The New Crude Oil Benchmark That Could Change the Oil Market’s Price Dynamics

by Sheena Martin, Contributing Editor Tuesday, November 24, 2009

Earlier this month, the world’s largest oil producer set the table for a move away from traditional light, sweet crude oil.

Saudi Aramco, the state-owned company of Saudi Arabia has decided to drop West Texas Intermediate (NYMEX: WTI) as the basis for pricing its oil sold to the U.S. market. The Saudis priced off WTI for 15 years.

Why? Well, quite simply, WTI crude oil is dangerously volatile – as evidenced by the drop from $150 per barrel to $30 crude over the past year.

In its place, Saudi Aramco will start using the Argus Sour Crude Index (ASCI), which measures heavier oil with higher sulfur content. Traditionally, heavy, sour crude is cheaper than WTI. Heavy

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Russia has reached a new record high in monthly oil production, at more than ten million barrels a day in October, maintaining its position as the world's biggest oil producer.  Rosneft is at the forefront of the increase with production from its new Vankor field in the Arctic.  Vladimir Putin has nodded approval for a Danish initiative on CO2 emissions that could replace the Kyoto Protocol, but with two caveats - that Russian interests be taken note of, ie the country's immense CO2-absorbing forests, and that the resolution be ratified by all the world's biggest economies.  Russia may increase threefold its supplies of gas to Denmark, which could see supplies reach a total of 3 billion cubic meters a year via the Nord Stream pipeline.  The Prime Minister has urged the 'stingy' EU to assist Ukraine in its difficulties ...

This analysis is from Evan Smith and Brian Hicks, co-managers of the Global Resources Fund (PSPFX). Oil prices have bounced more than 150 percent off of December 2008 lows but inventory levels remain at historically high levels despite a healing global economy. However, Goldman Sachs says robust 2010 oil demand growth will deplete these inventories over the next 12-to-18 months and diminishing production rates in key areas around the world will create a supply/demand imbalance. The above chart shows the decline in production from the worldrsquo;s top 230 projects. After peaking in 2009, production from these projects is set to fall for the next several years. Excluding OPEC countries (right chart), the decline rates quadruple from 2007 to 2012 (est). Over that time period, non-OPEC production is expected to fall by 2.5 million barrels per day. Only Brazil, Canada and the former countries of the Soviet Union are expected to see production growth. One of ...

Rosneft has been fined $180 million by the Federal Anti-Monopoly Service for deliberately driving up wholesale prices for gasoline and other oil products in the first half of 2009, and Lukoil was warned that it could face a similar penalty...in which case, it's going to need the $1.5 billion it is trying to raise by selling dollar-denominated debt to international investors.  The state-owned Sayano-Shushenskaya hydropower plant was raided by riot police yesterday as part of a probe into an August flood that killed 75 employees.  Iran agrees with the 'general framework' of the UN-brokered proposal that it send most of its enriched uranium to Russia for processing into reactor fuel, but plans to make some changes.  'One common reaction is: 'If the foreigners are prepared to agree to this, there must be something wrong with this from Iran's point ...

Oil traded around $66 a barrel on Monday, steadying after an earlier decline which extended last week’s 8.4 percent slide, as the U.S. dollar lost ground and stock markets moved higher.

The dollar gave up most of its earlier gain against a basket of currencies, boosting the appeal of oil and commodities to investors. European stocks firmed and U.S. equity futures pointed to a higher opening.

“It’s making some progress back up, largely due to the dollar,” said Rob Montefusco of Sucden Financial. “At the same time, we haven’t seen demand pick up and we need that to draw strength back into this sector at the moment.”

U.S crude was up 8 cents to $66.10 a barrel by 1308 GMT, after earlier falling as far as $65.41. London Brentwas down 11 cents to $65.00.

Iran test-fired a type of missile on Monday which defence analysts have said could hit Israel and U.S. bases in the

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Reuters reports that the Russian government may sell part of its 75% stake in the country's largest oil producer, Rosneft.  Andrei Sharonov, a former deputy economy minister, has said that the government could sell up to 25% without any significant consequences.  RusHydro's plans to build a $20 billion Evenkia dam on the Lower Tunguska River have been shaken by public protests, says the Moscow Times.  Lukoil hopes to start production in the Caspian Sea oilfields in March 2010.  Enel Spa will complete the sale of a stake in SeverEnergia, a natural gas explorer in Siberia, to Gazprom 'in the next few weeks'.  A Royal Bank of Scotland report picked up by Reuters says that uranium demand will exceed supply in 2014 as China and Russia develop nuclear power stations.  Total has suggested that Russian companies may ...

Peak Oil and Petrobras

Tony Daltorio, Investment U Research

Back on Wednesday, September 9, I wrote on how to profit from British Petroleum ADR (NYSE: BP)’s huge discovery in the Gulf of Mexico, and how to profit from peak oil.

And while I stand by the profitability of both that find and stock, I think I should clarify that “peak oil” really doesn’t exist anymore. So instead, let’s call it peak-cheap-and-easily-recoverable-oil instead, since that seems much more appropriate.

The days of cheap and accessible oil are long gone, but that very fact opens up rich opportunities for investors who face up to the realities of today’s oil market.

Possibly the biggest reality comes down to this: Giant oil fields are the industry’s lifeblood. Out of the world’s 70,000 oil fields, the largest twenty account for a quarter of global production.

That’s

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Reuters reports that next week Vladimir Putin will hold a meeting with global oil giants on how to exploit gas reserves on the Arctic Yamal peninsula.  Natural Resources Minister Yuri Trutnev has told Reuters that Russia will consider easing laws regulating foreign participation in offshore energy projects, which had been restricted during the 2002-July 2008 boom in oil prices.  Rosneft has apparently said that it will not be able to maintain the high level of oil exports that has seen Russia overtake Saudi Arabia as the world's biggest oil producer, as the domestic market will become more alluring to oil producers.  The President of OPEC has reportedly argued that the cartel must improve cooperation with Russia in order to keep prices stable.  Bulgaria has agreed to continue preparations for the Russian-backed Belene nuclear plant, South Stream and ...

BP: British Petroleum. Big Profits

by Tony Daltorio, the Investment U Research Team

Not too long ago, seven major oil companies – commonly referred to as the Seven Sisters – controlled their market.

But that was then and this is now. Today, they’re scrambling to find new oil fields, while “smaller” companies rock the industry.

That’s why there’s been so much excitement over the recent discovery of a ‘giant’ oil field in the Gulf of Mexico by one of the Seven Sisters, British Petroleum ADR (NYSE: BP).

When international oil companies consider where to invest, they typically have to choose between technically straightforward fields in politically turbulent countries, or politically stable areas that require complex and costly production techniques.

Easily produced, accessible energy resources in secure countries just don’t exist anymore; the era of cheap oil is truly over.

But BP has a long history

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Why Is Beijing Investing $200 Billion in One Company? The answer is simple. This rail company hauls 25% of the world’s freight – but it only has 6% of the world’s track. Right now, freight supply is 65% shy of demand. Sales for this company have grown on average 47% over the last five year. And now, with a $200 billion infusion, it’s about to jump even higher. Estimates show the potential gains at 356%. Click here for the full report.

BP PLC (NYSE ADR: BP) yesterday (Wednesday) announced a “giant” oil discovery in the Gulf of Mexico that may contain more than 3 billion barrels of oil. The find is evidence of the Gulf’s resurrection as a major oil producer, as well as the great lengths – or depths – to which major oil companies must go to find vibrant wells.

The well, known as the …