Category — Energy

One of the main stories not being told about today’s oil market is the next round of turbulence set for the Middle East. It’s the oil war scenario, but with a new spin.

Last year when Byron King and I attended the Platts Crude Oil Conference, a main takeaway was an interesting OPEC break-even chart that shows how much money OPEC nations need to keep their governments funded. Take a look:

Click to enlarge

All’s well at $100 oil – all isn’t well at $80 oil. And all hell breaks loose if prices stabilize even lower at, say, $60…

1. The US oil boom is bigger than expected. As I see it, this is more of a ‘duh’ observation. I’ve yet to see it slow down since 2008. In fact, this week, the International Energy Agency (IEA) in its Oil Market Report claimed that America’s shale boom is growing even larger than expected. It’s also set to have a profound effect on OPEC. Which brings me to the second theme…

2. OPEC is also set to produce (or have the capability to produce) a heckuva lot of oil. One main driver of that supply growth is Iraq. After a turmoil-filled decade, Iraq is coming back on line in a big way – and could add another 3 million barrels per day to the oil mix by 2018.

So you see, once you start lumping together all of this oil, the market seems a bit flush. [Read more →]

John Wooden – the late, great UCLA basketball coach – once said, ‘Things turn out best for the people who make the best of the way things turn out.‘

With coach Wooden’s advice in mind, let’s think positive. Let’s review the upside of the resource news flow.

Hey, oil prices are stable. The Brent crude oil price is hovering in the low $100 range, while North American oil prices – embodied in the price for West Texas Intermediate (WTI) – are $10 less, give or take.

Of course, OPEC oil exporters hate $100 oil…

That’s because most of the OPEC producers need much higher prices to balance their national books. That addiction to oil income is part and parcel of leaders allowing their respective countries to evolve into petro welfare states. The usual Middle Eastern names come to mind, although even Russia has an oil problem.

Russia is entering a recession after two years of stagnant or declining economic growth. Some of this is blowback from the overall chronic weakness in Europe. [Read more →]

Don’t look now, but there are some problems developing in the global energy network. The US may be basking in the prospect of ample unconventional oil and gas substantially transforming the country from an importer to an exporter. But elsewhere, constrictions and outright shortages are developing more quickly than anticipated.

It’s hardly reassuring that the epicentre of all this is the Middle East…

Unfortunately, this is hitting hardest those areas already beset by broad, accelerating economic shortfalls. That they also happen to be areas of significant unrest hardly improves the situation.

The latest is Pakistan. There a combination of lower-than-expected water availability and a government powerless to provide the diesel fuel essential for the planting season means a population already on the brink is staring at food shortages.

The picture is very grim. [Read more →]

Precious metals, energy and commodities recently hit a rough patch.

But will these low ‘pullback’ prices last forever? Even in the face of what seems (to me) as an extreme wave of inflation rushing over us?

Today we’ll cover all the bases. Starting with crude oil…

West Texas Intermediate (WTI) crude oil is in the low-US$90s per barrel, while the iconic Brent Crude price just over US$100. That’s low, by recent standards, for two reasons.

One reason is that global oil demand growth is moderate, due to the creeping worldwide lack of economic confidence. China has slowed. Japan is moribund. Europe is a mess. The North American economy is iffy, on the best of days.

This widespread lack of confidence may or may not morph into the next recession (pleasant thought, eh?). But the global economy is a big, arm-waving subject, and let’s not go there just now. [Read more →]

Do you remember the 1970’s?

Sure, it was the era of questionable sartorial choices. Men wore very unnatural colours, showing up on dance floors as they tried to boogie until they couldn’t boogie no more.

In an energy sense, though, it was also the time of the dreaded mile-long gas lines.

Oil was in short supply at gasoline stations. It was an era of conflict. The nations that produced much of what the US consumed were none too happy and cut the nation off from their petrol spigots.

In those days, oil was a weapon. It was being utilized by the Organization of Petroleum Exporting Countries (OPEC) to punish the US for its support of the State of Israel as it was under attack by both Egypt and Syria.

This ‘oil war’ spurred the US government into action. Rationing began, whereby certain markets had restrictions on gasoline sales to private and commercial vehicles.

In addition, Congress passed, and President Richard Nixon signed, The Emergency Petroleum Allocation Act of 1973.

The act set into motion price controls on crude oil produced in the US — with existing known fields and reserves becoming price restricted, while new production was allowed to trade at market rates.

One of the interesting developments by Hess and Occidental Petroleum was to use a newer technology of pumping CO-2 (Carbon Dioxide) into older oil fields that were no longer productive to release crude oil in rock formations. [Read more →]

Of all the alternative energies in the world, nuclear power is both the most promising and the most reviled.

Many environmental activists now see nuclear as the ‘least-worst’ option for dealing with climate change. Compared to coal and even natural gas, nuclear is clean energy.

On the other hand, the 2011 Fukushima disaster in Japan illustrated all anyone needs to know about why nuclear power is held with such suspicion by the voting public. And where the voters go, politicians follow.

As a result, the price of uranium — the fuel for nuclear reactors — is hovering very near to its post-financial crisis lows.

And that’s why now could be the perfect time to add some nuclear industry exposure to your portfolio… [Read more →]

A good technology company should sell products that pay for themselves. In other words, products should have a rapid payback period for customers.

In the oil drilling equipment business, technology should offer solutions that cut operating costs or enhance production at customers’ projects. Oil companies spend billions on large offshore oil and gas projects.

Typically, the deeper the project, the more money is spent. So any high-tech equipment that can cut costs or boost production can essentially sell itself.

A Clear Oil Company LeaderIn the market for highly engineered offshore production equipment, FMC Technologies Inc. (NYSE: FTI) is the clear leader. FMC installed its first ‘full field’ subsea separation, boosting and injection system on Statoil’s Tordis field in the North Sea in 2007.

FMC increased recovery by an extra 35 million barrels of oil and extended the life of the field by 15 years. With a payback of an extra 35 million barrels, this sort of equipment pays for itself. [Read more →]

The to and fro of the markets is noise, or operational noise in military terms. What’s the strategy? And what’s at stake?

Well, despite a shocking few days in the Aussie share market, there are plenty of growth trends in the world. But Australian oil refining is obviously not one of them. Royal Dutch Shell let everybody know that this week.

Australia is rapidly losing the ability to produce its own refined fuels. That means higher imports and a larger trade deficit.

On the other hand, there are other opportunities in energy in Australia. One comes down to a few key firms in the Cooper Basin and a few key drilling results, the most important of which is due out in the next 30 days.

It’s all part of the dynamic energy landscape. Energy, especially oil and gas, has been the key industry of the last 100 years. That’s unlikely to change anytime soon. [Read more →]