Better Fill up today

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Jan-09 Crude is trading at $44.35, up $2.28, Jan-08 Natural Gas is trading at $5.58, up $0.001.

The EIA inventory report for crude and products comes out today, it will be interesting to see the new numbers.

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Crude Oil Rises on Speculation OPEC Will Reduce Supplies Again


Dec. 10 (Bloomberg) -- Crude oil rose on speculation that OPEC will cut production at a meeting next week to end the five- month slump in prices.

The Organization of Petroleum Exporting Countries, which pumps more than 40 percent of the world's oil, may reduce its output limit by as much as 2.5 million barrels a day to reverse recent declines, billionaire hedge-fund manager Boone Pickens said yesterday. Prices also rose as traders bought contracts to close out bets that prices will fall further.

"It seems that $40 a barrel is a bastion of support for oil," said Robert Laughlin, senior broker at MF Global Ltd. in London. "I am expecting OPEC to do something major, there is no option to do nothing."

Crude oil futures for January delivery rose as much as $1.89, or 4.5 percent, to $43.96 a barrel in electronic trading on the New York Mercantile Exchange. It was at $43.91 a barrel at 11:52 a.m. London time.

Traders who held short positions, or bets prices would fall, are purchasing futures after oil dropped more than 20 percent in the past two weeks. Yesterday, futures fell $1.64, or 3.8 percent, to $42.07 a barrel, capping a 23 percent drop since Nov. 26.

OPEC should make a "substantial" output cut when it meets on Dec. 17 in Algeria, Shokri Ghanem, Libya's top oil official, said on Dec. 8. Oil has tumbled more than 30 percent since the group announced a 1.5 million-barrel-a-day reduction in supply on Oct. 24.

OPEC will "work it back up to $100," Pickens said in an interview in New York. "It will all be determined by the global economy. If you get a recovery in the global economy, you will get it back up."

2009 Forecasts

The International Energy Agency and OPEC have lowered demand forecasts in the past month because of the economic contraction.

The Paris-based agency reduced its demand forecast by 170,000 barrels a day from its November estimate to 86.37 million barrels a day, analyst David Martin said on Dec. 5. OPEC cut its forecast for next year by 530,000 barrels a day, or 0.6 percent, to 86.68 million barrels a day, in its monthly oil market report on Nov. 17.

The IEA is likely to lower its 2009 demand growth forecast again in its monthly oil report which will be released tomorrow, said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich in Vienna.

"They should come out with a negative demand revision," Loacker said. "Their number is still too high."

China Imports

China's November crude-oil imports fell to the lowest in a year, the first decline since July. Imports fell 1.8 percent from a year earlier to 13.36 million metric tons last month, or 3.25 million barrels a day, the Beijing-based Customs General Administration of China said on its Web site today.

A government report today is forecast to show U.S. crude- oil inventories rose 1.3 million barrels last week, according to the median of 14 responses in a Bloomberg News survey. The report will probably show a drop in U.S. supplies of gasoline and distillate fuel, which includes diesel and heating oil.

The Energy Department is scheduled to release its weekly report at 10:35 a.m. today in Washington.

Brent crude oil for January settlement rose as much as $1.73, or 4.2 percent, to $43.26 a barrel on London's ICE Futures Europe exchange. It was at $43.19 a barrel at 11:52 a.m. local time.

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The Weekly Crude Inventory Report came out this morning, below are some comments that I thought were interesting. The Hawks in OPEC are wanting to cut back and push prices up, the Saudis, Kuwait, UAE and some of the more levelheaded OPEC members are wanting to hold prices down to hopefully avoid a full blown worldwide depression. I am hopeful that the more levelheaded members prevail. However I see where Americans are already starting to buy more of the big V-8 Suvs and pickups that are being discounted so much, it seems we never learn from our mistakes.

Global Perspective

NYMEX crude moved lower yesterday with the back of the curve falling more than the front as heavy producer selling was evident. Spreads rallied sharply and after a decline of over $100/bbl may be signaling a bottom in the front part of the curve. Furthermore, US gasoline demand is starting to show signs of life with the 4th consecutive week of higher demand and 1st y-o-y increase since April per MasterCard survey.



The U.S. Energy Information Administration (EIA) forecast that the global economic slowdown would decrease world oil consumption for the first time since 1983. Furthermore, in its monthly short term outlook EIA revealed it expected global oil demand to fall by 450,000 barrels per day in 2009. The International Air Transport Association also forecast a 3% reduction in global air traffic next year, stating that it does not expect a recovery until 2010.



With oil prices slumping, an OPEC cut at its meeting on December 17th appears likely, especially as Saudi Arabia is rumored to be looking to defend the $40 mark. The issue of compliance still remains unknown.



As a result of the falling prices, China has reportedly been filling its third strategic reserve. However, latest estimates have shown that crude imports have still fallen in November by 15% vs. October's imports figure. Market participants will look towards today's DOE inventory and Thursday's monthly EIA data for short term direction.



The Bloomberg survey for today's DOE petroleum report shows:



Crude Oil           +1.3 mln bbls
Gasoline           - 0.4 mln bbls
Distillates          - 1.5 mln bbls
Refineries            No Change


Technical Analysis: NYMEX WTI remains in a very strong downtrend, though it's starting to look as if a bottom may be forming. A rally and close above $48.11 would signal a reversal with an eventual target of the low $60s. Furthermore, a rally in Euro/Yen would add further conviction the bottom is in.

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Jan-09 Crude settled at $43.52, up $1.45 on the day, Jan-08 Natural Gas settled at $5.686, up $0.107 on the day.   

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Jan-09 Crude is trading at $45.475, up $1.955, Jan-08 Natural Gas is trading at $5.68, down $0.006.

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Jan-09 Crude settled at $47.90, up $4.46 on the day, Jan-09 Natural Gas settled at $5.598, down $0.088 on the day.

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Jan-09 Crude is trading at $44.875, down $3.105, Jan-09 Natural Gas is trading at $5.49, down $0.108.

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Drilling in the US is being cut way back, it is understandable but disturbing for the future. We have seen the peaks and valleys in pricing and supply 3-4 times since the 1973 Embargo and the aftershocks are not good for the US and World Economy and the Industry.

Energy giants trim spending plans for 2009

Industry absorbing shock of market whiplash


Alberta's oil balloon continued to deflate yesterday after Canadian petroleum giants EnCana Corp. and Petro-Canada squeezed more than $3 billion from their 2009 capital spending plans, citing the need to stay flexible during uncertain economic times.



The capital deferrals are in effect a wait-and-see strategy at a time of unprecedented volatility in the price of oil, which jumped 10 per cent yesterday to $47.98 (U.S.) a barrel on the New York Mercantile Exchange.



Crude prices are up about 19 per cent since last week but still down two-thirds from their mid-July high of $147.27. Industry players are being forced to absorb the shock of this market whiplash.



Calgary-based EnCana, which dropped its 2009 spending to $6.1 billion from $7 billion, said its capital program for next year could increase or fall by a further $500 million as economic circumstances unfold. "This model positions us very well to deal with the current market uncertainty," chief executive Randy Eresman said.



Most of the money is being taken out of oil-sands developments and diverted to projects with lower risk and resource costs. Nexen Inc. on Wednesday announced a 15 per cent scale-back of its investments following Suncor Energy Inc.'s decision earlier this fall to slash a third from its 2009 spending plans.



"All of this has happened quite fast," said Dragan Trajkov, an oil and gas analyst with Salman Partners in Calgary. "Companies that do better will be the ones that can adjust to the situation quickly."



The International Energy Agency said yesterday the West's economic woes and falling fuel demand in China will shrink worldwide oil demand in 2008 to 85.8 million barrels a day, the first decline in 25 years. Earlier this week the U.S. Department of Energy issued a similarly grim outlook.



Members of the Organization of the Petroleum Exporting Countries, eager to stem the plunge in their national oil revenues, have vowed to collectively cut production again in hopes of boosting crude prices. A meeting of members will be held Dec. 17 in Oran, Algeria, to discuss reduction targets.



OPEC president Chakib Khelil, who is also Algeria's oil minister, told his country's state radio yesterday that a "severe production cut" will be decided.



Jeff Rubin, chief economist at CIBC World Markets, warned that "supply destruction" as a result of low oil prices is a "surefire recipe" for higher prices down the road.



"Although capacity is ample for now, we expect supply strains to emerge beyond mid-2009 as GDP growth and global demand turn the corner, setting the stage for a return to the $100-barrel mark by year-end (2009)," wrote Rubin in a research brief.



"In the Alberta oil sands alone, we estimate that project cancellations and delays, affecting $100 billion of investment, will shave over 800,000 barrels from daily new capacity, roughly half of earlier projected growth in the next five years. And what is happening there is occurring in Brazil, West Africa and the Middle East itself."



Trajkov said industry isn't just reacting to rapidly falling oil prices. Project costs, including labour and materials, are expected to gradually fall as the sector cools off. The trick is to find the sweet spot for investment.


"We could see a shortage in supply and commodity prices going back up, and at the same time project costs coming down," he said.

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Jan-09 Crude settled at $46.28, down $1.70 on the day, Jan-09 Natural Gas settled at $5.488, down $0.110 on the day.

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Jan-09 Crude is trading at $48,325, up $2.045, Jan-09 Natural Gas is trading at $5.56, up$0.072