Thursday, June 30, 2011

Oil prices back to levels before release from emergency reserves

Crude oil prices continued to climb June 29 with crude escalating 2% in New York, back to levels prior to the International Energy Agency’s announcement of the pending release of 60 million bbl from members’ emergency petroleum reserves.

Just a week ago, IEA announced it would release the crude and product from emergency reserves in an effort to drive down oil prices. Now the “flat price is already back to its pre-IEA level, and Brent has regained most of its premium to West Texas Intermediate,” said Olivier Jakob at Petromatrix, Zug, Switzerland. “From the price action, we have to conclude either that the supply and demand is so tight that 30 million bbl of sweet oil release from the US Strategic Petroleum Reserves does not matter or that the futures markets are disconnecting from the reality of the physical markets,” he said.

Energy Futures 1 july 2011 

“Brent futures regaining most of its premium to WTI remains for us a very intriguing phenomenon when the Brent 2011 backwardation has disappeared, the Light Louisiana Sweet (LLS) premium to WTI is eroding, and the physical premiums for Forties or West African crude oil are falling to the pre-Libya levels. We find it difficult to currently attach anything to the relative strength of Brent futures vs. WTI futures,” Jakob said.

Paul Horsnell, managing director and head of commodities research at Barclays Capital in London, said, “After an initial fall, prices have rallied. The back of the curve has risen, given that the release is primarily a way of borrowing oil from the future into the present because the strategic reserves will ultimately be replaced. Overall, we see the IEA action as being well motivated, but a shot in the dark; in our view, the impact on oil politics and on market perceptions raises the danger of some significant distortions.”

Cumulative loss of Libyan production now stands at 182 million bbl—“primarily diesel-rich light crude bound for Europe,” Horsnell reported, adding, “The first IEA release is one third of that amount, split across regions and between crude and products.”

A larger-than-expected drop in the weekly report of US petroleum inventories also helped boost crude prices, said analysts in the Houston office of Raymond James & Associates Inc. “Progress towards staving off a European debt default [in Greece] lifted the broader market (with the Dow Jones Industrial Average and the Standard & Poor's 500 Index up 1%). Energy stocks outperformed, given the strength in crude,” they said. “Meanwhile, natural gas fell 1% after the Energy Information Administration reported strong monthly production data for April and May and forecasts for current hot weather to moderate next week.” Natural gas was lower while crude and the broader market were roughly flat in early trading June 30.
US inventories
EIA reported commercial inventories of benchmark US crude (excluding US SPR stocks) fell 4.4 million bbl to 359.5 million bbl in the week ended June 24, well past the Wall Street consensus for a 1.5 million bbl draw. Gasoline stocks dropped 1.4 million bbl to 213.2 million bbl in the same period, against market expectations of an 800,000 bbl increase. Finished gasoline stocks decreased while blending components increased. Distillate fuel inventories rose 300,000 bbl to 142.3 million bbl, short of the 1.1 million bbl build analysts anticipated (OGJ Online, June 29, 2011).

On June 30, EIA reported the injection of 78 bcf of natural gas into US underground storage during the week ended June 24, below Wall Street’s consensus for an input of 81 bcf. It increased working gas in storage to 2.4 tcf, down 243 bcf from the storage level in the comparable week last year and 63 bcf below the 5-year average.

“Refining stocks saw a nice boost from the draw in gasoline with a smaller than expected build in distillates. Notably, Cushing, Okla., inventories fell by 500,000 bbl and are nearly on par with levels from last year,” Raymond James analysts said. On the demand side, distillate demand rebounded from its recent slide (up 3.9% for the week) but remains down nearly 8% from a year ago. Total petroleum demand and gasoline demand fell from a week ago. “While gasoline demand is up slightly year-over-year, total petroleum demand is down 3% year-over-year,” they said.

EIA revised down total US petroleum demand in April by 437,000 b/d, with most of the revisions coming from lower demand than first estimated in gasoline (down 304,000 b/d) and distillates (down 189,000 b/d). Demand for petroleum products excluding LPG was down 450,000 b/d in April vs. a year ago (down 2.7%) “and is the lowest demand for a month of April since 1997,” Jakob reported.

For January-April, he said, US demand for petroleum products excluding LPG was unchanged from a year ago, down 232,000 b/d vs. 2009, down 1.2 million b/d vs. 2008, and down 1.7 million b/d vs. 2007. “Gasoline demand was at the lowest level for a month of April since 2002,” said Jakob. “The strong downward revision to gasoline demand is only half of a surprise since the US Highway Administration had shown vehicles miles of travel dropped 2.4% in April vs. a year ago, showing the first drop outside of winter months since 2008. Prices have a verified impact on demand, and [this is] something to keep in mind as flat price is currently trying to rebound towards the April price levels.”

Jacob surmised, “If the US domestic demand is not recovering from the economic crisis levels of early 2009, the US refineries continue to compensate the lack of domestic demand with increased exports. Exports of distillates in April at 873,000 b/d were a match to the record levels set in October of last year. On a distillates yield of 28.1%, US refineries were running 3.1 million b/d of crude oil in April to produce distillates for exports.”

He said, “Given that domestic demand is dead, running too hard for distillate exports would create an imbalance in the domestic gasoline market, but that is offset by an increase in gasoline exports that is also starting to trend higher. US gasoline demand in April is down 450,000 b/d vs. 2007, but US gasoline exports are higher by 360,000 b/d vs. 2007.”

Energy prices

The August contract for benchmark US sweet, light crudes climbed by $1.88 to $94.77/bbl June 29 on the New York Mercantile Exchange. The September contract advanced $1.86 to $95.32/bbl. On the US spot market, WTI at Cushing was up $1.88 to $94.77/bbl.

Heating oil for July delivery increased 9.45¢ to $2.92/gal on NYMEX. Reformulated blend stock for oxygenate blending for the same month rose 12.01¢ to $3.01/gal.

The new August front-month contract for natural gas dropped 3.9¢ to $4.32/MMbtu on NYMEX. On the US spot market, however, gas at Henry Hub, La., was up 3.6¢ to $4.38/MMbtu.

In London, the August IPE contract for North Sea Brent crude escalated by $3.62 to $112.40/bbl. Gas oil for July jumped by $32.50 to $923.25/tonne.

The average price for the Organization of Petroleum Exporting Countries' basket of 12 reference crudes gained $2.60 to $106.19 bbl. OPEC also revised its June 27 average basket price down by a penny to $101.55/bbl.

Renewable energy's share of U.S.consumption up to 8 percent.


Between 2006 and 2010, ethanol consumption more than doubled to over 1 quadrillion Btu (Table 2). It is expected to grow further in the future, due in some measure to the changing regulatory environment. Near the end of 2010, the Environmental Protection Agency (EPA) issued the final volume of renewable fuels required in 2011 under the Clean Air Act Section 211(o), as amended by the Energy Independence and Security Act of 2007 (EISA).1 The target is 13.95 billion ethanol equivalent gallons of renewable fuels, including corn ethanol, cellulosic biofuels, biomass-based diesel, and advanced biofuels. By comparison ethanol consumption with denaturant stood at 13.19 billion gallons for 2010.

Renewable Energy Consumption in the Nation's Energy Supply, 2010

Also, to relieve constraints in the consumer ethanol market known as the 10 percent blend wall, EPA approved, as a first step, waivers to permit a blend of motor gasoline with 15 percent ethanol (E15) to be sold for use in light-duty vehicles model year 2001 and later. A blend of motor gasoline and 85 percent ethanol (E85) is another potential market for ethanol, but further expansion depends on a much greater number of E85 vehicles being made available and the expansion of infrastructure to deliver the fuel. Until the U.S. vehicle fleet is able to absorb substantially more ethanol, exports are expected to increase and imports will decline.
Renewable Energy Consumption by Energy Source, 2006 and 2010

The consumption of biodiesel, the other main biofuel, dropped 30 percent in 2010 as domestic production plummeted due to the expiration of the biodiesel blender tax credit at the end 2009 and a further decline in imports. Late in December 2010, the credit was extended retroactively for 2010 and forward through 2011, so production and consumption may pick up temporarily, though there are issues about how the industry may respond to the uncertainties of a one-year renewal.

The electric power sector had the most renewable energy consumption, a little over 4,000 trillion Btu, but its market share decreased from 55 to 50 percent between 2006 and 2010 (Table 2). The industrial sector was second with 2,249 trillion Btu and a steady market share. The transportation sector's consumption more than doubled from 475 trillion Btu in 2006 to 1,098 trillion Btu in 2010, due to the expanded consumption of biofuels. As a result, the sector's share of renewable energy doubled from 7 to 14 percent. The residential and commercial sectors were the smallest sectors with stable market shares.


Renewable energy provided 10 percent, or 425 billion kilowatthours (kWh) of electricity in 2010, out of a U.S. total of 4,120 billion kWh (Table 3).3 U.S. total net generation increased by 4 percent, while renewable generation increased just 2 percent between 2009 and 2010. Renewable generation would have been higher, but for a net decrease of 16 billion kWh in conventional hydropower due to low water availability. Thirty-seven states experienced losses in hydropower generation (Table 5 and Table 6). Washington and Oregon in the West and Alabama, New York and Tennessee in the East had the largest decreases. California was a notable exception, experiencing an increase of 6 billion kWh in hydropower generation. Over half of total renewable generation was provided by 5 states (California, New York, Oregon, Texas and Washington).

U.S. energy consumption by energy source, 2006 - 2010

Wind generation increased by 21 billion kWh to 95 billion kilowatt hours, as it experienced across-the-board increases in 34 states between 2009 and 2010. The expansion was led by Texas with a 6 billion kWh increase, followed by Illinois, Indiana, Iowa and North Dakota, each with an increase of over 1 billion kWh. By 2010, wind provided 2 percent of total U.S. generation. All the other remaining renewable sources except other biomass increased as well.

Despite the lingering effects of the recession being felt in financial markets into 2010, competition from low natural gas prices, and an increased reluctance for utilities to enter power purchase agreements with wind, renewable capacity expanded by 3 percent, or 4,019 megawatts (MW) in 2010, according to preliminary data reported to the EIA (Table 4). This was not as large a gain as seen in 2009, but sizeable nonetheless. Some drivers contributing to this growth were:

Federal Incentives
For 2010, the federal production tax credit (PTC) provided a 2.2 cent/ kWh credit for all wind facilities in operation by the end of 2012 and closed-loop biomass facilities operating by the end of 2013. A 1.1 cent/ kWH credit was provided for all remaining eligible technologies: open-loop biomass, geothermal energy, landfill gas, municipal solid waste, qualified hydro electric and marine and hydrokinetic (150 kilowatts or larger) in operation by the end of 2013.
The energy investment tax credit (ITC) was available in lieu of the PTC to those tax payers eligible for the PTC. The ITC was worth 30 percent of expenditures and was available to eligible systems in operation by specific due dates, which are as far away as 2016 for some technologies but just 2012 for wind.
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853) was signed in December 2010, and it extended the U.S. Treasury Grant program. Thus, projects in service or under construction by 2011 are eligible. The grant is equal to 30 percent of the basis of property for wind, closed and open loop biomass, geothermal energy, landfill gas, trash, qualified hydropower, marine and hydrokinetic, solar (except passive solar and solar for pool heating), fuel cells, and small wind turbine facilities (up to 100 kilowatts in capacity). The grant is 10 percent of the basis of property for geothermal heat pumps, micro turbines and certain combined heat and power facilities.
The Renewable Production Incentive (REPI) provided a 2.2 cent per kWH incentive payment for new eligible facilities in operation before October 2016 and owned by local, state and tribal governments; municipal utilities; rural electric cooperatives and native corporations that have no tax liability. It is paid subject to availability of appropriations in each federal fiscal year of operation.
Renewable portfolio standards or mandates in 37 states and the District of Columbia.
Transmission expansion like California's new Tehachapi project, which takes electricity to market in Los Angeles and plans for the Texas Competitive Renewable Energy Zone (CREZ).
Lower cost of silicon used in crystalline silicon PV installations.

Wind expanded by 3,593 MW between 2009 and 2010. Two states had wind capacity for the first time: Delaware with 2 MW and Maryland with 70 MW. In addition, wind expanded in 21 other states. The largest year to year increases were in Texas (573 MW), Illinois (350 MW), Minnesota (328 MW), Wyoming (311 MW) and Oregon (273 MW). Altogether, wind capacity has more than tripled from 11,329 MW in 2006 to 37,889 MW in 2010.

Solar has progressed rapidly from 2006, when it had central station capacity in just two states, California (402 MW) and Arizona (9 MW).4 By 2010 it had expanded to a total of 15 states with capacity of 888 MW (Table 8). The largest states were California (460 MW), Nevada (137 MW), Florida (125 MW), Colorado (33 MW), and North Carolina (33 MW). Four states were new in 2010.
Data Revisions

Estimates of energy consumption at geothermal power plants were revised to reflect application of the fossil fuel equivalent heat rate instead of the estimated geothermal plant heat rate in converting electricity generation (Kwh) to Btus. This eliminated the inconsistency between the treatment of geothermal energy and other noncombustible renewable energy forms (conventional hydro, solar and wind) and thus put them on a comparable basis for analysis. For 2009, this resulted in a decrease in total geothermal energy consumption from 369 to 200 trillion Btu.

Wednesday, June 29, 2011

Opec's concern with IEA's oil release

Abdullah El-Badri, secretary general of the Organization of the Petroleum Exporting Countries, urged the International Energy Agency to reverse its earlier decision to release 60 million bbl of oil over the coming 30 days.
“I hope this practice will be stopped and stopped immediately,” El-Badri told a news conference in Vienna after the scheduled 8th ministerial-level meeting of the energy dialogue between OPEC and the European Union.

OECD Stock Oil Demand

“We don't see a good reason to release this quantity, and I hope the IEA will refrain from using this practice,” El-Badry said, also telling the Kuwait News Agency that IEA had wronged OPEC with its decision to release the oil.

"The agency did not give OPEC an opportunity to increase its output before deciding to draw from the strategic reserves of its 28 members," he said, noting that such a move is justifiable only as “a final resort in extreme emergencies” and not to control prices.

Read More about IEA targets Oil Bubble 

“As international organizations, IEA, which represents the interests of consumers, and OPEC, which represents producers, have to work together for the stability of the market and to maintain fair prices,” El-Badri said.

His remarks were in line with those of Iran’s OPEC Gov. Mohammad Ali Khatibi who blasted the IEA’s decision to release the strategic reserves as a politically motivated intervention in “the ordinary function” of the oil market.

“Following the failure to bring down the prices at 159th ministerial meeting of OPEC in June 8, the US and Europe are using all the means to push oil prices lower,” he said ahead of the meeting with the EU.

OECD Oil Stocks 

Tamas Fellegi, president of the EU's energy council and also Hungary's development minister, said there is “obviously” a disagreement on the issue of the IEA’s decision.

"Even if the IEA made this action, it has to remain extraordinary and limited in time, this is very important, and should not undermine the cooperation between the EU and OPEC and should not disrupt the market mechanisms," Fellegi said.

That view matched remarks by IEA Executive Director Nobuo Tanaka, who told reporters in London the agency took its decision as a short-term measure to ensure the availability of supplies while awaiting a production increase by Saudi Arabia.

“We are simply saying we will just fill the gap before OPEC or Saudi is going to produce supplies for the market,” said Tanaka. "We are just filling the gap—we can't continue forever."

Tanaka expressed confidence that Saudi Arabia—which he said has “about 3 million b/d of spare capacity”—would produce more, as it had pledged, but that the extra supplies might take "a couple of weeks" to reach the market.

"We are very sure this tightening of the market will happen in July, August when refinery maintenance is over," said Tanaka, who repeated that the current stocks release was for 30 days after which the agency would reassess the market.

Kuwait’s Minister of Oil Mohammad al-Busairy shared Tanaka’s view of tightening supplies and said the global oil market will be in “dire need” for some 2 million b/d of oil during the third quarter, with demand falling to around 1.5 million b/d in the last quarter of the year.

Noting Saudi Arabia, Kuwait, and the UAE alone have the necessary spare capacity to meet the growing demand, al-Busairy said his country should take advantage of the situation while prices are high.

“We should not miss such opportunity, particularly under the soaring prices, and the increasing demand in the market, and we have the ability to meet such demand,” al-Busairy said, adding, “This is an output policy in the interest of our country, and we are following it."

OPEC has not officially issued a statement concerning IEA’s decision to release oil from its reserves.

VW Passat BlueMotion goes 1526 miles on one tank

Volkswagen Passat BlueMotion
Over in Europe, Volkswagen has officially launched the BlueMotion version of its latest Passat. Rated at 68.9 miles per gallon (57.4 mpg U.S.) on the highway, the Passat BlueMotion is set to become one of Europe's most fuel-frugal four-door sedans.

Powering the Passat BlueMotion is VW's 104-horsepower, 1.6-liter common-rail turbodiesel engine mated to a row-your-own six-speed transmission. The diesel-sipping sedan benefits from fuel-saving features, including stop-start technology, modified aerodynamics, a lower ride height, an underbody panel, revised front grill and low rolling-resistance tires.

In sedan form, the BlueMotion Passat emits 109 grams per kilometer of CO2. Meanwhile, its roomier stablemate, the Passat BlueMotion wagon, emits 113 g/km of CO2 and returns a slightly less remarkable, by comparison, 65.7 mpg (54.7 U.S.).
The four-door sedan starts at £19,875 ($31,713 U.S. at the current exchange rate), while the cargo-hauling wagon starts at £21,180 ($33,795 U.S.). Though you can order one now, neither version of the Passat BlueMotion will hit showrooms in Europe until the end of July.

Volkswagen has already announced today that one of their VW Passat BlueMotion managed to go 2456.872 km or 1,526.63 miles on one tank of fuel. This is the new official Guinness World Record for the longest distance traveled by a standard production passenger car on a single tank of fuel. The VW Passat BlueMotion that traveled for almost 2,500 km on one tank started its journey from Madison in Kent, went to the South of France and then returned.

Read more about how Diesel automobiles for US could help to reduce oil consumption

Renault Fluence Z.E

Renault has announced that its electric Renault Fluence Z.E will cost from £17,850 (including the government’s £5000 Plug-In Car Grant), making it the “UK’s most affordable electric car.”

Set for launch next year, customers will also pay £75 per month on battery leasing.

The entry-level ‘Prime Time’ Fluence Z.E gets 16-inch alloys, climate control, cruise control, ecoMeter and sat-nav, as well as charging sockets on both front wings.

Power for the Fluence Z.E comes courtesy of a 94bhp/167lb ft of torque electric motor, with a claimed range of 115 miles, “depending on driving and road conditions,” according to Renault.

The electric Renault Fluence Z.E is available to reserve online now for £20.

Monday, June 27, 2011

Tripoli Running Out of Gas

Mohammed leans his bicycle against the wall of a cafĂ© on Tripoli’s Green Square, opposite the city’s red-stone museum and Roman walls. Six months ago, he would have left his Volkswagen Passat for valet parking.

“The boys would take it and wash it while I was here,” he says. The oil-company engineer asked to be identified by one name because of the security situation.

Libyans in the capital are getting on their bikes to avoid the hundred-meter lines and weeklong waits at gas pumps -- evidence that the rebellion against Muammar Qaddafi, backed by NATO warplanes and international sanctions, is applying a squeeze on the territory that remains under his control.

The U.S. and its European allies say the leader’s four- decade grip on the country that holds Africa’s biggest oil reserves is nearing its end, as economic pressure and strikes on troops and communication centers erode his capacity to resist a spreading insurgency. Qaddafi is betting that he can survive longer than the coalition against him can stay united.

Italian Foreign Minister Franco Frattini on June 22 called for a “humanitarian suspension” of hostilities. The House of Representativesrefused on June 24 to authorize President Barack Obama to continue American involvement in the North Atlantic Treaty Organization’s aerial combat missions, while declining to restrict funding for the operation.

There are signs of opposition to Qaddafi even within the zone he controls. Drivers in Azzawiya, 100 kilometers (62 miles) west of Tripoli, are stopped by soldiers every five minutes at checkpoints amid searches for rebel weapons.
Covered Graffiti

Patches of fresh paint on some walls in the capital show where anti-government graffiti has been covered up, while slogans denouncing “the rats,” Qaddafi’s term for the rebels, are left alone. In the center of Tripoli, a city of 2 million people that is shaken almost daily by NATO bombs, unexplained bursts of gunfire sound at night.

The government claims it has widespread support. “We are not the Taliban in Afghanistan, we are a state, there are people standing behind their leader,” said government spokesman Moussa Ibrahim in a June 23 interview in Tripoli. “We will stay steadfast, because we have no other option. Their resolve and unity will falter, because they are aggressors.”

Oil rose more than $25 a barrel in the first two months of the Libyan conflict. The International Energy Agency in Paris said last week that the U.S. and 27 other countries will release 60 million barrels of emergency stockpiles, only the third such action in more than three decades, to offset the loss of 132 million barrels of Libyan output. The move helped push crude for August delivery below $90 a barrel in New York.
Talking Together

Talks between the Libyan government and insurgents have taken place via intermediaries inSouth Africa and Paris, Mahmoud Shammam, a rebel spokesman, told France’s Le Figaro newspaper last week. Qaddafi’s government portrays the rebels, who control the east of the country from their base in Benghazi, as a blend of Islamic extremists and corrupt defectors used by Western powers seeking to control Libyan oil.

It’s hard to tell how much support such views have in Tripoli. Reporters aren’t allowed to move around without government minders -- officially, to protect them from locals hostile to the international media because of its alleged pro- rebel bias.

In Green Square, Randa Mukhtar was taking part in a demonstration of women against NATO. Dressed in army-style fatigues, she said she was a member of one of the Revolutionary Committees, paramilitary units set up by Qaddafi.
‘Don’t Exist’

“There is no internal problem, there is a foreign aggression,” said Mukhtar, 30. “It’s you, the journalists, who are telling lies, fabricating stories that don’t exist.”

Mohammed, the engineer, spoke in English to make it harder for those around him to listen.

“Put aside petrol, we don’t really lack things,” he said. “But we are worried because we don’t know what to expect, we don’t know when this will finish and how it will finish.”

Fuel shortages are a novelty in a country where gasoline costs 0.15 dinar a liter. The officialexchange rate is 1.20 dinars per dollar and in the black market it trades at about 1.70. Most Libyans are limited to 1,000 dinars a month in bank withdrawals.

The 120,000 barrel-a-day oil refinery in nearby Azzawiya can supply up to 30 percent of the needs of the territory controlled by Qaddafi, said the chairman of the Union of Libyan Chambers of Commerce and Industry, Abdulmagid Elmansuri, in a June 22 interview. No cargoes of imported oil products are reaching ports under government control, he said.
Power Functioning

Water and electricity are still available round the clock. NATO has mostly avoided hitting civilian infrastructure. A stray missile on June 19 was the first bombing acknowledged by the coalition to have caused civilian deaths in more than 5,000 sorties. Libya’s government said nine people died in the Souk El Gomaa district of Tripoli and maintains that civilians and their institutions are being targeted.

The bombings may have persuaded Qaddafi to consider relocating outside the capital, the Wall Street Journal reported June 24, citing an unidentified U.S. official.

While Tripoli’s supermarkets are well stocked with food, prices have increased to reflect higher transport costs for imported goods. A 680-gram (24-ounce) bottle of tomato paste, a key ingredient in the local dish of couscous, was on sale at one grocery store for 3.5 dinars, compared with 2.5 dinars before the conflict. A Kitkat chocolate bar was priced at 2 dinars, compared with 1 dinar in February.
Price Increases

While the chamber of commerce has no estimate for the increase in consumer prices, twelve shoppers interviewed in three grocery stores said they had seen rises of between 30 percent and 100 percent, depending on the goods.

The government on June 25 said it had ordered $3 billion of food supplies to cover local needs for at least six months, and was planning to add milk, bottled water, juices and dried beans to the list of food products that are subsidized. Subsidies already exist for some basic commodities such as wheat and pasta.

It is unclear how long the government can support Tripoli’s inhabitants. A sea blockade to prevent weapons and fuel from reaching Qaddafi’s troops, and European Union sanctions targeting ports, have reduced maritime traffic to the capital.

Tripoli’s only road link with the outside world is the coastal highway running west to the Tunisian border, a three- hour drive. The airport stopped operations because of the no-fly zone enforced by NATO, acting under a United Nations Security Council mandate to protect civilians from the conflict.
Cash Crisis

Qaddafi will also face a cash crisis, said Farhat Bengdara, the former central governor, who estimates the government had about $500 million at the end of February. “It’s almost run out,” he said in a June 14 interview in Dubai. “They have no fuel or tanks. It’s a matter of weeks.”

Qaddafi, who turned 69 this month, said on June 22 that the fight will continue “until doomsday.” He was speaking to mark the death of three grandchildren of Khweildi Hmeidi, one of the army officers who helped Qaddafi seize power in a 1969 coup. They were killed in an airstrike on a compound west of Tripoli that NATO said was a command and control center. The government said it was a farm.

There are signs that the fighting is moving closer to the capital. On the 100th day of the uprising, rebels clashed with Qaddafi loyalists about 80 kilometers (50 miles) southwest of Tripoli, the Associated Press reported today, citing Guma al- Gamaty, a rebel spokesman. The fighting began yesterday near the town of Bir al-Ghanem as the rebels attempted to push out of the Nafusa mountains toward Zawiya, a western gateway to Tripoli, the AP said.

The Libyan rebels have adopted the red-green-black flag of the monarchy that Qaddafi and Hmeidi overthrew. Pro-government graffiti in Souk El Gomaa, a working-class neighborhood, is scrawled in the olive-green of the flag Qaddafi introduced. “No to the rats,” one wall says.

IEA targets Oil Bubble

THE International Energy Agency (IEA) has been saying since the turn of the year that oil prices were too high for the world economy. Today it acted to crash the market.

Announcing the release of 60 million barrels of crude oil – or 2 million barrels a day for the next 30 days – the IEA said it was replacing output lost during Libya’s conflict. The war there has starved the market of quality oil and supported Brent prices. The IEA claimed 132 million barrels have been lost since the start of May.
That means this stock release may not be the last. The IEA’s statement was explicit: it will review the market within 30 days and decide on further action. A 4.1 billion barrel war chest gives it ample oil to douse the market. If that doesn’t send bulls running for cover, the involvement of Saudi Arabia should.The stock release immediately put the skids under oil prices. Brent fell to below $106 a barrel, before staging what will surely be a short-lived recovery to around $108/b.
Crude Future

But forget Libya. The IEA is manipulating the market lower. Libya’s outage gives cover to a political decision to burst an oil bubble that the agency believes has pushed Western economies into the red zone.

Consumer/producer collusion

The most plausible theory now doing the rounds is that a tacit agreement between the IEA, the US and Saudi Arabia went along the following lines: whatever happened at the Opec meeting on 8 June, the kingdom would make oil available to the market. If that didn’t soften prices – and it didn’t – the IEA would release stocks.
Saudi Arabia, said one analyst with close knowledge of its oil policy, has at last become convinced the US economy is in serious danger and that a strategic weakening of the oil market is necessary.
OECD Crude Product Stock

Meanwhile, the US has spent recent weeks signalling that it may unilaterally release its own stocks. A combined release by IEA members is a much more powerful signal to the market – and one for which the White House has lobbied hard.

With the three most powerful forces in the global oil market – its biggest consumer, its biggest exporter and its biggest bank of stocks – colluding to drive prices lower, support for oil prices cannot last.

Black day for the bulls

And there could be more black days for the oil market’s bulls, as the spectre of 2008 begins to hover over global markets. The global economy looks weaker by the day. New US jobless figures released on 23 June were worse than expected. Data from China showed that its manufacturing sector has now stalled – the consequence of the government’s efforts to dampen inflation.

The Eurozone is facing a sovereign-debt crisis that shows little sign of easing – and, if Greece defaults, could grow much worse when the wolf pack moves onto southern Europe’s other troubled economies.

The West is running out of options to revive its dying patient. Rock-bottom interest rates haven’t worked. Drastic debt-reduction plans have hurt growth in some economies. A competitive devaluation of the dollar hasn’t solved the unemployment problem in the world’s most important economy.

Federal Reserve boss Ben Bernanke reckons US GDP will grow by as little 2.7% this year, compared with earlier estimates of up to 3.3%. And extending the quantitative easing programme beyond the end of the month is out of the question – inflation is too great a worry.

Releasing crude from strategic stocks is drastic shock therapy, and it comes after the other treatments have failed.
The price correction has already started. Now the IEA has to hope it lasts. It should, because if it doesn’t, the outlook, especially in Western economies, is bleak. Either way, the coming months will be bumpy.


Some key questions about IEA release:

How many times has the IEA undertaken such a “collective action”? When was the last time?
On a global scale, this is the third time IEA member-country stocks have been used. IEA member countries released oil stocks in 2005, after Hurricane Katrina damaged offshore oil rigs, pipelines and oil and gas refineries in the Gulf of Mexico. The only other occasion IEA member countries mandated a stock release was at the time of Iraq’s invasion of Kuwait in 1990/1991.

How much time will it take for these stocks to become available?
Oil supplies from IEA member countries should begin hitting the market around the end of next week.

How much oil will each country release? Will each country release the same proportional amount, or will some countries do more? How is that decision made?
Country shares are based on their proportionate share of total IEA oil consumption – so larger oil-consuming countries obviously have a bigger share in the overall release. In this case, all IEA countries holding strategic stocks and representing more than 1% of IEA final oil consumption are participating. It is expected that North America will release 50 percent of the total, with European countries releasing some 30 percent and Asian countries providing the remaining 20 percent.The IEA will produce a tally once it has a clear indication of the types of oil that each country will make available.

Has the IEA consulted with OPEC or Saudi Arabia on this decision? Would this IEA action not discourage Saudi Arabia and other willing OPEC members from increasing oil production?

The IEA and its member countries have been in close contact with key oil producing countries, and in particularly with Saudi Arabia, which holds the lion’s share of OPEC’s spare capacity. The IEA welcomes the announcement made by Saudi Arabia that it intends to make incremental oil available to the market. However it will take time for these incremental barrels to be produced and shipped to consuming markets; the use of IEA strategic stocks now will help bridge the gap until these new supplies are available.
Producers and consumers have a common interest in stabilising oil markets. This point has been highlighted many times before, and is a reason for the IEA’s close liaison with key oil producing countries at all times.

I thought the IEA only does this for supply disruptions in excess of 7%. The 1.5 million-barrels-a-day disruption from Libya doesn’t seem all that much, given that global demand is around 88 mb/d, so why go to all the trouble?

As far back as 1984, IEA member countries understood that a disruption of a much smaller scale than 7% could cause significant economic damage, and thus they adopted more flexible response measures. The two previous emergency IEA actions, in 1991 and 2005, each accounted for less than 7% of world demand. Particularly in a tightening market such as the one we see currently, a relatively small disruption can have a significant impact on the market.

If the disruption from Libya is 1.5 million barrels per day, why are the IEA member countries releasing 2 million barrels per day?

By the end of May the Libyan crisis had removed 132 million barrels of crude from the market. Commercial stocks in the OECD countries have tightened as a result. Because crude demand peaks during the summer season in the Northern Hemisphere, we estimate that preventing further market tightening in the third quarter will require 2 million barrels per day of additional supply. Our action aims to provide market liquidity until incremental production comes to the market.

Libyan supplies have been off the market since February. Why are you only doing this now?

The IEA is prepared to act when there is a significant supply disruption or an imminent threat thereof. Since the Libyan crisis began, the market has focused on the potential for further tightening in both OECD industry stocks and OPEC spare capacity. The onset of the Libyan crisis fortuitously coincided with the peak of the European refinery outages, primarily linked to seasonal maintenance work, and thus lower demand for crude oil. Now, heading into the “driving season” in the Northern Hemisphere, demand for crude will rise as refiners seek to replenish product stocks ahead of rising transport fuel demand. This seasonal increase in demand, combined with OPEC’s announcement at their 8 June meeting not to increase production to fill the gap with the necessary additional supplies, represents an imminent risk, which is why the IEA has chosen to take decisive action now.

Are IEA countries not putting at risk their capacity to react to more serious oil disruptions that may happen in the coming months considering geopolitical uncertainties in MENA countries?

No; IEA countries benefit from a very large safety net with their stocks: Total IEA stocks amount to more than 4 billion barrels, of which 1.6 billion are public stocks held exclusively for emergency purposes. This is equivalent to 146 days of net imports. So even after this 60-million-barrel collective action, all participating countries’ stocks will remain above 90 days of their net oil imports.

Saturday, June 25, 2011

Shell Ready for Iraq’s Natural Gas

Royal Dutch Shell Plc (RDSA) and partner Mitsubishi Corp. (8058) are preparing to begin a delayed $12.5 billion natural-gas project in Iraq, said Hans Nijkamp, vice president and country chairman.

“Shell and Mitsubishi are now ready for execution of the project,” he said in an interview published on the website of Energy Exchange, organizer of an Iraqi energy conference to be held in Istanbul in September. “We are working with our Iraq partners to reach final agreements as soon as possible.”

Regarding delays since the contract was signed last year, Nijkamp said: “A number of external reviews have been carried out by international firms on behalf of the Ministry of Oil and it has also taken Shell 250,000 engineering man-hours on site to assess the scope of work.”

The Iraqi government is eager to develop gas resources to supply fuel to generate electricity. The nation’s power plants have failed to meet domestic demand and ending blackouts has become a political priority. The government, which hopes eventually to produce enough gas to export, awarded three licenses last November in the nation’s first auction of gas concessions since the U.S.-led invasion in 2003.

The project with Shell and Mitsubishi involves developing and capturing gas that is being flared, or burned off, in southern Iraq. Some 700 million cubic feet are flared daily in the south of Iraq and the quantity is sufficient to generate an estimated 4,500 megawatts, Nijkamp said.
Wells, Pipelines

In July, Shell will start installing 15 production wells and pipelines in the Majnoon oilfield in southern Iraq, Nijkamp said. It will also upgrade two degassing stations and build “a new central processing facility to include two new 50,000 bbl/d capacity early production systems,” he said.

Shell has concluded a geographical survey that produced “positive results” about the southern Shatt al-Arab waterway’s ability to handle equipment needed to develop the Majnoon oilfield. “We are now able to use it as a route to transport equipment to Majnoon and minimize road transport,” Nijkamp said. “We are also in the process of constructing a jetty.”

Together with Petroliam Nasional Bhd of Malaysia, Shell won a 20-year service contract in 2009 to raise output from Majnoon to 1.8 million barrels a day. Shell Chief Executive Officer Peter Voser said on Oct. 12 that production from Majnoon had risen to 70,000 barrels a day. Majnoon, which straddles the Basra and Maysan provinces, has estimated crude reserves of 12 billion barrels and 9.5 trillion cubic feet of gas.

Thursday, June 23, 2011

Europe's target: Qaddafi's Fuel Supply

Brussels tightens sanctions regime; Direct trade with Tripoli targeted

TIGHTER European Union sanctions on Muammar Qadhafi’s regime have been agreed and will be sent to the European Council for formal approval on 8 June, Petroleum Economist has learnt. The measures will directly target trade in and out of the regime by banning vessels from landing at six ports.

It is understood that any vessel that breaks the embargo would afterwards be banned from landing in an EU port.

The news, which follows the defection of former oil chief Shokri Ghanem, will increase pressure on Qadhafi. It will also exacerbate fuel shortages in the west, where civilians are said to be queuing for up to five days for gasoline that sells for more than $5 a litre.

While the EU works to impose new sanctions, documents seen by Petroleum Economist also show continued efforts by General National Maritime Transport Company (GNMTC), the state-run shipping firm under control of Qadhafi’s son Hannibal, to secure new cargoes of fuel into western Libya.

Such imports have become difficult since Petroleum Economist revealed details of Turkish and Italian fuel exports destined for Libya, which prompted Nato to interdict one ship and monitor others.

The new EU measures are another effort to stop fuel supplies from reaching western Libya. It is understood that ports within rebel-held territories, such as Tobruk, will be excluded from the new sanctions.

Previous EU sanctions banned “the supply to Libya of arms, ammunition and related material”. The Council, which oversees the EU’s sanctions regime, also prohibited “trade with Libya in equipment which might be used for internal repression”.

Nato approach

However, legal experts said neither that embargo nor UN Security Council Resolution 1973 which mandated Nato’s action to defend civilians from attack, were sufficient to prevent trading fuel and oil with the regime.

Nato has taken a different approach, saying the regime is diverting civilian fuel for use by the army in its war against the country’s rebels. Following a Petroleum Economist report, it arrested the Jupiter on 19 May, preventing it from discharging 12,750 tonnes of gasoline.

Another vessel, the Cartagena, which sources said was carrying 37,500 tonnes of gasoline to Tripoli, remains offshore Malta. A well-placed source told Petroleum Economist that its bill of lading carried a destination of Tripoli, Lebanon, but that the true discharge point was Zawiyah, Libya.

Petroleum Economist has seen a document, including communication between the vessel’s captain and GNMTC seeking instruction for passage of the Cartagena to Libya, confirming both the Cartagena’s efforts to evade arrest by Nato and that its destination is Zawiyah.

Banning trade in and out of Libya’s ports would also prevent the lifting of up to 800,000 barrels of Amnah light crude oil the regime wants to export. The cargo is held in Ras Lanuf, a source told Petroleum Economist. The source said that the oil came from fields now under rebel control, which meant they may try to claim ownership of it.

GNMTC has instructed the Samraa al-Khaleej urgently to lift the oil, said the source. Ship tracking services confirmed that the vessel was moored and awaiting instruction offshore Malta on 2 June.

A western diplomatic source said the EU’s new sanctions would also prevent such a trade. Previously, Italy and France had remained reluctant to include GNMTC on the banned list.

Ghanem spurned

Last year a French shipyard signed a contract to build a vessel for GNMTC. Italy’s Sarrouch refinery is said to have been a source of some fuel destined for Qadhafi’s regime in recent weeks. Saras, the company operating the refinery, has refused repeated requests from Petroleum Economist for comment.

Meanwhile, Shokri Ghanem has confirmed his defection. He told a news conference in Rome on 1 June that he had left the regime because of the daily bloodshed and was supporting Libya’s youth, and their goal of creating a constitutional democracy in the country.

His appearance ended days of speculation about his intentions and location. Sources within a western government and in the Libyan rebel government said Ghanem, who was formerly head of the National Oil Company, persuaded Qadhafi’s son Saif al-Islam to let him leave the country to negotiate with western firms on behalf of the regime.

He is thought to have met at least two Western chief executives before turning himself in to Italian authorities.

Ghanem said he had not decided whether to join the rebels. But a source in the Transitional National Council (TNC) told Petroleum Economist Ghanem remained the “unacceptable face of the Libyan oil industry” and that the TNC would not welcome him.

“It’s a blow for Qadhafi, but we don’t like him,” said the source.

In a statement on 1 June, the TNC said Ghanem’s defection, alongside that of 120 military officers on 30 May, showed the regime had lost its legitimacy and had “no credibility and no future”.

It added: “The latest defection by Ghanem is welcomed by all of Libya and we urge others to be brave and follow his example. Ghanem has shown that it is possible to stand up against Qadhafi and that it is our duty as Libyans to unite and end Qadhafi’s brutal reign.” 

U.S. Uranium Market Report

Uranium Purchases and Prices

Owners and operators of U.S. civilian nuclear power reactors ("civilian owner/operators" or "COOs") purchased a total of 47 million pounds U3O8e (equivalent)1 of deliveries from U.S. suppliers and foreign suppliers during 2010, at a weighted-average price of $49.29 per pound U3O8e. The 2010 total of 47 million pounds U3O8e decreased 7 percent compared with the 2009 total of 50 million pounds U3O8e.

Eight percent of the U3O8e delivered in 2010 was U.S.-origin uranium at a weighted-average price of $45.25 per pound. Foreign-origin uranium accounted for the remaining 92 percent of deliveries at a weighted-average price of $49.64 per pound. Australian-origin and Canadian-origin uranium together accounted for 37 percent of the 47 million pounds. Uranium originating in Kazakhstan, Russia and Uzbekistan accounted for 41 percent and the remaining 14 percent originated from Brazil, Czech Republic, Germany, Hungary, Malawi, Namibia, Niger, South Africa, and Ukraine. Owners and operators of U.S. civilian nuclear power reactors purchased uranium for 2010 deliveries from 23 sellers, down from the 29 sellers in 2009.

COOs purchased uranium of several material types. Uranium concentrate was 63 percent of the deliveries in 2010; natural hexafluoride (UF6) and enriched uranium were 37 percent. During 2010, 18 percent of the uranium was purchased under spot contracts at a weighted-average price of $43.99 per pound. The remaining 82 percent was purchased under long-term contracts at a weighted-average price of $50.43 per pound. Spot contracts are contracts with a one-time uranium delivery (usually) for the entire contract and the delivery is to occur within one year of contract execution (signed date). Long-term contracts are contracts with one or more uranium deliveries to occur after a year following the contract execution (signed date) and as such may reflect some agreements of short and medium terms as well as longer term.
Uranium purchased by owners

New and Future Uranium Contracts

In 2010, COOs signed 35 purchase contracts with deliveries in 2010. Thirty-one were new spot contracts with deliveries of 6 million pounds U3O8e in 2010 at a weighted-average price of $43.17 per pound. Four were new long-term contracts with deliveries of less than one million pounds U3O8e in 2010 at a weighted-average price of $43.69 per pound.

As of the end of 2010, the maximum uranium deliveries for 2011 through 2020 under existing purchase contracts for COOs totaled 258 million pounds U3O8e. Also as of the end of 2010, unfilled uranium market requirements for 2011 through 2020 totaled 255 million pounds U3O8e. These contracted deliveries and unfilled market requirements combined represent the maximum anticipated market requirements of 513 million pounds U3O8e over the ten-year period for COOs.

Uranium Feed, Enrichment Services, Uranium Loaded

In 2010, COOs delivered 45 million pounds U3O8e of natural uranium feed to U.S. and foreign enrichers. Fifty-seven percent of the feed was delivered to U.S. enrichment suppliers and the remaining 43 percent was delivered to foreign enrichment suppliers. Fourteen million separative work units (SWU) were purchased under enrichment services contracts from 7 sellers in 2010. The average price paid by the COOs for the 14 million SWU was $136.14 per SWU, a 4-percent increase compared with the 2009 average price of $130.78 per SWU. In 2010, the U.S.-origin SWU share was 16 percent and foreign-origin SWU accounted for the remaining 84 percent. Russian-origin SWU was 37 percent of the total. Germany, Netherlands, and the United Kingdom had an aggregate share of 37 percent.

Uranium in fuel assemblies loaded into U.S. civilian nuclear power reactors during 2010 contained 44 million pounds U3O8e, compared with 49 million pounds U3O8e loaded during 2009. Nine percent of the uranium loaded during 2010 was U.S.-origin uranium, and 91 percent was foreign-origin uranium.
Uranium Loaded into U.S. Civilian Nuclear Reactors

Uranium Foreign Purchases/Sales and Inventories

U.S. suppliers (brokers, converters, enrichers, fabricators, producers, and traders) and COOs purchase uranium each year from foreign suppliers. Foreign purchases totaled 55 million pounds U3O8e in 2010, and the weighted-average price was $47.01 per pound U3O8e. Also, U.S. suppliers and COOs sold uranium to foreign suppliers. Foreign sales totaled 23 million pounds U3O8e in 2010, and the weighted-average price was $42.78 per pound U3O8e.

Year-end commercial uranium inventories represent ownership of uranium in different stages of the nuclear fuel cycle (in-process for conversion, enrichment, or fabrication) at domestic or foreign nuclear fuel facilities. Total U.S. commercial inventories (including inventories owned by COOs, U.S. brokers, converter, enrichers, fabricators, producers, and traders) was 112.3 million pounds U3O8e as of the end of 2010. Commercial uranium inventories owned at the end of 2010 by COOs totaled 86.5 million pounds U3O8e, an increase of 2 percent from year-end 2009. Uranium inventories owned by U.S. brokers and traders were 12.1 million pounds U3O8e. U.S. converter, enrichers, fabricators and producers owned 13.6 million pounds U3O8e of inventories at the end of 2010.
U.S. Uranium Inventories

Wednesday, June 22, 2011

China's Power Shortage

Despite recent decreases in crude oil prices and concern over the pace of economic growth in Organisation for Economic Co-operation and Development (OECD) countries, supply and demand fundamentals underlying the oil market remain strong. Far from reducing their expectations of global oil demand growth for 2011, the U.S. Energy Information Administration's (EIA) Short-Term Energy Outlook and other forecasters have recently raised their demand projections. EIA is currently projecting global oil demand to average 88.4 million barrels per day (bbl/d) in 2011, 1.7 million bbl/d higher than in 2010. Of that increment, China alone is expected to account for some 700 thousand bbl/d. Why such strong growth, and why the upward revisions, given that most forecasters are becoming, if anything, slightly less optimistic about China's economy?

Generally speaking, the main driver of oil demand growth is economic expansion. Despite uncertainties about overheating, inflation, and potential policy measures by Beijing to slow down the pace of expansion, economic forecasters continue to expect remarkably steep growth from China. Recently, the International Monetary Fund cut its forecast of global economic growth by 0.1 percentage points to 4.3 percent, but kept its forecast of Chinese growth at 9.6 percent.

But economic growth, especially for the relatively short term, is only part of the story. In recent years, temporary spikes in China's oil use for power generation have also proved a substantial, if intermittent, factor driving its oil demand. That seems likely to be the case again in 2011.

It helps to remember that coal, rather than oil, accounts for a larger share of China's energy mix, in contrast with the United States and other mature, industrialized nations, which tend to be, primarily, oil economies. However large China's oil demand may appear in aggregate (China became the world's second largest oil consuming country in 2003), it pales in comparison with its coal consumption (China is by far the world's largest coal consumer). Past experience shows that even temporary shifts in the Chinese power generation mix from coal to oil can result in surprisingly large increments in apparent oil consumption.

Thus, in 2003-2004, Chinese oil demand spiked when electricity shortages occurred as the country lacked sufficient capacity to generate needed power. Faced with chronic brownouts and blackouts, or merely concerned with the potential for electricity shortfalls, many end-users turned to back-up generators, and ramped up their purchases of diesel to fuel them, or simply to keep as a precaution in the event that those oil-fired generators came in use.

Similar issues were at play in 2007-2008, when a growing wedge between market-based coal prices and state-regulated electricity prices made it uneconomical for some utilities to produce electricity, again resulting in shortages. In response, the state implemented new rates and pricing mechanisms in late 2008, which alleviated economic pressures to some extent. The economic downturn also helped mitigate shortages at the time.

This summer, China appears to be bracing itself for what the State Grid Corporation of China warned may prove to be the worst electricity shortages since 2004. Potential shortages may result from a combination of market-related fuel prices and lagging incentives in the electricity generation market. Earlier this week, the China Electricity Council reported that the five largest state-owned power generating companies showed significant losses in their thermal power business in May, even after tariffs charged to grid operators in some provinces were increased in April. In short, coal prices have run ahead of electricity prices, causing electricity generators to run at a loss - and thus providing them with a disincentive to produce electricity.

In addition, severe drought conditions have curtailed China's hydroelectricity generation, compounding the impact of potential shortfalls in coal-fired power generation. Hydroelectric generation is a substantial secondary source of Chinese electric generation, accounting for more than 16 percent of power supply. Reportedly, some areas of the country have experienced the worst drought in 50 years. Unlike in 2008, economic recession is unlikely to curb electricity demand growth.

In an attempt to avert shortfalls, China raised electricity prices to industrial, agricultural, and commercial consumers in at least 15 provinces. Prices to residential customers were left unchanged. While the new rates went into effect on June 1, the China Electricity Council warned of shortages of about 30 gigawatts during the summer of 2011, which implies the potential for significantly increased demand for crude oil and products, as electricity consumers will look to replace state electricity with their own power generation. Already middle distillates (diesel) account for the lion's share of Chinese oil demand (unlike the United States, where gasoline plays that role). One of the consequences of the expected uptick in Chinese oil demand for electricity generation this summer will be to further increase diesel's share of the Chinese demand barrel.

On a positive note, steep increases in Chinese refining capacity this year will boost China's capacity to produce these needed middle distillates domestically. In recent years, China has moved very close to Japan as the world's largest importer of Middle East crude oil. At the same time, as China's refining capacity has grown both larger and more complex, its ability to extract middle distillates from those relatively low-quality grades has substantially increased.

Nevertheless, China's economic growth presents the oil market with a challenge that will not fade at the end of 2011. EIA projects Chinese oil demand to grow an additional 550 thousand bbl/d in 2012. Albeit slower than in 2011, this still represents a third of projected 2012 global demand growth. In addition to China, other economies, both in and out of the OECD, are expected to experience higher demand for petroleum-fueled electric power generation. These include Japan, where nuclear power plant shutdowns have already led electric utilities to crank up operating rates at their liquefied natural gas and oil-fired generators, and the Middle East, where summer air-conditioning demand has been rising steeply in the last few years. This increase in demand will be particularly evident in the third quarter, as refineries return from second-quarter maintenance and electricity demand for cooling and air conditioning ramps up seasonally in the northern hemisphere. With non-Organization of the Petroleum Exporting Countries (OPEC) supply growth limited this year and next, the markets will look to OPEC to satisfy expected increases in demand. Given the current discord among OPEC members, such increases are uncertain, leaving the market vulnerable to significant tightening and volatility. One thing looks clear: China's appetite for oil shows few signs of significantly slowing down.
China Oil Consumption 

Gasoline prices down for the sixth straight week; diesel price sees small decrease
The U.S. average retail price of regular gasoline fell for the sixth consecutive week, dropping six cents to hit $3.65 per gallon. The average price is $0.91 per gallon higher than last year at this time. For the second straight week, biggest decrease came in the Midwest; prices in the region dropped almost 11 cents on the week. Gasoline on the Gulf Coast was priced almost a nickel lower this week the lowest price in the country at $3.51 per gallon. The East Coast, West Coast, and Rocky Mountains all saw average gasoline prices down almost four cents versus last week. West Coast prices remain the highest in the country, averaging $3.85 per gallon.

The national average diesel price decreased less than a penny and remained at $3.95 per gallon. The diesel price is $0.99 per gallon higher than last year at this time. The largest decrease occurred in the Rocky Mountains, where prices were down almost three cents. The West Coast and East Coast both saw prices down almost a penny on the week, while the Midwest saw a tenth of cent decrease. Although prices in the region were flat for the week, the Gulf Coast continues to have the country's least expensive diesel; a gallon in the region sells for $3.90, on average. The West Coast is only major region where diesel prices remain over $4 per gallon, currently averaging $4.16 per gallon.

Propane stocks grow again
Total stocks of propane in the United States grew last week by 1.8 million barrels to end at 37.5 million barrels. The largest gain was experienced in the Midwest region with 0.8 million barrels of new propane inventory. Gulf Coast regional stocks grew by 0.7 million barrels, while East Coast stocks added 0.3 million barrels. The Rocky Mountain/West Coast regional stocks were also up slightly. Propylene non-fuel use inventories represented 6.2 percent of total propane inventories.

Text from the previous editions of This Week In Petroleum is accessible through a link at the top right-hand corner of this page. Released 22 June 2011

Gasoline prices hit $30 at Tripoli

Sanctions, fuel shortages and Nato attacks have taken their toll. Qadhafi’s departure is imminent.

WESTERN governments believe Muammar Qadhafi’s fall is imminent, as new sanctions against regime-controlled ports bring panic to Tripoli and rumours emerge of more high-level defections.
On 13 June, the regime urgently summoned Algeria’s ambassador to Tripoli, amid claims that Qadhafi could seek asylum in that country. Algeria’s foreign minister, Mourad Medelci, on 12 June denied his government had offered to help Qadhafi leave Libya, but a senior source in the country told Petroleum Economist this could still happen.

The colonel’s son, Saadi Qadhafi, is also thought to be seeking an exit from Libya. The source said Saadi, a businessman who has influenced his father’s military strategy during the war, had instructed his associates to arrange his departure.

Final days

Briefings from a senior western diplomatic source with close knowledge of the effort to oust Qadhafi claims his regime is in its final days. “We expect him to go imminently,” he said.

While heavier and more precise aerial bombardment – some apparently targeting Qadhafi and his inner circle – has increased the pressure on the regime, a shift in tack from the Transitional National Council (TNC) and increasingly successful efforts to staunch the supply of fuel to western Libya could also now prove decisive, said the diplomatic source.

The TNC, according to the source, has grown more willing to negotiate a settlement with regime figures – a tactic designed to isolate Qadhafi still further. He is now thought to be changing locations every few hours.

But Qadhafi and his sons will have no future in Libya and the TNC will not negotiate with any members of the family, said the source. “They’re all out,” he said.

Meanwhile, gasoline shortages in western Libya are growing severe as a strategy to prevent fuel supplies to the regime begins to bite. A litre of gasoline now sells for LD10 ($8.12) in Tripoli which means $30 per gallon of gasoline. Lines at filling stations are “now being measured in miles, not km”, said a source. Thieves now siphon fuel from any cars not secured inside garages.

Staunch the flow of fuel

Although some trucks of fuel continue to cross the Tunisian border into Libya, rebels sources say they have staunched the flow. And since Nato interdicted the Jupiter tanker on 18 May, no other ships carrying fuel are thought to have reached a western Libyan port.

This has caused panic in Tripoli, said a source. Several desperate attempts have been made to commandeer another tanker, the Cartagena, which has been anchored offshore Malta for the past two weeks.

It was destined for a regime port, but following interdiction of the Jupiter, the Cartagena’s Indian crew has refused to sail to the country without written approval from Nato.

The Cartagena, holding 37,500 tonnes of 95 octane gasoline, belongs to General National Maritime Transport (GNMTC), the state-owned shipping firm under control of Qadhafi’s son Hannibal. According to sources, the regime has assembled a Libyan crew, which would commandeer the ship from its Indian crew and sail it to Tripoli.

Desperation to secure the Cartagena’s cargo follows a tightening of sanctions against Libya. The EU has now listed six ports – all under regime control – in which tankers may not dock or discharge fuel. If any does, it would be banned from EU ports. Benghazi and Tobruk, under TNC control, are not included.

Those measures are designed to end the flow of fuel to the regime, but also prevent crude oil liftings. GNMTC has been offering a cargo of 600,000-800,000 barrels from Ras Lanuf to any trader willing to buy it.

The regime has just 3.6 million to 4 million barrels of crude left in storage, following the near-total shut down of production. Derek Brower, London

Tuesday, June 21, 2011

Nissan Leaf beats GM Volt

Nissan Leaf & GM Volt

Once again, General Motors is burying the monthly sales totals for the Chevy Volt. In a press release headlined "May U.S. Retail Sales Rise 9 Percent on Demand for Fuel-Efficient Vehicles," the Volt's sales numbers are not disclosed. Instead, the total – 481 – is in the detailed PDF of the Chevrolet brand sales totals and shows the car is suffering from another month-to-month drop; GM sold 493 in April. Last month, GM told us that drop in Volt sales compared to March's 608 units was due, in part, to the company sending 300 Volts to dealers to use as demo vehicles. We await word on what the reason for the drop is this time.

On the other hand, Nissan is proudly proclaiming that it sold 1,142 units of the Nissan Leaf in May, a huge increase over the 573 sold in April. Overall, Leaf sales have now totaled 2,167 deliveries this year. For comparison, GM has sold 2,184 Volts in 2011. If this trend continues, it won't be long before we hear Nissan touting a new tagline for the Leaf: the best-selling plug-in car in America. You can see the press releases from both companies after the jump.

Electric car buyers usually have higher incomes, so the higher price tags for the cars typically haven’t been an issue for those looking for an electric car. Leaf owners are in the top 15 percent of households with regards to income, according to Nissan. Both Nissan and General Motors are trying to produce electric cars with broader appeal by slapping smaller price tags on them, but it’s resulted in demand that the car manufacturers just can’t keep up with.
GM said it expects to ship around 10,000 Volts this year, while Nissan has said it will ship around 20,000 Leafs by September. The U.S. government has set ambitious targets for both the Volt and Leaf, based on its goal of having more than 1 million electric cars on the road by 2015. The U.S. government expects GM to sell around 500,000 Volts by 2015 and Nissan to sell 300,000 Leafs by 2015, according to the report.