Friday, May 16, 2008

Oil Markets do Fandango, not Contango


There was a lot of very interesting testimony at hearings over a year ago. With the oil industry going through tribulations on the Hill and in the press, I thought I'd do an update, of sorts.

  • The oil market is not in contango any longer. Prices here.
  • There is a new survey of oil industry execs out with their view that oil prices will fall this year. Obviously, the futures markets disagree - see above.

  • From a recent conference of those in the know, it's nat gas we should be worried about:
    influential and knowledgeable CEOs reached the consensus that "oil prices will likely soon drop dramatically and the long-term price increases will be in natural gas."
  • There is a PR firm that has been hired to make oil industry execs more likable. This is not related to the recent collection of execs at one company (in Canada) who lied about oil production and got caught. The API is in the media business, now. (This is not related to Slick it up! ads, though). Wait. Everyone has the same idea now, so buy ad companies

    Coal companies, and the users and transporters of the commodity, are also trying to improve coal's image with a $45 million-a-year campaign, and Oklahoma billionaire Aubrey K. McClendon is spending millions through a foundation to promote natural gas.
  • The strategic oil petroleum reserve will stop being filled (and Bush won't veto the bill).
  • Despite global warming likely to dramatically affect it, ANWR will continue to be off limits. But "section 526" environmental standards remain a target as do permitting timelines for refinery expansion.

  • McCain is greener than his neighbor (McCain’s campaign sold eco-friendly polo and t-shirts made from bio-degradeable fabric)

  • C-span opens up an "Energy" page.

  • The short-term refining equation is - screwy, with distillate prices and stocks rising and demand falling (it does seem a little more screwy than usual, at least):

    At the same time, MasterCard's (MA) May 7 gasoline report showed that gas demand has fallen by 5.8%, while the government suggested that gasoline consumption might have fallen by slightly over 6%.

    We do know that refineries in the U.S. again cut back their utilization to 85%. That's down from 89% a year ago, in a season when production is normally 95%, only because they're trying to draw down gasoline inventories to bid gasoline prices up. Yet despite the reduced refinery runs, the EIA said, the U.S. managed to put another 800,000 barrels of gasoline in stock. The American Petroleum Institute put the gas gain at 1.4 million barrels. The point is that neither organization is in disagreement that gasoline was added into our active stocks; it's just a question of exactly how much.

  • When governments aren't fixing things, they are mucking them up (just like companies?), by insulating the poor and rich alike:

  • Never mind the flat domestic output; never mind the doubling of crude oil prices; retail prices of petrol and diesel in India have been put up by only 3.2 per cent and 4.4 per cent over the year. The rest of the inflation in crude oil prices has been absorbed by government through a lowering of taxes or by the oil marketing companies through a paring of profit. There has therefore been little financial pressure on consumers to reduce consumption.

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