May 2007 Archives

Some musings on a busy Thursday:

--All the news services, including Platts, had stories Thursday about the possibility of changes in the very valuable real estate at 1 North End Avenue in lower Manhattan. In other words, the home of the New York Mercantile Exchange.

Jarndyce vs. Jarndyce (or in the book, Jarndyce and Jarndyce) was the fictional center of Charles Dickens' novel Bleak House. It has become a catch-all phrase describing litigation that goes on...and on...and on.

For more than 10 years, Platts has been writing about the lawsuit filed -- and won -- by the state of Alaska against Exxon over the Exxon Valdez spill. The spill took place in 1989. We didn't have iPods then. Johnny Carson was still the host of Tonight. And on March 21, 1989, the day of the spill, Platts assessed Alaska North Slope crude at $17.80-$17.95/barrel. On May 24, 2007, we assessed it at $64.83-$64.90. A few things have changed, but the lawsuit lives on.

Chilly weather in usually-sunny La Jolla, California, didntt tamp down the spirits of the Latin American Energy Conference this year on May 21-22, although several participants and even a panel moderator offered some good-natured grousing over it. With an attendance of around 180 that included major and independent oil companies, think tanks, energy law firms, consultants and national oil companies, Colombia -- once viewed as a growing source of oil for the hemisphere, now struggling to maintain output -- dominated the gathering as representatives of both National Hydrocarbons Agency ANH and state company Ecopetrol made presentations.

Who better to invoke than President Theodore Roosevelt when you're talking about breaking up the oil companies? Roosevelt, of course, was famously known as the "trust buster," whose administration brought the antitrust lawsuit that led to the breakup of the Standard Oil Company in 1911.

"We are here today because, in the words of Teddy Roosevelt, 'We demand that big business give people a square deal,' " New York Senate Charles Schumer, Democrat, said at a May 23 hearing.

Roosevelt once said, Schumer related, "Rhetoric is a poor substitute for action. . . If we are really to be a great nation, we must not merely talk; we must act big."

John Podesta was Bill Clinton's chief of staff, and after leaving office, he was very vocal that liberalism in the US lacked the sort of intellectual generators of ideas that had so sustained the conservative movement. As The New York Times said in profiling Podesta's plans back in 2003, he wanted to "build an organization to rethink the very idea of liberalism, a reproduction in mirror image of the conservative think tanks that have dominated the country's political dialogue for a generation." So he founded The Center for American Progress.

The 5 a.m. CBS Radio newscast led with it: according to the Lundberg Survey, average US retail gasoline prices had hit their highest level ever. The Barrel heard the news en route to LaGuardia Airport for a one-day trip to Minneapolis. The weather was good, the roads were clear at that hour. Great driving weather.

There has been a lot of disagreement about whether these retail prices are flattening demand. The Energy Information Administration and the American Petroleum Institute have what might be described as a set of dueling statistics on the issue, with the EIA seeing growth and the API seeing little to none. Newspaper and broadcasts are filled with anecdotes about what people are doing to cut back their driving to reduce gasoline consumption.

The US tugboat industry needs mates and captains--ask anyone in this shipping industry sector and they'll agree, the market's tight for skilled labor.

Many mates/captains have flocked to the US Gulf for work on vessels servicing offshore rigs drilling for oil in recent years following rising oil prices. Wages there are the highest around; why commadeer a tugboat dragging, say, a cement barge down the Hudson River, when you can make big bucks tending to big rigs in the Gulf of Mexico?

A Wall Street Journal editorial that appeared in the US edition last Saturday, and the Europe edition Tuesday (sorry, can't link to it because it's subscription only) raised a few observations about reduced gasoline consumption and what it means.

The column's focus was a call by US presidential candidate Barack Obama for tougher Corporate Average Fuel Economy (CAFÉ) standards. So most of the editorial is the usual debate over CAFÉ: efficiency vs. safety, the type of cars Americans want to buy, and so on. It was the last two paragraphs that caught our eye.

Later in Wednesday's American Petroleum Instiute's conference call for bloggers, the topic of ethanol came up quite a few times. Needless to say, the API are not big fans of the renewable fuel boosters.

The API speakers expressed concern about legislation dictating the amount of biofuels used in gasoline and other transportation fuels, rather than market forces, since a mandate could lead to using less attractive, more expensive components just because they are "renewable".

The speakers took issue with claims from some unnamed ethanol fans that ethanol actually produces energy more efficiently than does gasoline.

The Barrel attended a conference call held for bloggers Wednesday by the American Petroleum Institute, with senior officials discussing legislative climate, refining and import levels, among other topics.

Red Cavaney, president of the API, spoke about potential price-gouging legislation and the legislative climate in Washington DC. The first message he had, was that refinery production is very higher, and there is no evidence that refiners are witholding supplies.

He added that in fact they have been expanding capacity, with "the equivalent of 8 new refineries in the pipeline".

The government is sending mixed signals, which makes it harder to attract investment, Cavaney said.

The headline numbers on the EIA report -- crude up 1 million barrels, gasoline up 1.7 million and distillate up 1 million -- sent the market lower, but on closer look the report is not so bearish.

The 1.528 million b/d total US gasoline imports and the 204,000 b/d week-over-week in Gulf Coast gasoline output should ease some supply concerns, as it shows refineries coming back from maintenance and the long-anticipated flow of imports starting to arrive. Demand is slowing down relative to year-ago levels

However, within the 1.7 million barrel gasoline build is a 1.2 million barrel build on the US West Coast, which is largely isolated from the rest of the US refining complex. Also, stocks are still 14.9 million barrels below the five-year average.

Things are looking "up" for the tugboat industry, at least in the eyes of Bob Beegle, president of Marcon International, which sells and charters tugs, barges and other vessels around the world. Beegle spoke Tuesday afternoon at....surprise!--a tug and barge conference in sunny Stamford, Connecticut, where a cool breeze blew through downtown from the nearby Long Island Sound, home to, one would think, no shortage of tugs. (The conference: MarineLog Tugs & Barges Conference/Expo 2007).

Up, up and up was the good word from Beegle. Demand for new and used tugboats is up--494 tugs are on "order" around the world, to add to the current 11,760 "ocean-going" tugs now operating, Beegle said. Rates tugs charge for their services--escorting barges, anchoring vessels, docking vessels, salvaging ships in distress, fighting vessel fires---are up.

Sales of Beegle's own Marcon International are up, thank you very much. And the power of tugs--their horsepower, that is--is up, as it must be to handle the increasingly larger barges and commercial vessels on the world's waterways. (Up from what levels for each of these items was not detailed.)

The U.S. Coast Guard is cracking down on all kinds of violations and criminal activity in the maritime industry, so much that it's "almost a daily occurrence," according to maritime lawyer Jeanne Grasso of the Washington law firm Blank Rome.

Grasso was a speaker Tuesday morning at the Marine Log Tugs & Barges Conference & Expo 2007 in Stamford, Connecticut, a gathering of about 150 people at the downtown Marriott hotel. Outside it's all sunny skies, but inside the focus in the morning session was on the turbulent legal and regulatory waters facing owners and operators of tugboats and barges, vessels responsible for ferrying giant tankers through waterways, delivering bunker fuel, and carrying people on ferries.

As usual for a Tuesday, energy markets are quiet, waiting for tomorrow's estimates of US oil inventories from the Energy Information Administration (the statistics arm of the Department of Energy).

The latest Platts' analyst survey projects a 200,000 barrel build in crude, 900,000 barrel build in gasoline and 1.4 million barrel build in distillate stocks, as of May 11.

The fact that the markets sit and wait for these admittedly incomplete estimates fascinates us at the Barrel. The EIA itself readily states that the estimates are not based on complete information, as there is not enough time to sift through the reams of data that are submitted.

Uh-oh. It's another gas-out day today.

You didn't know that? Yes, floating around the internet, in e-mails and on message boards, is a familiar notice, seen several times in the past few years, urging US drivers not to buy gasoline on May 15. The idea is that such enormous pressure will so cripple "the oil companies" (a relatively ill-defined term) that they will be forced to reduce their prices. In fact, the posters boast, a similar one-day boycott in 1997 (or maybe it was 1999... it's not entirely clear) pulled down prices 30 cts/gal overnight. Wow! (The Barrel declines to check our pricing records to determine the veracity of this claim. We have doubts).

Judging by comments from oil producing countries and the bumper profits of oil companies in the last couple of years, there are plenty of people out there quite happy with the way things are going in the market these days, but the International Energy Agency clearly isn't one of them.

Its latest report published today paints a fairly pessimistic picture of the short-term outlook, sounding the alarm bell on stock levels again and repeating a call we've heard from the IEA a few times in recent months for OPEC to pump more oil onto the market.

When I was growing up, gasoline advertising was sort of cool. Those of a certain age can remember Esso's (it wasn't Exxon yet) "Put A Tiger In Your Tank!" ads. You could also go to an Esso station and get a little furry tiger tail that would hang out your gas tank, showing that, indeed, you had done what the ad told you to do, and had put a tiger in your tank.

There was sushi on the menu and the staff wore Arab head dresses and spoke Chinese, Japanese, Urdu and Korean. The occasion? A gala dinner held on the eve of the Asian oil producers' and consumers' round table conference held recently in a ballroom at a five-star hotel in the Saudi capital Riyadh.

As guests, mainly male but with a sprinkling of women, tucked into raw fish and jumbo shrimp netted from the waters of the Persian Gulf to the east, multiple television screens around the ballroom were beaming down images from the Orient.

It must be spring. The baseball season is under way, tulips are in bloom, and US Senator Chuck Schumer has called for another investigation into gasoline prices.

Schumer has a long history of holding a press conference and calling for one of two things: a release of oil from the Strategic Petroleum Reserve to hold back prices, and investigations or monitoring of the price of gasoline. Last April it was a call to the Federal Trade Commission to make sure oil companies didn't use the end of the Mtbe mandate and the switch to ethanol as a reason to raise prices.

I remember when Platts' Houston editor Robert Sharp and I journeyed into Illinois in the summer of 2001. We knew ethanol was going to be big, and Robert had been chosen as the Platts' editor to cover what we knew was going to be a vibrant spot market for it. At least, we were pretty sure it was going to be vibrant.

We visited the offices of Archer Daniel Midland in Decatur, Ill. They were very polite. They were very civil. They were very nice. They also wanted nothing to do with us. This is when ADM's control of the market was in excess of 65%, and the idea of a spot market was anathema. We also got the very strong sense that they were determined to make sure that a spot market never developed.

US gasoline inventories fell for the 12th straight week, according to the EIA, but RBOB futures fell instead of rising. It's a case of the news being just not bullish ENOUGH to keep the rally going.

Technically, RBOB was due for a fall. The doji Monday signalled a beearish reversal, so it would have taken a shockingly huge draw to turn that around. Also, the June crack had settled at nearly $30/barrel, so some profit-taking from traders long the crack spread from less than $15/b was in order.

One region that is trying to make the most out of the OTC meeting is Nova Scotia. In the first 24 hours of the meeting, Nova Scotia was the subject of what is called here a "topical lunch"; a press conference was held the next morning; and an offer was made for a further interview with Diana Lee Dalton on Nova Scotia's plans, even though she had already spoke extensively to Platts following the Monday lunch.

NYMEX and ICE are working feverishly on competing Middle East sour crude contracts, both set to launch in the next 3-4 weeks. The nature of the contracts reflects the differing philosophies of the two exchanges. NYMEX represents the old-school physical commodity, while ICE tends to list cash-settled instruments.