David Seaton's Energy Links®

"The Stone Age came to an end not for a lack of stones and the oil age will end, but not for a lack of oil.'' 

Sheikh Ahmed Zaki Yamani
 

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Editorial
*Oil prices surge amid Hurricane Rita fears - The Guardian
*Opec powerless as oil keeps climbing after deal- Reuters
*Iran to link oil trade to nuclear dispute - Iranmania
*EU drops hardline stance on Iran - BBC
*G7 faces slippery task in tackling oil price surge - Reuters
*Russian oil output growth seen slowing further next year - energy minister - AFX- News
*OVL buys 30% in 7 oil blocks in Cuba - Rediff - India

David Seaton's Energy Links® Editorial - Gerhard Schröder or the Art of Losing In the German elections, as in the French and Dutch referendums, we are observing one of the most interesting political phenomena ever, a peaceful, democratic rebellion. The German voters simply are not buying what the system wants to sell them. For months the corporate media around the world had all been beating a huge tom-tom and singing, "Reform, Reform!! Merkel, Merkel!! Tony Blair, Tony Blair!!”, but the German voters seemed to be dancing to another tune; a melody that William Pfaff calls a “No to Expert Opinion.” The chief beneficiary of that trend was the “Links Partei” or “Left Party,” a hurried improvisation forced by Schroeder’s surprise call to elections.  Made up of dissident Social Democrats, Union militants and recycled former East German Communists, the new party went from nothing to surpass the charismatic Joschka Fisher’s Greens. As Jonathan Steele wrote in The Guardian, “Confused, bitter and bereft of leaders with a convincing program, many are joining a growing trend in saying that there must be another course.” Everyone swears they won’t talk to the Links Partei, but if negotiations drag on, the new party with their 54 seats will be difficult to ignore.

The other big winner of this election is the “loser” Gerhard Schroeder, who in a brilliant campaign came from 20 points behind to draw even with Merkel at the finish. As Wolfgang Munchau noted in the Financial Times “it is not the electoral mathematics that counts; it is the political momentum.” More than anything else Germany has voted for more time to think and time is Schroeder’s friend and Frau Merkel’s greatest enemy.

While the parties talk, Schroeder remains in power. The situation produced is so strange that only a master politician like Schroeder could navigate it. Bertrand Benoit described the scenario in the Financial Times, “Firstly, Schroeder will remain chancellor until a new government replaces his caretaker administration and is therefore under less time pressure to cut a deal. Secondly, the presence of the neo-Communist Left party gives the house a leftwing majority. Though Mr. Schroeder would not govern with the radical left, he wields the credible threat of staying in power as head of a minority government.”  If Merkel can’t get a coalition together in the next few days, she will be seen as the one who "snatched defeat out of the jaws of victory" and the coming recriminations and back stabbing in CDU are easy to predict.  David Seaton

David Seaton's Energy Links®

Oil prices surge amid Hurricane Rita fears - The Guardian
The International Monetary Fund today warned that high oil prices could trigger inflation and push interest rates higher as Hurricane Rita threatened energy supplies in the Gulf of Mexico. Oil prices in New York shot up $2 (£1.10) to $68.26 a barrel, creeping back up towards the record $70 seen in the immediate aftermath of Hurricane Katrina. "The possibility that oil prices could trigger more general inflation, rising interest rates and affect housing prices is a real possibility," Raghuram Rajan, the IMF chief economist, said. Oil prices have started climbing again amid fears that Hurricane Rita - which has been upgraded to the same level as Hurricane Katrina - will disrupt refinery capacity and drilling in the Texas region, aggravating the damage caused to refineries in Lousiana last month. Texas, the heart of US crude production, accounts for 25% of the total US oil output. Rita is also thwarting recovery efforts as refineries gear up for the winter - the peak time for producing distillate fuels including heating oil, jet fuel, kerosene and diesel. Numerous companies including BP, Shell, Apache, Exxon Mobil, Chevron Corp and Marathon Oil have abandoned facilities in the Gulf of Mexico as Rita threatens. A large number of Texas refineries are located in the Houston and Corpus Christi areas, both of which could be hit by the hurricane. With the US oil industry still recovering from Katrina, a further blow could send oil prices spiralling higher, despite a decision by Opec yesterday to make all its spare capacity - around 2m barrels a day - available. "It doesn't matter how much crude you pump in - you won't have a meaningful effect on prices if you can't get refined product out," Justin Smirk, a senior economist at Westpac in Sydney, told Reuters. Oil prices have fluctuated this week, putting on more than $4 a barrel on Monday but slipping back following the Opec meeting. They peaked at $70.85 when Katrina swept through the Gulf of Mexico but later fell back to $63, contributing to the decision of retailers to cut some UK pump prices last week.
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Opec powerless as oil keeps climbing after deal- Reuters
Opec ministers left Vienna yesterday powerless over oil prices that kept climbing despite the cartel's commitment to offer up every last barrel of its spare production to reassure consumers. Tuesday's deal means the 11-member Organisation of the Petroleum Exporting Countries is putting its remaining two million barrels a day of crude on the block, with most of the extra oil held by top exporter Saudi Arabia. The agreement has been welcomed by the European Union and Britain's finance minister Gordon Brown, among Opec's harshest critics in the run-up to the meeting. But with oil edging further above $US67 ($NZ97.11) a barrel yesterday, Opec's argument that gaps in the global refining network were to blame gained authority. Hurricane Rita is accelerating towards the Gulf of Mexico and threatening US refineries spared by Hurricane Katrina last month. The market fears a shortage of gasoline and heating fuel in the world's biggest consumer, the United States. "I believe a reasonable consumer will appreciate very much what Opec has done to go out of its way and to offer all the spare capacity it has, recognising that maybe there is no demand but offering it so the consumer can feel comfortable that the supply is there," Saudi Oil Minister Ali al-Naimi said. Prices are likely to remain hostage to downstream supply disruptions because global refining capacity is too stretched to handle more crude. The last new US refinery opened three decades ago. Tuesday's deal effectively suspends quotas until the end of the year although official Opec quota limits stay unchanged at 28 million bpd. The deal applies from October 1 for 3 months. Analysts at Barclays Capital said the deal was a first step in creating a framework for top exporter Saudi Arabia to raise its output levels independently, enabling a more flexible approach to future increases in output. Energy industry analysts said that by offering everything in reserve even though it sees no more demand, Opec had turned the tables on those consumer countries who blame it for high prices. While oil prices stay high, little attention is being paid to the sort of level Opec might seek to defend should crude markets start to fall. Ministers have been pleasantly surprised at how the world economy has managed to cope with high prices when little more than two years ago economists were fretting about oil over $US30
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Iran to link oil trade to nuclear dispute - Iranmania
Iran's top nuclear negotiator warned that Tehran would link its oil business and other economic trade with individual countries to how much they supported the Islamic republic over its nuclear programme. "Those countries that have economic transactions with Iran, especially in the field of oil, have not defended Iran's rights so far," Ali Larijani complained, AFP reported. He said Iran's Supreme National Security Council was "very determined to make a balance between these two things. "So based on how much they defend Iran's national right will facilitate their participation in Iran's economic field," he said.
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EU drops hardline stance on Iran - BBC
The EU's "big three" are said to have backed down from a demand that the UN nuclear watchdog should immediately report Iran to the Security Council. Diplomats from France, the UK and Germany said the shift came amid opposition from Russia and China. They are now reportedly proposing that the International Atomic Energy Agency (IAEA) in Vienna should only implicitly threaten Tehran with such action. Iran is accused of developing atomic weapons, an allegation it denies. The secretary of Iran's Supreme National Security Council, Ali Aghamohammadi, told the BBC that the decision by Europe not to refer Tehran could decrease tension. The BBC's Tim Franks at the Vienna talks says that in effect Tehran would be given until the end of October to allow the IAEA all the access it demanded to Iran's nuclear plants and officials. The Islamic republic insists its nuclear activities have not violated the nuclear Non-Proliferation Treaty. It has warned that if referred to the Security Council, it could start uranium enrichment - a possible step toward making nuclear arms - and stop allowing unfettered IAEA inspections of its nuclear facilities and programmes. The IAEA board of governors is meeting this week at the agency's headquarters in Vienna. At least a dozen of the 35 member states opposed the original EU draft resolution - backed by the US, a stern critic of Tehran - that called for immediate referral to the UN Security Council, a move that could trigger sanctions. According to the Associated Press news agency, the new draft now says only that suspicions over Iran's nuclear programme are "within the competence of the Security Council". It accuses Iran of "excessive concealment, misleading information and delays" in giving IAEA officials access to nuclear materials. It also expresses serious concern that Iran has failed to "re-establish full suspension of all enrichment-related activities", a reference to last month's resumption by Tehran of uranium conversion. Conversion is a prelude to enrichment - a key step in the manufacture of nuclear arms. The US appears to be behind the revised resolution. "Our goal is to build the broadest possible consensus," State Department spokesman Adam Ereli said. The threat of referral was not being withdrawn, he told reporters, adding it was "a question of not if, but when" the issue would go before the Security Council.
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G7 faces slippery task in tackling oil price surge - Reuters
The Group of Seven rich countries can do little to reverse a surge in oil prices that risks slowing their economies, and analysts say the group should respond to the rise by trying to wean itself off oil products. World oil prices, which have risen some 50 percent so far this year, will be high on the agenda when G7 finance chiefs meet in Washington on Friday. Policy makers have been pressing for the group to take action at the meeting, with European Central Bank President Jean-Claude Trichet telling European newspapers in an interview on Wednesday that more transparency was required in oil markets. But surging world demand for oil and the G7's limited leverage over supply means any impact will be hard to achieve. "I don't think the G7 meeting will have a sizeable and long-lasting effect on oil prices," said Stephane Deo, head of European economic research at UBS. "Fundamentally, in terms of short-term prices, there is no magic bullet," added Deborah White, senior energy analyst at SG Commodities. The G7 -- the United States, Japan, Germany, Britain, Italy, France and Canada -- relies, as a group, on oil imports. Canada and Britain are net exporters, but Britain's dwindling reserves mean it is expected to become a net importer in 2009 or 2010. Finance minister Gordon Brown has pressed the Organisation of the Petroleum Exporting Countries (OPEC) to lift its output and he welcomed a decision by the 11-member cartel on Tuesday to offer up every last barrel of its spare production. Oil prices kept climbing despite the OPEC deal, with the market fearing a shortage of gasoline and fuel in the world's biggest consumer, the United States. Policy makers are worried about the economic impact of high oil prices. International Monetary Fund chief economist Raghuram Rajan said on Wednesday there was a chance high oil prices could trigger broad inflation and push interest rates higher. To soothe oil market worries about a supply crunch, French Finance Minister Thierry Breton has suggested G7 officials visit oil producing states to try to improve transparency over prices. Breton has also won an agreement from oil firms in France to increase their investment in refineries and has said he will press his G7 colleagues to do the same. World refining capacity has been hit by Hurricane Katrina. Increasing investment in refineries will take time to translate into lower prices for oil products, analysts say. "It would certainly help reduce refined product prices but it takes a long time to construct a refinery, or even to raise the capacity of existing refineries," said Simon Hayley, senior international economist at Capital Economics in London. Transparency could be increased in the oil market by European countries publishing weekly stock figures, said White at SG Commodities, though this need not result in lower prices. "It would reduce the fear factor and it would reduce the amount to which we have to guess what European stocks are," she said. "Sometimes it would increase prices and sometimes it would decrease prices but it would reduce price volatility." "They (the G7) can encourage their members to have creative schemes to reduce reliance on oil in the future," White added. White said the G7 countries could try to reduce their dependency on oil products, for example by encouraging industry to invest in more fuel-efficient equipment. Deo at UBS added: "What you can do on the demand side is shift the demand from oil to other sources of energy, but obviously that is very difficult. In the short term you cannot switch a huge amount of demand." European finance ministers appealed earlier this month for the United States and China to use oil more efficiently. "We will use our G7 meetings in Washington...to have a frank word with our American colleagues," said Jean-Claude Juncker, chairman of the Eurogroup of the euro zone's finance ministers.
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Russian oil output growth seen slowing further next year - energy minister - AFX- News
Russian crude production has grown at a slower rate this year compared with 2004 and will decelerate further in 2006, Russian Energy Minister Viktor Khristenko said. 'During the first eight months of this year, oil extraction increased by 2.5 percent to 310 million tonnes, whereas last year growth was 10 percent,' he was quoted as saying by the Interfax agency during a meeting with President Vladimir Putin. In 2006, forecasts from the minister showed that growth in output from Russia, the world's second biggest oil producer, could slow to 'below two percent'. During the period 2000-2004, Russia increased crude oil production every year at an average rate of 8.5 pct, with growth in exports averaging 14 pct annually. At a G8 meeting held in Gleneagles, Scotland, in July this year, President Putin promised to increase Russian oil production in light of surging oil prices that threaten to dampen economic growth in oil-importing nations.
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OVL buys 30% in 7 oil blocks in Cuba - Rediff - India
ONGC Videsh Ltd, the overseas arm of state-owned Oil and Natural Gas Corp, has acquired a 30 per cent stake in seven oil and gas blocks in Cuba, which hold more than 4 billion barrels of oil reserves. Spain's Repsol-YPF is the operator of the Block 25-29, 36 and a part of Block 35 with 40 per cent stake and the remaining is with Norway's Norsk Hydro. "OVL has entered into an agreement on September 15 with Repsol-YPF of Spain to acquire 30 per cent participating interest in the deepwater exploration Blocks 25, 26, 27, 28, 29, 36 and part of Block 35 in Cuba," a company press release said in New Delhi. The acquisition, which marks OVL's first foray into the Cuban oil and gas industry, will be completed after formalisation of the contract by the Cuban government. The blocks are spread over an area of nearly 12,000 sq. km in the Exclusive Economic Zone of Cuba. "The hydrocarbon resource potential in the blocks is estimated to be in excess of four billion barrels. One exploratory well drilled in one of these blocks indicated presence of hydrocarbons," the release said. These blocks are in the third exploration period. Work program during this period includes acquisition of 3,000 sq km 3-D seismic data. Drilling wells on selected prospects will be decided in the next exploration phase. "With proven presence of petroleum system in Exclusive Economic Zone, Cuba, the area has drawn attention of many international oil companies. The blocks have good potential and are especially significant for OVL as they would open the doors to other opportunities in the Latin American hydrocarbons sector. With this acquisition, the company is now present in 13 countries," OVL Chairman Subir Raha said.
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