And The Scots Wanted Independence 

Weeks After The Nationalists Promised An Oil Boom For Scotland, One Of The North Sea’s Biggest Producers Calls It Quits

REUTERS/ Vivek Prakash

Apache UK operations amounted to 72,118 barrel a day in 2014.

Remember when Scottish Nationalists promised that North Sea oil production would buoy the nascent nation’s post-independence economy?

Well, the North Sea’s third-largest oil producer has put its operations up for sale, as reported by The Sunday Times. It doesn’t want to continue drilling there.

The move comes only two weeks after the Scottish voted “no” to independence in their referendum. Oil production was a hot topic in the contest, with the independence front claiming that Scotland would be better off without the rest of the UK thanks to the oil revenue that belongs to Scotland.

Apache Corp., an American oil and gas producer that also operates in Egypt and Australia, first entered the British North Sea in 2003, and it specialized in buying mature fields and revitalizing them. Its strategy has changed, however, despite 150 million barrels of proved reserves still in the field. These include the UK’s largest oil field, located in the Forties basin.

It is understood that Apache would now focus on the domestic boom of shale gas, and the international operations are meant to be spun off: “We are evaluating the separation of our international business through capital markets or strategic transactions,” Steve Farris, Chairman and CEO, said.

UK’s Apache production was at 1.4 million barrels in 2013, making it the third-largest operator after BP and Royal Dutch Shell. As a reminder, North Sea Oil is actually in decline, the Times says:

North Sea production has fallen from its 1999 high of 4.5m barrels a day to only 1.4m barrels last year.

Weakening Russian Energy Sector May Not Support Geopolitical Ambitions

The Russian economy may not be able to finance the Kremlin's ambitions in Eastern Europe for much longer because the country's oil and gas output is no longer a strong support of growth.
Russian Energy Minister Alexander Novak said on May 2 that gas supplies through Ukraine might be severed unless Kiev pays in advance for its June deliveries.

Russian energy company Gazprom cut gas supplies through Ukraine in 2009 because of contractual disputes. The deal that ended the impasse left Kiev with some of the highest gas debt obligations in the region. Now Russia says Kiev owes more than $11 billion for unused gas last year, a debt Ukraine's energy company, Naftogaz, disputes.

Russia meets about a quarter of European natural gas needs, most of it via a Soviet-era pipeline network in Ukraine. Overall, however, Russia's gas output is in decline. Gazprom, one of the largest companies in the world, has experienced a production decline of nearly 8 percent, to 40 billion cubic feet per day in March.

Though European countries are the top oil export destination for Russian crude, China is the third biggest importer of Russian oil, suggesting that sector is a bit more diverse than gas. Despite Russia's move to embrace Asian economies, where energy demands are greater, oil output declined 0.2 percent in April, the fourth month in a row for a slip.
  The International Monetary Fund (IMF) warned in an April 30 report that Russia's model for economic growth is outdated.
"After almost 15 years of growth based on rising oil prices, successful macroeconomic stabilization policies and increasing use of spare resources, this growth framework has reached its limits," the Fund warned.

Russian President Vladimir Putin has used an economy propped up by his country's energy wealth to support a policy of leash tightening in former Soviet republics like Ukraine and Georgia. With the IMF predicting 0.2 percent growth for Russia, however, his coffers may not be as deep as they were when Moscow laid claim to territory in Georgia in 2008.

The collapse of the Soviet Union in 1991 was brought on in part by military overreach, notably in Afghanistan. Now, Putin's Russia is at risk of mirroring the efforts of his predecessors by embracing a regional policy in the region described by European Energy Commissioner Gunther Oettinger as one of "divide and rule."
Russia is in the midst of its longest streak of declines in oil and gas production in years, its economy is in shambles and its leverage on the international stage is in question. With Putin clinging defiantly to the last threads of the Iron Curtain, it may be more than just Russia's economic model that's outdated.

Russian Pressure Has Slovakia Hesitating To Help Ukraine

In late April, Slovakia signed an agreement with Ukraine to reverse the flow of natural gas, allowing Ukraine to receive gas shipments in the event that Russia decides to cut off supplies. The deal could eventually open up an annual 10 billion cubic meters of natural gas capacity.

About 40 percent of Europe’s gas from Russia flows through Slovakia, which makes the small country an important transit point for the Russian-European gas trade.

But Slovakia is under intense pressure from Russia to resist appeals for more help, according to a May 5 article in The New York Times.

Slovakia balked at tweaking its full pipeline system in order to assist Ukraine, only agreeing to use an unused pipeline to ship gas to Ukraine. The pipeline will receive upgrades and could come online later this year, but initially only at 3 billion cubic meters (bcm) of annual capacity, which is a tiny fraction of what Ukraine will need next winter if Russia decides to turn off its gas flows. Ukraine needs around 55 bcm per year, half of which comes from Russia.

Ukrainian officials have grown frustrated with what they feel is Slovakia’s unwillingness to help. Some say that Slovakian Prime Minister Robert Fico is too deferential to Russia and Gazprom. “We have been struggling for a long time to convince them to find a solution,” Andriy Kobolev, the chairman of Ukraine’s state-owned Naftogaz, told the newspaper.  “We have now identified the problem, which was obvious from the beginning — restrictions placed by Gazprom.” 

Slovakian officials are worried that Gazprom could raise natural gas prices, just as it did with Ukraine, if Slovakia helps Kiev too much. When asked about Gazprom’s position on reversing the flow of natural gas, Gazprom’s chief Alexander Medvedev said that such a move would “require the agreement of all parties involved,” meaning that Slovakia could not make a decision without Gazprom’s approval.

Putin is Losing Eastern European 

Energy Gamble

 
Russian President Vladimir Putin said he doesn't think the European community can do without the natural gas it gets from energy monopoly Gazprom.  With a Russian economy starting to decline, however, it may be Gazprom that's too strongly interconnected to the European market to break free.
The narrative over European energy security reaches at least back to 2006 when Gazprom first cut gas supplies through Ukraine. The fallout from the latest disruption in 2009 put opposition darling and former Prime Minister Yulia Tymoshenko in prison, but now the tables have turned for a Ukraine tilting more strongly toward the European Union.
Last week, Putin warned European leaders that gas supplies through Ukraine may be cut if Kiev didn't settle its $2.2 billion gas debt to Gazprom. With European allies mulling the best way to break Russia's grip on the region's energy sector, Putin said there are few alternatives to Russian natural gas.
"Can they stop buying Russian gas?" he asked in a question-and-answer session this week. "In my opinion it is impossible."
Russia sends about 15 percent of its natural gas supplies bound for the European community through the Soviet-era transit network in Ukraine. The European energy market has options in Caspian gas waiting in the wings, and potentially liquefied natural gas deliveries, though those alternatives provide little short-term relief.
U.S. State Department spokeswoman Marie Harf warned Putin against using energy as a geopolitical tool in a crisis that's re-opened old Cold War wounds.
"We’ve said very clearly that Russia should not use this as a weapon and that, actually, Russia has a lot to lose if they try to do so," she said.
Before the situation erupted into one of the most severe Eastern European crises since the 1990s, the Kremlin had expected 2.5 percent growth in gross domestic product.  Now, Economic Development Minister Alexei Ulyukayev said GDP growth should be "near zero" and the Ukrainian row may be to blame.
Trade in oil and natural gas nets Russia about 70 percent of the estimated $515 billion in export revenue and accounts for more than half its federal budget. Though Gazprom has sought entry to a growing Asian economy, most of its natural gas heads to the European market, meaning Putin's Russia may be as strongly linked to the EU as the EU is linked to the Kremlin.
Russian First Deputy Prime Minister Igor Shuvalov said the economic situation in the country in part depends on how the Ukrainian crisis plays out. The World Bank, he said, expects 1 percent economic growth for Russia this year. The view from the Kremlin, however, is much more pessimistic. With both Russia and the European community interconnected by natural gas, the relationship may remain intact despite the rhetoric from both sides of the lowering Iron Curtain.

Putin Could Stop Selling Gas to Ukraine. Here's Why He Won't

Russian President Vladimir Putin holds a meeting with ministers to discuss the situation in Ukraine and natural gas transportation to Europe on April 9

For a time this week, Vladimir Putin looked ready to turn off the gas. In an April 10 letter to 18 European heads of state, he warned that Russia could “completely or partially cease gas deliveries” to Ukraine, in turn threatening Western Europe, which gets about 15 percent of its natural gas from Russia via Ukrainian pipelines.

But on April 11, the Kremlin appeared to soften its stance, saying that Russia didn’t plan to cut off Ukraine’s supply and promising it would honor its contracts with European customers.
Russia has played hardball with Ukraine before, most recently in 2009 when it shut off gas flows for two weeks in the middle of winter, causing supply disruptions across southeastern Europe. So why is Putin hesitating now?

Partly, it’s a question of timing. Because of reserves accumulated during an unusually warm winter, Europe doesn’t urgently need fresh gas supplies right now. More important, though, is Russia’s economy, which is “more vulnerable than has been perceived,” says emerging-markets economist Neil Shearing of Capital Economics in London.

All told, oil and gas sales to Europe account for 10 percent of Russia’s gross domestic product, according to Capital Economics.

Plagued by sagging growth, a weakening currency, and rising capital flight, “Russia needs money from its energy exports more than ever,” Shearing says. And there’s no practical way for Moscow to cut off Ukraine’s supply without hurting European customers that get their deliveries through Ukrainian pipelines.

In fact, Moscow still needs Ukraine as a customer, too, even as it complains bitterly that Kiev owes it billions in back payments for gas shipments. Under an agreement signed late last year by Putin and former President Viktor Yanukovych, Ukraine was to pay some $9.4 billion this year for heavily discounted gas from Gazprom—equaling some 6 percent of total revenue at the Russian state-owned gas export monopoly, according to the Oxford Institute for Energy Studies.

That deal has now been scrapped, and Russia is demanding higher prices. But Moscow probably won’t get a windfall, as Kiev is expected to reduce the volume of its Gazprom purchases and turn to European suppliers. These suppliers also buy from Russia, but in recent years they have squeezed big price concessions from Gazprom.

Ukraine and Western Europe certainly can’t afford to walk away from Russian gas, says Jonathan Stern, a senior research fellow at the Oxford Institute. “Without Russian gas, European gas prices would skyrocket. There’d be a massive increase in bills for everybody.” But an abrupt cutoff would be just as dangerous for Moscow, as it nurses a sick economy, Stern says. “It’s the last thing Putin needs.”

Germany Prepares To Supply Ukraine If Russia Shuts Off The Gas

REUTERS/Denis Sinyakov
German Chancellor Angela Merkel talks with Russian President Vladimir Putin in Heiligendamm June 6, 2007.

Germany could step up and start supplying excess natural gas to Ukraine should Russian Gas monopoly Gazprom stop deliveries, reports Der Spiegel.
German utility companies RWE and E.on are currently working on plans that could supply Ukraine with weeks’ worth of gas almost immediately.
Frank Dohmen, reporting for Der Spiegel, writes:

In an emergency, the flow through Europe’s pipelines could simply be reversed, with gas getting pumped from German reservoirs through the Czech Republic and Slovakia directly to Ukraine. Following this year’s especially mild winter, Germany’s reservoirs are much fuller than usual. Even long-term deliveries would be conceivable at the moment.

Russia has shut off gas supplies to Ukraine twice since 2006 in attempts to steer Ukrainian politics and Gazprom has threatened to rise prices or shut off gas to Ukraine unless a gas debt is paid.
Ukraine has already signed a preliminary framework agreement with RWE in 2012 making gas deliveries possible. RWE has so far committed to delivering 10 billion cubic meters of gas per year to Ukraine with the aims of filling the country’s reservoirs for next winter.
Although Germany draws around 35% of its natural gas from Russia, RWE receives its natural gas supply from the Netherlands and Norway.
Currently, Ukraine receives over half of all its natural gas reserves from Russia.

REUTERS
Map of Europe showing how heavily EU countries rely on Russian gas imports.

Russia Plays Ukraine Gas Card—Again

Russia appears to be backing down slightly over Ukraine, with President Vladimir Putin saying that military force would be a last resort amid the threat of US sanctions, but Moscow is expectedly playing the gas card—again.   

Speaking in a live televised address on RT News, Putin said Russia would employ military force in Ukraine as a last resort, but still reserved the right to use all options in Ukraine to protect from the threat of “terror”.

"As for bringing in forces, for now there is no such need but such a possibility exists," he said. "What could serve as a reason to use military force? It would naturally be the last resort, absolutely the last."
 
Moscow views recent events in Ukraine as no less than a coup that led to the ouster of pro-Russian Ukrainian President Viktor Yanukovych.

US officials have threatened to impose sanctions on Russia over the crisis in Ukraine, while Putin commented that such a move would be counterproductive. Putin noted in his public address that Moscow did not believe there was a political future for Yanukovych and was concerned only for “humanitarian reasons”.

The ouster of Yanukovych was the culmination of months of street protests in Kiev. The latest crisis is in response to Russia’s seizure of Ukraine’s Crimea region, where Russia houses its Black Sea Fleet, which has led to an ongoing military standoff between Ukrainian troops and pro-Russian forces at the Belbek airbase.  

After a day of panic on Monday, Putin’s comments today sparked a lift in the Russian bond markets.

Putin’s comments come as US Secretary of State John Kerry arrived in the Ukrainian capital Kiev, bringing with him news of an economic package and technical assistance for the country.   
Coupled with the looming threat of a Russian incursion into parts of eastern and southern Ukraine, Russia is also trying to raise the pressure on Ukraine by predictably playing the gas card.
Russian gas giant Gazprom has threatened to remove a gas price discount in April. However, according to Robert Bensh, the majority shareholder in Cub Energy in Ukraine, Gazprom’s move could actually bolster the new government in Kiev. 

“This move by Gazprom was not unexpected—especially since the discount in question was a deal made under Yanukovych late last year. So this is an obvious reprisal for his ouster,” Bensh said.

“But what’s interesting is that the new administration in Kiev could take advantage of this and play the Russian aggression card when it has to implement an increase in domestic gas prices in order to satisfy the IMF [International Monetary Fund],” Bensh said.
“This will make it much easier for the new administration to convince the public of the need for a gas price increase, so unwittingly, Moscow, through Gazprom, may be helping to prop up the new government in Kiev.”  

The US is also considering a Congressional push to approve $1 billion in loan guarantees to help ease the sting of proposed energy subsidy cuts.

America Always Go To War For Oil ? Don't Be Misled

America Will Produce More Fossil Fuels This Year Than It Ever Has Before

University of Michigan economics professor and American Enterprise Institute scholar Mark J. Perry has posted two graphs showing just how far America's fossil fuel production has come.

First, production is at an all-time high — nearly 62 quadrillion BTUs, an increase of about 12 percent from 2005.

That's enough to meet approximately 13 percent of the entire world's energy needs, according to the Department of Energy.

Perhaps more importantly, we haven't enjoyed this degree of energy self-sufficiency since the 1990s , according to his second chart:



This weekend, Standard & Poor's said the Marcellus shale formation could contain "almost half of the current proven natural gas reserves in the U.S," the AP reported.

Americans Are NOT Worried About High Petrol Price 

 So Government Can Go To War With Iran

UBS: No, Gas Prices Are Not Fazing the Consumer

Pulled some pretty key charts from an economic roundup this morning put out by the UBS Global Economics Research team.  The report looks at Consumer Confidence from every perspective imaginable - the broad strokes are that people are getting more confident still and things are headed in the right direction, regardless of higher gas prices.

Check it out:

The World's 15 Biggest Energy Companies 

Platts, an energy research agency, has released its list of 250 Global Energy Rankings. Here is the top 15 :-

Platts constructed their list by comparing individual companies' assets, revenue, profits, and return on investment capital. All of the them are huge — worth more than $3.5 billion.

There are some stawarts on the list. Exxon Mobile, for example, has maintained its 2010 #1 spot. And you won't be surprised to find BP on the list as well.

The real story here, though, is the rise of the BRICs, especially (you guessed it) China. 11 of the top 20 companies are from BRIC nations, and while they're only 4 of the top 10, all of those companies are on the rise. For example, China's Petroleum and Chemical Corp leaped from 23rd place last year, to 8th place this year.

Endesa SA

Location: Spain Assets: $73,935 mil
Revenues: $34,350 mil
Profits: $4,822 mil
Return on invested capital (ROIC): 8.9%

Rosneft Oil

Location: Russia Assets: $83,232 mil
Revenues: $39,431 mil
Profits: $6,514 mil
Return on invested capital (ROIC): 10.6%

Reliance Industries

Location: India Assets: $55,939 mil
Revenues: $43,636 mil
Profits: $5,248 mil
Return on invested capital (ROIC): 12.4%

RWE AG

Location: Germany Assets: $114,765 mil
Revenues: $65,234 mil
Profits: $4,892 mil
Return on invested capital (ROIC): 11.3%

LUKOIL

Location: Russia Assets: $84,017 mil

Revenues: $104,956 mil

Profits: $9,006 mil

Return on invested capital (ROIC): 13%

Royal Dutch Shell

Instant Shift

Location: Netherlands Assets: $292,181 mil

Revenues: $278,188 mil

Profits: $12,518 mil

Return on invested capital (ROIC): 7.4%

Chevron Corp

Location: The United States Assets: $164,621 mil

Revenues: $159,293 mil

Profits: $10,483 mil

Return on invested capital (ROIC): 10.2%

China Petroleum

Location: China Assets: $128,505 mil

Revenues: $192,638 mil

Profits: $9,041 mil

Return on invested capital (ROIC): 11.3%

Petro China Corp

Location: China Assets: $254,914 mil

Revenues: $220,177 mil

Profits: $21,034 mil

Return on invested capital (ROIC): 12%

E.On AG

Location: Germany Assets: $187,476 mil

Revenues: $115,772 mil

Profits: $12,045 mil

Return on invested capital (ROIC): 11.5%

Total SA

Location: France Assets: $156,913 mil

Revenues: $157,673 mil

Profits: $11,875 mil

Return on invested capital (ROIC): 11.6%

Petrobras Brasileiro

Location: Brazil Assets: $190,411 mil

Revenues: $100,880 mil

Profits: $16,002 mil

Return on invested capital (ROIC): 11.8%

Gazprom Oao

Location: Russia Assets: $270,501 mil

Revenues: $98,135 mil

Profits: $25,578 mil

Return on invested capital (ROIC): 11.4%

BP

Location: The United Kingdom Assets: $235,968 mil

Revenues: $239,272 mil

Profits: $16,578 mil

Return on invested capital (ROIC): 13.0%

Exxon Mobil Corp

Location: The United States

Assets: $233,323 mil

Revenues: $275,564 mil

Profits: $19,280 mil Return on invested capital (ROIC): 15.7%

Afghan Newspaper Lambasts China as Rapacious Exploiter

With the news that the U.S. is holding secret talks with the Taliban in the Persian Gulf state of Qatar, many Afghans are looking towards a future when military operations cease and the country can begin to recover from more than three decades of war.

Afghanistan’s infrastructure will require foreign aid in the billions, but the Pushtun-language independent Afghan newspaper Cheragh on 28 December published an editorial lambasting one of Afghanistan’s neighbors, which has the potential to inject billions of dollars in aid, but has so far contributed a miserly $150 million in reconstruction assistance while pursuing business deals worth billions.
 
The neighborly scofflaw?

China.

China’s border with Afghanistan is only 47 miles long and is located in the remote and largely inaccessible Pamir Mountain range along the northern frontier of Afghanistan’s Wakhan Corridor. The frontier has its genesis in the “Great Game,” as in 1895 Britain and Russia agreed to extend Afghanistan’s northern boundary east into the Pamir Mountains to produce the Wakhan Corridor, a new buffer zone that separated their respective empires. In 1963, the People’s Republic of China formally accepted the existing border with Afghanistan.

Afghanistan has asked China on several occasions to open the Wakhan Corridor border for economic reasons, or as an alternative supply route for fighting the Taliban insurgency, but China has resisted, fearing increased unrest in its bordering far western Xinjiang province, which contains a largely Turkic Uyghur population. In December 2009 the United States reportedly asked China to open the Corridor but two years later the frontier remains shuttered.

The tone of the Cheragh editorial is evident from its title, "China, the country which seeks big profit and little loss," which appeared the same day that the Afghan government announced that it had signed an agreement with China's state-owned National Petroleum Corporation (CNPC), allowing it to become the first foreign company to develop or exploit, choose your verb, Afghanistan's oil and natural gas reserves. According to Afghanistan’s Ministry of Mines, the Afghan-CNPC contract is worth $700 million but the Ministry added that the total value of the agreement could be ten times greater if more reserves are found and developed, and if international oil prices remain at today's levels, producing a potential eye-watering $7 billion.

The editorial author writes, “Under this deal, China has won access to potentially millions of barrels of Afghan fuel, although it has played a small role in the reconstruction of Afghanistan by contributing a meager $150 million. This amount pales in comparison to the financial and technical assistance provided by Afghanistan's other neighbors like Iran and Pakistan. This is despite the fact that China can play a greater role in the construction and reconstruction of infrastructure in Afghanistan, which has been destroyed during the war and crisis due to interference by Afghanistan's neighbors and sale of Chinese weapons.”

Warming up to his topic the author continues, “Oil and fuel exploration is not the only area in which China wants to invest. China previously won an agreement to access Mes-e Aynak copper fields in Afghanistan. This shows that China has been exploiting and taking advantage of the developments and situation in our country for its own profit and that it is not acting as a sympathetic neighbor.”

In 2008 China Metallurgical Construction Co. concluded an agreement for a 30-year lease to invest $3 billion to develop and mine copper from the country’s massive Mes-e Aynak copper deposits in Logar province, worth an estimated $88 billion. In collateral projects to develop the reserves China also agreed to construct a 400-megawatt power plant for the project that would electrify much of Kabul. To transit the ore out of Afghanistan China also proposed to build the country’s first railroad north through the Hindu Kush Mountains to Xinjiang. Because Afghanistan’s total GDP in 2007 was an estimated $7.5 billion, the Mes-e Aynak investment dwarfed any previously proposed development projects.

And the oil contract?

According to Afghan Minister of Mines Wahidullah Shahrani, the contract, covering the northeastern provinces of Sari Pul and Faryab, is the first of several such blocks to be put on the market in 2012, with exploration blocs in Balkh province scheduled for bidding in February and for Herat province by the summer. Ironically, Soviet engineers in the 1960s first explored Sari Pul and Faryab in the Amu Darya River Basin and estimated the reserves at about 87 million barrels, but both the Afghan and Chinese partners believe they will prove to be much larger. Supporters of the lease, including Minister Shahrani, note that it provides for the Afghan government to receive 70 percent of the profits from the sale of the oil and natural gas and that CNPC will also pay 15 percent in royalties, as well as corporate taxes and rent for the land used for its operations.

So, will this infusion of investment be to Afghanistan’s benefit? Our author writes, “In view of China's inactive and even indifferent position on developments in our country in the past, China does not deserve to win such economic concessions. By sending its cheap military equipment to the warring parties in Afghanistan, China has not only been involved in the destruction of our country in the past four decades, it has also been a mere spectator of its most impoverished neighbor.”

The editorial concludes, “It is necessary that the government of Afghanistan, which is trying to strike a positive balance among countries involved in Afghanistan, should stop awarding economic concessions to a neighbor which seeks more profit and little loss in our war-battered country. If, Allah forbid, the bitter incidents of the past repeat themselves, this superpower will abandon us and it will not lend our people a helping hand.”

Shahrani said Afghanistan's army and police will set up special units to guard the CNPC Sari Pul and Faryab project. If the level of resentment and bitterness in the Cheragh editorial is an indication, they will have their hands full.

It Is A Gas !

Fundamentals

It is tough being a Natural Gas bull these days, as prices continue to languish near the $3 per mmbtu level, despite that fact that we're in the heart of the winter heating season. With front month futures trading at 27-month lows, it is getting harder to find reasons for a rally. Above average temperatures in the Midwest and east coast regions of the US have hurt gas demand, with US inventories running nearly 12% above the 5-year average. This large gas surplus has allowed traders to largely ignore recent slowdowns in production, with the Baker Hughes rig count data showing 8 consecutive weeks of lower rig counts. Though it appears that lead month Natural Gas prices are destined to see a 2-dollar handle sooner rather than later, some weather forecasts are calling for colder temperatures to reach the east coast next week. This will keep traders focused on the 6 to 10-day outlook to see if the recent warm spell may be nearing an end. Many large speculative traders continue to expect lower Natural Gas prices, with the most recent Commitment of Traders report showing large non-commercial traders adding just over 2,600 new net-short positions for the week ending December 20th. This increased the net-short position to just over 161,000 contracts. Though this sounds like a huge net-short position, it is far from the record 297,972 net short positions that were held back in July of 2008 at the apex of the Gas bull market.

Technical Notes

Looking at the daily chart for February Natural Gas futures, we notice prices beginning to consolidate between 3.250 and 3.100, with current activity holding near the bottom on this price range. The 14-day RSI remains weak, holding just above oversold territory with a current reading of 30.49. Support is found at the contract low of 3.100 made on December 19th, with resistance seen at the 20-day moving average, currently near the 3.350 level.

Saxo Bank's 2012 Outrageous Predictions

Every December  puts out ten outrageous predictions for the coming year. The list is supposed to draw attention to outlier risks and is useful from a risk management perspective.


Some of last year's black swans came true, including the US 30-year falling to 3% and gold rising to $1800.
Here's the new list :

1. The stock of Apple Inc plummets 50 per cent from 2011 high

Going into 2012, Apple will find itself faced with multiple competitors such as Google, Amazon, Microsoft/Nokia, and Samsung across its most innovative products, the iPhone and iPad. Apple will be unable to maintain its market share of 55 per cent (three times as much as Android) and 66 per cent on the iOS and iPad.

2. EU declares extended bank holiday during 2012

The December EU Treaty changes prove insufficient to solve EU funding needs – particularly those in Italy – and the EU debt crisis returns with a vengeance by mid-year. In response, the stock market finally caves in and drops 25 per cent in short order, prompting EU politicians to call an extended bank holiday – closing all European exchanges and banks for a week or more.

3. A yet unannounced candidate takes the White House

In 1992, Texas billionaire Ross Perot managed to take advantage of a recessionary economy and popular disgust with US politics and reap 18.9 per cent of the popular vote. Three years of Obama has brought too little change and only additional widespread disillusionment with the entire US political system, and conditions for a third party candidate have never been riper. Someone with a strong programme for real change throws his or her hat in the ring early in 2012 and snatches the presidency in November in one of the most pivotal elections in US history, taking 38 per cent of the popular vote.

4. Australia goes into recession

The effects of the slowing up-and-coming Asian giant ripple through Asia Pacific push other countries into recession. If there ever was a country dependent on the well-being of China it is Australia with its heavy dependence on mining and natural resources. And as China’s demand for these goods weakens, Australia is pushed into a recession, which is then exacerbated as the housing sector finally experiences its long overdue crash –a half decade after the rest of the developed world.

5. Basel III and regulation force 50 bank nationalisations in Europe


As 2012 begins, pressure will mount on the European banking system as new capital requirements and regulatory pressure force banks to deleverage in a great hurry. This creates a fire sale on financial assets as there are few takers in the market. A total freeze of the European interbank market forces nervous savers to make bank-runs, as depositors distrust deposit guarantees from insolvent sovereigns. More than 50 banks end up on government balance sheets and several known commercial bank brands cease to exist.

6. Sweden and Norway replace Switzerland as safe havens

As we saw with Switzerland, becoming a safe haven in a world of devaluing central banks presents a number of risks to a country’s economy. The capital markets of both countries are far smaller than Switzerland, but the Swiss are aggressively devaluing their currency and money managers are looking for new safe havens for capital. Flows into the two countries’ government bonds on safe haven appeal becomes popular enough to drive 10-yearrates there to more than 100 basis points below the classic safe haven German Bunds.

7. Swiss National Bank wins and catapults EURCHF to 1.50


Switzerland’s persistency in fighting the appreciation of its currency will continue to pay off in 2012. With Swiss fundamentals –particularly export related – continuing to suffer mightily in 2012 from past CHF strength, the SNB and government bear down further to prevent more collateral damage and introduce extensions to existing programmes and even negative interest rates to trigger sufficient capital flight from the traditional safe haven of Switzerland to engineer a move in EURCHF as high as1.50 during the year.

8. USDCNY rises 10 per cent to 7.00

As marginal returns from building million-inhabitant ghost towns diminish and exporters struggle with razor-thin margins due to the advancing CNY China gets to the brink of a “recession”, meaning 5-6 per cent GDP growth. Chinese policymakers come to the rescue of exporters by allowing the CNY to decline against a US Dollar – buoyed by its safe-haven status amid slowing global growth and an on-going Eurozone sovereign debt crisis – and send the pair up to 7.00 for a 10 percent increase.

9. Baltic Dry Index rises 100 per cent


Lower oil prices in 2012 could lead to an increase in the Baltic Dry Index as operating expenses go down. Brazil and Australia are expected to expand iron ore supply, further leading to lower prices and therefore higher import demand from China to satisfy its insatiable industrial production. In combination with monetary easing this leads to a massive spike in iron ore demand.

10. Wheat prices to double in 2012

The price of CBOT wheat will double during 2012 after having been the worst performing crop in 2011. With 7 billion people on the earth and money printing machines at full throttle, bad weather across the world will unfortunately return and make it a tricky year for agricultural products. Wheat especially will rally strongly as speculative investors, who had built up one of the biggest short positions on record, will help drive the price back towards the record high last seen in 2008.

What The "Experts" Have Been Feeding You Misinformations about global and US energy issues

 Almost all the times "experts" (politicians, media, and  financial professionals) make comments about US domestic and global energy issues that are factually inaccurate.  They have been telling you that America always go to wars over oil, ask around what people think about energy dependence, production, global supplies, etc. and you may hear some of the following six myths:

Myth #1: US crude oil comes from the Middle East/Persian Gulf.

Not true. A large portion of imports is coming from Canada and other non-OPEC nations.  Only about 18% is coming from the Persian Gulf

Imports from OPEC nations - million barrels per day (source: EIA)

Imports from non-OPEC nations (source: EIA)

Here is the OPEC vs non-OPEC trend for the last 3 years:

Source: EIA

Myth #2: The US domestic energy production continues to dwindle.


Not true. The US domestic energy production is in fact increasing.

US domestic production  (source: EIA)

  Oil extracted from shale deposits in North Dakota, Montana, and Texas has reversed years of decreasing American oil production, leading to increased domestic extraction and thus reducing dependence on overseas oil from 60 percent of U.S. consumption in 2005 to a little less than half now.

Myth #3: If the US produced more of its energy requirements, the price at the pump would be lower.


This is a common misconception and is not true in the global economy.

It would not matter much if the United States produced 100 percent of what it consumed or whether it all came from the Persian Gulf, because the price at the pump is determined by the worldwide oil market. If more oil is put on market from anywhere around the globe, the price will go down; similarly, if oil production is cut anywhere in the world and not offset by increases elsewhere, the price will go up.

Myth #4: US energy needs are constantly growing.


Not true.

  U.S. customers have been pulling back in part because an anemic economic recovery has left millions still looking for work. In August, U.S. drivers burned 7.7% less gasoline than four years earlier, when gasoline usage peaked.

Here is a chart showing the US energy consumption for the past three years.

US energy consumption (source: EIA)

Myth #5: The US is not an energy exporter because it has no excess energy to export.


This is true on a net basis (imports less exports), but just the energy exports have been on the rise.

Source: EIA

In particular the US exports a great deal of coal and refined products because of efficient refining capabilities:

Source: WSJ

With higher exports, the net imports (imports minus exports) have been declining:

					US net imports (source: EIA)

Myth #6 - this one will get the conversation really going: World's oil production has already peaked and as the reserves dwindle, more wars will be fought over the scarce energy resources.


Not true.

First of all, “experts” have been repeatedly predicting the depletion of the world’s oil reserves since the late 1800s, but it never seems to happen. New technologies and periodic higher prices make previously uneconomic deposits viable—such as the tar sands and shale oil that have recently become economic—thus sustaining world production. Second, academic research has indicated that conflicts are much more likely over allocation of money received from abundant natural resources (for example, fighting in Nigeria over who gets proceeds from oil exports) than conflict over scarce resources that can be priced in a market. That is, it is cheaper to pay the market price than to go to war.

 

What Energy Problem? U.S. Is Now an Oil Exporter

Just as the average price for gas is set to hit $4 a gallon this week, the U.S. Energy Information Administration reports February was the third month out of four that the U.S. -- the world's most energy-hungry nation -- actually exported more oil that it imported.

Despite the notion that the U.S. is currently hugely reliant on foreign oil, the country sold 34,000 more barrels of petroleum products a day than it imported in November 2010. And, in both December and February, the U.S. sold 54,000 more barrels a day. Net imports have not been negative for nearly two decades.

Part of this has to do with weak U.S. demand in recent years due to the recession. The other part rests on the growing demand in our own backyard for not only crude oil, but refined oil as well.

Mexico, Latin America and even OPEC member Ecuador are some of the U.S.'s top customers for fuel products, namely refined oil. Rising demand in these countries far outpaces their capacity to refine crude oil into petroleum products like gasoline or diesel fuel.

But  this is not the only news item that hints at this country's ability to export energy to the rest of the world.

Yesterday, Arch Coal announced a $3.4 billion all-cash deal to buy its competitor International Coal Group. The transaction would make the newly formed company the second-largest U.S. supplier of metallurgical coal, which is the coal used to make steel.

And because of growing demand in places like India and China, where coal is used for electricity, the U.S. has started to export more at higher prices than in previous years.

Then there's natural gas. U.S. reserves of natural gas have also grown considerably in the last decade to record levels. A new report by the Potential Gas Committee suggests that in the last two years, potential U.S. natural gas supplies have increased by 3 percent. Two years ago, however, the group reported that supplies jumped 36 percent.

The U.S. does not currently export liquefied natural gas, but that time may soon be on the horizon.

Meet The Real Masters Of Universe That 
Control Your Everything

 

Welcome to the real world of commodities trading. Home to firms like Vitol and Trafigura, who trade more oil than Saudi Arabia and Venezuela can produce. 
 

In a new report, 18 Reuters' reporters and editors profiled 16 giant commodity companies that often go unnoticed. Combined, they generate annual revenue of $1.1 trillion.  The top five pull in $629 billion, rivaling the five largest financial institutions on the planet.
What they learned: They're massively profitable. They disrupt markets. Government's have little ability to police them. And they have ambitious plans to grow.

#16: Hin Leong (Singapore)

Revenue: $8 billion (2010) Trading Markets: Oil, oil tankers
Founder and CEO Lim Oon Kuin got his start by transporting diesel by bicycle. The company is now planning to build Singapore's fourth oil refinery in a move that would bring it closer to complete vertical integration: it already owns the tankers that ship oil.

#15: Olam (Singapore)

Revenue: $11 billion (2009/10) Trading Markets: Coffee, cocoa, rice, sugar
Olam started as a company that traded Nigerian cashew nuts.  It has since become the world's second largest rice trader, and now owns plantations and mills across the world. The company employs more than 13,000 people.

#14: Mabanaft (Rotterdam, The Netherlands)

Revenue: $15 billion (Reuters Estimate) Trading Markets: Oil
With a staff of 1,700, Mabanaft sold more than 20 million tons of oil last year. The company is expanding into naphtha, liquefied petrol and wood pellets.

#13: Arcadia (London, England)

Revenue: $29 billion (Reuters Estimate) Trading Markets: Oil
The company trades more than 800,000 barrels of oil a day and puts on derivatives for more than 10 million barrels a day. Arcadia has close relationships with Nigerian and Yemeni state oil firms, where it has reportedly broken laws to buy oil at below market prices.

#12: Wilmar International (Singapore)

Revenue: $30 billion (2010) Trading Markets: Grains, sugar, oils
Wilmar is the largest soy processor in China, controlling nearly 20% of the market. The company owns plantations, mills, processing facilities and transport for distribution.

#11: Bunge (White Plains, New York)

Revenue: $46 billion (2010) Trading Markets: Sugar, grains, feeds
Bunge is the world's largest oilseed processor.  It's also one of the largest feed providers in China, helping bulk up the nation's livestock. The company is aggressively expanding in South America.

#10: Louis Dreyfus (Paris, France)

Revenue: $46 billion (2010) Trading Markets: Cotton, rice, orange juice

The 160-year-old company is the largest trader of cotton and rice, but is struggling to grow. The company needs fresh capital and could become publicly listed in 2012.

#9: Noble Group (Hong Kong)

Revenue: $57 billion (2010) Trading Markets: Sugar, coal, oil
Founder Richard Elman is a high school dropout who got his start commodities in the scrap metal business when he was 15.  He was also once a trader for Phibro.   He now runs a company that employs more than 11,000 people. Noble has deep connections with politicians in China, where it plans to expand aggressively.

#8: Mercuria (Geneva, Switzerland)

Revenue: $75 billion (2011) Trading Markets: Energy

The company employs 890 people and trades nearly 120 million tons of energy commodities a year. Mercuria owns coal mines and oil fields across Asia, Europe and North America. 

#7: Trafigura (Geneva, Switzerland)

Revenue: $79 billion (2010) Trading Markets: Metals, energy

Trafigura ranks third in oil trading and second in industrial metals, all the more impressive considering the company is less than 20 years old. It paid a $200 million fine after dumping waste along the Ivory Coast that reportedly killed 16.

#6: Gunvor (Geneva, Switzerland)

Trading Markets: Energy, emissions

Gunvor has gone from a company with $5 billion in revenue in 2004 to an expected $80 billion this year. The company has expanded into coal and natural gas to buttress its oil dominance, which accounts for 20% of Russian exports. Co-founder Tornbjorn Tornqvist attributes the company's success to having "excellent contacts."

#5: ADM (Decatur, Illinois)

Revenue: $81 billion (2010) Trading Markets: Corn, cocoa

The company owns barges, trucks, railways and even the processing plants that make the goods it ships. The movie The Informant! was based on ADM's lysine price-fixing scandal, which resulted in a 2003 fine of $100 million.

#4: Koch Industries (Wichita, Kansas)

Revenue: $100 billion (2010) Trading Markets: Oil

Koch Industries, led by the Koch brothers Charles and David, owns three of the nation's most profitable refineries and operates in 60 other countries. They've also been credited with bank rolling the Tea Party movement. Charles Koch's net worth is estimated to be $22 billion.

#3: Cargill (Minneapolis, Minnesota)

Revenue: $108 billion (2010) Trading Markets: Grains, salt, fertilizer, metals, energy

Cargill pioneered the concept of filling up empty barges on their return trips — a revolutionary idea when first implemented. For example, grain would get shipped down river, and then salt would get shipped up.  If it were public, Cargill would rank 13 in the Fortune 500, right behind Citigroup.

#2: Glencore (Baar, Switzerland)

Revenue: $145 billion (2010) Trading Markets: Metals, minerals, agricultural

Glencore went public last year, opening up one of the most venerable trading businesses to public view. Last year the company controlled more than half of the zinc market, and than a third of the copper market. CEO Ivan Glasenberg made $10 billion on the IPO.

#1: Vitol (Geneva, Switzerland and Rotterdam, The Netherlands)

Revenue: $195 billion (2010) Trading Markets: Oil, coal, metals, sugar
This oil giant trades more than 5.5 million barrels a day and has storage tanks on five continents. Vitol was the first company to trade with Libya's rebels, against Gaddafi orders, supplying them with more than $1 billion in fuel.

Shocking News !!!! Western Australia To Declare Independence From Australia ?

Western Australia Talks Secession over Canberra’s Energy Policies


It’s marginal, economically backward states that fragment, like Yugoslavia and Sudan, right?

Usually – but an extraordinary situation is developing in energy-rich Western Australia, where Canberra’s policies have begun fuelling talk of secession.

Call it an east-west divide, pitting population-rich eastern Australia’s cities against resource-rich Western Australia, where resentment is rising over the upcoming imposition of the Mineral Resource Rent Tax (MRRT) and the state’s perception of poor treatment by Canberra’s bureaucrats.

Aside from fuelling resentment amongst mining companies, a recent poll on Western Australia Today's website found 63 percent of the 7,585 respondents stating that Western Australia should consider secession.

So, is this merely a case of consuming too many cases of Fosters, or something more serious? Like Texas, where legislators grumble about leaving the Union, secessionist talk has been a frequent staple of Western Australia's politics since the early 19th century.

Like Hawaiian discussions of secession, Western Australia has repeatedly seen the idea surface, appearing in the media and even being broached in a 1933 state referendum.

Far from being an idea grumbled about in taverns, secessionist ideas have political support including from Western Australia’s Minister for Mines and Petroleum, Norman Moore, one of Western Australia’s government's most senior members in the State's Upper House.

 Speaking bluntly, Moore said that the proposed MRRT had caused "rumblings of secession - everywhere you go these days, people are now talking about it. We should try and fix the federation, but in the event it can't be fixed, and I suspect it can't be, then states like Western Australia should give some thought to going it alone. The constitution has changed dramatically to the point where the Federal Government is very much in control of virtually every lever that goes on in the economy in Australia. The bottom line is Western Australia is being put in a position where its industries are being penalized because they are successful.

When you start doing that people take their successful industries somewhere else and to suggest we are the only place in the world with mineral resources is naïve. My view is we should go back to what the original foundation of the constitution provided for and that the states indeed have some responsibility. The concern we have here obviously is that the mining industry and the LNG industry especially are high emitting, and energy intensive and so they'll be hit with this on top of the mining tax. The Gillard government's coming along saying 'well you make all this money, you can pay extra tax,' but they already pay royalties to the states, and that's a charge that we levy on companies to access our minerals.

Contrary to the views of the Prime Minister, the minerals actually belong to the state of Western Australia, and all the other states, with respect to their minerals. So they pay royalties to the states, and I think our revenue last year was about $4 billion. "Why separate the mining industry from the rest just because it's going through a good time?"

According to Moore, of the $38 billion expected to be produced from the MRRT, 65 percent will come from companies operating in Western Australia.

Cazaly Resources managing director Clive Jones strongly supported Moore’s position stating that any constitutional legal challenge against the tax would have strong support from other Western Australia resources companies, "absolutely - 100 per cent. We are considerably less than happy. However, although the concept of secession is attractive it is not a realistic option as all States need to agree - which is very unlikely given we're their breadbasket these days. Under the proposed tax liens of the MRRT and its potential impact on Cazaly Resources' profitability Jones observed, "Our modeling shows our total tax hike will rise from around 37 percent to 44 to 46 percent. Meaning there will be far less incentive to us to go mining."

Australian Premier Colin Barnett has refused to support Moore’s call for Western Australia to consider seceding from the nation over the carbon tax and Minerals Resource Rent Tax. Barnett said, “Norman Moore is a very good mines minister, however, he has over many years argued the case for Western Australia seceding. Can I make it absolutely clear as Premier, Western Australia has no plan and no intention of ever seceding from Australia."

And if the split occurs, how will the new government defend itself?

Easy said Moore, the new nation could form alliances with China and the U.S. to cover for a lack of an army, navy and air force.

Moore’s defense comments impelled Opposition spokesman Mark McGowan to state that Barnett should take a stronger line and pull Moore into line for his ''disrespectful'' and ''preposterous'' comments, remarking, ''The idea that you have China, the People's Liberation Army, as our defense force is frankly ridiculous and secondly dangerous. 'The third most powerful man in Western Australia talking about those sorts of ideas is a bit disturbing. When you have cabinet ministers saying ridiculous stuff that's offensive and you're the premier, you should take some action.''

While the secessionist concept at present remains precisely that, Canberra should take heed of Western Australia’s discontent and modify both the proposed MRRT and carbon tax schemes accordingly. The stakes are hardly minor, as according to the Australian Bureau of Statistics the total pre-tax profits earned by mining firms operating in Australia was more than $51 billion in 2009-10.

Canberra should not kill the kangaroo that lays the golden eggs.