Tuesday, March 17, 2009

P53. Pick Points

Half-a-dozen or so stories that might be of interest:

There does appear to be a little recognition out there now that oil prices have hit a floor, and may perhaps be bounding up a little. I suppose if I was that kind of blogger I would point to the post where I said so, but let’s be a little cautious a week or so longer. Ecuador thinks that the price should really be $80 (per barrel) but would be happy with $60. Although Shell admitting they weren’t replacing their withdrawals from reserves, might also have helped. With some of the excess oil that has been held in tankers now coming onto the market perhaps others are seeing the sort of signal that says we may now see a crawl back up in price. It was only a month ago that something like 80 million barrels was being held in these vessels, given that a VLCC (Very Large Crude Carrier) can hold up to 2 million barrels, and with 45 tankers having been used that way, there was a lot to ease back into the market. Shell sold their first two tanker loads (some 1.2 mb) back at the end of January and it seems that others are now also finding a sale.

The lower supply price for natural gas is now reaching the point (as winter demand dies) that supply companies are starting to pass on their savings to the customer. For example up in Canada, Enbridge Gas Distribution has just go permission to drop their price from 30.4 cents per cu.m to 23.5 cents. For a household using 3,000 cu m per year, this will save some $230. (That price converts to a drop from $8.60 to $6.65 per kcf). Similar things are happening in New Hampshire with the utility there, Unitil Corp, is getting a new rate of 69 cents per therm, (or $6.90 per kcf), which is down 26% on recent prices, and 56% from last summer’s peak ($15.50 per kcf). There are some out there, however, that have picked up the message I have mentioned here earlier, that as rigs drop off, so availability will again become tight, and thus prices could double again by next year. Next January’s futures are up 49% on April. However, while I was looking at a 20% shortfall some time into early next year, with the current fall in production, some are seeing 5% drops by the fourth Quarter. And looking back in history (which I favor)
The last time drillers stopped rigs at this pace was seven years ago, when futures advanced 86 percent. The world's biggest hedge funds have already started to close bets on a drop in prices, government data show. Natural gas tumbled 30 percent this year, the worst start since 2006, as sales weakened with the recession.

I usually only just look at the weekly EIA numbers for crude, gasoline and natural gas, (and those comments may be a few hours delayed since I am working in Sweden) but it is worth having a quick peak at the coal forecasts, which come out on Monday’s. For reference here are the current spot prices for coal:

Source EIA

In case you were wondering why most utilities are buying Powder River Coal from Wyoming. The amount of coal being produced and used is remaining fairly stable.

Source EIA

The blue line for last year shows record production levels, that are, at this time, not anticipated to occur this year because of the economy. However, when one looks at the international market, where last year saw record prices of up to $300 a tonne, (sometime I will start correcting for the difference between short tons (US) and metric tonnes (most others)), the market is currently looking at prices of around $115. Of course that view came from New Zealand, where a new coal offering was fully subscribed. Australia is hoping to settle, for the moment, at around $70. But those who think that the global slowdown will seriously reduce consumption, might want to consider that China’s imports were at the highest level in 22 months in February, at 4.88 mill tons, and with prices being bruited of $62.10 per ton in Newcastle, Australia, they may not be the only ones that come calling. (But part of the demand relates to internal Chinese politics over the price utilities will have to pay the mines for coal). It might also be worth noting that in order to sustain their economies both China and India are pouring money into infrastructure, and that means steel, and steel means iron, and iron means coal. India is going into elections this year, in case you had forgotten. However the number of ships lined up to take coal at Newcastle has dropped from 70, eighteen months ago, to 15.

Well having just skimmed around the big three tonight, I thought I’d leave room for a couple of pictures. Back when we went to Cork for the ASPO Conference , Colin Campbell laid on a piper to lead us in to dinner. Well I was led to where I was ended up deciding to eat tonight by pipers* in the Stockholm Gamla Stan.

Pipers in Stockholm

And then when I wandered back to the hotel, I found that the Royal Palace had been surrounded by a belt of snow about a street wide, and some 20 cm (8 inches or more) thick of artificial snow. Maybe they thought I missed it, or was expecting it (it was snowing when I arrived). Anyway, not a good picture in the light, but just to show, these are normally the steps up to the Royal Palace.

Snow covering the stairs into the Royal Palace

(it’s artificial, and 20 cm plus deep)
* I actually dined on moose, and cloudberries, just around the corner.

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