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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Luke Harding has two pieces on Russian climate change in today's Guardian: an audio report on Northern-Siberia's seasonal shifts, and a special report on the Yamal peninsula.  Rumors abound that China, Japan, Russia and France have been in secret talks on using an alternative to the dollar for oil trading, but OPEC's Secretary General says that, even if there were to be a shift, it would be a long process, and that 'tradition' would make it difficult.  Serbian oil monopoly NIS, majority owned by Gazprom Neft, has signed a $100 million loan with Bank of Moscow on the back of Medvedev's Belgrade visit.  Italy, Russia, and Turkey, have signed a joint statement on the construction of the Samsun-Ceyhan oil pipeline linking Turkey's Black Sea coast and Mediterranean coast (the New York Times has a special report today ...

Max Keiser, international journalist, provocateur and ex-stockbroker, was interviewed on Tuesday by the Russia Today television network on the oil trade’s so-called “US dollar dump” (courtesy of GATA). He reported that he was hearing from his sources in Paris and the Middle East that there was substance to the widely publicized article by Robert Fisk (The Independent) about worldwide collaboration to replace the US dollar as the medium of exchange for oil trading.

Keiser added that gold was to have a much larger role in the basket of currencies likely to be created to replace the dollar and said China, Russia and other countries moving to shift from dependence on the dollar were tired of funding US wars and occupations.

Source: Chris Powell, GATA, October 7, 2009.

Did you enjoy

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Robert Fisk (Independent): Secret plan to ditch the US dollar’s dominance uncovered, October 6, 2009. Arab states have launched a secret plan with China, Russia and France to stop using the US currency for oil trading.

• Ambrose Evans-Pritchard (Telegraph): China calls time on dollar hegemony, October 6, 2009. You can date the end of dollar hegemony from China’s decision last month to sell its first batch of sovereign bonds in Chinese yuan to foreigners.

• John Hussman (Hussman Funds): Defensive, but a measure of equanimity, October 5, 2009. My view continues to be that the intrinsic condition of the US economy has not improved, and that the green shoots we’ve observed are a transient artifact

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A government source has suggested that Russia may reach pre-crisis levels in 2012.  Budget revenues in 2010 are expected to exceed expectations with predictions of oil trading at $57 a barrel as opposed to $54.  Despite the optimism, the government does not plan to increase spending.  VEB has agreed to a $917.3 million subordinated loan to Alfa Bank.  Payless ShoeSource will expand into Russia in 2010, with a plan to open 90 stores in about 5 years.  Fast retailing, which runs international clothing chain Uniqlo, also plans to open stores in Russia in spring 2010.  Reuters has a useful breakdown of what rival bidders Magna and RHJ have in mind for Opel if their bid is successful.  Steel-maker Evraz, which posted major losses yesterday, says that it imagines an upturn in domestic demand to be ...

The RTS is surging, oil comfortably trading around $70, and even Vladimir Putin is doing his topless thing again, which is always a sign of economic robustness.  Despite all the rosy news, Owen Matthews at Newsweek thinks that the crisis may not yet be done with Russia.Don't be fooled: Russia's still reeling from the commodities crash, and things are poised to get worse before they get better. Putin's oil fund will be "practically exhausted" by the end of 2010, says Finance Minister Alexei Kudrin. By the Russian government's own estimate, the economy will shrink by up to 8.5 percent in 2009. Worse, many Russian businesses appear to be all but insolvent. They face a $200 billion mountain of ...

PetroChina OKed to Buy Osaka Refinery Stake Earlier today, PetroChina Company Ltd. (PTR), the largest integrated oil company in China, gained approval from the country’s top economic policy planner -- the National Development and Reform Commission (NDRC) -- to invest in Nippon Oil Corporation’s Osaka refinery. NDRC said on its website that the agency had given the green light to the Chinese state-controlled energy giant's oil trading subsidiary PetroChina International to acquire a stake in the 115,000-barrels-per-day (Bbl/d) refinery in western Japan. Nippon Oil and PetroChina’s parent China National Petroleum Corporation (CNPC) finalized the deal earlier in the year to convert the Japanese refiner's wholly owned Osaka refinery into a 51:49 export-oriented joint venture, mainly targeting oil demand in China. The Osaka deal – which will be PetroChina's second overseas refinery transaction – would allow the company to take charge of all crude supply ...

Idiocracy in action: Congress blocks bill to audit the Fed… No surprise: American loan defaults hit record… Surprise: Could Canadians be next? China takes another “World’s No. 1” from U.S. … Dan Denning, Byron King on recent triumph and tragedy in the oil patch…

Great news: The Federal Reserve will retain its right to operate in secrecy.

“Thank God for Rule 16!”

Late yesterday, the Senate majority put the kibosh on a last-hour provision in the 2010 spending bill that would audit the Fed. Not because it’s a bad idea… but because of the arcane Rule 16, which prohibits policy legislation from being added to spending bills. (The kind of “rule” that’s only evoked when the majority gets uncomfortable.)

“The Federal Reserve will create and disburse trillions of dollars in response to our current financial crisis,” said Sen. Jim DeMint, who spearheaded

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While the long-term outlook for oil prices remains bullish, don’t be surprised to see a near-term correction. After tumbling to a low of $33.98 a barrel on Feb. 12, crude oil more than doubled in price, soaring to $69.82 on the New York Mercantile Exchange (Nasdaq: CME) – before tumbling nearly 4% on Thursday on a worse-than-expected jobs report.

Indeed, Money Morning predicted precisely that kind of a run-up for crude oil, first in January and then again on April 16.

As a basis for those previous analyses of the oil market, we cited the declining value of the U.S. dollar, falling production, and the possibility that demand for oil would soar as the global economy emerges from the worst financial crisis since World War II. And those factors continue to suggest that the price of oil will rise over the long-term.

However, while we still believe the

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Amiworld, Inc., an international energy company engaged in the production and distribution of alternative and traditional energy products and services, has reported financial results for its fiscal year ended December 31, 2008, which was the company’s first full year of operations.

The company has a state-of-the-art biodiesel plant and petroleum refinery, and distribution facilities in Colombia, South America. They are branching out with diversified products and services including biodiesel, petroleum diesel, international oil trading and the shipping of oil and fuel products with an initial principal focus on economies in South America. It is worth noting that Amiworld is also the owner and operator of the only government certified biodiesel plant in Colombia. The Company believes it is well positioned to capitalize on its unique government status as a result of the Colombian government’s aggressive biofuels initiatives mandating a 10% biodiesel mix by the end of 2009.

They have reported

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