Published Jul 16 2009 by ASPO-USA
Archived Jul 16 2009

Peak oil notes - July 16

by Tom Whipple

Prices and production

Oil prices rebounded on Wednesday following a $12 a barrel decline since the beginning of July, and after closing below $60 a barrel on Monday and Tuesday. Oil closed on Wednesday at $61.54 up $2.02. Most of the impetus behind the jump was rising equity markets, ongoing hopes that the worst of the recession is over, better news from China, and a falling dollar. The recent pattern of higher refinery utilization, falling crude, and increasing product inventories, which rose by 4.6 million barrels, continued last week. Product inventories are now at their highest level since 1998. Demand remains broadly sluggish.

It has been an active week in Nigeria with the militants attacking and setting fire to the main fuel unloading facility in Lagos. Agip and Chevron facilities were also attacked in the Niger Delta. The government released Henry Okah, the reputed leader of the main militant group. Okah has been in poor health, so the release was probably due to the government’s fear that he might die in custody, thereby sparking more violence. In response to the release, the militants declared a 60 day cease-fire; it could be short lived as government forces may be preparing additional attacks on militant villages.

Analysis of oil futures trading suggests that hedge funds and investment banks have sharply reduced their positions during recent weeks. This comes as government regulators are considering limits to energy speculation. Some believe that last week’s precipitous drop in oil prices may have been partially caused by the pull-out of non-commercial speculators.

The Nabucco pipeline

Turkey, Austria, Hungary, Romania, and Bulgaria signed an agreement to build a pipeline to transport natural gas from the Middle East to markets in Europe. The pipeline is scheduled to become operational in 2014 and will have capacity to deliver 5 percent of the EU’s gas consumption. Where the gas supplies will originate is still an open question, but several countries including Iran, Iraq, and the Gulf and Caspian gas producing states are possibilities.

Disruption of gas supplies to Europe via Ukraine and Georgia last winter was the catalyst to completing this pipeline agreement. Russia is opposed to the project, favoring pipelines to Europe that it can control.

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Original article available here
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