Crude Oil Price Spike 30 July

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.
Good old Putin

The cold war never ended did it Vladimir? 8O
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"
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.
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)
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"
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.
From Bloomberg:
Yukos Allowed to Use Accounts to Keep Producing Oil
By Alejandro Barbajosa
Aug. 4 (Bloomberg) -- OAO Yukos Oil Co., Russia's largest oil exporter, said court officials have authorized the company to use its accounts to pay for back taxes and oil production, easing for now concern that output will be halted.
The officials who are collecting $3.4 billion in late taxes and fines told Yukos that its accounts used to fund ongoing operations are not blocked, the Moscow-based company said in an e-mailed statement. Oil prices extended their decline from a record in New York and London, losing as much as 3.2 percent.
``This adds some clarification to the market that production won't be halted,'' said Egor Rybakov, who helps manage $10 billion in assets at Thornburg Investment Management in Santa Fe, New Mexico. ``I would still like to see some news related to the tax payments before the Yukos story is solved.''
A year long investigation into Yukos and its tax liabilities has raised concern among oil traders the company may have to stop producing oil at a time when world energy demand is surging. The Russian Micex stock index has plunged 26 percent from an April peak, and investors in the first half of this year pulled $5.5billion out of Russia.
``We welcome the decision of the Ministry of Justice, which lets us continue financing our ongoing business and to pay, without delay, our current taxes and our tax debt for the year 2000,'' Yukos Chief Financial Officer Bruce Misamore said in the statement.
Yukos pumps more oil than OPEC member Libya. Crude oil for September delivery fell as much as $1.40 to $42.75 a barrel on the New York Mercantile Exchange. It earlier reached a record $44.34.

More Time?

Yukos American depositary receipts in Germany jumped 1.31 euros, or 9.2 percent, to 15.55 euros ($18.72) at 7:11 p.m. London time, their highest in more than a week.
The government on Monday said the company may get more than the two months allowed by law to pay the tax bill, which Yukos hassaid may bankrupt it. Russia's Tax Ministry and Prosecutor General have been investigating Yukos and its largest owners, led by Mikhail Khodorkovsky, for more than a year. Khodorkovsky, 41, is facing trial on tax evasion and fraud charges he has denies as political. The Tax Ministry has filed a second $3.4 billion claim against Yukos for 2001 and is reviewing the company's operations for 2002 and 2003.
Khodorkovsky was arrested Oct. 25 after a four-month investigation that included searches of Yukos offices, lawyers and an orphanage financed by the company. The investigations have raised concern about property rights under President Vladimir Putin, 51. His reputation for political stability helped fuel a four-year rally in Russian stocks since he took over from Boris Yeltsin at the start of 2000.
``Incrementally positive news means that maybe investors will be looking at Russian natural resources again,'' Rybakov said.
Yukos Chief Executive Steven Theede on July 22 said the company may run out of cash in three weeks and predicted the government's plan to seize its main Siberian oil unit will bankrupt the company.

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."
old_bloke said:
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.
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!
PoisonDwarf said:
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.
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.

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?
From Reuters, 9 August 2004:

USA Sec. of Energy Spencer Abraham stated, this afternoon, that the US government will continue to add to the Strategic Petroleum Reserve.

This is maintained in a group of salt caverns in Texas and Louisiana.

It is stated that the SPR currently holds 665 million barrels.

The article does not say how much the government proposes to add.

Their timing does not seem brilliant: NYMEX September light sweet crude now trading at $44.44/bbl, down from Friday's record high of $44.77.

Mr. Abraham said that the government is prepared to release oil from the SPR "if there is a severe disruption" of supply.

Similar threads

Latest Threads