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Oil’s up, oil’s down, it’s France, it’s China

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It’s up. Crude oil rose on speculation that growing French demand for imported fuel because of a strike will reduce stockpiles elsewhere, reported Bloomberg. France is importing “massive” amounts of fuel and tapping reserves to alleviate service-station shortages, Environment and Energy Minister Jean-Louis Borloo said today. The French government last week authorized the use of fuel reserves after Total SA announced it would halt its five active refineries in France and other refiners took measures to reduce output. Workers at the country’s 12 crude-processing plants have extended their labor action since Oct. 12 to protest a plan to raise the minimum retirement age.

It’s up. Crude oil is poised to reach $90 a barrel by the middle of December, according to technical analysis by Lind-Waldock in Chicago. The December contract, which became the front-month contract yesterday, has been trading in an uptrend, a pattern of higher peaks and higher valleys, since touching a low of $75.10 on Sept. 23, Blake Robben, a strategist at Lind-Waldock, a division of MF Global Ltd., said in an interview.

It’s down. Crude oil may decline next week after China’s oil processing grew the least in 18 months as government measures to cool the economy reduced fuel demand, a Bloomberg News survey showed. Fourteen of 30 analysts, or 47 percent, forecast crude oil will fall through Oct. 29. Eleven respondents, or 37 percent, predicted prices will be little changed and five estimated an increase. Last week analysts were split over whether futures would drop or climb. Data from the China Mainland Marketing Research Co. yesterday showed that refineries in the world’s biggest energy- consuming country processed about 8.5 million barrels a day in September. That’s a 6.6 percent gain from a year earlier, the smallest increase since March 2009.

It’s down. Saudi Arabia has rejected claims that the era of cheaply produced oil is over, saying the world’s largest field in the kingdom’s eastern province still holds more than many countries. Many of the largest oilfields in Texas and the North Sea have passed their prime, forcing companies to target more costly prospects such as bitumen deposits in Venezuela, Canadian tar sands and ethanol. But Ali al Naimi, the Saudi Arabian oil minister, pointed to the Ghawar field’s 88 billion barrels of remaining reserves and the kingdom’s large cushion of spare pumping capacity as signs that oil was still abundant. “”I am sorry to disappoint people but the era of easy oil is not over,”” al Naimi said at a conference held in the Saudi capital to celebrate the 50th birthday of OPEC. “”How can you say the era of easy oil is over when we still have 88 billion barrels in the Ghawar field? That is more than many countries in the world. You can dismiss the notion that easy oil in Saudi Arabia is gone.”” The Ghawar field, measuring 280km by 30km, is by far the largest conventional oilfield in the world. Although details of the field’s performance are not made public, it is believed to have produced more than 65 billion barrels already since production began in 1951.

It’s up. Any oil price fall should be seen as an opportunity to buy the contract as the next move in the market is likely to be a rally, JPMorgan Chase & Co. said.“The signal that the next leg higher is imminent will be tighter Dubai forward spreads and a narrower Brent-Dubai spread,” Lawrence Eagles, head of commodity strategy in New York, said in a monthly oil market report. JPMorgan said it expects the dollar to weaken by four to five percent over the next six months, giving oil a boost. A declining dollar increases the appeal of energy as an inflation hedge. The strength in crude is also bolstered by rising demand in several regions, the bank said. A narrowing spread, when Dubai oil rises closer to North Sea Brent, typically shows increasing Asian demand. The Brent-Dubai exchange for swaps, or EFS, for December narrowed 12 cents to $2.40 a barrel today, according to data from PVM Oil Associates. The EFS is the price difference between Brent futures and Dubai swaps contracts and signifies Brent’s premium relative to the Middle East grade. The December-January Dubai spread shrank to minus 36 cents from minus 80 cents on Sept. 27, according to data compiled by Bloomberg. “The key risk is that we are being too cautious and that the threat of $100 a barrel oil that is implicit in our fourth- quarter 2011 oil forecast arrives much sooner than we expect, driven by not only a weak dollar, but also by rampant Chinese and emerging market demand, the rebuilding of French strategic stocks, and an upward bias to food prices,” Eagles said in the report.

Written by makanaka

October 25, 2010 at 19:28

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