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Oil trade: Difficulties and opportunities

Discussions about the economic and financial ramifications of PEAK OIL

Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Sat 27 Jul 2013, 18:19:34

OPEC oil revenues destined to go down

The Energy Information Administration, the US Department of Energy's analytic arm, said all members of the Organization of the Petroleum Exporting Countries, except Iran, earned nearly $982 billion in net oil export revenues in 2012. That's a 5.4 percent increase from 2011. After adjusting for inflation with 2005 dollars as a constant, OPEC's revenue increased by 3.2 percent to $835 billion in 2012, the EIA added.

And Riyadh remained the kingpin, accounting for 32 percent of the total OPEC revenues in 2012 with $311 billion, the EIA said. In its July market report, the OPEC had reported Saudi Arabia producing 9.7 million barrels of oil per day last year, a 4.3 percent increase from 2011.

However, the EIA also points out that in the wake of the market trends, OPEC sales revenue will tumble by 4.3 percent to $940 billion in 2013 and by further 3.9 percent to $903 billion in 2014.

In its first projections for 2013, released on July 10, even the OPEC conceded that the demand for its crude will slip by 300,000 barrels a day next year to 29.6 million barrels, or 2.6 percent less than the group is pumping now.

That is below OPEC’s current output. As per the monthly oil-market report of the Paris-based International Energy Agency, OPEC pumped 30.61 million barrels a day in June compared with 30.98 million barrels in May, exceeding the target of 30 million bpd output.

Prices are softening. Oil prices fell on Friday on worries over a looming Chinese economic slowdown and decades-high oil output in the United States, staying just above $107 per barrel due to a weak US dollar and possible supply disruptions.


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Re: Oil trade: Difficulties and opportunities

Unread postby Pops » Sun 28 Jul 2013, 11:11:50

someone wrote:...single digit oil price...


There will never be single digit oil prices, in fact there will never be sustained prices below the cost of producing the marginal barrel. If the marginal barrel is fracked shale the price will not go below the short term break even for new wells - say $60-70

Here from Leo M.
As we have seen, a shale well initial production rate over the first weeks of operation represents peak output that is bound to wane substantially during the following months of a well’s life. This implies that the foreseeable short to medium time price of oil is essential to any drilling strategy: In other words, starting production when the market is down means selling the bulk of a well total production for cheap without possibility of recovery because after one year of activity that well would produce 50 percent less.


So it becomes clear to me that if the price falls below break even, Frackers will just stop running up the down elevator and we know what happens then. So the more reliant we become on tight oil the more assured is the price of oil will rely on the price of new production.

This is just the opposite of traditional reservoir production including offshore that has huge up front costs and lead times so is less affected by short term pricing. Other processes, some tar sands for example, need $90 to break even but will weather short term dips without affecting production. Longer term though, they are just a business and die without profit or credit.

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Re: Oil trade: Difficulties and opportunities

Unread postby ROCKMAN » Sun 28 Jul 2013, 12:48:29

Yep...OPEC revenue may "tumble" by 4% or so in the next couple of years. Tumble down to a mere 3X to 4X what they were earning not too long ago. Perhaps PO.com should sponsor an OPEC Relief Fund. Just make your checks payable to " Kiss My *ss". LOL
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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Sun 28 Jul 2013, 19:52:26

Saudi prince urges less reliance on oil

SAUDI billionaire prince Alwaleed bin Talal has warned that global demand for the kingdom's oil is dropping, urging revenue diversification and investment in nuclear and solar energy to cover local consumption.

In letters to officials and published on Sunday on his Twitter account, King Abdullah's nephew warned that it was alarming that "92 per cent of the government budget relies on oil".

"The world's reliance on OPEC oil, especially the production of Saudi Arabia, is in a clear and continuous drop," he wrote in letter addressed to oil minister Ali al-Naimi.

He said the threat from shale gas is "definitely coming", pointing to progress in that sector in North America and Australia.

"Revenue diversification is a must, and that necessitates a clear vision that should be implemented immediately," the Arab world's richest businessman said.

He proposed creating a sovereign wealth fund to manage the kingdom's reserves, which he said stood at $US676 billion ($A735.66 billion) in March, citing official figures.

Alwaleed also urged action to press ahead with plans to develop nuclear and renewable energy to "reduce local consumption of oil as soon as possible".


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Re: Oil trade: Difficulties and opportunities

Unread postby ROCKMAN » Mon 29 Jul 2013, 09:59:42

Increased opportunity for more Canadian oil sand development and transportation to additional markets: first export line to Canada's East Coast

From: http://www.downstreamtoday.com/news/art ... a_id=40184

TransCanada Corp, after earlier reporting a 34 percent jump in second-quarter profit on Friday, said it expects its proposed Energy East pipeline, which will take Alberta crude to the Atlantic seaboard, will receive sufficient support from potential shippers to allow construction to proceed. The company said the planned 700,000-barrel-per-day project is expected to go ahead, even as it awaits results from a open season process, where shippers sign long-term contracts for space on the line. Those results are expected within two weeks. The line, which could deliver crude to refineries near Montreal, Quebec City and Saint John, New Brunswick, would be the first export line to Canada's East Coast. It would supplant imported crude that eastern refineries currently rely on and offer additional pipeline capacity for rapidly expanding oil sands production.
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Re: Oil trade: Difficulties and opportunities

Unread postby ROCKMAN » Mon 29 Jul 2013, 10:44:30

More expansion of the oil sands. From: http://www.rigzone.com/news/oil_gas/a/1 ... _Extension

“Enbridge will build a $1.3 billion extension to its Woodland crude line in northern Alberta to serve Imperial Oil's Kearl oil sands project. The 214-mile extension will have initial capacity of 400,000 barrels per day, with the ability to be expanded up to 800,000 bpd depending on crude viscosity. It will extend the Woodland Pipeline south from Enbridge's Cheecham terminal to its Edmonton terminal to connect with refineries and export pipelines in that area. Imperial's recently opened Kearl oil sands project was producing around 40,000 bpd in June and is expected to reach its full 110,000 bpd capacity over the summer.

Extension of the Woodland Pipeline will bring additional crude oil transportation capacity into the Edmonton area, enabling accommodation of forecasted regional oil sands production growth from the Kearl project and other oil sands projects targeted for delivery into the Edmonton hub. The extended pipeline is expected to be in service by the third quarter of 2015. The Woodland pipeline between the Kearl oil sands project and the Enbridge Cheecham terminal started running in the autumn of 2012. The majority of the proposed route will follow an existing Enbridge right-of-way and be in a shared corridor with the 600,000 bpd Waupisoo line. Edmonton, Alberta, is close to three refineries, including Imperial's 187,000 bpd Strathcona facility, and the starting point for export pipelines running west to the coast of British Columbia as well as south to the United States.”

Yes: there are a number of pipelines already transporting Canadian oil and products into the US. Enough to allow Canada to export more oil to the US in 2013 then ever before.
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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Mon 29 Jul 2013, 16:17:16

This is very disturbing news from a climate abatement point of view. It looks like insanity. God help us all. It appears that we can't help ourselves.
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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Tue 30 Jul 2013, 17:07:59

US shale revolution triggers oil derivatives upheaval

As the US shale revolution transforms global trade in oil, it is also causing upheaval in the derivatives market – and making life harder for America’s shale producers.

The companies behind rising US crude production are selling more of their output in advance to guarantee revenues. That is putting downward pressure on future oil prices – making it harder for those companies to enter crucial hedging contracts.

Since the start of 2011 crude production from the Bakken field in North Dakota, the most prolific US shale oil field, has nearly tripled. During the same period the price of benchmark West Texas Intermediate three years ahead has tumbled from more than $105 a barrel in April and May 2011 to as low as $81.51 by June this year.
That is a worry for the independent companies that dominate US shale production. To attract the credit they need to keep drilling, most of these companies sell futures contracts to show lenders they have locked in an oil price that is higher than their cost of production.

Though the breakeven oil price differs from company to company – depending on production costs where they are active and the company’s debt profile – some analysts say futures prices are approaching a danger zone.
“North American oil production growth is contingent on continued strength in forward oil prices. To grow oil production, the North American exploration and production industry needs to see a minimum of $85-$90 a barrel WTI,” says Stephen Shepherd at Simmons and Co, a Houston-based energy investment bank.


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Re: Oil trade: Difficulties and opportunities

Unread postby Pops » Tue 30 Jul 2013, 17:50:32

Pretty interesting Graeme, thanks.

So it turns out the actual market price may not shut off the spigot but that the frackers selling so many futures contracts that they themselves push the forward price below breakeven.

That would be funny - not funny ha-ha...
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Re: Oil trade: Difficulties and opportunities

Unread postby ROCKMAN » Wed 31 Jul 2013, 10:08:28

Good to remember that what futures contracts an oil producers buys has no bearing on what price oil is selling for at the time those contracts mature. Producers have used futures contract to try to stabilize their future revenue. They buy a contract at $X: if oil/NG sells for more than $X when the contract matures they lose money on the contract but make more money on their actual oil/NG sales. If oil/NG is selling for less than their contract when it matures they make money on the contract but earn less revenue on their actual oil sales. Companies have used this technique for decades to minimize swings in their cash flow.

There's actually a completely different market where such activities are conducted that the public has no access to as with the futures contracts on the exchanges. These are deals cut between private companies where no one outside those companies (except maybe for their bankers) know the details or that these trades even exist. And more complex using "floors", "ceilings", etc. For instance I can sell X thousand bbl of oil for $90/bbl. But if the actual price of oil is $100/bbl when I produce it I get $4 of that $10 increase. But I also had to pay the other guy $Y thousands upfront to do the deal. And often the other guy will protect his position by buying futures in the public market place.

And there are much more complex systems in place that I know very little about…a whole nuther universe.
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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Mon 05 Aug 2013, 18:32:57

US energy regulator threatens BP with $28m fine over irregular gas trades

The Federal Energy Regulatory Commission is threatening energy giant BP with a $28m fine over alleged irregular trades in natural gas, just a week after it reached a $410m settlement with JP Morgan.

In a sign that the agency is stepping up its action against powerful trading firms it suspects of manipulation, the FERC required BP on Monday to respond to allegations that it first made back in 2011, about trades made by BP's south-east gas trading desk in 2008.

FERC alleges that BP tried to increase the value of its gas contracts by manipulating the price of physical gas through false trades. FERC is also looking to claim $800,000 in BP's profits from the scheme.

BP heatedly denied the allegations, calling them "without merit".

Geoff Merrell, BP's head of communications, said in a statement: "BP is disappointed that the FERC has brought this action and we will vigorously defend against these allegations. The FERC bases its allegations on a recorded two-minute phone conversation between a BP trainee and BP natural gas trader that the regulator has taken completely out of context."

BP says that the trainee misunderstood a trade and was corrected by a senior trader, who reported the conversation to BP's compliance staff.

The tussle with BP is the latest in a series of aggressive FERC fines or settlements with energy traders, which have included Constellation Energy, Deutsche Bank, Barclays and JP Morgan. The FERC has levied closed to $1.3bn in fines and penalties on Wall Street firms since 2005 – although it has sometimes met challenges in court, and the trading firms frequently fight its charges. In its most recent cases, JP Morgan did not admit wrongdoing in its settlement, and Barclays said it will go to court to fight a proposed $470m fine from FERC.

FERC's progress has been contrasted with that of the Securities and Exchange Commission, which says it is perpetually underfunded, and the Commodity Futures Trading Commission, which may get a new chief less familiar with Wall Street's ways.


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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Wed 14 Aug 2013, 17:08:21

A royal(ty) scam: How oil and gas companies shortchange landowners

Discovering you live over an oil or gas deposit, in theory, presents you with a nice retirement plan. Lease the drilling rights to an energy company and you could be looking at thousands of dollars a month in royalties for as long as the fuel lasts. In fact, one of the arguments for expanded domestic drilling holds that those royalties will boost rural economies by putting extra cash in the pockets of local landowners, and funnel extra revenue to the federal government, as around 30 percent of drilling in the U.S. takes place on federal land.

It sounds like a sweet deal, so of course there must be a catch. Those royalties, it turns out, rarely end up being as high as expected, thanks to oil companies’ manipulation of the opaque formulas dictating how much drilling income the landowner ultimately sees. That’s according to an investigation by ProPublica:

In many cases, lawyers and auditors who specialize in production accounting tell ProPublica energy companies are using complex accounting and business arrangements to skim profits off the sale of resources and increase the expenses charged to landowners.

Deducting expenses is itself controversial and debated as unfair among landowners, but it is allowable under many leases, some of which were signed without landowners fully understanding their implications.

But some companies deduct expenses for transporting and processing natural gas, even when leases contain clauses explicitly prohibiting such deductions. In other cases, according to court files and documents obtained by ProPublica, they withhold money without explanation for other, unauthorized expenses, and without telling landowners that the money is being withheld.


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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Sat 07 Sep 2013, 17:09:38

Showdown looms in US case over Va. gas royalties

Lawsuits accusing two energy companies of cheating southwest Virginia landowners out of royalty payments for natural gas siphoned from coal seams are headed to a showdown that could dramatically expand the scope of the legal action.

At a hearing Thursday in Abingdon, a U.S. district judge will consider a recommendation from a U.S. magistrate judge that four lawsuits be certified as class actions representing thousands of property owners who've had the gas extracted from their land.

Jones isn't expected to rule immediately.

The plaintiffs name EQT Production Co. and CNX Gas Co., companies with thousands of wells in Appalachia.

CNX parent CONSOL Energy said it supports the "fair and efficient" distribution of royalties held in a state escrow account to property owners. EQT didn't respond to requests for comment.


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Re: Oil trade: Difficulties and opportunities

Unread postby Graeme » Wed 06 Nov 2013, 15:44:38

Whiny Oil Traders Pretty Sure Their Market Is Rigged

This big crude-oil price manipulation lawsuit is gibberish but that doesn't mean it's wrong. The gibberish might be inherent in how crude oil is priced. Which makes sense; I suppose that the harder it is to explain a market the easier it is to manipulate.
The story is that some guys who trade oil derivatives on New York Mercantile Exchange are suing Platts, the price reporting agency that sets the Dated Brent physical oil price benchmark, and a bunch of physical oil traders including Royal Dutch Shell, BP, Statoil, Morgan Stanley, Trafigura, Phibro and Vitol, claiming that those traders manipulated the Platts price. The Platts benchmark, which affects those Nymex etc. derivatives prices, is set in a semi-subjective way by Platts, based on transactions executed, and bids and offers made, between 4 and 4:30 p.m. London time each day for crude delivery 10 to 25 days out. The claim is that this window was pretty thinly traded and subject to manipulation, and that Shell and BP and the rest took advantage of the opportunity to manipulate the benchmark price in ways that helped their derivatives positions, and hurt those of the plaintiffs.*


More generally, you can't confuse the weakness of this case with wrongness. These guys don't seem to have any proof that anyone manipulated oil prices, but they have reason to hope that they'll happen upon some. The European Commission, the U.K. Serious Fraud Office, and the U.S. Federal Trade Commission are all looking into allegations of manipulation by some of the same oil traders here. Maybe they'll find something! These plaintiffs sure hope so; they say "The foregoing investigations are expected to yield information from Defendants' internal records (e.g., instant messages, e-mails, telephone records, Brent Crude oil trading data, etc.) that provide further support for Plaintiffs' claims." At which point they'll be all, "we told you so! Also, pay us."


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See also front page with Guardian article.
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China Seeks Greater Role in Global Oil Trade

Unread postby AdamB » Sat 24 Mar 2018, 20:55:08


China, the world’s largest oil importer, soon will launch a yuan-denominated crude futures contract with the potential to become a benchmark for global oil transactions. But it must overcome many challenges to earn a place alongside the internationally recognized U.S. dollar-denominated contracts. Tim Seymour, managing partner of Seymour Asset Management, notes that because the contract covers a product handled in the Shanghai Free Trade Zone, this will be the first time non-Chinese can trade in Chinese commodity markets. The trade zone, launched in 2013, is open to foreigners and lets goods and capital flow freely without import duties. This “will begin to create a 24-hour market for trading oil, especially where some of the largest buyers of oil are located,” he adds. The crude-oil futures will begin changing hands on March 26 on China’s Shanghai International Energy Exchange. They will be traded


China Seeks Greater Role in Global Oil Trade
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Re: Oil trade: Difficulties and opportunities

Unread postby ROCKMAN » Fri 30 Mar 2018, 11:53:49

Partnerships??? LMFAO! We have sellers and the KSA is a buyers. Perhaps they used "partnerships" to make the POTUS happy:

"Saudi Aramco has announced commercial partnerships worth over $10 billion with 14 American companies during the Saudi-US CEOs forum held in New York, which aims to promote bilateral business and cooperation between the two countries.

The partnerships included collaborations with a number of oil and gas companies, as well as Google, National Geographic, and the Smithsonian Institute. The full list of deals with oil and gas related companies can be seen below:

•Schlumberger Ltd - A corporate purchase agreement for downhole equipment and services and wellhead and surface control equipment.
•Baker Hughes, A GE Company - A corporate purchase agreement for downhole equipment and services.
•Halliburton - A corporate purchase agreement for downhole equipment and services including well and rig services.
•Saudi Aramco Nabors Drilling (SANAD) - An onshore drilling agreement.
•Weatherford - A corporate purchase agreement for downhole equipment and a well testing services contract.
•ARO Drilling - An offshore drilling services agreement.
•Texas Iron Works - A corporate purchase agreement for downhole equipment services.
•Honeywell International Inc. - A contract for main automation contractor (MAC) services for a new process control system (or upgrade of existing ones).

“We have enjoyed a long and successful relationship with our US partners since the discovery of oil in Saudi Arabia more than 80 years ago,” Saudi Aramco President and CEO, Amin H. Nasser, said during a speech at the forum.

“The growth of Saudi Aramco`s operations and the strategic roll out of Saudi Vision 2030 will provide multiple opportunities for strengthening our collaboration and partnerships,” he added.

In a statement on Saudi Aramco’s Twitter page, the company said the co-operations between Saudi Aramco and the US companies strengthens Saudi Aramco’s ‘leading position in the energy and chemicals sector’."
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