Upstream News
As oil prices rose throughout June, there was drama caused by a 'rogue' speculator and an interesting exchange of views on mid-term oil investments between OPEC and IEA's former Deputy Executive.
 Image: Tony |
According to Oiltrends' June report, crude prices saw a steady rise throughout June, mostly stimulated by a weak dollar and improving equities markets, although long-term demand prospects remain unchanged.
However, Brent Crude prices suddenly spiked to a year high on 30th July for no immediately obvious reason. On further investigation, PVM Oil Futures Ltd senior broker, Steve Perkins decided to take his own position on crude futures.
Perkins' unauthorised trades caused a hike in global crude prices and cost his unwitting employers an estimated $10bn loss and a full-blown investigation by the regulators.
The crisis also prompted governments on both sides of the Atlantic to react to a situation that has already been troubling them for some time.
In the US, regulators the Commodity Futures Trading Commission announced they are set to scrutinse the impact on oil prices by the activities of oil futures speculators, while the UK and French governments have also warned that the potential damage from speculation could hinder economic recovery.
Meanwhile, OPEC cut its five year forecast for oil-field spending from $165bn to between $110-$120bn, blaming a combination of the recession and an increase in energy efficiency.
The news drew the response of being "shortsighted" by William Ramsay, former IEA Deputy Executive and now Director of Energy Geopolitics and the French Institute of International Relations.
In May, the IEA had estimated a required investment of £170bn, with their Executive Director Nobuo Tanaka calling for a "huge investment" to meet future Asian demand. Ramsay belives that India and China are likely to soak up any extra capacity.
However, OPEC stated that crude capacity is like to stay at "comfortable levels", stating that oil demand in developed countries is currently over.
The mid-term doom and gloom was partially reflected in the short-term according to reports from the ICIS Asian Base Oils and Lubricants conference at the end of June. For Group I refiners the pressure appears to be on with a 5-10% drop in demand from 2008, but more than 2m metric tons of new capacity coming onstream. The Group III refiners are likely to fare little better with South Korea's SK Energy, at the conference, predicting a 30% drop in demand this year. However this did not deter them from announcing their intentions to double it production of high-quality API Group III oils and open two new plants in 2012 and 2014. There were better predictions from Petrochina who forsee slower growth but certainly no overall reduction in China's hunger for oil consumption.
The newly formed New Alpha Refinery Ghana Ltd was undaunted by the news, announcing a memorandum of understanding with the Ghanain government to build a $6bn refinery in the central Accra with a 200,000bpd output in 2015, and a potential ouput of double the volume on the 1,000 acre site. Repsol also bucked the apparent downard trend, temporarily restarting operations at its Cartagena refinery in Spain, having shut it down just two months ago due to low margins.
In Asia there was plenty of activity, with Taiwan's CPC Corp announcing plans to build a new base oil plant in either Vietnam or China while closing down three other plants by 2015. And the Vietnamese government were taking the diplomatic route to energy and mining co-operation with Saudia Arabia at an early-June meeting between the two countries. In neighbouring Bahrain, the government announced a joint venture with Finland's Neste Oil to set up a 400,000 metric ton manufacturing plant by 2011.