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Peak oil notes - Sept 8

Developments this week
Oil prices fell sharply on Monday and for part of Tuesday but rebounded to close on Wednesday at 30-day highs. The slump which was felt harder in the NY markets was largely due to the pessimism generated by last Friday’s US jobs report. Wednesday’s rebound was largely due to a jump in the equity market in anticipation of President Obama’s speech on Thursday in which he will discuss spending $300-400 billion over the next year to create jobs. A new tropical depression is forming in the Gulf which could threaten the oil fields next week supported the price rise. NY oil is now back to $89.34 and London $115.80, just $2 a barrel below where it was trading in June and July; however both are well below the highs of $115 in NY and $127 in London touched in the spring.

The gap between NY and London futures prices continues to widen, hitting a record of $26.87 a barrel on Tuesday as US traders seem to be focusing on bad economic news, while European traders are still concerned about the missing Libyan oil. Much discussion continues about just when Tripoli’s exports will begin with most now talking about a few hundred b/d in the next few months and full production sometime in late 2012 or 2013.

The US stocks report is delayed until Thursday this week, but the API “early-bird” estimate suggests that US crude stocks will be down by 3 million barrels and product inventories down by another 5 million as the tropical storms that hit the east coast and the Gulf states have slowed refining, oil imports, and production.

Gasoline futures in NY rose 8.5 cents a gallon on Wednesday to settle at $2.91. Again this is only about 10 cents a gallon below highs touched in April. Unless there are substantial reversals, there will not be much relief for motorists at the pump this fall.

Chevron announced a new oil discovery in the Gulf at a well that was delayed for nearly a year by the deepwater drilling moratorium. Sunoco announced it will quit the refining business after 117 years, citing their inability to make enough of a profit in the business.

The new 760 mile Nord Stream pipeline under the Baltic which can bring Russian natural gas to Germany without the complications of transiting other states opened for business this week. The $12.4 billion pipeline is the most expensive underwater project in Europe since the Channel Tunnel. The pipeline was financed by the Germans through higher gas prices and hurts the Ukrainians who will lose part of their transit business.

Beijing announced that its GDP grew by 10.4 percent last year, an increase of 0.1 percentage points. Manufacturing and construction growth was revised upward to 12.2 percent. After increasing its light vehicle production to 17 million last year from 2 million in 2000, car sales in China are reported to be up by on 5 percent this year vs. 33 percent in 2010. The recent rates of growth were obviously unsustainable. JD Powers estimated that at recent rates of growth, the Chinese would have the capacity to manufacture 31 million cars by 2013.

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