Archive for category Oil

The Conventional Wisdom On Oil Is Always Wrong

By Ben Casselman
Five Thirty-Eight
Dec 18, 2014

In 2008, I moved to Dallas to cover the oil industry for The Wall Street Journal. Like any reporter on a new beat, I spent months talking to as many experts as I could. They didn’t agree on much. Would oil prices — then over $100 a barrel for the first time — keep rising? Would post-Saddam Iraq ever return to the ranks of the world’s great oil producers? Would China overtake the U.S. as the world’s top consumer? A dozen experts gave me a dozen different answers.

But there was one thing pretty much everyone agreed on: U.S. oil production was in permanent, terminal decline. U.S. oil fields pumped 5 million barrels of crude a day in 2008, half as much as in 1970 and the lowest rate since the 1940s. Experts disagreed about how far and how fast production would decline, but pretty much no mainstream forecaster expected a change in direction.

That consensus turns out to have been totally, hilariously wrong. U.S. oil production has increased by more than 50 percent since 2008 and is now near a three-decade high. The U.S. is on track to surpass Saudi Arabia as the world’s top producer of crude oil; add in ethanol and other liquid fuels, and the U.S.is already on top. Read the rest of this entry »

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Oil slide threatens Malaysia’s fiscal progress

By Andy Mukherjee
Reuters
December 3, 2014

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Just when Malaysia was beginning to plug the holes in its public finances, the prospect of a sharp reduction in oil revenue is threatening to undermine fiscal progress and weaken the currency.

Petronas is playing spoiler. The state energy company recently warned that its contribution to the government’s exchequer – in the form of dividends, taxes and royalties – could slide 37 percent next year from an estimated 68 billion ringgit ($20 billion) in 2014.

Such a shortfall in the main source of government’s oil-and-gas revenue would easily exceed 2 percent of GDP. That would wipe out the 1.7 percent of GDP in annual savings the government hopes to achieve by scrapping domestic fuel subsidies from Dec. 1.

The fiscal hit could be even larger if oil prices next year remain below the $75 a barrel on which Petronas based its forecast. That would threaten the government’s target of reducing the budget deficit to 3 percent of GDP, from an estimated 3.5 percent this year.

The finance ministry is refusing to give up on the 2015 target just yet. It may hope that Petronas can be persuaded to make a less drastic cut in its dividend payment. Read the rest of this entry »

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Six reasons oil’s price plunge has shaken the markets

Malcolm Maiden
The Age
December 2, 2014

Oil is a key economic input and its price has fallen sharply. All things being equal, that’s a plus for global growth, but the markets are in turmoil. Here are six key reasons why oil’s price plunge has the markets gyrating.

THIS IS AN OIL PRICE SHOCK

In 2011, 2012 and last year oil averaged $US95.13 a barrel, $US94.15 a barrel and $US98.05 a barrel respectively, a spread of just $US3.90. It averaged $US100 a barrel in the first six months of this year and got to $107.26 a barrel on June 20. Monetary policy was still loose and the consensus was that the oil price would not move sharply in either direction.

Instead, it tipped into an accelerating price slide, to about $US75 a barrel ahead of last week’s meeting of the Organisation of the Petroleum Exporting Countries (OPEC). It hit $US66.15 a barrel on Monday, after the world’s biggest producer, Saudi Arabia, failed to back OPEC production cuts, and was still below $US70 a barrel on Tuesday despite a 3 per cent-plus bounce. Investors didn’t see the price slide coming, and haven’t worked out what it means. Read the rest of this entry »

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Can Oil Prices Drop to $40 a Barrel? Some Say It’s Possible

NBC News
1.12.2014

Remember way back in June, when oil was $115 a barrel? Now it’s trading at around $67.90 a barrel for Brent crude and some analysts are predicting, given the right conditions, it could tumble to as low as $40 a barrel.

Weak demand, a strong U.S. dollar and booming U.S. oil production are the three main reasons behind the fall, according to the International Energy Agency (IEA), which warned of a “new chapter” for oil markets, which could even affect the social stability of some countries. Russia is already feeling some pain: the ruble tumbled about 4 percent on Monday, on course for its biggest daily drop since the 1998 financial crisis.

Saudi Arabia sparked talk of an oil price war as it has cut its official selling prices for some customers for four consecutive months through November. Part of oil’s drop has to do with supply conditions. Increased U.S. oil production has added to a glut in the world oil market. The U.S. now produces about 8.9 million barrels a day, while Saudi Arabia, the world’s largest producer, pumps about 9.6 million barrels a day. Read the rest of this entry »

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What you need to know about falling oil prices

by Tom Huddleston, Jr.
Fortune
December 2, 2014

Prices have been cut by one-third since mid-summer due to oversupply.

It’s looking like Monday’s spike in oil prices was little more than a blip.

The price of oil fell again on Tuesday after experiencing a brief rebound to start the post-holiday week. Crude oil prices gained as much as roughly 4% yesterday, rebounding from five-year lows, before falling again today. Prices for Brent crude oil are recently down about 2.3%, to $70.83, while West Texas Intermediate (WTI) is down 1.8%, to $67.26.

Oil prices are down sharply this year, losing over 30% of their value since hitting a summer peak. Read the rest of this entry »

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As oil tumbles, drillers seek to idle more rigs, Petronas cuts capex

Reuters
2 December 2014

SINGAPORE: Offshore drillers globally are increasingly considering “warm stacking” their rigs to take them temporarily off the market, as they gear up for a slowdown in the hunt for oil with crude prices sliding to five-year lows.

Rigs in warm stack maintain basic operations and most of the crew, and can be put to use once the owner gets a contract. Drillers put rigs in warm stacks to lower operational costs and also to keep them sufficiently ready for quick deployment, meaning they are hopeful a downturn won’t be a prolonged one.

Rigs can also be “cold stacked”, or shut down, which typically happens when an owner does not expect to find work for an extended period of time.

Oil prices have fallen about 40 percent in the past six months, with international benchmark Brent dropping below $68 to a five-year trough and nearing the marginal production cost of the most expensive offshore projects.

“Six months ago, no one talked about stacking rigs,” said Thomas Tan, chief executive officer at Kim Heng Offshore & Marine Holdings Ltd, a Singapore-based oilfield service firm, “In the last few weeks, things have become scarier and the talk of stacking started.” Read the rest of this entry »

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After oil price slump, worries as Petronas slashes dividends, capital expenditure

Malay Mail Online
DECEMBER 2, 2014

KUALA LUMPUR, Dec 2 — The recent global oil price slump has affected both Putrajaya and domestic oil and gas (O&G) industry which depend heavily on Petroliam Nasional Bhd (Petronas), after the local giant decided to slash its dividends and capital expenditure.

In the aftermath of the slump, media reports revealed declines in the ringgit, local stock market, and net worth of industry players including billionaires Tan Sri Robert Kuok and T. Ananda Krishnan, and even Tan Sri Mokhzani Mahathir.

With the US crude oil prices at a five-year low, Petronas Chief Executive Tan Sri Shamsul Azhar Abbas told reporters on Friday after the that payments to the government in the form of dividends, tax and royalties could be 37 per cent lower from the previous year to about RM43 billion in 2015 if oil stays around US$75 (RM275) a barrel.

As a result, Malaysia’s ringgit headed for its biggest two-day decline since the 1997-98 Asian financial crisis yesterday. Read the rest of this entry »

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The real difference between RON95 and RON97 — besides the price

Malay Mail Online
December 2, 2014

PETALING JAYA, Dec 2 — With RON97 now only 20 sen more expensive than RON95, more Malaysians are now able to purchase it.

In 2012, both fuels used to have a price difference of RM1 per litre.

But what exactly is the difference between RON 95 and RON97 besides the price?

RON stands for Research Octane Number, a form of fuel quality and performance rating.

The rating system was developed by Russell Marker at American firm Ethyl Corporation in 1926, following Marker’s discovery that branching in hydrocarbons reduced “knocking”, or pre-ignition. Read the rest of this entry »

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The Geopolitical Impact of Cheap Oil

Martin Feldstein
Project Syndicate
NOV 26, 2014

CAMBRIDGE – The price of oil has fallen more than 25% in the past five months, to less than $80 a barrel. If the price remains at this level, it will have important implications – some good, some bad – for many countries around the world. If it falls further, as seems likely, the geopolitical consequences on some oil-producing countries could be dramatic.

The price of oil at any time depends on market participants’ expectations about future supply and demand. The role of expectations makes the oil market very different from most others. In the market for fresh vegetables, for example, prices must balance the supply and demand for the current harvest. By contrast, oil producers and others in the industry can keep supply off the market if they think that its price will rise later, or they can put extra supply on the market if they think the price will fall.

Oil companies around the world keep supply off the market by reducing the amount of oil that they take out of the ground. Oil producers can also restrict supply by holding oil inventory in tankers at sea or in other storage facilities. Conversely, producers can put more oil on the market by increasing production or by running down their inventories. Read the rest of this entry »

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After A Bloodbath In Oil, What Next?

Christopher Helman
Forbes
12/01/2014

Welcome back from Thanksgiving week. Apparently OPEC did something and oil prices plunged. If you were as out of touch with it all as I was last week, here’s a rundown.

As we tucked into Turkey and football last Thursday, OPEC announced no output cut, no target price and no output ceiling. Sounds like a lot of no news, but the OPEC meeting has been described in historic terms. Bloomberg’s headline declared that war had broken out: “Oil enters new era as OPEC faces off against shale; who blinks as price slides toward $70?” The accompanying article made the case that OPEC is indubitably locked in a price war against U.S. shale producers.

Oil prices plunged on the OPEC news. West Texas Intermediate crude is now at $65 a barrel. It was $107 back in June.

That Bloomberg article had my favorite quote of the week, from Leonid Fedun, a board member at Russia’s Lukoil. Fedun said that by maintaining output levels, OPEC would bring about an outright crash among U.S. shale drillers. “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

No surprise, Friday was a bloodbath for shares of America’s oil and gas independents. Read the rest of this entry »

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Oil hits five-year low in longest losing streak since 2008

by Ron Bousso and Ahmed Aboulenein
Reuters
London
Mon Dec 1, 2014 9:41am GMT

(Reuters) – Brent crude oil fell more than $2 a barrel to a five-year low below $68 on Monday as investors looked for a price floor after last week’s OPEC decision not to cut production.

Both U.S. crude and Brent have fallen for five straight months, oil’s longest losing streak since the 2008 financial crisis.

“The market is still very much in panic mode,” said Energy Aspects’ chief oil analyst Amrita Sen. “Once we get over the panic, Brent prices will probably stabilise at around $65-80 a barrel in the short term.”

Saudi Arabia, the most influential member of the Organization of the Petroleum Exporting Countries last week blocked moves by some smaller producers to curb oil output in response to huge oversupply in world markets.

Brent hit a low of $67.53 a barrel, the lowest since October 2009, and was down $1.42 at $68.73 a barrel by 9.21 a.m. . U.S. crude fell $1.45 to $64.70 a barrel, having slipped to an intraday low of $63.72, the lowest since July 2009.

Oil lost more than 12 percent after OPEC’s decision last Thursday. Read the rest of this entry »

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Oil Prices Are Plunging. Here’s Who Wins and Who Loses.

Neil Irwin
New York Times
NOV. 28, 2014

While Americans were stuffing their faces with poultry Thursday, global oil markets were in chaos. And the implications are far-reaching.

The price of oil was down more than 9.9 percent Friday afternoon after the Organization of the Petroleum Exporting Countries decided it would not cut back production significantly in the months ahead.

In other words, even amid a sluggish global economy and a boom in oil production in the United States, oil-producing countries from Saudi Arabia to Nigeria to Venezuela are going to keep pumping rather than pull back on output in hopes of pumping prices back up.

The latest decline pushes oil prices in the United States under $70 a barrel; the prices were more than $100 for almost all of July. And the latest OPEC move (or non-move, as it were) suggests that it isn’t going to reverse course anytime soon. Read the rest of this entry »

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Falling oil prices offer the west a great chance to refashion itself. Let’s seize it

Will Hutton
The Observer
30 November 2014

With the black stuff cheaper than it has been in years, Europe’s governments must invest in their infrastructure

For the past 18 months, the world’s biggest oil producer has been the US. Saudi Arabia, eat your heart out. Courtesy of the fracking revolution, the US will maintain this new standing for the foreseeable future, according to official projections.

The world as we’ve known it for the past 50 years is being stood on its head. Which provides cause for optimism. But an international landscape increasingly dominated by nationalist firebrands, conservative zealots and policy makers in thrall to austerity economics is always apt to waste opportunities.

One first good result of this oil price shift, however, was witnessed at Opec’s meeting in Vienna last week. The once feared cartel of oil-exporting countries, with Saudi Arabia at its core, a cartel that at one time commanded more than half of global production, is now a shadow of its former self. Opec’s members were unable to agree to cut production because most are strapped for cash and had no choice but to maintain levels.

With the US needing to buy less oil on international markets and China’s growth sinking to its lowest mark for 40 years, there is now, amazingly, the prospect of an oil glut. The oil price instantly nosedived to its lowest level for four years, around $70 a barrel – down more than a third in three months. Read the rest of this entry »

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The fall in the oil price is the biggest thing to happen for six months

Hamish McRae
The Independent
30 November 2014

Every swing in commodity values has winners and losers, but here there are many more winners

The fall in the oil price is big. It is big in terms of the raw numbers, a decline on the Brent reference price from above $115 (£74) a barrel as recently as June, to below $73 on Friday. We are starting to see that feed through to heating oil and the price at the pumps. But more important is the impact it has on the world economy. This is the biggest single thing that has happened in the past six months – and it comes in the nick of time, making the recovery in the developed world much more secure. Whenever there is a big swing in prices there are winners and losers, but the winners far outnumber the losers.

The basic point here is that high energy prices are like a tax on global growth. The oil price affects all energy prices and the more money that flows to the producers, the less there is in the consuming nations to spend on other goods and services. Read the rest of this entry »

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Oil: The Good, the Better, the Ugly

Commentary
By Alen Mattich
Wall Street Journal
Nov 28, 2014

Oil prices have fallen a long way this year. They might fall much further still.

Crude prices have fallen 36% since their summer peak, then sent into a tailspin by the failure of OPEC, the cartel of oil producing countries accounting for 40% of global supply, to trim its output quotas. And history suggests prices can fall substantially further.

It’s worth bearing in mind that for nearly two decades to 2005, crude oil prices largely ranged between $20 and $40 a barrel in today’s money. The average inflation-adjusted price of West Texas Intermediate oil since 1970 is a little under $55 a barrel compared with a little under $70 now.

That’s not to say that’s how far they’ll drop.

A rapid technical snap-back is always a possibility. But the fundamentals seem stacked towards lower rather than higher prices for now.

Which will make for some interesting economic dynamics. Read the rest of this entry »

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How low can it go? Oil, gas prices in freefall as OPEC reels from US fracking

FoxNews.com
November 29, 2014

Drivers paying less at the pump due to free-falling oil prices can thank the U.S. energy boom for generating shale oil – and weakening OPEC’s ability to keep the cost of a gallon of gas high.

In just a matter of months, the price of a barrel of oil has dropped from more than $100 to about $70, and gas is now cheaper than it has been in years. But a recent report conducted for the American Petroleum Institute claimed oil would cost twice as much as it does now if it weren’t for America’s fracking boom, which wrings oil and natural gas out of shale miles underground.

But the next question could be whether the fracking industry can survive the low prices it brought.

“The shale boom is on a par with the dot-com boom,” Russian oil baron Leonid Fedun of OAO Lukoil told Bloomberg. “The strong players will remain, the weak ones will vanish.” Read the rest of this entry »

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Tolls and hikes short-circuiting Malaysian future

S RAMAKRISHNAN | 12:47PM Jan 2, 2014
Malaysiakini

COMMENT The simultaneous increase in fuel and sugar prices, electricity tariff and toll hikes have got Malaysians worried and bewildered as to how they will manage their household expenses. Compounding matters will be the Goods and Services Tax (GST) that will kick in in 2015. The already weakened ringgit and the sudden withdrawal of subsidies on essential goods will hit hard where it hurts most – the pocket.

Not unlike Marie Antoinette, the prime minister is obstinately insisting that the people can afford these massive hikes. Talk about telling the masses to eat cake, he adds insult to injury by saying these increase are not a burden!

The entire cabinet and prime minister suddenly woke up from their slumber. It dawned on them that the budget deficit, huge public and household debt have to be narrowed. What is shocking is that for 16 continuous years, the deficit and the mounting debt did not raise any alarm bells.

In fact the pro-government economists and mainstream media stoically reminded the rakyat that economic fundamentals were positive and our country is on track to become a developed nation by 2020. But all that propaganda did not convince the world. Fitch Rating Agency, in a startling report, downgraded Malaysia from stable to negative. And the game was up.

The media propaganda failed and even more frightening, instead of being developed Malaysia, by 2020, may be a bankrupt nation!

The acrimonious Fitch report had a jolting effect that aroused the Malaysian government from its deep slumber and self-delusion. It suddenly dawned upon the cabinet that the lies they had believed to be the truth, were, in fact, lies. Read the rest of this entry »

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Power tariff – the last straw that broke the camel’s back?

Liew Chin Tong
Malaysiakini
Dec 6, 2013

MP SPEAKS

The spate of new taxes and price hikes, the latest being the electricity tariff hike, have caused me to doubt whether the government under Najib Abdul Razak has any idea about the macroeconomic risks that Malaysia faces.

Against the backdrop of an uncertain global economy and the likeliness of the quantitative easing tapering, domestic demand is crucial in sustaining the Malaysian economy. Yet the spate of new taxes and price hikes will produce an opposite result: the further decline of domestic demand.

Will the electricity tariff increase become the last straw on the camel’s back that will see the Malaysian economy collapsing due to the confluence of several domestic and global factors?

The electricity tariff will be increased by an average of about 14.89 percent for Peninsular Malaysia, and by about 17 percent for Sabah and Labuan from next year.

The average electricity tariff in Peninsular Malaysia will be up 4.99 sen per kWh or 14.89 percent from the current average rate of 33.54 sen/kWh to 38.53 sen/kWh.

For Sabah and Labuan, the average tariff will be up 5 sen per kWh or 16.9 percent from current average rate of 29.52 sen per kWh to 34.52 sen per kWh. Read the rest of this entry »

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Zul’s shallow apology

by Kunjuraman Karuppan
The Malaysian Insider
April 22, 2013

APRIL 22 — Does Datuk Zulkifli Noordin think his shallow apology to the Indians helps his cause in Shah Alam?

Does the Perkasa vice-president standing on a Barisan Nasional (BN) ticket think he can blame the Pakatan Rakyat for his congenital racism?

How does he imagine all this will help him go against Khalid Samad in Shah Alam and win “101 per cent” in the May 5 general election?

Khalid was the one MP who stood side by side with the Indian community after the cow-head protest in Shah Alam even when it was not the politically smart thing to do. Read the rest of this entry »

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The Petronas dilemma

LAWRENCE YONG
KiniBiz
MARCH 8, 2013

Oil is all about access, not production. And therefore only those who have access to the black gold can pump up extraordinary profits.

It is estimated that three quarters of the world’s 1,653 billion barrels of proven oil reserves are in the hands of national oil companies with no foreign participation. Many of them are in the OPEC cartel. That’s how they have managed to control supply and keep oil prices soaring.

Then you have the anomaly – the so-called century old multi-national oil companies, ExxonMobil Corp, The Royal Dutch/Shell Group, BP and Chevron Corp – who used to own the oil world. Now they offer their expertise and know-how to any country who will lend them access…and still make extraordinary profits (minus pollution payouts) because they have established markets everywhere…

But therein lies Petronas’ dilemma, a young upstart of 38 years which has neither full know-how nor international access or great oil assets. It is struggling between transforming into an international major oil company or staying as a national oil concern. Fairly speaking, Petronas is now neither here nor there.

One long-time observer of the company put it unkindly : “They are earning a reputation for biting off more than they can chew.” Read the rest of this entry »

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