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Oil drops more toward $60 on ample supply
Tue Oct 3, 2006 7:09am ET
LONDON (Reuters) - Oil fell further toward $60 a barrel on Tuesday, extending Monday's steep drop on forecasts of a further increase in fuel inventories in top oil consumer the United States.
U.S. distillates stocks, which include heating oil, probably rose last week, analysts polled by Reuters said. As oil slips further from a July peak, traders are watching for signs OPEC may act to support prices.
"Given comfortable middle distillate stocks, it's hard to see a real supply worry in the winter," said Mike Wittner, analyst at Calyon investment bank. "If the price comes off another couple of dollars, we'll see more action out of OPEC."
U.S. crude <CLc1> lost 67 cents to $60.36 a barrel by 1053 GMT, after falling as low as $60.22, the lowest since September 27. London Brent <LCOc1> dropped 65 cents to $59.80.
Further easing prices, the U.S. Energy Department told Reuters on Monday it would delay buying some 11 million barrels of crude for the nation's emergency reserve through the winter to keep more supply on the market.
Moves by OPEC members Nigeria and Venezuela to trim output have yet to stem the slide. The measure will have little impact unless larger Organization of the Petroleum Countries producers follow, analysts say.
Nigeria and Venezuela last week pledged to cut supply from October 1 by about 170,000 barrels per day, less than 1 percent of OPEC's total output.
"The Nigerian and Venezuelan announcements are significant, but they don't remove a lot of oil from the market," Wittner said. "Saudi Arabia has been conspicuous by its silence
OPEC's second-largest producer Iran on Sunday backed any move by the 11-member group to bolster the market, while stopping short of saying it would trim its own output.
Oil has lost more than 20 percent since July's peak of $78.40 due to healthy U.S. heating fuel supplies, forecasts for a mild winter and signs of slower economic growth in the world's largest economy.
"We continue to see oil prices as having overshot to the downside from a fundamental perspective, but acknowledge that in the short term at least there is risk of further moves to the downside," Barclays Capital said in a report.
Analysts expect U.S. stocks of distillates, already at a seven-year high, to rise 1.3 million barrels in the week to September 29. The U.S. government's latest supply report is due out on Wednesday.
Gasoline stocks are forecast to rise by 900,000 barrels and crude inventories to fall by 700,000 barrels. <EIA/S>
Wall St Week Ahead: Dow may test highs; jobs report looms
Sun Oct 1, 2006 11:25am ET
Market View
By Emily Chasan
NEW YORK, Oct 1 (Reuters) - U.S. stocks may test record highs this week as muted oil prices take center stage. But the September jobs report on Friday could keep traders cautious and upend a rally.
Though the Dow Jones industrial average <.DJI> made a run at its all-time closing high last week, the week ahead may offer the blue-chip stock gauge its chance to close above its record highs, analysts said.
With the all-important jobs data coming late in the week, traders will keep watch on crude oil prices for clues about how energy costs will impact consumer spending in the coming holiday season. On Friday, oil settled below $63 a barrel -- off about 20 percent from a NYMEX record of $78.40 in July.
"Interestingly enough, all our technical signals are still pointing higher," said Bruce Zaro, chief technical analyst at Delta Global Advisors in Plymouth, Massachusetts. "The direction still looks like it is going to be up."
Volume is likely to be light on Monday, with the observance of Yom Kippur, the most somber day on the Jewish calendar.
FLYING HIGH
The Dow Jones industrial average <.DJI> blew past its all- time closing high in intraday trading several times last week. At one point, the Dow came within less than 10 points of its record intraday high of 11,750.28.
But the benchmark average of 30 blue-chip stocks finished on Friday at 11,679.07, failing to end above its all-time closing high of 11,722.98. That suggested to some traders that the Dow is still testing these levels and has more work to do to break out to new highs.
"The advance has been narrow -- meaning less and less stocks are participating -- so that tends to raise a caution flag," said Barry Ritholtz, fund manager at Ritholtz Capital Partners, in New York.
"The Dow has done much better than the broader market, and, historically, when you see people rotate away from small-cap to big-cap, that tends to be a late-stage defensive maneuver by professional investors."
U.S. stocks just finished the best September since 1998, with the S&P 500 Index up about 2.5 percent for the month. But some investors may be cautious as they head into October, known as "the jinx month," according to the Stock Trader's Almanac, because of stock market crashes in 1929 and 1987.
Despite Friday's modest decline as traders consolidated quarter-end positions, all three stock indexes finished the week with gains: The Dow was up 1.49 percent, while the Standard & Poor's 500 Index <.SPX> was up 1.60 percent and the Nasdaq Composite Index <.IXIC> shot up 1.78 percent.
For the quarter, the Dow rose 4.74 percent, the S&P 500 jumped 5.17 percent -- its biggest third-quarter advance since 1997 -- and the Nasdaq climbed 3.97 percent.
For the year so far, the Dow is up 9 percent, the S&P 500 is up 7 percent and the Nasdaq is up 2.4 percent.
TRACKING OIL AND CONSUMERS
"The key right now is what is going to happen to the economy," said Neil Wolfson, president of Wilmington Trust Investment Management in New York. "This rally has partially been due to the fact that oil prices have declined, and the view is that it might prevent us from going into recession."
Oil prices will be particularly important this week, Wolfson said, as investors try to assess the strength of the consumer before the key holiday shopping season.
The November-to-December holiday shopping season is the most important period for U.S. retailers, generating anywhere from 25 percent to 40 percent of their annual sales.
"As we get close to the earnings season, the market direction will be more based on individual company forecasts and reports, (or) speculation," said Rick Meckler, president of investment firm LibertyView Capital Management in Jersey City, New Jersey.
"We're also getting closer to the beginning of the holiday season and that starts to put a more positive spin on retailers, who undoubtedly will be optimistic."
On the New York Mercantile Exchange, crude oil for November delivery <CLX6> settled on Friday at $62.91 per barrel -- up 4 percent for the week.
There have been few pre-announcements about the upcoming earnings season, which kicks off Oct. 10, when Alcoa Inc. (AA.N: Quote, Profile, Research) reports results. Any confessions about earnings or sales shortfalls this week could influence investors, who are worried about corporate profits.
The earnings calendar is light, but investors will try to glean some information about the consumer from beverage company earnings reports. Pepsi Bottling Group Inc. (PBG.N: Quote, Profile, Research) is due to report earnings on Tuesday and beverage importer Constellation Brands Inc. (STZ.N: Quote, Profile, Research) will give its quarterly report on Thursday.
Hotel chain Marriott International Inc. (MAR.N: Quote, Profile, Research) and contract electronics manufacturer Solectron Corp. (SLR.N: Quote, Profile, Research) also are due to report quarterly results on Thursday.
PUNCHING THE CLOCK
This week's economic data could help investors assess the likely magnitude of the economic slowdown.
On Friday, the Labor Department will release its September nonfarm payrolls report. Economists polled by Reuters expect that the U.S. economy added 125,000 jobs in September, compared with 128,000 in August. They see the U.S. unemployment rate holding steady at 4.7 percent.
"We're at or close to full employment with the unemployment rate being as low as it's been," Wolfson said. "But the question is what will happen with wages and wage inflation."
Average hourly earnings are expected to have gone up 0.3 percent in September, the Reuters poll showed, after gaining 0.1 percent in August.
The week's data calendar will kick off on Monday with the Institute for Supply Management's September index of U.S. manufacturing activity. The forecast: 53.5 in September, compared with 54.5 in August.
On Tuesday, domestic car and truck sales will be released, with economists expecting an uptick in both.
On Wednesday, the ISM's index of U.S. non-manufacturing activity will shed some light on the strength of the services sector. The forecast: 56.0 in September vs. 57.0 in August.
Investors also may get a better picture of the manufacturing sector's health on Wednesday, when August factory orders and revised August data on durable goods orders will be released. Investors have been worried about the pace of U.S. manufacturing after conflicting reports on business activity from the Federal Reserve's district banks in Philadelphia, Richmond and Chicago in the last two weeks.
Oil $62.30 May Rise as OPEC Considers Cuts to Bolster Prices (Update1)
By Mark Shenk
Sept. 29 (Bloomberg) -- Crude oil may rise on speculation members of the Organization of Petroleum Exporting Countries will join Nigeria and reduce output to counter a 20 percent decline in prices during the past two months.
Seventeen of 42 analysts, traders and brokers, or 40 percent, said prices will rise next week, according to a Bloomberg News survey. Fourteen forecast prices will fall and 11 predicted little change. A week ago, 56 percent of respondents said futures would decline.
Nigeria will cut exports 5 percent next month, the Nigerian National Petroleum Corp. announced yesterday. OPEC members are cutting output on a ``voluntary basis,'' acting Secretary- General Mohammed Barkindo said yesterday. Oil has plunged because of higher U.S. fuel supplies and reduced concern that conflict will disrupt Middle East shipments.
``OPEC has made some hawkish comments over the last week, which shows a commitment by them to protect the price,'' said Katherine Spector, an energy strategist at JPMorgan Chase & Co. in New York.
Crude oil for November delivery has risen $1.80, or 3 percent, so far this week to trade at $62.35 a barrel today on the New York Mercantile Exchange at 8:23 a.m. London time
Futures are down 5.9 percent from a year ago. Oil reached a record $78.40 a barrel on July 14 on concern that fighting in Lebanon between Israel and Islamic militia Hezbollah would spread through the Middle East.
The 11 members of OPEC, which produce about 40 percent of world oil, kept their output target at 28 million barrels a day at their Sept. 11 meeting. Ministers from Nigeria, Iran and Algeria said they were concerned about falling prices. OPEC's next scheduled meeting is on Dec. 14 in Abuja, Nigeria.
Nigeria's Output
Nigeria pumped 2.2 million barrels of oil a day in August, making it OPEC's-sixth biggest producer, according to a Bloomberg News survey of companies, producers and analysts. Nigeria was the fifth-biggest source of U.S. oil imports during the first seven months of 2006, Energy Department figures show.
Still, OPEC isn't considering an emergency meeting over the current oil price because ``prices are still at a good level,'' Saudi Oil Minister Ali al-Naimi told reporters at an energy and environment conference in Riyadh on Sept. 19. Saudi Arabia is the world's biggest oil exporter.
``A cut by OPEC depends on the Saudi position once WTI's current-month price approaches the mid-$50s a barrel,'' said Mordechai Abir, director of energy research at Burnham Securities Inc. in New York. ``To the best of my knowledge this would still provide Riyadh with sufficient revenue.''
West Texas Intermediate, or WTI, crude oil is the U.S. benchmark and can be delivered against New York futures.
Speculators Buy
Prices surged the most in six months on Sept. 27, as speculators who had sold contracts in a bet that prices would fall bought them back when futures failed to break through $60 a barrel in New York.
``After plunging from the peaks above $70, oil has settled into a trading band of within the low- to mid-$60s,'' said Gerard Burg, energy and minerals economist at National Australia Bank Ltd. in Melbourne. ``Without a clear direction from market fundamentals or external factors, crude prices are likely to fluctuate within this range until seasonal demand recovers toward winter.''
Global fuel consumption peaks during the Northern Hemisphere winter, when homeowners and businesses purchase heating oil.
Supplies of distillate fuel, a category that includes heating oil, were 22 percent higher last week than the five-year average for the period, the U.S. Energy Department said on Sept. 27. Crude oil inventories were up 12 percent and gasoline stockpiles are up 6.3 percent from the average.
Prices May Fall
``Both crude and product fundamentals are outright bearish,'' said Antonio Szabo, chief executive officer of Houston-based consultant Stone Bond Technologies. ``Crude prices should fall. In fact our belief is that they are heading to $58 a barrel in the near future, perhaps even next week.''
Talks yesterday between Iran and the European Union aimed at breaking the deadlock over Iran's atomic program produced some progress, the country's chief nuclear negotiator Ali Larijani said. Iran has the second-biggest proved oil reserves and almost a quarter of the world's oil flows through the Strait of Hormuz, a narrow waterway between Iran and Oman.
Oil should ``decline to the $50s a barrel,'' Burnham's Abir said. ``Weather was disappointing to price hawks and the Iran conflict is and was never serious. Demand is slowly declining while global proven production capacity, including that of Saudi Arabia, is gradually increasing.''
Oil platforms in the Gulf of Mexico have escaped damage this Atlantic hurricane season. Last year all platforms were shut when Hurricane Rita moved through the Gulf. The Atlantic hurricane season runs from June through November.
The survey has correctly predicted the direction of prices 52 percent of the time since it was introduced.
Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:
RISE NEUTRAL FALL
17 11 14
Oil $61 Little Changed After Falling on Signs U.S. Supplies Rising
By Gavin Evans
Sept. 27 (Bloomberg) -- Crude oil was little changed in New York after falling yesterday on speculation a government report today will show fuel stockpiles in the U.S., the world's biggest consumer, extended more than a month of gains.
An Energy Department report will probably show gasoline supplies climbed for a sixth time last week, rising 700,000 barrels, according to the median of 11 estimates in a Bloomberg News survey of analysts. Supplies of distillates, including heating oil and diesel, probably gained another 2.5 million barrels, according to the survey.
``I'm betting that we'll see a little build across the board,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. ``We do have high stockpiles. As long as they remain around 11 and 12 percent above average, that's going to put a cap on prices.''
Crude oil for November delivery was at $61.11 a barrel, up 10 cents, in after-hours electronic trading on the New York Mercantile Exchange at 8:15 a.m. in Singapore.
The contract fell 44 cents, or 0.7 percent, to $61.01 a barrel yesterday on the New York Mercantile Exchange. Oil reached a six-month low of $59.52 on Sept. 25 and has closed within 66 cents of $61 each of the past five sessions.
``We've seen prices for a week relatively range-bound,'' Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina, said yesterday. ``None of the major fundamentals have changed. Inventories remain lush.''
U.S. Stockpiles
U.S. crude oil stockpiles held 327.7 million barrels on Sept 8, 11.7 percent above the five-year average for the period, according to Energy Department records. Inventories slipped to 324.9 million barrels on Sept. 15 and probably declined by a further 1.7 million barrels last week, according to the median estimate from a Bloomberg News survey of 11 analysts.
U.S. distillate inventories have risen for six straight weeks and held 148.7 million barrels on Sept. 15. Stockpiles the week before were 12 percent above the five-year average, the department said Sept. 13.
World oil demand peaks in the fourth quarter when refiners make heating fuel for the northern hemisphere winter. Demand in the quarter will average 85.6 million barrels a day, up 2.2 percent from a year earlier, the Organization of Petroleum Exporting Countries said in a Sept. 15 forecast.
Oil reached a record $78.40 a barrel on July 14. It has fallen 22 percent since then as U.S. stockpiles rose and a United Nations deadline for Iran to stop its nuclear research passed without sanctions being imposed.
Direction
Oil remains in a bull market even though it has retreated from recent highs, Excel's Waggoner said. Further declines will be limited and oil is likely to trade between $60 and $67 a barrel for the remainder of the year.
``At $60 there's going to be some incentive for OPEC to cap the production again,'' he said. ``Demand remains reasonably strong'' and it is still unclear how cold winter will be, he said.
Daily U.S. demand, as measured by deliveries of all oil products, fell the past four weeks to average 20.76 million barrels a day in the week ended Sept. 15, matching the average so far this year. Consumption averaged 20.7 million barrels through 2005, according to Energy Department data.
A weak El Nino weather pattern is likely to bring warmer- than-normal weather to the western U.S. from October through December, government forecasters said Sept. 21. There is an equal chance of above- or below-normal temperatures in the east, the U.S. Climate Prediction Center said.
The U.S. Northeast accounts for about 80 percent of the nation's domestic heating oil consumption.
US says will pull Alaska wetlands from oil drilling
Sat Sep 23, 2006 9:47pm ET
http://today.reuters.com/news/articlenews.aspx?type=domesticNews&storyID=2006-09-24T014702Z_01_N...
WASHINGTON (Reuters) - In a win for environmentalists, the U.S. Interior Department says it is willing to withdraw sensitive wetlands from a large area in Alaska's western Arctic region that it wanted to open next week to oil and natural gas drilling.
The U.S. District Court of Alaska earlier this month blocked the department's plan to allow energy development on lands around Teshekpuk Lake in the National Petroleum Reserve, saying the government's assumptions about the environmental impact of drilling in the area were faulty.
The department told the court on Thursday it would pull the wetlands in dispute so the matter could be studied further, but it asked for energy exploration to continue on the other lands in the planned lease sale on Wednesday.
In its filing with the court, the department said, "The ability to go forward with some leasing in the (petroleum reserve) is in the public interest."
The department's Bureau of Land Management initially wanted to offer energy companies the opportunity to search for crude oil and natural gas on about 8 million acres (3.2 million hectares) in the petroleum reserve.
Environmentalists were concerned because 373,000 acres
north of the reserve's Teshekpuk Lake were also being put up for lease for the first time.
The reserve is estimated to hold between 5.9 billion and 13.2 billion barrels of recoverable oil and 39 trillion to 83 trillion cubic feet of natural gas. Two billion barrels of oil may be around Teshekpuk Lake alone, the BLM said
Oil recovers further toward $62 after 6-week dive
Fri Sep 22, 2006 2:25am ET
TABLE-FirstFed Financial Q2 earnings rise
More Company News... Email This Article | Print This Article | Reprints [-] Text [+] By Maryelle Demongeot
SINGAPORE (Reuters) - Oil prices rose for a second day on Friday after a brief mid-week dip below $60 a barrel, as investors bet a six-week slump driven by rising U.S. inventories and easing Iran tensions could be coming to an end.
The tumble of more than 20 percent since early August has raised expectations that OPEC, which decided two weeks ago to maintain production for the time being, will curb output to limit further losses.
U.S. light crude for November delivery <CLc1> rose 29 cents to $61.88 by 0555 GMT, having reached an intraday high of $62.02 -- adding to a 85-cent gain on Thursday. London Brent crude <LCOc1> was up 28 cents at $61.62.
Oil has lost about $15 over the past six weeks in a steady slide interrupted by a handful of temporary rallies, but the exodus of investment funds that has deepened losses is seen as likely to end soon given the approach of winter demand and OPEC cuts.
"You have had a very big sell-off. Continued downside momentum would require a continued flow of bad news, which I don't think we are going to get," said Michael Coleman, a partner with Singapore-based hedge fund Aisling Analytics.
"We think prices have got potential to stabilize and consolidate. Stocks are high but we are also going into winter. Geopolitical tensions are easing, but they are as easy as they are going to be," he added.
In a comment seen signaling a possible shift from the world's biggest exporter, Saudi oil minister Ali al-Naimi said on Tuesday that prices were "reasonable", a break from the past year when he has consistently said that prices are too high.
Rising fuel inventories in the United States have fed an increasingly bearish sentiment ahead of winter.
Distillates stocks, which include heating oil, stand at their highest level since January 1999, while crude inventories are also in their upper range for this time of the year.
Domestic gas inventories also stand at record-high levels for this time of year, standing at 356 billion cubic feet, or 13 percent above last year, after having risen by 93 bcf in the past week, the U.S. Energy Information Administration said on Thursday.
A surprise drop in regional factory activity reported on Thursday suggested that the U.S. economy may be losing momentum faster than most economists anticipated.
The Philadelphia Federal Reserve Bank said its business activity index tumbled to minus 0.4 in September from 18.5 in August, the first time the index had fallen below zero since April 2003, and indicating a decline in manufacturing.
Further easing supply risks, Iranian President Mahmoud Ahmadinejad said on Thursday his country was prepared to negotiate a suspension of its most sensitive nuclear work if it received fair guarantees in talks with major powers.
This was the most explicit public statement by an Iranian leader that Tehran is considering complying with the key condition for talks on broad co-operation with the West.
"We have said that under fair conditions and just conditions we will negotiate about it," the president said.
Oil $($61.50) , Gasoline Plunge with stockpiles & Bush Gives Diplomacy a Chance With Iran
By Mark Shenk
Sept. 19 (Bloomberg) -- Crude oil and gasoline fell to the lowest in almost six months after U.S. President George W. Bush said he will give diplomacy a chance to end a dispute with Iran, the fourth-biggest oil producer, over the country's nuclear program.
Bush said today that members of the European Union will continue negotiations with Iran on suspending enrichment. Once Iran halts uranium processing, ``the United States will come to the table,'' he said.
``The Bush speech was tame relative to what a lot of us expected,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``He didn't take as aggressive a tone as he could have with Iran and appears to have moved to the European position.''
Hedge funds are selling futures after losing money on bets in the energy market, analysts said. Prices also fell on speculation that a government report tomorrow will show that the U.S. has ample fuel supplies before the heating season.
Crude oil for October delivery fell $2.14, or 3.4 percent, to $61.66 a barrel on the New York Mercantile Exchange, the lowest close since March 21. It was the biggest one-day decline since May 15. Futures have plunged 21 percent from a record $78.40 a barrel on July 14 as tensions in the Middle East eased.
Amaranth Advisors LLC, a hedge-fund manager overseeing about $9.5 billion, told investors that its two main funds fell an estimated 50 percent this month because of a plunge in natural-gas prices.
Hedge Fund Bets
Hedge-fund managers and other large speculators last week reduced their bets on higher oil prices, according to the Commodity Futures Trading Commission. Speculative long positions, or bets prices will rise, outnumbered short positions by 37,020 contracts in New York in the week ended Sept. 12, the Washington- based commission said on Sept. 15. That was down 22 percent, from a week earlier.
``These funds can go short as quickly as they went long,'' said Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina. ``I think the most important thing at the moment is how lush product inventories are.'' Shorts are bets that prices will fall.
An Energy Department report tomorrow is expected to show that U.S. supplies of distillate fuel, a category that includes heating oil and diesel, and gasoline rose last week, according to the median of responses in a Bloomberg News survey. Crude oil, distillate and gasoline supplies in the week ended Sept. 8 were above the five-year average, the department said last week.
Gasoline for October delivery fell 7.58 cents, or 4.8 percent, to $1.5038 a gallon, the lowest close since Feb. 22. Pump prices have followed futures lower. Regular gasoline, averaged nationwide, is down 11 percent from a year ago, the AAA, the nation's largest motorist organization, said. Gasoline fell 0.8 cent yesterday to an average $2.487 a gallon.
Bush's Speech
``Iran must abandon its nuclear weapons ambitions,'' Bush said in an address to the United Nations General Assembly in New York today. Directing remarks to the Iranian people, he said, ``Despite what the regime tells you, we have no objection to Iran's pursuing of a truly peaceful nuclear power program. We are working toward a diplomatic solution to this crisis.''
Asked about French President Jacques Chirac's suggestion that sanctions be taken off the table temporarily as an incentive to get Iran back to negotiations, Bush said the U.S. and France agree on a strategy while warning Iran that ``time is of the essence.'' Iran missed an Aug. 31 United Nations deadline for suspending its uranium enrichment program.
Brent crude oil for November settlement fell $1.88, or 2.9 percent, to close at $62.17 a barrel on the London-based ICE Futures exchange.
Playing the field for oil profits-Barron's Online
From the "Weekday Trader" section: The storm that has blown energy prices back from their recent peak has created a new opportunity in the oil-field-services sector. Crude oil prices have tumbled about 20% from their mid-July high to near $62 per barrel. The result scared away some speculative energy investors, but the earnings cycle has not ended for large services-and-drilling companies with long-term, deepwater projects that continue even if oil prices fall below $50. Among them are driller Transocean (RIG), whose shares have fallen 8% since mid-July, and big equipment-and-services provider Weatherford International (WFT), whose stock has fallen more than 17% in that period. These companies are being paid by major international explorers to get oil and gas out of the ground. And those projects are budgeted to be profitable with oil prices well below the six-month $65 average projected by the futures market. Of course, if oil prices fall more, the prices of these stocks could feel more pain. But with the world still begging for more oil, large oil-field-services names with good prospects and valuations could prove to be the valuable seashell the oil-price storm left on the beach. :theflyonthewall
Algeria Oil Minister sees oil over $50 but watching US growth
Sun Sep 17, 2006 4:26 PM GMT
ALGERIA (Reuters) - Oil prices are expected to stay above $50 a barrel in coming months, but producers are watching the U.S. economy closely as the possibility of a recession there cannot be ruled out, Algeria's energy minister said on Sunday.
Asked by reporters for his price outlook for coming months, Energy and Mines Minister Chakib Khelil replied: "I think prices will still remain above $50. The indications on the futures market are above $50 for the coming years."
But he added: "Now everything depends on world economic growth. If there really is a recession in the U.S., at that moment demand could be affected fairly rapidly. We would find a lot of supply on the market and a lot of crude in competition."
"We cannot exclude this possibility. We count a lot on the wisdom of the chairman of the Federal Reserve to take good decisions on interest rates, as well as on the European Central Bank, to encourage economic growth."
Khelil reiterated that OPEC President Edmund Daukoru had the authority to convene another meeting in advance of its next scheduled gathering in Nigeria in December to enable OPEC to stabilise the market if he felt it necessary.
"We are coming into a period where there is the possibility of recession in the U.S. economy," said Khelil, who becomes alternate president of the oil exporting club from Jan 1, 2007.
"There are signs of recession. It's not clear that there will be a recession. But we are watching that," he added.
"We are following this (U.S. economic growth) with a lot of attention, because this element is critical for petroleum demand in the next few years."
Petroleum Inventory Preview
Petroleum inventory data is due at 10:30 E.T, according to Bloomberg survey, analysts believe distillate fuel inventories rose 2.0 mln during the week ending Sept 9th; 14 analyst expectations range from inventories being unchanged to a build of 3.0 mln; last year saw a 1.105 mln draw in distillate fuel inventories during this period; 4 week avg is a build of 1.88 mln barrels... Analysts believe that gasoline inventories rose 200K barrels; expectations range from a draw of 2.0 mln to a build of 2.0 mln (Analysts are split down the middle with 7 expecting a draw and 7 a build; prior year was a build of 1.892 mln)... Analysts believe crude oil inventories fell 2.0 mln; analyst estimates range from a draw of 3.4 mln barrels to a build of 1.1 mln (12 of the 15 analysts expecting a draw with the 1.1 mln build estimate being an outlier). Bloomberg expects capacity utilization to be approx 93.6%, compared to 87.3% from year ago (lower capacity utilization was due to Katrina)... Briefing.com note: Focus will start to switch from gasoline to distillate fuel as the summer driving season comes to an end and the winter heating season looms closer. September and October also tend to be big maintenance months for refiners as they try and take advantage of the period between gasoline and heating oil demand.
Stocks advance as Oil Prices Fall
By JOE BEL BRUNO , 09.11.2006, 05:19 PM
Wall Street inched higher Monday as a broad retreat in commodities prompted investors to shift money out of oil and raw materials-based companies and into other stock sectors.
Falling prices for petroleum and metals led to declines in shares of commodities producers; Exxon Mobil Corp. and Alcoa Inc., both Dow Jones industrials, were among the session's biggest decliners.
The six-day slide in crude prices, which closed under $66 per barrel Monday, was welcomed by Wall Street as a sign inflation will be kept under control. Cheaper oil also could help boost consumer spending, as well as corporate profits.
"The drop in oil prices is becoming a catalyst, as is other commodities, and giving people confidence to put money into areas that have somewhat been lagging such as technology," said Scott Fullman, director of investment strategy for Hapoalim Securities.
Investors have been looking for any direction about the state of the economy, but have also traded with relatively little conviction ahead of the Federal Reserve's next meeting Sept. 20. St. Louis Fed President William Poole said in a speech Monday that inflation is "pretty well controlled," but offered little else about the economy.
The Dow Jones industrial average rose 4.73, or 0.04 percent, to 11,396.84, after moving in and out of positive territory during erratic afternoon trading. The Dow slipped 0.63 percent last week.
Broader stock indicators also closed higher. The Standard & Poor's 500 index added 0.62, or 0.05 percent, to 1,299.54, and the Nasdaq composite index rose 7.46, or 0.34 percent, to 2,173.25.
Trading volume, while moving above the light summer levels seen last week, still remained sluggish with little corporate or economic news to start the week with. Some direction about the economy might come with retail sales figures due Thursday.
Bonds edged lower, with the yield on the benchmark 10-year Treasury note rising to 4.80 percent from 4.78 percent on Friday. The dollar was mixed against other major currencies, while gold prices fell below $600 an ounce for the first time in more than two months.
Oil fell again Monday as OPEC said it would continue pumping crude at high rates to extend global supplies. The price of light sweet crude fell 64 cents to $65.61 per barrel on the New York Mercantile Exchange, marking the sixth-straight day of declines.
Exxon Mobil fell $1.87, or 2.8 percent, to $64.94, while Alcoa declined $1.52, or 5.3 percent, to $27.16.
"We'd love to see the energy sector take a time out because we think if oil prices are up, that is a market negative," said Jim Russell, director of core equity strategy for Fifth-Third Asset Management in Cincinnati. "We don't mind at all oil stocks are trading down, all things being equal, that has been one of the inflationary signs everyone's been watching."
Fullman said he expects a continued migration from commodity-based stocks to other sectors "unless it's given a reason to reverse that trend, like if energy prices begin to rise again." Excluding that, he expects oil companies - which have been rich with profits during the past year and has had among Wall Street's most steady stock returns - will continue to decline.
Tech stocks were among the beneficiaries of the migration away from oil and metals. Freescale Semiconductor Inc. led the advancers after confirming it's in talks about a possible deal. The stock jumped $6.31, or 21 percent, to $37.06.
The bounce in tech shares also helped Dell Inc. recover some of its losses after the computer maker said it would delay a quarterly filing with the Securities and Exchange Commission amid questions about its accounting. The stock fell 46 cents, or 2.1 percent, to $21.19.
Bank of America Corp. fell 48 cents, or 0.9 percent, to $51.18 after securities firm UBS downgraded the nation's largest retail bank on signs of weakening credit and eroding deposit trends. BofA announced it would acquire healthcare technology company HeathLogic Systems Corp. for an undisclosed sum.
Canadian steelmaker Ipsco Inc. said it will acquire NS Group Inc. for about $1.46 billion in cash. Ipsco dropped $6, or 6.4 percent, to $87.20; NS surged $18.16, or 39 percent, to $64.31.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume came to 1.68 billion shares, compared to 1.32 million traded at the same time Friday.
The Russell 2000 index of smaller companies declined 1.10, or 0.16 percent, to 707.44.
Overseas, Japan's Nikkei stock average closed lower by 1.78 percent. At the close, Britain's FTSE 100 dropped 0.48 percent, Germany's DAX index rose 0.06 percent, and France's CAC-40 was shed 0.30 percent.
OPEC Will Probably Keep Oil Above $65 Current Production Level,
By Stephen Voss
Sept. 8 (Bloomberg) -- OPEC, the producer of 40 percent of the world's oil, is likely to keep production at current levels when its members meet next week, increasing the chances crude will stay above $65 a barrel for the rest of the year.
That's the unanimous view of 18 oil traders, brokers and analysts surveyed on Aug. 31, who predicted oil ministers will vote to keep quotas when they meet in Vienna. Officials from Iran and Nigeria said in the past three weeks that OPEC members, apart from Iraq, should keep their target of 28 million barrels a day.
The Sept. 11 meeting of the Organization of Petroleum Exporting Countries comes as high oil prices curb consumer spending from Australia to the U.S., prompting calls by politicians to reduce reliance on OPEC crude. Iran, Venezuela, Nigeria and Indonesia are all failing to produce as much oil as planned.
``OPEC will look at the market, they'll be happy with what's going on,' said Leo Drollas, deputy executive director of the London-based Centre for Global Energy Studies. ``Prices are high and their revenues are soaring. They feel the prices aren't affecting the world economy so there's no need to change anything, including production quotas.'
Output for the 10 members outside of Iraq was 27.9 million barrels a day in August, below the planned 28 million a day, according to data compiled by Bloomberg. Members last surpassed the target in February.
Oil in New York touched a record $78.40 a barrel on July 14, fueled by concern that fighting in Lebanon between Israeli and Hezbollah forces would spread in the Middle East, the source of 30 percent of the world's crude. Supply disruptions in Nigeria because of militant attacks and a dispute with Iran over its nuclear program also bolstered prices.
OPEC's Struggles
``OPEC still has the capacity to influence the market, but not on all occasions,' said Sadek Boussena, a former OPEC president who is now an adviser to French bank Societe Generale SA. ``The unpredictable factor is geopolitics. We can't predict what can happen in Nigeria, Iraq and Iran.'
Oil has since slipped about 14 percent as concern eased about disruptions from Iran, the world's fourth-biggest producer, and as the fighting in Lebanon ended. German Chancellor Angela Merkel on Sept. 6 said the nation won't back a military strike on Iran.
A benign Atlantic hurricane season has damped concern that oil and natural gas from platforms in the Gulf of Mexico will be disrupted. By this time last year, six hurricanes had developed, including Katrina, which shuttered most oil and gas production in the Gulf.
Member Views
Iran's OPEC governor, Hossein Kazempour Ardebili, told the state-run Iranian Students News Agency Sept. 2 he expected quotas to remain unchanged.
``OPEC will continue its policy of supplying the market above demand for this organization to avoid accusations of driving prices higher,' he said.
Edmund Daukoru, OPEC president and the Nigerian oil minister, said on Aug. 17 in Brazil the group won't lower the target this year.
Some members, including Saudi Arabia, OPEC's largest producer, exceed their official quotas to make up for shortfalls by other nations. Saudi Arabia produced 9.38 million barrels a day in August, according to the Bloomberg data, surpassing its quota of about 9.1 million a day. Saudi production peaked at 9.78 million barrels a day in October 2004.
``Saudi Arabia has cut back some of its heavier crude production,' as has Iran, because they can't sell it, said Kevin Norrish, an energy analyst at Barclays Capital in London, who expects oil to cost $70 to $80 next year. ``That's a symptom of a lack of refining capacity to handle those grades.'
Iran Conflict
Algeria pumped 54 percent more than its quota in August, while Indonesia was 41 percent below, according to the data compiled by Bloomberg.
``The quotas don't really reflect the potential of various countries,' Drollas said.
Increasing demand in countries such as China has also been driving prices, while spare production capacity has declined because OPEC isn't investing enough, Drollas said.
Traders are divided on whether Iran would curb oil exports. United Nations members including the U.S. are considering sanctions in an effort to contain the country's nuclear ambitions. Iran, which last week defied a UN demand to halt uranium enrichment, said Sept. 6 it's ready to retaliate against any attack.
Even a ``symbolic cut' would push prices up, Norrish said.
A two-day energy seminar in Vienna will follow the formal OPEC meeting, with ministers and executives from companies including Exxon Mobil Corp., Royal Dutch Shell Plc, Chevron Corp. and Saudi Aramco scheduled to attend.
To contact the reporter on this story: Stephen Voss in London at sev@bloomberg.net
Oil slides to under $67 new five-month
By Ikuko Kao
TOKYO (Reuters) - Oil extended a week of losses to strike a new five-month low under $67 on Friday after U.S. distillate supplies rose sharply and BP said it might be able to restore its Alaskan oilfield sooner than expected.
U.S. light crude for October delivery was down 53 cents at $66.79 a barrel by 6:21 a.m. British time after hitting a low of $66.75 a barrel, briefly surpassed Thursday's trough. Prices were falling for a fifth day to stand at their lowest since April 7.
London Brent crude fell 49 cents to $66.04.
Energy giant BP Plc said its Prudhoe Bay oilfield in Alaska, partially shut since August due to pipeline corrosion, could return to full capacity above 400,000 barrels per day (bpd) by end-October -- several months earlier than many estimates -- if regulators approved its plan to bypass a corroded pipeline.
The field, which supplies 8 percent of U.S. oil, is running at about 220,000 bpd. It was not immediately clear when the U.S. government would make a decision on the matter.
BP's decision to shut down North America's biggest field sent oil prices soaring above $77 a month ago, but prices have since slumped as a thus-far mild Atlantic hurricane season and healthy global oil inventory levels soothe supply concerns.
The BP comment came after U.S. government data showed domestic oil stocks were building up more quickly than analysts expected in the first week of the shoulder season between peak summer and winter oil demand.
"Traders are comfortable selling oil for the first time in a while," Tobin Gorey, a commodity strategist at Commonwealth Bank of Australia, said in a research note.
"The U.S. inventory report last night points to comfortable supply conditions for now."
COMFORTABLE STOCKS
Distillate stocks, including winter heating oil, rose 3.1 million barrels to 139.9 million barrels in the week of September 1, much more than expected and the highest level since January 2002, the U.S. Energy Information Administration (EIA) said.
Commercial crude stocks fell by a larger-than-expected 2.2 million barrels last week, but supplies remain about 6 percent higher than a year earlier and OPEC boosted production last month to its highest level this year, a Reuters survey found.
Gasoline stocks rose by 700,000 barrels to 206.9 million barrels, against analysts' forecasts for a decline. S]
Oil prices have fallen almost 8 percent over the past two weeks and stand about $12 below record-highs above $78, with the breach of a key technical level potentially deepening losses.
On Thursday, U.S. crude settled below the 200-day moving average -- a major technical trigger for speculators -- for the first time since mid-March. It continued to trade below the average -- effective at $67.48 a barrel -- on Friday.
"That's done little except slow the rally over the past few years but there's always a first time," Gorey said.
Oil has breached the 200-day average several times since 2003, but has not remained below it for more than two weeks.
Analysts say prices have also shed much of the premium attached to concerns over Iran's nuclear row with the West as there is growing doubt over sanctions against the world's fourth-largest oil exporter.
Six world powers said after a meeting on Thursday there was growing opposition to U.S. calls for sanctions against Iran, although Tehran has failed to meet a U.N. Security Council demand that it suspend nuclear enrichment.
OPEC is expected to keep pumping at full capacity for the rest of 2006 despite ample supplies in key consumer nations. The group will meet to review its output policy on Monday in Vienna.
(c) Reuters 2006. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.
This article: http://business.scotsman.com/latest.cfm?id=1327602006
Last updated: 08-Sep-06 06:36 BST
Drilling for Opportunities in Oil Services
Options-Trading Strategies on Oil Services Stocks
9/1/2006 12:21 PM ET
By Jocelynn Drake (jdrake@sir-inc.com)
http://www.schaeffersresearch.com/commentary/premium/bgscommentary.aspx?id=17257
August proved to be an ugly month for crude oil, as the price per barrel slipped more than seven percent. I'll admit that I'm not complaining too loudly, considering I can skip down the block and buy a gallon of unleaded gasoline at $2.46 a gallon. If we can get back below $2 per gallon, we just might witness some dancing in the streets.
But I digress. My focus today drills down on the oil-services sector, which had its technical troubles well before the price of oil started its descent. In fact, it appears that when oil prices briefly stalled in May and June before bouncing back, this group never recovered. Since mid-May, the PHLX Oil Services Index (OSX) has battled resistance at its 10-week and 20-week moving averages. During this time frame, the index has closed only one week above this duo. Furthermore, August marked the index's first monthly close below its 10-month trendline since November 2003. While the index is still sitting on a year-to-date gain of six percent, OSX has shed more than 19 percent since tagging a near-term peak in May.
Despite the group's pullback during the past few months, sentiment remains wildly bullish. According to Zacks, 74 percent of the 199 analyst ratings offered up on OSX components come in at a "buy" or better. Should Wall Street begin to shed some of its optimism and issue downgrades, this sector could come under additional selling pressure.
Drilling down a little deeper, one company that catches my bearish eye is Noble Corp. (NE: sentiment, chart, options). The security has been guided lower under its 10-week and 20-week moving averages since mid-May, creating a series of lower highs and lower lows. It also didn't help that the company reported per-share earnings on July 20 of $1.30, a penny shy of the consensus estimate. By the close of that trading session, the equity had retreated nearly six percent.
Meanwhile, investors refuse to acknowledge that the shares may be having some problems. Short interest for the security plunged 17 percent in August, resulting in a short-interest ratio that is just two times the stock's average daily trading volume. This paltry accumulation of bearish bets leaves the equity low on potential short-covering support should it succeed in drumming up a little good news.
Options speculators are also optimistic when it comes to Noble. Peak call open interest in the September series rests at the out-of-the-money 70 strike with nearly 3,600 contracts, while peak put open interest in the front-month series comes in at the 60 strike with only 2,200 contracts. In fact, call open interest among near-term options nearly doubles put open interest.
This combination of optimistic sentiment against the stock's weakening technical backdrop leaves that shares primed for a bearish play. Investors should consider the stock's January 2007 65 or 70 put.
Weatherford International (WFT: sentiment, chart, options) is in much the same boat as Noble. The stock has broken what looked to be solid support at the 45 level and is retreating under pressure from its 10-week trendline. What's more, August marked the stock's first monthly close below its 10-month moving average since May 2005.
While short sellers are jumping on the bearish train, with short interest soaring 27 percent last month, Wall Street refuses to shed its bullish stand. Zacks reports that 11 of the 15 analysts following the company rate it a "buy" or better. Any downgrades from this group could spell trouble for the shares. A January 2007 45 put would allow speculators to capture some gains on a continued pullback in the shares.
One last bearish pick from this sector arrives in the form of Baker Hughes (BHI: sentiment, chart, options). The stock has tumbled more than 21 percent from its June high and has drifted lower under its 10-day and 20-day moving averages since late July. However, I'm a little wary of this security, as it is currently testing round-number support at the 70 level.
Furthermore, options players have grown somewhat skeptical of the shares, as they have loaded up on puts. On the other hand, short sellers have yet to jump on this security. The stock's short-interest ratio sits at a meager 2.2 days to cover. Wall Street is also deeply entrenched in the bulls' camp, with 71 percent of analyst ratings a "buy." Traders should consider the stock's January 2007 70 put. However, keep a tight stop-loss price on this position in the event that it succeeds in bouncing off support at the 70 level.
Of course, there are a handful of bullish opportunities sparkling within the sector. Smith International (SII: sentiment, chart, options) is currently perched on long-term support at its 10-month moving average. Cameron International (CAM: sentiment, chart, options) is also consolidating into support at its ascending 10-month trendline, which it has not finished a month below since April 2004.
NE to Present sept 5th @ LEHM CEO Energy Conference
Thursday August 31, 9:00 am ET
A live broadcast of the presentation and a replay will be publicly accessible through the company's website at http://www.noblecorp.com . Go to the "Investor Relations" link and select "Presentations". Participants are encouraged to log onto the site at least 15 minutes before the scheduled start of the presentation to ensure that minimum software requirements are met.
Noble Corporation is a leading provider of diversified services for the oil and gas industry. Contract drilling services are performed with the Company's fleet of 63 mobile offshore drilling units located in key markets worldwide. This fleet consists of 13 semisubmersibles, three dynamically positioned drillships, 44 jackups and three submersibles. The fleet count includes three F&G JU-2000E enhanced premium newbuild jackups under construction, with scheduled delivery of the first unit in the third quarter of 2007, the second unit in first quarter of 2008 and the third unit in the first quarter of 2009. As previously announced, these units have been contracted. Approximately 84 percent of the fleet is currently deployed in international markets, principally including the Middle East, Mexico, the North Sea, Brazil, West Africa and India. The Company provides technologically advanced drilling-related products and services designed to create value for our customers. The Company also provides labor contract drilling services, well site and project management services, and engineering services. The Company's ordinary shares are traded on the New York Stock Exchange under the symbol "NE".
Additional information on Noble Corporation is available via the worldwide web at http://www.noblecorp.com .
Peak Oil Forecasters Win Converts on Wall Street to $200 Crude
http://www.bloomberg.com/apps/news?pid=20601109&sid=arur.i7moHMs&refer=news
By Deepak Gopinath
Aug. 31 (Bloomberg) -- On a sweltering Tuesday in mid-July, in the fields outside Pisa, Italy, Willem Kadijk scribbles notes as a ragtag troupe of doomsayers predict the end of the Oil Age.
With his shaved head, jeans and sandals, Kadijk, 48, blends into a crowd gathered under a white tent to hear of the coming calamity. The death of cheap, abundant crude, the forecasters warn, might unleash war and plunge the world into a second Great Depression.
That's not the prophecy of some apocalyptic cult. Kadijk, a hedge fund adviser, had flown from Amsterdam to attend a conference on a geologic theory known as peak oil.
Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline -- and some geologists say it already has -- oil will no longer be able to slake the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 -- and keep rising. To the peaksters, today's energy crunch is nothing next to the pain that will follow.
``Peak oil is a reality,' says Kadijk, a senior equity salesman at Kepler Equities, an Amsterdam-based brokerage. He plans to start a fund to capitalize on what he sees as a looming crisis for the world's fossil fuel-based economy and the ultimate bull market in oil.
As energy prices soar and violence convulses the Middle East, the peak-oil movement -- an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists -- is winning converts. Peak-oil ideas are bubbling up from scientific journals and offbeat Web sites, much the way warnings of global warming did a decade ago. For the first time, the peaksters have begun to grab the attention of Washington and Wall Street.
Congressional Caucus
U.S. Energy Secretary Samuel Bodman, former boss of Boston- based Cabot Corp., an oil and chemicals company, has asked the National Petroleum Council, which advises him, to investigate whether oil supplies can keep pace with demand. The U.S. Government Accountability Office, the nonpartisan congressional watchdog, is due to release a study on peak oil this November. Rep. Roscoe Bartlett, a Maryland Republican, has formed the Congressional Peak Oil Caucus to sound the alarm.
``The world has never faced a problem like this,' Bartlett says.
Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: The Earth holds only so much of it. The controversial issue is when a global peak will occur -- and what will happen then.
Colin Campbell, a British geologist who popularized the peak- oil theory in his book ``The Coming Oil Crisis' (Multi-Science Publishing Co. and Petroconsultants SA, 1997, 210 pages) says world production of conventional oil, the kind that comes from gushing wells, is reaching its apex.
End of Oil Age
Society isn't prepared for the consequences, Campbell, 75, says. It's too late to develop alternative sources of power, such as solar cells, nuclear reactors and windmills, to fill the oil gap before energy prices soar, says Campbell, who has a doctorate in geology from the University of Oxford and more than 40 years of experience in the oil industry.
``We have come to the end of the first half of the Oil Age,' Campbell says.
Nonsense, says Russ Roberts, a spokesman for Exxon Mobil Corp., the world's largest oil company. Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in U.S. newspapers such as the New York Times.
The Irving, Texas-based oil giant says the peaksters are being alarmist. In all, the world probably has 4 trillion barrels of oil left, four times the amount we have used so far, the ad says.
Time to Think
``The world is nowhere near running out of oil,' Roberts says. Exxon Mobil geologists believe global oil production will keep rising through 2030, he says.
Cambridge Energy Research Associates, whose chairman, Daniel Yergin, is a leading peak-oil critic, says production will reach an ``undulating plateau' sometime in the future.
``Our outlook goes to 2020, and we see no evidence of a peak,' CERA geologist Peter Jackson says. ``Eventually, we will start to see a decline. There is still time to think about alternatives.'
Predictions of an imminent oil famine are as old as the industry itself. When production at the first U.S. wells, located in western Pennsylvania, began to decline in the late 19th century, some people predicted the country would soon run out of oil. Then crude was discovered in east Texas, whose oil fields yielded so much black gold that the Texas Railroad Commission capped production to support prices.
Peak Moment
In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day only to push back the fateful moment. In 1997, Campbell said it would occur in 2001. Now, he says total production, which includes oil from deep-water wells and fuel derived from natural gases, will reach its height sometime after 2010.
Kenneth Deffeyes, a geologist and professor emeritus at Princeton University, first pinpointed Nov. 24, 2005, as the peak- oil date and then revised it to Dec. 16, 2005.
Campbell says the exact day or year isn't important. What matters is that peak oil is coming, and soon. Almost a century and a half after the first U.S. wells were drilled in Titusville, Pennsylvania, production has begun to decline in more than a dozen countries, including the U.S., according to the BP Statistical Review of World Energy. Production at the giant Cantarell oil field in Mexico is likely to decline 8 percent this year, according to Mexican state oil monopoly Petroleos Mexicanos.
U.S. Addiction
At a time when U.S. President George W. Bush has urged the country to break its addiction to foreign oil, the fact is, the U.S. is becoming ever more dependent on overseas crude. U.S. oil production peaked 36 years ago, in 1970, at 11.3 million barrels a day. Since then, output has fallen 39 percent, to 6.8 million barrels a day, or 8 percent of the world total, in 2005, according to BP.
Investors have started to listen to the peaksters. Billionaire Boone Pickens says he's a peak believer. So does Peter Thiel, who co-founded PayPal Inc. and now runs Clarium Capital Management LLC, a $2.1 billion hedge fund firm. Pickens, Thiel and other investors are positioning themselves to profit from what they say will be the biggest oil squeeze of all time.
Even some oil companies and industry veterans sound nervous. Chevron Corp. has run a series of full-page ads in U.S. newspapers that highlight surging oil consumption and declare, ``The era of easy oil is over.'
Chicken Littles
Thierry Desmarest, chief executive officer of Paris-based Total SA, told the World Gas Conference in Amsterdam in June that global oil production would peak in 2020. Matthew Simmons, whose Houston-based investment bank, Simmons & Co., trades oil and gas stocks, says Saudi Arabia's production may decline soon.
Alex Cranberg, chairman of Denver-based independent oil company Aspect Energy LLC, calls the peaksters Chicken Littles -- misguided souls who think the sky is falling.
In fact, Cranberg hired two people to dress in chicken costumes and hand out fliers dismissing peak oil at the conference Kadijk attended in July.
Like many oil-industry vets, Cranberg, 51, says market forces and technological advances will ultimately cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude and extract it. They'll invest in expensive deep-water wells and new technologies to wring more oil from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy.
$3-a-Gallon Gas
More and more, however, the peaksters are drowning out everyone else, Cranberg says. ``You can't turn around without seeing or hearing these ideas,' he says. ``I think they are gaining.'
You don't have to be a geologist to understand why. The price of crude has tripled since 2000. In the U.S., $3-a-gallon gasoline has sapped consumers' confidence. Nearly half of Americans believe the economy is doing poorly, according to a July 28-Aug. 1 Bloomberg/Los Angeles Times poll. Fifty-nine percent of Americans expressed a negative view of Bush's handling of the economy.
``If oil was still at $20, no one would be talking about peak oil,' says Manouchehr Takin, senior petroleum upstream analyst at the Centre for Global Energy Studies, a London-based consulting firm.
High oil prices are only part of the story, however. The world is straining to feed its energy habit. Today, we consume 85 million barrels of oil a day, according to the U.S. Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers.
Big Question Mark
No one knows for sure how much oil the world has. That's a big question mark because the peaksters say production will max out once half of the oil has been pumped. So far, we've extracted about 1 trillion barrels in all. In 2000, the U.S. Geological Survey estimated global resources at 3 trillion barrels, enough to push peak production out to 2037, according to the EIA. Campbell puts the total lower, at 2.5 trillion barrels.
Oil is certainly getting harder -- and more expensive -- to find and extract. Oil discoveries plummeted to 5 billion barrels in 2005 from 90 billion barrels in 1964, according to Campbell.
``Discovery is in long-term decline, and spending more money won't increase it,' says Chris Skrebowski, editor of the London- based Petroleum Review, an industry journal.
OPEC's Stash
Oil companies have to find enough crude to offset dwindling production at existing fields, which can decline by more than 8 percent a year, and to keep pace with rising demand. Most of that increase will have to come from members of the Organization of Petroleum Exporting Countries, which are often cauldrons of discontent, war and terror.
The cartel's members -- Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela -- together sit atop 75 percent of the world's reserves and account for about 42 percent of total production, according to BP.
OPEC countries are hardly paragons of economic and political stability. Most of the terrorists who attacked the U.S. on Sept. 11, 2001, came from Saudi Arabia. The war in Iraq has hurt that country's ability to pump oil. Bush says Iran is trying to develop nuclear weapons. In Venezuela, President Hugo Chavez has said he wants to diversify oil exports away from the U.S.
In its 2005 Energy Outlook, Exxon Mobil says the combined production of non-OPEC countries will peak sometime from 2010 to 2020. OPEC will be able to fill the gap, the report says. OPEC produced about 30 million barrels a day in 2005; by 2030, OPEC would have to churn out 47 million barrels a day -- almost 57 percent more than it did last year -- to satisfy the world's needs, the report says.
Meeting the Call
``We believe the resource base will support this increase, assuming that investments in development are made in a timely fashion,' the report says.
OPEC countries will invest a combined $100 billion in the five years through 2010 so they can increase output, OPEC spokesman Omar Ibrahim says. ``We are set to meet the extra call on OPEC to 2030,' Ibrahim says.
Yet even now, OPEC nations are struggling to keep up. Since 2000, OPEC has gradually lost the spare pumping capacity its members can use as an emergency reserve to moderate prices. The cushion has dwindled to about 1.5 million barrels a day from 6 million barrels a day, Takin says.
What's more, neither the peaksters nor oil industry executives know for sure how much oil OPEC has and how much it can actually produce. OPEC countries haven't been transparent about their reserves or production capacity, says Mike Rodgers, a partner at PFC Energy, a Washington-based oil industry consulting firm. ``OPEC is the big unknown,' he says.
Overstated Reserves
Many energy analysts believe OPEC nations began overstating their resources in the 1980s, when the cartel linked members' production quotas to the size of their reserves, says Mamdouh Salameh, an independent oil economist. In the late '80s, cartel members raised their reserve estimates by a combined 300 billion barrels even though none of them had actually found much more oil.
In his 2005 book ``Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy' (John Wiley & Sons, 448 pages, $24.95), Simmons says the Saudis have pumped so much oil so fast that the country's biggest oilfields face declining output.
``Saudi Arabia is keeping everything in the dark,' Simmons, 63, says.
Saudi officials have dismissed peak-oil theorists and suggestions that their country is running on empty.
Saudi Assurances
``We currently manage approximately 260 billion barrels of oil,' Abdallah Jum'ah, CEO of Saudi Aramco, the government-owned oil giant, said at an oil and gas conference in June. ``We continue to expand our reserve base, and conservatively estimate our additional potential of recoverable oil to be in the range of 200 billion barrels. At Saudi Aramco's present production levels, that means we will have well over a century's worth of oil to produce.'
Herman Franssen, former chief economist at the Paris-based International Energy Agency, says some OPEC members, such as Iran, Iraq, Kuwait and Venezuela, may be reluctant or unable to produce more oil even as prices soar, largely for political reasons.
``We may never see the volumes of conventional oil production that we see in official forecasts,' says Franssen, who's now an oil industry consultant in Chevy Chase, Maryland.
Sadad al-Husseini, who spent 35 years working for Saudi Aramco, says Saudi Arabia's reserves are sound but that Kuwait, which says it has reserves of 101.5 billion barrels, probably has half that much. Iran, with official reserves of 132.5 billion barrels, has likewise overstated its reserves, says Husseini, who was an executive vice president at Saudi Aramco before retiring in 2004.
Assume the Worst
``Even with high prices, it will be very difficult for world production of conventional oil to exceed 90 million barrels per day within the next 10 years,' he says. That's millions of barrels a day short of what the EIA says the world will need in 2015.
Political leaders, business executives and investors should assume OPEC won't be able to satisfy future demand, Rodgers says. ``From an energy-security point of view, if you believe in a non- OPEC peak and OPEC is not being transparent, we have to assume they don't have it,' he says.
The precarious balance of supply and demand in the oil markets became even clearer in early August when London-based BP Plc announced it would temporarily shut down its Prudhoe Bay oil field on the North Slope of Alaska because of pipeline corrosion. The news drove already-high oil prices up more than $2 to almost $77.
Alaskan Decline
Prudhoe Bay, the largest oil field in the U.S., is part of the peak-oil story. The field was discovered in 1968 and came onstream in 1977. Since then, it has yielded more than 11 billion barrels of oil.
Yet even before the August mishap, this vast field had begun to die. Its output has fallen 73 percent to 400,000 barrels a day from a height of 1.5 million barrels a day in 1989.
Prudhoe Bay is following the life cycle of oil fields across the U.S. and around the world, a phenomenon known as the Hubbert Curve, which takes its name from M. King Hubbert.
Fifty years ago, Hubbert, then a geologist at Shell Oil Co.'s research lab in Houston, postulated that U.S. oil production would follow a bell-shaped curve.
At the 1956 meeting of the American Petroleum Institute in San Antonio, Hubbert predicted that total annual U.S. output would climb steadily, level off sometime between 1965 and '70 and then decline after about half of the country's reserves had been depleted.
Hubbert's Peak
The U.S. reached what geologists now refer to as Hubbert's Peak in 1970. Hubbert died in 1989 at the age of 86.
It wasn't until the late 1990s when Hubbert's ideas, which had percolated for decades in academia and oil circles, began to reach a wide audience via Campbell, the British geologist.
Now in his eighth decade, Campbell is a grandfatherly man with a shock of gray hair. He hardly comes across as a doom- monger. He works out of a two-story house in Ballydehob, a village on the western edge of Ireland.
Campbell spent 40 years exploring for oil for Amoco Corp. and other companies. He helped Amoco search for oil in Ecuador and then, during the 1980s, led its exploration in Norway. He later joined PetroFina SA, the oil exploration company now owned by Total.
After retiring from PetroFina in 1990, Campbell joined forces with Jean Laherrere, a retired French geophysicist who had spent 25 years working at Total, to analyze production profiles for the world's countries.
Campbell says he and Laherrere, now 75, looked at their data and concluded global oil production was approaching its zenith. In 1998, they co-wrote an article for Scientific American magazine titled ``The End of Cheap Oil' that helped popularize their cause.
Coming Crunch
``The world is not running out of oil -- at least not yet,' Campbell and Laherrere wrote. ``What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend.'
In 2000, Campbell founded the Association for the Study of Peak Oil and Gas, an informal organization for fellow travelers. Now known as ASPO International, the group has sponsored five annual conferences, including the one in Pisa in July, which drew more than 230 people. It's now run by Kjell Aleklett, a physics professor at Uppsala University in Sweden. Twenty independent national ASPO groups have sprung up around the world, from Australia to France, to the U.S.
Many peaksters are driven by a moral imperative to spread the word. Campbell says he's a scientist, not a social or environmental crusader. Even so, he says he's worried that oil has harmed human society and the planet. Since the Oil Age dawned, nearly 150 years ago, the Earth's population has soared six-fold, he says.
Man Alone
``Man is the only animal that uses external energy,' Campbell says.
Asked why he has championed the peak-oil theory, Laherrere quotes Antoine de Saint-Exupery, author of ``The Little Prince': ``We don't inherit the Earth from our ancestors; we borrow it from our children.'
Activists have jumped on the peak-oil bandwagon and added their own, often strident, voices to the debate over the future of oil.
Jim Kunstler, a writer-activist who lives in Saratoga Springs, New York, says peak oil will ultimately destroy suburbia and plunge the U.S. into a violent dark age of feudalism.
``The question is, Can we run our shit the way we are running our shit?' Kunstler, 57, says. In 2005, Kunstler wrote ``The Long Emergency: Surviving the Converging Catastrophes of the Twenty-First Century' (Atlantic Monthly Press, 320 pages, $23), which warns of the havoc to come.
Dieoff.com
Lifeaftertheoilcrash.net, a Web site run by lawyer and peak- oil entrepreneur Matt Savinar, warns, ``Civilization as we know it is coming to an end soon.' The site sells peak-inspired books and products, including an investor's guide to peak oil.
Another site, dieoff.com, says wars over oil and other natural resources will eventually erupt and millions of people will be wiped out.
Stephen Andrews, a Denver-based energy consultant who founded ASPO-USA in June 2005, says the alarmists have hurt the peak-oil movement.
``The peak-oil tent has different voices -- some shrill, some more sober -- reaching different conclusions from the same facts,' Andrews, 59, says.
Andrews has attracted more-sober voices to the movement. Last November, Denver Mayor John Hickenlooper helped co-sponsor a two- day peak-oil conference organized by Andrews.
``I think the people most exuberant about peak oil underestimate how much unconventional sources of oil will help flatten the peak, but to say that there is no peak is shortsighted,' Hickenlooper says.
Crash Program
The world would have to embark on a crash mitigation program 20 years in advance to prevent peak oil from hobbling the global economy, says Robert Hirsch, a senior energy program adviser at San Diego-based research and engineering firm Science Applications International Corp. ``And I consider myself an optimist,' says Hirsch, 71, who included his findings in a 2005 study on peak oil for the U.S. Department of Energy and estimates such a program would cost the world $1 trillion a year.
Some investors and analysts see lots of opportunities in a post-peak world.
Charles Maxwell, senior energy analyst at Weeden & Co., an independent research firm based in Greenwich, Connecticut, says high oil prices will spur companies to invest in unconventional sources. Few people, however, realize how much such projects will cost or how long they will take to come onstream, he says.
Take the Canadian oil sands. This region in Alberta holds 175 billion barrels of oil, according to the Canadian Association of Petroleum Producers (CAPP), the world's second-largest reserves.
`Really Big'
``It's big. It's really big,' Neil Camarta, senior vice president for oil sands at Calgary-based Petro-Canada, says of the region. ``It can keep America going for 25 years.'
The oil sands hold vast stores of bitumen, a tarlike substance that is mined, rather than pumped, and then processed into oil that can be refined. The process is expensive -- and getting more so. Rising operating and capital costs have driven the price of mining and upgrading bitumen to as much as $40 a barrel, Camarta says.
By 2020, Canada's oil sands will yield 4 million barrels a day, almost four times what they do now, according to CAPP. That sounds like a lot until you realize that 4 million barrels is just over a third of what Saudi Arabia produced per day in 2005.
Pickens, who built Mesa Petroleum Co. into one of the world's largest independent oil and gas producers, says he sees trouble -- and opportunity -- in peak oil. Pickens, who collected a degree in geology from Oklahoma State University in 1951, has called for the construction of more nuclear power plants and the promotion of alternative energy. He says he's invested in the Canadian oil sands.
Pickens's Picks
``I'm a disciple of Hubbert,' Pickens, 77, says. ``I think we've peaked and we are going to see an undersupply of oil.'
Clarium Capital's Thiel says he began thinking about peak oil in 1999. As the Internet bubble grew that year, Thiel, 38, says he started to wonder about other risks that investors might be ignoring and seized on the uncertain future of oil.
``Energy will be systematically undervalued until peak oil is priced in,' Thiel says. He's bought shares of Calgary-based EnCana Corp., which has invested in exploration and new production, and of oil services companies like New York-based Schlumberger Ltd. and Houston-based Weatherford International Ltd., which stand to profit as explorers hunt for oil and drill wells. Thiel says he's leery of U.S. oil majors, such as Exxon Mobil, because they may become targets of new taxes once the government wakes up to peak oil.
Thiel himself says the peak will come by 2008 -- if it hasn't already. ``Geology will trump technology,' he says.
Coal, Uranium
Eric Sprott, CEO of Toronto-based Sprott Asset Management Inc., says he became a peak-oil convert after hearing Campbell speak in 2004. Sprott, who helps manage 3.6 billion Canadian dollars (US$3.2 billion), says the bull market in energy has only just begun. He's invested 36 percent of his firm's assets in a variety of areas that could benefit from peak oil. His flagship hedge fund returned 41 percent in 12 months ended July 31, he says.
Sprott's investments include St. Louis-based Arch Coal Inc. and Brisbane, Australia-based Macarthur Coal Ltd. His oil and gas picks include Halifax, Nova Scotia-based Corridor Resources Inc.; Denver- based Delta Petroleum Corp.; and Houston-based Ultra Petroleum Corp. He has also invested in Australian uranium companies Energy Resources of Australia Ltd. and Paladin Resources Ltd.
Midnight Ride
Meanwhile, the peaksters aren't about to let up. They'll convene in Boston on Oct. 25-27 to sound their alarm at a conference called ``Time for Action: A Midnight Ride for Peak Oil.' The title is a reference to the American patriot Paul Revere, whose horse ride in 1775 warned Massachusetts colonists that British soldiers were advancing. The battle that followed, at Lexington and Concord, marked the beginning of the American Revolution.
It was just 84 years after Revere took his ride, on Aug. 27, 1859, that Edwin Drake struck oil in Titusville, ushering in the Oil Age. Exxon Mobil says the era of oil isn't about to end. In one of its ads, the company says, ``Oil is a finite resource, but because it is so incredibly large, a peak will not occur this year, next year or for decades to come.' The ad depicts a man looking through binoculars at a snowcapped mountain whose summit is hidden by clouds.
Campbell says the illustration actually drives home the point Exxon Mobil is trying to avoid. ``Even though it is obscured by clouds, we know there is a peak,' Campbell says. His investor followers are betting he's right.
To contact the reporter on this story: Deepak Gopinath in New York at dgopinath@bloomberg.net .
Exxon field lifts Russian Aug oil output to record
Sat Sep 2, 2006 9:34am ET
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20060902:MTFH68009_2...
Exxon field lifts Russian Aug oil output to record
FACTBOX-Key dates for BP's East Prudhoe field restart
UPDATE 2-Canada's Terra Nova oil field restart delayed
More Company News... Email This Article | Print This Article | Reprints [-] Text [+] By Tom Miles
MOSCOW, Sept 2 (Reuters) - Russian crude oil production edged up 0.9 percent to a new all-time high of 9.759 million barrels per day in August, largely thanks to the Exxon-led (XOM.N: Quote, Profile, Research) Sakhalin-1 field coming on stream.
Sakhalin-1 aims to be pumping 250,000 bpd by the end of the year, so the output record could be overtaken again within months if production is ramped up further.
Energy Ministry data released on Saturday did not give an exact figure for the field, but showed that production sharing agreements -- including Sakhalin-1 and the Shell-led (RDSa.L: Quote, Profile, Research) Sakhalin-2 project -- pumped 611,000 tonnes (144,000 bpd) of crude in August, almost twice as much as in July.
However, exports through Russia's pipeline system fell after a leak in the link to Lithuania forced a halt in supplies to the state and to its Baltic Sea export terminal, Butinge, which had together accounted for almost 240,000 bpd of exports in the first seven months of this year.
Russia's environmental watchdog has said repairs and tests on the pipe mean the oil will not flow until at least February, meaning state pipeline monopoly Transneft (TRNF_p.RTS: Quote, Profile, Research) will have to suspend that section of the Druzhba pipeline to Europe by six months or more in total.
For a table of Russian oil output and exports, click on [ID:nL02651907]
Although total volumes through Transneft's pipes fell 2.6 percent in August, and Druzhba volumes fell 4.5 percent, Transneft's seaborne exports through ports rose 1.9 percent.
The biggest increases were in Odessa and Yuzhny in Ukraine, where a Moscow-leaning prime minister took office at the start of the month. Continued...
NY silver rockets to fresh 3-mo. peak, gold climbs
Thu Aug 31, 2006 2:56pm ET
A burst of speculative buying, an upbeat technical picture in silver vis-a-vis gold and growth in a new U.S. silver-backed security helped drive prices up 2.8 percent by the close.
Benchmark December delivery silver <SIZ6> surged 36.0 cents to $13.03 an ounce on the New York Mercantile Exchange's COMEX division, after trading between $12.77 and $13.08. It was the highest finish on a settlement basis since May 30.
Ongoing speculative buying in silver and interest from the trade powered the rise in silver, which has risen about 33 percent in value since mid-June. Gold rose about 12 percent in the same period.
"It was basically fund buying, mostly an end-of-the-month, protect-the-profits kind of a move," said Leonard Kaplan, president of Prospector Asset Management.
The close above $12.85 was technically bullish for the market, a floor trader said.
Talk of a big trend-following Commodity Trading Advisor (CTA) buying silver also circulated in the market.
"There is some fund interest in the market. Funds started buying silver on Tuesday when everything else closed a little weaker," said James Quinn, AG Edwards & Sons commodity commentator. "I think we can be in a range somewhere between $11.80 and $13.25."
Silver has outperformed gold in recent weeks, helped by robust demand for a U.S. silver exchange-traded fund. The gray metal shot up to a 25-year high above $15 an ounce in mid-May.
Physical silver holdings in Barclays Global Investors' iShares Silver Trust (SLV.A: Quote, Profile, Research) climbed above 100 million ounces on Wednesday for the first time since the ETF launched in late April. The security tracks the price of silver and trades on the American Stock Exchange.
UBS analyst John Reade said the 8 million ounce rise in the silver trust during a seasonally slow August was impressive.
"Although we believe that the silver ETF will need to collect 200 million-300 million ounces to materially squeeze physical liquidity, silver rates look too low here," he said. "Silver looks likely to move higher and the ETF should collect more ounces."
A falling gold/silver ratio was technically supportive also, wrote Greg Weldon, author of the Metal Monitor report. "This week's push back below 50:1 is significant and is bullish for silver."
Spot silver <XAG=> rose to $12.83/12.90 an ounce late in New York, from $12.47/57 on Wednesday. Thursday's fix by London bullion dealers reached $12.60.
COMEX December futures <GCZ6> gained $8.10 to end at $634.20 an ounce, in a range of $626 to $635, a one-week high.
Concern about Iran's stand-off with the West bolstered gold in its role as the tangible asset investors turn to in uncertain times, said traders.
A defiant Iran faces possible U.N Security Council sanctions after the world body's atomic watchdog said Tehran refused to stop work on its nuclear program by a Thursday deadline.
"Worries over Iran was the spark, because the dollar was stronger at times today," said Kaplan. "But I don't think the metals can continue for long, though, if the dollar goes higher and oil goes lower."
He sees futures stuck in a range of $605 to $660 for now.
Investors now were awaiting Friday's U.S. August payrolls report for a reaction in financial markets, analysts said.
Spot gold <XAU=> fetched $625.20/626.20 an ounce, up from $617.20/618.70. The afternoon London spot reference rate was fixed at $623.50.
In industry news, another consolidation was announced, with Vancouver-based Goldcorp Inc (G.TO: Quote, Profile, Research) acquiring Glamis Gold Ltd (GLG.TO: Quote, Profile, Research) to create one of the world's biggest gold mining firms.
In platinum, NYMEX October futures <PLV6> rose $13.70 to $1,251.20 an ounce. Spot platinum <XPT=> ended at $1,239/44.
December palladium <PAZ6> was up $3.40 at $348.70 an ounce. Spot <XPD=> reached $341.50/346.50.
Crude drops below $70 ...COMDX Commodities Summary
Ahead of weekly inventory stats due out at 10:30est (Bloomberg ests looking for a draw of 1.5 mln barrels), crude oil is up 10 cents to $69.81pbl (range is 69.72 to 70.25); the move back over $70 is due to speculation Iran will ignore tomorrow's UN deadline to cease enrichment of uranium. Oct natural gas, now the spot contract, is off 13 cents to $6.63mbtu (range is 6.58 to 6.77). Heating oil is up 1.43 cents to $1.9575/gal (range is 1.9470 to 1.9625). Gasoline is up .58 of a cent to $1.7950/gal (range is 1.7869 to 1.8025); RBOB gas is unch at $1.8250 (we are hearing the recent slide in gasoline has been helped by Goldman Sachs preparing to move its index from motor gasoline to RBOB; we are told Goldman has already sold 30k contracts of gasoline and that money will not go into RBOB, rather it will be distributed into WTI crude and distillate); traders we spoke w/ said they don't want to get long Oct cracks until Sep products expire tomorrow; Oct HO cracks rose 33 cents yesterday to $13.60 while Oct HU cracks rose $1.40 to $3.80... Gold is up $5.90 to $625 (helped by a slightly weaker than expected Prelim Q2 GDP figure and ahead of tomorrow's UN deadline for Iran to cease enriching uranium). Dec silver is up 9 cents to $12.41 (resistance is seen at $12.46)... Copper rises 2.1 cents to $3.405 a pound on the COMEX; Sucden, a floor trading co on the LME, thinks copper can take out the record $8,800 seen in May (currently $7,400); BHP's Escondida worker strike continues (in the 4th week); we note speculation that Chile may have the 1st monthly drop in output since March b/c of Escondida and Codelco's rockslide, which hurt production. Nickel fell $870 on the LME to $27,625 on speculation stockpiles may increase; platinum set at $1,227 while palladium set at $341 in London morning fixings.
Remain positive on energy stocks in the long-term, but think the current market environment calls for more caution - Oppenheimer
Oppenheimer says although they remain positive on energy stocks in the long-term, they think the current market environment calls for more caution. Firm advises long-term investors to increase energy holdings on meaningful pullbacks, and active investors to buy on dips and sell in spikes. Firm notes energey stocks usually outperform the market during rising energy prices and lag during periods of declining prices. Rising energy costs tax the economy, slow corporate earnings growth, and usually spur inflation. The opposite is true for declining energy costs. Firm believes the current low P/E multiples on energy stocks could indicate peak earnings as investors believe oil and gas prices and refining margins have peaked. Firm expects the volatility in oil and gas prices and refining margins to continue as a result of the surge in electronic trading of energy products and excessive speculation by major financial institutions. Firm expects energy demand growth to continue, while politics of exporting countries may limit production growth. Firm expects industry consolidation to continue and possibly even accelerate, especially natural gas onshore N.A., before potential power shift in Washington starting with the mid-term elections.
COMDX ...The E.I.A. reports that Gasoline Inventories had a build of 367K barrels (Bloomberg consensus is a draw of 600K barrels);
crude oil inventories had a build of 2.4 mln barrels (Bloomberg consensus is a draw of 1.5 mln barrels);
distillate inventories had a build of 1.3 mln barrels (Bloomberg consensus is a build of 1.3 mln barrels).
Oil Rises a Second Day on Sanctions Risk to Iranian Supplies
By Gavin Evans
Aug. 31 (Bloomberg) -- Crude oil rose a second day in New York after rebounding from a 10-week low yesterday on concern the United Nations next week may impose sanctions against Iran, the world's fourth-biggest oil producer.
The UN gave Iran until today to end its uranium enrichment or face economic sanctions. Senior officials from the U.S., the U.K., China, France, Russia and Germany will meet early next week to word a sanctions resolution, State Department spokesman Sean McCormack said yesterday. Oil workers in Nigeria plan a three-day strike starting on Sept. 13, Reuters reported.
``There is a fight between the high levels of inventories and the possibility of supply disruptions,'' said Andrew Harrington, industrial analyst at Australia & New Zealand Banking Group Ltd. in Sydney. ``Nothing has happened with Iran but just the possibility that it will is pushing the price around.''
Crude oil for October delivery rose as much as 60 cents, or 0.9 percent, to $70.63 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $70.49 at 8:49 a.m. in Sydney, 2.2 percent higher than a year ago.
Oil increased after yesterday falling as low as $68.65, the lowest since June 20, when an Energy Department report showed U.S. oil and gasoline stockpiles unexpectedly rose last week. The contract closed at $70.03, up 32 cents, and the first gain in three days.
``It's already apparent that Iran will refuse to stop enrichment,'' Michael Fitzpatrick, vice president for energy risk management at Fimat USA in New York said yesterday. ``It's also clear that there will be no sanctions or embargo imposed tomorrow.''
UN Process
The UN is likely to formally consider the sanctions issue ``toward the middle of September'', Agence France-Presse quoted Britain's UN Ambassador Emyr Jones Parry as saying on Aug. 29.
U.S. oil supplies jumped 2.48 million barrels to 332.8 million last week, 12 percent more than the five-year average for the period, the Energy Department reported yesterday. A 1.5 million barrel decline was expected, according to a Bloomberg News survey of 15 analysts.
Imports rose 9.4 percent to an average 11.2 million barrels a day, the second-highest ever. A cut in output earlier this month at Alaska's Prudhoe Bay field may have spurred shipments.
``Far from removing underlying concerns about spare capacity constraints and geopolitical risk, it demonstrates that the market is on high alert and determined to respond quickly to any disruption threat,'' Antoine Halff, an energy analyst with Fimat USA in New York, said yesterday. ``You want to have more oil on hand when there is the risk of a disruption.''
U.S. gasoline stockpiles rose 367,000 barrels last week to 206.2 million barrels, 2.6 percent more than average, the department said. A 600,000 barrel decline had been forecast by analysts.
To contact the reporter on this story: Gavin Evans in Wellington at
China to invest $5B in Venezuela energy projects by 2012-Reuters
Reuters is citing the Venezuela Oil Minister.
Crude Oil Falls on Signs Storm May Miss Gulf Production Areas
By Gavin Evans
Aug. 28 (Bloomberg) -- Crude oil fell in New York on signs a tropical storm in the Caribbean is headed toward Florida, missing the main oil and gas producing regions in the Gulf of Mexico.
ConocoPhillips, BP Plc and Royal Dutch Shell Plc evacuated non-essential personnel from some rigs and platforms in the Gulf at the weekend. Tropical Storm Ernesto, downgraded from a hurricane yesterday, may come ashore in southern Florida on Aug. 30, the National Hurricane Center said in a forecast issued at 5 p.m. New York time.
Crude oil for October delivery fell as much as 60 cents, or 0.8 percent, to $71.91 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 8:07 a.m. in Sydney. Prices are 9 percent higher than a year ago.
The contract rose 15 cents to close at $72.51 a barrel on Aug. 25 after earlier reaching $73.75, the highest intraday price since Aug.16.
To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net
Oil Rises as Atlantic Storm Forms, Nigeria Eni Workers Abducted
By Nesa Subrahmaniyan
Aug. 25 (Bloomberg) -- Crude oil rose in New York to the highest in more than a week as a storm is forming and may move to the Gulf of Mexico, and after three people working for a unit of Italy's Eni SpA were kidnapped in Nigeria.
Forecasts indicate a tropical depression, which may strengthen to become Tropical Storm Ernesto, will pass near Jamaica on Aug. 27 before heading for the Gulf of Mexico, according to the U.S. National Hurricane Center. The three oil workers were kidnapped in Port Harcourt, Italian news agency ANSA reported. An Italian foreign ministry official confirmed the abduction, it said.
``Any disruption on the supply side, however minor, there's an immediate reaction to buy'' oil futures, said Naohiro Niimura, head of commodity sales and research at Mizuho Corporate Bank Ltd. in Tokyo. ``Moreover, demand is still robust right now.''
Crude oil for October delivery gained as much as 69 cents, or 1 percent, to $73.05 a barrel on the New York Mercantile Exchange. That was the highest intraday price since Aug. 16. The contract traded at $72.86 a barrel at 9:17 a.m. Singapore time in after-hours electronic trading.
Brent crude oil for October settlement rose as much as 32 cents, or 0.4 percent, to $73 a barrel on the London-based ICE Futures Exchange. It traded at $72.92 at 8:39 a.m. Singapore time.
Port Harcourt
Port Harcourt is a city in the Niger delta, and home to the Nigerian headquarters of companies including Royal Dutch Shell Plc's venture. Nigeria is Africa's largest oil producer. Kidnappings and attacks on oil pipelines have cut output by as much as a third this year.
Armed men blocked the vehicle the three employees were traveling in near their office in a Port Harcourt suburb, and killed one bodyguard, ANSA reported. The three men work for Eni unit Saipem SpA, the report said.
More than 45 oil workers have been kidnapped this year in Nigeria. At least 17 were kidnapped in August alone in six separate incidents. Most of the abductions this month took place in Port Harcourt.
Increasing violence in the Niger delta has led Willbros Group Inc., an oil services company, which in February had nine of its employees kidnapped and later released, to announce plans to leave Nigeria.
To contact the reporter on this story: Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net
Forget Prudhoe Bay: We Have Bigger Problems
http://www.energyandcapital.com/editorials.php?id=254
Hi MARS. Do you have any ideas as to where OIH is likely to go in the near term with the turmoil in the mid east coupled with the overall effects on the markets in general?
Caracas threatens oil cut in case of US aggression
Sun Jul 30, 2006 7:36am ET
International News
TEHRAN (Reuters) - Venezuela will cut its oil exports to the United States if Washington takes a hostile stance toward Caracas, Oil Minister Rafael Ramirez was quoted as saying by Iran's official IRNA news agency on Sunday.
The Web site of the U.S. Energy Information Administration says 11.8 percent of U.S. oil imports came from Venezuela in 2004. The United States is the main buyer of Venezuelan oil.
"Our policy is clear; if America wants to have a hostile policy toward us, we will stop exporting oil to that country," he said in remarks translated into Persian.
"If Iran were under attack, it would definitely act just like us," he added.
Venezuelan President Hugo Chavez accuses Washington of backing a failed coup against him in 2002. The U.S. denies the charge.
Chavez says any attempt by the U.S. to invade the Caribbean country or assassinate him would result in the suspension of oil sales to the U.S.
NYMEX Closing Prices Crude oil fell $1.29 to $73.25pbl largely due to a weaker than expected Q2 GDP figure which suggested to many traders that crude could be in less demand in the country that uses it most; nat gas rose 7 cents to $7.19mbtu (warm weather cited); heating oil fell 3.86 cents to $1.9410/gal; gasoline fell 6.85 cents to $2.2275/gal; RBOB gas dropped 1.79 cents to $2.3350/gal
COG $46.89 Cabot Oil & Gas beats by $0.15 and issues operations update (46.71 +2.56)
Reports Q2 (Jun) earnings of $0.96 per share, $0.15 better than the Reuters Estimates consensus of $0.81; revenues rose 25.6% year/year to $190.7 mln vs the $166.7 mln consensus. Co also announces that its drilling program continues to be highly effective, with a 97% success rate in the second quarter. The co currently has 25 rigs drilling, 26 wells completing and 177 wells remaining for 2006. The co says it has been successful on two wells in its 9,200-acre north Louisiana Castor prospect (working interest 100%) with discoveries in both the Hosston and Cotton Valley formations. Co has finished its initial horizontal Devonian shale program in the Sissonville area in West Virginia. The last well, the Cabot 31H, was drilled with nearly 3,000' of lateral hole, the longest to date. The McKenna 14-14 (working interest 75%) is a Paradox Basin wildcat evaluating the gas productivity of the Paradox group. The initial well is drilling ahead and nearing the first evaluation point. Total depth is expected in two weeks and with a successful completion, this well could expose Cabot to a new gas resource play on its 40,000-acre block in the Paradox Basin.
NYMEX Energy Closing ...Crude oil rose 62 cents to $75.05pbl; natty rose 47 cents to $6.61mbtu; heating oil rose 1.4 cents to $1.9720/gal; gasoline rose 3.06 cents to $2.32/gal; RBOB gas fell .21 of a cent to $2.4225/gal
Floor Talk: Energy Crude oil has rallied to new session highs (now 74.90 +0.47), due to chatter that there is a tropical storm heading toward Corpus Christie, Texas, as well as headlines hitting the wires that the White House believes that a ceasefire in Lebanon would be "unenforceable."
CVX COP. .Russia to shut out U.S. oil companies-The Observer
Russia's President Putin is set to keep U.S. oil companies out of a gas field in favor of Norwegian firms. Putin is expected to rencent Chevron (CVX) and ConocoPhilips (COP) in favor of Norwegian firms like Norsk Hydro (NHY) and Statoil (STO) after The United States failed to back Russia's attempt to join the World Trade Organization.
Oil price spike very uncomfortable - Opec Saudi Oil Minister
Estelle Shirbon, Reuters
Smoke rises from southern Beirut on Hizbollah's stronghold that was attacked by the Israeli air strikes this week - one of the reasons for the latest oil price spike.
The latest spike in oil prices to near $80 a barrel is "very uncomfortable" and is hurting the world economy, the president of the Organisation of the Petroleum Exporting Countries (Opec) said.
Edmund Daukoru, who is also Nigerian Minister of State for Petroleum, said the conflict between Israel and Hizbollah was responsible for the latest jump, which saw US crude oil futures hit a record $78.40 a barrel last week.
"If it would have stabilised around the mid-'60s, I don't think people would complain too much. We are getting used to that, but the latest shoot-up to the mid-'70s and above is very uncomfortable," Mr Daukoru told Reuters on the sidelines of a conference in the Nigerian capital.
"Clearly the latest flare-up between Israel and Hizbollah is really the reason for the latest spike," he said. "It is always unfortunate if we have to address issues outside the power of Opec."
High prices bring more revenue to Opec in the short term, but exporters worry that sustained price increases dent global economic growth and encourage consuming nations to divert investment away from oil to alternative energy.
Asked if current prices were hurting the economy, he said: "At such high prices it must have an impact."
Oil prices dipped after Mr Daukoru's comments, with US futures down 64 cents at $72.90 a barrel.
Asked whether Opec could make up for any possible reduction in oil exports from Iran because of the Israel-Hizbollah conflict, Mr Daukoru said Opec had plenty of spare production capacity.
"We should have even more than two million barrels per day available, so whether the disruption comes as a result of Iran or some other cause, we will be able to put on the extra capacity provided there are refineries to take it," he said.
Mr Daukoru said he will travel to the Middle East Gulf next week to address some internal Opec issues such as a forthcoming summit, and would take advantage of the trip to discuss the oil market situation.
"We do our best to moderate the market, but with the current level of volatility one only can take short term decisions. We tend to react at three-monthly intervals," he said.
Aides said Mr Daukoru wants to resolve a long-standing row between Iran and Kuwait over which country's candidate should be appointed Opec secretary-general, the administrative head who represents the cartel and helps coordinate policy talks. Opec has been unable to reach agreement on the post since December 2003, and the selection process has exposed political differences between Opec's core Gulf members. The other contentious matter was that both Libya and Saudi Arabia want to host a meeting of Opec heads of state and government, an aide said.
Saudi Arabia (Reuters) - OPEC producers want to avoid high oil prices that may harm global economic growth, the oil minister of top world exporter Saudi Arabia said on Sunday.
"OPEC-member states want stability in world oil markets and seek to avoid fluctuations in oil prices or a rise in prices to levels that would affect the global economy, especially that of developing countries," Oil Minister Ali al-Naimi told the state Saudi Press Agency. He did not specify a price level.
China Oil imports set to dip: CNOOC
China's oil imports, a driving force behind record crude prices, have "stabilized" and may decline within three years on government measures to conserve fuel, the head of the nation's third- biggest energy company said.
Friday, July 21, 2006
China's oil imports, a driving force behind record crude prices, have "stabilized" and may decline within three years on government measures to conserve fuel, the head of the nation's third- biggest energy company said.
Shipments will stay near 130 million tonnes a year before dropping, helping global prices ease in the "long term," CNOOC chairman Fu Chengyu said. That prediction contrasts with Titan Petrochemicals Group, the country's largest oil-supertanker owner, which forecasts a jump of as much as 15 percent in imports for this year.
"The policies on energy saving will take three to five years to implement," Fu said in Beijing. "I feel confident that energy imports won't be as much as we thought before."
Falling orders from the world's fastest-growing major economy, which has more than doubled oil consumption in a decade, would ease pressure on global supplies that pushed prices to a record US$78.40 (HK$611.52) this month. Achieving the government's targets will involve shutting factories that waste energy, setting efficiency limits for cars and increasing fuel prices to curb use.
"They ought to improve the structure of the economy," and curb reliance on energy-intensive industries that consume a lot of oil, said Donovan Huang, senior analyst at credit-rating company Standard & Poor's in Beijing. "There's a lot they can do."
China's energy consumption is 8.4 tonnes of oil equivalent per US$10,000 of gross domestic product, 3.4 times the global average, eight times that of Japan and four times the figure in the United States, Huang said.
There's no sign of any slowdown in oil imports yet, as the nation's economy expanded 10.9 percent in the first half of the year. Shipments from overseas suppliers rose 16 percent to 73.3 million tonnes - 2.97 million barrels a day - according to customs figures. China accounted for 28 percent of the increase in global oil demand between 1995 and last year, figures in BP's 2006 Statistical Review of World Energy show.
China aims to cut the amount of energy used to produce each unit of GDP by 20 percent in five years, and 4 percent this year, Premier Wen Jiabao said in March. The government is seeking to reduce the nation's reliance on oil imports by promoting power sources such as nuclear, solar and hydropower.
Commenting on the oil market, Fu said "geopolitical issues" in regions such as the Middle East may boost prices beyond recent records. Asked whether oil could reach US$100, Fu said: "Maybe."
Prices beyond US$100 aren't warranted "just on demand and supply," as there haven't been any shortages, he said. The "consensus" on the long- term price is "maybe US$50 to US$60, or even lower."
CNOOC's investments in oil fields are based on the assumption that prices will be "no more than US$40" for the "long term," said Fu.
Crude for delivery next month was at US$73.20 a barrel, up 54 cents, in after-hours electronic trading on the New York Mercantile Exchange. Prices Thursday are 29 percent higher than a year ago.
Last year, China's oil imports rose to a record 126.8 million tonnes, according to the Customs General Administration of China. The cost of oil shipments soared 54 percent to US$33 billion in the first half.
"We expect China to import 10 to 15 percent more crude this year," Barry Cheung, chief executive of Titan Petrochemicals, said in Hong Kong in April. "We believe 2006 will be a better year than 2005."
BLOOMBERG
Bombs or Booms? Asia Pushes Oil Prices Higher: William Pesek
July 21 (Bloomberg) -- The surge in oil prices seems to have the Middle East written all over it.
Israel's confrontation with Hezbollah in Lebanon is unnerving markets already jittery over Iraq and Iran. Africa also is thought to have a role. Declining production in Nigeria is helping to keep crude oil above $73 a barrel. All these risks may push oil well above the recent record of $78.40.
The conventional wisdom that bombs and geopolitical risks are boosting oil prices and shaking up stock and bond markets is only half right. The other catalyst is one that won't soon go away: Asia's economic boom.
``While we recognize the risks associated with a supply shock in the oil patch, we believe investors should be just as concerned about the slow-motion demand shock evolving from Asia,'' said Joseph Quinlan, New York-based chief market strategist at Bank of America.
Asia, after all, is home to about 3 billion people edging toward simultaneous booms in industry, urbanization and demand for automobiles and air travel. And at the moment, Quinlan said, ``Asia's energy resources are grossly inadequate.'' The growing disconnect between Asian supply and demand alone could keep energy prices high in the years ahead.
The region's proven oil reserves and its share of global production of that commodity are in decline at a time when demand is expected to accelerate. Quinlan pointed out that Asia's share of global oil reserves slid to 3.4 percent in 2005 from 3.8 percent in 1995. The region's reserves would last just 13.8 years at today's production rates.
Asian Thirst
China's situation seems especially dire, Quinlan said. Asia's No. 2 economy has about 12.1 years of oil reserves based on today's consumption levels. India, by contrast, possesses about 21 years' worth. Tomorrow's usage will be much higher.
The bottom line is that neither of Asia's fastest-growing major economies has enough energy to feed its rapid industrialization and urbanization. And Asia's other major economies are unlikely to produce enough oil in a world awash in geopolitical risks and potential supply disruptions.
In 2005, Asia's oil production was 8 million barrels a day, outstripping both the U.S. and South America. Even so, Asian production has increased only slightly over the last decade, reducing its share of global output. That will become a bigger problem when 400 million Chinese and 400 million Indians -- or more -- own cars.
China's Boom
The region's thirst for oil may confound those who view energy prices as a speculative bubble. Sure, there's a lot of hedge-fund money in markets, and central banks are raising rates. Still, Asian demand matters and persistently high oil prices are fueling two obvious concerns. One, they're boosting some unsavory governments from Iran to Sudan. Two, they're imperiling global growth rates.
The irony of Asia driving up energy costs is that many of its economies are uniquely vulnerable. High poverty rates mean Asians are closer to the edge than western consumers. Oil is also fanning inflation and making it harder for governments to shield their people from the fallout.
Asia's resilience amid rising oil prices has surprised many. China's economy grew 11.3 percent in the second quarter, the fastest pace in more than a decade. Yet at the very least, expensive energy may boost interest rates globally. Perhaps it will even result in scattered bouts of stagflation, or inflation increasing faster than growth.
Rumblings about Chinese labor costs are also raising the stakes. It's often thought that multinational companies flock to China to exploit the nation's cheap workforce. Yet as economists such as Andy Xie of Morgan Stanley in Hong Kong are pointing out, lax environmental rules may be doing even more to encourage production in China.
Exporting Inflation
One side effect of China's industrial boom is rampant pollution. After years of keeping the global cost of manufacturing artificially low, there's political pressure within China to normalize production costs, which could force global inflation rates higher along with oil prices.
China's reluctance to let its currency appreciate versus the dollar also has analysts concerned the economy will overheat. It was a year ago today that China boosted the yuan 2.1 percent, and many investors have stopped betting on future revaluations. They've been burned too many times on such wagers.
Some observers doubt Asia will produce inflation. ``The concern about China exporting inflation is grossly inflated,'' said Stephen Green, an economist at Standard Chartered Bank in Shanghai. ``Though maybe less than before, China is still exporting deflation. Other countries in Asia are even more deflationary, and recent inflation is more related to lax monetary policy in the major economies than to price pressures from China.''
More Than Geopolitics
Even so, demographics may underpin today's trends. Marc Faber, managing director of Hong Kong-based Marc Faber Ltd., has been arguing that population growth and migration to Asian cities will increase energy demand in the years ahead. While the energy rally may take a breather, the odds favor it continuing.
Recent headlines offer little, if any, optimism that things will simmer down in the Middle East. And while factoring North Korea into oil prices is hardly straightforward, its nuclear shenanigans and missile tests surely don't help.
Even if geopolitical fears subside, oil markets still have Asian demand with which to contend. Billions of Asians getting richer by the day may leave prices with nowhere to go but up.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
07:56 China crude oil imports may decline, says Cnooc's Fu - Bloomberg.com
Bloomberg.com reports China's oil imports, a driving force behind record prices, have "stabilized'' and may decline within three years as govt measures to conserve fuel take root, Cnooc Ltd. Chairman Fu Chengyu said. Shipments will stay near 130 mln metric tons a year before dropping, helping global prices ease in the "long term,'' Fu, who runs China's third-biggest oil co, said in a July 18 interview. That prediction contrasts with Titan Petrochemicals Group, the country's largest oil-supertanker owner, which forecasts a jump of as much as 15% in 2006 imports. "The policies on energy saving will take three to five years to implement,'' Fu said in Beijing. "I feel confident that energy imports won't be as much as we thought before.'' Achieving the govt's targets will involve shutting factories that waste energy, setting efficiency limits for cars and increasing fuel prices to curb use. Briefing.com note: China's oil imports soared by 17.6% in the first half of this year, propelled by a surging economy, the govt said Thursday.
Wall St Week Ahead: Mideast, oil and earnings to roil stocks
Fri Jul 14, 2006 7:44pm ET
By Ellis Mnyandu
NEW YORK, July 14 (Reuters) - An escalation of Middle East fighting and crude oil prices close to $80 a barrel will create more angst on Wall Street next week, just as the quarterly earnings reporting season hits full swing.
If that doesn't give investors enough to worry about, here's one more thing. Federal Reserve Chairman Ben Bernanke is scheduled to appear before congressional committees on Wednesday and Thursday to testify about the Fed's semiannual monetary policy report.
Two major U.S. economic reports, notably the Producer Price Index and the Consumer Price Index for June, will be released next week, along with the minutes of the Fed's most recent policy-setting meeting.
Wall Street will watch the PPI and CPI reports for signs of whether the pace of inflation is picking up, while the Fed minutes will merit scrutiny for any hints about when the central bank might take a break from raising interest rates.
The violence in the Middle East, though, will keep Wall Street on edge.
"The real concern is not so much Israel going to Lebanon, but it's whether Israel is going to threaten Syria," said Steve Goldman, market strategist at Weeden & Co. in Greenwich, Connecticut.
"With Iran's backing of Syria, that would bring up a whole new issue. It's this lingering concern, which makes it tougher for stocks to rebound at this juncture."
This past week, Israel launched a military assault against targets in Lebanon after two of its soldiers were seized and eight killed.
The assault drove the price of crude oil up to a record $78.40 a barrel, fueling concerns that U.S. consumers may cut back spending as their gasoline bills soar. Consumer spending is watched closely because it accounts for about two-thirds of U.S. economic activity.
At Friday's NYMEX close, the August crude contract <CLQ6> settled at a record $77.03 -- up 4 percent for the week.
On Friday, U.S. stocks fell for third straight day, with major indexes registering sharp losses, despite a higher quarterly profit posted by conglomerate General Electric Co. (GE.N: Quote, Profile, Research), often viewed as a bellwether for the U.S. economy.
For the week, the Dow Jones industrial average<.DJI> dropped 3.1 percent, while the S&P 500 index <.SPX> shed 2.3 percent, while the Nasdaq <.IXIC> lost 4.4 percent.
HOPING FOR A CEASE-FIRE
Analysts said if there were any signs over the weekend that the Middle East tensions might ease, then earnings would take center stage, which could give the market a catalyst to crawl back up out of its slump.
"The geopolitical risks are a stiff headwind," said Joseph Quinlan, chief market strategist at Banc of America Capital Management in New York.
"Over the weekend," he said, "we do need to see a cease-fire ... Hopefully the G8 can craft some kind of deal that lowers the temperature," he added, referring to the Group of Eight summit of industrialized nations, which will meet Saturday through Monday in St. Petersburg, Russia.
But "if things continue to boil, oil prices could break through $80 a barrel, and that would weigh on the stock market early on Monday.
If problems subside, then the market would focus clearly on Bernanke and earnings next week," Quinlan added.
EARNINGS BLITZ
The coming week will resemble a blitz of numbers, with earnings reports scheduled from Dow components Microsoft Corp. (MSFT.O: Quote, Profile, Research), the software maker; diversified health-care company Johnson & Johnson (JNJ.N: Quote, Profile, Research); heavy equipment maker Caterpillar Inc. (CAT.N: Quote, Profile, Research) and diversified manufacturer Honeywell International Inc. (HON.N: Quote, Profile, Research).
Apple Computer Inc. (AAPL.O: Quote, Profile, Research), the maker of the iPod digital music player, and Web search company Google Inc. (GOOG.O: Quote, Profile, Research), are among the major technology names set to post their quarterly results, along with chip maker Intel Corp. (INTC.O: Quote, Profile, Research).
According to Reuters Estimates, S&P 500 companies' earnings are forecast to rise nearly 10 percent for the quarter, and could well achieve a 16th consecutive quarter of double-digit profit growth -- if most companies deliver the standard margin of earnings outperformance of between 2 percent and 3 percent over consensus estimates.
"It's going to be important to see that you don't get too many disappointments this quarter because that's going to make the next quarter even more concerning," said Barry Hyman, equity market strategist at EKN Financial Services Inc. in New York.
"We could see some upside surprises in health care and staples. The consumer discretionary sector will probably have a lot of misses," said Scott Wren, senior equity strategist at A.G. Edwards & Sons Inc. in St. Louis.
FED CHAIRMAN ON THE HILL
Bernanke's testimony on Capitol Hill is scheduled for Wednesday and Thursday, starting at 10 a.m. (1400 GMT) on each days. On Wednesday, the Fed chairman will speak to the U.S. Senate Banking Committee and take questions from the senators. On Thursday, he will testify before the House Financial Services Committee, and participate in a Q-and-A session with the U.S. representatives.
The Fed's roster of speakers includes Thomas Hoenig, president of the Federal Reserve Bank of Kansas City. He will speak on "The U.S. Economy and Current Challenges in Monetary Policy" at 1 p.m. on Wednesday before a business leaders' luncheon in Omaha, Nebraska.
The minutes of the Federal Open Market Committee's June 28-29 meeting, when it raised interest rates for the 17th time by a quarter-percentage point, will be released on Thursday at 2 p.m. (1800 GMT)
PPI AND CPI FORECAST HIGHER
Economists polled by Reuters forecast that the overall U.S. Producer Price index, a gauge of prices received by farms, factories and refineries, rose 0.3 percent in June after a 0.2 percent rise in May.
Core PPI, excluding volatile food and energy prices, is forecast to rise 0.2 percent after a 0.3 percent gain in May. The Labor Department will release the June PPI report on Tuesday at 8:30 a.m. (1230 GMT)
The overall Consumer Price Index is expected to rise 0.2 percent in June after climbing 0.4 percent in May, according to the Reuters poll.
Core CPI, meanwhile, is expected to rise 0.2 percent in June, following a 0.3 percent increase in May. The June CPI report is set for release on Wednesday at 8.30 a.m.(1230 GMT) (Wall St Week Ahead runs weekly. Questions or comments on this column can be e-mailed to: ellis.mnyandu(at)reuters.com) (Additional reporting by Caroline Valetkevitch and Jennifer Coogan)
here's the OIH "V" and the "sell" off the 70rsi touch in the am ...and the "Buy" off the 20 RSI dip later on and accompanying bounces for the the refiner/services/rigger/drillers universe bounce in symp with it VLO MRO SLB RIG NOV HAL etc , all follow along
almost this way everyday I've traded it , how hard/easy is this
to know when to eneter and exit and short and buy ?
see that first little double top on the OIH to the RSI 14/ 70 @ $148.50 ?
that's when I shorted & HAL simultaneously just t when the OIH peaked there too @ $74.50 ...just cov'd OIH on the 30rsi touch tp $145.70 & HAL $73.23 ....
works 85% ~90% of the time
have to get back to tradng
just the 3min rsi 14 ....
test it out today and see...
What time frames are you working with in your charts?
SLB SII ...The appeal of oil services stocks-Barron's Online
From the "Weekday Trader" section: As the parts department for the energy exploration business, the oil and gas services industry has kept the fossil-fuel engine running in high gear. Shares of oil and gas service and equipment companies themselves are up about 60% in the past 12 months. In recent weeks, though, services companies lost value during profit-taking in commodity-tied stocks. Yet the positive long-term outlook for the services industry remains strong: rising global demand for oil and natural gas weighed against the need to replace dwindling supplies.
That's why there's still appeal for some large services companies, which provide everything from seismic reserve-measuring systems, like international industry giant Schlumberger (SLB), to fluids used to flush oil from deep wells, such as Smith International (SII). Analysts expect Schlumberger, the largest energy-services company as measured by market capitalization, to boost revenue by 17% and earnings by 30% in 2007. Meanwhile, demand growth for Smith International's drilling fluids, high-end drill bits and equipment that completes wells should yield 18%-22% revenue growth over the next five years, says one analyst.
In either case, for investors who still have the energy for energy, buying into oil and gas services may serve as a fresh spark plug for portfolios in the coming year - as long as oil demand doesn't completely collapse.
same divergence as well in the metals , miners , and steels ....Gold up , miners selling off too .
In times like these big money flys out of stocks and into safe havens ....though the GLD/SLV etf's were exceptions for obvious reasons with the ME situation ..
Have been shorting HAL regularly each day on any pop with seeming ease noticing a negative bias and sellers ready there everytime it bids up . Have taken it long too in sympathy to bidding up in the OIH which has been muted trader lately . Buy the OIH off any touch on the RSI 30 , short doubletops at the 70rsi ....works almost always .
But oil @ $80 and we start to really set-off longer term impacts on the consumer and economy , which already $75 oil will have done .
oil up, oih down... guess it's not supposed to make sense...
Oil hits records $76 on Mideast, Nigeria supply worries
By Neil Chatterjee
Reuters
Thursday, July 13, 2006; 4:28 AM
SINGAPORE (Reuters) - Oil surged to record highs near $76 on Thursday as worries over lower U.S. crude stocks were underlined by increased tension in the oil-rich Middle East and suspected explosions at a pipeline in OPEC exporter Nigeria.
The world's fourth-biggest oil exporter Iran said it would not abandon the right to nuclear technology and Israel moved naval vessels into Lebanon's waters to impose a blockade.
U.S. crude futures (CLc1) traded 70 cents higher at $75.65 a barrel by 0825 GMT, after hitting a record of $75.89 as gains came on top of Wednesday's 79-cent rally. London Brent (LCOc1) traded up $1.02 at $75.41 a barrel after a record $75.60.
"Geopolitical risk is out of control," said Tony Nunan, a manager of risk management at Mitsubishi Corp.
"There's a pipeline attack in Nigeria, Israel is taking a strong stance and that's adding fuel to the fire, but more than anything it's U.S. gasoline demand holding up and the Iran situation."
Iranian President Mahmoud Ahmadinejad said on Thursday the world's fourth-largest oil exporter would not abandon its right to nuclear technology after Tehran's case was referred back to the U.N. Security Council over its nuclear dispute with the West.
In the world's eight-largest exporter Nigeria, two suspected explosions at a crude oil pipeline operated by Italy's Agip and feeding the Brass oil terminal caused massive oil spills in Nigeria's southern state of Bayelsa, state government officials said on Thursday. Output has already been cut by militant attacks.
Compounding tensions in the Middle East, Israel said on Thursday its naval vessels were in Lebanon's territorial waters and blocking access to ports as part of an offensive launched after Lebanese Hizbollah guerrillas captured two soldiers in a border clash.
And in Asia, North Korea blamed the South for the collapse of their first high-level talks since Pyongyang's missile tests sparked a regional crisis, saying Seoul would "pay a price" for the failure.
The series of real or potential supply threats have helped drive oil's 24 percent rally this year against a background of growing world demand.
FUEL DEMAND GROWTH
U.S. crude oil inventories slid 6 million barrels last week as imports fell nearly a million barrels per day (bpd), a government report said on Wednesday. The drop was five times larger than the 1.2 million barrels forecast among analysts polled by Reuters.
"The dramatic decrease in U.S. inventories is propping up the market and we're seeing an extension of the bullish sentiment which followed the numbers on Wednesday," said Dariusz Kowalczyk, senior investment strategist at CFC Securities in Hong Kong.
A shipping artery in Louisiana was closed for 10 days last month after an oil spill. Though it opened back up before the end of last week, the disruption may have continued to slow cargo deliveries to the region.
Gasoline stocks slipped 400,000 barrels, against a forecast decline of 100,000 barrels, on lower refinery production and as demand from the world's largest oil consumer remained strong.
U.S. motorists, who consume over 40 percent of the world's gasoline, bought 1.7 percent more fuel in the past four weeks compared with a year ago. The data covered the U.S. Independence Day holiday weekend when annual gasoline demand peaks.
Despite near record-high prices, growth in oil demand will rise more quickly through to 2011 than it did in the past decade, the Paris-based International Energy Agency (IEA) said on Wednesday.
The IEA, adviser to 26 industrialized nations, predicted the world would need an extra 1.57 million bpd of oil to fuel economic growth in 2007, up from growth of 1.21 million bpd this year.
(Additional reporting by Paul Marriott in Sydney)
Oil Falls Amid Optimism on Iran Nuclear Dispute
July 10 (Bloomberg) -- Crude oil fell for a third day in New York on signs a negotiated settlement may be possible over the nuclear research program in Iran, the world's fourth-largest oil producer.
Oil fell from a record $75.78 a barrel on July 7 after Iran's chief nuclear negotiator Ali Larijani said he had constructive talks with European officials on a package of incentives to stop the Islamic republic's uranium enrichment. Iran will formally respond to the proposals next month, Foreign Minister Manouchehr Mottaki told journalists yesterday.
``The kind words from the Iranians were quite important,' said Tobin Gorey, commodity analyst at Commonwealth Bank of Australia Ltd. in Sydney. Also, ``the premise for the push up through last week's high was modest,' he said.
Crude oil for August delivery fell as much as 53 cents, or 0.7 percent, to $73.56 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $73.70 at 7:53 a.m. in Singapore, 24 percent higher than a year ago.
The August contract fell 1.4 percent to $74.09 a barrel on July 7, the biggest one-day decline in more than three weeks. Crude oil reached a record earlier in the session after North Korea, which fired at least seven missiles last week said it would continue missile tests.
Prices eased the day before when the Energy Department's weekly inventory report showed U.S. gasoline stockpiles unexpectedly rose during peak summer motoring demand.
Temporary Risks
While North Korea's posturing had temporarily ``raised the risk temperature' in the oil market, the missile tests had merely proven the Asian nation's ``rogue-state credentials', Commonwealth's Gorey said.
Gasoline for August delivery fell 2.02 cents, or 0.9 percent, to $2.2192 a gallon in after-hours trading. The contract fell 0.9 percent to $2.2394 on July 7, following a 0.7 percent decline the day before.
The price of the motor-fuel fell late last week after the department's report showed U.S. gasoline inventories gained 727,000 barrels in the week ended June 30. Stockpiles rose even as demand reached 9.65 million barrels a day, the third-highest ever, the department said.
``The market is definitely reviewing how soft demand in the U.S. is,' Gorey said. ``Given what can still happen with this Iran situation, and given we're still in the hurricane season' oil prices may not fall much further, he said.
About 12 percent of U.S. oil production in the Gulf of Mexico remains shut because of damage from hurricanes Katrina and Rita last year, the U.S. Minerals Management Service said June 21. The Atlantic hurricane season runs from June 1 through November.
COMDX Commodities Summary.... Crude oil $75.60 is trading at a new all-time high this morning as traders worry oil supplies will be disrupted by Iran's nuclear endeavor and North Korea's missile tests (some traders think N. Korea may soon launch yet another missile but same traders also add we could still a very strong hurricane season); our energy contacts believe that if Iran doesn't respond to EU incentives to halt enriching uranium by the 7/15 G-8 summit in Russia, oil can continue its uptrend; crude oil is up 46 cents to $75.60pbl (range is 74.72 to 75.78). Natural gas is unch at $5.671mbtu (technically it seems natty has a bottom around $5.50 -- we continue to be positive on nat gas and related names as we feel any heat wave, tropical storm, or weaker inventory level could have hefty upside potential). Heating oil is up 1.09 cents to $2.0725/gal (range is 2.0445 to 2.0755); gasoline is up .6 of a cent to $2.2650/gal (range is 2.24 to 2.2675); despite a surprise build in gasoline inventory data, our contacts say underlying strength remains due to near record demand for the product; RBOB gas is off 1.2 cents to $2.3935/gal; Aug HO cracks rose a penny to $11.45 yesterday, while Aug HU cracks fell 22 cents to $17.79. Energy Reminder: Nat gas inventory data will be released at 10:30est... A weaker than expected June payrolls figure has the dollar weaker against the euro (something helping gold reverse losses hard this morn as traders speculate the Fed may not raise rates again in Aug); Gold is now up $2.40 to $638.40 while silver was relatively unch at $11.60 (gold also being helped by higher energy prices; low in gold was $630.20)... Copper may see buying on word that Chile, the world's largest producer of the metal, announced their June exports fell to $4.86bln (copper could also elevate due to shrinking global supplies -- LME inventories fell 1,975 tons to 89,600 tons); BHP is still trying to avert the largest worker strike in the world (Escondida produces 7% of copper supply in the world) by possibly increasing wages; Inco (N), the #2 nickel producer in the world, said its Goro Mine will probably be delayed and cost more than planned b/c of vandalism, additional permitting and higher building costs (nickel hit the highest levels in London since 1987); platinum set at $1,232, while palladium set at $325 in London.
U.S. House oks oil, gas offshore drilling bill, heads to U.S. Senate-Dow Jones
A proposal to allow more oil and natural gas drilling in federal waters won approval from the U.S. House late Thursday, 232-187, despite Bush administration concerns that the measure would cost the federal government billions of dollars, Dow Jones reported. Supporters of the bill were eager to see the House sign off on the bill to send a message to the Senate, where another bill aimed at opening an offshore area to natural gas drilling has been stalled, Dow Jones reported
Crude Oil Rises Above $72 on Increase in U.S. Gasoline Demand
http://www.bloomberg.com/apps/news?pid=10000087&sid=aehmlqrGYXOY&refer=top_world_news
June 27 (Bloomberg) -- Crude oil rose above $72 a barrel in New York for the first time in two weeks on speculation an increase in gasoline demand will drain U.S. fuel stockpiles.
Inventories last week probably climbed 400,000 barrels, which would be the second-smallest gain in two months, according to a Bloomberg News survey of nine analysts. Gasoline supplies amounted to 213.4 million barrels, 1.2 percent less than a year earlier, the Energy Department said last week.
``The ongoing level of high demand has been quite strong considering the relatively high price people are paying,'' said David Land, market analyst with CMC Markets Ltd. in Sydney. ``With refinery capacity still stretched in the U.S., gasoline is going to be a watched factor at the moment.''
Crude oil for August delivery rose as much as 25 cents, or 0.4 percent, to $72.05 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $71.98 at 11:30 a.m. in Singapore, 19 percent higher than a year ago.
Prices last traded above $72 on June 12. Oil reached a record $75.35 a barrel on April 21 and April 24.
The Energy Department will publish its weekly inventory report at 10:30 a.m. Washington time tomorrow.
``A sharp gain in gasoline prices has led bullish momentum in oil over the past several days of trade,'' said Kazuhiko Saito, a commodity strategist at Interes Capital Management in Tokyo. ``Oil may reach $73 a barrel this week.''
Gasoline Rally
Gasoline for July delivery was at $2.1788 a gallon at 10:14 a.m. Singapore time in after-hours trading, after rising 2.4 percent to $2.1788 yesterday, the highest close since June 6. Prices have gained 9.4 gains in the past five sessions.
Gasoline jumped 3 percent on June 21, when the Energy Department's report showed stockpiles of the fuel in the world's biggest oil consumer rose 294,000 barrels in the week ended June 16, a fifth of the forecast gain.
Consumption in the four-week period averaged 9.41 million barrels a day, 0.9 percent higher than a year earlier, the department said last week.
``Unleaded gasoline is definitely giving strong support to the crude oil market,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``It's the summer driving season and you've got the fourth of July coming up and people are going to be driving'' during the Independence Day holiday weekend, he said.
Oil has risen this year, partly on concern that Iran, the world's fourth-largest oil producer, may cut exports in its dispute with the United Nations over nuclear enrichment.
`Ultimate' Weapon
Iran will disrupt oil supplies only as the ``ultimate'' weapon in the conflict over its nuclear program, government spokesman Gholam Hossein Elham said yesterday.
The U.S. and European Union are trying to convince Iran to drop its nuclear fuel ambitions by offering technology and trade incentives in exchange for the nation ceasing enrichment work.
Conditions are ``favorable for solving the nuclear issue diplomatically,'' the state-run Islamic Republic News Agency cited Elham as telling reporters at a news conference in Tehran yesterday. Disrupting oil supplies is the ``ultimate'' option and ``we don't see the necessity to plan such matters in the current atmosphere and with the given conditions.''
It will probably show U.S. oil stockpiles declined 1.2 million barrels last week, based on the median forecast from the nine analysts surveyed. Inventories rose to 347.1 million barrels the week before, the highest since May 1998 and 4.9 percent higher than a year earlier, the department said June 21.
To contact the reporters on this story:
Christian Schmollinger in Singapore at
christian.s@bloomberg.net;
Gavin Evans in Wellington at gavinevans@bloomberg.net.
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