ODAC Newsletter – Feb 25

Oil headed for its biggest weekly gain in almost two years on concern the turmoil that has cut Libya’s output may spread to other parts of the Middle East, and on speculation U.S. economic growth will boost fuel demand.

Crude pared gains after the U.S., Saudi Arabia and the International Energy Agency made assurances they can compensate for any disruption of Libyan supplies. It surged to a 29-month high in New York yesterday amid estimates that Libya’s output was cut by as much as two-thirds. Futures rose as much as 2 percent today before U.S. data that may show economic growth quickened and consumer confidence improved…

Saudi Arabia moved to reassure oil consumers Thursday it would tap its vast spare capacity to make up for any supply shortfall as Libya descended into anarchy and its oil production plummeted.

Brent crude and New York light sweet crude futures rose to 30-month highs in early trade even before Eni CEO Paulo Scaroni said Libya’s total oil output had slumped by 1.2 million b/d amid violent confrontations between anti-regime protesters and the security forces of a defiant Moammar Qadhafi. The IEA estimated Libyan crude output before the disruption around 1.58 million b/d…

High oil prices pose a danger for a global economic recovery and industrialised countries stand ready to release oil from stockpiles to meet Middle East supply disruptions, the IEA’s chief economist said on Tuesday.

U.S. crude futures CLc1 hit a 2-½ year high on Tuesday as violence in Libya led one oil company there to shut in 100,000 barrels per day (bpd) of the country’s 1.6 million bpd output…

What’s easy to lose sight of in the chaos sweeping through the Middle East is where oil prices were trading before it began. The Brent futures contract, the world’s new benchmark oil price, had already broken $100 (U.S.) a barrel before protesters in Cairo started sweeping into Tahrir Square and demanding Hosni Mubarak’s head. And the price of West Texas Intermediate (CL-FT100.912.812.86%), laden as it is with record inventories of Bakken oil and Canadian oil sands crude piling up in Cushing, Okla., was trading just shy of $90 per barrel.

These are the kind of prices that one might expect to encounter at the end of an economic cycle, not at the beginning of one. But world oil demand once again grew at lot faster than the oil experts at the International Energy Agency were expecting — almost twice as fast, to be precise…

Oil prices are going through the roof today, and gasoline prices at the pump will follow, as we get the first regime-rattling news in a major oil-producing state. What’s happening is that the sketchy news out of Libya makes the country look like it’s on fire – Col. Muammar Qaddafi may be spending his last days in power. And even though no oil supplies have been disrupted, traders are engaging in some casino behavior and bidding up prices to new two-year highs. Here is some video:

Look for more of the same going forward if — as seems as likely as not — unrest strikes Saudi Arabia. That is because Saudi is the linchpin of global oil prices, satisfying a full 10 percent of total global demand, and possessing by far the majority of the capacity to produce much more in the case of an emergency — such as if Libya’s 1.6 million barrels a day of oil production abruptly is taken off the global oil market…

The oil sector in Libya was descending into chaos on Monday as the revolt against Muammer Gaddafi called into question the industry’s rush to the oil-rich north African country over the past few years…

Iraq’s goal of a fivefold surge in oil production capacity this decade to rival Saudi Arabia’s dominance in world markets will almost surely have to be revised, industry experts say, because of technical and skilled labor limitations and the country’s self-interest in defending high international crude prices.

The government has signed 14 contracts with international oil companies since late 2008, to develop 12 fields as part of a plan to increase production capacity to 12.5 million barrels a day by 2017, up from 2.6 million now. That goal, however, is widely considered unrealistic in the industry…

BP said on Tuesday that it will seek to sell its holdings in a “number” of UK oil and gas fields, as part of an ongoing restructuring.

“BP announced today the intention of selling its interests in a number of operated oil and gas fields in the UK,” it said in a statement…

The big oil companies have a long way to go to recover from the BP well blowout that spilled millions of barrels of crude into the Gulf of Mexico. But on Thursday they took a step in the direction of drilling again by unveiling a new well-blowout plugging and spill containment system.

Soon after the spill, a consortium organized by ExxonMobil, Royal Dutch Shell, Chevron and ConocoPhillips began a $1 billion project to create such a system. An interim plan is now ready. BP later joined the group, and a final plan is expected by early 2012…

A federal judge in New Orleans on Thursday ordered the Obama administration to move quickly on permits for new deepwater oil wells in the Gulf of Mexico, saying that the government could no longer justify long delays in allowing new projects to go forward.

A consortium known as the Marine Well Containment Company has created a new system for capping underwater oil spills. The group includes BP, Chevron, ConocoPhillips, Exxon Mobil and Shell…

China, Asia’s biggest oil consumer, increased retail gasoline and diesel prices for the first time this year, aiding state refiners under pressure from $100 crude.

Shares in China Petroleum & Chemical Corp., the nation’s biggest refiner, climbed 1.4 percent in Shanghai. The company’s Hong Kong-listed shares dropped 2.3 percent as analysts said the increase in government-controlled prices won’t be enough to offset refining losses…

The 2010 Deepwater Horizon oil spill “devastated” life on and near the seafloor, a marine scientist has said.

Studies using a submersible found a layer, as much as 10cm thick in places, of dead animals and oil, said Samantha Joye of the University of Georgia…

Libyan natural gas supplies to its former colonial overlord Italy were halted on Tuesday amid turmoil in the North African state as Rome braced for an expected wave of migrants from Libyan shores.

Italy’s ENI, the biggest foreign energy major in Libya, said supplies through the Greenstream gas pipeline between the two countries had been halted after it suspended some of its operations in the energy-rich country…

Plans to build a gas pipeline to the heart of Europe to reduce dependence on Russian imports have been dealt a blow after estimated costs almost doubled.

The proposed 2,000-mile (3,200km) Nabucco pipeline would transport gas from BP’s $20bn (£12.3bn) new project in the Caspian Sea to Austria via Turkey and the Balkans…

Alexei Miller will have to perform a careful balancing act when he goes into European energy policy negotiations later this week. The chief executive of Gazprom — the state-owned Russian giant that supplies more than a fifth of Europe’s gas — will be called upon to champion the role of natural gas in Europe’s energy mix, while playing down the implications of price pressures from shale gas and liquefied natural gas (LNG). At the same time, he has to instill confidence in the security of Russian supply and argue against a policy package that threatens to undermine the company’s hopes for a merger with Ukraine’s Naftogaz Ukrainy.

But Mr Miller is undeterred. “The 20th century was the century of oil, and the 21st century will be the century of gas,” he says with conviction. “Gas is the key fossil resource that will ensure the energy balance of Europe in the short term and in the long term.”…

Operating profits at British Gas rose 24% in 2010 to £742m, its parent company Centrica has said.

The news comes two months after the UK utility announced a 7% rise in domestic energy bills, which it blamed on rising wholesale prices…

The price of uranium, the fuel for nuclear reactors, will jump to a record high as surging demand from China stimulates a decade-long bull market, according to forecasts from CRU, a leading commodities consultancy…

North Africa and the Middle East experience some 3,000 hours of sunshine every year – three times as much as Germany. So why not turn some of that sunshine into electricity and export it to Europe?

The Desertec initiative was hoping to achieve just that. It’s an ambitious project which aims to boost development in North African countries and secure Europe’s energy supply at the same time…

Scotland is seeing a boom in small hydro schemes, with scores of streams and rivers earmarked for development. But why has this form of green energy suddenly become so popular?

There’s a gold rush starting in the Scottish hills. But the rush is to find one of most Scotland’s most abundant resources – water – rather than a precious metal…

MAKING all the towers, turbines and other kit needed for an anticipated boom in wind, wave and tidal electricity has become one of the big hopes for British manufacturing. Rundown ports on the east coast are wooing foreign engineering firms in the hope of becoming suppliers to the burgeoning offshore renewable industry in the North Sea. Unlikely as it might seem, the biggest long-term winner from this green rush might be Glasgow…

Drax Group stepped up its biomass co-firing operations last year, but remains concerned a lack of government support is forcing it to delay further green investments and restrict the amount of renewable fuel burnt at its Yorkshire power station to less than half full capacity.

The company burned a record 907,000 tonnes of biomass in 2010, double the previous year, according to year end results published yesterday…

Nick Clegg is now the main driving force of the government’s “green investment bank” amid a Whitehall struggle over how precisely the new entity will function…

Investing $1.3 trillion (£800bn) each year in green sectors would deliver long-term stability in the global economy, a UN report has suggested.

Spending about 2% of global GDP in 10 key areas would kick-start a “low carbon, resource efficient green economy”, the authors observed…

King Abdullah of Saudi Arabia announced financial support measures, worth an estimated SR135bn ($36bn), in a bid to avert the kind of popular unrest that has toppled leaders across the region and is now closing in on Libya’s Muammer Gaddafi…

Oil analysts are paying very close attention to fast-moving events in Bahrain, fearing that clashes between the island’s Sunni elite and an aggrieved Shi’ite majority could embroil the two Gulf giants of Iran and Saudi Arabia.

“While events in Libya are undoubtedly of prime importance, they are a red herring for the oil market,” said Helima Croft from Barclays Capital. “We believe the unrest in Bahrain may be of far greater importance to the strategic balance in the Middle East and to the oil market.”…

Airlines are hiking their fares at the fastest pace in two years, driven by high fuel prices and enticed by strong consumer appetite.

And travelers should brace themselves for more hikes, because there’s no reason for airlines to stop now, according to industry experts…