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OPEC Rift Deepens Amid Falling Oil Prices

This article by Benoit Faucon, Summer Said and Sarah Kent Connect for the Wall Street Journal may be of interest to subscribers. Here is a section: 

But even modest cooperation between many members has broken down, and Saudi Arabia, in particular, has moved to act on its own. While it cut output earlier this summer, other members didn’t go along. Since then, it has dropped its prices.

Each member has a different tolerance for lower prices. Kuwait, the United Arab Emirates and Saudi Arabia generally don’t need prices quite as high as Iran and Venezuela to keep their budgets in the black.

Late Friday, Venezuelan Foreign Minister Rafael Ramirez, who represents Caracas in the group, called for an urgent meeting to tackle falling prices. The group’s next regular meeting is set for late next month.

But on Sunday, Ali al-Omair, Kuwait’s oil minister, said there had been no invitation for such a meeting, suggesting the group would need to stomach lower prices. He said there was a natural floor to how low prices could fall at about $76 to $77 per barrel—near what he said was the average production costs per barrel in Russia and the U.S.



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International schemes hatch to tap nuclear for industrial heat

Thanks to a subscriber for this informative article from the energy2blog which may be of interest: Here is a section: 

The HTR-PM is not to be confused with another ambitious high temperature project underway in China, in which the Chinese Academy of Sciences in Shanghai is developing small prototypes of a salt-cooled, solid fueled pebble bed reactors (Li Fu’s HTR-PM design uses gas cooling) and of a salt-cooled, liquid fueled molten salt reactor. It is targeting a 2019 completion date.

The two projects reflect a drive in China to develop nuclear power as part of an environmental and energy security push. China even has other advanced reactor projects under way. For example, it hopes to operate a “super critical water-cooled reactor” by 2025, NucNet reported. And its current commitment conventional reactors has become legendary. As I wrote recently, whereas China currently operates only 20 nuclear reactors , it has another 28 under construction, an additional 58 planned, and a staggering 150 or so proposed.

It is also stepping up as an exporter of nuclear reactors and technologies to countries including Saudi Arabia and possibly the UK. Its penchant for selling abroad applies not only to conventional reactors, but to advanced reactors as well. In one of his Vienna slides, Tshinghua’s Li noted that the HTR-PM is “suitable for international market” and that its small size makes it “more flexible for developing countries.”

 



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Musings from the Oil Patch September 24th 2014

Thanks to a subscriber for kindly forwarding this edition of Allen Brooks’ ever informative energy report for PPHB. Here are two important sections: 

The IEA’s comment about how remarkable the decline is, suggests that it did not have a grasp of the magnitude of the impact on oil demand from China’s ending the filling of its oil storage tanks during the past few months in response to the country’s growing economic weakness and financial stress. It would appear that the additional cost of this storage oil was too expensive for the Chinese economy and banking system to bear. Additionally, we believe the IEA’s model assumed too generous an estimate for economic growth in Western Europe and North America during the second half of 2014.

And

Besides the accelerating demand growth against limited non-OPEC supply increase case, the bulls point to the growing cost to find additional oil supplies. They also point to the new dynamic for OPEC, which is the high fiscal cost of their oil output. By “fiscal cost” they mean the price for a barrel of oil that multiplied by the number of annual barrels produced yields income sufficient to cover the cost of running the country’s government. That cost has risen sharply in a number of Middle Eastern and North African countries due to rapidly growing populations (these countries have some of the highest birth rates in the world) and the cost to mitigate social tensions associated with the ethnic struggles (Arab Spring) ongoing within most of these countries – what some of us might call political insurance. A number of analysts have crunched the budget numbers for these countries and created charts such as that below.

What this chart demonstrates is that only Qatar and Kuwait among the OPEC members have fiscal breakeven prices of around $75 a barrel. A substantial volume of OPEC production needs a price somewhere around $100 a barrel for the country to breakeven, while another substantial amount requires prices in the $125 per barrel neighborhood.



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Uranium officially enters bull market

This article from Bloomberg on the 16th may be of interest to subscribers. Here is a section: 

The U.S. on Sept. 12 expanded sanctions against Russia to include OAO Sberbank, the country’s largest bank, because of the fighting in eastern Ukraine. The EU added 15 companies such as Gazprom Neft and OAO Rosneft, and 24 people to its own list of those affected by its restrictions.

In Canada, voting on Cameco’s new labor agreement will happen once workers are back on the job, the United Steelworkers said Sept. 12. The Saskatoon, Saskatchewan-based producer said Aug. 27 it had started shutting down the mine after receiving a strike notice from the union.

An agreement to end the strike will be negative for the uranium sector, Rob Chang, the head of metals and mining at Cantor Fitzgerald in Toronto, said in a Sept. 12 note. The brief shutdown may affect about 900,000 pounds of supply, he said.



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Marine Shipping: Brighter Horizons Ahead

Thanks to a subscriber for this report from Deutsche Bank which may be of interest to subscribers. Here is a section: 

1. We believe the global Shipping industry is on the cusp of entering a new era of prosperity, driven by:
Improved supply/demand dynamics
Increased fleet utilization
Abundant capital to fund vessel growth

2. We forecast an almost doubling of earnings power in 2016 (vs. 2013) across our coverage universe, driven by:
Increasing spot market rates
Vessel growth

3. We are most bullish on shippers of Dry Bulk, Crude Oil, and LPG/LNG
Near-term: Dry Bulk rates are starting to inflect higher, but are still 55% below 20-year historical average (i.e. more room to run).
Mid-term: Distance between where oil is harvested and refined is increasing, creating significant secular growth opportunities for shippers of crude oil.
Long-term: Demand for LPG/LNG shipping should increase significantly as infrastructure projects come online and export capacity grows.



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Crude Rises as OPEC Secretary General Says Group May Cut Target

This article by Mark Shenk for Bloomberg may be of interest to subscribers. Here is a section:

“I am not really concerned about the prices declining at this short term,” OPEC’s El-Badri said. “I think the price will rebound by the end of the year. When we’re coming to the fall, things will look better.”

Saudi Arabia cut its crude production by 408,000 barrels a day to 9.6 million in August, the biggest reduction since the end of 2012, the kingdom said in a submission to OPEC.

OPEC officials, including Saudi Arabian Oil Minister Ali Al-Naimi, have said they see no urgent need to respond to oil’s drop. Prices “always fluctuate and this is normal,” Al-Naimi told reporters in Kuwait on Sept. 11. Oil will recover as demand for winter fuels climbs, Kuwaiti Oil Minister Ali Al-Omair said the same day. The group is next due to meet on Nov. 27.

‘Huge Decline’
“The huge decline in prices since June has been a major concern to all oil producers,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The Saudis have already started to cut output and now we’re getting evidence of further action. The market appears to have found a bottom and the statements are a sign for the buyers to return.”

Russian and OPEC analysts will meet in the spring, Russian Energy Ministry spokeswoman Olga Golant said by text message. “High-level” talks are scheduled for the second half of 2015, according to a joint statement from OPEC and Russia today “I wouldn’t be surprised if the Russians and OPEC cooperated to support the market,” Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $2.6 billion, said by phone. “It’s in the interests of both parties to keep prices from falling further.”



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BlackRock Betting on Silva Win in Brazil Is Bullish on Petrobras

This article by Christiana Sciaudone for Bloomberg may be of interest to subscribers. Here is a section: 

Brazil votes next month on whether to reinstate incumbent President Dilma Rousseff or elect Marina Silva. The two are running in a statistical tie, with a Vox Populi poll published last week showing Silva would get 42 percent of votes in a runoff, compared with 41 percent for Rousseff.

“We’re overweight because we’re looking and we’re continuing to look for change,” Landers said in a Sept. 12 interview at BlackRock’s New York office. “We have good reasons to believe that the election will go towards Marina.”

Landers said Silva is signaling that she will allow the private sector to be “in charge of its own destiny,” instead of trying to control every aspect of the economy, and that she will bring inflation down. Rousseff has been using Petrobras and other state companies as fiscal and monetary policy tools, driving their value down, Landers said.

As part of Rousseff’s effort to contain inflation, she limited Petrobras’s ability to increase fuel prices.

If Rousseff wins in October, Petrobras will return to the nine-year low it hit in March, Landers said, and BlackRock would reduce its exposure to Brazil. “We would significantly have to rethink our portfolio,” Landers said. The Latin America fund shrank from $4.5 billion in December on flows.

Petrobras is the second-largest holding in Brazil after Itau Unibanco Holding SA in BlackRock’s Latin America fund. Earlier this year, various BlackRock funds bought 500,600 shares of Petrobras, as the Rio de Janeiro-based company is known, according to data compiled by Bloomberg.



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Email of the day on uranium mining investment vehicles

Your comment on the Uranium price is of interest to me. Prior to Fukishima , Geiger Counter was very much in vogue. Then came the collapse. I wondered what the view was now concerning the above and perhaps suggest other companies listed in London that have positive chart patterns .    



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Brent Crude Declines Below $100 for First Time Since June 2013

This article by Mark Shenk for Bloomberg may be of interest to subscribers. Here is a section: 

WTI for October delivery fell 98 cents, or 1.1 percent, to $92.31 a barrel on the New York Mercantile Exchange. Futures touched $91.80, the lowest level since Jan. 14. Volumes were 8.6 percent higher than the 100-day average. The U.S. benchmark grade traded at a $7.52 discount to Brent, compared with $7.53 at the close on Sept. 5.

“The fundamentals have been bearish and eventually the fundamentals win out,” Sarah Emerson, managing principal of ESAI Energy Inc. in Wakefield, Massachusetts, said by phone. “We’re looking at a weak global market.”

In China, imports fell for a second month as a property slump hurt domestic demand. The trade surplus climbed to a record of $49.8 billion in August as exports rose on the back of increased shipments to the U.S. and Europe.

The 2.4 percent drop in imports compares with the median estimate for a 3 percent increase. Exports increased 9.4 percent from a year earlier, the Beijing-based customs administration said today, compared with the 9 percent median estimate in a Bloomberg survey.



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Worst Case BP Ruling on Spill Means Billions More in Fines

This article by Bradley Olson and Margaret Cronin Fisk for Bloomberg may be of interest to subscribers. Here is a section:

Once one of the biggest and most powerful oil companies in the world, BP faces years more of uncertainty that will put continued pressure on shares and may open the company to takeover pressure from larger rivals such as Royal Dutch Shell Plc or Exxon Mobil Corp.

Today’s ruling defines the scope of the ultimate payouts, which will be determined after a trial scheduled to begin in January 2015 in New Orleans. If Barbier agrees with the government’s spill estimate of 4.2 million barrels, the payout could ultimately be as high as $18 billion based on federal guidelines for pollution fines. If he sides with BP’s estimate that only 2.45 million barrels spilled, it would reach $10.5 billion.

Barbier has discretion in how the fines are ultimately decided. “During the penalty proceedings, BP will seek to show that its conduct merits a penalty that is less than the applicable maximum after application of the statutory factors,” BP said in its statement.

BP also may be subject to unspecified punitive damages from lawsuits. Legal appeals may prolong the outcome for more than a decade -- Exxon paid the final punitive damages from the 1989 Valdez spill off Alaska 20 years after the incident.



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