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December 7, 2011 Energy Data Highlights Crude oil futures price 12/5/2011: $100.99/bbl up$2.78 from week earlier up$11.80 from year earlier Natural gas futures price 12/5/2011: $3.461/mmBtu up$0.097 from week earlier down$0.888 from year earlier Retail gasoline price 12/5/2011: $3.290/gal down$0.017 from week earlier up$0.332 from year earlier Retail diesel price 12/5/2011: $3.931/gal down$0.033 from week earlier up$0.734 from year earlier Weekly coal production 11/26/2011: 20.807 million tons down0.411 million tons from week earlier up0.324 million tons from year earlier

Natural Gas/ Power News

EIA Storage Release 11/23/11 (Actual): -1 Bcf Previous Week: +9 Bcf +1.1% Change from 1 Year Ago +7.3% Change 5-year Average Canadian Natural Gas Falls Amid Mild Weather, Ample Supplies

Canadian natural gas fell amid mild U.S. weather and abundant supplies that have pared demand for furnace fuels. Alberta gas fell 0.9 percent after forecasters including AccuWeather Inc. predicted warmer weather for large U.S. cities. New Yorks high will touch 56 degrees Fahrenheit (13 Celsius) tomorrow, 10 degrees higher than normal, AccuWeather said. U.S. stockpiles were 7.3 percent above the five-year average as of Nov. 25, according to the Energy Department. An extremely mild November explains some of the recent surge in the storage surplus, said Stephen Smith, an analyst and president of Stephen Smith Energy Associates in Natchez, Mississippi. Average onshore gas production has been routinely running 5 billion to 6 billion cubic feet a day higher than a year ago. Its going to take a while to fix this problem. http://www.bloomberg.com/news/2011-12-06/canadian-natural-gas-falls-amidmild-weather-ample-supplies.html

Shell Weighs Options for U.S. Shale Gas Royal Dutch Shell Plc (RDSA), Europes largest energy producer, is weighing options for rising North American natural-gas output including exports and making liquid fuels, Chief Executive Officer Peter Voser said. Shell will double North American gas production in the next three years to the equivalent of 400,000 barrels of oil a day as output from shale deposits rises, Voser said in an interview. Shell may channel gas into chemical production, an export project in Canada, and a program to use the fuel to power trucks, he said. We are getting now into production phase in a big way, Voser said at the World Petroleum Congress in Doha, Qatar. Its about the right time to look for further options. We are really looking at the usage of gas in a much wider way in North America. Pumping gas trapped in shale rocks has transformed the U.S. into the worlds largest gas producer, cut prices about 75 percent from their 2008 peak and made exports to higher priced markets in Asia and Europe a viable option. The fuel will overtake crude oil to account for more than 50 percent of Shells global production next year, driven in part by the development of shale gas fields in Texas and Pennsylvania. http://www.bloomberg.com/news/2011-12-07/shell-says-exports-truck-fuel-amongoptions-for-u-s-shale-gas.html

Shell Strikes Shale Gas in China Royal Dutch Shell has found shale gas in China, a development that could cap imports in a market natural gas producers are hoping will drive demand. An official with Shell's partner, PetroChina, a unit of the country's top energy group, state-owned CNPC, said drilling results from two wells Shell drilled had been positive."Shell has two vertical wells and they got very good primary production," Professor Yuzhang Liu, Vice president of Petrochina's Research Institute of Petroleum Exploration and Development (RIPED), said in an interview at the sidelines of the World Petroleum Congress (WPC) in Doha. "It's good news for shale gas," Liu, who regularly represents PetroChina at industry events around the

world, told Reuters late on Monday. China currently has no commercial shale gas production. http://www.cnbc.com/id/45564167 Natural gas, nuclear get bigger role in energy master plan New Jersey will depend less on solar panels, wind turbines and other renewable energy sources than originally proposed as Governor Christie approved a plan Tuesday that calls for increased reliance on natural gas and nuclear energy. The final energy master plan calls for 22.4 percent of the state's energy to come from renewable sources by 2020, down from 30 percent under a 2008 plan by former Gov. Jon Corzine. But Christie said he still supports incentives to increase the amount of energy supplied by solar over the next three years. Christie wants 70 percent of the state's electric use to come from "clean" sources by 2050 and has said that category has to include nuclear, natural gas and hydroelectric facilities. http://www.northjersey.com/news/135151688_Natural_gas__nuclear_get_bigger_ro le_in_energy_master_plan.html Gas users lock in low long-term prices Long-term price risk management deals are becoming more popular with utilities and regulators as a way to lock in low natural gas prices. With natural gas spot prices falling to a low of $2.83 per million British thermal unit (mmBtu) in late November a two-year low some consumers of the fuel have sought out deals to secure fixed-price supply benchmarked against current lows for as long as possible. At the same time, the US Energy Information Administration expects 2011 production to rise by 6.1% in 2011 to 65.6 billion cubic feet per day (bcf/d) and storage is now 261bcf above the five-year average, prompting producers on the other side of such deals to look for ways to secure long-term customers. One such deal, completed by Oregon utility NW Natural and Canadian producer Encana Oil & Gas on May 1, 2011, established a joint venture to develop certain reserves owned by Encana in Wyoming. NW Natural will invest a total of $250 million over five years to cover drilling costs in exchange for working interests in certain sections of Encanas Jonah field. It expects the reserves to provide a portion of its natural gas supplies for customers over a 30-year period. Over the life of the investment, NW Natural estimates it will receive 93bcf of gas at an average cost of $5.15/mmBtu. http://www.risk.net/energy-risk/news/2130614/gas-users-lock-low-term-prices US gas consumption on the upswing, says new EIA report Thanks in part to strong production levels and resulting price reductions, US natural gas consumption now is expected to average 67.18 Bcf/d this year, up 100,000 Mcf/d from the Energy Information Administration's month-ago estimate. In its December Short-Term Energy Outlook, released Tuesday, EIA said that greater use of gas in the industrial and electric power sectors will account for most of the increase in total consumption this year, with projected growth rates of 2.3% and 2.2%, respectively. The agency also hiked its earlier estimate for 2012 consumption to 68.4 Bcf/d, up 1.7%. US marketed natural gas production should average 65.9 Bcf/d in 2011, a 6.6% increase over 2010, the report added. For 2012, marketed production will continue to grow, but at a slower pace, increasing by 2.8%. "All of this growth comes from higher onshore production in the Lower-48

States, which more than offsets a year-over-year decline of 1.2 Bcf/d (20%) in the Federal Gulf of Mexico," it said. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6736273 Electricity demand changes in predictable patterns System operators must match electricity supply to demand in real time, with very tight tolerances. Demand on a system can change throughout the day as well as throughout the year. Wholesale electricity prices generally rise with increasing demand levels as more expensive generation is brought online to meet demand. Changes in electricity demand levels are generally predictable and have daily, weekly, and seasonal patterns: 1Daily patterns: Demand levels rise throughout the day and tend to be highest during a block of hours referred to as "on-peak," which usually occurs between 7:00 a.m. and 10:00 p.m. on weekdays. 2Weekly patterns: Demand levels are generally lowest between 10 p.m. and 7 a.m. and on weekends. This is usually referred to as "off-peak". 3Seasonal patterns: Demand levels during the summer and winter months tend to be higher than demand levels during the fall and spring "shoulder" seasons when system demand for space conditioning (heating or cooling) is low. The annual peak of hourly, daily, and monthly demand typically occurs during the winter or summer. http://www.eia.gov/todayinenergy/detail.cfm?id=4190

Green/ Alternative Energy News

What is the role of hydroelectric power in the United States? The importance of hydropower as a source of electricity generation varies by geographic region. While hydropower accounted for 6% of total U.S. electricity generation in 2010, it provided over half of the electricity in the Pacific Northwest. Because hydroelectric generation relies on precipitation, it varies widely from month to month and year to year. http://www.eia.gov/energy_in_brief/hydropower.cfm

Crude Oil News


OPEC Daily Basket Price 12/6/2011- $109.62 (OPEC Daily Basket Price 12/5/2011- $110.35) Crude Oil Erases Gains on Concern EU Summit May Not Resolve Debt Crisis Oil erased earlier gains on concern that the European Unions debt crisis may not be resolved by the groups summit this week. Crude was little changed in New York after rising as much as 0.7 percent, snapping three days of gains. Futures retreated as the dollar gained against the euro after a German government official said Chancellor Angela Merkels government is more pessimistic of the outcome of a European Union leaders summit in Brussels beginning tomorrow. Investors are not convinced that the upcoming EU summit will address the sovereign debt issue

and they feel that the struggling continent will show a drop in demand, said Glen Ward, head of retail derivatives at London Capital Group Ltd. http://www.bloomberg.com/news/2011-12-07/oil-rises-for-a-fourth-day-on-iranban-speculation-u-s-stockpile-decline.html

Brent Steady Above $110; Eyes EU Summit, China Data Brent crude was steady above $110 on Wednesday, as investors turned cautious ahead of a European summit to deal with the region's debt crisis and the release of key Chinese economic data later this week. Market participants hope recent credit warnings by Standard & Poor's will drive European leaders to take more decisive action at Friday's summit. These expectations also pushed up Asian equities and gold prices. Brent crude fell 14 cents to $110.67 a barrel, after settling Tuesday $1 higher at $110.81 a barrel. U.S. crude edged up 21 cents to $101.49 a barrel. "The market is likely to stay cautious before the ECB rate decision and the EU summit on Friday. Investors have priced in a positive outcome at the summit, so we might see a sell-off if the meeting disappoints," said Natalie Robertson, a commodities analyst with ANZ Bank in Melbourne. http://www.cnbc.com/id/45574233 Brent Could Drop, But Not for Long The price of Brent crude could immediately slide by $5 a barrel if European Union leaders are unable to agree on a convincing plan at the crisis summit in Brussels, analysts say. Losses of as much as $20 a barrel are predicted if the currency union were to break apart. "Any potential breakup would have dire economic consequences, not just for Europe, but the global economy and that would have a knock-on effect on global oil demand," said Simon Wardell, an analyst at IHS Global Insight. "A lot of sentiment would be very, very negative and that would obviously push down on prices." But such a shock would be short-lived, analysts say, because prices would likely rebound on factors such as an EU embargo of Iranian oil, which has been threatened. http://online.wsj.com/article/SB1000142405297020490380457708215104693876 4.html?mod=WSJ_Commodities_LEFTTopNews Oil companies plan record capital spending next year Energy companies are planning to spend a record $598 billion on finding and producing oil and natural gas worldwide in 2012, a 10 percent increase over this year, Barclays Capital analysts said in a report Monday. In a survey of about 350 energy companies, the investment bank found that oil and gas exploration and production will continue to expand rapidly in 2012. At nearly $600 billion, the energy industrys global E&P spending is about equal to the annual gross domestic product of crude oil powerhouse Saudi Arabia. Exxon Mobil Corp. remains the biggest spender at more than $30 billion, expanding 5 percent for 2012, according to Barclays. http://fuelfix.com/blog/2011/12/06/oil-companies-plan-record-capital-spendingnext-year/

Hedge Funds Reverse as Iran Drives Oil to $100: Energy Markets Hedge funds retreated from bearish oil bets as rising tension with Iran, OPEC's second-largest producer, pushed crude to more than $100 a barrel. The funds and other large speculators increased wagers on rising prices by 2.6 percent in the seven days ended Nov. 29, according to the Commodity Futures Trading Commission's Commitments of Traders report on Dec. 2. They had cut so-called long positions, bets on rising oil, by the most since August the previous week, the Washington-based CFTC said. http://www.sfgate.com/cgi-bin/article.cgi? f=/g/a/2011/12/05/bloomberg_articlesLVPP9F6K50YC.DTL OPEC's Badri hopes EU doesn't ban oil imports from Iran OPEC Secretary General Abdalla el-Badri said Wednesday he hoped that the European Union would not agree an oil import embargo on Iran over its controversial nuclear program. Badri said a threat against any member of the oil producer club could affect oil supply to world markets and that an EU ban on oil imports from OPEC member Iran would remove a large volume of crude that would be difficult to replace. "We are against threatening any OPEC country because that will effect production and supplies and the market. We want to solve those problems in peaceful ways without any threatening," Badri told reporters on the sidelines of the World Petroleum Congress in Qatar. "I really hope that there will be no embargo from the EU," Badri said. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/8672555

No need for Russia to join EU-led oil embargo on Iran: Shmatko Russia has no plans to join any EU proposed embargo on Iranian oil exports as it is not importing crude from the country and considers the move to be politically motivated, Russian energy minister Sergei Shmatko said Wednesday. "I heard yesterday [Tuesday] that Russia was asked to join this embargo ... Today, Russia is not taking even a single ton of Iranian oil and we don't have any plans to increase our import share of Iranian oil. In other words there is no need for us to join this embargo because we are not consuming Iranian oil at all," Shmatko said on the sidelines of the World Petroleum Congress in Doha. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/7835142 Iran- Oil and Natural Gas Summary Iran, a member of the Organization of the Petroleum Exporting Countries(OPEC), ranks among the world's top four holders of both proven oil and natural gas reserves. Iran is OPEC's second-largest producer and exporter after Saudi Arabia, and in 2010 was the third-largest exporter of crude oil globally after Saudi Arabia and Russia. However, falling production and increases in domestic consumption have been squeezing the volumes of oil available for export in recent years.

Natural gas accounts for 54 percent of Iran's total domestic energy consumption. Most of the remainder of energy consumption is attributable to oil, with marginal contributions from coal and hydropower. Iran will realize a boost in natural gas production from its offshore South Pars natural gas field in the Persian Gulf, an integral component of energy sector expansion plans. http://www.eia.gov/countries/cab.cfm?fips=IR

Recent Rig Counts Date of Last Year's Count 24 Nov 10 24 Nov 10 September 2010

Area U.S. Canada

Last Cou Change from Count nt Prior Count 2 Dec 1993 11 2 Dec 11 484 -7 Unchanged

Date of Prior Count 23 Nov 11 23 Nov 11 Septembe r 2011

Change from Last Year +280 +35 +98

Internatio October 1197 nal 2011

+23

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

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