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Transcript of Energy and Markets Newsletter 120911
8/3/2019 Energy and Markets Newsletter 120911
http://slidepdf.com/reader/full/energy-and-markets-newsletter-120911 1/10
December 9,2011
Energy Data Highlights
Crude oil futures price12/7/2011: $100.49/bblup$0.13 from week earlierup$11.80 from year earlier
Natural gas futures price12/7/2011: $3.421/mmBtudown$0.129 from week earlierdown$0.972 from year earlier
Weekly coal production12/3/2011: 22.106 million tonsup1.299 million tons from week earlierup0.273 million tons from year earlier
Natural gas inventories12/2/2011: 3,831 Bcf
down20 Bcf from week earlierup102 Bcf from year earlier
Crude oil inventories12/2/2011: 336.1 mmbblup1.3 mmbbl from week earlierdown19.8 mmbbl from year earlier
Natural Gas/ Power News
EIA Storage Release 12/8/11 (Actual): -20 Bcf Previous Week: -1 Bcf +2.7% Change from 1 Year Ago+8.7% Change 5-year Average
From King Coal to King GasIf the bible for energy policy wonks is the International Energy Agency’s annual
World Energy Outlook, industry executives have ExxonMobil’s The Outlook for
Energy. The 2012 edition of Exxon’s long-term report, released on Thursday,
offers an insight on one of the biggest talking points in Big Oil’s boardrooms: the
golden age of natural gas. The increasing importance of natural gas is behind
some of the tectonic shifts in the hydrocarbon industry, including Royal Dutch
Follow
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Shell’s efforts to brand itself as a gas rather than an oil company; Exxon’s
acquisition of US gas producer XTO Energy for $25bn last year; and BHP Billiton
takeover in July of US-based gas developer Petrohawk for $12bn.Exxon believes
that over the next three decades natural gas will overtake thermal coal to become
the world’s second most important source of energy, only behind oil. The company
says on the closely watched report that while crude oil will remain the “mostwidely used fuel” until 2040, overall energy demand will be “reshaped by a
continued shift” towards greener energy sources, particularly natural gas. The
company goes as far as to predict that the energy market will start to wave
goodbye to thermal coal.
http://www.ft.com/intl/cms/s/0/21ba5860-2248-11e1-acdc-
00144feabdc0.html#axzz1g2c14fyD
Update: Exxon says natural gas will support energy demand growth
The world’s energy demand will grow 30 percent by 2040, but coal’s reign inelectricity generation will decline in favor of cleaner-burning natural gas, ExxonMobil said in its annual energy outlook. Developing economies in Latin America,China, India and Africa, will largely drive the surging global demand, said BillColton, ExxonMobil vice present of Corporate Strategic Planning. More energy willbe needed to power their growing commercial and industrial sectors and theircitizen’s improved standards of living. Electricity remains the largest draw onenergy and rapid improvements in the energy efficiency of buildings andappliances won’t be enough to curb demand, Colton said in a press conference
Thursday morning. “In the near-term, prospects for the global economy might lookuncertain, but over the next 30 years, the world will continue to experienceeconomic growth,” he said. “As the world population expands and living standards
improve, the world will need more energy, even as we learn to use energy moreefficiently.” In 2040, coal, oil and natural gas will supply nearly 80 percent of theworld’s energy, the report noted. Renewable fuels, primarily wind, will be thefastest growing energy sources, but they will remain a minor slice of the globalenergy supply, increasing from 1 percent today to 4 percent in 2040, the reportprojects.http://fuelfix.com/blog/2011/12/08/exxon-report-says-natural-gas-will-be-king/
EPA Says Fracking Likely Polluted Wyoming Aquifer
Fluids caused by a company employing a drilling technique known as "fracking"likely polluted an aquifer in Wyoming, the U.S. Environmental Protection Agency
said in a draft report that countered industry claims the technique has never led
to water contamination. The EPA said "the best explanation" for the pollution seen
in the deep monitoring wells in Pavillion, Wyoming, is a release of hydraulic
fracturing, or fracking, fluids into the aquifer above the production zone. The
pollution includes benzene, alcohols and glycols, the report said.
http://www.cnbc.com/id/45601713
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Gas prices: Low enough for consumers, high enough for producers? WPC
Long term oil-linked gas contracts are likely to persist and coexist with spot
pricing though the percentage of the oil price in the indexation may change, Alan
Haywood, Chief Operating Officer of Global Gas at BP said Thursday. Gas
consumption rose by 7.4% in 2010, the fastest rate since 1984, he said. Natural
gas trade increased by 10.1% and LNG by 22.6%. Between 2000 and 2010,
demand in Japan grew from 12.7% to 17%, in South Korea from 9% to 15% and in
Europe from 21% to 25%. BP projects natural gas to continue to grow at 2% a year
to 2030 with gas accounting for more than 50% of growth in fossil fuels, Haywood
said at the World Petroleum Congress in Doha. Gas was affordable when
compared with coal when the cost of carbon is considered and affordable versus
oil when higher production costs are taken into account, Haywood said at a
session on the theme of whether gas prices were low enough for consumers and
high enough for producers.
http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/8677812
Green/ Alternative Energy News
Renewable energy umbrella launched Four leading renewable energy associations have announced their intention to
launch an umbrella body to act as a single voice championing the importance and
relevance of the renewable energy industry in South Africa. The announcement
comes in the wake of the Green Economy Accord recently concluded through a
series of engagements among the government, business, labour and communityat Nedlac. This accord envisages aggressively addressing climate change
concerns and the need to grow the SA economy by simultaneously stimulating the
green economy and creating green jobs.
"Creating a united voice for renewable energy custodians is imperative at this
juncture in the development of the industry," said Pancho Ndebele, chair of the
South African Solar Thermal Industry Association.
http://www.fin24.com/Economy/Renewable-energy-umbrella-body-launched-
20111209
Crude Oil News
OPEC Daily Basket Price 12/8/2011- $109.02
(OPEC Daily Basket Price 12/7/2011- $110.105)
Crude Heads for Biggest Weekly Drop Since September as Europe
Disappoints
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Oil headed for the biggest weekly decline since September as economic rescue
measures by European leaders failed to assuage concern that growth is slowing.
West Texas Intermediate futures have lost 2.2 percent this week, as euro-area
countries resolved on steps to ease the region’s crisis without forging an
agreement among all European Union members. Chinese industrial production
slowed last month. Saudi Arabia, the world’s largest crude exporter, is in no rushto agree to new output quotas when OPEC meets next week, Oil Minister Ali al-
Naimi said. “The details have failed to impress the market,” said James Zhang, a
strategist at Standard Bank Plc in London, referring to the European measures.
“We expect the euro zone crisis to drag on well into next year.”
http://www.bloomberg.com/news/2011-12-09/crude-heads-for-biggest-weekly-drop-since-september-as-europe-disappoints.html
Brent rises over $108 on China investment report Brent crude oil rose above $108 on Friday after a Reuters report that China's
central bank will create a new investment vehicle worth $300 billion, part of which
would be focused on Europe.The report, which also boosted the euro, raised hopes
that funds from the world's second-biggest and fastest growing major economy
could be used to support European growth and soften the impact of the euro
crisis. Markets had earlier fallen after a European Union summit left the bloc
divided over moves to build a fiscal union and tighten integration in an attempt to
rescue the euro. Thorbjoern Bak Jensen, analyst at Global Risk Management, said
the exclusive Reuters report from Beijing had helped reverse negative sentiment
after the division at the summit.
http://www.reuters.com/article/2011/12/09/us-markets-oil-idUSTRE7AD06820111209
Brent Falls Below $108 on Euro Zone, China Output Brent crude oil fell below $108 on Friday after a European Union summit left thebloc divided over moves to build a fiscal union to rescue the euro and followingChinese and German data pointing to slower global growth. Twenty-three of the27 EU leaders at a summit in Brussels agreed on tighter integration with stricterbudget rules for the euro zone, but Britain rejected proposed amendments to theEU treaty after failing to secure concessions for itself. The split deepened worriesthat policy makers would fail to tackle the euro zone debt crisis, leading to slowereconomic activity and lower demand for oil. Sentiment also softened after Chineseindustrial output growth hit its slowest pace in two years, although this was offset
by the prospect of further policy easing at the world's no.2 oil consumer afterinflation plunged to a two-year low.http://www.cnbc.com/id/45604393
Syrian pipeline attack raises supply threat A Syrian oil pipeline has been blown up in the first significant rebel attack on theoil industry since the uprising started nine months ago. Damascus confirmed theattack yesterday. The state-run Syrian Arab News Agency said: “A destructiveterrorist group targeted a crude oil pipeline in Tal Al-Shur, northwest of Homsrefinery.”The Homs refinery is the second largest in Syria, with a capacity toprocess about 107,000 barrels a day from domestic oilfields, according to the US
Department of Energy. The country’s largest refinery is at the Mediterranean portof Banias. The so-called Arab spring has disrupted oil markets through 2011, with
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lower oil supplies in Libya due to the civil war, in Yemen and more recently inSyria.http://www.ft.com/intl/cms/s/0/e648a0e6-21c2-11e1-a19f-00144feabdc0.html#axzz1g2c14fyD
Oil Price Paralysed by Lack of Forward Visibility
Like a rabbit trapped in the headlights of an oncoming car, Brent prices haveremained static in the past fortnight despite an exceptionally heavy news flow.
The market has been hit by a series of large shocks ranging from the deepening
debt crisis in Europe to possible sanctions on Iran's exports and speculation about
a military strike on the country's nuclear facilities. News that would normally have
a significant impact has had none at all, however. Instead the market is paralysed
by informational and analytical overload, unable to process the unusually large
number of economic and political risks. "Forward visibility" has shrunk from the
usual months to just weeks or even days. Daily price movements have been
unusually small. Realised volatility has fallen to 22.6 percent over the last 30
trading days, down from more than 35 percent in October, putting it in the 23rd
percentile of the 2006-2011 distribution, and the trend is still lower. Front-month
Brent futures prices have ranged less than 2.25 percent a day in the last fortnight
compared with an average of more than 3 percent since the start of 2006.
http://www.commodities-now.com/commodities-now-news/power-and-
energy/9195-oil-price-paralysed-by-lack-of-forward-visibility.html
Gas prices up slightly over last week Gas prices are up slightly over last week in Houston and Texas, according to AAAgas gauge. The average price of gasoline rose to $3.10 in Houston, up a penny
from last week’s price. The state average also edged up a penny to $3.11.Nationally, prices remained at last week’s average of $3.29. Gas prices havesteadily falling since peaking this summer near the $4-per-gallon range, but theystill remain more than 30 cents over the average price last year. Houston driverspaid $2.78-per-gallon last year. However, the price gap between last year’saverage and this year has been shrinking as gasoline demand declines during thesluggish economy, Tom Kloza, chief oil analyst at Oil Price Information Service.http://fuelfix.com/blog/2011/12/08/gas-prices-up-slight-over-last-week/
US Republicans dig in heels on linking Keystone to payroll tax cutsUS House Republican leaders Thursday said they had no plans to drop an effort toaccelerate approval of TransCanada's Keystone XL pipeline from a key end-of-year
tax package. President Barack Obama promised Wednesday to reject anyattempts by Congress to link expiring payroll tax cuts and unemploymentinsurance with the controversial permitting process for the 1,600-mile crude oilpipeline. House Speaker John Boehner appeared emboldened by the WhiteHouse's veto pledge. He told reporters that his members had agreed to move abill that would extend unemployment benefits and the payroll tax credit and wouldcontain riders speeding Keystone and delaying environmental rules for industrialboilers. "You know, the president says that the American people can't wait on
jobs," he told reporters at the US Capitol. "Well, guess what? We agreewholeheartedly with the president. The Keystone pipeline project will create tensof thousands of jobs immediately."http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6745332
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Is the CME Preparing for the death of WTI? The CME Group's announcement that it is considering the launch of a new Gulf
Coast oil futures contract has perplexed some market participants. Why would
the exchange announce the idea on Wednesday, less than a month after news of
the Seaway pipeline reversal, which should end the dislocation of the CME's
crown jewel, the West Texas Intermediate crude oil futures contract? A simple
explanation is that the exchange is simply trying to innovate and provide new
ways for market participants to engage with the market. Another is that the
exchange wants to transition away from an inland delivery point at Cushing,
Oklahoma to another in Houston that will be better connected to global markets.
After all, markets tend to prefer a single futures contract with deep liquidity over
a fragmented market split between shallower pools of trade. When contacted on
Thursday, a CME spokesman rebuffed the suggestion the proposal aimed to
create a substitute for WTI and said the exchange was delighted with the Seaway
reversal which it says ensures that WTI remains well connected with global
markets. So it is safe to say that the CME is not interested in unilaterally forcing
market participants to shift their preference to a new contract, especially in thecase of WTI, its most lucrative product. But there is demand for a Gulf Coast
product for hedging, as evidenced by the growth in CME-cleared swaps based on
physical Gulf Coast crude prices.
http://www.commodities-now.com/commodities-now-news/power-and-
energy/9194-is-the-cme-preparing-for-the-death-of-wti.html
Recent Rig Counts
Area
Last
Count
Cou
nt
Change from
Prior Count
Date of
Prior
Count
Change
from Last
Year
Date of Last
Year's
Count
U.S. 2 Dec11
1993 -7 23 Nov 11 +280 24 Nov 10
Canada 2 Dec11
484 Unchanged 23 Nov 11 +35 24 Nov 10
International
October2011
1197 +23 September 2011
+98 September2010
http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm
Weather
6 to 10 Day Outlooks
Temperature
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Precipitation
8 to 14 Day Outlooks Temperature
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Precipitation
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