasn't available in 2001.

Link to Amazon for Dhando Investor

Phil Flynn - The Energy Report

2007-07-16T21:13:00.000-07:00

Today's Wall Street Journal is writing on a report commissioned by Samuel Bodman and the Department of Energy and put together by the National Petroleum Council . The report has concluded that world oil and gasoline supplies from conventional sources are unlikely to keep up with rising global demand over the next 25 years. The Wall Street Journal says that the conclusions appear to be the first explicit concession by the petroleum industry that it can’t meet burgeoning global demand for oil, which may increase as much as 120 million barrels a day by 2030 from about 84 million barrels a day currently according to some projections. The report is called "Facing the Hard Truths About Energy” and long term oil bears will also have to face hard truths.

But so too will the anti-oil Democratic Congress that wants to tax our country and oil companies while they sell off our nations energy security. As they handicap our energy industries ability to do business we are losing out on the global race to secure oil supply.

Do you think I am kidding you? Already Petro China's oil output has risen by 3.7% surpassing growth at Exxon Mobil and Royal Dutch Shell. The anti-oil populism that the Democratic Congress has embraced in light of the growing competition for world wide supply is dangerous at best and criminal at worst.

Crude Oil Rises to 11-Month High

2007-07-14T01:29:00.000-07:00

Crude Oil Rises to 11-Month High as North Sea Production Drops
By Mark Shenk
July 13 (Bloomberg)

Crude oil rose to an 11-month high in New York and London after a pipeline shutdown and maintenance work reduced North Sea Brent oil production.

Chevron Corp. and ConocoPhillips said they lost output from North Sea fields that produce oil and gas after BP Plc closed the pipeline. BG Group Plc said its Armada oil field in the North Sea has been shut for maintenance since June. The International Energy Agency said in a report today that global oil demand will rise 2.5 percent next year.

``Obviously, Brent is the leader,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``It looks like 150,000 barrels a day are being lost because of the pipeline problems in the North Sea, which is giving Brent a boost.''

Crude oil for August delivery rose $1.43, or 2 percent, to settle at $73.93 a barrel at 2:50 p.m. on the New York Mercantile Exchange. It was the highest close since Aug. 11 and the biggest one-day gain since June 14. Oil rose 1.5 percent this week.

New York crude is down 3.6 percent from a year ago, when prices were approaching a record $78.40 a barrel reached July 14, 2006, on concern fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.

``This is largely a technical move,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``We're headed for the $75 to $77.50 area where there is a lot of resistance. If we can breach that level there will be an assault on the old high of $78.40.''

Brent Crude Oil

Brent crude oil for August settlement increased $1.17, or 1.5 percent, to close at $77.57 barrel on the London-based ICE Futures exchange. It was the highest settlement price since Aug. 7, when prices closed at a record $78.30.

World oil demand will rise 1.8 percent this year, according to the IEA. Demand next year will be led by accelerating consumption growth in China and the Middle East. The agency lowered its 2007 demand estimate by 100,000 barrels a day since its previous report a month ago. The Paris-based agency is an energy adviser to 26 industrialized countries.

``The IEA is looking for strong growth next year,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``They revised some recent demand estimates lower but not by enough to excite anyone.''

Iranian Inspection

Iran will allow United Nations inspectors to visit a reactor under construction that could produce plutonium, the UN's International Atomic Energy Agency said today. The agreement came during discussions this week in Tehran between Ali Larijani, the country's security chief, and Olli Heinonen, the nuclear agency's deputy director-general.

Iran, which holds the world's second-largest oil and natural gas reserves, says it wants to enrich uranium for use in nuclear power plants to produce electricity. The U.S. says Iran seeks instead to develop an atomic bomb. The dispute has bolstered oil prices since January 2006 because of concern that oil shipments from the country might be cut.

``Iran has recently been off the radar but if the inspections go well we may see prices retreat below $70,'' Lynch said.

Crude oil prices have also risen on concern that shipments from Nigeria and Iraq have been disrupted because of attacks on facilities. Venezuelan production has slipped as the country nationalized heavy oil production ventures this year.

``I am surprised by today's movement because today's news from Iran is the most positive we've seen in years,'' Beutel said. ``The situation in Nigeria is still a major concern, the Venezuelan saga continues and now there's even trouble in Ecuador.''

IEA Report on CNBC

2007-07-10T14:46:00.000-07:00

Here is a discussion of IEA's July 2007 Medium Term Oil Market Report forecasting out 5 years to 2012.

http://www.cnbc.com/id/15840232?video=418682388

Here is the report itself (80 pages)
http://online.wsj.com/public/resources/documents/iea20070707.pdf

Energy guru: $4 per gallon gas still likely

2007-07-07T02:08:00.000-07:00

Energy guru: $4 per gallon gas still likely
Morris Beschloss
Special to The Desert Sun
July 5, 2007

...
An exclusive interview with one of America's leading energy gurus, Phil Flynn, in Chicago last week disclosed the hard facts U.S. oil producers and consumers will be facing this year.
Flynn is vice president of marketing for Alaron, a major energy trading firm.

He has become the "go-to man" on many major networks, including CNBC, MSNBC, Fox and CNN, and the Wall Street Journal and New York Times. I had the privilege of serving with him on an economics TV panel in Chicago prior to settling in the desert permanently a few years ago.

Flynn has been remarkably accurate in forecasting the pricing movements of crude oil and gasoline in the past few years and the reason for their volatility.

His predictions have been so uncanny that he has been approached by major publishers to write a book on the world's worsening energy crisis.

In our dialogue, Flynn blamed the ongoing gasoline and crude oil availability pressure on the following major factors:

U.S. refinery shortages and maintenance problems, which are due to get worse as the year progresses.

OPEC's desire to restrict shipments on what they know is a vanishing resource. The Middle East oil monopoly also is adamant in squeezing the top prices out of its oil availability, realizing that alternative energy sources eventually will cut into crude oil demand.

Saudi Arabia, the only remaining "swing" producer, conceivably could be losing production in one or more of its five major oil fields at this time.

Although crude oil touched $70 per barrel late last week, Flynn believes it should be priced even higher since West Texas Intermediate, which is quoted on the New York Mercantile Exchange, has faced increasing refining blockage. The refinery bottlenecks have caused a crude inventory backup in Cushing, Okla., the nation's main storage area.

As refinery capacity utilization is climbing to the 90 percent plus level, U.S. crude prices will rise to the mid $70 range, while London-traded Brent crude will lag by $2 to $4, the reverse of today's circumstances.

Because the latter is more difficult to refine due to its OPEC-based heavy sulfur content, it will revert back to its historically cheaper price structures.

Flynn attributes California's high prices at the pump to the state's multi-faceted blends, the state's inability to import from elsewhere and the unexpected consumer demand increase this year.

He cites the recent $4 per gallon prices in Chicago to the production breakdown of the major Whiting, Ind., refinery, and the confiscatory Illinois state taxes.

He invites consumers to check the high taxes that federal and state governments charge in these areas to ascertain what gas at the pump really costs.

Flynn believes that the present ethanol approach is an unmitigated disaster.

"Without the 51 cent subsidy," he exclaims, "this unproven energy alternative would be out of business."

Flynn considers Congress' anti-gouging legislation political grandstanding.

Although no apologist for the Big Five multinationals, he believes these major global oil and natural gas producers are beset by government restrictions, political propaganda and an inability to project their strategies through effective communications.

Flynn believes that these international monoliths are less likely to expand refining capacity as government is calling for less gasoline through mandated ethanol blends in future years.

He believes the world's geopolitical situation is getting increasingly dangerous, as the natural resource heavy nations are gaining the upper hand.

Flynn cites Vladimir Putin's Russia, Hugo Chavez's Venezuela and Mahmoud Ahmadinejad's Iran as the new "axis of oil and natural gas evil."

This is not only due to OPEC's price rigging but the loss of technological skills as engineers, geologists and other experts flee these increasingly authoritarian countries.

Even though major new oil fields are being located, Flynn says, the costs of extraction are so prohibitive that countries like Mexico financially are not capable of exploiting them.

By precluding foreign investment in their energy industry, these countries are shutting out the necessary expertise and financing.

Putting his superior forecasting record on the line, Flynn believes that crude oil will reach $75 per barrel this summer and break last year's $78 record if the hurricane season becomes increasingly active.

He adds that "if the geopolitical situation deteriorates," the $85 per barrel mark is a distinct possibility later this year.

With crude oil comprising at least 50 percent of gasoline costs, $4 per gallon at the pump won't be far behind.

"And if the ethanol scam reaches anywhere near its destructive possibilities, look for gasoline to become increasingly expensive," he adds.

When asked what all this would mean to corn-based products in America, Flynn stipulated that such inflationary impact on consumer products would be harshly felt as the year progresses.

With worldwide demand of oil at an all-time high of 86 million barrels a day, according to the International Energy Agency, Flynn concludes that the supply/demand squeeze practically will eliminate the thin margin between production and usage that now exists.

Fraudulent Claims of Impending Shortages

2007-07-05T22:57:00.000-07:00

NYMEX Oil Complex Settles Higher Despite Bearish EIA Data
July 05, 2007
By John Troland, Tom Waterman

Houston, TX - The NYMEX oil complex finished the day higher despite EIA inventory data for the week ended June 29 indicating inventories of the three major NYMEX energy components were sharply higher than the previous report.

Crude oil stocks were up a surprising 3.1 million barrels with gasoline and distillate stocks higher by 1.8 and 1.2 million barrels respectively. We cannot believe anyone would suggest the data was anything but bearish, yet those claiming prices are too low due to imbalances in supply and demand proved us wrong. It is obvious that those wanting higher prices are not looking at fundamentals but are again raising unfounded concerns that soaring demand is outpacing supplies.

The cheerleaders continue to talk about gasoline and how "dangerously low" inventories are. Well, the summer driving season is here and there are no lines, no outages, no indication of potential outages, or any other reason to think for a moment that gasoline is tight. In fact, the latest EIA report brings gasoline inventories up to 22 days of supply for the first time since the end of March. And inventories are still building at a time when stocks are usually drifting lower.

One of the reasons for the early jump in values this morning was that attacks have begun again in Nigeria, after the government had negotiated a truce between itself and militant factions. To suggest that old story is having an impact on world oil supplies, which we hear are "abundant," is strictly self-serving rhetoric in the absence of any real supply issues.

As we have written for months, while Nigeria is having problems in the Niger Delta, production remains close to its OPEC quota and is expected to remain that way well into the future. Those wanting higher prices act like we are about to run out, again ignoring the fact that we have 354 million barrels of crude in primary storage with a mere 690 million barrels stored in government salt domes. The fraudulent claims of impending shortages are used for one reason -- to make more money and nothing else.

Today's trading session, once again, defies a logical explanation other than those wanting higher prices have the money to be successful despite fundamentals that suggest refiners will keep supplies of finished products adequate for the foreseeable future. [...]

http://www.oilintel.com/newshome.cfm?news_id=2744&action=showstory

Asian Aframax Rate Drops First Time in 6 Days

2007-06-28T00:11:00.000-07:00

Asian Aframax Tanker Shipping Rate Drops First Time in Six Days
By Katherine Espina
June 27 (Bloomberg)

The cost of shipping 80,000 metric tons of oil on Asian routes dropped the first time in six days as most bookings for early July have been concluded. Further declines may be limited as freights for the rest of the month are fixed.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait dropped 0.13 percent to Worldscale 154.42 yesterday, according to the London-based Baltic Exchange. Last week, it rose the most since March 30.

Asian freight rates for shipping oil on Aframax tankers increased 6 percent last week as charterers hired vessels to load fuel, brokers including London-based Galbraith's Ltd. said. Some owners of Aframax vessels expect rates to rise after vessel requirements for early next month have been fixed, Kats Nishikawa at shipbroker Matsui & Co. in Tokyo said.

``A number of fixtures have been concluded throughout the week and there are still plenty lined up,'' said Galbraith's in its report for the week ended June 22. ``This firmer trend looks set to continue next week.''

This week, four Aframax tankers are expected to arrive in Singapore and three more in the first week of July, according to AISLive on Bloomberg.

The Baltic Dirty Tanker Index, which tracks 12 routes, has fallen 21 percent this year. It fell 1.1 percent to 1041 yesterday, the second day the measure fell. The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait-to-Singapore route stood at $2.01 yesterday, unchanged for a second day, according to Bloomberg data.

Indonesia, Japan Route

The Aframax tanker rate on the Indonesia-to-Japan route was steady at Worldscale 157.50 on June 22, the daily cost for the past 17 days, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, little changed in the past three weeks, according to Bloomberg data.

The costs of shipping gasoline and other so-called clean petroleum products to Asia were mostly lower yesterday, according to the Baltic Exchange.

Shipping rate for 55,000 tons of products on the route to Japan from the Middle East dropped 0.9 percent to a four-month low of Worldscale 155.77, based on data from the Baltic Exchange. The rate has fallen 22 percent in the past 21 days.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for a 12th day. The rate dropped 3.2 percent to Worldscale 124.17, the biggest drop since Jan. 23, Baltic Exchange data showed. The cost of shipping on the route fell 5 percent last week, the most in 11 weeks.

The rate of shipping 30,000 tons of oil products from Singapore to Japan rose 0.3 percent to Worldscale 198.96 yesterday, a second day of gains. It has slumped 33 percent this year.

I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

Peak Oil Crisis - Tom Whipple

2007-06-23T00:12:00.000-07:00

Peak oil crisis: approaching the cliff
by Tom Whipple
June 21, 2007

Last weekend across southern South Dakota the pumps went dry. Gas terminals from Sioux Falls to Yankton to Sioux City were empty. “There is simply not enough fuel coming down the pipeline into the delivery system” said a BP station owner. Eventually the tankers were sent to Nebraska to find gas. A minor glitch in the distribution? Possibly, but more likely a harbinger of more serious problems to come.

Meanwhile, I would like to tell you that Congress, which has been debating energy bills for the last two weeks, is getting ready to pass legislation that will make our lives easier during the troubled years ahead. Sadly, I cannot. From their public pronouncements and posturing, it is unlikely more than a dozen members of Congress have the slightest idea of what 2007 energy legislation should be trying to accomplish in an urgent manner.

Many of the just-barely-in-the-majority Democrats, especially in the Senate, are on the right track, with proposals to improve average gasoline consumption, and to increase the use of renewable energy. Scattered here and there are conservation measures and R&D money for more efficient something or others, but from the perspective of imminent oil depletion, the proposals are too little, too late. Setting efficiency goals for 10 or 15 years from now is absurd when the problems to solve may be upon us in 15 or 20 months, or, if the real alarmists are right, in 15 or 20 weeks.

However inadequate the Democrats’ proposals may be, they pale in comparison to the absurdity of the opposition to energy legislation forming on Capitol Hill. Detroit, in conspiracy with the coal and electric industries, is mounting a full court press to see that little gets through this Congress to upset the status quo – mild efficiency standards, no greenhouse gas regulation, no renewable energy mandates. From the opposition’s point of view, if Congress wants to do anything, then it might be OK for them to bankroll the R&D so we can convert good old American coal into our gasoline; don’t even think about taxing energy, but a few more subsidies might be nice.

With crucial Senate votes scheduled for later this week, it is still too early to judge what the final legislation will look like, but it is starting to look as if we are going to arrive at the precipice of oil depletion without Congress having done much of anything to mitigate the situation. The American automobile industry is clearly on its way to committing suicide; the coal industry does not seem to realize its days are numbered; and the electric industry seems to have no notion that, within a lifetime, fossil fuels and perhaps even some forms of nuclear energy are going to have to be replaced.

As a civilization, we are all to blame. Most Americans are showing little inclination to cut back on driving. In study after study we tell interviewers we are willing to spend our last nickel, mortgage the farm, and deprive our grandchildren before we will give up driving. We are all heading towards the cliff together.

Not much happened in the last week to tell us just how close we are to the cliff. There is a general strike going on in Nigeria that so far does not seem to be affecting oil production. Nigerian strikes are usually settled quickly, but there is a new president in charge so there could be surprises in store. In the Niger Delta, the insurgency bubbles along, despite the nominal ceasefire, with still more oil being shut-in by the insurgents during the past week.

From the perspective of oil production, Iraq continues to hold its own. OPEC is still refusing to consider production increases and the Chinese imports of crude oil continue to increase.

This week’s U.S. oil status report was a strange one. U.S. refinery utilization plunged to what should be an abysmally low 87.6 percent, but at the same time the refineries managed to produce the same amount of gasoline as the week before. Unless there is something wrong with the numbers, this confirms that improvements made to our refineries in recent years are now allowing them to squeeze considerably more gasoline out of each barrel of crude -- a definite plus. Imports increased a bit, resulting in U.S. gasoline stockpiles growing by 1.8 million barrels last week. There are still major shortages along the East Coast and the summer driving season is almost here. There seem to be some unusually large anomalies in this week’s report, however, so there may be revisions ahead.

In general, the gasoline stockpiles situation now can be categorized as serious rather than dire. We seem to be getting the gasoline we need without our refineries working too well and so far we seem to be able to find enough gasoline to import. From here through Labor Day it depends on how much we all drive and of course the hurricanes. None are yet in sight.

End

http://www.fcnp.com/index.php?option=com_content&task=view&id=1438&Itemid=35

http://www.energybulletin.net/31199.html

Asian Aframax Ship Rate Gains

2007-06-21T02:52:00.000-07:00

Asian Aframax Ship Rate Gains May Be Limited on Rising Supply
By Katherine Espina
June 21 (Bloomberg)

Gains in the cost of shipping 80,000 metric tons of oil on Asian routes may be curbed in the next several days as the supply of tankers increases, brokers including Matsui & Co. said.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait climbed for a second day, gaining 1.7 percent to 148.27 yesterday, according to the London-based Baltic Exchange. Shipment cost on the route fell 1.2 percent in the week ended June 15, the first decline in three weeks.

``There will be many vessels available in the Singapore area in the early part of July so the market may stay the same or even move lower,'' Kats Nishikawa, general manager at the chartering team of Matsui & Co. in Tokyo, said by phone. ``Unless we see more activity in the Singapore area, the market may be softer.''

This month, there are 12 Aframax tankers sailing to Singapore, according to AISLive on Bloomberg. The cost of shipping crude on Aframax vessels to Asian routes has declined 7.4 percent this year as capacity expanded.

The Baltic Dirty Tanker Index, which tracks 12 routes, has fallen 19 percent this year. The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait-to-Singapore route stood at $1.97 as of June 20, unchanged for the previous 19 days, according to Bloomberg data.

Japan Bound

The Aframax tanker rate on the Indonesia-to-Japan route was steady at Worldscale 157.50, the daily cost for the past 12 days, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, steady for the past two weeks, according to Bloomberg data.

The cost of shipping gasoline and other so-called clean petroleum products to Asia declined yesterday, according to the Baltic Exchange.

The cost of shipping 30,000 tons of oil products from Singapore to Japan fell 0.6 percent to Worldscale 200.42 yesterday, the lowest in eight weeks. It has slumped 20 percent the past four weeks, based on data from the Baltic Exchange.

Shipping costs for 55,000 tons of products on the route to Japan from the Middle East dropped 2.2 percent to Worldscale 161.92, the lowest since Feb. 15. The rate has fallen 17 straight days.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for an eighth day. The rate dropped 1.5 percent to Worldscale 131.46 yesterday, the lowest in four months, Baltic Exchange data showed. The cost of shipping on the route fell 3.2 percent last week, the second weekly decline.

Caribbean Tanker Rates Fall

2007-06-21T02:50:00.000-07:00

Caribbean Tanker Rates Fall as Oil Supplies Jump, Plants Slow
By Todd Zeranski
June 20 (Bloomberg)

Rates to ship crude oil from the Caribbean basin fell as a U.S. Energy Department report indicated oil stockpiles increased and refinery utilization rates fell.

Two Aframax tankers, which each can transport about 600,000 barrels of oil, were hired today for an average rate in the industry standard Worldscale 145, according to a daily report from Houston-based shipbroker Lone Star, R.S. Platou.

Valero Energy Corp. contracted one tanker to ferry crude between St. Eustatius and the U.S. East Coast, and Royal Dutch Shell Plc contracted a ship to transport oil from the east coast of Mexico to the U.S. Gulf Coast, according to Lone Star.

Demand in the region is hampered by low refinery operating rates. Refineries operated at 87.6 percent of capacity last week, the lowest since the week ended March 30, according to the department. It was the lowest utilization rate for the period in 16 years.

Crude-oil inventories surged 6.9 million barrels to 349.3 million in the week ended June 15, the report showed. It was the biggest one-week gain since the week ended March 19, 2004.

Worldscale 145 is equivalent to about $20,280 per day after expenses such as fuel and port fees, according to New York-based- broker Poten & Partners.

General Maritime Corp., the second-largest U.S. tanker owner, has a break-even rate of about $12,000 a day. The New York-based company operates many of its vessels in the Caribbean.

Overseas Shipholding Group is the biggest U.S.-based oil- tanker owners.

Gonu leaves $3.8bn cloud over Oman

2007-06-21T01:35:00.000-07:00

Gonu leaves $3.8bn cloud over Oman
by Dylan Bowman
17 June 2007
ArabianBusiness.com

Cyclone Gonu has cost Oman's economy almost $4 billion, according to initial government estimates.

An official source at the Ministry of National Economy said reconstruction could cost the country between $3.24 billion and $3.89 billion, and that the ministry is currently working with various governmental authorities to repair infrastructure damaged or destroyed by the cyclone, WAM reported today.

Cyclone Gonu wreaked havoc on the country earlier this month, battering its coast for three days and killing around 50 people.

The cyclone halted Oman’s oil and gas exports and damaged main roads and bridges connecting the eastern provinces with the capital Muscat, and caused floods and landslides across all regions.

In Muscat's centre, streets were turned into turbulent rivers, trees uprooted and power lines cut. Cars were left piled on top of each other, stuck in rubble and mud.

The country also suffered from power outages for days after the storm left its coast
and moved up to southern Iran.

At its peak, Gonu was measured as a maximum-force Category Five hurricane.

Oman's weather centre, which has been keeping records since 1890, says Gonu could have been the strongest storm to reach the coast since 1977.

Counterinsurgency Warfare (part two)

2007-06-20T21:55:00.000-07:00

The same kind of politics are now in evidence in Afghanistan and Iraq, including the ineffectual enshrinement of Islam in the new Iraqi constitution, and the emergence of clerical warlords who are as ready to use violence as Cardinal Ruffo was. Since the 2003 invasion, both Shiite and Sunni clerics have been repeating over and over again that the Americans and their “Christian” allies have come to Iraq to destroy Islam in its cultural heartland and to steal the country’s oil. The clerics dismiss all talk of democracy and human rights by the invaders as mere hypocrisy — with the exception of women’s rights, which the clerics say are only propagandized to persuade Iraqi daughters and wives to dishonor their families by imitating the shameless nakedness and impertinence of Western women.

The vast majority of Afghans and Iraqis naturally believe their religious leaders. The alternative would be to believe what for them is entirely unbelievable: that foreigners are unselfishly expending blood and treasure in order to help them. They themselves would never invade a foreign country except to plunder it, the way Iraq invaded Kuwait, thus having made Saddam Hussein genuinely popular for a time when troops brought back their loot. As many opinion polls and countless incidents demonstrate, the Americans and their allies are widely considered to be the worst of invaders, who came to rob Muslim Iraqis not only of their territory and oil but also of their religion and even their family honor. Many Muslims around the world believe as much, even in Turkey, whose most successful recent film depicted an American Jewish military doctor who was operating on Iraqis not to save their lives but to remove their kidneys, which of course he was sending back to the U.S. for transplantation and his personal profit (he was Jewish after all). It is the same in Afghanistan, where the American-imposed quota of women parliamentarians has caused widespread resentment, not least because most Afghans are scandalized by the spectacle of a woman contradicting a man in public — as in, for example, televised parliamentary debates.

In other words, “Integrating Civil and Military Activities” to improve local conditions need not gain public support. And even if it did, it does not automatically follow that such support would be decisive, or even important.

http://www.harpers.org/archive/2007/02/0081384 Edward Luttwak

Asian Aframax Rates May Extend Decline a Second Week

2007-06-19T00:54:00.000-07:00

Asian Aframax Rates May Extend Decline a 2nd Week
By Katherine Espina
June 19 (Bloomberg)

The cost of shipping 80,000 metric tons of oil on Asian routes, which fell 1.2 percent last week, may extend its decline until charterers book their cargoes for July.

The rate of shipping crude or fuel oil on so-called Aframax tankers to Singapore from Kuwait declined 0.13 percent to 144.81 yesterday, according to the London-based Baltic Exchange.

Rates to ship crude on Aframax vessels to Asian routes last week dropped the first time in three weeks as capacity expanded. The cost of hiring Aframax tankers may rise or hold steady when more vessels are hired to load cargoes for July, shipbrokers including London-based Galbraith's Ltd. said.

There are 12 Aframax tankers sailing to Singapore this month and none for July yet, according to AISLive on Bloomberg.

Saudi Arabia, the world's biggest oil producer, Iran, and the United Arab Emirates this week may release port-loading schedules for July crude shipments, stoking demand for supertankers.

That may lead to increased demand in the following weeks for Aframax vessels, which are predominantly deployed on short-haul routes or intra-regional trade and in harbors too small to accommodate supertankers.

The cost of shipping a barrel of oil on an Aframax vessel on the Kuwait to Singapore route stood at $1.97 as of June 18, unchanged for the previous 17 days, according to Bloomberg data.

Japan Bound

The Aframax tanker rate on the Indonesia to Japan route was steady at Worldscale 157.50, the daily cost for the last two weeks, according to Bloomberg data. Shipping a barrel of oil on the route amounts to $1.84, steady from the last two weeks, according to Bloomberg data.

The cost of shipping gasoline and other so-called clean petroleum products to Asia declined on June 18, according to the Baltic Exchange.

The cost of shipping 30,000 tons of oil products from Singapore to Japan fell 1.03 percent to Worldscale 202.88 yesterday, the lowest in almost eight weeks. It has slumped 20 percent the last four weeks, based on data from the Baltic Exchange.

Shipping costs for 55,000 tons of products on the route to Japan from the Middle East dropped 0.4 percent to Worldscale 168.46, the lowest in about four months. The rate fell 15 percent in the past four weeks.

The cost of carrying 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan declined for a sixth day. The rate dropped 1.07 percent to Worldscale 135.42 yesterday, the lowest in about six weeks, Baltic Exchange data showed. The cost of shipping on the route fell 3.2 percent last week, the second weekly decline.

The Theory of Counterinsurgency Warfare

2007-06-18T21:42:00.000-07:00

Luttwak

THE THEORY OF COUNTERINSURGENCY WARFARE

Two distinguished American generals of exceptional intelligence, James N. Mattis of the Marine Corps and David H. Petraeus of the Army, each now responsible for the training and doctrine policy of his own service, have recently circulated the text of a new “counterinsurgency” field manual, FM 3-24 DRAFT, which they propose for official use. Its doctrines emerge from the chapter titles. After a first chapter of definitions (which any military manual must have, because the battlefield is no place for semantic debate) we come to the first substantive chapter, “Unity of Effort: Integrating Civil and Military Activities,” in which the authors duly recognize and strongly emphasize the essentially political nature of the struggle against insurgents. That is hardly an original discovery, as the two generals and their staffs would be the first to recognize, yet it is still necessary to affirm what should be obvious, because amid the frustrations of fighting a mostly invisible enemy, it is hard to resist the tempting delusion that some clever new tactics, or even some clever new technology, can defeat the insurgents.

http://www.harpers.org/archive/2007/02/0081384

OPEC Quotas May Bring In-Fighting in September

2007-06-16T03:02:00.000-07:00

May 22, 2007
By John Troland, Tom Waterman

Houston, TX - At the September 2007 OPEC meeting there may be trouble brewing if expectations that Angola, the newest member of OPEC, is assigned a quota. With Angolan crude output on the rise from recent estimates of about 1.5 mbpd to more than 2.0 mbpd in the not too distant future, there will probably be requests from other OPEC producers of sweet crude such as Algeria, Libya and most importantly Nigeria, to increase their quota allotments. Currently Nigeria's quota is 2.044 mbpd with full production potential nearly 1.0 mbpd above that level, assuming militant actions in the Niger Delta were to cease.

Nigeria has for some time been a price hawk although at current levels, seem less concerned about its quota allotment than in past years. The government also appears less concerned about the lost production. We suspect that the central government, at the moment, is not overly concerned with the militant actions as it does keep prices at artificial levels. Market bulls are quick to point to lost production in Nigeria as a major factor, when other hype fails. They can point to Nigerian output of about 1.0 mbpd lost to ongoing strife in the country. But as we stated in an earlier article, the additional 1.0 mbpd would put Nigeria way over its quota.

As history has proven, OPEC members have little problem with each other when prices are high and moving higher, but when prices begin to fall, the cheating expands as member countries try to maintain a similar revenue flow. We suggest that this scenario is closer to happening than some analysts predict. Both Angola and Nigeria will continue to seek higher and higher quotas going forward. This puts the onus on major OPEC producers such as Saudi Arabia, Iran and others who continue to enjoy much larger quotas. Will the Saudis, in particular, be willing to cut back its quota enough to support high prices? An even bigger question is will other OPEC members show restraint in curbing production to quota levels?

The problems arise as Algeria, Angola, Libya and Nigeria do not have quotas proportionate to output. As we suggested earlier, OPEC history will repeat itself at some point in the not too distant future if the above mentioned countries are successful in getting higher quotas.

Our position is they will revert to cheating, which logic dictates they are probably engaged in right now. This will eventually lead to the same problem we had last summer as the crude oil market was flooded. With the possible exception of Saudi Arabia and perhaps Kuwait, the rest of OPEC countries are cheating now if they have the capacity to overproduce. We are approaching the saturation level where crude oil is ample and if the situation persists, the fight will be on for the last buyer of crude oil.

While tanker charters and other market barometers often measure crude shipments, they do not measure the amount of crude oil available. Countries will store excess production and hope to sell it at elevated levels somewhere down the road. OPEC never does well in a down market. This is why there is nothing but silence from the cartel recently. They do not wish to upset the apple cart. Just as the majors in the U.S. are really not to blame for the current market prices, they are enjoying the profit margins, and are really not interested in seeing a change from the status quo. Every oil company executive knows that speculation is driving this market, but they won't say it publicly, even as many face hearings in Washington on the subject of gasoline prices. Right now, the volatility favors the oil companies, so don't expect any complaining.

Ever wonder why we have not run out of gasoline? There are no lines at retail outlets anywhere in the country at the present time. Neither do we hear about signs posted saying "We're Out of Gas!" The hype just keeps things moving up.

Cost of Gonu Rebuild in Millions

2007-06-15T22:53:00.000-07:00

ArabianBusiness.com
by Conrad Egbert
16 June 2007

The cost of reconstructing Oman after last week's Cyclone Gonu is set to run into millions of dollars.

According to a developer operating in the country, most of the damage was done to roads and infrastructure, along with building projects under construction.

"The damage has been quite extensive to the infrastructure with widespread destruction of roads and bridges that could cost hundreds of millions of dollars, but the authorities are working round the clock to try and get things back to normal," said Amer Al Fadhil, vice president - external affairs, The Wave, Muscat - one of the largest waterfront developments in Oman.

"Oman is focusing on three aspects at the moment. The first priority is relief operations to those who need it, with The Wave also sending out basic necessities across Muscat. The second is the clean-up, while the third is, of course, the reconstruction."

Roads and bridges have suffered extensive damage and the city has turned into a mini-lake due to water logging in many areas.

Muscat's terrain is mountainous with wadis (dried up river beds), which are used as residential and commercial space. Due to these low-lying areas, rain and seawater brought in by the storm caused severe flooding of the wadis, resulting in parts of roads and bridges being swept away as well as buildings being submerged.

"Most of the damage has been to the infrastructure," said David Skinner, regional manager, Carillion Alawi, Oman.

"A section of a road outside the Seeb Airport that is being constructed by us was washed out but we started repairs on the morning after the storm [Thursday 7 June] and worked round the clock to get it functional by 5am on Saturday [9 June]."

The most affected areas have been Al Hubra, Qurum and Amerat, which has been totally cut off due to the collapse of its only highway connection.

Other roads that have been affected are Al Khodh and Southern Marbela, while storm waters that tore through a wadi ripped open the Qurum high road to Darsait.

A McDonald's restaurant on the edge of Wadi Aday in Qurum was almost completely submerged by the flood waters along with Qurum Park, a popular recreational area near the shore.

Muscat Municipality chairman, Abdullah Bin Abbas, said that the city has been devastated due to the cyclone but will soon be back on track.

"We are doing our best to restore city life back to pre-Gonu days," he said.

UAE to up oil output 30%

2007-06-14T03:30:00.000-07:00

by Dylan Bowman
14 June 2007
ArabianBusiness.com

The UAE is looking at upping its oil output 30% in the next two years, the country’s minister of energy said on Wednesday. Mohammad Bin Dha'en Al Hamili said during a press conference the country was considering raising production from 2.7 million barrel per day (BPD) to 3.5 million barrel per day by 2009. The minister, who is also the current president of OPEC, said both the UAE and OPEC are worried about oil price stability, but that there are enough oil supplies.

He attributed the rise in prices to political tension in some production areas, market speculations and refining bottleneck in some producing countries. Al Hamili called for more communication between oil producing nations and consumer countries in order to create greater stability within the market and wider global economy.

Persian Gulf Tanker Rates May Extend Decline

2007-06-13T21:20:00.000-07:00

Persian Gulf Oil-Tanker Rates May Extend Decline on Ship Supply
By Grant Smith
June 13 (Bloomberg)

The cost of shipping Middle East crude oil to Asia, which rose for the first time in 18 days yesterday, may extend this month's 10 percent decline because of excess supplies.

A surplus of spare supertankers has accumulated after routine maintenance among Chinese refiners in May damped oil imports. There are almost as many ships available for the first two weeks of July as will be needed for the entire month, according to an e-mailed report today from Paris-based shipbrokers Barry Rogliano Salles.

``Rates are taking a small step forward but are still under pressure, with plenty of tonnage available for the remainder of June and into early July,'' Nikolaos Varvaropoulos of Optima Shipbrokers said in an e-mail from Athens.

Freight rates for very large crude carriers, or VLCCs, on the benchmark route to Japan, rose 0.1 percent yesterday to 69.14 Worldscale points. Rates have lost 22 percent in the past four weeks, according to the London-based Baltic Exchange.

Rates temporarily halted their slide yesterday as owners refused to offer further discounts on the vessels they hire, Halvor Ellefesen of shipbrokers SeaLeague AS said in an e-mail.

China's crude oil imports rose at the slowest pace in four months in May, customs figures released in Beijing yesterday showed. The imports rose 4.7 percent to about 3.1 million barrels a day. There are 91 supertankers free to July 13, compared with 103 cargoes that typically load in the Persian Gulf each month, Barry Rogliano said.

Break Even

Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

At 69.14 Worldscale points, owners of modern VLCCs can earn about $41,337 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.

Frontline Ltd., the world's biggest oil-tanker company by capacity, said May 30 that it needs $29,500 a day to break even on each of its VLCCs.

Cargo Ship sinks at Bandar Abbas

2007-06-09T23:36:00.000-07:00

LONDON, June 10 (IranMania)

Following devastating tropical storm, Cyclone Gonu, which hit Persian Gulf region a cargo ship sank in the coastal waters of Haghani jetty in Bandar Abbas on Wednesday, it was announced, IRNA reported.

Speaking to IRNA, Colonel Asghar Ghotbzadeh said the ship had already been seized by coastal guards for illegal transport of crude oil.

Following the incident, all crew on board were evacuated and are all in good health conditions, he said.

Cyclone Gonu Oman Oil Facilities

2007-06-09T01:07:00.000-07:00

ArabianBusiness.com - June 8th

Gonu peaked as a maximum-force Category Five hurricane on Tuesday and faded to a Category One hurricane on Wednesday. Apart from the 32 dead, at least 30 people were missing, Omani news agency said.

Further north to Oman's east coast, the United Arab Emirates' port of Fujairah, one of the world's largest ship refuelling centres, said 11 sailors were rescued after their boat sank in regional Omani waters on Wednesday.

Port Director Moussa Murad said there were 10 sailors missing from the same boat. The rescued sailors were nine Indians, a Sudanese and one Eritrean. The port reopened on Thursday after it closed on Wednesday.
Three people were killed in southern Iran on Thursday while people within 300 metres (yards) of the coast in Hormozgan province had been evacuated, Iran state television said.

State media said roads and houses in Iran's southeastern province of Sistan-Baluchestan had been damaged and many coastal areas were cut off by flooding.

Oman's only 650,000 barrel per day oil terminal Minal al Fahal resumed operations after a three-day closure. Oman carried out tests on pipelines in the terminal before it resumed operations.

Petroleum Development Oman said on Thursday that operations and facilities had escaped damage.

PDO, a majority state-owned firm, produces most of Oman's crude. PDO expects its output to decline by around 20,000 bpd this year to between 560,000 and 570,000.

The storm had raised fears of a disruption to exports from the Middle East, which pumps over a quarter of the world's oil, pushing prices to around $71 a barrel on Thursday.

The main liquefied natural gas terminal at Sur, which was badly hit, was not operating either, a shipper said. Sur terminal handles 10 million tonnes per year of such gas.

Sohar refinery and port reopened and these facilities were working as well as before the storm, the company said.

Oman Monthly Oil Production Cyclone Gonu

2007-06-07T04:07:00.000-07:00

Latest Update 11am Gulf Time Sunday

Oman produces 720,000 barrels per day of crude oil and exports approximately 650,000 bpd of that. Its production is declining at approximately 5% annually.

Oman Oil Production Gonu

2007-06-07T02:54:00.000-07:00

Latest Update 11am Gulf time Sunday
Yearly Oil Production from Oman

updates on Cyclone Gonu

more oil production information

Gonu Misses Rigs Updated Image 10am Muscat

2007-06-07T02:30:00.000-07:00

Latest update 11am Gulf time Sunday

By Eduard Gismatullin
June 7 (Bloomberg)

Crude oil traded below $66 a barrel in New York as Tropical Cyclone Gonu missed oil rigs and fields in the Middle East, causing only some disruption to shipping.

Gonu battered southern Iran early today after hitting the eastern coast of Oman yesterday, closing all its seaports and oil- export terminals two days ago and causing the country to suspended oil and gas exports. Ships continued to pass through the Strait of Hormuz, a waterway between Iran and Oman at the mouth of the Persian Gulf, the Associated Press reported.

``We think that bulls will find it difficult to make much of a case centering around the fading Persian Gulf cyclone,'' Edward Meir, an analyst at Man Financial in Darien, Connecticut, wrote in a report. Gonu ``did not hit any key oil installations.''

Crude oil for July delivery was down 1 cent at $65.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 9:08 a.m. in London.

Gonu's center was 88 kilometers (55 miles) south of the town of Jask on the southern coast of Iran at 3:30 a.m. Omani time today, according to the latest U.S. Navy Joint Typhoon Warning Center advisory. Gonu's winds fell to 83 kilometers per hour as the storm moved north-northwest across the Gulf of Oman at 13 kilometers per hour.

Prices rose yesterday following reports that Turkish troops chased Kurdish guerrillas into northern Iraq. Government officials from Turkey and the U.S. denied any attack occurred.

Iraq has the world's third-biggest proved oil reserves, according to BP Plc. Turkey has threatened to launch a military operation unless U.S.-led coalition forces in Iraq eradicate the threat posed by the Kurdistan Workers' Party. The Turkish military has deployed tens of thousands of troops near the border to stop members of the group from entering Turkey.

``Neither do we think the Turkish incursions will morph into a wider conflagration,'' Meir wrote. The Turkish parliament ``will have to sanction any sustained military operation.''

In London, Brent crude oil for July settlement fell 13 cents to $70.89 a barrel on the ICE Futures Exchange at 9:10 a.m. in London.

Cyclone Gonu Misses Rigs

2007-06-07T02:11:00.000-07:00

Latest Update 11 am Gulf Time Sunday

By Eduard Gismatullin
June 7 (Bloomberg)

Crude oil traded below $66 a barrel in New York as Tropical Cyclone Gonu missed oil rigs and fields in the Middle East, causing only some disruption to shipping.

Gonu battered southern Iran early today after hitting the eastern coast of Oman yesterday, closing all its seaports and oil- export terminals two days ago and causing the country to suspended oil and gas exports. Ships continued to pass through the Strait of Hormuz, a waterway between Iran and Oman at the mouth of the Persian Gulf, the Associated Press reported.

``We think that bulls will find it difficult to make much of a case centering around the fading Persian Gulf cyclone,'' Edward Meir, an analyst at Man Financial in Darien, Connecticut, wrote in a report. Gonu ``did not hit any key oil installations.''

Crude oil for July delivery was down 1 cent at $65.95 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 9:08 a.m. in London.

Gonu's center was 88 kilometers (55 miles) south of the town of Jask on the southern coast of Iran at 3:30 a.m. Omani time today, according to the latest U.S. Navy Joint Typhoon Warning Center advisory. Gonu's winds fell to 83 kilometers per hour as the storm moved north-northwest across the Gulf of Oman at 13 kilometers per hour.

Prices rose yesterday following reports that Turkish troops chased Kurdish guerrillas into northern Iraq. Government officials from Turkey and the U.S. denied any attack occurred.

Iraq has the world's third-biggest proved oil reserves, according to BP Plc. Turkey has threatened to launch a military operation unless U.S.-led coalition forces in Iraq eradicate the threat posed by the Kurdistan Workers' Party. The Turkish military has deployed tens of thousands of troops near the border to stop members of the group from entering Turkey.

``Neither do we think the Turkish incursions will morph into a wider conflagration,'' Meir wrote. The Turkish parliament ``will have to sanction any sustained military operation.''

In London, Brent crude oil for July settlement fell 13 cents to $70.89 a barrel on the ICE Futures Exchange at 9:10 a.m. in London.

Best Gonu Photo Oman Muscat Cyclone

2007-06-06T23:59:00.000-07:00

Best Gonu Photo Oman Muscat Cyclone
Latest Update 11 am Gulf time Sunday

Click Here for link to high resolution version

Latest update on Gonu

Cyclone Gonu Batters Southern Iran

2007-06-06T22:14:00.000-07:00

Latest Update 10 am Gulf time Friday

By Ryan Flinn and Aaron Sheldrick
June 7 (Bloomberg)

2am EST
7am GMT
10am Dubai
10am Muscat
9:30am Iran

Cyclone Gonu, the worst to hit the Arabian Peninsula in more than 60 years, battered southern Iran, prompting authorities to close schools and universities, cancel some flights and evacuate thousands of people from coastal areas.

The Health Ministry put hospitals on alert in southern Hormuzgan and Sistan-Baluchistan provinces late yesterday as the storm approached, the state-run Islamic Republic News Agency reported. The cyclone's outer winds knocked out electricity power lines in the port cities of Konarak and Chabahar, as people took refuge in shopping malls, IRNA said.

Gonu's center was 88 kilometers (55 miles) south of the town of Jask on the southern coast of Iran at 3:30 a.m. today, according to the latest U.S. Navy Joint Typhoon Warning Center advisory. Gonu's winds fell to 83 kilometers per hour as the storm moved north-northwest across the Gulf of Oman at 13 kilometers per hour.

The storm hit the east coast of Oman yesterday, where the Sultanate declared a state of emergency, ordering people to take shelter and shutting schools and offices until June 10. There were no immediate reports of casualties in either country.

Ships continued to pass through the Strait of Hormuz, a waterway between Iran and Oman at the mouth of the Persian Gulf, Associated Press reported, citing Suresh Nair of the Gulf Agency Co. shipping firm. At least a quarter of the world's oil supplies passes through the strait.

Oil Platforms

Gonu probably won't threaten Iran's oil platforms in the Persian Gulf because they are far from the forecasted path of the cyclone, AP cited Bahram Narimanian, a spokesman for Iran's Offshore Oil Company, as saying yesterday.

In the southeastern coastal city of Chabahar, 4,000 university students were evacuated to higher ground yesterday, IRNA reported.

The Islamic Republic of Iran Air Lines yesterday canceled all flights from Konarak for 48 hours, IRNA added.

Oman closed all its seaports and oil-export terminals two days ago as the government suspended oil and gas exports, shipping executives and oil traders said. They said they didn't know how long exports would remain suspended.

Oman sits on the southeast coast of the Arabian Peninsula and produces about 700,000 barrels of crude a day. It borders Yemen, Saudi Arabia and the United Arab Emirates.

Suspending Operations

Fujairah port in the United Arab Emirates suspended all offshore bunkering operations, including fuel oil and gasoil, and the movement of utility boats two days ago because of the storm. The port is one of world's three largest for fuel oil bunkering, along with Rotterdam and Singapore.

Saudi Aramco, the world's biggest state-controlled oil company, said yesterday it doesn't expect Gonu to hurt production or exports from Saudi Arabia's eastern province.

Crude oil for July delivery on the New York Mercantile Exchange traded at $66.00 a barrel at 8:33 a.m. Singapore time today. It rose 35 cents to $65.96 a barrel yesterday.

Gonu, which means a bag made of palm leaves in the language of the Maldives, is the most powerful storm to hit the Arabian Peninsula since records began in 1945, AP reported.

Earlier this week, it was a Category 5 storm, the strongest on the Saffir-Simpson scale, as it churned across the northern Arabian Sea.

Iran Adding Attack Boats in Persian Gulf

2007-06-06T20:58:00.000-07:00

By Tony Capaccio
June 6 (Bloomberg)

Iran is increasing its fleet of small attack boats capable of challenging warships and disrupting oil traffic in the Strait of Hormuz, the sea route for two-fifths of the world's daily supply of crude oil, the U.S. Navy says.

Iran's Revolutionary Guard Corps already has more than 1,000 of the speedboats ``and continues to add boats armed with anti- ship cruise missiles,'' said Robert Althage, spokesman for the U.S. Office of Naval Intelligence.

``Iran still states that the Iranian Revolutionary Guard Corps will employ swarming tactics in a conflict,'' Althage said in an e-mail. Naval intelligence, in its latest report on threats, said an attack against U.S. forces and commercial tankers ``could include over 100 boats in coordinated groups of 20 to 30 approaching simultaneously from multiple axes.''

The U.S. has two carrier groups in the Persian Gulf. The commander of these forces, Vice Admiral Kevin Cosgriff, said the attack boats have``a significant military capability.'' His fear is that Iran's central leadership might not have enough control over this Revolutionary Guard force to ensure against unauthorized attacks.

``I'm fairly comfortable that the regular Iranian navy and air force has a pretty good command-and-control system -- the key word is`control,''' he said. ``I don't have the same sense with the Revolutionary Guard.''

``Is there a rigorous, disciplined chain of command where people pay attention?'' Cosgriff said. ``In some instances, the answer would be yes. In other instances I've had some concern that people may be prone to miscalculation.''

``Somebody who gets fired up based on firebrand rhetoric is what I am speaking about,'' he said.

Mines, Torpedoes, Missiles

The boats -- up to 70 feet long and capable of speeds up to 57 miles per hour -- are armed with torpedoes and rocket- propelled grenades as well as cruise missiles and also are used to lay mines. The U.S. estimates Iran has 5,000 sea mines.

Cosgriff and other U.S. naval officers say they can defend against this threat. Still, attacks on tankers and a few sunken ships could disrupt traffic through the chokepoint of the world's most important oil transit route.

Iran launched a much smaller fleet of these attack boats against U.S. ships and U.S.-flagged tankers in the Persian Gulf in late 1987 through mid-1988 after the Reagan administration sided with Iraq in its war with the Islamic Republic.

The ships were able to lay mines, attack ships and disrupt oil traffic. They damaged at least one tanker traveling under the U.S. flag as well as the frigate USS Samuel Roberts.

Cosgriff said the U.S. now has four minesweepers deployed to the Gulf and the British Navy has two. The coalition ``routinely'' practices minesweeping and ``we are actually quite good at it,'' he said.

Defense Against 'Swarming'

Cosgriff, in a telephone interview yesterday from the United Arab Emirates, said the U.S. Navy has ``devised various tactics and other ways of coping with'' the swarming tactics of the small attack boats.

In addition, ``there are some limitations'' to launching an attack by these boats, he said. ``You just don't get 1,000 or 500 or even 20 of anything under way and tightly orchestrated over a large body of water to create a specific effect at a specific time and specific place. They have their own challenges.''

Officers of the aircraft carrier USS Stennis in the Persian Gulf offered similar assurances in onboard interviews June 1.

``We spend a lot of time making sure we have eyes out for that sort of thing,'' said Commander Chris Rentfrow, director of the Stennis's self-defense nerve center.

Cheney's Warning

The Stennis arrived in the Gulf 12 days after Vice President Dick Cheney spoke on the warship, highlighting the capability of the two carrier groups to protect sea lanes and send a warning that the U.S. won't tolerate Iran developing a nuclear capability.

The Stennis was joined by the Nimitz and the Marine Corps's Bonhomme Richard amphibious assault group in sailing through the Strait of Hormuz to conduct joint training exercises -- nine ships with 17,000 personnel in the largest daylight transit since 2003.

The maneuvers mark the second time in two months that two of the Navy's 11 aircraft carriers are in the Gulf for joint exercises. The Stennis exercised in March with the USS Dwight D. Eisenhower. Before that, the last time more than one carrier deployed in the Gulf was March 2003 for the Iraq invasion.

The current exercise will continue through tomorrow.

Raytheon System

The centerpiece of the Stennis's defenses is a Raytheon Co. Shipboard Shelf-Defense System installed last year that synthesizes data from the carrier's radar and anti-submarine sonar as well as Aegis air defense information gathered by the flattop's escort vessels into a single picture displayed on consoles.

Stennis operators can track up to 200 vessels or aircraft simultaneously, Rentfrow said in an interview. Two large digital maps showed the carrier was in the middle of the northern Persian Gulf about 37 miles from Busher, Iran. There was no significant Iranian naval or
air presence.

The system can ``absolutely'' deal with Iran's small boats, Rentfrow said. ``We practice a lot with these ships in terms of how to defend the zone around the carrier,'' he said.

One method is an old-fashioned .50 caliber machine gun on the vessel's stern, manned by a gunner in a grimy red t-shirt peering through binoculars into a hot, hazy Gulf horizon.

Senior officers of the Stennis, in interviews June 1 and May 31 onboard the ship, said the strike groups aren't exercising specifically to counter Iran but were practicing generic tactics to counter submarines, aircraft
and missile attacks.

This week the Stennis and Bonhomme Richard groups also planned an exercise practicing earthquake relief.

Stennis Strike Group Commander Rear Admiral Kevin Quinn, in response to a question, said the deployment of the two carrier groups isn't intended to send a message to Iran. ``I don't see it that way, but I'm the tactical guy,'' he said. ``My focus has been on exercising maritime skills'' and providing air support for ground troops in Iraq.

Cyclone Gonu Pummels Oman

2007-06-06T02:54:00.000-07:00

By Aaron Sheldrick and Ryan Flinn
June 6 (Bloomberg)

Cyclone Gonu pummeled the northeast coast of Oman, where authorities ordered people to take shelter. The storm's winds weakened to 147 kilometers per hour (91miles per hour) as Gonu's eye skirted the coast southeast of Muscat.
The center of the cyclone, the worst to hit the Arabian Peninsula in more than 60 years, was 183 kilometers southeast of Muscat at 4 a.m. Oman time today, according to the latest advisory on the Web site of the U.S. Navy Joint Typhoon Warning Center. The storm is moving northwest at 15 kilometers per hour.
The Sultanate's civil defenses were mobilized, according to the Ministry of Information, as the country's meteorological agency warned waves as high as 12 meters (39 feet) would hit coastlines. The government declared a state of emergency, ordered people to take shelter and shut schools and offices till June 10. There were no immediate reports of injuries or damage. Gonu's eye is forecast to be close to Muscat by about 4 p.m. today before heading for the Strait of Hormuz and making landfall in southern Iran by June 8 or 9, according to U.S. Navy forecasters.
By the time it reaches the Omani capital, the storm's winds are expected to slow to 120 kilometers per hour, with gusts to 184 kilometers per hour.
Gonu is the most powerful storm to hit the Arabian Peninsula since records began in 1945, the British Broadcasting Corp. said. Earlier this week, it was a Category Five storm, the strongest on the five-step Saffir-Simpson scale, as it churned across the northern Arabian sea.
The government closed all ports and oil export terminals from 2 p.m. yesterday. The country produces about 700,000 barrels of crude oil a day.
Crude oil for July delivery rose as much as 28 cents, or 0.4 percent, to $65.89 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $65.82 at 10:26 a.m. Singapore time.
The rise was attributed to refinery maintenance in the U.S. which may limit increases in gasoline supplies.
Almost a quarter of the world's oil flows through the Strait of Hormuz, a waterway between Iran and Oman at the mouth of the Persian Gulf.
Latest update

Gonu Cyclone Oman - 2pm Muscat update 2

2007-06-06T02:16:00.000-07:00

Gonu Cyclone Hurricane Oman Muscat Dubai Iran
Wednesday, June 6th

6am EST
11am GMT
2pm Dubai
2pm Muscat

Latest update

Gonu is a CAT 1 hurricane/cyclone located on the eastern tip of Oman, heading NW at 9mph up Oman’s northeast coast. It should hit the Iran’s southern coast within 24 hours. Check Dr. Jeff Masters’ Wunderblog for updated information and reports from the ground in the comments section.

http://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=690&tstamp=200706

Weather Underground has best satellite imagery and graphics
http://www.wunderground.com/blog/JeffMasters/comment.html?entrynum=690&tstamp=200706

Also try
www.accuweather.com

www.weather.com

Oman Cyclone Gonu Muscat 2pm Gulf Time

2007-06-06T01:15:00.000-07:00

Gonu Cyclone Hurricane Oman Muscat Dubai Iran

GO HERE FOR LATEST UPDATE 10am Muscat Friday

Wednesday, June 6th
6am EST
2pm Dubai
2pm Muscat

Gonu is a CAT 1 hurricane/cyclone located on the eastern tip of Oman, heading NW at 10mph up the Oman’s northeast coast. It should hit the Iran’s southern coast within 24 hours.

www.accuweather.com

www.weather.com

Oman Cyclone Gonu 9AM Gulf Time

2007-06-04T23:56:00.000-07:00

Latest Update

June 5 (Bloomberg)

Crude oil was little changed near a two- week high in New York after risingyesterday on risks to supplies from the Middle East and Nigeria.
Tropical Cyclone Gonu is heading northwest at 15 kilometers per hour on a path U.S. Navy forecasters expect will take it across the Gulf of Oman, an important shipping lane for oil supplies from the Gulf. Brent crude oil climbed as high as $70.63 a barrel yesterday on the risk to tankers operating in the Gulf and the threat of further strikes in Nigeria, Africa's biggest producer.
``The impact of the cyclone is lifting Brent and the New York price is responding to it,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``If the Nigerian situation amounts to any real disruption, further increasing the present disruptions, then it will affect Brent more.''
The contract rose $1.13, or 1.7 percent, to $66.21 yesterday, the highest close since May 21. Futures touched $66.48, the highest intraday price since April 30.
Gonu, earlier given the maximum rating of a Category Five storm on the Saffir-SimpsonHurricane Scale, weakened slightly into a Category Four storm with winds of 249 kilometers per hour (155 miles per hour) toward the Gulf of Oman, the Navy said.

OPEC oil output edges higher in May

2007-06-01T14:44:00.000-07:00

June 1st, 2007
(Reuters)

OPEC boosted crude oil output in May as higher supply from members including Algeria and the United Arab Emirates countered a drop in Nigeria, a Reuters survey showed on Friday.
Ten OPEC members bound by output targets, all except Iraq and Angola, pumped 26.76 mbpd, up 110,000 bpd from April, according to the survey of oil companies, traders, OPEC officials and analysts.
The survey suggests OPEC's adherence to agreed supply curbs eased in May as global oil prices rallied. Brent crude is trading at around $68 a barrel, close to a high for 2007 near $72 reached last week.
"OPEC is shipping more barrels out and prices are holding up fine," said Paul Tossetti, director of market analysis at Washington-based PFC Energy.
The Organization of the Petroleum Exporting Countries, source of more than a third of the world's oil, agreed last year to lower production by 1.2 million bpd from November 1 and by a further 500,000 bpd from February 1 to prop up prices.
May supply from the 10 countries was 880,000 bpd less than in October, according to Reuters estimates, or about 52 percent of the total production cut pledged.

Frontline Profit Falls 26 Percent

2007-05-31T22:34:00.001-07:00

by Alaric Nightingale

Frontline Ltd., the world's biggest oil-tanker company by carrying capacity, said first-quarter profit fell 26 percent after ship-hire rates dropped because of OPEC production cuts and the warmest winter on record.
Net income declined to $158.8 million, or $2.12 a share, from a restated $214 million, or $2.86 a share, a year earlier, Hamilton, Bermuda-based Frontline said today in a statement to the Oslo Stock Exchange. That beat the $100.3 million median estimate of 10 analysts surveyed by Bloomberg.
``Underlying trading looks a bit better than we expected,'' said Robin Byde, an analyst for HSBC Securities in London who has an ``underweight'' recommendation on the shares. Earnings ``look like a small positive,'' he said in an interview.
December to February was the warmest winter period on record, according to the U.S. National Oceanic and Atmospheric Administration, lowering refinery demand for crude oil. Tanker bookings also were curbed by the 1 million-barrel-a-day output cut that members of the Organization of Petroleum Exporting Countries started implementing in the fourth quarter of 2006.
Shares of Frontline climbed 0.5 Norwegian kroner, or 0.2 percent, to close at 255 kroner in Oslo, valuing the company at 19 billion kroner ($3.2 billion). They have climbed 37 percent this year. The profit included a $39.8 million gain from the sale of shares in Sea Production Ltd., a company that converts aging tankers into storage-and-production ships. Stripping out that gain, profit still beat analysts' estimates by $18.7 million.
Frontline deferred a gain of $155 million from the sale of shares of another company, Sea Lift Ltd., which will convert tankers to transport oil rigs, rig parts, bridges and other ships. Sales fell 25 percent to $362 million.
The profit decline was Frontline's first in three quarters. It reported a 0.6 percent increase in earnings in the fourth quarter after selling two vessels for gains of $73.2 million.
Frontline declared a cash dividend for the quarter of $1.50 a share. The payout is ``slightly disappointing,'' said Arne Roenning, an analyst for Fondsfinans AS in Oslo.
Earnings from Frontline's very large crude carriers, or VLCCs, slumped 31 percent to $50,200 a day while those from its 1 million-barrel carriers declined 29 percent to $34,900 a day. Break-even levels are $29,500 and $22,000 a day respectively.
Declines in freight rates are being exacerbated by a surge in shipbuilding, led by China and South Korea. Vessels equivalent to 34 percent of the world's existing tanker fleet are under construction, Frontline, led by Norwegian billionaire John Fredriksen, said today. The expansion ``gives some reason for concern,'' it said in the statement.
Employment of the global supertanker fleet may decline this year to 93 percent, from 96 percent last year, according to London-based shipbroker Galbraith's Ltd.
OPEC cut production by 1 million barrels a day by February as part of its commitment to trim excess supplies. OPEC is pumping enough crude to satisfy world consumption and has no need to review quotas before its September meeting, group president Mohamed al-Hamli said May 15.

Forecasters Predict Five Major Hurricanes

2007-05-31T13:53:00.000-07:00

By Courtney Dentch (Bloomberg)

Colorado State University forecasters said five major hurricanes will form this season, and there's a 74 percent chance a storm will make landfall in the U.S.
The forecast released today reiterates the team's April prediction for above-average tropical activity during the Atlantic season, which officially starts tomorrow. Ten storms and six hurricanes have formed, on average, during the June-November season over the last 50 years.
Five major hurricanes, with winds of at least 111 mph (179 kilometers per hour), will grow out of the 17 total storms expected to form, researchers Philip Klotzbach and William Gray said in their outlook. Nine of the storms will become hurricanes, with winds of at least 74 mph, they said.
``We expect an above-average hurricane season with El Nino-Southern Oscillation conditions on the cool side, which will help increase the likelihood of major storm activity in the Atlantic,'' Klotzbach said in a statement.
Cooling Pacific Ocean temperatures, part of La Nina conditions, are expected to drive storm formation, while warm Atlantic waters will provide fuel. La Nina is the opposite of El Nino, when Pacific temperatures rise above historical averages, and both conditions can affect weather patterns around the globe.
The Colorado State report echoes other predictions for a more active tropical season this year, after outlooks overestimated last year's near-normal activity. Experts forecast an average of 16 storms and four major hurricanes.
One system, Andrea, formed off the southeastern U.S. coast about three weeks before the official start of the season, although it didn't strike land.
The forecast comes as a Mason-Dixon poll found that 53 percent of residents along the U.S. Gulf and East coasts don't feel vulnerable to a hurricane or related flooding, and 88 percent haven't taken steps to reinforce their homes. The survey included 1,100 adults from May 10 to 15, and was commissioned by the National Hurricane Survival Initiative.
``Nearly two years after Hurricane Katrina shocked and horrified the nation, far too many residents are still unprepared for storms,'' said Bill Proenza, director of the Miami-based National Hurricane Center. ``Last year's below-normal hurricane season may have resulted in coastal residents being lulled into a false sense of complacency.''
Last year was the first time since 2001 and the 11th time since 1945 that no hurricane made landfall in the U.S. Three tropical storms did come ashore, causing at least five deaths and $500 million in damage, according to the center.
It was expected to be an active season, although less active than 2005, when 28 storms formed, including Hurricanes Katrina, Rita and Wilma. A late El Nino weather pattern in the Pacific Ocean, where equatorial waters warmed patterns of air circulation, and dryness in the tropical Atlantic atmosphere curtailed storm formation.

U.S. Growth Weakest in Over 4 Years

2007-05-31T13:10:00.000-07:00

U.S. Economic Growth Weakest in Over 4 Years
By Jeremy W. Peters
May 31st, 2007
NYT

The government cut in half its estimate of economic growth in the first quarter, reporting the slowest rate of expansion since the end of 2002.

Before today’s numbers were released by the Commerce Department, it was clear the economy was downshifting from the rapid 5.6 percent expansion of the first quarter last year. But the new data reinforced how significant the slowdown has been.

Growth advanced just 0.6 percent, compared with an initial estimate of 1.3 percent. IThe chief reasons for the revisions were adjustments to the estimates of imports and business inventories. Imports, which subtract from the gross domestic product, were stronger than the government first thought. At the same time, businesses cut production and accumulated smaller inventory stockpiles.

Despite the adjustments to the growth figures, inflation in the first quarter was essentially unrevised. Prices excluding food and energy, a measure preferred by the Federal Reserve, advanced by 2.2 percent in the first quarter, still above what the central bank has said it considers acceptable.

But there were some revisions to the numbers that economists said they found to be encouraging. Consumer spending, the staple of economic growth for the last decade, was revised higher. It advanced 4.4 percent in the first quarter, compared with an initial estimate of 3.8 percent. And the drag from the collapse in residential real estate was slightly less than the government first reported.

Most economists agree that the first quarter was probably a low point for the last several years, and they expect the economy has regained some strength in the second quarter. Although consumer spending has probably slowed since the first quarter and the correction in the housing market is continuing, economists expect demand from overseas — given an added lift because of a weaker dollar — to help businesses in the United States.

“We know that the world economy is growing,” said Ken Mayland of ClearView Economics. “It doesn’t seem realistic that our exports will be dead in the water. And in the context of an even cheaper dollar, they’re even more competitive now.”

A new report today found that some American businesses are indeed seeing faster growth. The National Association of Purchasing Management said that its measure of manufacturing activity in the Chicago area rose far above the level economists expected in May. Its barometer rose to 61.7 from 52.9 in April. Readings above 50 indicate growth.

Another significant factor that will determine how much the economy grows during the rest of the year is the labor market. And today there were signs that it has so far avoided hitting the skid that many economists have predicted. The Labor Department said today that the four-week moving average of Americans filing state unemployment claims for the first time fell to 304,500, the lowest level in more than a year. Initial jobless claims dropped by 4,000, to 310,000, in the week ended May 26. Tomorrow, the Labor Department will report job growth and unemployment statistics for May, shedding more light on the health of the labor market.

The housing market, meanwhile, continued to weather its slowdown. In a separate report today, the Commerce Department said that construction spending rose 0.1 percent in April after a 0.6 percent gain in March. At the same time, spending on residential construction fell again.

The Coal Trap

2007-05-29T23:37:00.000-07:00

May 30, 2007
Editorial
The Coal Trap
NYT

There is a rule for judging solutions to the twin problems of energy dependence and global warming: A policy designed to solve one problem should not make the other worse. But that is a likely outcome of the many “energy independence” bills circulating in Congress that aim to build a whole new generation of coal-to-liquid plants to convert coal into automotive fuel.

These bills have already acquired an enthusiastic constituency and will be offered as amendments to what is now a relatively simple and sound energy bill designed to increase the fuel efficiency of cars and light trucks, encourage the production of biofuels and provide research and development money for the capture and storage of carbon dioxide emissions from power plants.

There are, of course, ways to make this bill better. Senator Jeff Bingaman will offer a useful amendment to require utilities to generate a percentage of their electricity from renewable sources like wind. But there are also ways to make the bill a lot worse. One of them is to require the expenditure of billions of dollars in loans, tax incentives and price guarantees to lock in a technology that could end up doing more harm than good.

Coal is far and away America’s most abundant fuel. It provides more than half the country’s electricity. And there is no doubt that it could substitute for foreign oil, although how much and at what price is not clear. In addition, the technology to convert coal into liquid fuels is well established. But it is also true that between the production process and burning it in cars, coal-to-liquid fuel produces more than twice the greenhouse gas emissions as gasoline and nearly twice the emissions of ordinary diesel. These are terrible ratios.

Congressional and industry proponents of coal-to-liquid plants argue that the same technologies that may someday capture and store emissions from coal-fired plants will also be available to coal-to-liquid plants. But that deals with only half of the problem. According to the Environmental Protection Agency, coal-based automobile fuel would still be marginally dirtier than ordinary gasoline and only marginally cleaner than conventional diesel.

What this means is that the country would be investing billions to produce fuels that, from a global warming perspective, leave us at best treading water. That is unacceptable at a time when mainstream scientists are warning that greenhouse gases must be cut by 60 percent or better over the next half-century to avert the worst consequences of global warming.

Researchers at M.I.T. estimate that it will cost $70 billion to build enough coal-to-liquid plants to replace 10 percent of American gasoline consumption. A similar investment in biofuels like cellulosic or sugar-based ethanol — which could yield substantial reductions in greenhouse gases — would seem a lot smarter.

Given the dimensions of our energy problems, new ideas must be explored. But it makes little sense to shackle the country now to a coal-based technology of such uncertain promise.

Russian Exports

2007-05-29T21:48:00.000-07:00

Russian exports from IEA OMR May 2007 - page 25

Chavez Threatens Second TV Shutdown

2007-05-29T16:43:00.000-07:00

Chavez Threatens Second TV Shutdown as Protests Mount
By Guillermo Parra-Bernal and Alex Kennedy
May 29 (Bloomberg)

Chavez said he had ``no fear'' of criticism he might face for closing Globovision, a 24-hour news channel that he accused of trying to instigate his assassination. The threat follows the May 27 shutdown of Radio Caracas Television, Venezuela's most- watched TV network.
Venezuelan President Hugo Chavez threatened to shut down the country's last opposition television station as students took to the streets for a third day, protesting what they say is a crackdown on free speech.

``They're trying to light the streets on fire and justify violence,'' Chavez said in a speech to supporters televised from Vargas state. ``I call on the people in the slums to be alert to defend the revolution.''

The three days of disorder in Caracas and other major cities marks the longest stretch of anti-Chavez demonstrations since March 2004, when opposition-led protests demanding a recall referendum left nine dead. Clashes across Venezuela between the police and marchers injured at least 40 yesterday, Globovision reported.

The yield on the 2019 government bond, known as TICC, jumped 4 basis points to 4.86 percent, the highest since March 26, according to Econoinvest Casa de Bolsa CA prices. The price dropped 0.4 to 103.50 cents on the dollar at 5 p.m. New York time.

The cost of buying protection on $10 million of Venezuela's bonds for five years had its biggest jump since Jan. 9, surging 17 percent to $198,000, according Credit Market Analysis. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on the ability of countries or companies to repay debt. An increase in price suggests deterioration in credit quality.

University students gathered in eastern Caracas while Chavez supporters rallied downtown to support the government's refusal to renew the license of RCTV, as the country's oldest broadcaster was known.

Communications and Information Minister William Lara added pressure on non-state television outlets yesterday, asking for an attorney-general's probe of Globovision Tele CA and Time Warner Inc.'s Cable Network News for allegedly inciting violence. Globovision, founded in 1994, is owned by an investor group called Corporacion GV Inversiones CA.

RCTV, which had a national distribution, and Globovision, available only in Caracas and Carabobo state, were the only prominent stations critical of the government. xxx Coup xxx In an interview yesterday, Globovision General Manager Alberto Federico Ravell called the accusations ``ridiculous.''

``Chavez has just gone too far this time,'' Ruben Briceno, 22, a Central University of Venezuela student majoring in social work, said in an interview. ``First it was the shutdown of Radio Caracas. What will come next?''

Chavez said today the students are being manipulated by people he didn't cite. National Assembly Vice President Roberto Hernandez said the protests are organized by opposition parties seeking to overthrow Chavez.

``They will not succeed in weakening this government,'' Hernandez told reporters in Caracas Interior and Justice Minister Pedro Carreno said state intelligence and police services were prepared to quell any effort to destabilize the county.

In the days leading up to the RCTV shutdown, Chavez said the company's executives had used the network to help incite a coup that ousted him from office for two days in 2002. While RCTV covered his ouster without interruption, it failed to report his government's return to power and ran cartoon shows.

During the coup and strike, the four biggest private stations -- RCTV, Venevision, Televen and Globovision -- ran commercials calling for Chavez to resign, said Daniel Hellinger a professor of political science at Webster University in St. Louis and author of several books about Chavez. ``They say I'm a tyrant,'' Chavez said today. ``Who accuses me? Serpents.''

Globovision television station showed students putting up barricades on the streets of El Junquito, a town about 20 kilometers (12 miles) east of Caracas. Another group blocked traffic for a time on the Prados del Este highway in Caracas, creating logjams, it said.
Groups of RCTV supporters held a demonstration in front of the Organization of American States' local offices. The police deployed 4,000 officers to protect the surroundings of the OAS offices.

RCTV's shutdown, coupled with the probes of CNN and Globovision, will intensify international scrutiny of free speech in Venezuela, Miguel Henrique Otero, editor-president of Caracas-based El Nacional, the nation's second-most read newspaper, said in an interview yesterday.

``Press relations with governments with authoritarian inclinations are always difficult,'' said Paul Knox, chair of school of journalism at Ryerson University in Toronto. ``At this point, it's fair to say that the Chavez government has an authoritarian inclination.''

Saudi sees no need for raising production

2007-05-28T19:55:00.000-07:00

Saudi Arabia sees no need for raising crude oil production
05.28.07
RIYADH (Thomson Financial)

The surge in oil prices is being driven by political factors and there is no need for additional crude supplies, Saudi Arabia's assistant oil minister said on Monday.
'What brings prices up is politics, what brings them down is politics,' Prince Abdul Aziz bin Salman bin Abdul Aziz told Agence France-Presse, referring to tensions in major crude producers Nigeria, Iraq, Iran and Venezuela.
'We have a well-supplied market,' he said on the sidelines of a European-Gulf forum today. 'We have always said, and OPEC has always committed itself to keep the market well-supplied and balanced. Never has this market been more balanced with crude than today,' said Prince Abdul Aziz, who is assistant oil minister for petroleum affairs.
He said that while there was no need for additional crude supplies, there is a problem with refining capacity. He was referring to what Saudi officials say is a need to invest in expanding refining capacity in consumer countries.
OPEC kingpin Saudi Arabia was sticking to its output quota of 8.5 mbpd, he said.

Asia Oil-Product Tanker Rates

2007-05-28T19:41:00.000-07:00

Asia Oil-Product Tanker Rates Trade Near 4-Month High on Korea
By Will Kennedy
May 28 (Bloomberg)

The cost of shipping gasoline and other clean petroleum products in Asia remained close to a four-month high as South Korean exports boost demand.
Rates to carry 30,000 tons of fuel on the benchmark route from Singapore to Japan have gained 49 percent to Worldscale 253.64 from March 11, when they were at the lowest this year, according to London's Baltic Exchange. Rates reached Worldscale 257.27 on May 17, the highest since Jan. 16.
Exports from refineries in South Korea to other Asian countries and across the Pacific to the U.S. have increased demand for tankers. Gasoline imports into the U.S. West Coast have averaged 96,000 barrels a day this year, more than double the amount in the year-earlier period. South Korea's plants can produce gasoline to meet California's strict emissions rules.
``Singapore has also seen a very stable week with 30,000 tons Singapore-Japan remaining at Worldscale 250-255 levels with little sign of change at the moment,'' London-based shipbroker E.A. Gibson Ltd. said in a May 25 note to clients. ``Korean back-haul cargoes have remained busy and continue to improve owners' returns in the Far East.''
The tanker Siteam Leopard was hired last week to load 30,000 tons of fuel in South Korea on May 27 and ship it to the U.S. West Coast, according to data compiled by Bloomberg. The company hiring the ship or the rate wasn't given.
Three more tankers are scheduled to load 30,000-ton fuel cargoes each in South Korea this week bound for other Asian countries, Bloomberg data shows. These are called back-haul cargoes because they run against the normal pattern of trade from Singapore to Northeast Asia.

I've moved Oil Tanker coverage to a new address:

http://oiltankers.blogspot.com

Oil Execs see trend of declining reserves

2007-05-25T20:37:00.000-07:00

60 percent of oil and gas execs believe trend of declining reserves is irreversible
May 11, 2007
PRNewswire

Oil and Gas Executives say government involvement in supporting the development of renewable energy sources is necessary to alleviate the problem of declining oil reserves, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm.
In the KPMG survey, which polled 553 financial executives from oil and gas companies in April 2007, twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable sources sector and a further 44 percent said that at least 50 percent of funding should be allocated in the same way. These feelings stem from the overwhelming majority, or 82 percent, citing declining oil reserves as a concern.
"These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening," said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. "They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed."
While oil and gas executives are keen to see renewable energy sources becoming a mass produced reality, 60 percent say that will not be possible by 2010. Of those that believe it will, 18 percent say ethanol is the most viable for mass production by then, 13 percent say biodiesel and only 3 percent say cellulosic ethanol.
Sixty percent of the executives believe that the trend of declining oil reserves is irreversible. And, when asked about the impact of emerging markets, such as China, will have on declining oil reserves, almost 70 percent of the executives said that it would lead the situation to worsen.
The executives also clearly see that there are steps that individuals can take to alleviate the issue of declining oil reserves.
"One-third of oil and gas executives questioned said that the next time they are purchasing a family car they would consider one that consumes less gasoline, such as a hybrid," said Kimble. "They clearly see demand-side as part of the solution to declining oil reserves."
When executives were asked about their upstream capital spending in the 2006 survey, the majority indicated that investment will be a factor in helping them manage declining oil reserves. Sixty-nine percent said that it would increase by more than 10 percent, a jump of 49 percent over 2005. The 2007 survey suggests that increases in spending are flattening, with 35 percent saying they expect and increase of more than 10 percent, 19 percent saying they expect an increase of up to ten percent, and 38 percent say it will stay the same. Only seven percent expect to see a decrease.
Mergers and acquisitions continue to be a trend, with 24 percent of the executives saying that they expect their company to be involved in one in the next year - a three percent increase over last year's survey. Sixty eight percent of respondents expect private equity to play a larger role over the next year than it has in previous years.
As financial executives, the respondents put a great deal of their focus on the risks facing their companies. Forty-four percent say that the biggest risk facing their company at this time is financial; such as satisfying news regulatory requirements and shareholder demands. The next biggest risks cited, at nine percent each, were "political unrest in certain countries in which your company has operations" and "insufficient access to drilling rigs".

Gasoline $3.20

2007-05-25T20:07:00.000-07:00

Some of these latest pieces on Gasoline are getting a little bit dicey. Both Thursday and Friday all network evening newscasts had major stories on the "Pain at the Pump. I'm guessing about the third each night. But it's a reasonable assumption. My DVR only records two channels. So it was ABC and CBS with Katie Couric one night, and ABC and NBC in HD the next. The Big Number was $4.38. I forget which broadcast carried that theory. Anyway, Gasoline is all the rage now. So here's a sampling of what the "experts" are saying.

Stuart Staniford says

So then the question is whether 2mbpd in missing Saudi oil production is enough to account for the $0.70 increase that can reasonably be attributed to crude, rather than refinery tightness. Well, that's a $0.70/$1.90 ~ 35% increase. Given a gasoline price elasticity of -0.05 during the period of interest, it would only take a 35/20 = 1.75% reduction in global gasoline supplies to do the job. Since the missing Saudi production is 2/84 = 2.4% of oil supply, it would appear that, had this not happened, we would have had little or none of the 35% crude-based increase in gasoline prices since 2004.

James D. Hamilton discusses the problems involved in constructing the first new US refinery since 1976 in Arizona.

What if we'd had this refinery's planned 85,000 barrels/day of gasoline online right now? That would represent a little less than 1% of total U.S. demand. In an environment like the present in which refining capacity may be the determining factor driving retail prices at the margin, with a short-run demand elasticity of 1/3, a 1% increase in quantity supplied would translate into a 3% reduction in price, or 9 cents per gallon using the current U.S. average retail price of $3.16 a gallon.

Admittedly, that calculation is a bit misleading, because it ignores the potential significant smoothing of price fluctuations that should come from adjustment of inventories and imports. But it does highlight the fact that, when those adjustments are working imperfectly (as they appear to be at the moment), even one more refinery could make a lot of difference.

Tom Whipple is concerned

The next important point about gasoline stockpiles is that not all of it is useable. As gasoline is largely delivered by pipeline, barge and coastal tankers these days, a lot of gasoline is tied up in transit. Thus the amount of gasoline “trapped” in transport is substantial. This“trapped” gasoline is known as the “minimum operating level.” [...]
If stockpiles – on either coast – drop much more, we are going to find out, the hard way, exactly where the minimal operating level is, for that will be the day the shortages develop. [...]
Total US gasoline inventory increased by 1.5 million barrels last week to 196.7 million barrels, still well below normal and still a cause for concern given the increased demand and the proximity of the summer driving season.[...]
There is still a good possibility of trouble ahead; last week’s stockpile increase certainly was not enough to prepare us for a Gulf hurricane, or any other kind of major disruption, but it may be enough to get us through the first part of the summer driving season without shortages. These issues are how much we continue to consume and whether imports will stay high. We will know shortly. The distribution of the US stockpiles is still not good with the Midwest and East Coast being the most vulnerable to shortages.[...]
Large US imports of gasoline, mainly from Europe, are starting to raise questions. Last weekend gasoline in Germany went over $7 per gallon and analysts are talking about the possibility of $8 gasoline later this summer. The Europeans note that the US is now importing roughly 1 out of every 8 gallons of gasoline consumed and that there is no end to this imbalance in sight. Some Europeans are beginning to ask whether their governments should be taking action to slow the exports to the US.[...]

Tom Kloza says.

I’m still holding to my prediction that we’ll see some moderation or perhaps a “giveback” in retail prices between now and the July 4th holiday. Most of the drops should occur in markets that have the most excessive prices - Oregon, Washington, the Rockies, Great Plains, and Great Lakes states. But once the Weather Channel starts showing those “cones” that indicate the probability of storm paths, we’ll bounce higher on the fear that comes with Hurricane season.

On Politics - Romney

2007-05-24T14:15:00.000-07:00

Funniest Political Piece of the Week goes to Bruce Reed's

"They All Look Alike" on Slate

http://www.slate.com/id/2166674?nav=tap3

Foreign Affairs on Ethanol

2007-05-24T01:26:00.000-07:00

http://www.foreignaffairs.org/20070501faessay86305/c-ford-runge-benjamin-senauer/how-biofuels-could-starve-the-poor.html

The Iowa Imperative: Ethanol

2007-05-24T00:15:00.000-07:00

The Iowa Imperative: Ethanol
By Robert Bryce
March 6, 2007
Energy Tribune

When looking for a root cause of the ongoing ethanol scam, look no further than Iowa. Indeed, the dearth of rationality in America’s choice of motor fuels can be blamed on a single fact: the Iowa Caucus is the first presidential primary. That accident of the calendar has led to some of the most egregious examples of flip-flopping, pandering, and groupthink in modern American political history. The Iowa imperative has also allowed the U.S. to continue tariff policies that are blatantly protectionist and anti-consumer. The ethanol madness now underway is largely due to the economic needs of a state with less than 1 percent of the U.S. population – or to be more precise, the economic desires of a tiny subgroup of that 1 percent: Iowa’s corn farmers and ethanol producers.

There’s plenty of evidence of the way the ethanol lobby made Iowa the make-or-break state for presidential contenders. Back in the 1990s, former New Jersey senator Bill Bradley was a leading critic of ethanol, saying the ethanol subsidy meant higher gasoline prices for his New Jersey constituents. But once Bradley began eyeing the White House, he became an ethanol convert. Thus in 1999 and 2000, he campaigned in Iowa claiming he had changed his mind on ethanol, stating that the U.S. had to “help our family farmers get a bigger chunk of the food dollar.” During the 2000 presidential race, every candidate who campaigned in Iowa supported the ethanol subsidy. The only candidate opposing it: Republican John McCain, who refused to campaign in Iowa.

During the 2000 race, the campaign coverage made much of the ethanol issue, with several newspapers taking a dim view of it. The San Diego Union-Tribune, in a January 2000 editorial, wrote that there was “simply no justification” for the continued ethanol subsidies. Esquire magazine lauded Bradley’s opposition to ethanol prior to the Iowa causes, calling the subsidies a “preposterous boondoggle.”As the primaries ended, the late, great Texas columnist Molly Ivins declared the ethanol subsidy was “a useless piece of junk” and a “total failure.”

But now eight years later, with energy independence as key buzzwords in Washington, ethanol subsidies are alive and well, the media is largely prostrate, and old opponents of the corn-based fuel are flip-flopping like a fish on a hook. Why? The numbers explain it: Iowa produces about one-third of all of the ethanol in the U.S. Since 2002, the amount of Iowa corn going into ethanol production has tripled. The state has 21 producing ethanol plants and another 23 plants are planned or under construction. About 2,500 jobs in Iowa are directly related to ethanol production and another 14,000 have jobs – according to IowaCorn.org – that are “affected” by ethanol.

For John McCain, it appears that genuflecting before Iowa’s ethanol interests is now more important than sticking to his long-held belief that ethanol is a bad deal for taxpayers. Back in 2002, the Republican senator from Arizona declared that ethanol is a “giveaway to special interests in corn-growing states at the expense of the rest of the country.” In 2003, McCain declared that ethanol wouldn’t exist if Congress hadn’t “[created] an artificial market for it.” He also said it “does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality.” In 2005, McCain voted against the big energy bill that passed Congress because its ethanol mandates would “result in higher gasoline costs for states, like Arizona, that do not have an abundant in-state supply” of ethanol.

That was the old McCain. The new McCain, who has his eyes on the Oval Office, loves the stuff. In August 2006 during a speech in Grinnell, Iowa, he said ethanol is “a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects.”

The same flipping and flopping is afflicting Hillary Clinton, who as senator from New York voted against ethanol some 17 times. In 2002, she signed a letter saying that the ethanol subsidies were “equivalent to a new tax” on gasoline and that there is “no sound public policy reason for mandating the use of ethanol.” But in January, during a visit to Des Moines, Clinton said that the U.S. needs to work on “limiting our dependence on foreign oil. And we have a perfect example right here in Iowa about how it can work with all of the ethanol that’s being produced here.”

Then there are the protectionists, a group that includes another presidential contender, Barack Obama. Last year the Democrat from Illinois, along with four other farm-state senators, sent a letter to President Bush asking him to ignore calls to reduce tariffs on Brazilian sugarcane-based ethanol. Lowering the tariff, they said, would make the U.S. dependent on foreign ethanol. “Our focus must be on building energy security through domestically produced renewable fuels,” they wrote. Perhaps it’s just a coincidence, but during his first year in office, Obama twice used corporate jets belonging to agribusiness giant ADM, the world’s biggest producer of corn-based ethanol.

Many of the neoconservatives who pushed for the war in Iraq and are now pushing for the U.S. to decrease its imports of foreign oil, are trying to get the import tariffs on ethanol removed. In January, one of that group’s leaders, Ariel Cohen, a prominent neocon who works at the Heritage Foundation, lauded Bush’s State of the Union speech, in which he laid out a plan to reduce American gasoline consumption. Cohen claims that imported oil is a “dire geopolitical threat.” But he complained that Bush’s proposals do not “address the need to bring into the U.S. the most competitive ethanol, sugar-cane ethanol, which is now penalized with punitive tariffs.”

Those tariffs are going to stay in place for one simple reason: they protect the Iowa ethanol business. That point was made clear by Iowa Senator Charles Grassley, a Republican, shortly after Bush’s speech. “Lifting the ethanol tariff would undermine faith in the domestic renewable fuels industry,” Grassley declared. “We need to continue the current supportive policies of the domestic industry….Lifting the tariff would only undercut our domestic efforts, virtually eliminate any chance of developing ethanol from other sources, and potentially leave us dependent on foreign sources for our ethanol.”

Thus, for Iowans like Grassley, and for the leading candidates for the White House, foreign oil is bad. But foreign ethanol is even worse. And that worldview is going to get a lot of play between now and January 18 – the date of the Iowa Caucus.

http://www.energytribune.com/articles.cfm?aid=404

Aframax Tanker Rates From Indonesia

2007-05-23T23:19:00.000-07:00

Aframax Tanker Rates From Indonesia May Rise on Utility Demand
By Christian Schmollinger
May 23 (Bloomberg)

The cost of shipping 80,000 tons of crude oil from Indonesia to Japan may increase on demand from power utilities.
The rate for so-called Aframax tankers sailing from Indonesia to Japan remained at Worldscale 147.5 for a tenth day, according to data compiled by Bloomberg. That pegs the cost of shipping a barrel of oil on the route at $1.73.
Charters are hiring more ships to transport Duri crude from Indonesia to Japan, where utilities burn the oil in their power plants, ship broker Kats Nishikawa said. South Korean demand for the grade for refining into low-sulfur fuel oil has grown on power demand, PVM Oil Associates Ltd. said in a report today.
``The market is firming up some,'' Nishikawa, general manager with Tokyo-based ship broker Matsui & Co. said in an interview yesterday. ``Especially for early June, you're seeing a lot of cargoes going from Indonesia to Japan and Korea.''
SK Corp., South Korea's biggest refiner, hired the KWK Esteem for June 4 to travel from Senipah port in Indonesia to Ulsan at Worldscale 148.5, said a report today from brokers Seatown Shipbroking Ltd.
GS Caltex Corp. and Hyundai Oilbank Ltd. hired Aframax tankers to sail from Dumai in Indonesia to South Korea at rates between Worldscale 149 and 150, said Seatown.
Kuwait to Singapore
The rate for so-called Aframax tankers to Singapore from Kuwait was unchanged at Worldscale 139.42, according to the London-based Baltic Exchange. The cost of shipping on the route has fallen 5.5 percent since May 14.
Inventories of fuel oil in Singapore have surged to 15.2 million barrels, a six-month high, in the week ending May 16, according to government data. Imports of the product to Asia from the Middle East, called arbitrage shipments, have fallen as buyer demand has declined.
Shipping cost of gasoline and other clean petroleum products to Asia gained, according to the Baltic Exchange.
Shipping costs for 55,000 tons of products on the route to Japan from the Middle East rose to Worldscale 200 from 199.15, the highest in four months.
The rate to carry 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan rose to Worldscale 139.17 from 138.13, the third straight day of gains, according to the Baltic Exchange.
The cost to ship 30,000 tons of oil products from Singapore to Japan remained at Worldscale 256.25, unchanged from the day before.

Asian Fuel-Tanker Rates Rise a 9th Day

2007-05-17T13:15:00.000-07:00

Asian Fuel-Tanker Rates Rise a Ninth Day on Ship Supply Squeeze
By Katherine Espina
May 17 (Bloomberg)

The cost of hiring tankers to ship 30,000 tons of gasoline, diesel and other so-called clean petroleum products on Asian routes rose for a ninth day because of a lack of vessels.

Rates to transport a 30,000 metric-ton cargo on the benchmark route from Singapore to Japan climbed 2.2 percent to Worldscale 257.08 yesterday, the highest in four months, the London-based Baltic Exchange said. Shipping a gallon of fuel on the route costs 7 cents, according to calculations based on Bloomberg data.

``There still seems some upwards potential for the MR class with the market getting tighter,'' said Norway-based shipbroker Lorentzen & Stemoco AS in its latest report. So-called medium- range, or MR, tankers typically carry 30,000 ton cargoes.

Rates on the Singapore to Japan route have surged 20 percent in the last nine days as the number of cargoes for shipment gained after the end of holidays in China and Japan earlier this month. A series of ships hired to carry fuel from Asia to the U.S. has added to the shortage of vessels.

Tesoro Corp., the second-largest refinery in the U.S. West, has hired a vessel to move 30,000 tons of clean oil products on June 5 to the U.S. West Coast from South Korea for $1.44 million, Trade Sea Shipbroking Pte Ltd. in Singapore said in its market report today. No details were available on the ship and fuel.

Rates to ship 55,000 tons of oil products to Japan from the Middle East rose 1.7 percent to Worldscale 197.31, the ninth day of gains, according to the Baltic Exchange.

Japan Bound

The cost of shipping 75,000 tons of clean petroleum products to Japan from the Middle East fell for a second day, losing 0.8 percent to Worldscale 138.33.

The cost to hire a tanker to move 80,000 tons of oil to Singapore from Kuwait fell 3.5 percent to Worldscale 142.88 yesterday. The rate of hiring the same type of vessel to Japan from Indonesia was unchanged for a fifth day at Worldscale 140, according to Bloomberg data.

I've moved Oil Tanker coverage to a new address:

http://oiltankers.blogspot.com/

Asian Tanker Rates Set for 4th Week of Gains

2007-05-16T20:25:00.000-07:00

Asian Oil Product Tanker Rates Set for Fourth Week of Gains
By Katherine Espina
May 11 (Bloomberg)

The cost of hiring tankers to ship gasoline, diesel and other so-called clean petroleum products on Asian routes is set for a fourth weekly gain as demand for ships in the Atlantic draws vessels away from the Far East.
This week, four fixtures were made to ship a total of 148,000 tons of oil products to the U.S. Atlantic Coast from Europe, according to Bloomberg data. Exports have increased this year as U.S. gasoline demand outstripped supply. Gasoline supplies in the week ended May 4 were 8 percent below the five- year average, the U.S. Energy Department said yesterday.
Rates to transport a 30,000 metric ton cargo on the benchmark route from Singapore to Japan rose a fifth day, gaining 3.3 percent to Worldscale 235.83 yesterday, the London-based Baltic Exchange said. Shipping a gallon of fuel on the route costs 6 cents, according to calculations based on data compiled by Bloomberg.
Itochu Corp., Japan's fourth-largest trading company, hired an oil-products tanker to ship 30,000 tons of fuel to Korea and Japan from Mumbai on May 21, Singapore-based Trade Sea Shipbroking Pte Ltd. sad in its daily market report today.
The Singapore broker didn't say how much was paid to hire the Da Qing 451. The double-hull vessel was built by Dalian Shipyard Co. Ltd. in 2001.
Itochu also hired a tanker to carry 30,000 tons of oil products from South Korea to Subic Bay in the northern Philippines at end of the month, a report by shipbroker Odin Marine Inc.(Singapore) Pte said.
The double-hulled Pacific Serenity, built in 2003, is currently sailing to the Port of Hazira in India from off the shores of Singapore.
Rates to ship 55,000 tons of oil products to Japan from the Middle East rose 2.2 percent to Worldscale 188.46, the fifth day in a row that it's gained, according to the Baltic Exchange.
The cost of shipping 75,000 tons of clean petroleum products to Japan from the Middle East climbed 2 percent to Worldscale 137.92.

I've moved Oil Tanker coverage to a new address:

http://oiltankers.blogspot.com/

Supertanker Prices May Stay Near Record

2007-05-14T07:27:00.000-07:00

By Katherine Espina
May 14 (Bloomberg)

The price of supertankers able to ship 2 million barrels of oil may stay near records because of demand for vessels, shipbroker Poten & Partners said.

The demand for shipyard slots to build very large crude carriers hasn't slipped as prices have risen to more than $130 million, the New York-based shipbroker said in a May 11 report. The rate to hire a tanker on the benchmark route from the Persian Gulf to Japan has gained 67 percent this year.

``With charter rates firm and continued demand for ships strong it is likely that asset prices will be high for quite some time,'' said Poten & Partners. ``Any softening in freight rates may slow the momentum of orders, but will likely have little effect on the asset prices in the near term.''

Prices have risen to records as ship owners compete for space at yards. Record earnings for bulk carriers that ship coal, iron ore and other commodities has increased investment in that sector, taking potential berths for tanker building.

Ships equal to 30 percent of the current fleet of 490 VLCCs are on order, according to Poten & Partners.
I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

Intrade Airstrike-Iran Options (Update 1)

2007-05-05T10:12:00.000-07:00

Airstrike.Iran.Jun07 : $5.00
Airstrike.Iran.Sep07 : $9.60
Airstrike.Iran.Dec07 : $17.00

Average : $10.50, down from $22.00 on March 29th.

Selling all 10 Jun07 options, 0 left.
Buying 30 more Sep07 options, 40 total.
Buying 20 more Dec07 options, 30 total.

Account value: $894 in options, $3762 in cash = $4656(-7%)

Record Gasoline Price

2007-04-29T23:02:00.000-07:00

I'll be the first to report this (before it happens).

Gasoline for May delivery was at $2.3709 a gallon in after- hours trading after surging 3.1 percent to $2.3613 on April 27. The contract expires today. The more actively traded June contract was at $2.2671 a gallon today. -Bloomberg

Another ten cents and we should have a record for May, if we don't already.

King Abdullah of Saudi Arabia

2007-04-29T01:38:00.000-07:00

From the NYT

The cause of the latest friction in the American-Saudi relationship began in 2003, before the invasion of Iraq. The Saudis agreed with the Bush view of Saddam Hussein as a threat, but voiced concern about post-invasion contingencies and the fate of the Sunni minority. When it became clear that the administration was committed to invading Iraq, Prince Bandar took a lead role in negotiations between the Bush administration and Saudi officials over securing bases and staging grounds.

But Saudi frustration has mounted over the past four years, as the situation in Iraq has deteriorated. King Abdullah was angry that the Bush administration ignored his advice against de-Baathification and the disbanding of the Iraqi military. He became more frustrated as America’s image in the Muslim world deteriorated, because Saudi Arabia is viewed as a close American ally.

A Saudi Prince Tied to Bush Is Sounding Off-Key

2007-04-29T01:35:00.000-07:00

From the New York Times

Tensions between King Abdullah and top Bush officials escalated further when Mr. Bush announced a new energy initiative to reduce the nation’s dependence on foreign oil during his 2006 State of the Union address, and announced new initiatives in that direction this year.

Bandar Bush

2007-04-29T01:34:00.000-07:00

IEA Tanker Rates March OMR

2007-04-28T22:56:00.000-07:00

From the April 2007 Oil Market Report

Million-barrel crude tanker rates in the Mediterranean hit 15-month peaks at the end of March following a strike at Fos, a key European oil import hub in France. Regional vessel availability was reduced sharply as almost 40 tankers were left stranded offshore, unable to discharge their cargo. In the Middle East Gulf, increased vessel demand pushed VLCC rates towards six-month highs in late March, as US refiners sought transportation for crude to arrive ahead of peak summer demand. Clean product tanker rates in the Atlantic rose to the top of five-year ranges in March, supported by strongregional competition for vessels.xxx

On 14 March, port workers at Fos began a strike which lasted 17 days. This left almost 40 tankers stranded, unable to discharge oil into the Marseille refining complex or into pipelines which feed inland refineries and other European countries. The consequent erosion of regional vessel availability pushed cross-Med Suezmax rates up from under $4/tonne to almost $11/tonne on 31 March when the strike finished, a 15-month high. Slim vessel supply also raised West African Suezmax rates from under $10/tonne to nearly $18/tonne over the same period, for trades to the US Gulf. North Sea Suezmax rates were not significantly affected and remained at seasonal norms of $9/tonne for exports to the US Atlantic coast. Aframax rates in the Mediterranean were also boosted substantially by the strike but fell sharply, alongside other regional rates, at the start of April, as the action ended and vessels were offloaded. xxx

Competition for tankers in the Middle East Gulf tightened vessel supply considerably in March, boosting VLCC charter rates. US refiners actively sought transportation to move crude for arrival after the maintenance season, as peak summer demand approaches. Further competition for vessels for late March and first half April loading came from Eastern refiners, notably Korean, despiteapproaching refinery turnarounds. VLCC rates to Japan rose from around $10/tonne to almost $15/tonne in the first three weeks of March. Corresponding rates to the US Gulf rose from $16/tonne to over $24/tonne during the same period. Middle East Gulf Suezmax rates were also supported in March as thin vessel availability prompted charterers to consider splitting cargoes on to smaller vessels. Tanker movement reports confirmed that, as chartering activity implied, Middle East sailings increased in late March and April. East- and westbound VLCC rates eased at the end of the month as vessel supply increased. xxx

US refinery maintenance reduced demand for short-haul crude imports, causing dirty Aframax rates in the Caribbean to sink from $14/tonne to $10/tonne in March, continuing the downward trend seen in February. Conversely, the need for product imports was one factor which supported clean rates to the US from the Caribbean and North Europe. Charter rates for 33,000-tonne clean vessels on the latter route rose from $24/tonne to $28/tonne in March. Although US gasoline imports were actually no higher than average seasonal levels, Atlantic Basin clean rates were supported by continued competition for European gasoline from West African refiners. East of Suez clean tanker rates were flat or slightly weaker, despite firm Asian naphtha demand. Maintenance at certain Middle East Gulf product export terminals reduced available cargoes. xxx

I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

ASPO-USA

2007-04-28T22:46:00.000-07:00

http://aspo-usa.com/

Energy Briefs

OPEC softened its policy to withhold oil from the market last week, saying it would supply more if necessary. President al-Hamli reiterated: ”Oil supply is adequate. The market is well-supplied.” But he added: ”We are ready to supply more if the market needs more.”

Kuwait may abandon plans to build a new oil refinery if a second round of bidding fails to cut high costs. The state has earmarked $6.3bn for the refinery, but international companies have estimated the cost in their bids at $15bn.

Saudi Aramco said a shortage of refining capacity to process so-called heavy-sour crudes will persist because of rising construction costs.

IEA Tanker Rates

2007-04-24T20:48:00.000-07:00

From IEA Oil Market report February 2007

Freight rates for large tankers from the Middle East Gulf plunged to nominal three-year lows in mid-January before rising later in the month. Colder temperatures supported spot vessel demand in the Atlantic basin, boosting dirty rates in the second half of January. Comfortable Asian product stocks continued to undermine clean product tanker rates for east of Suez trading in January.

From IEA Oil Market report January 2007

Freight rates for VLCCs, the two million-barrel crude carriers, continue to be undermined by OPEC output cuts and mild winter temperatures in consumer regions. In contrast, typical seasonal delays in the Turkish Straits in mid-December caused shipping rates for medium-sized crude cargoes to spike in the Mediterranean and further afield. Clean product shipping costs firmed in December, boosted by higher demand for product imports in Asia and sustained above-average gasoline imports into the US.
yyy

Reduced OPEC exports continue to weigh on VLCC rates from the Middle East Gulf. Eastbound
vessel demand was dented on 11 December when Saudi Arabia notified certain Asian customers that crude cargoes would be reduced by 8-9% below term-contract volumes in January. Japan-bound VLCC rates remained around $9/tonne in December, approximately half the December 2005 average. Reports of deeper Saudi cuts to Asian cargoes in February add downside risk to eastbound rates.
yyy

Tanker movement reports suggested that there was a slight increase in crude moving to Western markets towards the end of December. Nevertheless, rates have faced downward pressure from reduced demand following mild temperatures and lower oil-on-water. VLCC rates for ships heading for the US Gulf were down to $14/tonne at end-2006, dramatically lower than the end-2005 value of $25/tonne.
yyy

Mediterranean Aframax rates more than doubled in mid-December as transit delays through the Turkish Straits stretched regional vessel availability. Delays of six to seven days in both directions during a busy trading period pushed Black Sea to Mediterranean Aframax rates (for approx. 600 kb cargoes) from $10/tonne on 8 December to over $22/tonne on 15 December. Increased Balticexport activity in December added further constraints to the Aframax fleet. The sentiment of vessel tightness spread across the Atlantic to the Caribbean and worsened when fog also caused mid-December closures to major shipping channels feeding US Gulf refineries. Caribbean to US GulfAframax rates gained over $5/tonne to top $15/tonne mid-month. Demand for million-barrelSuezmaxes in the Mediterranean and West Africa was also boosted by the reductions to Aframax supply. West Africa to US Atlantic Coast Suezmax rates rose from under $13/tonne to almost $20/tonne in the middle of December. However, as delays cleared towards end-year, most Aframax and Suezmax routes lost the majority of their mid-month gains, returning to unseasonably low levels.
yyy

Clean tanker rates returned to usual winter levels in December after an unseasonably weak November. Most notably, Asian rates rose as winter product trade supported regional vessel demand. Naphtha trade from the Middle East Gulf to Japan was boosted by Asian petrochemical plants restarting after maintenance and the diversion of competing Indian naphtha exports to domestic fertiliser production. 75,000-tonne rates for this trade rose from $21.50/tonne at the start of December to $32/tonne in early January. In the west, US demand for gasoline imports remained firm in December as low stocks kept upward pressure on transatlantic clean rates. Clean rates corrected downwards in January, especially in Europe, following the build-up of a surplus of tonnage available for charter.

From IEA Oil Market report December 2006

Reduced OPEC exports prompted further counter-seasonal declines in crude freight rates from the Middle East Gulf in November. VLCC spot charter rates to Japan are now at a quarter of last year’s rates and corresponding front-quarter freight futures recently hit a four-year low. In a depressed dirty sector, only Suezmax rates in the Atlantic basin showed any firmness, temporarily buoyed by protracted US refinery maintenance which boosted demand for vessels to import light, sweet crudes. Clean tanker rates lost ground in November until some Asian product trade activity spurred an endmonth rebound.

yyy

A November slump in Middle East Gulf crude rates suggested slackening export activity as OPEC supply cuts took effect. Tanker movements reports confirmed this, showing steep declines in sailings from the region in November and significantly reduced volumes of oil in transit. The resultant surplus of vessels for hire in the region dragged November VLCC rates to Japan down by $2/tonne to finish around $8/tonne. Corresponding rates to the US Gulf lost slightly less than $2/tonne and ended the month around $16/tonne.

yyy

Declining VLCC rates in November are unusual. Even ignoring the exceptional fourth quarters in
2004 and 2005, dirty shipping rates normally rise as refiners build crude stocks ahead of winter. This year, busy summer flows left third-quarter OECD crude stocks high, which has helped undermine crude vessel demand in the fourth quarter. Nonetheless, OECD product stocks dropped to seasonal levels in October and preliminary November data showed further draws in the US. A cold snap in consumer regions would not only push refiners to raise utilisation rates but would also increase competition for spot crude cargoes. This could have trade implications which support crude freight rates especially if long-haul arbitrage windows are forced open.

yyy

A slow restart after US refinery maintenance lent some late-November support to dirty freight rates in the Atlantic basin. Upgrading units were particularly slow to return, boosting interest in
transportation for million-barrel cargoes of distillate-rich Atlantic crudes. West Africa to US Atlantic Suezmax rates rose by $4/tonne in the second half of November to $14/tonne but lost most of thesegains in early December. Caribbean Aframax rates weakened throughout November and briefly fell below $10/tonne in the first week of December after highs of over $14/tonne in October. Heavy maintenance to complex refinery units in the US Gulf deflated demand for transportation for low quality crude from Mexico and Venezuela. Mediterranean rates fared little better.

yyy

Clean tanker rates rebounded at the end of November after falling to multi-month lows in the first half of the month. Maintenance at exporting refineries and importing petrochemical plants had stemmed product flows in Asia, reducing clean tanker demand. Rising Indian naphtha exports have also diluted large product tanker rates from the Middle East by offering an alternative naphtha supply option but exporting in smaller product vessels. Transatlantic product trade was tempered by mild weather, despite heavy refinery maintenance. However, forecasts of colder US temperatures, a couple of trans-Pacific charters, diversions of Indian naphtha to the domestic power sector and draws in Japanese kerosene stocks all combined to prop up clean rates as November ended. Singapore to Japan rates for 30,000-tonne clean cargoes, which reached $24/tonne in August, hit a low of $11.50/tonne mid-November before rebounding back over $20/tonne at the start of December.

From IEA Oil Market report November 2006

From IEA Oil Market report October 2006

Persian Gulf Oil-Tanker Glut

2007-04-18T22:12:00.000-07:00

Persian Gulf Oil-Tanker Rates May Extend Decline on Vessel Glut
By Alaric Nightingale
April 18 (Bloomberg)

The cost of transporting 2-million barrel consignments of crude oil from Middle East ports on supertankers may extend a three-week decline because there are too many ships available for hire.
About 104 tankers can reach Persian Gulf ports by May 18, according to a report today from Paris-based shipbroker Barry Rogliano Salles. That's already enough to cover the entire month's demand, based on April shipments. More vessels will become available later in the month, increasing the glut.
``There is still plenty of tonnage,'' Nikos Varvaropoulos, an oil-tanker broker from Optima Shipbrokers in Athens, said in an e-mailed note.
Kuwait Petroleum Corp., the state-owned oil company, booked the tanker Smiti to ship crude to the U.S. yesterday at a 21 percent discount to London-based Baltic Exchange's benchmark rate. The owners of Smiti, India's Essar Shipping Ltd., didn't try to negotiate over the rate, Varvaropoulos said.
Haggling over rates can last several days when owners believe prices will rise or if they think there may be a shortage of ships competing to haul the cargo. After offering to lease its tanker at 60 Worldscale points, Essar accepted Kuwait Petroleum's counter-offer at 40 points without further bartering, Varvarpoulos said.
Asian refineries account for about 70 percent of demand for Middle East crude. Rates for tankers plowing that voyage slumped to 53.44 points yesterday, a drop of 46 percent since March 26. Rates to the U.S. have declined 39 percent to 46.92 points since March 27.
Asian Demand
At 53.44 Worldscale points, VLCCs, can earn about $28,026 a day on a 38-day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.
At 46.92 Worldscale points, VLCCs, can earn about $21,650 a day on a 64-day round trip from Saudi Arabia to the Louisiana Offshore Oil Port in the Gulf of Mexico, based the same formula.
Daily returns from voyages to the U.S. are normally lower because the journey-lengths are longer, meaning owners can guarantee employment for their ships for a longer period.
At those rates, Frontline Ltd., the world's biggest carrier by capacity, may be losing money. The shipping line said Feb. 27 that it needs $30,200 a day to break even on each of its VLCCs.
Ship-fuel prices at Fujairah in the United Arab Emirates fell $7 to $346.50 a ton on April 17, their highest price in eight months, according to Bloomberg data.
I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

Caribbean Oil-Tanker Rates Rise

2007-04-18T22:05:00.000-07:00

Caribbean Oil-Tanker Rates Rise on Short Supply, Bad Weather
By Todd Zeranski
April 18 (Bloomberg)

Rates to transport crude oil in the Caribbean basin rose on storms in the U.S. Gulf of Mexico and a shortage of ships to transport cargo slated for May delivery.
Five Aframax tankers, which can transport about 600,000 barrels of oil each, were hired today to the U.S. for a rate in the industry standard Worldscale measure of WS 183, according to a daily report from Lone Star, R.S. Platou in Houston.
That's an increase of 24 percent from the rate of WS 148 yesterday, according to data from Lone Star. The availability of ships to carry goods slated for May delivery is now ``scarce,'' driving up rates, according to a report from Fearnleys, an Oslo-based shipbroker.
WS 183 is equivalent to about $32,878 per day after expenses such as fuel and port fees, according to New York-based broker Poten & Partners. xxx
Three tankers were hired to move oil from the eastern coast of Mexico to the U.S. Gulf Coast by Citgo Petroleum Corp. and Royal Dutch Shell Plc.
Another was hired by Valero Energy Corp. to travel from the Dutch Antilles to the U.S. East Coast. Petroleo Brasileiro SA hired a tanker to transport crude between the Carribean and the U.S. Gulf Coast, according to the Lone Star report.
General Maritime Corp., the third-largest U.S. tanker owner, has a break-even rate of about $12,000 a day. The New York-based company operates many of its vessels in the Caribbean.
Overseas Shipholding Group and OMI Corp. are the largest U.S.-based oil-tanker owners.

Iraq Output Could Double To 4mbpd In 5 Yrs

2007-04-18T18:17:00.000-07:00

Iraq Oil Output Could Double To 4M Barrels A Day In 5 Yrs - IHS

by Lananh Nguyen
Apr 18, 2007
LONDONxxx

Iraq's oil production could double to 4 million barrels a day in the next five years if the security situation stabilizes in key producing regions, data provider IHS Inc. (IHS) said Wednesday. xxx
"There is a very straightforward path to improving production capacity (in Iraq)," said Ron Mobed, president and chief operating officer of IHS's energy segment. xxx
Mobed said that pipeline repairs, better reservoir management and infrastructure investment could allow the country to double its oil and gas output, unless violent conflict there escalates further. xxx
"As for the investment required, the Iraqi Ministry has estimated that it could take $20 (billion)-$25 billion depending on the level of repair and modernization needed to double current production levels," Ed Mattix, IHS vice president of corporate communications, said in an e-mailed statement. xxx
In its new study of Iraq's oil reserves, IHS estimated that the country has 116 billion barrels of proven and probable oil reserves, the third highest in the world. Iraq's western desert potentially held an additional 100 billion barrels of oil reserves, IHS added. xxx Aside from the political and security risks, investment in Iraqi oil was appealing due to the country's geology and its commercial terms, Mobed said. xxx
This year, the Iraqi government is expected to launch a bid round for 65 exploration blocks, and 78 fields are also to be offered for development, according to IHS. xxx
Mohammed Zine, IHS regional manager for the Middle East, said: "The cost to produce oil in some Iraq fields is less than $2 per barrel according to our estimates and investments involved in developing the fields are minimal." xxx
Prior to Iraq's war with Iran in 1980, the country had a production capacity of 3.6 million barrels of oil a day. It was 3.2 million barrels a day before the first Gulf War in 1990 and 2.7 million barrels per day before the start of the most recent conflict. xxx
© 2007 Dow Jones Newswires.

Asian Aframax Tanker Rates Drop

2007-04-17T23:14:00.000-07:00

By Katherine Espina
April 18 (Bloomberg)

The rate to ship 80,000 tons of crude oil on Asian routes fell for a second day as refinery maintenance work cut oil demand, increasing ship supply.
The cost of shipping crude oil on so-called Aframax tankers to Singapore from Kuwait fell 1.1 percent to Worldscale 167.12, according to the London-based Baltic Exchange.
``In Asia, with refinery maintenance upcoming, cargo demand tailed off,'' said U.K-based shipbroker Simpson Spence & Young Ltd. in its latest weekly tanker report.
Refiners Nippon Oil Corp. and Royal Dutch Shell Plc. are shutting down plants in Asia next month for scheduled maintenance work. In addition, Aframax rates may be tracking the recent fall in the Very Large Crude Carrier market brokers said. VLCCs can transport more than 2 million barrels of oil.
``For the VLCC market, rates last week continued to decline with an ample supply of double-hull tonnage available, few April cargoes left to fix and the market awaiting May cargo stems,'' according to the weekly report by Simpson Spence & Young, the world's largest closely held shipbroker. Refinery maintenance pushed Aframax rates for 80,000 tons of crude oil to Japan from Indonesia lower by 25 points to Worldscale 165, according to the shipbroker.

Teekay to Buy Tanker Owner OMI for $2 Billion

2007-04-17T22:53:00.000-07:00

By Matthew Leising
April 17 (Bloomberg)

Teekay Shipping Corp. and Denmark's D/S Torm A/S agreed to buy OMI Corp., the second-largest U.S. oil-tanker owner, for $1.98 billion to expand their fleets.
OMI shareholders will receive $29.25 in cash for each share, the companies said today in a statement. That's 5.4 percent above today's closing price for OMI. Teekay and Torm will split the cost of the acquisition, which is $2.2 billion including debt, the companies said.
Prices for new ships have skyrocketed because of shipyard backlogs, so OMI's fleet of Suezmax crude oil tankers and vessels that carry refined oil products is an attractive way for the buyers to expand. Prices for a new Suezmax jumped more than 75 percent since January 2003, while used ships rose more than 90 percent, according to Cantor Fitzgerald.
``Torm gets to build on its fat product fleet, and Teekay gets to bolster its Suezmax fleet,'' said Omar Nokta, an analyst with Dahlman Rose & Co., an investment bank in New York. ``This transaction makes sense.''
Nokta, who rates OMI shares ``buy,'' predicted in a note to clients last month that Torm was looking to acquire a stake in OMI. Hellerup, Denmark-based Torm sold a $700 million stake in a rival Danish commodities shipping line to fund a bid for the U.S. oil-tanker company, Nokta said in the March 28 note. Nokta calculated that OMI's ships were worth about $2 billion. OMI said in March that it was exploring a possible sale of the company.
Young Fleet
Teekay, the world's largest tanker owner, will acquire the nine Suezmax tankers OMI owns or operates and eight tankers that carry refined oil products such as gasoline. Suezmaxes can each carry 1 million barrels of crude. Torm, an oil- and commodities- shipping company, will buy OMI's remaining 26 oil-product tankers, the statement said.
Stamford, Connecticut-based OMI has one of the youngest fleets among publicly traded tanker companies, averaging 3.3 years at the end of 2006.
Competitors such as Overseas Shipholding Group, the largest U.S.-based tanker owner, had expressed interest in OMI. Overseas Shipholding Chief Executive Officer Morten Arntzen said in March that he would look at OMI.
The purchase will add to the 15 Suezmax tankers that are already owned or operated by Teekay, which is based in the Bahamas and has its main offices in Vancouver. Torm operates a fleet of 100 vessels, including tankers that carry refined fuels such as gasoil and jet fuel, and dry-bulk vessels that carry commodities such as coal and iron ore.
In a separate statement, Teekay said it may file regulatory documents in the second half of 2007 for an initial public offering of its conventional tanker business.
(Teekay will hold a conference call on the acquisition tomorrow at 11 a.m. New York time. To listen, access the company's Web site at http://www.teekay.com/ .)

Persian Gulf Tanker Rates May Snap 11-Day Decline

2007-04-12T16:08:00.000-07:00

Persian Gulf Tanker Rates May Snap Eleven-Day Decline
By Grant Smith
April 12 (Bloomberg)

The cost of shipping Middle East crude oil to Asia may snap an 11-day slide as bookings by Exxon Mobil Corp. help reduce a surplus of vessels.
Exxon, the world's biggest publicly traded oil company, hired five tankers to collect cargoes in the last week of April, leaving 13 loads to pick up this month, according to an e-mailed report today from Paris-based shipbrokers Barry Rogliano Salles. There are about 18 so-called double-hulled tankers available to collect them, Athens-based Optima Shipbrokers said in an e-mail.
``There are plenty of ships to be honest but also plenty of cargoes,'' Mathieu Philippe, a broker for Barry Rogliano in Dubai, said in an e-mail. ``Some owners are ready to resist'' further discounts in freight rates.
Rates for Very Large Crude Carriers, or VLCCs, on the benchmark route to Japan fell an eleventh day yesterday to 58.6 Worldscale points, according to the London-based Baltic Exchange. One tanker, hired at a discount because it has only one layer around its cargo tanks, was booked at WS 52.5, Barry Rogliano said.
Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
At 58.6 Worldscale points, owners of modern Very Large Crude Carriers, or VLCCs, can earn about $33,015 a day on a 38- day round trip from Saudi Arabia to South Korea, based on a formula by R.S. Platou, an Oslo-based shipbroker, and Bloomberg bunker prices.
Frontline Ltd., the world's biggest oil-tanker company by capacity, said on Feb. 27 that it needs $30,200 a day to break even on each of its VLCCs. It made $56,500 a day hiring out its double-hulled tankers, 50 percent more than for its single- hulled vessels.

Asian Fuel Tanker Rates Extend Drop

2007-04-12T01:11:00.000-07:00

Asian Fuel Tanker Rates Extend Drop on Maintenance Shutdown
By Katherine Espina

April 12 (Bloomberg) -- Asian rates for shipping 55,000 tons of gasoline, jet fuel and other so-called clean petroleum products fell for a sixth day as maintenance shutdowns by refineries left less of the products available for shipment. xxx Shipment cost of products to Japan from the Middle East on so-called Long Range 1, or LR1 ships, dropped 0.8 percent to Worldscale 175.85, according to the London-based Baltic Exchange. The cost of carrying 30,000 tons of gasoline, naphtha and jet fuel from Singapore to Japan dropped 0.4 percent to Worldscale 169.79.
Oil tanker rates on Asian routes have been falling as oil refineries conduct maintenance work and demand slowed with the Easter holidays. The cost of hiring oil tankers may fall for the next two years because of the rush of vessels, New York-based consultant McQuilling Brokerage Partners Inc. said in February. Tankers carry more than 40 percent of the world's seaborne trade.
``There were few significant changes to report in the market east of Suez, perhaps because of the pause created by the recent Easter holidays,'' Oslo-based shipbroker Fearnleys AS said in its weekly report. The rate of shipping 55,000 tons of products to Japan from the Middle East was around Worldscale 175, down 5 Worldscale points from a week before, according to the report.
The rate of shipping 75,000 tons of oil products to Japan from the Middle East was unchanged for a second straight day at Worldscale 134.58.
Aframax Tankers
Shipment fee for 80,000 tons of crude oil on Asian routes fell for a fourth day in a row. The cost of shipping crude oil on so-called Aframax tankers to Singapore from Kuwait dropped 1.9 percent to Worldscale 173.08, based on data from the Baltic Exchange.
Aframax tanker rates on the route from Indonesia to Japan, were unchanged for a fourth day at Worldscale 170, according to Bloomberg data. It was last seen at this level in December.
Worldscale points are a percentage of a nominal rate, or flat rate, for a specific route. Flat rates, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.

North Koreans Arm Ethiopians as U.S. Assents

2007-04-10T02:17:00.000-07:00

By MICHAEL R. GORDON and MARK MAZZETTI
The New York Times
April 8, 2007

Three months after the United States successfully pressed the United Nations to impose strict sanctions on North Korea because of the country’s nuclear test, Bush administration officials allowed Ethiopia to complete a secret arms purchase from the North, in what appears to be a violation of the restrictions, according to senior American officials.
The United States allowed the arms delivery to go through in January in part because Ethiopia was in the midst of a military offensive against Islamic militias inside Somalia, a campaign that aided the American policy of combating religious extremists in the Horn of Africa[...]
It is also not the first time that the Bush administration has made an exception for allies in their dealings with North Korea. In 2002, Spain intercepted a ship carrying Scud missiles from North Korea to Yemen. At the time, Yemen was working with the United States to hunt members of Al Qaeda operating within its borders, and after its government protested, the United States asked that the freighter be released[...]
American intelligence agencies reported in late January that an Ethiopian cargo ship that was probably carrying tank parts and other military equipment had left a North Korean port.
The value of the shipment is unclear, but Ethiopia purchased $20 million worth of arms from North Korea in 2001, according to American estimates, a pattern that officials said had continued. The United States gives Ethiopia millions of dollars of foreign aid and some nonlethal military equipment.
After a brief debate in Washington, the decision was made not to block the arms deal and to press Ethiopia not to make future purchases.
John R. Bolton, who helped to push the resolution imposing sanctions on North Korea through the Security Council in October, before stepping down as United Nations ambassador, said that the Ethiopians had long known that Washington was concerned about their arms purchases from North Korea and that the Bush administration should not have tolerated the January shipment[...]
Ethiopia has an arsenal of T-55 tanks that it acquired years ago from the Soviet Union and Eastern European nations. For years, it has turned to North Korea for tank parts and other equipment to keep its military running[...]
In late January, the Central Intelligence Agency reported that an Ethiopian-flagged vessel had left a North Korean port and that its cargo probably included “tank parts,” among other military equipment.
American officials said that the ship, the Tekeze, a modern vessel bought from a company in Montenegro and named after an Ethiopian river, unloaded its cargo in Djibouti, a former French colony where the United States has based Special Operations troops and other military forces. From there, the cargo was transported overland to Ethiopia.
The Security Council resolution’s list of prohibited items included spare parts. Because the cargo was never inspected, some administration officials say the United States cannot say for certain that the shipment violated the resolution.
It is not clear if the United States ever reported the arms shipment to the Security Council. But because the intelligence reports indicated that the cargo was likely to have included tank parts, some Pentagon officials described the shipment as an unambiguous Security Council violation[...]
The timing of the shipment was extremely awkward, as the Ethiopian military was preoccupied with Somalia and also quietly cooperating with the United States. Ethiopia began an offensive in Somalia to drive back the Islamic forces and install the transitional government in Mogadishu late last year. The United States was providing it with detailed intelligence about the locations of the Islamic forces and was positioning Navy ships off Somalia’s coast to capture fighters trying to escape the battlefield by sea.
On Jan. 7, American AC-130 gunships launched two strikes on terrorist targets from an airstrip inside Ethiopia, though it did not appear that the casualties included any of the few top operatives of Al Qaeda American officials suspected were hiding in Somalia.
After some internal debate, the Bush administration decided not to make an issue of the cargo ship.

China’s Oil Tanker Boom

2007-04-09T21:55:00.000-07:00

Lee Geng
Apr. 09, 2007
EnergyTribune.com

During the Ming Dynasty six hundred years ago,famed Chinesenavigator Zhengexplored the seas with his mighty fleet. Today, China is a manufacturing power, not a naval one. And that bothers the Chinese government. With oil imports of about 2.7 million barrels per day (nearly half of its total consumption), the government wants to double its fleet of supertankers by 2008.
At present, Chinese tankers only transport about 10 percent of the country’s oil imports. The government wants to increase that percentage to help ease concerns over energy security, avoid the possibility of shortages, and perhaps avert political frictions that could lead to delays or blocks on deliveries.
China currently has 23 300,000-deadweight tonnage (dwt) tankers, known as very large crude carriers, or VLCCs. Those VLCCs account for about 30 percent of China’s tanker tonnage and about 4 percent of the world’s fleet.
Most of the remaining tankers in China’s inventory are small and/or old, and thus better suited for the coastal trade than for international oil shipments. Chinese tankers on average are 30 percent older than their international counterparts and much smaller, averaging only 20,000 dwt (about one-fifteenth the size of a VLCC).
By 2010, China wants to have a VLCC fleet capable of shipping over 50 percent of its expected 4 million barrels per day of imports. By 2020, China plans a fleet of 70 VLCCs. Big Chinese shipping corporations are ordering VLCCs to achieve that target. China Merchants Group, with the country’s largest VLCC fleet, will add six before 2008, with China Ocean Shipping Corp. (COSCO) adding five. State-owned China Shipping Group (CSG) is operating three VLCCs and nine are on order for a total of 12 by 2010. This will allow it to boost its total annual capacity to over 100 million tons of oil.
COSCO operates eight VLCCs and has another seven under construction. One of China’s largest shipyards, Dalian Shipbuilding Industry Co., Ltd., has received more than 20 orders from both domestic and foreign companies for VLCCs, scheduled for delivery around 2009. Other players in the tanker business are ordering new vessels as well. Nanjing Tanker Corp. has plans to establish a fleet of 10 VLCCs. Hebei Ocean Shipping Co. has ordered three VLCCs and Nanjing Changjiang has ordered eight.

http://www.energytribune.com/articles.cfm?aid=445

I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

Crude Oil Drops More Than $2.50 a Barrel

2007-04-09T11:56:00.000-07:00

By Mark Shenk
April 9 (Bloomberg)

Crude oil plunged more than $2.50 a barrel in New York, the biggest decline in three months, on speculation that an Energy Department report will show U.S. inventories jumped last week as refiners unexpectedly shut units.

Crude-oil supplies in Cushing, Oklahoma, where oil traded in New York is delivered, surged 12 percent in the week ended March 30, Energy Department figures show. Fires and power outages have forced refiners to shut units, reducing crude-oil demand. Oil prices also fell because release of British naval personnel on April 5 eased concern of a supply disruption in the Persian Gulf.

``Crude oil is pulling everything lower,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``It looks like we will see record inventories in Cushing this week because of all of the refinery outages.''

Crude oil for May delivery fell $2.77, or 4.3 percent, to $61.51 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. The contract is heading for the biggest one-day decline since Jan. 4. Futures touched $68.09 a barrel on March 27, the highest since Sept. 6. Prices are down 8.7 percent from a year ago. Xxx

``The continuing spate of refinery outages and maintenance issues is pushing product prices higher and putting downward pressure on crude,'' said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis. ``Until you see an up-tick in refinery operations, crude oil will have a hard time rising.

Motiva Enterprises LLC, the refining joint venture between Europe's Royal Dutch Shell Plc and Saudi Arabia's state oil company, reported a malfunction that occurred yesterday at its plant in Port Arthur, Texas. The Port Arthur refinery has a daily processing capacity of 285,000 barrels.

The profit margin, or ``crack'' spread, for turning three barrels of crude oil into two barrels of gasoline and one of heating oil jumped 5.5 percent to $22.546, the highest since Sept. 29, 2005, based on closing futures prices in New York.

Refineries in Texas, California, Pennsylvania, Colorado, Ontario and Delaware have had to trim output over the past two months. The closure of Valero Energy Corp.'s McKee refinery near Sunray, Texas, has contributed to the increase in supplies in Cushing. Increasing stockpiles in this oil hub have depressed the price of oil in New York compared with Brent oil.

``Prices here are depressed because the tanks in Cushing are full as a result of refinery problems,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There's nowhere to put the oil. If someone could figure a way to ship the oil stuck in Cushing to the U.K. they would make a fortune.''

Uranium Enrichment

Iranian President Mahmoud Ahmadinejad said today that his country has begun enriching uranium on an industrial scale, stepping up defiance against the United Nations.

``Iran has succeeded in the nuclear-fuel-cycle development to attain production at an industrial level,'' Ahmadinejad said today at a ceremony at the Natanz uranium-enrichment site. He repeated that nuclear-fuel production was Iran's ``undeniable right'' and referred to ``a few powerful governments imposing their will on the rest,'' according to a broadcast of the speech.

The United Nations Security Council gave Iran 60 days from March 24 to suspend enrichment. The country already has ignored three UN deadlines to shut down production of the nuclear fuel. The UN demands were in response to allegations by the U.S. and some of its allies that Iran is using the development of nuclear power to disguise a weapons program. Iran denies that.

Sweden Land Of Freedom

2007-04-03T23:58:00.000-07:00

Couple Fights to Name Baby 'Metallica' Apr 3

Metallica may be a cool name for a heavy metal band, but a Swedish couple is struggling to convince officials it is also suitable for a baby girl.
Michael and Karolina Tomaro are locked in a court battle with Swedish authorities, which rejected their application to name their six-month-old child after the legendary rock band.

"It suits her," Karolina Tomaro, 27, said Tuesday of the name. "She's decisive and she knows what she wants."

Although little Metallica has already been baptized, the Swedish National Tax Board refused to register the name, saying it was associated with both the rock group and the word "metal." Tomaro said the official handling the case also called the name "ugly."

The couple was backed by the County Administrative Court in Goteborg, which ruled on March 13 that there was no reason to block the name. It also noted that there already is a woman in Sweden with Metallica as a middle name.

The tax agency appealed to a higher court, frustrating the family's foreign travel plans."We've had to cancel trips and can't get anywhere because we can't get her a passport without an approved name," Tomaro said.

Hurricanes

2007-04-03T22:28:00.000-07:00

Rigzone posted article today on Gray's 2007 Hurricane prediction.

by David Bird
NEW YORK Apr 03, 2007 (Dow Jones Newswires)

The 2007 Atlantic Basin hurricane season likely will be "very active," with 17 named storms, nine hurricanes, including five intense storms ranked as Category 3 or above, forecasters at Colorado State University said Tuesday.
Forecaster Phil Klotzbach said the season won't be as active as the 2004 or the 2005 season, which was noted for the landfall of Hurricanes Katrina and Rita.
In 2006, no hurricanes made landfall along the U.S. coastline.
The probability of a major hurricane making landfall along the U.S. coastline is 74% compared with the last-century average of 52%, Klotzbach said.
There is a 50% chance that a hurricane could make landfall on the East Coast, including the Florida peninsula, compared with a long-term average of 31%, the forecasters said.
There is a 49% chance of a major hurricane making landfall on the Gulf Coast, from the Florida Panhandle west to Brownsville, Texas, compared with a long-term average of 30%. The region houses a large portion of the U.S. oil refining industry and substantial offshore oil and gas production.
In 2006 the season included 10 named storms, five hurricanes and two intense hurricanes with sustained winds of 111 miles per hour or greater.
Long-term averages are for 9.6 named storms, 5.9 hurricanes and 2.3 intense hurricanes per year in the season that runs from June 1 to Nov. 30.
Forecasters predict that so-called tropical cyclone activity in 2007 will be 185% of the average season. By comparison the 2005 season recorded activity that was 275% of the average.
Klotzbach noted that the 2006 season was only the 12th year since 1945 that no hurricanes made landfall in the U.S. Since then, there have been only two consecutive-year periods when there were no hurricane landfalls, 1981-82 and 2000-01.
Forecasters also predicted above-average major hurricane landfall risk in the Caribbean region.
William Gray, a 24-year veteran of the Colorado State forecast, said continued warm tropical and north Atlantic sea-surface temperatures, which have been prevalent in most years since 1995, and neutral to weak La Nina conditions are "a recipe for greatly enhanced Atlantic basin hurricane activity." Gray said conditions are similar to those that existed in 1952, 1964, 1966, 1995 and 2003 seasons, which each recorded above-average activity.
Gray said there is "no reliable data" to indicate that global temperature change is causing increased hurricane intensity or frequency. "Meteorologists who study tropical cyclone basins have no valid physical theory as to why hurricane frequency or intensity would necessarily be altered significantly by small amounts of global mean temperature change."
The latest forecast calls for a more active season in 2007 than Colorado State projected in its Dec. 8, 2006 projections, when it called for 14 named storms, seven hurricanes and three intense hurricanes.
In pre-season 2006 forecasts, like the one issued this time last year, Colorado State joined other forecasters in calling for a very active 2006 season, with well-above average landfall probabilities.
But those forecasts were downgraded over time as drier tropical Atlantic air, due to high levels of atmospheric dust from West Africa, and warm equatorial Pacific Ocean temperatures due to the appearance of El Nino, altered the conditions that needed for an active hurricane season.

List of People You Should Listen To About Oil

2007-04-03T22:03:00.000-07:00

List of People You Should Listen To About Oil

Category 1) Best Ever

1) Daniel Yergin
2) Rockefeller

Category 2) Current Affairs

1) Matthew Simmons
2) Kenneth Deffeyes
3) T.Boone Pickens
4) Tertzakian
5) Naimi
6) Michael Lynch

Category 2 - "B" List)

1) Chris Skrebowski
2) Rembrandt Koppelar

Category 3) Authors

1) Crude Oil
2) Oil
3) Roberts
4) The Color of Oil
5)
6)
7)
8)
9)
10) Oil on the Brain

Cat 4) Bloggers

1)
2)
3)
4)
5)
6)
7)
8)
9)
10)

Cat 5) "Industry"

1) CERA/IHS
2) Halliburton
3) Aramco/Bush-Cheney(Abdullah)
4) SAIC

Robert Rapier on Peak Oil

2007-04-01T00:10:00.000-07:00

"For the record, I believe there is a 90% chance of a production peak by 2015, and maybe a 10% chance that production has already peaked."

Iran "Crisis" Day 6

2007-03-29T01:05:00.000-07:00

That's what they are calling it.

Tuesday evening oil jumped to $69. $5 in 5 minutes as one trader reported. I saw mention of two different rumors. One was of a possible British rescue mission. One of an American ship being attacked.

Yesterday the Iranians videos of the captured British. Lead sailor whatsername to be released soon, supposedly.

In other news: interesting article on Molybdenum prices yesterday.

Intrade Airstrike.Iran Options

2007-03-29T00:35:00.000-07:00

Piece on MSNBC titled “War with Iran unlikely if Gates has any say.” Interesting. This as the US and Iran move into an even more advanced stage of discord, further even than when Rumsfeld was around. The Big News is the abducted UK sailors coming right after a new round of sanctions approved by the Security council.

Several stories about Iran here. Only because the price of crude has broken the $65 mark for the first time since early September. I wanted to talk about intrade.com. I’ll be looking at the prices of futures options there as another indicator. I’ll average the furthest contracts in an attempt to monitor one number. It is March 28th. The March contract expires on the 31st. It is at $2.60 down from about $5 a month ago. Previous to that it had hit a low of $15 in July of last year before doubling to $30 last August and September as tension with Iran hit its highs. It started its slide coincident with that of the price of crude.

Airstrike.Iran.Jun07 : $16, before this week : $10
Airstrike.Iran.Sep07 : $20, before this week : $17
Airstrike.Iran.Dec07 : $30, before this week : $21

Average : $22, up about $6 from a week ago. What does this say? Well a contract pays $100 if it turns out good. So if the price was $20, this would mean an investor is paying $20 for the chance to win $100, or a 5-to-1 payoff. So I guess for even odds we would expect this suggests a 20% chance of conflict in the given time frame. So a week ago the expectation was a 16% chance, now it is 22%.

I personally feel the chances are a lot slimmer. Let’s say by at least 5% in both cases. But I want to play this game or at least practice. So I’ll start a portfolio with 10 contracts apiece of the 3 contracts that expire at the latest dates. So that gives us a value of $660. I’m betting that at some point the value of these contracts will rise before they start to slide. Could I have bought them earlier at a much lower price?

The graphs only go back 7 months, but the contracts should last 9 months to a year, so the complete history is missing. These contracts here seem to have bottomed at $7, $13, and $15 in January. The same month the price of oil bottomed.

Since I don’t think these are good prices and I’m just getting started we’ll say the account started with $5000. $660 is about 13% invested so the remainder will be cash for now. I’ll figure out the theoretical transaction fees later.

expires Mar2007

expires Dec2007

War with Iran unlikely if Gates has any say

2007-03-28T23:10:00.000-07:00

Here are some excerpts from a piece that appeared on MSNBC:

ANALYSIS
By Robert Windrem
March 28, 2007

Since taking over the Department of Defense at the end of last year, Robert Gates has gotten kudos for what he has done, demanding responsibility for mistakes like the Walter Reed debacle and the cover-up of Pat Tillman’s death. He is also known to have wanted to close the U.S. prison at Guantanamo as a way of helping the United States recover some of its lost credibility in the Muslim world.
But Gates has also been getting quiet credit for something he hasn’t done: push hard on Iran, not raising the temperature in a time of crisis. In particular, Gates has distanced himself from some of the harshest criticism of Iranian operations in Iraq and pushed back on rhetoric calling for military solutions to U.S. problems in the Persian Gulf. Most prominently, on the supply of explosives technology, Gates has declined to point the finger of responsibility at the Iranian government, something his own Army Chief of Staff, Gen. George Casey, has done.
Gates says that some of the technology in improvised explosive devices (IEDs) and explosively formed projectiles (EFPs) has found its way into Iraq from Iran, but has left open the question of high-level Iranian involvement.
“I think the evidence is pretty solid that at least the materials for this and some of the machining associated with the EFPs is coming out of Iran,” Gates said in a March 13 interview with Pentagon TV, adding, “What we're not certain of is how high the level of approval these operations goes. That's the area of uncertainty. The fact that these things are coming out of Iran, I think, is not in question. ”
Anyone who has followed Gates’ interest in U.S.-Iranian relations should not be surprised at those comments, coming even as they did a month after a more conclusive Defense Intelligence Agency assessment appeared on the front page of the New York Times. Gates, quite simply, is not a hawk on Iran.
As a senior former U.S. intelligence official who worked with Gates said of him, “If Bob Gates is Secretary of Defense, we are not going to war with Iran.”
In fact, three years ago, Gates and former Carter National Security Advisor Zbigniew Brzezinski co-chaired a Council on Foreign Relations task force on U.S.-Iranian relations. The comments and recommendations found in the report, entitled, “Iran: Time for a New Approach” give a sense of what Gates thinks about Iran.
Conceding the wide gaps on issues like nuclear weapons development, terrorism and Iraq, Gates and Brzezinski still argued for a rapprochement with the Islamic Republic:
“The Task Force proposes selectively engaging Iran on issues where U.S. and Iranian interests converge, and building upon incremental progress to tackle the broader range of concerns that divide the two governments," the final report concluded.
“U.S. policies toward Tehran should make use of incentives as well as punitive measures. The U.S. reliance on comprehensive, unilateral sanctions has not succeeded in its stated objective to alter Iranian conduct and has deprived Washington of greater leverage vis-à-vis the Iranian government apart from the threat of force.”
Analysts say Gates’ position is one that was finely honed during the Cold War, which he sees as the model for dealing with Iran.
“Just as the United States maintains a constructive relationship with China (and earlier did so with the Soviet Union) while strongly opposing certain aspects of its internal and international policies,” the two Cold Warriors noted, “Washington should approach Iran with a readiness to explore areas of common interests, while continuing to contest objectionable policies.”
And while that was 2004, Gates more recently gave strong support for negotiations with Iran and Syria while a member of the Iraq Study Group. Gates left the group before its final report to take the Pentagon job, but during his confirmation hearings he reiterated his fundamental support for the talks.
Gates is also on the record as being opposed to those in the White House and elsewhere in Washington who think the Iranian issue can best be resolved by working with Iranian dissidents to overthrow the current regime.
“Despite considerable political flux and popular dissatisfaction, Iran is not on the verge of another revolution,” he and Brzezinski wrote. “Those forces that are committed to preserving Iran’s current system remain firmly in control and currently represent the country’s only authoritative interlocutors.
“Direct U.S. efforts to overthrow the Iranian regime are therefore not likely to succeed; nor would regime change through external intervention necessarily resolve the most critical concerns with respect to Iran’s policies.”
Bottom line for Gates and Brzezinski: Iran “could play a potentially significant role in promoting a stable, pluralistic government in Baghdad. It might be induced to be a constructive actor toward both Iraq and Afghanistan, but it retains the capacity to create significant difficulties for these regimes if it is alienated from the new post-conflict governments in those two countries.”

Iran and the Price of Crude

2007-03-28T13:49:00.000-07:00

Mark Shenk reports:

March 28 (Bloomberg) -- Crude oil surged above $64 a barrel to close at a six-month high in New York on concern that tensions with Iran will escalate, disrupting shipments from the Middle East.

``It is now time to ratchet up the pressure,'' Prime Minister Tony Blair said in Parliament in London today, referring to the capture of 15 U.K. naval personnel. Oil jumped late yesterday on speculation the U.K. would mount a rescue attempt. A report today showed that U.S. crude oil, gasoline, diesel and heating oil supplies declined last week.

``As long as the British naval personnel are held, prices are going to move higher,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``The chances of a military incident occurring in the Persian Gulf are high. The volatility that occurred last night is probably a preview of what we will see in the weeks to come.''

``The recent price moves show that geopolitical factors are back front and center,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Sentiment is bullish. Geopolitical tension and tightness in the gasoline market are the twin pillars of this market.''

``The situation isn't getting any better with Iran, there's been a major ratcheting up of tension,'' said Paul Horsnell, head of commodities research for Barclays Capital in London. ``We see Iran as being a major driver of oil prices through 2008.''

Horsnell said he put the finishing touches on an oil forecast of $70 a barrel for Barclays' global outlook last weekend, only to see Brent oil prices surge to $69 a barrel late yesterday, before the report was printed.

``It's ironic and rather frustrating -- what we said would happen already happened,'' Horsnell said. ``We've had a gradual, remorseless push up in price and then $5 in less than 10 minutes.''

An Iranian Foreign Ministry spokesman said his country will release a British female sailor in detention ``within one or two days.'' Seaman Specialist Faye Turney was detained along with 14 other British sailors and Marines on March 23 in the Shatt al- Arab waterway, which separates Iran and Iraq.

The United Nations Security Council on March 24 unanimously backed a resolution freezing the assets of an Iranian bank and imposing penalties on some military commanders, to push Iran to suspend production of nuclear fuel. The package toughens sanctions approved in December.

Daniel Yergin, CERA, and the new O-15

2007-03-23T18:19:00.000-07:00

Ashok Dutta
CanWest News Service
Friday, March 23, 200

CALGARY -- Canada has been ranked fifth in a new global oil grouping unveiled Thursday by an independent energy analyst in testimony in Washington to the U.S. House Committee on Foreign Affairs.

Called Oil-15, or O-15, the new order put together by Daniel Yergin, chairman of Cambridge Energy Research Associates, includes all OPEC states — barring Indonesia — and includes five others that have the highest potential to increase supplies by 2015. Besides Canada, they are Azerbaijan, Kazakhstan, Brazil and Russia. The group is projected to produce 72.7 million barrels per day, or 69 per cent of total global oil output.

“It is a straight forward grouping of producers that are planning major investments and do not necessarily have a political agenda,” Guy Caruso, administrator of Washington-based watchdog Energy Information Administration, said in an interview.

Saudi Arabia was ranked No. 1. Its output was forecast by Cambridge to grow to 14.3 million barrels per day from 2005 output of 12.7 million bpd. Russia was in the No. 2 spot, and was forecasted to see production grow to 11.5 million bpd from 9.6 million. Iran was No. 3, with output forecast to grow to 4.3 million bpd from 5.7 million bpd, and Iraq No. 4, with output forecast to grow to 5.5 million from 2.6 million.

Next came Canada, with production forecast to grow to 5.3 million bpd by 2015 from 3.5 million bpd in 2005.

“We will see a concentration of growth in liquid production capacity within the O-15,” said Yergin, who was asked to make the presentation on energy security.

“After two decades of working off excess capacity, global energy supply is now dominated by the growth challenge.”

Canada, with over $125 billion investments in the Alberta’s oilsands sector, is set to play a central role in meeting U.S. energy demand. Last year, the largest share of American’s energy imports came from Canada, Yergin said.

Greg Stringham, vice-president at the Canadian Association of Petroleum Producers, said the testimony is a recognition of Canada’s importance both now and in the future for delivering energy supplies.

“Canada is the most secure source and will continue to maintain its lead position,” he said.In 2006, Canada exporting 2.29 million bpd of crude oil to the U.S., accounting for 17 per cent of total imports. This was followed closely by Mexico at 13 per cent. Until a few years ago, Saudi Arabia was the principal supplier of Arabian Light and Super Light grades of crude to the U.S. The call on Canadian crude is likely to increase, if a statement issued Wednesday by Mexico’s Pemex on a 5.8 per cent dip in its proved oil and gas reserves is any indication.

However, from an energy security perspective, a question remains to what extent.

“From an energy security perspective, there will be a limit. But, it is still too early days to talk about it,” Caruso said.

Stringham felt that if the O-15 group were drawn up on a political-stability basis, Canada would have been on the top.

“The U.S. has made it amply clear they do not want us to sell our oil in the global markets and will take as much as we can offer. At the same time there will not be any pressure on Canadian producers to increase
supplies,” he said.

http://www.canada.com/nationalpost/financialpost/story.html?id=9d39ecf7-6796-4c16-8384-142807913ab8&k=32047

Canada ranked fifth in ability to increase oil production

IHS Acquires RapiData

2007-03-22T22:20:00.000-07:00

Thursday, March 22, 2007

IHS Inc. has acquired the RapiData product, well known for its comprehensive well test, pressure and completions data for the Western Canadian Sedimentary Basin. IHS purchased RapiData from Rapid Technology Corporation of Calgary, Alberta, Canada.

RapiData is the only complete source of well test, pressure and completions data for Western Canada. IHS has been a partner with Rapid since 2003. IHS products AccuMap and Enerdeq use RapiData to provide exploration and production (E&P) companies desktop access to information used to evaluate reservoir pressures and well-flow rates, forecast flow and pressure declines, and estimate reservoir size.

"The acquisition of RapiData is consistent with the IHS strategy of providing superior information to E&P companies' desktops," said Ron Mobed, president and chief operating officer of the Energy segment of IHS. "The combination of existing IHS products and RapiData will allow E&P companies of all sizes to make informed, profitable decisions at all stages of a well's lifecycle and development. IHS is committed to a vision of transforming physical data sets into high-value, high-speed, on-demand digital data sets. The acquisition of RapiData represents a substantial step forward for that vision."

The Energy segment of IHS enables oil and gas companies worldwide to create and maintain best-in-class decision-making processes by providing and integrating essential exploration and production information, intuitive software and consulting services.

Rapid Technology Corporation is a privately held company that provides integrated software, data and engineering solutions for the oil and gas industry. Following the sale of its product line to IHS, Rapid Technology Corporation will be a holding company with an investment interest in publicly traded Rapid Solutions Corporation which is unaffected by the sale.

IHS is a leading provider of critical technical information, decision-support tools and related services to customers around the world. Its data and services are used primarily by the energy, defense, aerospace, construction, electronics, and automotive industries.

http://www.rigzone.com/news/article_pf.asp?a_id=42888

Articles on Iran

2007-03-21T23:28:00.001-07:00

Articles on Iran in National Interest.

Books.