Crude rises in optimistic market

The front-month crude contract for North Sea Brent climbed through most of August from $104.92/bbl July 31 to as high as $116.90/bbl Aug. 16, hovering around $114/bbl through Aug. 24 as market optimism for solution of the Euro-zone financial crisis and increased demand “prevailed over hard facts and past experience,” said analysts at the Centre for Global Energy Studies, London.

“Oil futures moved upward on continued concerns over an anticipated short-term supply disruption due to maintenance in the North Sea and on increased hope that Euro-zone leaders will make progress on resolving the region’s debt crisis,” CGES analysts reported. Prices also were buoyed as the Standard & Poor’s 500 Index escalated to its highest level in 4 years, the euro strengthened to $1.25, and the US Federal Reserve and China’s Central Bank seemed ready to stimulate the economy.

“Oil supply, especially in Europe, has been tightening during the past couple of months,” CGES acknowledged. “But the global demand environment for crude oil is extremely poor for this year and in 2013 and is insufficient to support the price increase for much longer.” Front-month Brent retreated to $13.59/bbl at close of trading Aug. 24 as doubts resurfaced regarding the strength of the United States’ economic recovery and Greece’s ability to overhaul its economy.

Rumors Germany might ease time restrictions for Greece's bailout requirements if the main targets of the austerity program were met encouraged investors to take on riskier assets, initially sending oil prices higher in the week ended Aug. 24. Reports the European Central Bank intended to cap bond yields of peripheral Euro-zone nations to prevent contagion of core economies also boosted market confidence.

“However, looking past these expectations, the macroeconomic data are not encouraging,” CGES analysts said. “Germany's private sector continues to shrink, and surveys suggested the Euro-zone is heading for a double-dip recession, while at the same time it is vulnerable to an oil shock as crude prices denominated in euros surged above their 2008 levels.” The willpower to save the euro exists, “but converting good intentions into actionable decisions is a shaky procedure that could be overturned quickly by the course of events,” they cautioned.

The Euro-zone debt crisis is undermining global economic recovery. Japan’s trade deficit widened in July as its exports to the European Union fell 25% from a year ago. China's manufacturing hit a 9-month low in August. “Things in the US are not looking bright either, as economic activity has slumped sharply from earlier this year, and possible contagion from the European debt crisis, together with the risk of a hard landing for China's economy, have added greater uncertainty to US economic prospects,” CGES officials said.

“Regional, short-term factors such as the impending maintenance in the North Sea and the shortage of middle distillate fuel in Europe can explain some of the rise in Brent prices,” they said, “while a big dose of nervousness is still provided by Iran, as Ayatollah [Sayyed Ali] Khamenei's latest saber-rattling statements about Israel demonstrated. Consequently, for now prices are expected to remain range-bound, unless Middle East tensions lessen dramatically or the Euro-zone debt crisis escalates once more.”

Distillates decline

Distillate inventories in the EU have been squeezed most of this year by low refinery runs and reduced capacity as European refineries were forced to shut down. Diesel stocks are particularly low as a result of reduced imports from the US, which is sending more diesel to Latin America, and from Asia where refinery closures have reduced long-haul exports from South Korea and India. CGES analysts said, “Growing volumes of diesel are likely to be heading to India following recent power outages, with diesel generators being the preferred backup when the power network is overwhelmed. Diesel exports from Russia are expected to increase in the coming weeks now that punitive export levies have been lifted, which should alleviate some of the tightness.”

They noted Chinese crude imports fell to 5.11 million b/d in July, “seemingly bringing to a close the stock building that was widely perceived to be behind high imports in the first half of 2012.” They said, “This may simply reflect temporary difficulties in shipping Iranian oil in the face of the EU ban on tanker insurance, but July also saw China’s exports grow by just 1% year-on-year, which together with falls in manufacturing activity is sparking fears that the Chinese economy is heading for a hard landing.”

(Online Aug. 27, 2012; author's e-mail: samf@ogjonline.com)

Related Articles

Antitrust gambit shows why biofuel mandates must end

08/26/2013 With a ludicrous antitrust initiative, US senators from Iowa and Minnesota show why the federal Renewable Fuels Standard (RFS) needs repeal instead...

Energy consumption to escalate

07/30/2013 World energy consumption will jump 56% in the next 30 years, driven by growing demand in developing countries, the US Energy Information Administra...

US, Mexico energy trade in flux

05/28/2013 Energy trade between the US and Mexico is in flux with rising crude production in the US, falling production in Mexico, and rising Mexican demand f...

Foreign crude supply concentrated

04/29/2013 It’s no secret the jump in US oil production in recent years has dropped imports of foreign crude to the lowest It’s levels since 1997—down 1.3 mil...

Corn, ethanol prices squeeze profit

03/25/2013 Last summer, US prices for ethanol and corn reached such an imbalance that production costs exceeded revenue at relatively simple ethanol plants, t...

Working on the railroads

02/26/2013 The rapid increase of North American crude production has resulted in pipeline bottlenecks in some areas, forcing more reliance on rail transportat...

War, weather issues affect energy

01/28/2013 The fatal 4-day siege at the In Amenas gas production plant in eastern Algeria near the Libyan border that left 81 people dead “heightens concerns ...

Historic mistakes should guide US on LNG exports

01/11/2013

Political opposition to LNG exports by the US brings to mind monumental energy mistakes of the past.

2013 looks a lot like 2012

12/31/2012 New Year 2013 looks as though it will be much like the old one. There’s rioting in Egypt, confrontation with Iran, continued crisis in the Euro-zon...
White Papers

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by
Available Webcasts


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected