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December 9,2011

Energy Data Highlights

Crude oil futures price12/7/2011: $100.49/bblup$0.13 from week earlierup$11.80 from year earlier

Natural gas futures price12/7/2011: $3.421/mmBtudown$0.129 from week earlierdown$0.972 from year earlier

Weekly coal production12/3/2011: 22.106 million tonsup1.299 million tons from week earlierup0.273 million tons from year earlier

Natural gas inventories12/2/2011: 3,831 Bcf 

down20 Bcf from week earlierup102 Bcf from year earlier

Crude oil inventories12/2/2011: 336.1 mmbblup1.3 mmbbl from week earlierdown19.8 mmbbl from year earlier

Natural Gas/ Power News

EIA Storage Release 12/8/11 (Actual): -20 Bcf Previous Week: -1 Bcf +2.7% Change from 1 Year Ago+8.7% Change 5-year Average

From King Coal to King GasIf the bible for energy policy wonks is the International Energy Agency’s annual

World Energy Outlook, industry executives have ExxonMobil’s The Outlook for

Energy. The 2012 edition of Exxon’s long-term report, released on Thursday,

offers an insight on one of the biggest talking points in Big Oil’s boardrooms: the

golden age of natural gas. The increasing importance of natural gas is behind

some of the tectonic shifts in the hydrocarbon industry, including Royal Dutch

Follow

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Shell’s efforts to brand itself as a gas rather than an oil company; Exxon’s

acquisition of US gas producer XTO Energy for $25bn last year; and BHP Billiton

takeover in July of US-based gas developer Petrohawk for $12bn.Exxon believes

that over the next three decades natural gas will overtake thermal coal to become

the world’s second most important source of energy, only behind oil. The company

says on the closely watched report that while crude oil will remain the “mostwidely used fuel” until 2040, overall energy demand will be “reshaped by a

continued shift” towards greener energy sources, particularly natural gas. The

company goes as far as to predict that the energy market will start to wave

goodbye to thermal coal.

http://www.ft.com/intl/cms/s/0/21ba5860-2248-11e1-acdc-

00144feabdc0.html#axzz1g2c14fyD 

Update: Exxon says natural gas will support energy demand growth

 The world’s energy demand will grow 30 percent by 2040, but coal’s reign inelectricity generation will decline in favor of cleaner-burning natural gas, ExxonMobil said in its annual energy outlook. Developing economies in Latin America,China, India and Africa, will largely drive the surging global demand, said BillColton, ExxonMobil vice present of Corporate Strategic Planning. More energy willbe needed to power their growing commercial and industrial sectors and theircitizen’s improved standards of living. Electricity remains the largest draw onenergy and rapid improvements in the energy efficiency of buildings andappliances won’t be enough to curb demand, Colton said in a press conference

 Thursday morning. “In the near-term, prospects for the global economy might lookuncertain, but over the next 30 years, the world will continue to experienceeconomic growth,” he said. “As the world population expands and living standards

improve, the world will need more energy, even as we learn to use energy moreefficiently.” In 2040, coal, oil and natural gas will supply nearly 80 percent of theworld’s energy, the report noted. Renewable fuels, primarily wind, will be thefastest growing energy sources, but they will remain a minor slice of the globalenergy supply, increasing from 1 percent today to 4 percent in 2040, the reportprojects.http://fuelfix.com/blog/2011/12/08/exxon-report-says-natural-gas-will-be-king/ 

EPA Says Fracking Likely Polluted Wyoming Aquifer 

Fluids caused by a company employing a drilling technique known as "fracking"likely polluted an aquifer in Wyoming, the U.S. Environmental Protection Agency

said in a draft report that countered industry claims the technique has never led

to water contamination. The EPA said "the best explanation" for the pollution seen

in the deep monitoring wells in Pavillion, Wyoming, is a release of hydraulic

fracturing, or fracking, fluids into the aquifer above the production zone. The

pollution includes benzene, alcohols and glycols, the report said.

http://www.cnbc.com/id/45601713 

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Gas prices: Low enough for consumers, high enough for producers? WPC

Long term oil-linked gas contracts are likely to persist and coexist with spot

pricing though the percentage of the oil price in the indexation may change, Alan

Haywood, Chief Operating Officer of Global Gas at BP said Thursday. Gas

consumption rose by 7.4% in 2010, the fastest rate since 1984, he said. Natural

gas trade increased by 10.1% and LNG by 22.6%. Between 2000 and 2010,

demand in Japan grew from 12.7% to 17%, in South Korea from 9% to 15% and in

Europe from 21% to 25%. BP projects natural gas to continue to grow at 2% a year

to 2030 with gas accounting for more than 50% of growth in fossil fuels, Haywood

said at the World Petroleum Congress in Doha. Gas was affordable when

compared with coal when the cost of carbon is considered and affordable versus

oil when higher production costs are taken into account, Haywood said at a

session on the theme of whether gas prices were low enough for consumers and

high enough for producers.

http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/8677812 

Green/ Alternative Energy News

Renewable energy umbrella launched Four leading renewable energy associations have announced their intention to

launch an umbrella body to act as a single voice championing the importance and

relevance of the renewable energy industry in South Africa. The announcement

comes in the wake of the Green Economy Accord recently concluded through a

series of engagements among the government, business, labour and communityat Nedlac. This accord envisages aggressively addressing climate change

concerns and the need to grow the SA economy by simultaneously stimulating the

green economy and creating green jobs.

"Creating a united voice for renewable energy custodians is imperative at this

 juncture in the development of the industry," said Pancho Ndebele, chair of the

South African Solar Thermal Industry Association.

http://www.fin24.com/Economy/Renewable-energy-umbrella-body-launched-

20111209 

Crude Oil News

OPEC Daily Basket Price 12/8/2011- $109.02

(OPEC Daily Basket Price 12/7/2011- $110.105)

Crude Heads for Biggest Weekly Drop Since September as Europe

Disappoints

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Oil headed for the biggest weekly decline since September as economic rescue

measures by European leaders failed to assuage concern that growth is slowing.

West Texas Intermediate futures have lost 2.2 percent this week, as euro-area

countries resolved on steps to ease the region’s crisis without forging an

agreement among all European Union members. Chinese industrial production

slowed last month. Saudi Arabia, the world’s largest crude exporter, is in no rushto agree to new output quotas when OPEC meets next week, Oil Minister Ali al-

Naimi said. “The details have failed to impress the market,” said James Zhang, a

strategist at Standard Bank Plc in London, referring to the European measures.

“We expect the euro zone crisis to drag on well into next year.”

http://www.bloomberg.com/news/2011-12-09/crude-heads-for-biggest-weekly-drop-since-september-as-europe-disappoints.html 

Brent rises over $108 on China investment report Brent crude oil rose above $108 on Friday after a Reuters report that China's

central bank will create a new investment vehicle worth $300 billion, part of which

would be focused on Europe.The report, which also boosted the euro, raised hopes

that funds from the world's second-biggest and fastest growing major economy

could be used to support European growth and soften the impact of the euro

crisis. Markets had earlier fallen after a European Union summit left the bloc

divided over moves to build a fiscal union and tighten integration in an attempt to

rescue the euro. Thorbjoern Bak Jensen, analyst at Global Risk Management, said

the exclusive Reuters report from Beijing had helped reverse negative sentiment

after the division at the summit.

http://www.reuters.com/article/2011/12/09/us-markets-oil-idUSTRE7AD06820111209 

Brent Falls Below $108 on Euro Zone, China Output Brent crude oil fell below $108 on Friday after a European Union summit left thebloc divided over moves to build a fiscal union to rescue the euro and followingChinese and German data pointing to slower global growth. Twenty-three of the27 EU leaders at a summit in Brussels agreed on tighter integration with stricterbudget rules for the euro zone, but Britain rejected proposed amendments to theEU treaty after failing to secure concessions for itself. The split deepened worriesthat policy makers would fail to tackle the euro zone debt crisis, leading to slowereconomic activity and lower demand for oil. Sentiment also softened after Chineseindustrial output growth hit its slowest pace in two years, although this was offset

by the prospect of further policy easing at the world's no.2 oil consumer afterinflation plunged to a two-year low.http://www.cnbc.com/id/45604393 

Syrian pipeline attack raises supply threat A Syrian oil pipeline has been blown up in the first significant rebel attack on theoil industry since the uprising started nine months ago. Damascus confirmed theattack yesterday. The state-run Syrian Arab News Agency said: “A destructiveterrorist group targeted a crude oil pipeline in Tal Al-Shur, northwest of Homsrefinery.”The Homs refinery is the second largest in Syria, with a capacity toprocess about 107,000 barrels a day from domestic oilfields, according to the US

Department of Energy. The country’s largest refinery is at the Mediterranean portof Banias. The so-called Arab spring has disrupted oil markets through 2011, with

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lower oil supplies in Libya due to the civil war, in Yemen and more recently inSyria.http://www.ft.com/intl/cms/s/0/e648a0e6-21c2-11e1-a19f-00144feabdc0.html#axzz1g2c14fyD 

Oil Price Paralysed by Lack of Forward Visibility 

Like a rabbit trapped in the headlights of an oncoming car, Brent prices haveremained static in the past fortnight despite an exceptionally heavy news flow.

 The market has been hit by a series of large shocks ranging from the deepening

debt crisis in Europe to possible sanctions on Iran's exports and speculation about

a military strike on the country's nuclear facilities. News that would normally have

a significant impact has had none at all, however. Instead the market is paralysed

by informational and analytical overload, unable to process the unusually large

number of economic and political risks. "Forward visibility" has shrunk from the

usual months to just weeks or even days. Daily price movements have been

unusually small. Realised volatility has fallen to 22.6 percent over the last 30

trading days, down from more than 35 percent in October, putting it in the 23rd

percentile of the 2006-2011 distribution, and the trend is still lower. Front-month

Brent futures prices have ranged less than 2.25 percent a day in the last fortnight

compared with an average of more than 3 percent since the start of 2006.

http://www.commodities-now.com/commodities-now-news/power-and-

energy/9195-oil-price-paralysed-by-lack-of-forward-visibility.html 

Gas prices up slightly over last week Gas prices are up slightly over last week in Houston and Texas, according to AAAgas gauge. The average price of gasoline rose to $3.10 in Houston, up a penny

from last week’s price. The state average also edged up a penny to $3.11.Nationally, prices remained at last week’s average of $3.29. Gas prices havesteadily falling since peaking this summer near the $4-per-gallon range, but theystill remain more than 30 cents over the average price last year. Houston driverspaid $2.78-per-gallon last year. However, the price gap between last year’saverage and this year has been shrinking as gasoline demand declines during thesluggish economy, Tom Kloza, chief oil analyst at Oil Price Information Service.http://fuelfix.com/blog/2011/12/08/gas-prices-up-slight-over-last-week/ 

US Republicans dig in heels on linking Keystone to payroll tax cutsUS House Republican leaders Thursday said they had no plans to drop an effort toaccelerate approval of TransCanada's Keystone XL pipeline from a key end-of-year

tax package. President Barack Obama promised Wednesday to reject anyattempts by Congress to link expiring payroll tax cuts and unemploymentinsurance with the controversial permitting process for the 1,600-mile crude oilpipeline. House Speaker John Boehner appeared emboldened by the WhiteHouse's veto pledge. He told reporters that his members had agreed to move abill that would extend unemployment benefits and the payroll tax credit and wouldcontain riders speeding Keystone and delaying environmental rules for industrialboilers. "You know, the president says that the American people can't wait on

 jobs," he told reporters at the US Capitol. "Well, guess what? We agreewholeheartedly with the president. The Keystone pipeline project will create tensof thousands of jobs immediately."http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6745332 

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Is the CME Preparing for the death of WTI? The CME Group's announcement that it is considering the launch of a new Gulf 

Coast oil futures contract has perplexed some market participants. Why would

the exchange announce the idea on Wednesday, less than a month after news of 

the Seaway pipeline reversal, which should end the dislocation of the CME's

crown jewel, the West Texas Intermediate crude oil futures contract? A simple

explanation is that the exchange is simply trying to innovate and provide new

ways for market participants to engage with the market. Another is that the

exchange wants to transition away from an inland delivery point at Cushing,

Oklahoma to another in Houston that will be better connected to global markets.

After all, markets tend to prefer a single futures contract with deep liquidity over

a fragmented market split between shallower pools of trade. When contacted on

 Thursday, a CME spokesman rebuffed the suggestion the proposal aimed to

create a substitute for WTI and said the exchange was delighted with the Seaway

reversal which it says ensures that WTI remains well connected with global

markets. So it is safe to say that the CME is not interested in unilaterally forcing

market participants to shift their preference to a new contract, especially in thecase of WTI, its most lucrative product. But there is demand for a Gulf Coast

product for hedging, as evidenced by the growth in CME-cleared swaps based on

physical Gulf Coast crude prices.

http://www.commodities-now.com/commodities-now-news/power-and-

energy/9194-is-the-cme-preparing-for-the-death-of-wti.html 

Recent Rig Counts

Area

Last

Count

Cou

nt

Change from

Prior Count

Date of 

Prior

Count

Change

from Last

 Year

Date of Last

 Year's

Count

U.S. 2 Dec11

1993 -7 23 Nov 11 +280 24 Nov 10

Canada 2 Dec11

484 Unchanged 23 Nov 11 +35 24 Nov 10

International

October2011

1197 +23 September 2011

+98 September2010

http://investor.shareholder.com/bhi/rig_counts/rc_index.cfm

Weather

6 to 10 Day Outlooks

Temperature

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Precipitation

8 to 14 Day Outlooks Temperature 

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Precipitation

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