Ever since oil lifted over $50 I’ve been saying that speculation is the cause.   Actually, the lower dollar (caused by speculation) is a good part of the cause and inflation speculation is the rest.   What is not driving oil up, it seems, is actual supply and demand.  That’s the assumption in the market, anyway, and it’s probably correct. But there are some fundamentals influencing oil to the upside that are worth noting.   One is Nigeria and the other is Venezuela.   Both have collapsing governments and economies that have been well …

[Read more →]

Oil prices are ascending in concert with a rising stock market and an expanding sense of non-pessimism about the global economy, yet the supply of cheap oil remains far greater than demand.   Huge amounts of $5 cost oil is being moth-balled by OPEC and there is no shortage of oil inventory above ground, much of it floating at sea.   So the fundamentals of near term oil supply and demand imply lower prices but they are being overpowered by speculators who want to own oil as an investment category.  There …

[Read more →]

http://online.wsj.com/article/SB122461947159855391.html   Africa’s Potential to Sate World’s Oil Demand Dims By PETER FRITSCH Cape Town, South Africa The petroleum potential of Africa, a key contributor of oil barrels to thirsty markets, is beginning to look dimmer because of the credit crunch and a host of endemic challenges. Certainly, Big Oil’s continental land grab will continue. Countries such as Angola and those around the Gulf of Guinea continue to lease tantalizing exploration blocks in the deep waters off the Atlantic coast. That region has been …

[Read more →]

The following two reports from Reuters suggest that further violence in Nigeria is continuing to take more oil production off line.  One report says the recent violence upsurge is responsible for reducing exports by about 150 kb/d.   It is not clear whether the $6 rise in the oil price today was due to Nigerian issues or a spillover from the huge relief rally of the stock market after the U.S. began to seriously address the root problem of its credit crisis, sub-prime mortgages - or both. Nigeria militants turn against …

[Read more →]

A report posted below from the AP saying oil production is down by 1 mb/d after only a few days of attacks by MEND is a bit hard to take at face value.   A second report from Reuters is more reasonable, saying 115 kb/d have been taken off line during the past five days.  Both reports are dated 11/17, although the AP report was later by 9 hours.  We shall see. Nigeria: Militant attacks cutting oil production By KATY POWNALL, Associated …

[Read more →]

I think oil will trade in a range of $80 - $100 a barrel in the foreseeable future, probably another year.  Why?  First supply and demand:  Vectors for a lower price include roughly 3 mb/d  of reduced demand from the U.S. (about 1 mb/d) and more Saudi supply (about 2 mb/d) vs. a year ago.  The rest of the world is about flat with higher demand from China, some other Asian economies and oil exporting economies more than offsetting reduced OECD demand.  On the non-Saudi supply side, more supply from …

[Read more →]

The report posted below from the political consulting firm Stratfor provides context for the conflicting reports I recently posted - one saying MEND (the Delta rebel army) is happy with economic reforms aimed at helping the Delta region being proposed and will therefore cooperate with the government;  the other, a few days later, declaring out and out war on the government and on oil production after MEND forces were attacked.   Apparently the government was sending mixed signals.  The complexity of this situation is explored below by Stratfor.  Note Stratfor’s …

[Read more →]

According to this report, the leadership of MEND is sufficiently satisfied with a new government program to improve life in the Delta Region that MEND will cease its military operations against oil production.  But according to this other report dated three days after the first one, MEND is totally at war with the government and the oil companies after government troops attacked MEND patrols.  Talk about a volatile situation.  Can stability in Nigeria ever be achieved?   And if it were reportedly achieved, could it be relied …

[Read more →]

Production in Nigeria declined slightly in ‘07 from ‘06 - about 110 kb/d, but it is off about 500 kb/d in ‘08 vs. ‘07.  Clearly the MEND and other criminal/protest forces are gaining the upper hand.

In a sense, Nigeria has really become the world’s “swing producer”.   The tightness of global oil supplies hinges as much on whether the Nigerian government can get control of its country as whether the Saudis increase their production or not.

Here is a recent report from Bloomberg

July 28, 2008, 9:33AM
Nigeria to ramp up oil exports by …

[Read more →]

This story may not impact the price of oil in the near term but some day it may bite.  It’s a useful construct for understanding what is happening in the geo-politics of oil, which is vital since above-ground conditions increasingly determine how much oil reaches OECD markets. Here is the short version:    1. A great deal of future potential oil flows lie offshore Africa.    2. Shipments of oil from Nigeria are attracting pirates.  Bandits who are internal to Nigeria are also stealing much …

[Read more →]

Is it a criminal gang or a criminal government?  And if the stolen oil is on the market, has Nigerian crude production really been reduced as much as claimed? And, then…if Nigerian crude has been reduced less than has been reported to the market is the impact of Nigeria’s oil problem partly  “psychological”?

Here’s the story from the BBC:

Nigeria seeks to end ‘blood oil’

Stealing crude oil requires government cover, activists say

An international cartel of oil smugglers steals billions of dollars …

[Read more →]

Nigerian oil production is now down to 1.5 mb/d according to a Financial Times report.  Thus it appears that nearly 1 mb/d has been taken off line by the militant actions of MEND, the paramilitary group that purports to be fighting for social justice for the people of the Niger Delta where most of the oil is produced but where little of the revenue is distributed. In a recent post, I commented that, “Iran, Venezuela, Mexico, Nigeria, and Iraq together represent an enormous percentage of the world’s …

[Read more →]

The Oil & Gas Journal (5/5/08) published an analysis of the Iranian oil industry that begins: “The Iranian oil and gas industry approaches its 100th anniversary bloated, corrupt, and nearly bankrupt, managing four times the employees but two thirds of the oil production it had before the Islamic Revolution of 1978-79.”

The piece provides details supporting each of those allegations and it outlines the history of the industry, starting with the discovery of oil in 1908 by a predecessor company of BP.  Oil was nationalized in 1951 with a very successful …

[Read more →]

The recently successful attack on an offshore oil platform by MEND was the first successful attack on any offshore facility by the rebel group that purports to represent the interests of the poor people of the southern Nigerian Delta region where most Nigerian oil is produced.  It has taken 225,000 b/d off the market for an indeterminate period.  The successful attack on an offshore rig is significant above and beyond the immediate loss of oil production because all future planned expansion of Nigerian production, totaling 1.25 mb/d through 2013, will …

[Read more →]

The following two reports seem to paint a grim picture of the outlook for Nigerian oil Production.  MEND rebels have “achieved” a new capacity to disrupt Nigerian oil production, starting with an offshore field operated by Shell and scheduled to produce nearly 200 kb/d.  This cannot be good news.  Here’s the report from Reuters.  It is followed by a second report from Bloomberg: Why is Nigerian oil militant attack significant? WHY IS THIS ATTACK DIFFERENT? Militant attacks on oil installations in Nigeria have mostly targeted facilities …

[Read more →]