EIA Examines Alternate Scenarios for the Future of U.S. Energy

The U.S. Energy Information Administration (EIA) today released the complete version of Annual Energy Outlook 2011 (AEO2011), which includes 57 sensitivity cases that show how different assumptions regarding market, policy, and technology drivers affect the previously released Reference case projections of energy production, consumption, technology, and market trends and the direction they may take in the future.

"EIA's projections indicate strong growth in shale gas production, growing use of natural gas and renewables in electric power generation, declining reliance on imported liquid fuels, and projected slow growth in energy-related carbon dioxide emissions in the absence of new policies designed to reduce them," said EIA Administrator Richard Newell. "But variations in key assumptions can have a significant impact on the projected outcomes."

In addition to considering alternative scenarios for oil prices, economic growth, and the uptake of more energy efficient technologies, the AEO2011 sensitivity cases explore important areas of uncertainty for markets, technologies, and policies in the U.S. energy economy.

Key results highlighted in AEO2011 include:
U.S. reliance on imported liquid fuels falls due to increased domestic production ¿ including biofuels ¿ and greater fuel efficiency. Although U.S. consumption of liquid fuels continues to grow through 2035 in the Reference case, reliance on petroleum imports as a share of total liquids consumption decreases. Total U.S. consumption of liquid fuels, including both fossil fuels and biofuels, rises from about 18.8 million barrels per day in 2009 to 21.9 million barrels per day in 2035 in the Reference case. The import share, which reached 60 percent in 2005 and 2006 before falling to 51 percent in 2009, falls to 42 percent in 2035. Sensitivity cases illustrate opportunities for further reductions in U.S. reliance on imported liquid fuels through additional increases in fuel efficiency or domestic liquid fuels production.

Domestic shale gas resources support increased natural gas production with moderate prices, but assumptions about resources and recoverability are key uncertain factors. Shale gas production continues to increase strongly through 2035 in the AEO2011 Reference case, growing almost fourfold from 2009 to 2035 when it makes up 47 percent of total U.S. production¿up considerably from the 16 percent share in 2009.

Although more information on shale resources has become available as a result of increased drilling activity in developing shale gas plays, estimates of technically recoverable resources and well productivity remain highly uncertain. Over the past decade, as more shale formations have gone into commercial production, the estimate of technically and economically recoverable shale gas resources has skyrocketed.

However, the increases in recoverable shale gas resources embody many assumptions that might prove to be incorrect over the long term. Alternative cases in AEO2011 examine the potential impacts of variation in the estimated ultimate recovery per shale gas well and the assumed recoverability factor used to estimate how much of the play acreage contains recoverable shale gas.

Proposed environmental regulations could alter the power generation fuel mix. The EPA is expected to enact several key regulations in the coming decade that will have an impact on the U.S. power sector, particularly the fleet of coal fired power plants. Because the rules have not yet been finalized, their impacts cannot be fully analyzed, and they are not included in the Reference case.

However, AEO2011 does include several alternative cases that examine the sensitivity of power generation markets to various assumed requirements for environmental retrofits. The range of coal plant retirements varies considerably across the cases, with a low of 9 gigawatts (3 percent of the coal fleet) in the Reference case and a high of 73 gigawatts (over 20 percent of the coal fleet) in the most extreme case.

Electricity generation from natural gas is higher in 2035 in all the environmental regulation sensitivity cases than in the Reference case. The faster growth in electricity generation with natural gas is supported by low natural gas prices and relatively low capital costs for new natural gas plants, which improve the relative economics of gas when regulatory pressure is placed on the existing coal fleet. In the alternative cases, natural gas generation in 2035 varies from 1,323 billion kilowatthours to 1,797 billion kilowatthours, compared with 1,288 billion kilowatthours in the Reference case.

Assuming no changes in policy related to greenhouse gas emissions, carbon dioxide emissions grow slowly. Energy related CO2 emissions grow slowly in the AEO2011 Reference case due to a combination of modest economic growth, growing use of renewable technologies and fuels, efficiency improvements, slow growth in electricity demand, and more use of natural gas, which is less carbon intensive than other fossil fuels.

In the Reference case, which assumes no explicit regulations to limit greenhouse gas (GHG) emissions beyond vehicle GHG standards, energy related CO2 emissions do not return to 2005 levels (5,996 million metric tons) until 2027, growing by an average of 0.6 percent per year from 2009 to 2027, or a total of 10.6 percent. CO2 emissions then rise by an additional 5 percent from 2027 to 2035, to 6,311 million metric tons in 2035. The projections for CO2 emissions are sensitive to many factors, including economic growth, policies aimed at stimulating renewable fuel use or low carbon power sources, and any policies that may be enacted to reduce GHG emissions, all of which are explained in sensitivity cases.

The projections from the complete AEO2011, including the Reference case, all of the alternative cases, supplemental tables showing the regional projections, as well as a report on the major assumptions underlying the projections, can be accessed on EIA's Internet site at: www.eia.gov/forecasts/aeo


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Bloomberg: Contango on Mideast Oil Disappears on China Diesel Squeeze

The 1 month old contango in Dubai oil, the benchmark grade of crude for Asia, has disappeared as a shortage of diesel in China puts a premium on the quickest deliveries of fuel. The December contract was 15 cents a barrel more expensive than January’s today, reversing a discount that’s been in place since July 2009, according to data from PVM Oil Associates, a London based broker.

A shortage of diesel in China is pushing up the premium for the fastest deliveries of oil as the nation curbs power use under a plan by Premier Wen Jiabao to cut electricity consumption per unit of gross domestic product by 20 percent in the five years through 2010. Stockpiles in the country, the world’s biggest energy user, fell for a seventh month in October, according to data from China Oil, Gas & Petrochemicals, a publication of the state owned Xinhua News Agency.

“China’s got to be short” of crude oil, said Alex Yap, an analyst at FACTS Global Energy in Singapore. “If they want to do any restocking from November to December, they’ll have to be importing a lot for the next couple of months.”

Oil imports dropped 30 percent to a 17 month low of 16.4 million metric tons in October, or about 3.9 million barrels a day, the General Administration of Customs said Nov. 22. Diesel inventories declined 11 percent to about 6.2 million tons in October, data from Xinhua News showed on Nov. 22. They were 11.5 million tons in February......Read the entire article.


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Commodity Corner: Crude Oil Price, Natural Gas Inventories Hit New Highs

Crude oil for December delivery surged to $88.21 a barrel Wednesday before settling at $87.81. The day's peak oil futures price, a two year high, followed a U.S. Department of Energy report showing that commercial crude inventories fell by 0.9 percent last week. According to the department's Energy Information Administration, oil stocks had declined to 364.9 million barrels as of last Friday 3.3 million barrels lower than the previous week's figure. The most recent number represents the first decline in crude stocks that EIA has reported in the past four weeks. December crude oil bottomed out at $86.10.

Natural gas futures, meanwhile, fell 3.8 percent after the EIA reported that U.S. natural gas inventories rose to record territory last week. December natural gas settled at $4.05 per thousand cubic feet, a 16 cent drop from Tuesday, after trading within a range from $4.06 to $4.25. According to EIA, the amount of natural gas in storage hit 3,840 billion cubic feet (Bcf) as of November 5. The 19 Bcf net injection week-on-week propelled the inventory statistic to a new all time record. In addition, the figure is approximately 10 percent higher than the five year (2005-2009) average. The December gasoline futures price ended the day at $2.24 a gallon, slightly more than a nickel higher than Tuesday's settlement. Gasoline traded from $2.18 to $2.25.

Courtesy of Rigzone.Com

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New Video: What's Going on in Crude Oil?

We've had a number of requests to do a video on crude oil, so here it is. This market has been largely trapped in a broad trading range with support coming in around $70/barrel and resistance around $80-85/barrel.

In this new video, we show you some of the other factors that could tip this market one way or the other.

As always our videos are free to watch and there is no need to register. We hope you enjoy the video and please feel free to leave a comment and let us know where you think crude oil is headed.


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Oil Rises After Industry Report Shows U.S. Gasoline Supply Drop

Crude oil rose in New York after an industry-funded report showed a drop in U.S. gasoline stockpiles, renewing optimism of increasing fuel demand in the world’s largest crude consumer. Oil pared part of yesterday’s 2.1 percent decline after the American Petroleum Institute said gasoline supplies fell 3.19 million barrels last week. Crude has dropped 20 percent since reaching $87.15 a barrel on May 3, the highest intraday price in more than a year. U.S. equities erased losses in the final minutes of trading, with the Dow Jones Industrial Average closing 0.2 percent lower after plunging 292 points.

“The drop in the gasoline inventories has brought optimism back to the market,” said Serene Lim, an energy and commodity strategist with Australia & New Zealand Banking Group Ltd. “Crude prices have been oversold the past two weeks so that is opening up some buying opportunities.” Crude oil for July delivery rose as much as $1.38, or 2 percent, to $70.13 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $69.27 at 2:03 p.m. Singapore time. Yesterday, the contract fell $1.46 to $68.75 after dropping as much as 4.4 percent.

“A drop in gasoline supplies almost always gives the energy markets reason to trade higher,” said Mike Sander, an investment adviser a Sander Capital Advisors in Seattle. “Oil is also up after the Dow Jones rallied in trading at the end of its session. With such a positive reversal, the price of oil received a boost”....Read the entire article.


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Crude Oil Falls Hard as Dollar Reverses Losses Against Euro

Crude oil tumbled to a 12 week low in New York as the strengthening dollar curbed the appeal of commodities as an alternative investment. Oil slipped as much as 2.7 percent as the U.S. currency climbed against the euro after Portugal announced austerity measures, spurring concern that fiscal tightening across Europe will limit economic growth. A U.S. Energy Department report yesterday showed that crude supplies rose 0.5 percent to 362.5 million barrels.

“We’ve been very sensitive to what’s happening on the currency side since the recession began,” said Phil Flynn, vice president of research at PFGBest in Chicago. “There’s been a new focus on currency markets since the crisis started in Europe.”
Crude oil for June delivery fell $1.47, or 2 percent, to $74.18 a barrel at 10:22 a.m. on the New York Mercantile Exchange. Futures touched $73.62, the lowest level since Feb. 12. Prices are down 6.5 percent this year.

The greenback advanced to $1.2558 per euro, up 0.4 percent from $1.2614 yesterday. It touched $1.2529 on May 6, the highest level since March 2009. Europe’s common currency has dropped 1.5 percent against the dollar this week, following the EU’s plan to shore up the region’s finances. The package included a pledge from the European Central Bank to buy government and private bonds to stem a surge in borrowing costs among so called peripheral nations such as Greece, Spain and Portugal.....Read the entire article.

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Crude Oil Rises a Fifth Day on Signs Global Fuel Demand to Recover

Crude oil rose for a fifth day on speculation demand will increase as the world economy recovers from recession. Oil traded above $85 a barrel as a Conference Board report tomorrow in the U.S., the world’s largest energy user, will probably show consumer confidence climbed to a three month high. Asian stock markets rose by the most in five weeks on expectations of higher earnings at Toyota Motor Corp. in Japan.

“People are becoming more bullish on oil demand growth,” said Serene Lim, an energy commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “The more positive world economic data, especially in the U.S. data, is bringing about more optimism.” Crude oil for June delivery rose as much as 44 cents, or 0.5 percent, to $85.56 a barrel in after hours electronic trading on the New York Mercantile Exchange. It was at $85.36 at 1:39 p.m. in Singapore.

The MSCI Asia Pacific Index rose 1.5 percent to 127.24 as of 12:40 p.m. in Tokyo, with more than seven times as many stocks advancing as declining. Oil climbed 1.7 percent to $85.12 on April 23, the highest settlement since April 15, after government reports showed that U.S. sales of new homes surged in March and orders for non transport durable goods climbed. Commodities had rallied as the dollar fell against the euro for the first time in seven days.

A Commerce Department report on April 23 showed that sales of new U.S. homes increased 27 percent in March, the most in 47 years. Bookings for goods meant to last at least three years, excluding cars and aircraft, climbed 2.8 percent.....Read the entire article.


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Crude Oil Extends Gains on Unexpected Decline in U.S. Supply, Increase in Demand

Crude Oil climbed for a second day in New York after a U.S. government report showed an unexpected drop in supplies as gasoline demand increased the most in five years.
Oil rose 2.1 percent yesterday as crude stockpiles dropped 2.2 million barrels last week, the Energy Department said, the first decline in 11 weeks. Supplies were forecast to climb 1.3 million barrels, based on analyst estimates in a Bloomberg News survey. Gasoline use rose 1.3 percent in the four weeks ended April 9, the biggest gain since August 2004.

“The draw in crude was unexpected by the market and is a bit of a release because we have had so many weeks of builds, along with stronger imports into the U.S.,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Demand for gasoline was also up.” Crude oil for May delivery gained as much as 37 cents, or 0.4 percent, to $86.21 a barrel and was at $86.12 in electronic trading on the New York Mercantile Exchange at 9:25 a.m. Singapore time. Yesterday, the contract gained $1.79 to settle at $85.84, ending a five day decline.

U.S. gasoline consumption climbed 119,000 barrels in the four weeks ended April 9 to 9.14 million barrels a day, the Energy Department said. That’s the highest level since October. The dollar traded at $1.3661 per euro from $1.3653 yesterday. A weaker dollar makes commodities more attractive as an alternative investment.
....Read the entire article.


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Crude Oil Bulls Charge Ahead on Surprise Draw

Lifted by a bullish drop in U.S. crude inventories, as well as upbeat economic data on the domestic front, crude futures snapped a recent losing streak on the New York Mercantile Exchange Wednesday to soar past an $85 resistance area. On target to test $90 in the near term, the price of light, sweet crude oil for May delivery added $1.79 to yesterday's final price tag to close higher at $85.84 a barrel. Also rising on today's commodity exchange, NYMEX gasoline futures scaled above $2.32 a gallon, while natural gas spot prices at the Henry Hub burned brighter at $4.20 Mcf.

Rally Reignites
"I think we're seeing the rally that drove oil prices to 18 month highs starting up again," commented Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut. The analyst underscored several supportive factors helping to prop up the price per barrel of crude today, including weakness in the dollar, encouraging retail sales for March and positive earnings reports out of U.S. companies. "The stronger earnings reports can point to improving economic conditions, which have played a primary role in rallying oil prices," McGillian explained.

Furthermore, the Energy Information Administration posted surprisingly supportive technical data for the previous week, which renewed risk appetite for the energy commodity and pushed prices back into positive territory. Specifically, crude oil supplies, expected to have grown by 1.4-1.5 million barrels, fell by 2.2 million barrels in the week to Apr. 9. Also paring down bearish levels, gasoline stocks shed 1.1 million barrels last week, trumping forecasts for a mere 600,000 barrel loss.

From reporter Nancy Agin at Rigzone


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Crude Oil Declines for a Fifth Day as U.S. Crude Stockpiles Forecast to Increase

Crude oil declined the most in six weeks as the International Energy Agency boosted its forecast for non OPEC supplies and U.S. inventories were estimated to climb, raising concern that the markets are oversupplied. Oil fell as much as 1.6 percent on the IEA forecast that production would expand in countries such as Canada, the U.K. and Russia as it kept the global demand outlook little changed. U.S. crude stockpiles may advance for an 11th week, the longest stretch of consecutive increases since December 2004, according to a Bloomberg News survey of analysts.

“We’re seeing a lot of growth out of the U.S., Russia and Canada, responding to high prices,” said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. “Investments that were made leading up to 2008 are coming to fruition.”
Crude oil for May delivery lost $1.67, or 2 percent, to $82.67 a barrel at 10:27 a.m. on the New York Mercantile Exchange. It was the biggest one day decline since Feb. 25. Prices have risen 65 percent in the past year. Crude oil peaked at a record $147.27 a barrel in July 2008.

Countries outside the Organization of Petroleum Exporting Countries will raise output by 600,000 barrels a day this year to average 52 million barrels a day, the IEA said in its monthly market report today. That’s 220,000 barrels a day more than estimated last month. The agency’s global oil demand forecast was 30,000 barrels a day higher than in last month’s report. Non OPEC producers pump about 60 percent of the world’s oil.....Read the entire article.


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Phil Flynn: Big Build Bananza!

Maybe the oil bulls can take some comfort in the fact that oil was unable to close below $80 despite the fact that the euro hit a ten month low and the stock market actually closed lower. (It can do that you know.) Oil prices shook off a mighty crude oil inventory build according to the Department of Energy’s Energy Information Agency. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by gigantic 7.3 million barrels from the previous week.

The build was on the back of strong imports which averaged 9.4 million barrels per day which was up a cool 969,000 barrels from last week. Yet draw downs in products kept the oil somewhat supported. The EIA reported a fall of 2.7 million barrels in gasoline supply and a 2.4 million barrel drop in distillates. The drop was inspired in part by strong gasoline demand. The EIA says that gasoline demand rose 2.7%, or 238,000 b/d, to 9.087 million barrels a day which according to David Bird at Dow Jones was the highest weekly level since November 20.

Still year over year demand was down 13,000 barrels per day for the corresponding week a year ago. Bird says that the gain in gasoline led a 504,000 barrel per day, or 2.7%, rise in total oil demand for the week, to 19.336 million barrels per duty which was a two week high.Increasing gas demand usually is a sign that things for consumers are getting a little better and we may see that optimism grow in gas demand numbers first.

Over the last few weeks I have scoffed at strong gas demand numbers but the trend may have to be now taken more seriously. Perhaps the rally in the stock market has been more reflective of an improving backdrop for the economy than we have expected. Assuming we avoid a double dip maybe we can see a better than expected summer driving season. Still that does not mean that retail gas prices will go straight up. With gas production rising we should be close to the seasonal top.

Still for oil the dollar remains the key. Yesterday the flight to the dollar helped sink commodities as Portugal’s debt rating was downgraded. The EU members meet today and tomorrow and the outcome of this meeting may be the catalyst for the next big move in commodities. We are still buying breaks and selling rallies at what we project will be the high or low for that particular day. Long term position traders, both bulls and bears, will have their days but until we break out of the larger range there will be mounting frustration. Iron condors may be another way to play a market that is locked in a range. Long term players are just in a rut.

Catch Phil daily on the Fox Business Network. And for buy and sell points across the commodity spectrum, just pick up the phone and call Phil at 800-935-6487.


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Crude Oil Increases to Eight Week High as Fuel Supply Falls, Demand Gains

Crude oil fell from an eight week high after a government report showed that U.S. inventories climbed for a sixth week, the longest stretch since May.

Stockpiles rose 1.43 million barrels to 343 million in the week ended March 5, according to the Energy Department report. Imports tumbled 8.1 percent to an average 8.49 million barrels a day, the biggest one week drop since October.

Crude oil for April delivery fell 13 cents to $81.36 a barrel at 12:25 p.m. on the New York Mercantile Exchange. Futures reached $83.03, the highest level since Jan. 11.

Brent crude for April delivery declined 35 cents, or 0.4 percent, to $79.56 a barrel on the London based ICE Futures Europe exchange. Futures touched $81.46, the highest level since Jan. 11.


From Mark Shenk at Bloomberg news. You can contact Mark at mshenk1@bloomberg.net.



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Crude Oil Declines for First Day in Four as Dollar, Stockpiles Increase

Oil declined for the first time in four days as the dollar rose against the euro and a government report showed a bigger than forecast increase in crude oil supplies in the U.S., the world’s biggest energy consumer. Oil pared yesterday’s 2.2 percent gain after crude stockpiles rose 3.09 million barrels to 334.5 million last week, according to a report from the Department of Energy. An increase of 1.73 million barrels was forecast, according to the median estimates in a Bloomberg News survey. A stronger dollar damps investor demand for commodities.

Crude oil for March delivery dropped as much as 91 cents, or 1.2 percent, to $78.15 a barrel in electronic trading on the New York Mercantile Exchange. It was at $78.20 at 10:32 a.m. in Sydney. Yesterday, the contract rose $1.73 to $79.06, the highest settlement price since Jan. 14. Futures have gained 5.5 percent this week. The dollar rose after the Federal Reserve raised the discount rate charged to banks for direct loans for the first time in more than three years. The U.S. currency traded at $1.3493 per euro at 10:36 a.m. in Sydney, from $1.3527 yesterday.

Inventories of distillate fuel, a category that includes heating oil and diesel, fell 2.94 million barrels to 153.3 million, according to the department. Gasoline stockpiles climbed 1.62 million barrels to 232.1 million. An increase of 1.5 million barrels was forecast. Brent crude for April delivery rose $1.51, or 2 percent, to end the session at $77.78 a barrel on the London based ICE Futures Europe exchange yesterday.


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IEA Raises This Year's Estimate for Oil Demand on Economic Recovery, Asia

The International Energy Agency raised its forecast for global oil demand this year as developing countries need more crude to fuel their economies. The IEA increased its estimate for world demand in 2010 by 170,000 barrels a day to 86.5 million barrels a day. That would mean a gain of 1.6 million barrels a day, or 1.8 percent, from 2009 levels, it said. Consumption growth is driven entirely by economies outside the Organization for Economic Cooperation and Development, the IEA said.

“Global oil demand now takes its cue primarily from rising emerging country incomes,” the Paris-based agency said in its monthly oil market report today. “More robust economic projections by the International Monetary Fund, notably for 2010, are partly counterbalanced by a higher price assumption and persistently weak OECD oil demand data.” The IMF forecasts world economic growth of 3.8 percent this year, up 0.8 percentage point from its previous estimate. While the estimates for both OECD and non-OECD economies were revised up, it is emerging and developing economies that are the key driving force in the economic recovery and rebound in oil demand, the IEA said.

Oil consumption in those countries, where economic growth is forecast at 6.1 percent, is expected to average 41 million barrels a day in 2010, an increase from last year of 1.6 million barrels a day, or 4 percent, according to the IEA. That is 170,000 barrels a day more than the agency estimated last month.....Read the entire article.


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Crude Oil Drops a Second Day on U.S. Inventory Gains, Stronger Dollar

Crude oil declined for a second day after a U.S. government report yesterday showed a bigger than forecast increase in inventories, while a stronger dollar dulled the appeal of commodities. The Energy Department reported that crude stockpiles rose by 2.32 million barrels last week, compared with an expected 400,000 barrel gain, as refineries operated at their lowest rate outside of a hurricane period since 1989. Supplies of distillate fuels such as heating oil declined less than forecast.

“Strong contraction in distillate demand, which belies the recovery in the U.S. suggested by the latest GDP and manufacturing data, is weighing on sentiment,” said Harry Tchilinguirian, head of commodity derivatives research at BNP Paribas SA in London. “It will be the second half of the year before oil breaks its range centered around $75 and sustainably rallies.” Crude oil for March delivery fell as much as 88 cents, or 1.1 percent, to $76.10 a barrel in electronic trading on the New York Mercantile Exchange. It was at $76.35 at 1:21 a.m. London time. Futures, which gained 78 percent in 2009, are down 3 percent so far this year.

Crude declined in tandem with European stock indexes. The Dow Jones Stoxx 600 Index slipped 0.9 percent to 247.21 as of 1:22 p.m. in London, erasing an earlier gain of 0.3 percent, led by losses among companies in Greece, Portugal and Spain.....Read the entire article.

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Iraq Seals Deal with Russia's Lukoil-led Group

A consortium grouping Russia's private oil giant Lukoil and Norway's Statoil ASA on Sunday signed a final deal to develop one of Iraq's biggest oil fields, capping an auction process key to the OPEC nation's plans to boost output and generate sorely needed reconstruction revenues. The deal on West Qurna Phase 2 field in southern Iraq is the last of the 10 fields that Iraq awarded last year during two international licensing rounds as it looked to revamp an oil sector battered by years of sanctions, neglect and, most recently, postwar violence and political bickering.

The signing Sunday also offers some much needed political capital for Iraqi officials as they head into elections in March determined to show that they are actively turning the country around following the turmoil and instability that has defined Iraqis' daily lives since the 2003 U.S. led invasion to topple Saddam Hussein. "These contracts will bring in cash to Iraq, and move ahead plans to develop the infrastructure," said Oil Minister Hussain al-Shahristani, adding that these deals afforded Iraqis the chance to "look toward a bright future."

Although it sits atop the world's third largest proven reserves of conventional crude, Iraq currently only produces about 2.5 million barrels per day, a level still far below its pre-2003 war output. Officials say international companies like Lukoi and Statoil, which together won West Qurna Phase 2 in the December licensing round, are key to raising that output to over 12 million barrels per day in about six years.

Such production, viewed by analysts as unrealistic in that timeframe, would rival Saudi Arabia's. The kingdom, seen as the de facto leader of the Organization of the Petroleum Exporting Countries, currently produces over 8 million barrels per day, but has an overall output capacity in excess of 12 million barrels per day.

For the 15 international firms that won development rights in the various fields, the 20 year contracts were their first chance at access to Iraq since Saddam expelled foreign firms and nationalized the sector in the 1970s. Despite the tempting spoils, the auction results were mixed, with only 10 deals struck out of the 21 oil and gas fields offered during the two licensing rounds.....Read the entire article.

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Oil Falls as Dollar Strengthens Versus Euro, Analysts Forecast Supply Gain

Crude oil fell to a five week low as the dollar strengthened against the euro, reducing the appeal of commodities as an alternative investment. Oil dropped as much as 1.9 percent as the U.S. currency gained against its major counterparts on speculation China will take further steps to cool its economy, discouraging demand for higher yielding assets. A U.S. Energy Department report tomorrow will probably show oil supplies rose last week, based on a Bloomberg News survey of analysts.

“It’s a further erosion of prices exacerbated somewhat by a stronger dollar today,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas based energy consultant. “If we see another big build in crude tomorrow, I think you’ll just see the market move lower.”

Crude oil for March delivery dropped 63 cents, or 0.8 percent, to $74.63 a barrel at 10:15 a.m. on the New York Mercantile Exchange. Earlier, it touched $73.82 a barrel, the lowest since Dec. 22. Futures fell 8.8 percent in the two weeks through yesterday. The U.S. currency strengthened 0.6 percent to $1.4062 per euro as of 9:46 a.m. New York time, from $1.4151 yesterday.

Oil stockpiles probably climbed 1.58 million barrels in the week ended Jan. 22 from 330.6 million the prior week, according to the median of 18 analyst estimates in the survey of analysts. Oil inventories were 6.5 percent above the five year average in the week ended Jan. 15. Refining rates, already at their lowest outside the Atlantic hurricane season since at least 1989, probably fell 0.1 percentage point, according to the Bloomberg survey.....Read the entire article.

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Oil Falls Most in Five Weeks as China Moves to Curb Liquidity

Crude oil dropped the most in five weeks as China, the world’s second largest oil consuming country, raised bank reserve requirements to curb a credit boom and prevent the economy from overheating. Oil fell as much as 2.1 percent as China increased the proportion of deposits banks must set aside for the first time since 2008. China boosted oil purchases to a record last year, the government reported this week. Crude prices also fell amid forecasts a U.S. cold snap will abate this week. “This is a significant move on the part of the Chinese, and they’re the difference makers on whether the oil demand picture remains robust,” said John Kilduff, a partner at Round Earth Capital, a New York based hedge fund that focuses on food and energy commodities. “If they’re going to try to trim the sails, it’ll be tough for crude to even keep $80 a barrel.”

Crude oil for February delivery fell 76 cents, or 0.9 percent, to $81.76 a barrel at 10:02 a.m. on the New York Mercantile Exchange. Earlier, the contract touched $80.80 in the biggest daily decline since Dec. 9. Futures rose to $83.95 a barrel yesterday, the highest since Oct. 14, 2008, following the report that China’s crude imports reached a record 203.8 million metric tons last year, or 4.1 million barrels a day.
Today’s move will help remove about 300 billion yuan of liquidity from the Chinese economy, according to estimates by Xing Ziqiang, an economist in Beijing at China International Capital Corp., ranked the top China local brokerage by Asiamoney magazine last year.....Read the entire article.

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Oil Falls From 14 Month High on Unexpected U.S. Supply Gain

Crude oil fell from a 14 month high after a U.S. Energy Department report showed that supplies unexpectedly increased as refineries reduced operating rates and imports gained. Stockpiles climbed 1.33 million barrels to 327.3 million in the week ended Jan. 1. Supplies at Cushing, Oklahoma, where New York traded West Texas Intermediate oil is stored, surged to the highest level since tracking began in 2004. Imports rose to the highest amount since November as refinery utilization rates dropped to the lowest total since that month.

“This report shows that there is plenty of crude oil on hand,” said Michael Fitzpatrick, vice president of energy with MF Global in New York. “There are also enough shut refinery units to meet any increase in fuel demand.” Crude oil for February delivery dropped 50 cents, or 0.6 percent, to $81.27 a barrel at 10:47 a.m. on the New York Mercantile Exchange. Oil traded at $82.47, the highest since Oct. 14, 2008, before the release of the report at 10:30 a.m. in Washington. Prices are up 67 percent from a year ago. Stockpiles of crude oil were forecast to decline 1 million barrels, according to the median estimate of 15 analysts surveyed by Bloomberg News.....Read the entire article.

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