Oil falls below $94 on falling global demand

Oil prices drop below $94 a barrel as falling global demand outweighs bailout hopes

NEW YORK (AP) — Oil prices closed at their lowest level in two weeks Thursday, tumbling below $94 a barrel on doubts that a revamped financial bailout plan will be enough to avoid a protracted economic slump and revive dwindling U.S. energy demand. Read more

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Oil falls as global demand concerns re-emerge

SINGAPORE (AP) - Oil prices fell below $106 a barrel Tuesday in Asia - $10 below its close Friday before the Labor Day weekend - as investors shifted their focus to slowing global demand after worries about Hurricane Gustav subsided.

Light, sweet crude for October delivery was trading at $106.03 a barrel in electronic trading on the New York Mercantile Exchange midafternoon in Singapore, and at one point dropped as low as $105.46.

On Monday, when U.S. trading was closed for Labor Day, the contract had plunged $4.34 to $111.12 a barrel in late electronic trading. On Friday, the contract settled at $115.46 a barrel.

Traders were relieved that Gustav weakened as it approached the offshore oil rigs and Louisiana refineries, and appeared to have caused less damage than expected in New Orleans and surrounding areas.

But they quickly turned their attention to slowing global economic growth, speculating that will dampen demand for crude oil, even in developing countries such as China and India.

“The market continues to be weighed down by worries of a global economic downturn and slowing oil demand in developing markets,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. “Action by OPEC and supply side concerns should put a backstop to any sharp price drop.”

The Organization of Petroleum Exporting Countries is scheduled to meet Sept. 9 and has indicated it may take action to defend the $100 a barrel level.

There was some disruption to oil supplies as oil companies shut down production and evacuated facilities ahead of the storm. Altogether, about 2.4 million barrels of refining capacity had been halted, roughly 15 percent of the U.S. total, according to figures from Platts, the energy information arm of McGraw-Hill Cos. (MHP) The Gulf Coast is home to nearly half of the nation’s refining capacity.

It could be a day or more before oil and natural gas companies can assess the damage to their drilling and refining installations. Louisiana Gov. Bobby Jindal said as much as 20 percent of oil and gas production that was stopped because of Gustav could be restored by this weekend, stressing that it was a rough estimate.

Traders are also keeping an eye on other storms brewing in the region.

Hurricane Hanna was predicted to come ashore in Georgia and South Carolina late in the week, and Tropical Storm Ike formed late Monday in the Atlantic Ocean and may become a hurricane in the next 36 hours as it approached the Bahamas.

“September is the peak of the Atlantic hurricane season. After Gustav, there are two more now on the radar screen. The storms are likely to provide some upside risks to the oil futures market,” Shum said.

In other Nymex trading, heating oil futures fell 15.44 cents to $3.0375 a gallon, while gasoline prices lost 16.92 cents to $2.685 a gallon. Natural gas for October delivery fell 47.3 cents to $7.472 per 1,000 cubic feet.

In London, October Brent crude was down $2.01 to $107.40 a barrel on the ICE Futures exchange.

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Associated Press writer Eileen Ng in Kuala Lumpur contributed to this report.

AP | ALEX KENNEDY | Tuesday, September 2, 2008

Surge for the dollar as global fears rise

The dollar surged to a two-year high against the pound and a six-month peak against the euro on Friday, as fears about spreading economic gloom triggered a sell-off in commodities.

Rice: Israel can decide for itself on Iran

US Secretary of State Condoleezza Rice defended Israel’s right to make its own decision about whether it takes military action against Iran, in an interview released over the weekend.

“We don’t say yes or no to Israeli military operations. Israel is a sovereign country,” she said in response to a question from The Politico Web site as to whether she was concerned that America would be blamed in the case of an IDF attack on the Islamic Republic.

Her statements come amid speculation that Washington has warned Jerusalem not to attack Iran and media reports that the US told Israel it doesn’t have the green light to use Iraqi airspace for any such attack.

At the same time, Rice emphasized diplomacy.

“We are in very close contact with the Israelis and we talk about the diplomatic track that we’re on,” she said. “They’ve said that diplomacy can work here. And I know they’re doing their part to talk to all of the countries with which they have good relations to explain why it’s important to have a tough edge to our diplomacy.”

Asked if she would use the opportunity to tell Israel it shouldn’t strike Iran, Rice replied that the US and its international partners announced this week that they would be looking at further sanctions against Iran after it failed to meet another deadline to begin negotiations over its nuclear program, as it continued enriching uranium in defiance of the international community.

The US has been holding consultations with the other permanent members of the UN Security Council - Britain, France, Germany, Russia and China - about beginning work on a fourth sanctions resolution.

At the same time, amid indications that will be a slow process, particularly with signs the Russians are hesitant about ratcheting up the sanctions language, the US and EU are taking their own additional measures outside the UN framework.

“We’re on a diplomatic course and that’s the important thing,” Rice said.

In the interview, she also dismissed the concern that Teheran could hold the world’s energy markets hostage because of its large role in the international oil market and its control over a key shipping route.

“I don’t know what the Iranians would do without the revenue that they receive from selling oil. And so the idea that they would somehow deprive the world of Iranian oil exports would have to have a pretty devastating effect on Iran itself,” she said.

The interview was released the day before the Institute for Science and International Security published a report arguing that force wouldn’t be particularly effective in ending Iran’s nuclear threat.

In the report, titled “Can military strikes destroy Iran’s gas centrifuge program? Probably not,” David Albright, ISIS president and a former UN weapons inspector, lays out short-comings including a lack of sufficient intelligence to be able to destroy all of the nuclear production sites, Iran’s ability to quickly replicate whatever centrifuges are destroyed, and the likely strengthening of Iranian President Mahmoud Ahmadinejad’s domestic standing in the wake of such an attack.

Albright and co-authors Paul Brannan and Jacqueline Shire also reject any equivalence between a strike on Iran and that carried out by Israel in Iraq in 1981 to take out the Osirak reactor, or its attack on an alleged incipient reactor in Syria last September.

“This analogy is grossly misleading. It neglects the important differences between a gas centrifuge uranium enrichment program and a reactor-based program, and fails to account for the dispersed, relatively advanced, and hardened nature of Iran’s gas centrifuge facilities,” they write. “It also ignores the years Iran has had to acquire centrifuge items abroad, often illicitly, allowing it to create reserve stocks of critical equipment and raw materials.”

Jerusalem Post | HILARY LEILA KRIEGER | Sunday, August 10, 2008

Opec income hits record as oil prices soar

Opec nations earned as much in the first half of this year as they did in the whole of 2007 - thanks both to record oil prices and record production - triggering a big increase in its spending.

Members of the Saudi ­Arabia-led oil exporters’ cartel took home $645bn (£335bn, €430bn) between January and June, just below the record $671bn they earned last year, according to the US department of energy.

At the current pace, Opec nations would earn about $1,245bn this year, a record.

The recent 20 per cent drop in oil prices below $120 a barrel is unlikely to damp the earnings significantly, as higher output will offset the impact.

Industry estimates suggest that Opec production in July hit a record 32.6m b/d. The current oil price, at $116.53 a barrel, is still higher than the first half of the year’s average: $111.1 a barrel.

The flood of petrodollars has boosted Opec’s overseas spending, with imports rising up to 40 per cent from last year’s level.

Binky Chadha, of Deutsche Bank in New York, said that Asian emerging markets were now the primary beneficiaries of oil exporters’ rising trade expenditure, followed by the euro area.

The US, meanwhile, was losing some of its market share.

“Although oil prices have been increasing, they [Asian emerging markets] have seen an increasing offset in terms of rising exports to the oil exporters,” he said.

China’s share of oil exporters’ spending has risen to 11 per cent, from 4 per cent in 1999, mostly at the expense of the US, where the share of spending has fallen to 7.5 per cent from 12 per cent.

Opec officials believe that the cartel’s overseas spending plus sovereign wealth fund investments in troubled western banks has helped to support global economic growth

The oil boom is being felt in the Gulf perhaps more than anywhere else and is the driver behind a swathe of multi-­billion dollar mega-projects throughout the region.

It is also making the region’s sovereign wealth funds and state investment vehicles more active, particularly as the Gulf’s boom coincides with the financial turmoil in western markets.

HSBC forecasts that between 2006 and 2010 the Gulf will earn more in oil revenue than in the past 20 years combined and that the six states of the Gulf Co-operation Council should earn more in 2008 than the entire 1980s.

But Gulf governments are spending only about 40 per cent to 45 per cent of their public revenues this year, a figure that is lower than it has ever been.

That is in spite of the fact that public spending in absolute terms is at its highest, says Simon Williams, chief economists for Gulf markets at HSBC.

“What people can miss is the magnitude of change this oil price is bringing. It’s probably a $1.2 trillion economy this year for the GCC; five years ago it was more like $350bn.”

He says there are limits to how much oil revenue Gulf countries can absorb, adding that the region is already operating at its maximum absorptive capacity. As a consequence, he says, while the level of domestic spending is rising significantly, overseas savings are rising sharply as well.

Some government officials in the region have already started talking about slowing down government spending as a means of damping inflation, which has reached double-digit figures in many of the Gulf states and is causing increasing ­concern.

FT | Javier Blas, Krishna Guha and Andrew England | Sunday, August 10, 2008

Big Oil’s biggest quarter ever: $51.5B in all

HOUSTON (AP) - Oil giants Chevron Corp. (CVX) (CVX) and Total SA (TOT) wrapped up a string of gargantuan, record-breaking earnings reports Friday, a stretch in which six of the major international oil companies topped $50 billion in combined profit for the first time.

While the profits of unparalleled size have brought withering criticism from Washington and disgust from consumers across the country, very few were surprised. Crude prices during the second quarter were nearly double what they were a year ago.

Chevron said Friday its second-quarter profit rose 11 percent to a record $5.98 billion.

Revenue rose significantly to $82.9 billion from $56.1 billion a year ago.

(AP) Charts show quarterly net income of Exxon Mobil and monthly regular unleaded gas prices since 1998;…
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But results for the second-largest U.S. oil company missed Wall Street forecasts and shares fell.

Like its competitors, Chevron made the bulk of its money at its exploration and production arm, also known as the upstream, where income nearly doubled from a year ago to $7.25 billion.

Chevron said the average sales price for crude and natural gas liquids was $109 a barrel in the quarter, up from $57 a barrel in the year-earlier period.

In addition to Chevron, soaring commodity prices led to record quarters for Exxon Mobil Corp. (XOM), ConocoPhillips, BP PLC (BP) and Royal Dutch Shell PLC. (RDSB) Exxon Mobil stood apart even from this crowd, logging the largest ever quarterly operating profit for a U.S. company. Barring companies that made huge profits on one-time gains like bankruptcy settlements and spin-offs, Exxon Mobil holds the top 10 records for biggest U.S. quarterly earnings.

French energy company Total SA said Friday its profit climbed 38.7 percent in the second quarter to $7.38 billion. Quarterly sales rose 23 percent to $75.25 billion.

Altogether, the profits of the six companies jumped more than 40 percent in the second quarter to $51.5 billion, the first time big Western oil companies have ever reached that level.

Total’s earnings were at the top end of analysts’ expectations.

Unlike some other oil majors, Total reported production growth of 1.3 percent in the second quarter.

Also Friday, Norway’s state-controlled StatoilHydro ASA (STO) reported a 37 percent rise in second-quarter net profits to $3.7 billion.

At Chevron, the company division that refines and sells gasoline actually swung to a loss of $734 million in the quarter after earning $1.3 billion a year ago. The culprit: those same crude prices that lifted upstream earnings.

Like its peers, Chevron doesn’t produce enough oil on its own to feed its refineries, forcing it to buy some on the open market. And it wasn’t able to raise the price of gasoline and other products fast enough to recover its own rising costs for oil.

Chevron also said that planned downtime at some refineries contributed to the loss.

“The higher cost of crude oil used in the refining process was not fully recovered in the price of gasoline and other refined products,” said Chairman and CEO Dave O’Reilly. “As a result, our downstream operations incurred a loss in the second quarter, with most of the loss taking place in the United States.”

Chevron said overall production in the quarter fell about 3 percent from a year ago, hurt in part by production-sharing contracts. However, on a conference call with analysts Friday, company officials said project startups will increase production in the second half of 2008 and the company should meet or exceed its full-year volume target.

Chevron shares slipped 71 cents in afternoon trading to $83.85. They’ve traded in a range of $76.40 to $104.63 in the past year.

Total shares fell 1.2 percent to 48.79 euros ($75.95) in Paris.

—_

Associated Press Writer Angela Charlton in Paris contributed to this report.

AP | JOHN PORRETTO | Friday, August 1, 2008

Kucinich seeks to bar US oil firms from Iraq

Rep. Dennis Kucinich has introduced a measure that would bar US oil companies from receiving contracts in Iraq.

The Ohio Democrat, who believes exploiting Iraq’s massive oil reserves was the primary reason we invaded, introduced a measure he says aims to keep Iraq’s oil wealth within the country.

“Iraq needs oil revenue now more than ever as they try to rebuild their country,” Kucinich said Thursday, unveiling the Oil for Iraq Liberation Act.

Kucinich noted Congress recently required Iraq to match US investments in the country’s reconstruction, and he implied that Iraq’s ability to contribute to its reconstruction was damaged because of its reliance on oil revenues.

“The invasion of Iraq was about oil, but it didn’t result in more oil or cheaper gas,” Kucinich said on the House Floor. “It resulted in war profiteering by oil companies who benefited by keeping Iraqi oil off the market.”

Recent reports have indicated that big oil companies like Exxon, Chevron, BP, Total and Shell are set to receive lucrative no-bid contracts to explore in Iraq.

It’s unclear what effect, if any, Kucinich’s proposal would have on companies like the former British Petroleum, which is headquartered in London; Total, based in Paris; or Royal Dutch Shell, headquartered in The Hague. Of the companies reportedly in line to receive contracts, only ExxonMobil and Chevron are based in the US, but both operate around the globe.

The State Department last week said its Inspector General would investigate the Iraqi contracts after four Democratic senators said government officials may have intervened to secure the contracts.

The full text of Kucinich’s OIL Act had not been posted to the Library of Congress’s legislative tracking Web site as of early Friday afternoon.

In his floor speech, he said the bill would “discourage US oil companies from profiting from the war and will stop the further theft of Iraq’s oil resources by the very interests who have profited from the war for oil: the US oil companies.”

Raw Story | Nick Juliano | Friday, August 1, 2008

Exxon posts record $11.68 billion profit

World’s largest publicly traded oil firm makes $1,485.55 a second in the quarter, but misses forecasts.

NEW YORK (CNNMoney.com) — Exxon Mobil once again reported the largest quarterly profit in U.S. history Thursday, posting net income of $11.68 billion on revenue of $138 billion in the second quarter.

That profit works out to $1,485.55 a second.

That barely beat the previous corporate record of $11.66 billion, also set by Exxon in the fourth quarter of 2007.

“The fundamentals of our business remain strong,” Henry Hubble, Exxon’s vice president of investor relations, said on a conference call. “We continue to capture the benefit of strong industry conditions.”

But Exxon (XOM, Fortune 500) profit fell short of Wall Street estimates.

Analysts predicted the company, the world’s largest publicly traded oil firm, would make $12.1 billion in profit on $144.4 billion in revenue, according to Thomson Reuters.

Exxon shares fell about 3% on the New York Stock Exchange.

Excluding money set aside for a recent damage award related to the Valdez tanker spill back in 1989, Exxon made $11.97 billion in the quarter.
Pricey oil cuts both ways

Exxon was both helped and hurt by high oil prices.

As an oil producer, the company makes a lot of money when crude prices rise. Exxon made $10 billion from selling oil in the latest quarter, up nearly 70%.

But as a refiner, it must also buy crude oil to turn into gasoline. Exxon actually buys more crude than it sells.

Profits from its refining business totaled $1.6 billion in the quarter, less than half of what they were last year.

“Record crude oil and natural gas realizations were partly offset by lower refining and chemical margins, lower production volumes and higher operating costs,” read a statement attributed to Rex Tillerson, Exxon’s chief executive.

While oil prices in the quarter were nearly twice as high as the same time last year, gasoline prices only rose about 30%.

That’s one reason why the stock of major oil companies - such as Exxon, Chevron (CVX, Fortune 500), Royal Dutch Shell (RDSA) and BP (BP) - that both produce and refine crude has been relatively flat over the last year, despite the runup in oil prices.

Meanwhile, shares of companies that mostly produce oil, like Anadarko and Apache, have soared in the last year, while shares in refiners like Valero and Sunoco have tumbled.
Where the money goes

Exxon spent $7 billion in the second quarter finding and producing more new oil, up 38% from last year. Still, oil and natural gas production from the company fell 8%. Even excluding special events such as a labor strike in Nigeria and seizure of fields in Venezuela, production slipped 3%.

The production declines shouldn’t be seen as an indicator the world is running out of oil, said Fadel Gheit, a senior energy analyst at Oppenheimer.

Rather, as the price of oil rises, the amount of oil Exxon or any international oil firm is allowed to pump from many oil-rich countries decreases, said Gheit.

“We didn’t expect production to be down as much as reported,” he said. “But that doesn’t mean [worldwide] production is down, just that Exxon’s share is decreasing.”

The company returned $10.1 billion to shareholders in the form of dividends and stock buybacks, 12% more than last year.

On an earnings-per-share basis, Exxon made $2.22. That was still lower than analysts had expected, but 24% higher than last year, a gain Exxon attributed to its aggressive stock buyback plan.

The big international oil companies have been criticized for plowing much of their profits back into stock buybacks and other programs to benefit shareholders, as opposed to exploring for more oil which could bring down the price of crude for everyone.

“While oil companies are earning record profits and gas prices are soaring, the largest oil companies have invested more resources in stock buybacks than U.S. production,” said Congressional Democrats in a press release shortly after Exxon announced its earnings.

Other critics charge the oil companies with deliberately restricting production in an attempt to keep prices high.

The industry says it’s investing as much as it can in finding new oil, but is having a hard time given the shortage of workers and equipment in the sector.

Recent efforts by countries such as Russia, Venezuela and Kazakhstan to gain greater control of their own domestic oil resources have also hampered the ability of international oil companies to increase production.

In addition to making hefty profits, Exxon also had a hefty tax bill. Worldwide, the company paid $10.5 billion in income taxes in the second quarter, $9.5 billion in sales taxes, and over $12 billion in what it called “other taxes.”
Political backlash

With Americans paying nearly $4 a gallon for gas, oil company earnings have been political fodder of late.

Congressional Democrats said they are having a conference later in the day to call for an end to tax breaks for big oil firms.

Several bills have been introduced in Congress to enact a “windfall” profits tax on these earnings, or at the very least eliminate manufacturing tax exemption oil companies now enjoy. Presumptive Democratic presidential nominee Barack Obama wants to tax oil companies at a special rate every time crude goes over $80 a barrel.

Most plans would either use this newfound tax money to fund investments in renewable energy, or give it to low income Americans struggling with high energy prices.

But so far those efforts have been blocked - mainly by Republicans - who say raising taxes on oil companies will only discourage investments in finding new oil and raise the price of crude.

Defenders of oil company profits also point out that their profit margin, at around 8%, is slightly below average for S&P 500 companies, and far below the 20%-plus margins seen at companies such as Microsoft or Pfizer.

CNN Money | Steve Hargreaves | Thursday,  July 31, 2008

Shell reports 33% rise in profit

Royal Dutch Shell, Europe’s largest oil company, reported a 33 percent increase in second-quarter profit Thursday, helped by a higher oil price even as production declined.

Like smaller rival BP earlier this week, Shell profited from an oil price that almost doubled in the second quarter from the year earlier but a 13 percent drop from a record on July 11 raised some concern among investors about whether oil companies can keep up the pace of earnings growth.

BP said earlier a higher oil price started to affect consumer demand for its gasoline, which declined as much as 10 percent in the United States and Europe.

Shell’s profit rose to $11.56 billion from $8.67 billion in the same period last year. BP reported a 28 percent increase in profit earlier this week and Italian oil company Eni said Thursday profit in the second quarter rose 52 percent, citing a higher oil price.

Shell’s shares have fallen 12.5 percent this year. That compares with a 14.7 percent drop of BP’s stock and a 9.9 percent decline for Exxon Mobil, the world’s biggest energy company.

Oil companies are under pressure to find new reserves as their traditional fields age and they face increasing competition from state-run oil companies in Russia and the Middle East. Shell is also looking to make up for production lost in recent incidents in Nigeria, where militants attacked an offshore production vessel in June, and in Russia, where it had to sell its share in the Sakhalin Island oil and natural gas project to state-controlled energy company OAO Gazprom last year.

Oil and gas production fell to 3,126 thousand barrels of oil equivalent per day from 3,178 thousand barrels.

Shell chief executive Jeroen van der Veer pledged to continue investing to fuel growth. “Shell is making substantial, targeted investments to grow the company for shareholders and help ensure that energy markets remain well supplied,” van der Veer said in a statement Thursday.

The company agreed two weeks ago to spend about $5.9 billion to buy Canada’s Duvernay Oil Corporation to increase its gas production from tough rock formations and is in talks with Iraq about some service contracts.

IHT |  Julia Werdigier | Thursday,  July 31, 2008

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