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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: edward miller who wrote (40461)	3/21/2005 8:20:03 AM
From: Ed Ajootian	Read Replies (4) \| Respond to of 206107

Opec struggles to contain the beast within By Kevin Morrison in Isfahan, Iran Published: March 18 2005 11:47 \| Last updated: March 18 2005 21:36 The Organisation of the Petroleum Exporting Countries has given speculators a very good reason to buy crude futures this week after sending a strong signal that it is concerned about supplies keeping up with demand in the second half of the year. This was certainly not the market reaction the cartel wanted. Many members would shudder at the thought of giving hedge funds a reason to make more money from trading oil, preferring prices to stabilise as because rapid increases could ultimately lead to large-scale demand destruction. US benchmark crude futures hit a peak of $57.60 a barrel on Thursday, while Brent hit $56.15 a barrel, up $1.12 on the same day. The WTI price in real terms, adjusted for inflation, is close to prices seen in the first oil shock in the 1970s and above those experienced during the Gulf War. The price surge was pushed partly by Opec’s decision to immediately increase its output ceiling by 500,000 barrels a day to 27.5m b/d, and an option to add another 500,000 b/d if prices remain high. The other factor was a surprise drop in heating oil and petrol stocks in the US. “The market’s response to this increase reflects Opec’s concerns and the lack of options that the organisation faces in 2005,” said PFC, a Washington-based energy consultancy. Opec is being pushed into a corner now. Only a month ago it was going to trim its production quota in line with the usual dip in demand during the northern hemisphere spring. A week ago, the talk was of no-change to the official output ceiling. Both choices were viewed as supportive of high nominal oil prices. But prices still rose in spite of the quota increase and a pledge from the cartel’s biggest producer Saudi Arabia that it will would boost output next month from its current rate of 9.5m b/d. This means that whatever Opec does right now, it appears unable to drag prices lower. “By talking about its concerns, Opec has reinforced the market’s bullish sentiment,” said the PFC report. The main concerns are lack of spare capacity. Should Opec pump more oil, it reduces the world’s spare production capacity leaving it vulnerable to price spikes should severe supply disruptions like Hurricane Ivan or sabotage attacks in Iraq arise. PFC says another factor why any increase in Opec production is unlikely to drag prices lower is that the extra output will be the heavy and medium sour crudes, which carry a heavier sulphur content and are not suitable for producing petrol. Petrol, which begins to drive the energy complex by the end of spring, is coming under stricter emissions standards around the world and refiners prefer to use light sweet crudes such as WTI and Brent. The high oil price cannot be just blamed on Opec, as the lack of investment in refinery capacity by the major oil companies is another significant contributor to the price rise. But all parts of the industry have been surprised by the rate of increase in world oil consumption, which is estimated to have increased by 10m b/d by the end of the year from the 2000 average. It took the whole of the 1990s to increase by the same magnitude, even though oil prices averaged only a third of the current price during that time. “Every time energy prices have rocketed, we have had inflation, recession or both,” says Hanover, a US daily oil report. “People keep talking about oil prices in terms of 1980 dollars, but we honestly do not know anyone who can show us one of those dollars still in his or her pockets.” It adds: “We believe in spending-pocket economics. Higher energy prices are sucking millions of dollars out of consumers’ pockets each and every day.” By the close in New York on Friday, Nymex WTI was up 32 cents to $56.72 a barrel but was up. Brent crude closed 53 cents higher at $55.59. ************************************************************** Thanks Edward Miller et al for your helpful responses to my prior post. The bolded part of the above article is what led me to make the comment about WTI being the raw material needed to make gasoline at a profit. Taking everyone's comments in mind and re-reading the article I take it that I was overstating the case, i.e. you can use heavy sour crude to make gasoline and still make money (maybe even good money) if you have a complex refinery and the spread between the 2 grades is high enough. Regarding making dumb statements (or asking dumb questions), I have been doing this with regularity on various internet investment chat boards such as this one for about the last 10 years, and have learned an immense amount of information about the oil & gas industry, and with a huge amount of luck have been able to make more than a coupla profitable investments as a consequence. I reserve the right to continue doing this.

To: edward miller who wrote (40461)	4/4/2005 6:06:28 AM
From: Ed Ajootian	Read Replies (1) \| Respond to of 206107

Crude Oil Rises to Record; OPEC Supply May Be Inadequate to Make Gasoline April 4 (Bloomberg) -- Crude oil climbed to a record for a second day on concern that rising output from the Organization of Petroleum Exporting Countries may be inadequate to produce enough gasoline to meet a peak in demand during the U.S. summer. OPEC, producer of about 40 percent of the world's oil, will discuss this week a second increase in output quotas in 2005, the group's President, Sheikh Ahmad Fahd al-Sabah, said April 2. The additional supply may contain too much sulfur to refine into gasoline. Futures of the fuel rose to a record for a third day. ``There seems to be a little bit of panic about gasoline despite relatively good stockpile levels,'' said Tony Machacek, a broker at Bache Financial Ltd. in London. ``It's good of OPEC to make a gesture to try to raise production, but they can only increase grades of crude that the market doesn't need.'' Crude for May delivery jumped as much as 52 cents, or 0.9 percent, to $57.79 a barrel, a record in more than two decades of futures trading on the New York Mercantile Exchange. It was up 33 cents at $57.60 at 10:03 a.m. London time. It's ``possible'' that prices reach $60 this week, Machacek said. They have gained 67 percent in the past year. Brent crude for May settlement added 29 cents to $56.80 a barrel, up 40 percent this year, on London's International Petroleum Exchange. Prices touched $57.05 earlier today, the highest price since futures were introduced on the IPE in 1988. The European Commission cut its 2005 growth forecast for the second time in six months as record oil costs and rising unemployment weigh on the 12 economies using the euro. Growth will slow to 1.6 percent this year, less than the 2 percent predicted in October, the commission said today in Brussels. OPEC Talks OPEC ministers will resume talks this week on raising the output quota by 500,000 barrels a day to 28 million barrels a day as early as May and may add another half a million barrels a day in the third quarter, al-Sabah, who is also Kuwait's oil minister, said two days ago. At a meeting in Iran on March 16, OPEC boosted its quota by 500,000 barrels a day to 27.5 million a day, a record for the 10 members whose output is restrained by self-imposed limits, all except Iraq. Most producers are pumping nearly as much as they can and only Saudi Arabia, OPEC's most influential member, can raise production by at least another 1 million a day. ``The flip side is that OPEC will have less spare capacity later this year, when demand is expected to surge,'' said Kevin Norrish, an analyst at Barclays Capital. ``The market's ability to respond to demand and supply shocks is going to be constrained for a long period.'' Oil Demand Oil demand is forecast to grow 2.2 percent this year to 84.3 million barrels a day, according to the International Energy Agency. That's equivalent to the content of about 42 supertankers being burnt every day. Consumption climbed by 3.4 percent last year, the biggest increase since 1976. Crude imports into the U.S. surged to their highest this year the week ended March 25, averaging more than 10.5 million barrels a day and sending inventories to their highest since July 2002. U.S. refiners may still be unable to process all the crude that's accumulating in storage, analysts including Craig Pennington of Schroders Plc in London have said. ``The most recent data suggests that the crude market is relatively well supplied,'' Norrish said. ``The concern is particularly about gasoline supplies for the driving season.'' U.S. gasoline demand peaks during the so-called driving season, which runs from Memorial Day at the end of May to Labor Day at the beginning of September. The nation's stockpiles have dropped according to the past four weekly Energy Department reports and the last two declines were bigger than expected. Gasoline Gasoline for May delivery climbed as much as 0.5 percent to a record $1.7390 a gallon on Nymex. It was trading at $1.7360 a gallon at 10:07 a.m. London time. Retail prices in the U.S. are also at records, with the average rising to $2.153 a gallon the week ended March 28. ``There's a very strong bullish trend in place,'' Norrish of Barclays said. ``The market is setting up for a technical assault on $60'' a barrel, he said, referring to so-called technical traders who watch charts to predict price movements. OPEC will press harder in talks to resume in coming days to increase production quotas to prevent record-high prices from hurting growth, the group's acting secretary general, Adnan Shihab- Eldin, told reporters today at an oil and gas conference in Dubai, the United Arab Emirates. To contact the reporter on this story: Alejandro Barbajosa in London at abarbajosa@bloomberg.net. To contact the editor responsible for this story: Tim Coulter at tcoulter@bloomberg.net Last Updated: April 4, 2005 05:16 EDT ************************************************************* Edward M, here's another idiot that thinks you need light sweet crude to produce gas. At least I'm not alone. Will be interesting to see how high the light-heavy price differential gets on crude this summer.