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Monday, June 30, 2008

Oil world gathers in Madrid

BRIEFLY 30.06.2008 - Deutsche Welle - Representatives of oil-producing and consuming nations have gathered in the Spanish capital, Madrid, for the World Petroleum Congress. This came as oil hit a new record high of more than $143 a barrel in European trading. A similar meeting held in Saudi Arabia earlier this month failed to take the heat out of the market. Part of the problem is that oil producing and consuming nations haven't been able to agree on what is causing oil prices to soar. Some producer countries blame speculators for the doubling of the price of crude over the past 12 months. US officials say that it is a supply-side problem and that OPEC members need to step up production.

Friday, June 27, 2008

State Oil Cos. Transcend Borders

Open Gallery...June 25, 2008 - Kommersant - Ernst & Young estimates in a report published yesterday that more than half of the state oil and gas companies in the world have already acquired assets beyond their national borders. They are faster to undertake risky investments, work together more successfully than private companies and are growing in value much faster than private companies. In a number of cases, however, the state itself interferes with its own expansion. The Russian government, for example, makes access to Asia easier and access to Europe harder. There are over 100 state oil and gas companies in the world. In 2007, state gas and oil companies and sovereign funds invested more than $13 billion, or a third of their total investments, abroad, according to the consulting company John S. Herold, Inc. They compete with transnational companies and behave identically to them. State companies are given preference in many countries, however, because they can provide other benefits. The Chinese state CNPC promised investments in railroads and electricity when it bought PetroKazakhstan in 2005, for example. They are also more likely to work together, as the state oil companies of Iran and Venezuela. Analysts have identified a number of problems looming in the future for state oil companies. The first is a conflict between the companies’ commercial interests and political missions. Another problem is politically motivated resistance in foreign companies they operate in, such as when the Chinese CNOOC was forced to abandon its efforts to buy the U.S. Unocal in 2005. Konstantin Simonov, director of the Foundation for National Energy Security, says that a more meaningful division of companies is those that have reserves in the country where their shareholders are and those that do not. “Their overseas strategies are determined by what they do not have. Companies with no reserves try to obtain access to production assets at any cost, and those that have them try to obtain overseas assets in refining and access to the direct consumer,” he explained.

Monday, June 23, 2008

Can oil production boost bring down rising costs?

June 23, 2008 - Russia Today - Oil producers and consumers have gathered at the Jeddah Energy Meeting where Saudi Arabia announced it could boost production - depending on consumer demand. The state of the global oil market was discussed with the effects of soaring prices worldwide being felt both by consumers and producers. Saudi Arabia, the world's largest oil exporter, has been under pressure from the United States and other consumers concerned over rising prices. In response, Saudi Arabian Oil Minister Ali al-Naimi said: "Whether oil production is going to increase or decrease depends on the demand from our customers. We do not just raise production or reduce production just for the sake of doing it. But as long as there is a consumer, you have to meet the needs of that consumer.” The country declared it will increase production to 200,000 barrels a day in order to hold down price increases. That would bring daily output up to 9.7 million barrels. In Russia, oil production has been falling, but the country’s Deputy Energy Minister thinks producers are not to blame for price rises. Stanislav Svetlitsky said: “We are increasing the extraction and export of oil, but as it has become clear, current oil prices are being pushed up by speculators, not producers. Both producers and customers want a stable predictable market.” World oil prices rose on Monday in spite of Saudi Arabia's output pledge, as investors focused not on possible future supplies, but on tensions in the Middle East and disruption to production in Nigeria.

Russia to keep low profile at Jeddah oil summit

June 19, 2008 - Agence France-Presse by Amelie Herenstein MOSCOW, (AFP) - Russia is a key oil power but its problems with raising production and wariness of openly associating with OPEC mean it will be keeping a low profile at an oil summit in Jeddah on Sunday, analysts said. While Russia has been invited to the conference between producer and consumer countries in Saudi Arabia to discuss soaring oil prices, officials say no decision has yet been taken on whether Moscow will send a delegation. In contrast, Britain will be represented by Prime Minister Gordon Brown and the United States by Energy Secretary Samuel Bodman at the emergency meeting -- called as world prices neared 140 dollars per barrel. Russia has been vying for the top oil producer position with Saudi Arabia for years but recent statistics show that production may be stagnating and could even fall during 2008 -- a source of much embarrassment among officials. "At the moment, Russia has nothing to offer" at Jeddah, where other producer countries could announce output increases to lower global prices, said Chris Weafer, chief analyst at the Uralsib investment bank in Moscow. "This is a bad time for Russia to put itself in such a central stage ... It would much rather keep its head down for a couple of years to fix this problem and then come back," Weafer said. Senior officials including Prime Minister Vladimir Putin have sought to downplay disappointing production figures in recent weeks and have announced tax cuts in a bid to promote investment. But these measures to increase production appear insufficient and in any case will not have any effect before 2009, senior oil executives said at a business conference in Moscow this week. Experts expect Russia's oil production will at best level off in 2008 at the 10 million barrels per day it churned out last year -- some 12.6 percent of total global production, figures compiled by British oil major BP showed. The trouble with Russia's oil sector, a Western energy expert told AFP, is that it is dominated by "short-term thinking" because it has gone through severe legal uncertainty in recent years. The controversial privatisation of almost the entire energy sector, the Kremlin-backed legal campaign against the Yukos oil major and now the implosion of British-Russian oil venture TNK-BP have all contributed to unease. Oil executives in Russia are now more interested in dividends than in long-term investments that could help boost production. Any production increases will be "very difficult," said the Western energy expert who asked not to be named. Russia's other problem with Jeddah is that it has always been careful not to identify too closely with other producers, particularly with the Organization of the Petroleum Exporting Countries (OPEC), analysts said. "The meeting would identify them much more as part of the producers bloc and that would be something they want to avoid with the G8 meeting coming up soon," Weafer said, referring to the July 7-9 Group of Eight summit in Japan.

Monday, June 16, 2008

Oil Falls As Saudi Boosts Oil Production

16.06.2008 - [Neftegaz.RU] - Oil fell more than a dollar to below $134 on Monday as Saudi Arabia prepared to push production to its highest rate in decades, moving to soothe the market ahead of this weekend's crisis meeting over record prices. U.S. light, sweet crude for July delivery was down 85 cents at $134.01 a barrel by 2:45 a.m. EDT, after falling as much as $1.40 a barrel, or about 1 percent, earlier in the session. The contract dropped nearly $2 on Friday, when an industry newsletter reported that Saudi was poised for a big output boost. London Brent crude fell 61 cents to $134.50 a barrel. At the weekend, United Nations chief Ban Ki-moon said the world's biggest exporter was set to increase output to 9.7 million barrels per day in July, the first official indication of its second supply boost in as many months. That would be a rise of 550,000 bpd or over 6 percent since May and would take Saudi crude output to its highest monthly rate since August 1981, according to U.S. government data. Oil traders said the news could spur heavier selling during more liquid European trading hours, but losses may be checked by fears that many refiners -- particularly in Asia -- will balk at buying more of the kingdom's heavier, hard-to-process crude. Saudi King Abdullah "sees that oil prices are currently abnormally high and he is willing to do all that is possible to bring prices to their appropriate levels," state news agency SPA quoted Ban as saying after meeting the Saudi monarch. The Saudi plan comes to light a week before the kingdom hosts an unprecedented meeting of producers and consumers to tackle market instability, its latest effort to turn back a rally that has boosted prices 40 percent this year alone, spurring protests around the world and endangering global economic growth. But some questioned whether Saudi oil would temper prices, which have also been buoyed by fears over whether the world can meet long-term demand for crude and the influx of investment funds seeking a hedge against the dollar and inflation. Saudi Arabia had pledged a month ago to increase supply by 300,000 bpd this month versus May to meet demand from buyers, primarily in the United States, although most OPEC ministers have maintained that the world is not short of crude. Oil had fallen nearly $2 a barrel on Friday after industry newsletter the Middle East Economic Survey reported Riyadh was considering a sizeable output increase to near 10 million bpd. But prices are still double what they were a year ago and have surged six-fold since 2002, and financial leaders fear the rally could worsen the U.S. economic downturn. Saudi Arabia is the only member of OPEC with the spare capacity to boost supplies quickly and significantly. It could pump around 2 million bpd more than it does.

Thursday, June 12, 2008

OPEC blames speculators for rising oil price

OPEC blames speculators for rising oil priceJune 11, 2008 – Russia Today - The price of crude oil could hit $US 250 per barrel in the foreseeable future, according to the head of the Russian energy giant Gazprom. In response, the Organisation of the Petroleum Exporting Countries assured the markets that there is no shortage of oil. Twenty days before France assumes the EU presidency, the stage is set for a burning debate on energy matters. Speaking at a business forum in Deauville, Gazprom CEO Aleksey Miller said the company had underestimated the potential growth of oil and gas prices and gave his own forecast. ”We believe speculation is influencing the oil price, but it isn't the determining factor. We are facing a large jump in hydrocarbon prices and they are approaching new high levels. We expect the price to reach $US 250 dollars per barrel in the foreseeable future,” he said. Such words from the head of one of the world’s largest energy companies could itself stimulate price growth. Several hours after Miller’s speech the OPEC Secretary General, Abdullah Al-Badri, tried to calm the situation, saying that “high oil prices have nothing to do with supply and demand" going on to explain that "pure speculation has caused the high oil prices." OPEC is calling for a curb on speculation. However, with the Internet alive with news of a parliamentary debate in Saudi Arabia about saving oil supplies for the future and renewed calls for attacks on Iran’s nuclear processors, the oil price is unlikely to stop rising soon.

Wednesday, June 11, 2008

Non-Opec output forecasts slashed

11 June 2008 - Upstream OnLine - Two of the world's most closely watched energy forecasters have slashed predictions for output from oilfields outside Opec in 2008 - more bad news for a global economy struggling with record high oil prices and tight supply. The dimming outlook for world production will keep the market on edge even as high prices hit consumers and cut into the pace of global demand growth. The International Energy Agency, adviser to 27 industrial economies, cut its expectations for supply growth from countries outside Opec to 460,000 barrels per day above 2007 levels, down from 680,000 bpd a month ago. The US Energy Information Administration, the statistical arm of the Energy Department, cut its forecast for non-OPEC output growth nearly in half to 310,000 bpd from 600,000 bpd. Both groups have consistently over-shot on non-Opec supply growth in recent years, as soaring field costs and geopolitical constraints have wreaked havoc on official timelines. Partly due to the dearth of supplies outside the Opec countries, the EIA raised its projections for 2008 oil prices by nearly 12%. Benchmark West Texas Intermediate oil prices will average $122.15 a barrel, up from its previous forecast of $109.53 a barrel, the EIA predicted. Oil prices hit a record near $140 a barrel last week, a seven-fold increase since 2002 that has been driven by surging demand from China and other developing countries. The EIA said it was still accounting for a planned non-Opec supply increase of 820,000 bpd later this year as big fields in Brazil and Azerbaijan come online. But, given recent delays, the EIA hedged its bets on the probability of such supplies materialising as planned. "Given recent history, EIA believes that the pace and timing of non-Opec supply growth will continue to be subject to possible delays in key projects and accelerating production declines in some older fields," the agency said. The EIA has sifted through new data that paints a less rosy picture for supplies from three key producers: Russia, Mexico and Brazil, said Matt Cline, an economist at the agency. In Russia, the world's second biggest exporter behind Saudi Arabia, a venture between Lukoil and US supermajor ConocoPhillips to produce 160,000 bpd in Russia's north has been repeatedly delayed. In Mexico, production from the huge Cantarell offshore field plummeted by more than 30% in the first four months of 2008, versus a year ago, Cline said. "Like everyone else, we had been expecting Cantarell to decline this year," Cline said. "But no one had been expecting it to decline by that much." In Brazil, the EIA has dramatically increased its baseline for decline rates in some larger, more mature fields, especially in its offshore areas. EIA head Guy Caruso said the downward revisions would put more pressure on Opec suppliers like Saudi Arabia to fill the gap, and will lead to tighter global spare capacity. "Tight spare capacity means upward pressure on oil prices," Caruso told Reuters. The slower growth in supply from non-Opec countries will keep supplies tight, despite weakening growth in demand, as high prices hit consumers, the EIA said. And analysts must balance predictions for supply decreases with similar predictions for falling oil demand, both in the US and globally. "It's a tricky situation, because supply is falling as fast as demand is," said Francisco Blanch of Merrill Lynch. The IEA said global oil demand will rise by 800,000 bpd this year, 230,000 bpd less than its previous forecast, in part because developing Asian economies are moving to roll back fuel subsidies that sheltered consumers. The EIA, meanwhile, cut its forecasts for US demand by 100,000 bpd and global oil demand by 210,000 bpd in 2008.

Tuesday, June 10, 2008

OPEC reference basket reaches $130.87 per barrel

MOSCOW, June 10 (RIA Novosti) - OPEC's reference basket of crudes from 13 countries was $130.87 per barrel on Monday, compared with $126.11 the previous Friday, the oil cartel said on Tuesday. In use since 1987, the basket is calculated from the crude prices of: Saharan Blend (Algeria), Girassol (Angola), Oriente (Ecuador), Minas (Indonesia), Iran Heavy (Iran), Basra Light (Iraq), Kuwait Export (Kuwait), Es Sider (Libya), Bonny Light (Nigeria), Qatar Marine (Qatar), Arab Light (Saudi Arabia), Murban (UAE) and BCF 17 (Venezuela). The chief executive of Russia's energy giant Gazprom told a European business forum in France that oil prices could reach $250 per barrel in the longer term. News agency AFP quoted Alexei Miller as saying that rivalry for hydrocarbon resources will continue to grow.

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