Crude Oil Price Spike 30 July

Discussion in 'Current Affairs, News and Analysis' started by Not_Whistlin_Dixie, Jul 30, 2004.

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  1. NYMEX light sweet crude for September delivery up almost seven dollars a barrel today to close at $43.80/bbl.

    That's the nominal (not taking inflation into account) all-time high.

    I could guess that some of that price hike reflects speculative buying on fears of supply interruption due to war.

    Russian government is beating up on Russia's biggest producer, YUKOS. Stockholders may end up being virtually expropriated. ("Hey! They can't do that! That's....communism.") I'll guess that that's another, but lesser, factor.

    I could guess that that effects will spill over into equities markets in the USA and elsewhere. Automobile manufacturers, commercial airlines, tourist cruise operators might be particularly vulnerable.

    Caveats: I'm not a registered investment adviser. Nothing here is investment advice. Anybody crazy enough to trade on my opinions/feverish ravings deserves whatever happens. Do your own due diligence and investigate before you invest.
  2. Yukos!
    Not in line with the give Bush, 40 K troops for Iraqi.
  3. Here's a number to conjure with: $100/bbl crude oil.

    The person in charge of energy strategy for Deutsche Bank views it as possible.

    He ascribes this to a global lack of excess capacity to take up the slack if current output from any significant supplier is disrupted.

    "Deutsche Warns Oil Price May Hit $100," by James Dow.
  4. Good old Putin

    The cold war never ended did it Vladimir? 8O
  5. From the International Herald Tribune, 3 August 2004:

    "KIRKUK, Iraq. Saboteurs bombed a northern oil pipeline on Tuesday, halting oil exports to the Turkish port of Ceyhan, and official of the state-run oil company said.


    "Insurgents have repeatedly attacked Iraq's oil infrastructure....The Ceyhan pipeline was out of commission for about 10 months after a series of attacks in the area. At the end of June Iraq started to export limited quantities of crude through it."

    "Key Iraqi Oil Pipeline Is Bombed"
  6. I know the current crisis is one of confidence, rather than production, but why, when we're a nation that produces more oil than it consumes are we so badly affected by oil crises? All the other net producers seem to be laughing all the way to the bank.
  7. With the current heat over crude oil , maybe now is the time to start bringing in alternative forms of energy. 8)

    Im no tree hugger but right now, a solar powered house, with triple glazing and a car that is recharged with the wind seems like a fair money saving option. 8)
  8. From Bloomberg, 4 August 2004.

    Russian energy firm YUKOS produces 1.7 million bbl/day of crude oil.

    The Russian government has reconsidered its prior announced intent to seize the YUKOS bank accounts for accrued arrears of taxes. YUKOS representatives said that, without any funds, the company could not continue to extract oil.

    The Russian government claims that YUKOS owes it $3.4 billion.

    "Yukos Allowed To Use Accounts To Keep Producing Oil"
  9. There are a number of reasons for the high oil price but simply it's a consequence of demand (higher global economic growth) outstripping supply. Specifically:

    1. A shortage of US refining capacity combined with the US govt's decision to increase strategic stockpiles
    2. OPEC now pretty much producing at full capacity. Further production would require extensive capital expenditure in well heads, oil pipelines and tankers - all which typically takes one to two years.
    3. Production problems in Nigeria
    4. The situation in Iraq and lower than expected Iraqi production due to the shit state of the Iraqi oil industry and the attacks on the infrastructure
    5. The worsening security situation in Saudi Arabia, notably attacks on foreign workers, which has very serious ramifications for the Saudis ability to pump oil and develop their reserves (they control 75% of the world's proven reserves).
    6. The Russian govt's persecution of Yukos, mainly driven by politics - Putin's desire to strip Khodorkovsky and the other Menatep boardmembers (Menatep is the controlling shareholder of Yukos) to strip them of wealth and influence. All this was brought about by Khodorkovsky's blantant interference in last year's Duma's elections (despite an agreement Putin had with the Oligarchs that they would stay out of Russian politics) - Khodorkovsky was the single largest backer of the Communist Party for example. This issue has nothing to do with Putin continuing to fight the Cold War and everything to do with Russian domestic politics - taking on the Oligarchs is extremely popular with the Russian electorate. Recent development's have been rather positive for Yukos - it has been able to continuing pumping oil (generating c. US$900m in cashflow per month) and the baliffs have been forced to unfreeze accounts to allow operations to continue. The key issue now is that if Yukos is forced to sell its main asset Yugansk (oilfield responsible for 60% of Yukos total production) what price it gets for the asset. While the book cost is US$1.7bn, the market value is anywhere between US$16 - 30bn. Also Yukos could sell its 35% in Sibneft worth approx US$6bn but the baliffs don't appear keen on this solution. Basically the govt wants Menatep to surrender their stake to the Russian Govt.

    Altogether it looks as though the oil price will remain at least in the high 30s for some time. As a net exporter of oil this is a mild net positive for the Uk but a b*gger for consumers.
  10. NYMEX September light sweet crude retreated this afternoon from the day's high of $44.25/bbl, by $1.47, down to $42.78.
  11. From Bloomberg:
  12. Conall

    you missed out this one - direct from the US of A .

    7. Oil prices rise due to the "vacation season". Right. the world oil price fluctuates because of Uncle Sam's sons and daughters going on vacation.

    Well, keeps the SPAMS living in happy land for a while.

    I like the German's forcast. Lets see crude go to $100 plus and see how quickly George trys to pass that as a holiday fluctuation.

    China and India - look out the sleeping dragons awake.

    They both out produce and out breed the West. Just a matter of time till they dragons get up and start to walk about looking for food and with the UK's three combat aircraft, both tanks and the rented tug boat we don't stand much of a chance without the big bang sticks.

    Still B'lair can ask George for help As we know...

    "A friend in need is a pain in the arrse."
  13. China's economy is going wild at the moment. As their domestic industry expands and they all buy cars, imagine the required growth for crude.

    I love chaos. It's really interesting.

    Solution? Nuke Mecca and invade Saudi Arabia then we, the west (i.e. Goerge Bush and his oligarch family) take all the oil. Hoorah!
  14. It's a bit more complex than that - since the end of the first quarter of this year the Chinese government has been piling on the anchors and trying to slow their rate of growth. Most of this has been done by forcing banks to stop lending and putting pressure on the regions to cut back on infrastructure spending. Their aim is to get GDP growth down from c.12-14% to a more sustainable 7-8%. So far this seems to be working but this is probably a short term effect and in the medium to long term they will be unable to control the rate of economic growth. The real downside of that is the very strong likelihood that this will lead to an economic crash, which has rather serious negative ramifications for the global economy. Not least because China was responsible for nearly 30% of global demand for iron ore, 35% for coal and nickel and about 27% of glbal steel production. Unless the US, Japanese and European economies recover in the meantime (a 12 - 18 month window) there is a strong possibility that the global economy as a whole will be deep in the sh*t.
  15. PoisonDwarf

    You jest, but, apparently, during the 70's oil crisis, someone at the State Department hatched a plot to do just that (ie invade Saudi and seize the oil). The idea was, by all accounts, quickly shelved. I wonder if it's had a dusting-off recently?