Famous Last Words

'Crude oil traders joke that the price jump to $100 a barrel on Wednesday was like a teenager's first kiss' - Javier Blas

NVDL: Do these traders know what teenagers are like? After that first kiss it's not like they go into hibernation. It's not like they go: oh, okay, let's go rollerskating. It's not like one little snowflake. There's a freakin' avalanche on the heels of that first kiss. So the analogy turns out to be more accurate than I guess they meant it to be.

Oil prices aim higher on US rate cut hopes

Oil Gyrates on Weather, Supplies

By JOHN WILEN – 14 hours ago

NEW YORK (AP) — Oil prices fluctuated Thursday as traders weighed forecasts for a warmer winter — which could lower demand for heating and crude oil — against data suggesting supplies are falling.

Natural gas futures fell after the government reported that inventories declined less than expected last week.

The National Oceanic and Atmospheric Administration said Thursday that the beginning of winter will be warmer than normal in the eastern two-thirds of the nation, which includes the heating oil-dependent Northeast, Dow Jones Newswires reported.

Warmer weather could mean lower demand for heating oil and natural gas.

On the other hand, the government on Wednesday reported that supplies of heating and crude oil fell sharply last week. Heating oil supplies are nearly 30 percent below five-year average levels, said James Cordier, president of Liberty Trading Group in Tampa, Fla.
More.

NVDL: Right now the US is experiencing a very cold winter, with plenty of harsh ice storms. This impacts on the demand for heating oil. In the past 2-3 years the US was lucky to experience the opposite - unsually warm winters.

Snow, freezing rain on tap in Northeast

ALBANY, N.Y. - A storm system slid across the Northeast with snow, sleet and freezing rain Sunday, glazing roads and tying up air travel after blacking out thousands of customers in the Midwest.

At least 10 traffic deaths have been blamed on weather-related traffic accidents.
Winter storm warnings were in effect into Monday in Vermont, New Hampshire and Maine and into Tuesday in parts of New York state. On the other side of the weather system, warnings were issued for parts of Michigan, where freezing rain and sleet was predicted to turn to all snow late Sunday.
By VALERIE BAUMAN, Associated Press Writer Sun Dec 2, 6:04 PM ET

NVDL: Why should South Africans care about the weather in the USA? Actually, we ought to care a great deal. The world's greatest consumer of heating oil will consume a lot more of the stuff if they suffer a particularly cold winter. That has an impact on the rest of us, in terms of absolute demand for fuel, and thus upward pressure on prices.

Former Head Of Saudi Armanco: Oil At $120 by 2010

David Strahan: Sadad al-Huseini, thanks for talking to me. You're about to give a presentation at the oil and money conference. What are you going to tell them about the future direction of the oil price?

Sadad al-Huseini: Well, every indication is that the increasing prices that we've been seeing are part of a trend, and the factors that caused the prices to rise are unlikely to go away. So, we're going to have a sustained price increase as long as the factors that drive prices persist.

DS: How much do you think prices are going to go up over the next few years?

SAH: Well, you can't put a control on the ceiling because the ceiling is a function of political events and other factors: emotional, speculation, etc. But you can predict that the floor on oil prices, and based on what we've seen so far, I would guess, in the next four to five years, the floor will keep rising at twelve - maybe a little bit more - dollars per barrel per year.

DS: So, where would you see prices in 2010, say?

SAH: 2010, we may well be - the floor on prices - may well be above $100. That's three years times twelve - thirty-six - plus where we are, $70 - $106 - as a floor.

DS: So, where is the technical floor, now, as you see it?

SAH: Now, the technical floor should have been around $70/$72. But, of course, the global hedging related to the dollar being soft - and commodities, and so on - has driven prices higher - but that's not because of the basic structural elements of the industry, it's because of the financial markets.

DS: So, what you're saying really is that in 2010, it's unlikely - rather unlikely - that oil prices will be less than $110 a barrel?

SAH: Absolutely. That's the whole point - that if your persist the way we do with demand as it is, the economy, globally, growing as it is, and the supplies being as constrained as they are - no question the dollar value - current dollar value - of oil would be well above $100.

DS: And where do you think it could be - in terms of its maximum? I know you say you can't put a constraint on that - but what's your guess?
SAH: We've seen fluctuations - it's a volatile market - and we've seen fluctuations of plus or minus maybe 20% - so it could be as high as $120/$125.

DS: Isn't there a counter argument here, though. Traditional economics would tell you that if the price of oil goes up - and goes up strongly - then it would either bring on additional supplies and/or depress demand. And, either way, mightn't that rather suggest that the oil price is going to head south, rather than going further north?

SAH: Yes. I mean, the point that you're making is that you would have demand destruction, and demand destruction would result in excess capacity, and, therefore, prices would come down. But, the reality is, what we've seen is there's a momentum to demand. This momentum is basically GDP. Unless you have a global recession that actually brings GDP down to zero, you're always going to have some incremental demand. And what we're seeing is there's no spare capacity of any significance, and, therefore, the factors that are driving prices up will persist.

Now, the only way for reversing this is a introduction of alternative energies - in very short order - which is unrealistic; as I said, a global recession which we don't see materializing; or alternative fuels, which again, are a problem to deliver in the short term. Based on all of that, we can only expect prices to go up. Now, there's also the question of who's going to buy the oil? There are economies in the world that can afford it, and so they will bid the price up, and there are countries and economies that cannot afford it, and they will unfortunately be hurt by this price trend.

DS: But the other side of the traditional economics equation would suggest also that additional supplies would come on stream if the price goes strongly upwards. Isn't that going to happen?

SAH: What we've seen is that although the price of oil has almost quadrupled - or more - in the last few years, the supply has not. The non-OPEC, non-former Soviet Union countries - and that includes countries like Mexico, North Sea, and others - have, in fact, gone down, even though the prices have increased four-fold or five-fold. We're also seeing that OPEC and non-OPEC former Soviet Union are levelling off. So, the normal economic theory is not working in this case, and that's because of course there's - there are ceilings in the industry that don't allow the normal equation to work.

DS: What are those ceilings - are they geopolitical, resource nationalism, or are we rubbing up, do you think, against some fairly fundamental geological constraints?

SAH: I think it's the latter. There's no question that there are giant fields left in the world, and there are major reserves left in the world, but they are all maturing oil fields - large fields, but maturing. The additional discoveries that are happening are very complex fields - smaller, less durable, less sustainable. The demand on resources, both human and equipment, is increasing to the point where their isn't any additional resource - human or mechanical. All these factors put together have created a structural ceiling - it's not politics, it's not a negative strategy by OPEC or any of the major produces - these are the realities of the industry.

DS: Is it peak oil?
SAH: I don't call it peak because I believe that with increasing prices you will be able to sustain some demand. But it's maybe more appropriately a plateau, a ceiling that is very hard to go above. It's sustainable. My guess is for another ten to fifteen years. Now, beyond that it's pretty hard to predict. But, certainly, the resources will be very severely depleted by then.

DS: So, from what you say, you seem to think that we are on this plateau already?
SAH: The evidence is that in spite of the increases - very large increases - in oil prices over the last four years, we haven't been able to match that with increasing capacity. So, essentially, we are on a plateau.

DS: And this point - fifteen years from now - is when you foresee production actually starting to fall?
SAH: In my own modelling of the resources, I cannot see additional reserves coming online fast enough to sustain the plateau - but as far as I can see with any clarity. Now, there may be other solutions. The Department of Energy in the U.S., the IEA, both believe that there will be some additional fuels, perhaps unconventional fuels, extra-heavy crudes, Gas to Liquids - perhaps - but as far as the conventional oil resources, I can't see that they would be sustainable beyond that time frame.

DS: And, in your own mind, do you think that those non-conventional - slightly non-conventional - sources of fuel like the Gas to Liquids and the oil sands, and so forth - can you see them making up the decline of conventional crude?
SAH: By 2030, with my model, they would have to be producing something like 24 million barrels a day to meet the demand, and also increase capacity to the levels as are anticipated by some of these international agencies. That's a very substantial volume, and it requires a very early start in investments, which we still don't see.

DS: So, do you think it's credible that they could provide 24 million barrels a day by 2030?
SAH: It's a stretch. You need to see a lot more activity on a international level to believe in that.
DS: You've talked about the maturity of the giant fields - which, of course, are the mainstay of global production. There's - in the outside world - obviously an intense debate about Ghawar, and Saudi production, more generally - an intense debate as to whether Ghawar has already gone into decline, and whether or not the Saudi cutbacks over the last couple of years - at least - were voluntary or involuntary. It's fair to say, I think, that everybody in the outside world is working pretty much in the dark about this - can you shed any light on it?

SAH: Well, Saudi Arabia has a large number of very giant fields, and its policy has always been to be very prudent in how they're managed, and to sustain their capacity over the long haul. I don't have a concern about Saudi Arabia's production. I think the confusion is that many of these international organizations have assumed that Saudi Arabia will double - or more - its capacity; in other words, produce 20/20 plus million barrels a day. That's the unrealistic aspect of these forecasts. But, as far as Saudi Arabia sustaining its capacity, it's doing very well, and can sustain its capacity. The problem is nobody else seems to be doing anything, whether in the Gulf region or internationally - whether it's Russia or Mexico or any of the others - so it's a bit of an unfair burden to assume that Saudi Arabia will pull everybody's chestnuts out of the fire.

DS: A Saudi official said, recently, I think that Saudi capacity would rise to some 12 million barrels a day by 2012. Is that achievable, do you think?
SAH: Certainly, the investments are being made. The total capital program that has been announced since, say, 2003 through 2011, is over $80 billion. Something like $55 billion is into the oil capacity. So, certainly, the investments are being made. How the reservoirs will respond - some of these are new fields - will be determined as they start producing. But the investments are definitely being made. It's an achievable number.

DS: And what about beyond that? Because Saudi officials have also said, I think, that Saudi would have no trouble in producing some 15 million barrels a day for 50 years, or for decades. Is that credible, do you think?

SAH: I haven't heard that myself. What I have read and seen is that the capital program is intended to reach 12.5, and what I've read is that the government officials in Saudi Arabia and in the oil companies - Saudi Aramco - have said that they intend to wait and see - once they've reached that level - what to do next. So those numbers, I believe, are achievable. Beyond that, I haven't heard of an official strategy to go higher.

DS: As you say, the international agencies and the energy departments of the big consuming nations do assume in their forecasts that Saudi Arabia and the Middle East "Big Five" are going to continue to make good all the demand growth in the future, and you've cast doubt on that today. How safe are those assumptions, then? It's a rhetorical question, I guess, but how safe do you think those assumptions are?
SAH: Some of those assumptions, for example, assume that OPEC will go from about 30 million barrels a day - which is what it produces now - to well over 45 or 47 million barrels a day. Other companies - oil companies - have even shown a high of 60 million barrels a day. That's what I'm calling unrealistic. Staying at 30 million barrels a day is not a small feat - that's a lot of oil - that's half of the exported (sold) oil in the markets today, and to stay there requires a sustained investment program which is quite massive, and a lot of resources. I think that's realistic - staying at 30. But going to some of these numbers - 47, 48, 60 million barrels a day - I think that's quite unrealistic.

DS: So what risks do you think Western consuming nations run by sticking to those assumptions?
SAH: I think, perhaps, they're just not looking realistically at prices because the equation has three factors: supply, demand, and price. If you assume that you have a endless supply to meet demand, then price would stay reasonably low. If you assume supply is constrained - which is what I'm saying - and has a ceiling, then the only way to balance the equation is to assume that prices will increase significantly, and I think that's a more prudent and realistic outlook.
DS: Sadad al-Huseini, thank you very much for talking to me.

Weather Lifts Oil Prices Near $99/barrel (N)

By GILLIAN WONG

SINGAPORE (AP) — Oil prices rose to near $99 a barrel Monday on signs of colder weather in the United States and Europe and continued weakness in the U.S. dollar.

The Thanksgiving holiday on Thursday marked the unofficial start of winter in the United States. Among other areas, southeastern New Mexico got up to 9 inches of snow and experienced colder than normal temperatures over the holiday weekend. Snow also fell in Germany over the weekend.

"The onset of cold U.S. weather is going to boost fuel demand," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Light, sweet crude for January delivery added 49 cents to $98.67 a barrel in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore. On Friday, the contract rose 89 cents to settle at $98.18 a barrel, besting the previous settlement record by 15 cents.

Meanwhile, the dollar hit a new low against the euro Friday as speculation continued that the American credit crisis will lead to another cut in U.S. interest rates.

"The weakened U.S. dollar remains at record low levels and so we've got pricing trying to test $100 again," Shum said.

Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the U.S. currency is falling.

Nymex crude prices reached a trading record of $99.29 a barrel on Wednesday, and are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

Shum said that data suggesting OPEC is increasing production more quickly than expected is likely to keep a temporary cap on oil prices.

Oil Movements, an oil tanker tracking firm based in Britain, reported that Organization of Petroleum Exporting Countries oil exports are likely to jump by an average of 720,000 barrels a day in the four weeks ended Dec. 8, more than the expected 500,000 barrels per day.

Oil prices rose 43 percent between August and early November on falling domestic inventories, concerns about supply disruptions overseas and, many analysts argue, speculative buying. But recent forecasts have suggested high prices are cutting demand.

Nymex heating oil rose 0.18 cent to $2.706 a gallon while gasoline prices gained 1.70 cents to $2.484 a gallon. Natural gas futures rose 22.3 cents to $7.923 per 1,000 cubic feet.

NVDL: A mindset that links energy prices to climate change will soon make it abundantly clear what the cost to our delays actually are.

OPEC Comment Drives Oil Close to $95

"The fact that the OPEC members are talking about issues like the weak U.S. dollar and not talking about raising output is supportive of strong pricing and so we're seeing signs of the market gaining strength," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Iranian President Mahmoud Ahmadinejad, in Riyadh, Saudi Arabia, called the dollar a "worthless piece of paper," and said the cartel's members have expressed interest in converting cash reserves into a currency other than the U.S. dollar -- a sentiment echoed by Venezuelan President Hugo Chavez, who called the euro a better option.

There had been speculation over whether OPEC would raise production at the meeting following recent oil price increases that have closed in on $100 a barrel. U.S. Energy Secretary Samuel Bodman had called on OPEC to raise output last week, but cartel officials say they will hold off any decision until the group meets next month in Abu Dhabi in the United Arab Emirates.

Some analysts say a decision to increase output next month is unlikely to strengthen supplies to meet peak winter demand season.

"Even if the OPEC ministers decide to raise output in early December, that would likely become effective only in January so by the time the oil gets to the market, the winter season would essentially be over," Shum said.

OPEC officials have also cast doubt on the effect any output hike would have on oil prices, saying the recent rise has been driven by the falling dollar and financial speculation by investment funds, rather than any supply shortage.

In other Nymex trading, heating oil futures gained 1.79 cents to $2.6050 a gallon (3.8 liters) while gasoline futures added 1.56 cents to $2.3910 a gallon.

Natural gas futures jumped 7.2 cents to $8.073 per 1,000 cubic feet.

Associated Press Writer Gillian Wong in Singapore contributed to this report.

From Yahoo News.com

NVDL: Unfortunately, $100 is a matter of time.

Tough December coming for consumers

South African consumers face a double-whammy of increases next month - Economists are predicting another hike in lending rates, while motorists are expected to receive a nasty surprise at the petrol pump.

Although early in the accounting period, the under-recovery of petrol is already 51.5 cents a litre.

This means that consumers are paying less for oil-rated products than the ruling price.
A big worry came out on the world markets today, with the price of Brent crude oil hitting an historic peak of 95.09 dollars per barrel in trading amid concerns over tight global energy supplies. Earlier, New York’s main contract, light sweet crude for December delivery, hit a record high of 98.46 dollars per barrel.

For the rest of this Sowetan Online article, go here.

Oil Now

Brent Crude Oil: $91.46

The ptrol price goes up by 3 cents on Wednesday. Fortunately we're in a position right now to say: "Is that all." This is due in large part to the R/$ moving in our favour. Let's hope it stays that way.

Unfortunately November also spells the beginning of the winter (heating oil) season, or in layman's terms, the Northern hemisphere winter. Global warming - bizarrely - can actually help in this context by offsetting the ordinary effects of Northern Hemisphere winter chill and lowering the tab (for heating) in this respect. But the misconception is that global warming is 'warming everywhere'. One exception is the United Kingdom, which is likely to experience increasingly cold winters with the warm Gulf Stream conveyor belt (bringing them warm air and milder temperatures) being cut off by melted (this cold and low saline), arctic inflows swimming into the Atlantic currents.