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January 4, 2012

Energy Data Highlights

Retail gasoline price 1/2/2012: $3.299/gal up$0.041 from week earlier up$0.229 from year earlier Retail diesel price 1/2/2012: $3.783/gal down$0.008 from week earlier up$0.452 from year earlier Crude oil futures price 12/30/2011: $98.83/bbl down$0.85 from week earlier up$8.99 from year earlier Natural gas futures price 12/30/2011: $2.989/mmBtu down$0.125 from week earlier down$1.349 from year earlier Weekly coal production 12/24/2011: 20.291 million tons down1.647 million tons from week earlier up0.236 million tons from year earlier Commodities at Close CRUDE OIL -- Oil traded near the highest in almost eight months as investors speculated that tensions over Iran, shrinking U.S. crude stockpiles and signs of economic recovery will tighten global supplies. OIL PRODUCTS -- Gasoil, or diesel, swaps for February surged $2.57, or 2.1 percent, to $126.47 a barrel at 11 a.m. Singapore time, according to PVM Oil Associates Ltd., a broker. Thats the biggest gain since Nov. 8. PRECIOUS METALS -- Gold may drop for the first time in four days after the metals climb to the highest level in more than a week prompted some investors to sell. GRAINS, OILSEEDS -- Corn for March delivery fell as much as 0.7 percent to $6.5425 a bushel on the Chicago Board of Trade and was at $6.55 at 12:51 p.m. in Singapore. Futures reached $6.6425 yesterday, the highest price since Nov. 9. Prices gained 6.3 percent in December and rose 2.8 percent last year. Soybeans for delivery in March declined 0.4 percent to Wheat for March delivery dropped 0.7 percent to $6.5225 a bushel. It touched $6.7075 yesterday, the highest price for a most-active contract since Sept. 21. The grain climbed 6.3 percent in December, the biggest monthly advance since August.

http://www.bloomberg.com/news/2012-01-04/copper-falls-gold-to-drop-corndeclines-commodities-at-close.html

Natural Gas/ Power News

EIA Storage Release 12/29/11 (Actual): -81 Bcf Previous Week: -100 Bcf +9.1 % Change from 1 Year Ago +13.7% Change 5-year Average Devon Reaches $2.2 Billion Shale Deal With Sinopec Devon Energy Corp. reached a deal with Sinopec International Petroleum Exploration & Production Corp. in which the Chinese oil major will pay $2.2 billion for a one-third interest in five alternative shale playsThe deal is another sign of foreign companies' growing appetite for U.S. oil-and-gas assets. It comes on the heels of French oil giant Total SA's purchase of a minority stake in a swath of Chesapeake Energy Corp.'s Ohio shale discovery for $2.32 billion."This arrangement improves Devon's capital efficiency by recovering our land and drilling costs to date and by significantly reducing our future capital commitments," said Devon President and Chief Executive John Richels. http://online.wsj.com/article/SB1000142405297020355030457713849319232550 0.html?mod=WSJ_hp_LEFTWhatsNewsCollection

China and France chase US shale assets Chinese and French companies have announced large investments in US shale oil and gas projects as they seek to benefit from the countrys controversial boom in unconventional resources. Sinopec, Chinas second-largest oil company by market capitalisation, unveiled a $2.5bn deal with Oklahoma-based Devon Energy to invest in five new development areas from Ohio to Alabama. Separately, Total of France is investing $2.3bn in an Ohio oil and gas joint venture with Chesapeake Energy and EnerVest of the US. International groups are still keen to increase their exposure to unconventional US energy resources despite the environmental controversy over fracking, the injection of water, sand and chemicals into wells to crack rocks and release oil and gas. The exploration technique has been banned in France. Nicolas Sarkozy, the French president, has expressed fears about the process massacring the French landscape. http://www.ft.com/intl/cms/s/0/30c4c46e-35e2-11e1-9f9800144feabdc0.html#axzz1iUfq0Lbd

Canada Natural Gas Gains Amid Cooler Weather in U.S. Northeast Canadian natural gas rose, reversing an earlier decline, as cooler-than-normal weather in the U.S. Northeast boosts demand for heating fuels.

http://www.businessweek.com/news/2012-01-04/canada-natural-gas-gains-amidcooler-weather-in-u-s-northeast.html

US BLM to consider gas pipeline route through historic canyon in Utah The US Bureau of Land Management is considering a Rockies natural gas producer's proposal to build a gas pipeline in a Utah canyon that is famous for its Indian rock carvings. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6819964 President Obama signs US pipeline safety bill into law Pipeline safety legislation cleared its last hurdle Tuesday when President Obama signed the measure into law. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6819661

Green/ Alternative Energy News

The Convoluted Economics of Storing Energy Some companies think that one form of renewable energy is going to open a window for another that solar photovoltaic panels, which convert sunlight directly into electricity, are going to increase the grids need for a type of solar energy that can be stored http://green.blogs.nytimes.com/2012/01/03/the-convoluted-economics-of-storingenergy/

Crude Oil News

OPEC Daily Basket Price 1/3/2012- 109.40 (OPEC Daily Basket Price 12/30/2011- $106.84) Crude Oil Falls From Near Eight-Month High on European Economic Concerns Oil fell from its highest settlement in almost eight months on signs that Europes debt crisis may drag the region into a recession, curbing fuel consumption. West Texas Intermediate crude futures reversed gains as the euro dropped from near a one-week high against the dollar after European reports showed services and manufacturing output contracted and inflation slowed. German 10-year bonds stayed lower after the country sold additional securities. Oil rallied 4.2 percent yesterday as the head of Irans army warned the U.S. against sending an aircraft carrier back to the Persian Gulf. http://www.bloomberg.com/news/2012-01-04/oil-trades-near-8-month-high-ondemand-iran-tension-amid-shrinking-supply.html

Oil Pulls Back, but Iran Threats, Strong Data Support Oil prices edged lower on Wednesday, though crude remained supported by fears of possible supply disruptions from Iran and by strong economic data from the U.S. and China. Oil prices surged on Tuesday as Iran threatened to choke off crude shipments through the strategic Strait of Hormuz in retaliation against tougher sanctions from the West over its nuclear program. Brent crude rose 74 cents to $111.39 barrel, after rising more than 4 percent on Tuesday to settle at the highest since Nov. 15. This represented the biggest one day gain since last May. U.S. light sweet crude was down 78 cents to $102.18 a barrel, following its highest close since May 10. However, sluggish demand, particularly in Europe, could be put under further pressure by prices at these levels, said Olivier Jakob, analyst at Petromatrix in Zug, Switzerland."Iran is the supporting factor, but these price levels will hurt the economy, Europe oil demand with prices at these levels will be a total disaster," he said, adding that the euro's recent weakness against the dollar was making oil particularly expensive in the region, equivalent to $133 per barrel in 2008 terms. http://www.cnbc.com/id/45863722 Oil down slightly amid improving US economy Oil prices retreated toward $102 a barrel Wednesday as investors booked profits following big gains in the previous session when further evidence of an improving U.S. economy emerged and tensions in the Persian Gulf ratcheted higher. http://www.washingtonpost.com/business/markets/oil-drift-lower-toward-102-ineurope-as-traders-eye-improving-us-economy-irantensions/2012/01/04/gIQAO1BBaP_story.html Vitol tipped to win Sri Lankan Ceypetco's end-Jan gasoline, gasoil buy tender Western trader Vitol has submitted the lowest of three offers into Sri Lankan stateowned Ceylon Petroleum Corp.'s tender to buy gasoline and gasoil for January, a source familiar with the matter said Wednesday. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/7960458

NYMEX crude settles $4.13/b higher on Iran tension, bullish data NYMEX February crude futures settled $4.13 higher at $102.96/barrel Tuesday on a boost from bullish economic data and ongoing concerns of supply disruptions in the Middle East as US-Iran tensions rise. http://www.platts.com/RSSFeedDetailedNews/RSSFeed/NaturalGas/6819653 Iran Warns U.S. Over Aircraft Carrier Iran's army chief on Tuesday warned an American aircraft carrier not to return to the Persian Gulf in Tehran's latest tough rhetoric over the strategic waterway, part of a feud with the U.S. over new sanctions that has sparked a jump in oil prices. Gen. Ataollah Salehi spoke as a 10-day Iranian naval exercise ended near the Strait of Hormuz at the mouth of the Gulf. Iranian officials have said the drill aimed to show that Iran could close the vital oil passage, as it has threatened to do if the U.S. enacts strong new sanctions over Iran's nuclear program. The strait, leading into the Gulf of Oman and Arabian Sea, is the only possible route for tankers transporting crude from the oil-rich states of the Persian Gulf to markets. A sixth of the world's oil exports passes through it every day.

http://online.wsj.com/article/SB1000142405297020346230457713845176380142 4.html?mod=WSJ_Commodities_LEFTTopNews US dismisses Iranian threats over carrier The Obama administration dismissed a new warning from Iran about its naval operations in the Gulf on Tuesday, saying that the threat showed the Iranian regime was under pressure at home and that international sanctions were hitting its economy hard. The comments came after Iran made a fresh move to ratchet up tensions with the west on Tuesday, sending oil prices higher when it implied that it would take military action if the US Navy moves an aircraft carrier back into the Gulf. In the latest sign of tension between Iran and the west over the future of the Strait of Hormuz, a key transit point for oil, Iran stated that it did not want to see Washington redeploying an aircraft carrier in the Gulf region. While the State Department described the comments as the latest example of bluster from Iran and said that sanctions were biting on the country, the White House said the threat demonstrated the weakness of the Tehran regime. Iran is isolated and is seeking to divert attention from its behaviour and domestic problems, said Jay Carney, White House spokesman. Its ... confirmation that Tehran is under increasing pressure for its continued failure to live up to its international obligations. http://www.ft.com/intl/cms/s/0/b9af14e0-35e8-11e1-9f9800144feabdc0.html#axzz1iUfq0Lbd Oil and Gas Bubble Up All Over You'll know the U.S. energy industry is really on the rebound when North Dakota's newfangled Bakken oil field starts pumping more crude than Alaska's stalwart Prudhoe Bay. Energy experts expect it to happen in 2012. Dwindling production from the once-mighty Alaskan field has been a symbol of what was once seen as the slow, inexorable decline of U.S. oil. But new technologies have turned that overall decline into an increase, led by the Bakken shale, which in July produced 424,000 barrels a day, to Alaska's 453,000. Rising oil production from the Bakken and other nontraditional fields is expected to add 250,000 barrels of oil a day to U.S. production, according to the International Energy Agency, even as conventional oil production falls. If overall trends continue, daily U.S. oil output could be up by 1 million barrels a day by 2016, to 6.6 million. "I didn't see it, and I don't know anyone else who saw it coming," said James L. Williams of WTRG Economics, an energy consultancy in London, Ark. http://online.wsj.com/article/SB1000142405297020446440457711268194251735 6.html?mod=WSJ_Commodities_LEFTTopNews Traders fear tail risks in commodities It has only taken one business day in 2012 to demonstrate what traders see as the greatest challenge for commodity markets in the coming year: tail risk. Brent crude oil rose more than $4 a barrel on Tuesday, hitting $112 for the first time in a month and a half, after Irans army chief warned the US not to return an aircraft carrier to the Gulf, ratcheting up an increasingly aggressive war of words with the west. As commodity markets enter the new year, the price outlook, particularly for crude oil, is clouded by the risk of an economic crisis in Europe and hence, the possibility of a price plunge and geopolitical concerns therefore the risk of an increase. In the trading rooms of Geneva, London, New York, Houston and

Singapore talk is of tail risks low probability events that have an outsize impact on prices. Veteran traders and analysts reckon the risks are inordinately large. The biggest, and more bullish, tail risk is further turmoil in the Middle East and north Africa. If Iran goes through with a threat to close down the Strait of Hormuz, a chokepoint for a third of the oil seaborne trade, traders believe that oil prices could soar. http://www.ft.com/intl/cms/s/0/74465e8c-35ec-11e1-9f9800144feabdc0.html#axzz1iUfq0Lbd

Enterprise to build pipeline from Pennsylvania to Texas A pipeline project that could eventually transport up to 190,000 barrels of ethane daily from Appalachian shale fields to the Texas Gulf Coast has secured enough customers to move forward, Enterprise Products Partners announced Tuesday. The Houston company, which revealed two months ago that it had lined up its first long-term contract to use the pipeline, now says it has enough in place to make the project financially feasible. The 1,230-mile line is expected to begin pumping in early 2014, taking advantage of increased production of natural gas liquids and their lower price relative to oil-based alternatives. The willingness of shippers to commit to a term of at least 15 years reflects the long-term potential of shale development in the Appalachian region and provides us with the assurance necessary to build the midstream infrastructure that will facilitate further development of this important domestic resource, Enterprise president and CEO Michael Creel said in a statement. http://fuelfix.com/blog/2012/01/03/enterprise-to-build-pipeline-from-pennsylvaniato-texas/ Crucial year for BP in gulf spill legal fight For BP, 2012 will be a crucial year as the UK oil major defends itself against a barrage of civil lawsuits and the looming threat of criminal charges relating to the Deepwater Horizon disaster in the Gulf of Mexico in which 11 people died. Since the 2010 oil spill, BP has been at the centre of a legal frenzy. The company is already a defendant in more than 600 private civil suits and has been accused of everything from gross negligence to breaching anti-racketeering laws. Federal prosecutors are also investigating BP for potential criminal violations of the Clean Water Act and the Migratory Bird Treaty Act and may also decide to pursue charges against the company or individuals for manslaughter, obstruction of justice and false statements. The Deepwater Horizon accident has been described by some as the worst environmental disaster in US history. Millions of barrels of oil gushed from the seabed into the Gulf of Mexico after a blowout at the Macondo well, although, more than a year later, the region has at least partially recovered. http://www.ft.com/intl/cms/s/0/2a4ac13c-324b-11e1-b4ba00144feabdc0.html#axzz1iUfq0Lbd

Recent Rig Counts

Area Last Count Cou Change from Date of nt Prior Count Prior Change from Last Date of Last

Count U.S. Canada 29 Dec 2007 11 29 Dec 11 221 -1 -185 -12 22 Dec 11 22 Dec 11 October 2011

Year +313 -25 +55

Year's Count 30 Dec 10 30 Dec 10 November 2010

Internatio Novemb 1185 nal er 2011

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

Weather
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