Energy

Crude Settles at $95.60, Fresh Three-Month High

Crude-oil futures prices settled at a fresh three-month high above $95 a barrel Thursday afternoon, extending to a third day a rally spurred by concerns over tightening supplies.

Rigzone,

16 August, 2012

Nymex September-delivery crude oil settled $1.27 higher at $95.60 a barrel, the highest price since May 11. In recent days, the price has been hitting three-month highs.

Traders said Thursday's intraday move above the $95 level for the first since mid-May, after a sluggish start to trading, was fueled by position adjustments ahead of the expiration of September crude-oil options at the end of trading on the New York Mercantile Exchange.

Crude-oil and products prices have rallied in recent days on signs of tightening supplies, caused in part by operating snags at several refineries.

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Oil feels pressure from Middle East crises

Potential geopolitical crises in the Middle East are likely to have a ripple effect on the global oil sector, analysts and U.S. government officials said

UPI,

17 August, 2012

Crude oil prices on the New York Mercantile Exchange climbed for most of the week. Eugen Weinberg, a commodities analyst Commerzbank in Frankfort, told Bloomberg News that U.S. crude prices could slip, however, because of "high inventories, high imports (and) anemic demand."

Crude oil prices early this year spiked in part because of Iranian threats to close the Strait of Hormuz. The U.S. military deployed to the region to protect key shipping lanes, sparking protest from Iranian commanders who said littoral states were responsible for regional security.

David Goldwyn, a former U.S. State Department energy official, told The New York Times that a potential disruption in the strait "poses a physical threat to U.S. supply as well as a potential price shock on a global level."

Adam Sieminski, an Energy Department official told the Times that "if oil prices go up because of a problem in the Middle East, that causes a problem for the world in general and not one that is specific to the United States."

Oil prices for September delivery declined 62 cents to $94.28 during the latest trading session on the NYMEX.

US Reliance on Saudi Oil Heads Back Up

The United States is increasing its dependence on oil from Saudi Arabia, raising its imports from the kingdom by more than 20 percent this year, even as fears of military conflict in the tinderbox Persian Gulf region grow.

CNBC,

17 August, 2012

The increase in Saudi oil exports to the United States began slowly last summer and has picked up pace this year. Until then, the United States had decreased its dependence on foreign oil and from the Gulf in particular.

This reversal is driven in part by the battle over Iran’s nuclear program. The United States tightened sanctions that hampered Iran’s ability to sell crude, the lifeline of its troubled economy, and Saudi Arabia agreed to increase production to help guarantee that the price did not skyrocket. While prices have remained relatively stable, and Tehran’s treasury has been squeezed

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Mexico's big oil problem

Mexico, one of the largest suppliers of oil to the United States, has a big problem: Its production of crude is falling fast

CNN,

17 August, 2012

In 2008, the country's production peaked at 3.2 million barrels a day, according to the U.S. Energy Information Administration. Last year, it didn't even produce 3 million a day.

The reason: aging oil fields and years of underinvestment.

Industry experts say Mexico could revive production if it allowed more investment from international oil companies. But under current policy, EIA says Mexico will have to start importing oil by 2020.

For the United States, the decline in Mexico's oil industry means it will likely be buying more oil from Canada and Saudi Arabia, the No. 1 and No. 2 sources of U.S. oil imports. Mexico is now third.

And because oil is a global market, any drop in production one place could mean higher prices worldwide.

The loss of Mexico's current exports of about 1 million barrels a day would be greater than the amount lost due to sanctions on Iran -- albeit over a longer time period.

Many experts blame the structure of Mexico's oil industry for the decline.

Mexico nationalized its oil industry in 1938. Since then companies such as Exxon Mobil (XOM, Fortune 500), Royal Dutch Shell (RDSA) and BP (BP) have been prohibited from taking a meaningful stake in the country's oil operations. The state oil giant, Petroleos Mexicanos, or PEMEX, has run the show.

PEMEX is one of the largest companies in the world, and provides the Mexican government with 32% of its revenues, according to the EIA.

But oil exploration requires big investments and Mexican lawmakers have long resisted giving the firm the money it needs to go out and find new sources of crude.

The difference between U.S. and Mexican oil exploration is striking, said Jose Valera, a partner in the energy practice at the Houston law office of Mayer Brown.

The number of wells drilled in the U.S. Gulf of Mexico and the Eagle Ford shale in Texas is "hundreds to one" when compared to the Mexican side.

Indeed, the United States has been undergoing a resurgence in oil production, largely because of these two areas.

"There is absolutely no geological reason to believe the Eagle Ford ends at the border, or the Mexicans got the dry side of the Gulf," Valera said. "There is substantial potential that has not been developed."

Mexico has taken some small steps to liberalize its oil industry over the last few years, including allowing foreign firms to bid for contracts with PEMEX.

A spokeswoman for PEMEX said these efforts, along with a recent doubling of its budget, will enable the company to soon boost production.

But industry analysts feel that unless international companies are given ownership stakes in the oil fields, investment will remain low and production will continue to decline.

There's also been recent talk of broader industry liberalization, but it faces strong opposition from the country's unionized oil workers, government agencies that rely on PEMEX proceeds and Mexican consumers, who benefit from gasoline subsidies.

Said Alejandra León, an oil analyst at the consultancy IHS CERA in Mexico City: Oil is "still a sensitive topic and politics play a critical role."