September 2008 Archives

Panic was palpable across Singapore on Tuesday. Like traders in any other market, oil dealers were in early. Most rushed in as soon as news spread, mostly by word of mouth and SMS, that oil prices had overnight crashed by 7% in value. Underlying the panic, and when you really ask people about what is going on, something more disturbing is happening. You can see that people are losing faith in the ability of free markets to deliver what we all look to the markets to give: a clear and rational valuation.

Two stories about what amounts to the same subject shows the issue of shale natural gas from two widely-divergent perspectives.

At the annual meeting of the American Association for the Study of Peak Oil in Sacramento this week, several participants who spoke to Platts' editor Richard Rubin were dismissive of the bullish claims of Chesapeake Energy CEO Aubrey McLendon. He has been touting widely expanded use of natural gas in the US, supplied to a large degree by abundant new supplies of natural gas from various shale plays, such as the Barnett, freed from the earth through recently-developed technologies.

Ethanol makers have had a tough year despite the soaring price of crude and products that have put ethanol's gasoline blending abilities in high demand.

The most recent sign of trouble came last week, when big producer VeraSun, considered a bellwether for the industry, effectively put itself up for sale after some hedges went south.

Careful now, that other Asian giant -- India has begun to stir languorously from its slumber. And when it is fully awakened, the world will be faced with another mammoth energy guzzler, hot on the heels of the US and China.

We've written a great deal here at The Barrel about the woeful performance of Mexico's oil industry.

A milestone was reached last month, and it's nothing to celebrate for anybody: Production of the Cantarell oil complex in Mexico's Sound of Campeche dropped below 1 million b/d in August for the first time in 13 years.

What would be really nice is if the demand for petroleum journalists was as strong as the demand for petroleum engineers.

But we don't have to go to school for as many years, and some of the courses are considered easy. So if you want to just about guarantee yourself a job offer, or multiple ones, upon graduation, follow the advice in this story.

The role of speculators in the runup and recent fall in the price of oil seems academic, until you attend a Senate hearing on the issue, as The Barrel did Wednesday. Then there are human beings discussing it.

It was a perfect 3-for-3 setup at the Senate Energy Subcommittee on Energy and Natural Resources. There were three advocates of the argument that it has been speculators that drove the price to $147, and there were three who reject that idea. The meeting was chaired by North Dakota Democrat Byron Dorgan, who has been one of the loudest voices blaming speculators for the increase.

Futures markets never pretended to care about the hurricanes, with crude falling more than $24/b since the end of August as Hurricane Gustav and then Ike steamed through the Gulf of Mexico. The RBOB crack spread rose, but only up to $15/b before falling back.

Petroleum cash markets in the US pretended to care for a while, surging last week on concerns refinery production would be shut in for a long time, but cash differentials fell back Tuesday as quickly as they rallied last week, as it appears Hurricane Ike did not cause widespread destruction to the Gulf Coast refining industry.

You've probably heard a lot in the general media that oil prices have been strangely calm, even lower, as Hurricane Ike nears landfall later today near Houston. You may even be figuring: those gas prices on the corner will hold, even as the storm hits.

You might want to rid yourself of those views.

Chevrolet's gasoline-sipping plug-in hybrid, the Chevrolet Volt, got an inadvertent introduction on the Web Monday.

A series of pictures of both the car and the development team leaked out, and set off a mini-frenzy among auto bloggers. You can see them here. The off-the-cuff conclusion is that for such a futuristic vehicle, it looks pretty pedestrian.

It isn't clear exactly what numbers OPEC President Chalib Khelil is citing, but it was a fairly stark version of supply/demand math he used today, one day before OPEC is to meet in Vienna.

Nigeria's oil output suffered another setback after first exports from Chevron's Agbami offshore field were halted and production cut due to technical issues.
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